2013 Q3 Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2013
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File No. 1-10410
 _________________________
CAESARS ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
 _________________________
 
Delaware
 
62-1411755
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
One Caesars Palace Drive, Las Vegas, Nevada
 
89109
(Address of principal executive offices)
 
(Zip Code)
(702) 407-6000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
 _________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x     No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
x
 
 
 
 
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
Outstanding at November 1, 2013
Common stock, $0.01 par value
136,881,638


CAESARS ENTERTAINMENT CORPORATION
INDEX
 
 
 
Page
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

We have proprietary rights to a number of trademarks used in this Form 10-Q that are important to our business, including, without limitation, Caesars, Caesars Entertainment, Caesars Palace, Harrah’s, Total Rewards, Horseshoe, Paris Las Vegas, Flamingo, and Bally's. In addition, Caesars Interactive Entertainment, Inc., which as of October 21, 2013 became a subsidiary of a Caesars Acquisition Company (“CAC”), a newly formed company created to facilitate the previously announced strategic transaction pursuant to which Caesars formed a new growth-oriented entity and joint venture between Caesars and CAC, Caesars Growth Partners, LLC, has proprietary rights to the Bingo Blitz and World Series of Poker (WSOP) trademarks. We have omitted the registered trademark (®) and trademark (™) symbols for such trademarks named in this Form 10-Q.
.

2

PART I—FINANCIAL INFORMATION

Item 1.
Unaudited Financial Statements

CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(In millions, except par value)
 
September 30, 2013

December 31, 2012
Assets
 

 
Current assets
 

 
Cash and cash equivalents
$
1,707.9


$
1,757.5

Restricted cash
123.4

 
833.6

Receivables, net of allowance for doubtful accounts of $179.9 and $201.7
506.9


580.5

Deferred income taxes
140.7


114.9

Prepayments and other current assets
196.6


150.0

Inventories
43.3


52.0

Assets held for sale
5.4


5.1

Total current assets
2,724.2


3,493.6

Property and equipment, net
14,916.4


15,701.7

Goodwill
3,019.5


3,160.3

Intangible assets other than goodwill
3,660.2


3,985.7

Investments in and advances to non-consolidated affiliates
213.1


100.4

Restricted cash
403.6


364.6

Deferred charges and other
693.4


720.6

Assets held for sale
466.0

 
471.2

 
$
26,096.4


$
27,998.1

Liabilities and Stockholders’ Deficit
 

 
Current liabilities
 

 
Accounts payable
$
371.8


$
376.2

Interest payable
377.7


233.7

Accrued expenses
1,180.9


1,094.7

Current portion of long-term debt
166.4


879.9

Liabilities held for sale
0.7

 
3.8

Total current liabilities
2,097.5


2,588.3

Long-term debt
21,173.8


20,532.2

Deferred credits and other
739.3


823.0

Deferred income taxes
3,528.3


4,334.1

Liabilities held for sale
54.3

 
52.1

 
27,593.2


28,329.7

Commitments and contingencies (Note 17)


 


Stockholders’ equity/(deficit)
 

 
Common stock: voting; $0.01 par value; 128.7 and 127.5 shares issued
1.3


1.3

Treasury Stock: 2.2 and 2.1 shares
(16.3
)
 
(16.3
)
Additional paid-in capital
7,003.4


6,954.4

Accumulated deficit
(8,471.5
)

(7,280.2
)
Accumulated other comprehensive loss
(95.6
)

(70.9
)
Total Caesars stockholders’ deficit
(1,578.7
)

(411.7
)
Noncontrolling interests
81.9


80.1

Total deficit
(1,496.8
)

(331.6
)
 
$
26,096.4


$
27,998.1

See accompanying Notes to Consolidated Condensed Financial Statements.

3

CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In millions, except per share data)
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 
 
Casino
$
1,466.6

 
$
1,578.8

 
$
4,396.8

 
$
4,755.7

Food and beverage
382.9

 
389.2

 
1,149.2

 
1,156.6

Rooms
318.5

 
312.1

 
929.0

 
932.3

Management fees
14.5

 
12.5

 
42.3

 
34.4

Other
225.4

 
203.5

 
642.5

 
580.5

Reimbursable management costs
72.7

 
22.3

 
203.2

 
43.5

Less: casino promotional allowances
(300.6
)
 
(322.6
)
 
(881.7
)
 
(937.4
)
Net revenues
2,180.0

 
2,195.8

 
6,481.3

 
6,565.6

Operating expenses
 
 
 
 
 
 
 
Direct
 
 
 
 
 
 
 
Casino
803.2

 
902.2

 
2,457.6

 
2,725.1

Food and beverage
168.8

 
169.8

 
503.5

 
501.3

Rooms
76.9

 
74.3

 
232.4

 
230.1

Property, general, administrative, and other
548.2

 
519.0

 
1,592.8

 
1,529.5

Reimbursable management costs
72.7

 
22.3

 
203.2

 
43.5

Depreciation and amortization
130.2

 
178.8

 
433.2

 
533.8

Write-downs, reserves, and project opening costs, net of
recoveries
0.5

 
32.8

 
44.7

 
56.9

Intangible and tangible asset impairment charges
930.9

 
419.0

 
1,055.6

 
626.0

Loss/(income) on interests in non-consolidated affiliates
4.0

 
(1.5
)
 
20.4

 
8.8

Corporate expense
37.0

 
51.7

 
114.3

 
145.2

Acquisition and integration costs
3.2

 
1.0

 
69.6

 
2.2

Amortization of intangible assets
41.9

 
43.2

 
124.4

 
129.6

Total operating expenses
2,817.5

 
2,412.6

 
6,851.7

 
6,532.0

(Loss)/income from operations
(637.5
)
 
(216.8
)
 
(370.4
)
 
33.6

Interest expense, net of interest capitalized
(563.0
)
 
(515.8
)
 
(1,677.7
)
 
(1,574.3
)
Gain on early extinguishments of debt
13.0

 
—

 
17.5

 
79.5

Gain on partial sale of subsidiary
—

 
—

 
44.1

 
—

Other income, including interest income
0.5

 
4.7

 
8.9

 
19.4

Loss from continuing operations before income taxes
(1,187.0
)
 
(727.9
)
 
(1,977.6
)
 
(1,441.8
)
Benefit for income taxes
413.4

 
225.3

 
819.3

 
489.5

Loss from continuing operations, net of income taxes
(773.6
)
 
(502.6
)
 
(1,158.3
)
 
(952.3
)
Discontinued operations
 
 
 
 
 
 
 
Income/(loss) from discontinued operations
14.9

 
0.8

 
(29.3
)
 
(69.4
)
Provision for income taxes
(3.1
)
 
(1.6
)
 
(0.2
)
 
(4.6
)
Income/(loss) from discontinued operations, net of income taxes
11.8

 
(0.8
)
 
(29.5
)
 
(74.0
)
Net loss
(761.8
)
 
(503.4
)
 
(1,187.8
)
 
(1,026.3
)
Less: net loss/(income) attributable to noncontrolling interests
0.4

 
(2.1
)
 
(3.5
)
 
(1.5
)
Net loss attributable to Caesars
$
(761.4
)
 
$
(505.5
)
 
$
(1,191.3
)
 
$
(1,027.8
)
Loss per share - basic and diluted



 






Loss per share from continuing operations
$
(6.12
)

$
(4.02
)

$
(9.23
)

$
(7.62
)
Income/(loss) per share from discontinued operations
0.09


(0.01
)

(0.24
)

(0.59
)
Net loss per share
$
(6.03
)
 
$
(4.03
)
 
$
(9.47
)
 
$
(8.21
)
Weighted-average common shares outstanding - basic and diluted
126.3

 
125.3

 
125.7

 
125.3

See accompanying Notes to Consolidated Condensed Financial Statements. 

4

CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(In millions)
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Net loss
$
(761.8
)
 
$
(503.4
)
 
$
(1,187.8
)
 
$
(1,026.3
)
Other comprehensive (loss)/income:
 
 
 
 
 
 
 
Defined benefit plan adjustments
(3.9
)
 
(1.9
)
 
0.9

 
0.4

Foreign currency translation adjustments
3.3

 
(2.2
)
 
(22.4
)
 
(1.9
)
Loss on derivatives reclassified into earnings
—

 
6.9

 
3.9

 
21.2

Unrealized losses on available-for-sale investments
(0.4
)
 
(0.2
)
 
(5.1
)
 
(0.3
)
Total other comprehensive (loss)/income, before income taxes
(1.0
)
 
2.6

 
(22.7
)
 
19.4

Income tax provision related to items of other
comprehensive (loss)/income
(0.9
)
 
(4.1
)
 
(2.1
)
 
(8.7
)
Total other comprehensive (loss)/income, net of income taxes
(1.9
)
 
(1.5
)
 
(24.8
)
 
10.7

Total comprehensive loss
(763.7
)
 
(504.9
)
 
(1,212.6
)
 
(1,015.6
)
Less: amounts attributable to noncontrolling interests:
 
 
 
 
 
 
 
Net income
0.4

 
(2.1
)
 
(3.5
)
 
(1.5
)
Foreign currency translation adjustments
—

 
0.2

 
0.1

 
(1.3
)
Total amounts attributable to noncontrolling interests
0.4

 
(1.9
)
 
(3.4
)
 
(2.8
)
Comprehensive loss attributable to Caesars
$
(763.3
)
 
$
(506.8
)
 
$
(1,216.0
)
 
$
(1,018.4
)
See accompanying Notes to Consolidated Condensed Financial Statements. 

5

CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT)
(UNAUDITED)
(In millions)
 
 
Caesars Stockholders
 
 
 
 
 
 
Common Stock
 
Treasury Stock
 
Additional
Paid-in-
Capital
 

Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income/(Loss)
 
Total
Caesars Stockholders' Equity/(Deficit)
 
Noncontrolling
Interests
 
Total Equity/(Deficit)
 
 
 
Balance at December 31, 2011
 
$
0.7

 
$
—

 
$
6,885.1

 
$
(5,782.7
)
 
$
(96.4
)
 
$
1,006.7

 
$
46.7

 
$
1,053.4

Net (loss)/income
 
—

 
—

 
—

 
(1,027.8
)
 
—

 
(1,027.8
)
 
1.5

 
(1,026.3
)
Share-based compensation
 
—

 
—

 
25.6

 
—

 
—

 
25.6

 
—

 
25.6

Initial public offering
 
0.6

 
—

 
16.6

 
—

 
—

 
17.2

 
—

 
17.2

Common stock issuances
 
*

 
—

 
0.2

 
—

 
—

 
0.2

 
—

 
0.2

Increase in treasury shares
 
—

 
(16.3
)
 
16.3

 
—

 
—

 
—

 
—

 
—

Contributions and contractual
obligations from noncontrolling
interests, net of distributions
 
—

 
—

 
—

 
—

 
—

 
—

 
31.8

 
31.8

Other comprehensive income, net
of tax
 
—

 
—

 
—

 
—

 
9.4

 
9.4

 
1.3

 
10.7

Other
 
—

 
—

 
2.1

 
—

 
—

 
2.1

 
—

 
2.1

Balance at September 30, 2012
 
$
1.3

 
$
(16.3
)
 
$
6,945.9

 
$
(6,810.5
)
 
$
(87.0
)
 
$
33.4

 
$
81.3

 
$
114.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2012
 
$
1.3

 
$
(16.3
)
 
$
6,954.4

 
$
(7,280.2
)
 
$
(70.9
)
 
$
(411.7
)
 
$
80.1

 
$
(331.6
)
Net (loss)/income
 
—

 
—

 
—

 
(1,191.3
)
 
—

 
(1,191.3
)
 
3.5

 
(1,187.8
)
Share-based compensation
 
—

 
—

 
17.8

 
—

 
—

 
17.8

 
—

 
17.8

Common stock issuances
 
 *

 
—

 
15.4

 
—

 
—

 
15.4

 
—

 
15.4

Issuances of common stock under
stock incentive plans
 
 *

 
—

 
1.1

 
—

 
—

 
1.1

 
—

 
1.1

Increase in treasury shares
 
—

 
 *

 
(0.1
)
 
—

 
—

 
(0.1
)
 
—

 
(0.1
)
Contributions and contractual
obligations from noncontrolling
interests
 
—

 
—

 
24.7

 
—

 
—

 
24.7

 
10.6

 
35.3

Decrease in noncontrolling interests
including distributions and
write-downs
 
—

 
—

 
—

 
—

 
—

 
—

 
(12.2
)
 
(12.2
)
Other comprehensive loss, net of tax
 
—

 
—

 
—

 
—

 
(24.7
)
 
(24.7
)
 
(0.1
)
 
(24.8
)
Purchase of additional interest in
subsidiary
 
—

 
—

 
(9.9
)
 
—

 
—

 
(9.9
)
 
—

 
(9.9
)
Balance at September 30, 2013
 
$
1.3

 
$
(16.3
)
 
$
7,003.4

 
$
(8,471.5
)
 
$
(95.6
)
 
$
(1,578.7
)
 
$
81.9

 
$
(1,496.8
)
___________________ 
*
Amount rounds to zero.
See accompanying Notes to Consolidated Condensed Financial Statements.

6

CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions)
 
Nine Months Ended September 30,
 
2013
 
2012
Cash flows from operating activities
 
 
 
Net loss
$
(1,187.8
)
 
$
(1,026.3
)
Adjustments to reconcile net loss to cash flows (used in)/provided by operating activities:
 
 
 
 Loss from discontinued operations
29.5


74.0

 Gain on early extinguishments of debt
(17.5
)
 
(79.5
)
Depreciation and amortization
567.1

 
672.7

Amortization of deferred finance costs and debt discount/premium
273.0

 
232.7

Reclassification from, and amortization of, accumulated other comprehensive loss
4.4

 
21.2

Non-cash write-downs and reserves, net of recoveries
13.7

 
18.8

Gain on partial sale of subsidiary
(44.1
)
 
—

Non-cash acquisition and integration costs
48.9

 
—

Unrealized (gains)/losses on fair value of derivatives
(100.6
)
 
10.9

Impairment of intangible and tangible assets
1,055.6

 
626.0

Loss on interests in non-consolidated affiliates
20.4

 
8.8

Stock-based compensation expense
18.2

 
43.0

Deferred income taxes
(828.2
)
 
(440.6
)
Change in deferred charges and other
(18.0
)
 
(3.5
)
Change in deferred credits and other
4.0

 
(57.0
)
Change in current assets and liabilities:
 
 
 
Accounts receivable
74.9

 
(22.3
)
Prepayments and other current assets
(25.7
)
 
(27.6
)
Accounts payable
(1.6
)
 
6.3

Interest payable
145.2

 
155.9

Accrued expenses
(24.5
)
 
42.4

Other
(17.9
)
 
1.5

Cash flows (used in)/provided by operating activities
(11.0
)
 
257.4

Cash flows from investing activities
 
 
 
Acquisitions of property and equipment, net of change in related payables
(466.7
)
 
(303.4
)
Change in restricted cash
671.2

 
(551.0
)
Proceeds from partial sale of subsidiary, net of cash deconsolidated
50.4

 
—

Cash received in conjunction with the sale of a subsidiary, net of cash contributed
—

 
42.4

Payments to acquire businesses, net of transaction costs and cash acquired
(8.6
)
 
7.7

Investments in/advances to non-consolidated affiliates
(36.2
)
 
(22.8
)
Purchases of investment securities
(26.7
)
 
(36.0
)
Proceeds from the sale and maturity of investment securities
55.8

 
27.0

Other
(14.1
)
 
(6.3
)
Cash flows provided by/(used in) investing activities
225.1

 
(842.4
)
Cash flows from financing activities
 
 
 
Proceeds from the issuance of long-term debt
1,808.1

 
2,469.4

Debt issuance costs and fees
(57.8
)
 
(31.9
)
Borrowings under lending agreements
—

 
453.0

Repayments under lending agreements
—

 
(608.0
)
Cash paid for early extinguishments of debt
(2,067.8
)
 
(1,450.6
)
Cash paid for loan maturity extension fees
(23.3
)
 
—

Scheduled debt retirements
(9.6
)
 
(12.7
)
Purchase of additional interests in subsidiary
(9.9
)
 
(9.6
)
Contributions from noncontrolling interest owners
35.3

 
—

Proceeds from sale of additional interest in a subsidiary
—

 
32.2

Issuance of common stock, net of fees
16.2

 
17.4

Other
(21.1
)
 
(9.2
)
Cash flows (used in)/provided by financing activities
(329.9
)
 
850.0

Cash flows from discontinued operations
 
 
 
Cash flows from operating activities
0.7

 
29.3

Cash flows from investing activities
65.7

 
(2.9
)
Cash flows from financing activities
—

 
—

Net cash provided by discontinued operations
66.4

 
26.4

Net (decrease)/increase in cash and cash equivalents
(49.4
)
 
291.4

Change in cash classified as assets held for sale
(0.2
)
 
2.5

Cash and cash equivalents, beginning of period
1,757.5

 
891.2

Cash and cash equivalents, end of period
$
1,707.9

 
$
1,185.1

See accompanying Notes to Consolidated Condensed Financial Statements.

7

CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

In these footnotes, the words “Company,” “Caesars,”“Caesars Entertainment,” “CEC,” “we,” “our,” and “us” refer to Caesars Entertainment Corporation, a Delaware corporation, and its subsidiaries, unless otherwise stated or the context requires otherwise.
Note 1 — Organization and Basis of Presentation
Organization
Our business is primarily conducted through a wholly owned subsidiary, Caesars Entertainment Operating Company, Inc. ("CEOC"), although certain material properties are not owned by CEOC. As of September 30, 2013, we owned, operated, or managed, through various subsidiaries, 52 casinos in 13 U.S. states and six countries. Of the 52 casinos, 39 are in the United States, including 20 land-based casinos, 10 riverboat or dockside casinos, three managed casinos on Indian lands, three managed casinos in Ohio, one casino combined with a greyhound racetrack, one casino combined with a thoroughbred racetrack, and one casino combined with a harness racetrack. Our 13 international casinos are comprised of eight land-based casinos in England, two in Egypt, one in Scotland, one in South Africa and one in Canada. We view each casino property as an operating segment and aggregate such casino properties into one reportable segment.
On January 28, 2008, Caesars Entertainment was acquired by affiliates of Apollo Global Management, LLC (together with such affiliates, “Apollo”) and affiliates of TPG Capital, LP (together with such affiliates, “TPG” and, together with Apollo, the “Sponsors”) in an all-cash transaction (the “Acquisition”). Our common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “CZR.”
Basis of Presentation
The accompanying unaudited consolidated condensed financial statements of the Company have been prepared under the rules and regulations of the Securities and Exchange Commission ("SEC") applicable for interim periods and, therefore, do not include all information and footnotes necessary for complete financial statements in conformity with accounting principles generally accepted in the United States ("GAAP"). The results for the interim periods reflect all adjustments (consisting primarily of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations, and cash flows. The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 2013 fiscal year.
The financial information for the three and nine months ended September 30, 2012 is derived from our consolidated condensed financial statements and footnotes included in the Quarterly Report on Form 10-Q for the three months ended September 30, 2012 and has been revised to reflect the results of operations and cash flows of the Alea Leeds casino and the subsidiaries that hold a land concession in Macau as discontinued operations. See Note 3, "Acquisitions, Investments, Dispositions and Divestitures."
We have revised certain other amounts for prior periods to conform to our 2013 presentation. This Form 10-Q filing should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012, as amended ("2012 10-K").
Note 2 — Recently Issued Accounting Pronouncements
Effective January 1, 2013, we adopted guidance issued by the Financial Accounting Standards Board ("FASB") on the reporting of reclassifications out of accumulated other comprehensive income. The guidance requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount is reclassified to net income in its entirety in the same reporting period. As this is a presentation and disclosure requirement, there was no impact on our consolidated financial position, results of operations or cash flows upon adoption.
In February 2013, the FASB issued new guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. The new guidance is effective for us January 1, 2014. We are currently assessing what impact, if any, the adoption of this new guidance will have on our consolidated financial position, results of operations and cash flows.

8
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


In March 2013, the FASB issued new guidance applicable to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The new guidance is effective for us January 1, 2014. We plan to adopt the guidance prospectively as of January 1, 2014 and will evaluate the impact, if any, that this guidance will have on our consolidated financial position, results of operations and cash flows should we sell a part or all of an investment in a foreign entity.
In July 2013, the FASB issued new guidance for the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The new guidance is effective for us January 1, 2014. Historically, we have complied with the presentation and disclosure requirements provided in this new guidance.  As such, we do not expect this new guidance to have a material impact on our consolidated financial position or results of operations.
Note 3 — Acquisitions, Investments, Dispositions and Divestitures
Acquisitions
Buffalo Studios, LLC and Bubbler Media
In December 2012, Caesars Interactive Entertainment, Inc. ("CIE") purchased substantially all of the net assets of Buffalo Studios, LLC ("Buffalo"), a social and mobile games developer and owner of Bingo Blitz, for consideration of $45.2 million plus an earnout payment with an acquisition date fair value estimated at $5.6 million. During the first quarter 2013, the estimated fair value of the earnout was increased to $58.0 million, with a charge to acquisition and integration costs of $52.4 million. The estimated fair value of the earnout was reduced to $54.5 million during the second quarter 2013, resulting in a $3.5 million reduction in the earnout accrual, recorded in acquisition and integration costs. As of September 30, 2013, the estimated fair value of the earnout remains $54.5 million.
The preliminary purchase price allocations include total assets, liabilities and net assets acquired of Buffalo of $52.9 million, $7.7 million and $45.2 million, respectively.
In September 2012, CIE purchased the assets of Bubbler Media ("Bubbler") a social and mobile games developer based in Belarus, for consideration of approximately $7.5 million. The final purchase price allocation for Bubbler included net assets acquired of $7.5 million.
The purchase prices of Buffalo and Bubbler were allocated based on estimated fair values of the assets acquired and liabilities assumed, with the excess of the purchase price over the estimated fair value of the net tangible and intangible assets acquired recorded as goodwill. The Company has not yet finalized its purchase price allocation for the Buffalo transaction and is in the process of performing final reviews of the values assigned to assets acquired and liabilities assumed.
Dispositions
Conrad Punta del Este Resort and Casino
In November 2012, we signed a definitive agreement with Enjoy S.A. (“Enjoy”) to form a strategic relationship in Latin America and completed the transaction in May 2013. Under the terms of the agreement, Enjoy acquired 45% of Baluma S.A., our subsidiary that owns and operates the Conrad Punta del Este Resort and Casino in Uruguay (the “Conrad”), in exchange for total consideration of $139.5 million. After customary deductions for expenses associated with the closing, we received $50.4 million in cash, net of $29.7 million of cash deconsolidated, a 4.5% equity stake in Enjoy, and a deferred cash payment of $31.9 million due by January 2014, which is included in other current assets as of September 30, 2013. The shares of Enjoy that we acquired are classified as available-for-sale securities. These securities are adjusted to their market value at every reporting period, with unrealized gains or losses recorded as a component of other comprehensive income. During the three and nine months ended September 30, 2013, these market value adjustments resulted in unrealized losses of $0.7 million and $3.6 million, respectively.
In connection with the transaction, Enjoy assumed control of the Baluma S.A. board and primary responsibility for management of the Conrad. Upon completion of the transaction, we deconsolidated Baluma S.A. from our financial statements and began accounting for Baluma S.A. as an investment in non-consolidated affiliates utilizing the equity method of accounting.

9
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Alea Leeds
On March 4, 2013, we permanently closed our Alea Leeds casino in England. As a result of the closure, during the quarter ended March 31, 2013, we recorded charges of $5.7 million related to the write-down of tangible and intangible assets, net of currency translation adjustment, and $15.8 million related to exit costs, comprised of non-cancellable contract costs of $15.1 million, employment related costs of $0.5 million and other costs in the amount of $0.2 million. During the three and nine months ended September 30, 2013, the Company paid $0.5 million and $1.5 million of exit-related costs, respectively, accreted interest expense of $0.5 million and $1.0 million, respectively, and recognized increases in the liability of $1.0 million and $1.2 million, respectively, due mainly to the impact of currency translation adjustments. As of September 30, 2013, $16.5 million remains accrued. We have presented the operations of Alea Leeds casino as discontinued operations in the Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2013 and 2012. See “Discontinued Operations” below.
Harrah's St. Louis
On November 2, 2012, the Company sold its Harrah's St. Louis casino and recorded a pre-tax gain of $9.3 million on the sale. As a result of working capital adjustments in connection with such sale, the Company recorded reductions to the originally recorded pre-tax gain of $0.7 million in the first quarter of 2013. We have presented the results of Harrah's Maryland Heights, LLC, previous owner of the Harrah's St. Louis casino, as discontinued operations in our Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2012. See “Discontinued Operations” below.
Macau Land Concession
During the second quarter of 2012, we determined that it was more likely than not that we would divest of our investment in a land concession in Macau prior to the end of the remaining 35-year term of the concession (the “Macau Land Concession”). As a result, we performed an impairment assessment on the Macau Land Concession and recorded an impairment charge of $101.0 million.
In the fourth quarter of 2012, the Company began discussions with interested investors regarding a sale of the subsidiaries that hold the Macau Land Concession. As a result of this plan of disposal, the assets and liabilities have been classified as held for sale in our Consolidated Condensed Balance Sheets at September 30, 2013 and December 31, 2012. See “Held for Sale” below. We have presented the operations of the business as discontinued operations in the Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2013 and 2012. See “Discontinued Operations” below. We have adjusted the book value of the Macau Land Concession each reporting period to the estimated sales price less cost to sell and, as a result, recorded an additional reduction to the book value of $21.0 million during the first quarter of 2013.
On August 6, 2013, the Company, along with certain of its wholly owned subsidiaries, entered into a share purchase agreement with Pearl Dynasty Investments Limited (“Pearl Dynasty”), pursuant to which Pearl Dynasty will purchase from the Company all of the equity interests of the subsidiaries that hold the Macau Land Concession for a purchase price of $438.0 million subject to customary closing conditions. During the third quarter of 2013, the Company increased the recorded book value by $15.2 million to reflect the final estimated fair value less cost to sell.
The Purchase Agreement required Pearl Dynasty to deposit certain amounts with the Company in connection with the transaction. Pearl Dynasty deposited $21.9 million on August 7, 2013, and an additional $43.8 million on August 8, 2013. The deposits were applied to the purchase price at closing of the transaction, which occurred on November 1, 2013. See Note 21, "Subsequent Events."
The Company expects to use the net proceeds from the sale, which were approximately $420.0 million, to fund CEOC capital expenditures or to repurchase certain outstanding debt obligations of CEOC.
See Note 21, "Subsequent Events."
Atlantic City Marketplace Parcels
In June 2013, we signed an agreement with the  Casino Reinvestment Development Authority (“CRDA”) under which we have agreed to convey certain land parcels with an appraised value of $7.3 million to the CRDA (the “Marketplace Parcels”) on which the CRDA may construct a marketplace-style retail development project. The CRDA is a New Jersey state governmental agency responsible for directing the spending of casino reinvestment funds for the benefit of Atlantic City.  Casino reinvestment funds (also known as investment alternative tax obligation deposits, or IAT) are paid to the CRDA on a monthly basis equal to 1.25% of monthly gross gaming revenues. In return for the Marketplace Parcels, we will receive a credit against future IAT payable

10
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


to the CRDA in the amount of $7.3 million. Conveyance of the Marketplace Parcels is subject to, among other things, the CRDA’s determination that the Marketplace Parcels are suitable for their development project. During the third quarter 2013, the CRDA substantially completed their suitability tests. As a result of this plan of disposal, the Marketplace Parcels are classified as held for sale as of September 30, 2013. See "Held for Sale" below. The Marketplace Parcels were tested for recoverability during the third quarter 2013 as a result of their classification as held for sale. See Note 6, "Property and Equipment, net."
Held for Sale
Assets and liabilities classified as held for sale relate to the subsidiaries that hold our land concessions in Macau and the Marketplace Parcels in Atlantic City are as follows:
(In millions)
September 30, 2013
 
December 31, 2012
Assets
 
 
 
Cash and cash equivalents
$
4.9

 
$
4.7

Other current assets
0.5

 
0.4

     Assets held for sale, current
$
5.4

 
$
5.1

 
 
 
 
Property and equipment, net
$
466.0

 
$
471.2

     Assets held for sale, non-current
$
466.0

 
$
471.2

 
 
 
 
Liabilities
 
 
 
Accounts payable and accrued expenses
$
0.7

 
$
3.8

     Liabilities held for sale, current
$
0.7

 
$
3.8

 
 
 
 
Deferred credits and other
$
2.5

 
$
0.2

Deferred income taxes
51.8

 
51.9

     Liabilities held for sale, non-current
$
54.3

 
$
52.1


11
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Discontinued Operations
Net revenues, pre-tax income/(loss) from operations, and income/(loss), net of income taxes presented as discontinued operations are as follows:
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(In millions)
2013
 
2012
 
2013
 
2012
Net revenues
 
 
 
 
 
 
 
Harrah's St. Louis
$
—

 
$
60.8

 
$
—

 
$
189.3

Macau
0.7

 
1.0

 
2.5

 
2.6

Alea Leeds
—

 
1.6

 
0.7

 
4.3

           Total net revenues
$
0.7

 
$
63.4

 
$
3.2

 
$
196.2

 
 
 
 
 
 
 
 
Pre-tax income/(loss) from operations
 
 
 
 
 
 
 
Harrah's St. Louis
$
—

 
$
4.6

 
$
(0.7
)
 
$
46.5

Macau
15.3

 
(2.8
)
 
(5.2
)
 
(112.4
)
Alea Leeds
(0.4
)
 
(1.0
)
 
(23.4
)
 
(3.5
)
           Total pre-tax income/(loss) from discontinued
 operations
$
14.9

 
$
0.8

 
$
(29.3
)
 
$
(69.4
)
 
 
 
 
 
 
 
 
Income/(loss), net of income taxes
 
 
 
 
 
 
 
Harrah's St. Louis
$
(0.1
)
 
$
2.8

 
$
(0.5
)
 
$
28.5

Macau
12.3

 
(2.6
)
 
(5.6
)
 
(99.0
)
Alea Leeds
(0.4
)
 
(1.0
)
 
(23.4
)
 
(3.5
)
           Total income/(loss) from discontinued
operations, net of income taxes
$
11.8

 
$
(0.8
)
 
$
(29.5
)
 
$
(74.0
)

Note 4 — Caesars Growth Partners Transaction
On April 23, 2013, our board of directors approved the material terms of a proposed strategic transaction, pursuant to which the Company will form a new growth-oriented entity, Caesars Growth Partners, LLC (“Growth Partners”), to be owned by the Company and participating Caesars stockholders, including the Sponsors. Participating Caesars stockholders will own their interests in Growth Partners through Caesars Acquisition Company (“CAC”), a new company created to facilitate the transaction. CAC will hold all of the voting units of Growth Partners. The Company may not sell or transfer any units of Growth Partners without the consent of CAC prior to the fifth anniversary of the issuance. From and after the fifth anniversary of the issuance, the Company may transfer units of Growth Partners to a non-competitor of Caesars Entertainment. In addition, after the fifth anniversary of the issuance, the non-voting units of Growth Partners will be exchangeable into non-voting shares of CAC with terms equivalent to the non-voting units and with rights to have such shares registered under the Securities Act of 1933.
The Company and Growth Partners will have the opportunity to work together to develop future projects. A committee of the board of directors of the Company consisting of disinterested directors will make determinations on behalf of the Company with respect to any new investment and acquisition opportunities. The Company will have the option to (1) pursue any potential project itself or (2) decline the project for itself, after which Growth Partners may elect or decline to pursue the project. The Company will have the first right to make an offer if Growth Partners plans to sell any assets acquired from the Company.
After the third anniversary of the closing of the transaction, the Company and/or its subsidiaries will have the right to acquire the voting units of Growth Partners, or at the election of CAC, the shares of CAC, subject to certain conditions, including shareholder and Board approval. Following the fifth anniversary of the closing of the transaction and until the eight years and six months anniversary of the closing of the transaction, the board of directors of CAC will have the right to cause a liquidation of Growth Partners, which means the sale or winding up of Growth Partners, or other monetization of all of its assets and the distribution of the proceeds remaining after satisfaction of all liabilities of Growth Partners to the holders of Growth Partners’ units. Unless

12
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


otherwise agreed by the holders of the non-voting units, on the eight years and six months anniversary of the closing of the transaction, if CAC has not previously exercised its liquidation right, Growth Partners shall liquidate as described above.
See Note 21, "Subsequent Events."
Note 5 — Restricted Cash
In December 2012, CEOC completed the offering of $750.0 million aggregate principal amount of 9.0% senior secured notes due 2020, the proceeds of which were placed into escrow and recorded as short-term restricted cash at December 31, 2012. On February 20, 2013, the escrow conditions were satisfied, and the cash was released from restriction.
As of September 30, 2013, short term restricted cash is primarily comprised of amounts related to interest payments on outstanding debt, and long term restricted cash primarily represents funds reserved for ongoing development projects.
Note 6 — Property and Equipment, net
Property and equipment, net consists of the following:
(In millions)
September 30, 2013
 
December 31, 2012
Land and land improvements
$
6,810.3

 
$
7,208.8

Buildings, riverboats, and improvements
8,102.9

 
8,725.7

Furniture, fixtures, and equipment
2,530.7

 
2,491.0

Construction in progress
694.8

 
378.3

 
18,138.7

 
18,803.8

Less: accumulated depreciation
(3,222.3
)
 
(3,102.1
)
 
$
14,916.4

 
$
15,701.7

Depreciation expense, which is included in depreciation and amortization, corporate expense and income/(loss) from discontinued operations in our Consolidated Condensed Statements of Operations, is as follows:
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(In millions)
2013
 
2012
 
2013
 
2012
Depreciation expense
$
131.7

 
$
188.2

 
$
438.1

 
$
571.8

Interest expense is capitalized on internally constructed assets at the applicable weighted-average borrowing rates of interest. Capitalization of interest ceases when the project is substantially complete or construction activity is suspended for more than a brief period of time.
Tangible Asset Impairments
Continuing Operations
We review the carrying value of our long-lived assets for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.
Over time, we have experienced deteriorating gaming volumes at properties in certain of our markets and, as a result, the Company continues to evaluate its options regarding its participation in those markets. In connection with these evaluations, the Company determined it was necessary to complete an assessment for impairment for certain of our properties. Upon the failure of step one of the assessment, we performed a valuation of the long-lived assets of the properties. As a result of these assessments, in September 2013, we recorded tangible asset impairments of $477.1 million and $112.3 million related to certain properties in Atlantic City and Tunica, Mississippi, respectively.  With the assistance of third party valuation experts, we estimated the fair value of the properties starting with a “Replacement Cost New” approach and then deducting appropriate amounts for both functional and economic obsolescence to arrive at the fair value estimates. These analyses are sensitive to management assumptions and the estimates of the obsolescence factors, and increases or decreases in these assumptions and estimates could have a material impact on the analyses.
We have been in negotiations with potential investors on the possible sale of a real estate project owned by the Company related to investments of the CRDA. The Company estimated the fair value of the project based on a market value approach, and in June 2013, we recorded a tangible asset impairment of $22.4 million primarily related to our investment in this real estate project.
The Company has entered into an agreement to convey the Marketplace Parcels with an appraised value of $7.3 million to the CRDA; therefore, these real estate assets are classified as held for sale as of September 30, 2013. As a result of the held for sale classification, we tested the real estate assets for recoverability during the third quarter 2013 and recorded a tangible asset impairment of $21.7 million related to the Marketplace Parcels. See Note 3, "Acquisitions, Investments, Dispositions and Divestitures."
As a result of a possible transaction involving certain of our land holdings in Biloxi, Mississippi, we tested the land holdings for recoverability during the second quarter 2013. As a result of our analysis, we recorded tangible asset impairments of $79.3 million to adjust the land holdings to fair value.
Discontinued Operations
We recorded an impairment related to our land concession in Macau in the second quarter of 2012. In response to the assets and liabilities being classified as held for sale an additional downward adjustment to fair value less cost to sell was recorded in the first quarter of 2013. In the third quarter of 2013 a portion of this adjustment was reversed to equate the book value to the final estimated sales price less cost to sell. See Note 3, "Acquisitions, Investments, Dispositions and Divestitures."
Note 7 — Goodwill and Other Intangible Assets
Each year, we perform an annual impairment assessment of goodwill and other non-amortizing intangible assets as of September 30, or more frequently if impairment indicators exist.
During the third quarter of 2013, we completed a preliminary annual assessment of goodwill as of September 30, which resulted in impairment charges of $133.3 million. These impairment charges were the result of reduced projections within our long-term operating plan. We are not able to finalize our annual impairment assessment until such time as we finalize fair value determinations, which we expect to complete during fourth quarter 2013.
For our preliminary assessment, we determined the estimated fair value of each reporting unit as a function, or multiple, of earnings before interest, taxes, depreciation and amortization (“EBITDA”), combined with estimated future cash flows discounted at rates commensurate with the capital structure and cost of capital of comparable market participants, giving appropriate consideration to the prevailing borrowing rates within the casino industry in general. We also evaluated the aggregate fair value of our reporting units and other non-operating assets in comparison to our aggregate debt and equity market capitalization as of September 30, 2013. Both EBITDA multiples and discounted cash flows are common measures used to value and buy or sell businesses in our industry.
Also during the third quarter of 2013, we completed our annual assessment of other non-amortizing intangible assets as of September 30, which resulted in impairment charges of $175.2 million, including $98.0 million related to trademarks and $77.2 million related to gaming rights. These impairment charges were the result of reduced projections associated with these intangible assets within our long-term operating plan.
As a result of the impairments on long lived assets for one of our properties in Atlantic City, we recognized an impairment charge of $11.4 million related to certain amortizing intangible assets at a property in the region.
During each of the first and second quarters of 2013, due to various factors, including changes in projected earnings, we performed interim impairment assessments of goodwill and other non-amortizing intangible assets and, as a result, we recorded impairment charges of $20.0 million and $3.0 million, respectively, related to certain gaming rights.
We determine the estimated fair values of our non-amortizing intangible assets by primarily using the Relief From Royalty Method and Excess Earnings Method under the income approach.

13
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


The following table sets forth changes in our goodwill and other intangible assets for the nine months ended September 30, 2013:
 
Amortizing
Intangible Assets
 
Non-Amortizing Intangible Assets
(In millions)
Goodwill
 
Other
Balance at December 31, 2012
$
1,027.6

 
$
3,160.3

 
$
2,958.1

Impairments
(11.4
)
 
(133.3
)
 
(198.2
)
Amortization expense
(124.4
)
 
—

 
—

Foreign currency translation
(0.1
)
 
—

 
(0.5
)
Additions
11.4

 
—

 
—

Disposals
—

 
(14.9
)
 
—

Other
(1.7
)
 
7.4

 
(0.6
)
Balance at September 30, 2013
$
901.4

 
$
3,019.5

 
$
2,758.8

During the second quarter of 2013, we recorded a $14.9 million reduction in goodwill in connection with the deconsolidation of Baluma S.A. upon the closing of the Conrad transaction. See Note 3, "Acquisitions, Investments, Dispositions and Divestitures."
The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets other than goodwill:
 
September 30, 2013
 
December 31, 2012
(Dollars in millions)
Weighted
Average
Remaining
Useful Life
(in years)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Amortizing intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
6.3
 
$
1,432.1

 
$
(699.7
)
 
$
732.4

 
$
1,456.7

 
$
(618.0
)
 
$
838.7

Contract rights
1.2
 
145.1

 
(76.4
)
 
68.7

 
145.1

 
(66.3
)
 
78.8

Patented technology
3.0
 
166.8

 
(94.5
)
 
72.3

 
156.7

 
(76.6
)
 
80.1

Gaming rights
10.8
 
42.8

 
(14.8
)
 
28.0

 
42.8

 
(12.8
)
 
30.0

Trademarks
—
 
—

 
—

 
—

 
1.7

 
(1.7
)
 
—

 
 
 
$
1,786.8

 
$
(885.4
)
 
901.4

 
$
1,803.0

 
$
(775.4
)
 
1,027.6

Non-amortizing intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
Trademarks
 
 
 
 
 
 
1,601.5

 
 
 
 
 
1,699.7

Gaming rights
 
 
 
 
 
 
1,157.3

 
 
 
 
 
1,258.4

 
 
 
 
 
 
 
2,758.8

 
 
 
 
 
2,958.1

Total intangible assets other than goodwill
 
 
 
 
 
$
3,660.2

 
 
 
 
 
$
3,985.7


Note 8—Debt
In October 2013, we completed the Caesars Entertainment Resort Properties refinancing and used the net proceeds of the offering of notes and borrowings under the term loans, together with cash on hand at the time, to retire 100% of the principal amount of loans under the mortgage and mezzanine loan agreements entered into by certain subsidiaries of the CMBS properties, repay in full all amounts outstanding under the senior secured credit facility entered into by Caesars and Caesars Linq, LLC and Caesars Octavius, LLC, each an indirect subsidiary of Caesars, and to pay related fees and expenses. See Note 21, "Subsequent Events."

14
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


The following table presents our outstanding debt as of September 30, 2013 and December 31, 2012:
Detail of Debt (Dollars in millions)
 
Final
Maturity
 
Rate(s)
 
Face Value
 
Book Value
 
Book Value
 
 
 
 
September 30, 2013
 
December 31, 2012
Credit Facilities (a)
 
 
 
 
 
 
 
 
 
 
Term Loans B1 - B3
 
2015
 
 3.18% - 3.25%
 
$
29.1

 
$
29.1

 
$
1,025.8

Term Loan B4
 
2016
 
9.50%
 
962.5

 
949.6

 
954.5

Term Loan B5
 
2018
 
4.43%
 
991.9

 
989.2

 
1,218.8

Term Loan B6
 
2018
 
5.43%
 
2,431.9

 
2,398.4

 
2,812.6

Revolving Credit Facility
 
2014
 
—
 
—

 
—

 
—

Revolving Credit Facility
 
2017
 
—
 
—

 
—

 
—

Secured Debt
 
 
 
 
 
 
 
 
 
 
Senior Secured Notes (a)
 
2017
 
11.25%
 
2,095.0

 
2,064.7

 
2,060.2

Senior Secured Notes (a)
 
2020
 
8.50%
 
1,250.0

 
1,250.0

 
1,250.0

Senior Secured Notes (a)
 
2020
 
9.00%
 
3,000.0

 
2,953.2

 
1,486.9

CMBS Financing
 
2015
(c) 
3.68%
 
4,389.0

 
4,371.1

 
4,660.5

Second-Priority Senior Secured Notes (a)
 
2018
 
12.75%
 
750.0

 
743.7

 
742.9

Second-Priority Senior Secured Notes (a)
 
2018
 
10.00%
 
4,528.1

 
2,377.7

 
2,260.2

Second-Priority Senior Secured Notes (a)
 
2015
 
10.00%
 
214.8

 
184.4

 
173.7

Chester Downs Senior Secured Notes
 
2020
 
9.25%
 
330.0

 
330.0

 
330.0

PHW Las Vegas Senior Secured Loan
 
2015
(d) 
3.04%
 
510.0

 
464.0

 
438.2

LINQ/Octavius Senior Secured Loan
 
2017
(c) 
9.25%
 
450.0

 
447.0

 
446.5

Bill's Gamblin' Hall & Saloon Credit Facility
 
2019
 
11.00%
 
185.0

 
181.6

 
181.4

CBAC
 
2020
 
8.25%
 
225.0

 
218.5

 
—

Subsidiary-Guaranteed Debt (b)
 
 
 
 
 
 
 
 
 
 
Senior Notes
 
2016
 
10.75%
 
478.6

 
478.6

 
478.6

Senior PIK Toggle Notes
 
2018
 
10.75% - 11.50%
 
10.9

 
10.9

 
9.7

Unsecured Senior Debt (a)
 
 
 
 
 
 
 
 
 
 
5.375%
 
2013
 
5.375%
 
80.7

 
79.5

 
116.6

7.0%
 
2013
 
7.00%
 
—

 
—

 
0.6

5.625%
 
2015
 
5.625%
 
364.4

 
322.6

 
306.7

6.5%
 
2016
 
6.50%
 
248.7

 
209.5

 
200.9

5.75%
 
2017
 
5.75%
 
147.9

 
113.3

 
108.7

Floating Rate Contingent Convertible
Senior Notes
 
2024
 
0.57%
 
0.2

 
0.2

 
0.2

Other Unsecured Borrowings
 
 
 
 
 
 
 
 
 
 
Special Improvement District Bonds
 
2037
 
5.30%
 
62.9

 
62.9

 
64.3

Other
 
2016
 
0.00% - 6.00%
 
84.7

 
84.7

 
47.7

Capitalized Lease Obligations
 
to 2017
 
3.57% - 11.00%
 
25.8

 
25.8

 
35.9

Total Debt
 
 
 
 
 
23,847.1

 
21,340.2

 
21,412.1

Current Portion of Long-Term Debt
 
 
 
 
 
(167.6
)
 
(166.4
)
 
(879.9
)
Long-Term Debt
 
 
 
 
 
$
23,679.5

 
$
21,173.8

 
$
20,532.2

___________________
(a)
Guaranteed by Caesars Entertainment.
(b)  
Guaranteed by Caesars Entertainment and certain wholly owned subsidiaries of CEOC.
(c)  
Refinanced October 2013. See Note 21, "Subsequent Events."
(d)  
Based on our ability and intent, assumes the exercise of extension options to move the maturity from 2013 to 2015, subject to certain conditions.

15
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


As of September 30, 2013 and December 31, 2012, book values are presented net of unamortized discounts of $2,506.9 million and $2,691.0 million, respectively.
Current Portion of Long-Term Debt
Our current maturities of long-term debt include required interim principal payments on certain term loans under the senior secured credit facilities, the special improvement district bonds, other unsecured borrowings and capitalized lease obligations. The current portion of long-term debt also includes $26.0 million of 10.0% second-priority senior secured notes due 2018, $24.9 million of 10.0% second-priority senior secured notes due 2015 and $80.7 million of 5.375% unsecured senior debt due 2013. Our current maturities exclude the PHW Las Vegas senior secured loan due in December 2013 based upon our ability and intent to exercise our options to extend the maturities to 2015.
The current portion of long-term debt at December 31, 2012 includes $750.0 million of 9.0% notes issued in December 2012 pending satisfaction of certain escrow conditions. On February 20, 2013, the escrow conditions were satisfied and the debt obligation was reclassified to long-term.
CEOC Credit Facilities
In connection with the Acquisition, CEOC entered into the senior secured credit facilities (the “Credit Facilities”). This financing is neither secured nor guaranteed by Caesars’ other direct, wholly owned subsidiaries, including the subsidiaries that own properties that are security for the CMBS Financing, as defined in our 2012 10-K.
In January and February 2013, CEOC converted $133.9 million aggregate principal amount of original maturity revolver commitments held by consenting lenders to Term B-6 Loans and terminated $133.9 million principal amount of revolving commitments of extending lenders.
In connection with the February 2013 notes offering described in the CEOC Notes section below, CEOC received the requisite lenders’ consent and entered into a bank amendment to its Credit Facilities to, among other things: (i) use the net cash proceeds of the February 2013 notes offering to repay a portion of CEOC’s existing term loans as described in the CEOC Notes section below; (ii) obtain up to $75.0 million of extended revolving facility commitments with a maturity of January 28, 2017, which received all required regulatory approvals in April 2013, (iii) increase the accordion capacity under the Credit Facilities by an additional $650.0 million (which may be used to, among other things, establish extended revolving facility commitments under the Credit Facilities); (iv) modify the calculation of the senior secured leverage ratio for purposes of the maintenance test under the Credit Facilities to exclude the notes issued in February 2013; and (v) modify certain other provisions of the Credit Facilities.
As of September 30, 2013, our Credit Facilities provide for senior secured financing of up to $4,630.8 million, consisting of (i) senior secured term loans in an aggregate principal amount of $4,415.4 million and (ii) a senior secured revolving credit facility in an aggregate principal amount of up to $215.5 million, with $109.4 million maturing January 28, 2014 and $106.1 million maturing on January 28, 2017, including both a letter of credit sub-facility and a swingline loan sub-facility. The term loans under the Credit Facilities currently require scheduled quarterly payments of $2.5 million, with the balance due at maturity. As of September 30, 2013, the senior secured term loans are comprised of $29.1 million maturing on January 28, 2015, $962.5 million maturing on October 31, 2016, and $3,423.8 million maturing on January 28, 2018. As of September 30, 2013, $100.5 million of the revolving credit facility is committed to outstanding letters of credit. After consideration of the letter of credit commitments, $114.9 million of additional borrowing capacity was available to the Company under its revolving credit facility as of September 30, 2013.
CEOC Notes
Issuances
In December 2012, CEOC completed the offering of $750.0 million aggregate principal amount of 9.0% senior secured notes due 2020. On February 20, 2013, when the proceeds were released from escrow, CEOC used $350.0 million of the proceeds to repay a portion of the existing term loans under the Credit Facilities at par.
In February 2013, CEOC completed the offering of $1,500.0 million aggregate principal amount of 9.0% senior secured notes due 2020. On March 27, 2013, when the proceeds were released from escrow, CEOC used $1,433.3 million of the proceeds to repay a portion of the existing term loans under the Credit Facilities at par. As a result of these repayments, we recognized a loss on early extinguishment of debt of $29.4 million during the first quarter of 2013.

16
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Open Market Purchases
During the third quarter of 2013, we purchased $18.3 million of face value of CEOC 5.375% unsecured senior notes for $18.3 million.  In connection with this transaction, we recorded a loss on early extinguishments of debt of $0.2 million, net of discounts. The notes were repurchased by a non-CEOC subsidiary of Caesars Entertainment and are still outstanding for purposes of CEOC.
CMBS Financing and Open Market Purchases
As previously disclosed, in October 2013 we completed the Caesars Entertainment Resort Properties refinancing and used the net proceeds of the offering of notes and borrowings under term loans, together with cash on hand at the time, to retire 100% of the principal amount of loans under the mortgage and mezzanine loan agreements entered into by certain subsidiaries of the CMBS properties, repay in full all amounts outstanding under the senior secured credit facility entered into by Caesars and Caesars Linq, LLC and Caesars Octavius, LLC, each an indirect subsidiary of Caesars, and to pay related fees and expenses. See Note 21, "Subsequent Events."
In February 2013, we paid an extension fee of $23.3 million and exercised the option to extend the maturity of the CMBS Financing to 2014. As part of the extension, we entered into a new interest rate cap agreement. See Note 9, "Derivative Instruments."
In June 2013, we purchased $225.0 million of face value of CMBS debt for $183.7 million, recognizing a pre-tax gain of $39.0 million, net of deferred finance charges.
In August 2013, we purchased $49.8 million of aggregate face value of CMBS debt for $36.0 million, recognizing a pre-tax gain of $13.4 million, net of discount and deferred finance charges.
Horseshoe Baltimore Financing
On July 2, 2013, CBAC Borrower, LLC (“CBAC”), a joint venture among Caesars Baltimore Investment Company, LLC (a wholly owned indirect subsidiary of CEOC), Rock Gaming Mothership LLC, CVPR Gaming Holdings, LLC, STRON-MD Limited Partnership and PRT Two, LLC, entered into a credit agreement (the “Baltimore Credit Facility”) in order to finance the acquisition of land in Baltimore, Maryland and the construction of the Horseshoe Baltimore and a garage (collectively, the “Baltimore Development”).
The Baltimore Credit Facility provides for (i) a $300.0 million senior secured term facility with a seven-year maturity, which is comprised of a $225.0 million facility that was funded upon the closing of the Baltimore Credit Facility, a $37.5 million delayed draw facility available from the closing of the Baltimore Credit Facility until the 12-month anniversary of the closing and a $37.5 million delayed draw facility available until the 18-month anniversary of the closing and (ii) a $10.0 million senior secured revolving facility with a five-year maturity. The Baltimore Credit Facility is secured by substantially all material assets of CBAC and its wholly owned domestic subsidiaries.
Concurrently with the closing of the Baltimore Credit Facility, CBAC also entered into a term loan facility that provides for up to $30.0 million of equipment financing (the “Baltimore FF&E Facility”). Under the Baltimore FF&E Facility, CBAC may use funds from the facility to finance or reimburse the purchase price and certain related costs of furniture, furnishings and equipment to be used in the Baltimore Development.
Restrictive Covenants and Other Matters
Certain of our borrowings have covenants and requirements that include, among other things, the maintenance of specific levels of financial ratios. Failure to comply with these covenants can result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions, or cause an event of default. Specifically, the Credit Facilities require CEOC to maintain a senior secured leverage ratio of no more than 4.75 to 1.0, which is the ratio of senior first priority secured debt to last twelve months ("LTM") Adjusted EBITDA - Pro Forma - CEOC Restricted. After giving effect to the February 2013 bank amendment to the Credit Facilities discussed above, this ratio excludes $3,700.0 million of first priority senior secured notes and up to $350.0 million aggregate principal amount of consolidated debt of subsidiaries that are not wholly owned. For purposes of calculating the senior secured leverage ratio, the amount of senior first priority secured debt is reduced by the amount of unrestricted cash on hand. As of September 30, 2013, CEOC's senior secured leverage ratio was 4.36 to 1.0.

17
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


In addition, certain covenants contained in CEOC's senior secured credit facilities and indentures covering its first priority senior secured notes and second priority senior secured notes restrict our ability to take certain actions such as incurring additional debt or making acquisitions if we are unable to meet a fixed charge coverage ratio (LTM Adjusted EBITDA - Pro Forma - CEOC Restricted to fixed charges) of at least 2.0 to 1.0, a total first priority secured leverage ratio (first priority senior secured debt to LTM Adjusted EBITDA - Pro Forma - CEOC Restricted) of no more than 4.5 to 1.0, and/or a consolidated leverage ratio (consolidated total debt to LTM Adjusted EBITDA - Pro Forma - CEOC Restricted) of no more than 7.25 to 1.0. As of September 30, 2013, CEOC's total first priority secured leverage ratio and consolidated leverage ratio were 7.30 to 1.0 and 13.44 to 1.0, respectively. For the twelve months ended September 30, 2013, CEOC's LTM Adjusted EBITDA - Pro Forma - CEOC Restricted was insufficient to cover fixed charges by $641.9 million. For purposes of calculating the fixed charge coverage ratio, fixed charges includes consolidated interest expense less interest income and any cash dividends paid on preferred stock (other than amounts eliminated in consolidation). For purposes of calculating the total first priority secured leverage ratio and the consolidated leverage ratio, the amounts of first priority senior secured debt and consolidated total debt, respectively, are reduced by the amount of unrestricted cash on hand. The covenants that provide for the fixed charge coverage ratio, total first priority secured leverage ratio, and consolidated leverage ratio described in this paragraph are not maintenance covenants.
Note 9 — Derivative Instruments
Derivative Instruments – Interest Rate Swap Agreements
We use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. As of September 30, 2013, we have entered into eight interest rate swap agreements for notional amounts totaling $5,750.0 million. The difference to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense for the related debt. Changes in the variable interest rates to be paid or received pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows.
The major terms of the interest rate swap agreements as of September 30, 2013 are as follows:
Effective Date
 
Notional Amount
(In millions)
 
Fixed Rate
Paid
 
Variable Rate Received
 
Next Reset Date
 
Maturity Date
April 25, 2011
 
$
250.0

 
1.351
%
 
0.179
%
 
October 25, 2013
 
January 25, 2015
April 25, 2011
 
250.0

 
1.347
%
 
0.179
%
 
October 25, 2013
 
January 25, 2015
April 25, 2011
 
250.0

 
1.350
%
 
0.179
%
 
October 25, 2013
 
January 25, 2015
January 25, 2011
 
1,000.0

 
3.068
%
 
0.179
%
 
October 25, 2013
 
January 25, 2015
April 25, 2011
 
1,000.0

 
3.150
%
 
0.179
%
 
October 25, 2013
 
January 25, 2015
January 25, 2011
 
1,000.0

 
3.750
%
 
0.179
%
 
October 25, 2013
 
January 25, 2015
April 25, 2011
 
1,000.0

 
3.264
%
 
0.179
%
 
October 25, 2013
 
January 25, 2015
January 25, 2011
 
1,000.0

 
3.814
%
 
0.179
%
 
October 25, 2013
 
January 25, 2015
The variable rate on our interest rate swap agreements did not materially change as a result of the October 25, 2013 reset.
Derivative Instruments – Interest Rate Cap Agreements
In February 2013, in conjunction with exercising the option to extend the maturity of the CMBS Financing to 2014, we entered into a new interest rate cap agreement. The interest rate cap agreement, which is effective from February 13, 2013 and terminates February 13, 2015, is for a notional amount of $4,664.1 million at a LIBOR cap rate of 4.5%. Any future changes in fair value of the interest rate cap will be recognized in interest expense during the period in which the changes in value occur.
Derivative Instruments – Other
During the second quarter of 2012, the Company entered into a written put option (the “Option”) for certain preferred equity interests in Sterling Suffolk Racecourse, LLC ("Sterling Suffolk"), owner of Suffolk Downs racecourse in East Boston, Massachusetts. The potential future aggregate cash payments of $5.5 million as of September 30, 2013 related to the Option may occur from time to time. Based on the structure of this security as a written put option, the obligation for these potential cash payments is not reflected in our Consolidated Condensed Balance Sheets. Additionally, the Option is recorded in our Consolidated Condensed Balance Sheets at its fair value, which was de minimis as of September 30, 2013. See Note 21,"Subsequent Events."

18
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Derivative Instruments – Impact on Consolidated Condensed Financial Statements
None of our derivative instruments are offset, and the fair values of assets and liabilities are recognized in the Consolidated Condensed Balance Sheets. The following table represents the fair values of derivative instruments in the Consolidated Condensed Balance Sheets as of September 30, 2013 and December 31, 2012:
 
(In millions)
 
 
 
Asset Derivatives
 
Liability Derivatives
  
 
 
 
Fair Value
 
Fair Value
Derivatives instruments
 
Balance
Sheet
Location
 
September 30, 2013
 
December 31, 2012
 
September 30, 2013
 
December 31, 2012
Interest rate swaps
 
Deferred credits and other
 
$
—

 
$
—

 
$
(203.0
)
 
$
(306.4
)
Interest rate caps
 
Deferred charges and other
 
*

 
*

 
—

 
—

Total
 
 
 
$
—

 
$
—

 
$
(203.0
)
 
$
(306.4
)
___________________ 
*
Amount rounds to zero.
The following table represents the effect of the designated interest rate contracts in the Consolidated Condensed Statements of Operations:
(In millions)
 
 
 
Quarter Ended
September 30,
 
Nine Months Ended
September 30,
Derivatives designated as hedging instruments
 
Location of (Gain) or Loss Recognized in Net Loss
 
2013
 
2012
 
2013
 
2012
Amount of (gain) or loss reclassified from AOCL into net loss (effective portion)
 
Interest expense
 
$
—

 
$
6.9

 
$
3.9

 
$
21.2

The following table represents the effect of the non-designated interest rate contracts in the Consolidated Condensed Statements of Operations:
(In millions)
 
 
 
Quarter Ended
September 30,
 
Nine Months Ended
September 30,
Derivatives not designated as hedging instruments
 
Location of (Gain) or Loss Recognized in Net Loss
 
2013
 
2012
 
2013
 
2012
Unrealized (gains)/losses
 
Interest expense
 
$
(34.1
)
 
$
(6.2
)
 
$
(100.6
)
 
$
10.9

Derivative settlements
 
Interest expense
 
43.4

 
42.6

 
128.3

 
126.6

Total
 
 
 
$
9.3

 
$
36.4

 
$
27.7

 
$
137.5

The derivative settlements under the terms of the interest rate swap agreements are recognized as interest expense and are paid monthly.
At September 30, 2013, our variable-rate debt, excluding $5,750.0 million of variable-rate debt hedged using interest rate swap agreements, represents 19% of our total debt, while our fixed-rate debt is 81% of our total debt.
Note 10 — Stockholders' Equity, Noncontrolling Interests and Variable Interest Entities
Common Stock
In March 2012, the Company filed a prospectus with the SEC, as part of a registration statement, to sell shares of common stock, up to a maximum aggregate offering price of $500.0 million. In April 2012, the Company entered into an equity distribution agreement with Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC whereby the Company may issue and sell up to 10.0 million shares of the Company's common stock from time to time. During the three and nine months ended September 30, 2013, the Company issued 155,000 and 1,055,493 shares, respectively, with aggregate offering proceeds of $2.8 million and $15.4 million, respectively. During the three and nine months ended September 30, 2012, the Company issued 15,000 shares for aggregate offering proceeds of $0.2 million. As of September 30, 2013, a total of 1,070,493 shares had been issued for total proceeds of $15.6 million.

19
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Pursuant to an underwriting agreement entered into on September 25, 2013, Caesars issued 10.3 million shares of its common stock at a price of $19.40 per share to the underwriter. The transaction closed on October 1, 2013. See Note 21, "Subsequent Events."
Noncontrolling Interests
CBAC Gaming, LLC, the Company-led consortium developing Horseshoe Casino Baltimore, received additional capital contributions from minority shareholders of $35.3 million in the nine months ended September 30, 2013. The investment increased the Company's noncontrolling interest equity for partner contributions to the development of the project, net of pre-opening losses of $6.3 million also allocated to noncontrolling interest equity.
Financing for the project was obtained and the development broke ground in July 2013. See Note 8, "Debt."

Note 11 — Reclassifications out of Accumulated Other Comprehensive Loss
Reclassifications out of AOCL for the three and nine months ended September 30, 2013 include the following:
 
Quarter Ended September 30, 2013
 
Nine Months Ended September 30, 2013
(In millions)
Defined Benefit Plan Adjustments
 
Foreign Currency Translation Adjustments
 
Losses on Derivative Instruments
 
Defined Benefit Plan Adjustments
 
Foreign Currency Translation Adjustments
 
Losses on Derivative Instruments
Amount reclassified from AOCL to interest expense, net of capitalized interest
$
0.2

 
$
—

 
$
—

 
$
0.6

 
$
—

 
$
3.9

Amount reclassified from AOCL to write-downs, reserves, and project opening costs, net of recoveries
—

 
—

 
—

 
—

 
(4.1
)
 
—

Amount reclassified from AOCL to loss/(income) from discontinued operations
—

 
—

 
—

 
—

 
(2.2
)
 
—

Related tax impact
(0.1
)
 
—

 
—

 
(0.2
)
 
—

 
(1.4
)
Reclassification, net of income taxes
$
0.1

 
$
—

 
$
—

 
$
0.4

 
$
(6.3
)
 
$
2.5

Reclassifications out of AOCL for the three and nine months ended September 30, 2012 include the following:
 
Quarter Ended September 30, 2012
 
Nine Months Ended September 30, 2012
(In millions)
Losses on Derivative Instruments
 
Losses on Derivative Instruments
Amount reclassified from AOCL to interest expense, net of capitalized interest
$
6.9

 
$
21.2

Related tax impact
(2.5
)
 
(7.7
)
Reclassification, net of income taxes
$
4.4

 
$
13.5

Note 12 — Casino Promotional Allowances
The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as casino promotional allowances.
The estimated retail value of such casino promotional allowances is included in operating revenues as follows:
 
Quarter Ended September 30,
 
Nine Months Ended September 30,
(In millions)
2013
 
2012
 
2013
 
2012
Food and Beverage
$
157.0

 
$
166.8

 
$
469.9

 
$
497.3

Rooms
119.8

 
127.7

 
343.0