Caesars Entertainment Corporation
CAESARS ENTERTAINMENT Corp (Form: 10-K, Received: 03/15/2013 15:13:05)


SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
  FORM 10-K  
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED December 31, 2012
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-10410
 
CAESARS ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
 
Delaware
 
62-1411755
(State of incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
One Caesars Palace Drive, Las Vegas, Nevada
 
89109
(Address of principal executive offices)
 
(Zip code)
Registrant’s telephone number, including area code:
(702) 407-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class                  Name of each exchange on which registered     
Common stock, $0.01 par value             NASDAQ Global Select Market

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   o     No   x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   o     No   x
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   x
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 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
Smaller reporting company   o
 
 
(Do not check if a smaller
reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   o     No   x
The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2012 was $429.9 million .
As of March 1, 2013 , the registrant had 125,362,197 shares of Common Stock outstanding.




CAESARS ENTERTAINMENT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
Page
No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


We have proprietary rights to a number of trademarks used in this Form 10-K that are important to our business, including, without limitation, Caesars Entertainment, Caesars Palace, Harrah’s, Total Rewards, World Series of Poker, Horseshoe, Paris Las Vegas, Flamingo Las Vegas, and Bally's Las Vegas. We have omitted the ® and ™ trademark designations for such trademarks named in this Form 10-K.


2



PART I

ITEM 1.    Business
Overview
Caesars Entertainment Corporation (referred to in this discussion, together with its consolidated subsidiaries where appropriate, as “Caesars,” “Caesars Entertainment,” the “Company,” “we,” “our” and “us”), a Delaware corporation, is the world's most diversified casino-entertainment provider and the most geographically diverse U.S. casino-entertainment company. 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 December 31, 2012 , we owned, operated, or managed, through various subsidiaries, 52 casinos in 13 U.S. states and seven countries. The majority of these casinos operate in the United States, primarily under the Caesars, Harrah’s, and Horseshoe brand names, and in England. Our casino entertainment facilities include 33 land-based casinos, 11 riverboat or dockside casinos, three managed casinos on Indian lands in the United States, one managed casino in Cleveland, Ohio, one managed casino in Canada, one casino combined with a greyhound racetrack, one casino combined with a thoroughbred racetrack, and one casino combined with a harness racetrack. Our land-based casinos include nine in England, two in Egypt, one in Scotland, one in South Africa and one in Uruguay. As of December 31, 2012 , our facilities had an aggregate of approximately three million square feet of gaming space and approximately 43,000 hotel rooms. Our industry-leading customer loyalty program, Total Rewards, has over 45 million members. We use the Total Rewards system to market promotions and to generate customer play across our network of properties. In addition, we own an online gaming business, providing for real money casino, bingo, and poker games in the United Kingdom, alliances with online gaming providers in Italy and France, "play for fun" offerings in other jurisdictions, social games on Facebook and other social media websites, and mobile application platforms. We also own and manage the World Series of Poker tournament and brand.
We were incorporated on November 2, 1989 in Delaware and operated under predecessor companies prior to such date. Our principal executive offices are located at One Caesars Palace Drive, Las Vegas, Nevada 89109, telephone (702) 407-6000.
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, hereinafter referred to as the “Acquisition,” valued at $30.7 billion , including the assumption of $12.4 billion of debt, and the incurrence of $1.0 billion of acquisition costs. Subsequent to the Acquisition, our stock was no longer publicly traded.
Effective February 8, 2012 , as the result of our public offering, our common stock trades on the NASDAQ Global Select Market ("NASDAQ") under the symbol “ CZR .” In connection with the public offering, we effected a 1.742 -for- one split of our common stock. Unless otherwise stated, all applicable share and per-share data presented herein have been retroactively adjusted to give effect to this stock split.
Description of Business
We have established a rich history of industry-leading growth and expansion since we commenced casino operations in 1937 . We own, operate or manage casino entertainment facilities in more areas throughout the United States than any other participant in the casino industry. In addition to casinos, our facilities typically include hotel and convention space, restaurants, and non-gaming entertainment facilities. The descriptions below are as of December 31, 2012 , except where otherwise noted.
In southern Nevada, Caesars Palace, Harrah’s Las Vegas, Rio All-Suite Hotel & Casino, Bally’s Las Vegas, Flamingo Las Vegas, Paris Las Vegas, Planet Hollywood Resort and Casino, The Quad Resort & Casino (formerly the Imperial Palace Hotel and Casino), Bill’s Gamblin’ Hall & Saloon, and Hot Spot Oasis are located in Las Vegas and draw customers from throughout the United States. Harrah’s Laughlin is located near both the Arizona and California borders and draws customers primarily from the southern California and Phoenix metropolitan areas and, to a lesser extent, from throughout the U.S. via charter aircraft. Bill's Gamblin' Hall & Saloon temporarily closed in early February 2013 to accommodate the renovations discussed below in the Summary of 2012 Events. The renovated hotel, casino, and restaurant are expected to open in December 2013 and the dayclub/nightclub is expected to open in April 2014.
In northern Nevada, Harrah’s Lake Tahoe and Harveys Resort & Casino are located near Lake Tahoe and Harrah’s Reno is located in downtown Reno. These facilities draw customers primarily from northern California, the Pacific Northwest, and Canada.

3



Our Atlantic City casinos, Harrah’s Resort Atlantic City, Showboat Atlantic City, Caesars Atlantic City, and Bally’s Atlantic City, draw customers primarily from the Philadelphia metropolitan area, New York, and New Jersey.
Harrah’s Philadelphia (formerly Harrah's Chester) is a combination harness racetrack and casino located approximately six miles south of Philadelphia International Airport and draws customers primarily from the Philadelphia metropolitan area and Delaware.
Our Chicagoland dockside casinos, Harrah’s Joliet in Joliet, Illinois, and Horseshoe Hammond in Hammond, Indiana, draw customers primarily from the greater Chicago metropolitan area. In southern Indiana, we own Horseshoe Southern Indiana, a dockside casino complex located in Elizabeth, Indiana, which draws customers primarily from northern Kentucky, including the Louisville metropolitan area, and southern Indiana, including Indianapolis.
In Louisiana, we own Harrah’s New Orleans, a land-based casino located in downtown New Orleans, which attracts customers primarily from the New Orleans metropolitan area. In northwest Louisiana, Horseshoe Bossier City, a dockside casino, and Harrah’s Louisiana Downs, a thoroughbred racetrack with slot machines, both located in Bossier City, cater to customers in northwestern Louisiana and east Texas, including the Dallas/Fort Worth metropolitan area.
On the Mississippi gulf coast, we own the Grand Casino Biloxi, located in Biloxi, Mississippi, which caters to customers in southern Mississippi, southern Alabama, and northern Florida.
Harrah’s North Kansas City dockside casino draws customers from the Kansas City metropolitan area. Harrah’s Metropolis is a dockside casino located in Metropolis, Illinois, on the Ohio River, drawing customers from southern Illinois, western Kentucky, and central Tennessee.
Horseshoe Tunica, Harrah’s Tunica, and Tunica Roadhouse Hotel & Casino, dockside casino complexes located in Tunica, Mississippi, are approximately 30 miles from Memphis, Tennessee and draw customers primarily from the Memphis area and, to a lesser extent, from throughout the U.S. via charter aircraft.
Horseshoe Casino and Bluffs Run Greyhound Park, a land-based casino and pari-mutuel facility, and Harrah’s Council Bluffs Casino & Hotel, a dockside casino facility, are located in Council Bluffs, Iowa, across the Missouri River from Omaha, Nebraska. At Horseshoe Casino and Bluffs Run Greyhound Park, we own the assets other than gaming equipment, and lease these assets to the Iowa West Racing Association, or IWRA, a nonprofit corporation, and we manage the facility for the IWRA under a management agreement expiring in October 2024. Iowa law requires that a qualified nonprofit corporation hold Bluffs Run’s gaming and pari-mutuel licenses and own its gaming equipment. The license to operate Harrah’s Council Bluffs Casino & Hotel is held jointly with IWRA, the qualified sponsoring organization. The Sponsorship and Operations Agreement between IWRA and us terminates on December 31, 2015, subject to our option to extend the term of the agreement for five succeeding three year terms, provided we are not in default.
The Conrad Resort & Casino located in Punta Del Este, Uruguay (the “Conrad”), draws customers primarily from Argentina and Uruguay. In November 2012, the Company announced that it had entered into a definitive agreement with Enjoy S.A. ("Enjoy") to form a strategic relationship in Latin America. Under the terms of the agreement, Enjoy will acquire 45% of Baluma S.A., our subsidiary which owns and operates the Conrad, and we will become a 10% shareholder in Enjoy upon consummation of the agreement. Upon the closing of the transaction, which is subject to certain conditions, including the receipt of all regulatory and governmental approvals, Enjoy will assume primary responsibility for management of the Conrad. Enjoy will have the option to acquire the remaining stake in Baluma S.A. between years three and five following closing. The closing of the transaction remains subject to a number of conditions, including regulatory and governmental approvals in both Uruguay and Chile.
We own four casinos in London: the Sportsman, the Golden Nugget, The Playboy Club London, and The Casino at the Empire. Our casinos in London draw customers primarily from the London metropolitan area as well as international visitors. We also own Alea Nottingham, Alea Glasgow, Alea Leeds, Manchester 235, Rendezvous Brighton, and Rendezvous Southend-on-Sea in the provinces of the United Kingdom, which primarily draw customers from their local areas. Pursuant to a concession agreement, we also operate two casinos in Cairo, Egypt, The London Club Cairo (which is located at the Ramses Hilton) and Caesars Cairo (which is located at the Four Seasons Cairo), which draw customers primarily from other countries in the Middle East. Emerald Safari, located in the province of Gauteng in South Africa, draws customers primarily from South Africa. We closed our Alea Leeds casino on March 4, 2013.
We own and operate Bluegrass Downs, a harness racetrack located in Paducah, Kentucky.

4



We earn fees through our management of three casinos for Indian tribes:
Harrah’s Phoenix Ak-Chin, located near Phoenix, Arizona, which we manage for the Ak-Chin Indian Community under a management agreement that expires in December 2014. Harrah’s Phoenix Ak-Chin draws customers from the Phoenix metropolitan area;
Harrah’s Cherokee Casino and Hotel, which we manage for the Eastern Band of Cherokee Indians on their reservation in Cherokee, North Carolina under a management contract that expires in November 2018. Harrah’s Cherokee draws customers from eastern Tennessee, western North Carolina, northern Georgia and South Carolina; and
Harrah’s Rincon Casino and Resort, located near San Diego, California, which we manage for the Rincon San Luiseno Band of Mission Indians under a management agreement that expires in November 2013. Harrah’s Rincon draws customers from the San Diego metropolitan area and Orange County, California.
We also earn fees through our management of the following casinos:
We manage Caesars Windsor, located in Windsor, Ontario, which draws customers primarily from the Detroit metropolitan area.
Horseshoe Cleveland casino in Ohio, which we manage for Rock Ohio Caesars LLC (“ROC”), a venture with Rock Ohio Ventures, LLC (“Rock Gaming”), in which we have a 20% equity interest. We manage the property for a fee under a management agreement that expires in May 2032.
Subsequent to its opening on March 4, 2013, we manage the Horseshoe Cincinnati casino in Ohio for ROC for a fee under a management agreement that will expire in March 2033.
As more fully discussed in Note 3 , " Acquisitions, Investments, Dispositions and Divestitures ," in Item 8 of this report, in August 2012, we sold a 53.39% interest in Thistledown Racetrack, LLC (“Thistledown”), a thoroughbred racing facility in Cleveland, Ohio, to Rock Gaming and contributed the remaining 46.61% interest in Thistledown to ROC in exchange for additional equity interests in ROC. ROC wholly owns the operation and once it commences video lottery terminal ("VLT") operations we will manage the property for a fee under a management agreement that will expire on the 20th anniversary of commencing such VLT operations. In May 2012, we also contributed our 50% interest in Turfway Park LLC which is the owner of the Turfway Park thoroughbred racetrack in Boone County, Kentucky, to ROC in exchange for additional equity interests in ROC. Immediately subsequent to these transactions, Rock Gaming purchased a portion of equity interests in ROC from us in order to retain their 80% ownership interest in ROC. Turfway Park LLC, also owns a minority interest in Kentucky Downs LLC, which is the owner of the Kentucky Downs racetrack located in Simpson County, Kentucky.
We have a minority interest in Sterling Suffolk Racecourse, LLC ("Suffolk Downs"), which owns a horse-racing track in Boston, Massachusetts, and the right to manage a potential future gaming facility. During 2012 , the Company acquired a $28.1 million preferred equity interest in Suffolk Downs.
In July 2012, a consortium led by the Company was awarded the license to operate a casino in downtown Baltimore, Maryland. In October 2012, Caesars entered into definitive agreements with Rock Gaming, CVPR Gaming Holdings, LLC, The Stronach Group and Brown Capital Management to form a venture that will build and own the casino. Subject to regulatory approvals and receipt of project financing, Caesars expects to begin construction of the casino in the first half of 2013 and to open the casino in the middle of 2014.
Caesars Interactive Entertainment, Inc. ("CIE"), which is a majority-owned subsidiary of Caesars Entertainment, owns the World Series of Poker ("WSOP") tournaments, and we license trademarks for a variety of products and businesses related to this brand. We also offer real money online gaming in the United Kingdom under the WSOP and Caesars brands, as well as alliances with online poker providers in France and Italy. In addition, we offer online “play for fun” casino genre games to residents globally online, through Facebook and other social networks, and on iOS and Android mobile devices. In December 2012, CIE received an interactive operator's license for online poker in Nevada. Going forward, we intend to offer real money gaming in jurisdictions where it is legal.
We also own and operate a golf course on 175 acres of prime real estate through a land concession on the Cotai strip in Macau. In the fourth quarter of 2012, we began discussions with interested investors on a sale of the entities holding the land concession. We cannot assure you that we will be able to sell the entities holding the land concession, if at all.
Additional information about our casino entertainment properties is set forth below in Item 2, “Properties.”

5



Sales and Marketing
We believe that our North American distribution system of casino entertainment provides us the ability to capture a disproportionate share of our customers’ entertainment wallet when they travel among markets, which is core to our cross-market strategy. In addition, we have several multi-property markets like Las Vegas, Atlantic City, and Tunica, and we have seen increased revenue from customers visiting multiple properties in the same market. We believe our industry-leading customer loyalty program, Total Rewards, in conjunction with this distribution system, allows us to capture a growing share of our customers’ entertainment budget and compete more effectively.
Our Total Rewards program is structured in tiers, providing customers an incentive to consolidate their entertainment spend at our casinos. Total Rewards customers are able to earn Reward Credits at essentially all of our casino entertainment facilities located in the U.S. and Canada for on-property entertainment expenses, including gaming, hotel, dining, and retail shopping. Total Rewards members can also redeem Reward Credits for on-property amenities or other off-property items such as merchandise, gift cards, and travel. Depending on their level of play with us in a calendar year, customers earn status within the Total Rewards program, designated as Gold, Platinum, Diamond, or Seven Stars customers, each with increasing sets of benefits and privileges.
Separately, customers are provided promotional offers and rewards based on the ways that they choose to engage with us. These benefits encourage new customers to join Total Rewards and provide existing customers with incentives to consolidate their entertainment spend at our casinos.
We have developed a database containing information about our customers, aspects of their casino gaming play, and their preferred spending choices outside of gaming. We use this information for marketing promotions, including through direct mail campaigns, the use of electronic mail, our website, mobile devices, social media, and interactive slot machines.
Patents and Trademarks
The development of intellectual property is part of our overall business strategy, and we regard our intellectual property to be an important element of our success. While our business as a whole is not substantially dependent on any one patent or combination of several of our patents or other intellectual property, we seek to establish and maintain our proprietary rights in our business operations and technology through the use of patents, copyrights, trademarks, and trade secret laws. We file applications for and obtain patents, copyrights, and trademarks in the United States and in foreign countries where we believe filing for such protection is appropriate. We also seek to maintain our trade secrets and confidential information by nondisclosure policies and through the use of appropriate confidentiality agreements. At December 31, 2012, we had 28 active U.S. cases (22 issued patents, 6 pending) and 8 active foreign cases (5 issued patents, 3 pending). The U.S. cases have patent terms that variously expire between 2015 and 2030.
We have not applied for patents or the registration of all of our technology or trademarks, as the case may be, and may not be successful in obtaining the patents and trademarks for which we have applied. Despite our efforts to protect our proprietary rights, parties may infringe our patents and use information that we regard as proprietary, and our rights may be invalidated or unenforceable. The laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the United States. In addition, others may be able independently to develop substantially equivalent intellectual property.
We hold the following trademarks used in this document: Harrah's, Caesars, Grand Biloxi, Bally's, Flamingo, Paris, Caesars Palace, Rio, Showboat, Bill's, Harveys, Total Rewards, Bluffs Run, Louisiana Downs, Reward Credits, Horseshoe, Seven Stars, Slotomania, Tunica Roadhouse, The Quad Resort & Casino, WSOP and World Series of Poker. Trademark rights are perpetual provided that the mark remains in use by us. In addition, we hold a trademark license for Planet Hollywood used in connection with the Planet Hollywood Resort & Casino in Las Vegas, NV, which will expire on February 19, 2045. We consider all of these marks, and the associated name recognition, to be valuable to our business.

6



Competition
The casino entertainment business is highly competitive and characterized by competitors that vary considerably by their size, quality of facilities, number of operations, brand identities, marketing and growth strategies, financial strength and capabilities, level of amenities, management talent, and geographic diversity. In most markets, we compete directly with other casino facilities operating in the immediate and surrounding market areas. In some markets, we face competition from nearby markets in addition to direct competition within our market areas. In addition, internet gaming could create additional competition for us and could adversely affect our operations. We also compete with other non-gaming resorts and vacation areas, with various other entertainment businesses, and with other forms of gaming, such as lotteries and internet gaming. Our competitors in each market that we participate may have substantially greater financial, marketing, or other resources than we do, and there can be no assurance that they will not, in the future, engage in aggressive pricing action to compete with us. Although we believe we are currently able to compete effectively in each of the various markets in which we participate, we cannot assure you that we will be able to continue to do so or that we will be capable of maintaining or further increasing our current market share. Our failure to compete successfully in our various markets could adversely affect our business, financial condition, results of operations, and cash flow.
In recent years competition in existing markets has intensified. Many casino operators, including us, have invested in expanding existing facilities, such as our renovated and expanded facility in Hammond, Indiana, and our expansion at Caesars Palace in Las Vegas, developing new facilities, such as our new Horseshoe Cleveland and Horseshoe Cincinnati casinos, and acquiring established facilities in existing markets, such as our acquisition of Planet Hollywood in Las Vegas in 2010. This expansion of existing casino entertainment properties, the increase in the number of properties, and the aggressive marketing strategies of many of our competitors has increased competition in many markets in which we compete, and this intense competition can be expected to continue.
The expansion of casino entertainment into new markets presents competitive issues for us which have had a negative impact on our financial results. In particular, our businesses have been adversely impacted by the additional gaming and room capacity in Nevada, New Jersey, New York, Connecticut, Pennsylvania, Mississippi, Missouri, Maryland, Michigan, Indiana, Iowa, Kansas, Illinois, Ohio, Louisiana, Ontario, South Africa, Uruguay, United Kingdom and Egypt. In addition, our operations located in New Jersey may be adversely impacted by the expansion of gaming in Maryland, New York and Pennsylvania, and our operations located in Nevada may be adversely impacted by the expansion of gaming in California. Several states and Indian tribes are also considering enabling the development and operation of gaming facilities in their jurisdictions.
The casino entertainment industry is also subject to political and regulatory uncertainty. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidated Operating Results” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations “—Regional Operating Results.”
Summary of 2012 Events
Development Transactions
Octavius Tower at Caesars Palace Las Vegas
In January 2012, we opened 662 additional rooms in the Octavius Tower at Caesars Palace Las Vegas. In November 2012, we opened three high-end villas in the Octavius Tower.
Chester Downs
In January 2012, we acquired an additional 4.5% in Chester Downs and Marina, LLC ("Chester Downs"), for $9.6 million, bringing our ownership interest in Chester Downs to 99.5%.
Horseshoe Cleveland
In May 2012, Rock Ohio Caesars LLC (“ROC”) opened the 96,000 square foot Horseshoe Cleveland casino, located in downtown Cleveland, Ohio, which we manage for ROC under a management agreement.
Windsor Casino Limited
In June 2012, we increased our ownership interest in Windsor Casino Limited, the employer of record and which formerly operated Caesars Windsor located in Windsor, Ontario, from 50% to 100%. The property is operated by Caesars Entertainment Windsor Limited.

7



Horseshoe Baltimore
In July 2012, a consortium led by Caesars was awarded a license to operate a casino in downtown Baltimore, Maryland. In October 2012, we formed a venture that will build and own the casino. Subject to regulatory approvals and receipt of project financing, we expect to begin construction of the casino in the first half of 2013 and to open the casino in the middle of 2014.
Thistledown
In August 2012, we sold a portion of our equity interest in Thistledown to Rock Gaming and contributed the remaining equity interest in Thistledown to ROC in exchange for additional equity interests in ROC. Immediately subsequent to this transaction, Rock Gaming purchased a portion of equity interests in ROC from us in order to retain their 80% ownership interest in ROC. Once Thistledown commences VLT operations we will manage the property for a fee under a management agreement.
Sale of Harrah's St. Louis Casino
In November 2012, we sold our Harrah's St. Louis casino to Penn National Gaming, Inc. for $610.0 million.
Conrad Punta Del Este Resort and Casino
In November 2012, we entered into a definitive agreement with Enjoy S.A. (“Enjoy”) to form a strategic relationship in Latin America. Enjoy will acquire 45% of Baluma S.A., our subsidiary which owns and operates the Conrad, for approximately $140 million in cash and stock. We will become a 10% shareholder in Enjoy and Enjoy will assume primary responsibility for management of the property. Enjoy will have the option to acquire the remaining stake in Baluma S.A. in the future. The closing of the transaction remains subject to a number of conditions, including regulatory and governmental approvals in both Uruguay and Chile.
Buffalo Studios, LLC
In December 2012, we purchased substantially all of the net assets of Buffalo Studios, LLC, a social and mobile games developer and owner of Bingo Blitz .
Suffolk Downs
During 2012, the Company acquired a $28.1 million preferred equity interest in Sterling Suffolk Racecourse, LLC, which owns a horse-racing track in Massachusetts.
Project Linq
During 2012, we continued construction on Project Linq, a dining, entertainment, and retail development between the Flamingo casino and The Quad Resort & Casino, on the east side of the Las Vegas Strip, which is scheduled to open in phases beginning in late 2013. Project Linq also includes the construction of a 550-foot observation wheel, the High Roller, which is expected to open in early 2014.
Financing Transactions
Chester Downs Notes
In February 2012, Chester Downs issued $330.0 million aggregate principal amount of 9.25% senior secured notes due 2020 and used $232.4 million of the proceeds of the notes to repay its existing term loan, and distributed the remaining proceeds to Chester Downs' managing member, a subsidiary of Caesars.
Caesars Public Offering
In February 2012, CEC offered 1.8 million shares of its common stock in a public offering (the “Public Offering”), at $9.00 per share. As the result of the Public Offering, our common stock trades on NASDAQ under the symbol “CZR.” In connection with the Public Offering, the Company effected a 1.742-for-one split of its common stock.

8



Bill's Credit Facility
In November 2012, we entered into a $185.0 million, seven-year senior secured credit facility to fund the renovation of Bill's Gamblin' Hall & Saloon into a boutique lifestyle hotel that includes a dayclub/nightclub. The renovation will include a complete remodeling of the guest rooms, casino floor, and common areas, the addition of a second floor restaurant, and the construction of an approximately 65,000 square foot rooftop pool and dayclub/nightclub. The Company will own the property and manage the casino, hotel, and food and beverage operations, and the dayclub/nightclub will be leased to a third party. Bill's Gamblin' Hall & Saloon temporarily closed in early February 2013 to accommodate these renovations. The renovated hotel, casino, and restaurant are expected to open in December 2013 and the dayclub/nightclub is expected to open in April 2014.
CEOC Bond Offerings
During 2012, CEOC completed offerings of $1,250.0 million aggregate principal amount of 8.5% senior secured notes and $1,500.0 million aggregate principal amount of 9% senior secured notes due 2020, $750.0 million of which was held in escrow at December 31, 2012 and released in 2013 upon the satisfaction of certain conditions.
CEOC Credit Facilities
During 2012, we (i) extended the maturity of $3,812.3 million B-1, B-2 and B-3 term loans held by consenting lenders from January 28, 2015 to January 28, 2018 and increased the interest rate with respect to such extended term loans (the “Term B-6 Loans”), (ii) converted $457.8 million original maturity revolver commitments held by consenting lenders to Term B-6 Loans and promptly following such conversion, repaid $1,574.3 million of term loans held by any consenting lender, (iii) extended the maturity of $37.2 million original maturity revolver commitments held by consenting lenders who elected not to convert their commitments to term loans from January 28, 2014 to January 28, 2017 and increased the interest rate and the undrawn commitment fee with respect to such extended revolver commitments, and upon the effectiveness of such extension, terminated $798.5 million of revolver commitments and increased the amount of outstanding Term B-6 Loans by $2,853.8 million, and (iv) modified certain other provisions of the senior secured credit facilities (the "Credit Facilities"). The Term B-6 Loans have a springing maturity to April 14, 2017 if more than $250.0 million of CEOC's 11.25% senior secured notes due 2017 remain outstanding on April 14, 2017.
CMBS Loans
During 2012, we purchased $367.3 million of face value of commercial mortgage-backed securities (“CMBS”) Loans for $229.3 million, recognizing a gain of $135.0 million, net of deferred financing costs.
Transactions with Rock Gaming
In 2012, Rock Gaming made an investment in CIE whereby it purchased 6,155 shares of CIE common stock for $30.4 million. In addition, during 2012 CIE issued non-interest bearing convertible promissory notes with principal totaling $47.7 million to Rock Gaming that are convertible into approximately 8,913 shares of CIE common stock.
Summary of 2013 Events
Horseshoe Cincinnati
In March 2013, ROC opened the 100,000 square foot Horseshoe Cincinnati casino in Cincinnati, Ohio, which we manage for ROC under a management agreement.
CEOC Financing Transactions
In January and February 2013, CEOC converted $267.8 million aggregate principal amount of original maturity revolver commitments held by consenting lenders to Term B-6 Loans, repaid $133.9 million principal amount of term loans of extending lenders, terminated $267.8 million principal amount of revolving commitments of extending lenders, and increased the amount of outstanding Term B-6 Loans by $133.9 million.
In February 2013, CEOC completed the offering of $1,500.0 million aggregate principal amount of 9% senior secured notes due 2020, the proceeds of which we plan to repay a portion of CEOC's existing term loans at par. The proceeds of this offering are held in escrow pending the satisfaction of certain conditions, including receipt of all regulatory approvals.

9



Governmental Regulation
The gaming industry is highly regulated, and we must maintain our licenses and pay gaming taxes to continue our operations. Each of our casinos is subject to extensive regulation under the laws, rules, and regulations of the jurisdiction where it is located. These laws, rules, and regulations generally concern the responsibility, financial stability, and character of the owners, managers, and persons with financial interests in the gaming operations. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. A more detailed description of the regulations to which we are subject is contained in Exhibit 99.3 to this Form 10-K.
Our businesses are subject to various foreign, federal, state, and local laws and regulations, in addition to gaming regulations. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, employees, currency transactions, taxation, zoning and building codes, and marketing and advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or material differences in interpretations by courts or governmental authorities could adversely affect our operating results.
Employee Relations
We have approximately 68,000 employees through our various subsidiaries. Approximately 28,000 employees are covered by collective bargaining agreements with certain of our subsidiaries, relating to certain casino, hotel and restaurant employees at certain of our properties. Most of our employees covered by collective bargaining agreements are located at our properties in Las Vegas and Atlantic City. Our collective bargaining agreements with employees located at our Atlantic City properties expire at various times throughout 2014 and 2016 and our collective bargaining agreements with our employees located at our Las Vegas properties expire at various times throughout 2013. A number of labor contracts expired in 2012, and the Company is actively engaged in bargaining with the respective unions with regard to those contracts.
Available Information
Our Internet address is www.caesars.com. We make available free of charge, on or through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). We also make available through our website all filings of our executive officers and directors on Forms 3, 4, and 5 under Section 16 of the Exchange Act. These filings are also available on the SEC’s website at www.sec.gov. Our Code of Business Conduct and Ethics for Principal Officers is available on our website under the “Investor Relations” link. We will provide a copy of these documents without charge to any person upon receipt of a written request addressed to Caesars Entertainment Corporation, Attn: Corporate Secretary, One Caesars Palace Drive, Las Vegas, Nevada 89109. Reference in this document to our website address does not constitute incorporation by reference of the information contained on the website.

ITEM 1A.    Risk Factors
Our substantial indebtedness and the fact that a significant portion of our cash flow is used to make interest payments could adversely affect our ability to raise additional capital to fund our operations and limit our ability to react to changes in the economy or our industry.
We are a highly leveraged company. As of December 31, 2012 , we had $24,103.1 million face value of outstanding indebtedness and our current debt service obligation for the next 12 months is $2,848.2 million , which includes required interest payments of $1,943.1 million . As of December 31, 2012 , CEOC had $21,045.3 million face value of outstanding indebtedness including $516.4 million owed to Caesars Entertainment, and CEOC’s debt service obligation for the next 12 months is $2,758.8 million , which includes required interest payments of $1,857.3 million .

10



In January and February 2013, CEOC converted $267.8 million aggregate principal amount of original maturity revolver commitments held by consenting lenders to Term B-6 Loans, repaid $133.9 million principal amount of term loans of extending lenders, terminated $267.8 million principal amount of revolving commitments of extending lenders, and increased the amount of outstanding Term B-6 Loans by $133.9 million. Also in February 2013, CEOC amended 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 at par, with such repayment being applied: first, to all outstanding B-1, B-2, and B-3 term loans held by consenting lenders; second, to B-5 and B-6 term loans held by consenting lenders, in an amount up to 20% of the principal amount of the B-5 and B-6 term loans; and third, if any proceeds remain outstanding, to outstanding term loans as CEOC elects in its discretion; (ii) obtain up to $75 million of extended revolving facility commitments with a maturity of January 28, 2017, (iii) increase the accordion capacity under the Credit Facilities by an additional $650 million, (iv) modify the calculation of the senior secured leverage ratio for purposes of the maintenance test under the Credit Facilities to exclude the February 2013 notes, and (v) modify certain other provisions of the Credit Facilities. The full terms of these transactions are described in Note 21 , " Subsequent Events ," to the consolidated financial statements included in Item 8 of this report. The closing of the amendment transaction is subject to certain conditions, including required regulatory approvals.
Our substantial indebtedness could:
limit our ability to borrow money for our working capital, capital expenditures, development projects, debt service requirements, strategic initiatives or other purposes;
make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness;
require us to dedicate a substantial portion of our cash flow from operations to the repayment of our indebtedness thereby reducing funds available to us for other purposes;
limit our flexibility in planning for, or reacting to, changes in our operations or business;
make us more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;
make us more vulnerable to downturns in our business or the economy;
restrict us from making strategic acquisitions, developing new gaming facilities, introducing new technologies or exploiting business opportunities; affect our ability to renew gaming and other licenses;
limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds or dispose of assets; and
expose us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest.
Despite our substantial indebtedness, we may still be able to incur significantly more debt. This could intensify the risks described above.
We and our subsidiaries may be able to incur substantial indebtedness at any time, and from time to time, including in the near future. Although the terms of the agreements governing our indebtedness contain restrictions on our ability to incur additional indebtedness, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.
For example, as of December 31, 2012 , we had $317.7 million of additional borrowing capacity available under our revolving credit facility with an additional $90.6 million committed to back outstanding letters of credit, all of which is secured on a first priority basis. None of our existing indebtedness limits the amount of debt that may be incurred by Caesars Entertainment. Our Credit Facilities allow for one or more future issuances of additional secured notes or loans, which may include, in each case, indebtedness secured on a pari passu basis with the obligations under the Credit Facilities and our first lien notes. This indebtedness could be used for a variety of purposes, including financing capital expenditures, refinancing or repurchasing our outstanding indebtedness, including existing unsecured indebtedness, or for general corporate purposes. We have raised and expect to continue to raise debt, including secured debt, to directly or indirectly refinance our outstanding unsecured debt on an opportunistic basis, as well as development and acquisition opportunities.

11



We may be unable to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful. If we are unable to satisfy or refinance our debt obligations as they come due, we cannot assure you that your investment in our company will retain any value.
Our ability to satisfy our debt obligations will depend upon, among other things:
our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, many of which are beyond our control; and
our future ability to borrow under our Credit Facilities, the availability of which depends on, among other things, our complying with the covenants in our Credit Facilities.
We may be unable to generate sufficient cash flow from operations, or unable to draw under our Credit Facilities or otherwise, in an amount sufficient to fund our liquidity needs. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. As of December 31, 2012 , $6.8 billion face value of our indebtedness is scheduled to mature in 2015 (assuming the extension options with respect to the CMBS Financing and PHW Las Vegas senior secured loan are exercised), representing 28% of the total face value of our debt. For a discussion of our debt maturities, see “Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Guarantees of Third-Party Debt and Other Obligations and Commitments-Contractual Obligations.” We do not expect that our cash flow from operations will be sufficient to repay this indebtedness, and we will have to seek a refinancing. We cannot predict at this time whether we will be able to secure any such refinancing, even if market conditions and our financial condition improve between now and then. Even if refinancing alternatives were available to us, we may not find them suitable or at comparable interest rates to the indebtedness being refinanced. In addition, the terms of existing or future debt agreements may restrict us from securing a refinancing on terms that are available to us at that time. In the absence of such operating results and resources, we would face substantial liquidity problems and would likely be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions for fair market value or at all. Furthermore, any proceeds that we could realize from any such dispositions may not be adequate to meet our debt service obligations then due. We could also be required to reorganize our Company in its entirety. CEC is pursuing a strategic transaction that contemplates the transfer of certain of its assets that are not part of the collateral package for the Credit Facilities or the secured notes issued by CEOC, including unencumbered assets of CEC and unrestricted subsidiaries of CEOC, to a newly created entity, named Caesars Growth Venture Partners ("CGVP"), which is anticipated to be controlled by common parties that control CEC. CGVP would be a growth oriented vehicle focused on projects that are complementary to CEC's existing properties. We anticipate that CEC would own a significant portion of CGVP's equity interests and that subsidiaries of CEC would manage new casino properties owned by CGVP. We are pursuing this transaction because we believe it will improve our liquidity and credit profile, enhance our distribution network and provide additional support for potential new ventures. It is currently contemplated that the following assets would be transferred: (i) Planet Hollywood, (ii) investment in a casino project under development in Baltimore, Maryland, (iii) interest in a portion of the management fee revenues of the management companies for Planet Hollywood and the casino to be developed in Baltimore, Maryland, (iv) shares of Caesars Interactive Entertainment, Inc.'s outstanding common stock held by HIE Holdings, Inc., a subsidiary of CEC, and (v) approximately $1.1 billion face value of senior notes issued by CEOC held by Harrah's BC, Inc. It is anticipated the Sponsors would participate in the transaction and that CEC's other shareholders would have the opportunity to participate on the same terms as the Sponsors. The form of consideration to CEC is expected to be equity interests and cash, and any consideration to CEOC is expected to be cash, in each case at fair value. There is no current intention that this transaction will involve CEC's outstanding CMBS financing. There are no commitments with respect to any such transaction and there have been no agreements with respect to price or value. The transfer of such assets would require the approval of regulators and other third parties, which we may not be able to obtain. Therefore, we cannot assure you that any such transaction will be entered into or consummated or, if consummated, describe the impact the transaction would have on us. Neither the Sponsors nor any of their respective affiliates has any continuing obligation to provide us with debt or equity financing. Even if we are able to refinance our debt, any refinancing could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. For example, the interest rates on our first and second lien notes are substantially higher than the interest rates under our Credit Facility. If we are unable to service our debt obligations generally, and if we are unable to refinance our debt obligations that mature in 2015 or thereafter, we cannot assure you that our company will continue in its current state or that your investment in our company will retain any value.

12



Our debt agreements contain restrictions that limit our flexibility in operating our business.
Our Credit Facilities, the CMBS mortgage loan and/or related mezzanine loans the (“CMBS Loans”), the indentures governing most of our existing notes, the senior secured loans related to the development of Octavius Tower at Caesars Palace Las Vegas and Project Linq, the senior secured loan of PHW Las Vegas, LLC, the senior secured notes of Chester Downs and the senior secured loans related to the redevelopment of Bill's Gamblin' Hall & Saloon contain, and any future indebtedness of ours would likely contain, a number of covenants that impose significant operating and financial restrictions on us, including restrictions on our and our subsidiaries' ability to, among other things:
incur additional debt or issue certain preferred shares;
pay dividends on or make distributions in respect of our capital stock or make other restricted payments;
make certain investments;
sell certain assets;
create liens on certain assets;
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
enter into certain transactions with our affiliates; and
designate our subsidiaries as unrestricted subsidiaries.
As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.
We have pledged and will pledge a significant portion of our assets as collateral under our Credit Facilities, our CMBS Loans, our first lien notes, our second lien notes, the senior secured loan of PHW Las Vegas, LLC, the senior secured loan related to the developments of the Octavius Tower at Caesars Palace Las Vegas, Bill's Gamblin' Hall & Saloon, and a retail, dining and entertainment corridor located between The Quad Resort & Casino and the Flamingo Las Vegas on the Las Vegas strip ("Project Linq"), or the senior secured notes of Chester Downs. If any of these lenders accelerate the repayment of borrowings, there can be no assurance that we will have sufficient assets to repay our indebtedness.
Under our Credit Facilities, we are required to satisfy and maintain specified financial ratios. Specifically, our Credit Facilities requires us to maintain a senior secured leverage ratio of no more than 4.75 to 1.0 , which is the ratio of our senior first priority secured debt to LTM Adjusted EBITDA - Pro Forma - CEOC Restricted. This ratio excludes up to $2,200.0 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. This ratio also reduces the amount of senior first priority secured debt by the amount of unrestricted cash on hand. As of December 31, 2012, the senior secured leverage ratio was 4.44 to 1.0. In addition, under certain circumstances, our Credit Facilities allow us to apply cash contributions received by us as an increase to LTM Adjusted EBITDA - Pro Forma - CEOC Restricted if we are unable to meet our senior secured leverage ratio. Many factors affect our continuing ability to comply with the covenant, including (a) changes in gaming trips, spend per trip and hotel metrics, which are correlated to a consumer recovery, (b) increases in cost-savings actions, (c) asset sales, (d) issuing additional second lien or unsecured debt, (e) equity financings, (f) delays in investments in new developments, or (g) a combination thereof.
Our ability to meet those financial ratios can be affected by events beyond our control, and there can be no assurance that we will meet those ratios. A failure to comply with the covenants contained in our Credit Facilities or our other indebtedness could result in an event of default under the facilities or the existing agreements, which, if not cured or waived, could have a material adverse effect on our business, financial condition and results of operations. In the event of any default under our Credit Facilities or our other indebtedness, the lenders thereunder:
will not be required to lend any additional amounts to us;
could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable and terminate all commitments to extend further credit; or
require us to apply all of our available cash to repay these borrowings.
Such actions by the lenders could cause cross defaults under our other indebtedness. If we were unable to repay those amounts, the lenders under our Credit Facilities, our CMBS Loans and our first and second lien notes could proceed against the collateral granted to them to secure that indebtedness.

13



If the indebtedness under our first and second lien notes, Credit Facilities, CMBS Loans or our other indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full.
We are controlled by the Sponsors, whose interests may not be aligned with ours.
Hamlet Holdings, the members of which are comprised of an equal number of individuals affiliated with each of the Sponsors, beneficially owns approximately 69.9% of our common stock pursuant to an irrevocable proxy providing Hamlet Holdings with sole voting and sole dispositive power over those shares. As a result, the Sponsors have the power to elect all of our directors. Therefore, the Sponsors have the ability to vote on any transaction that requires the approval of our Board or our stockholders, including the approval of significant corporate transactions such as mergers and the sale of substantially all of our assets. The interests of the Sponsors could conflict with or differ from the interests of other holders of our securities. For example, the concentration of ownership held by the Sponsors could delay, defer or prevent a change of control of us or impede a merger, takeover or other business combination which another stockholder may otherwise view favorably. Additionally, the Sponsors are in the business of making or advising on investments in companies it holds, and may from time to time in the future acquire interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. One or both of the Sponsors may also pursue acquisitions that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. A sale of a substantial number of shares of stock in the future by funds affiliated with the Sponsors or their co-investors could cause our stock price to decline. So long as Hamlet Holdings continues to hold the irrevocable proxy, they will continue to be able to strongly influence or effectively control our decisions.
In addition, we have an executive committee that serves at the discretion of our Board and is authorized to take such actions as it reasonably determines appropriate. Currently, the executive committee may act by a majority of its members, provided that at least one member affiliated with TPG and Apollo must approve any action of the executive committee.
The downturn in the national economy over the past few years, the volatility and disruption of the capital and credit markets, and adverse changes in the global economy could negatively impact our financial performance and our ability to access financing.
The severe economic downturn over the past few years and adverse conditions in the local, regional, national and global markets have negatively affected our operations, and may continue to negatively affect our operations in the future. During periods of economic contraction such as recently experienced, our revenues may decrease while most of our costs remain fixed and some costs even increase, resulting in decreased earnings.
Gaming and other leisure activities we offer represent discretionary expenditures and participation in such activities may decline during economic downturns, during which consumers generally earn less disposable income. For example, key determinants of our revenues and operating performance include hotel Average Daily Rate ("ADR"), number of gaming trips and average spend per trip by our customers. Given that 2007 was the peak year for our financial performance and the gaming industry in the United States in general, we may not attain those financial levels in the near term, or at all. If we fail to increase ADR or any other similar metric in the near term, our revenues may not increase and, as a result, we may not be able to pay down our existing debt, fund our operations, fund planned capital expenditures or achieve expected growth rates, all of which could have a material adverse effect on our business, financial condition, results of operations and cash flow. Even an uncertain economic outlook may adversely affect consumer spending in our gaming operations and related facilities, as consumers spend less in anticipation of a potential economic downturn. Furthermore, other uncertainties, including national and global economic conditions, terrorist attacks or other global events, could adversely affect consumer spending and adversely affect our operations.

14



We may not realize any or all of our projected cost savings, which would have the effect of reducing our LTM Adjusted EBITDA - Pro Forma, which would have a negative effect on our results of operations and negatively impact our covenant calculation and could have a negative effect on our stock price.
Beginning in the third quarter of 2008, we initiated a company-wide cost savings plan in an effort to align our expenses with current revenue levels. In addition, we embarked on Project Renewal in the fourth quarter of 2010 to identify the optimum way of structuring our business given our breadth and scale of product offerings. While these efforts have allowed us to realize substantial savings since we initiated our cost savings plan, our continued reduction efforts may fail to achieve similar or continued savings. Although we believe, as of December 31, 2012, once fully implemented, these cost savings programs will produce additional estimated annual cost savings of $212.8 million we may not realize some or all of these projected savings without impacting our revenues. Our cost savings plans are intended to increase our effectiveness and efficiency in our operations without impacting our revenues and margins. Our cost savings plan is subject to numerous risks and uncertainties that may change at any time, and, therefore, our actual savings may differ materially from what we anticipate. For example, cutting advertising or marketing expenses may have an unintended negative affect on our revenues. In addition, our expected savings from procurement of goods may be affected by unexpected increases in the cost of raw materials. Furthermore, because we use our projected yet-to-be realized cost savings as a pro forma adjustment to calculate our LTM Adjusted EBITDA - Pro Forma, our actual Adjusted EBITDA would be reduced to the extent of the cost savings we do not achieve.
We are subject to extensive governmental regulation and taxation policies, the enforcement of which could adversely impact our business, financial condition, and results of operations.
We are subject to extensive gaming regulations and political and regulatory uncertainty. Regulatory authorities in the jurisdictions where we operate have broad powers with respect to the licensing of casino operations and may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines and take other actions, any one of which could adversely impact our business, financial condition and results of operations. For example, revenues and income from operations were negatively impacted during July 2006 in Atlantic City by a three-day government-imposed casino shutdown. Furthermore, in many jurisdictions where we operate, licenses are granted for limited durations and require renewal from time to time. For example, in Iowa, our ability to continue our gaming operations is subject to a referendum every eight years or at any time upon petition of the voters in the county in which we operate; the most recent referendum which approved our ability to continue to operate our casinos occurred in November 2010. In Maryland, we will have to reapply for our license in 15 years. There can be no assurance that continued gaming activity will be approved in any referendum in the future. If we do not obtain the requisite approval in any future referendum, we will not be able to operate our gaming operations in Iowa, which would negatively impact our future performance.
From time to time, individual jurisdictions have also considered legislation or referendums, such as bans on smoking in casinos and other entertainment and dining facilities, which could adversely impact our operations. For example, the City Council of Atlantic City passed an ordinance in 2007 requiring that we segregate at least 75% of the casino gaming floor as a nonsmoking area, leaving no more than 25% of the casino gaming floor as a smoking area. Illinois also passed the Smoke Free Illinois Act which became effective January 1, 2008, and bans smoking in nearly all public places, including bars, restaurants, work places, schools and casinos. The Act also bans smoking within 15 feet of any entrance, window or air intake area of these public places. These smoking bans have adversely affected revenues and operating results at our properties. The likelihood or outcome of similar legislation in other jurisdictions and referendums in the future cannot be predicted, though any smoking ban would be expected to negatively impact our financial performance.
The casino entertainment industry represents a significant source of tax revenues to the various jurisdictions in which casinos operate. From time to time, various state and federal legislators and officials have proposed changes in tax laws, or in the administration of such laws, including increases in tax rates, which would affect the industry. If adopted, such changes could adversely impact our business, financial condition and results of operations.
Our stockholders are subject to extensive governmental regulation and if a stockholder is found unsuitable by the gaming authority, that stockholder would not be able to beneficially own our common stock directly or indirectly.
In many jurisdictions, gaming laws can require any of our stockholders to file an application, be investigated, and qualify or have his, her or its suitability determined by gaming authorities. Gaming authorities have very broad discretion in determining whether an applicant should be deemed suitable. Subject to certain administrative proceeding requirements, the gaming regulators have the authority to deny any application or limit, condition, restrict, revoke or suspend any license, registration, finding of suitability or approval, or fine any person licensed, registered or found suitable or approved, for any cause deemed reasonable by the gaming authorities. For additional information on the criteria used in making determinations regarding suitability, see “Governmental Regulation.”

15



For example, under Nevada gaming laws, each person who acquires, directly or indirectly, beneficial ownership of any voting security, or beneficial or record ownership of any non-voting security or any debt security, in a public corporation which is registered with the Nevada Gaming Commission, or the Gaming Commission, may be required to be found suitable if the Gaming Commission has reason to believe that his or her acquisition of that ownership, or his or her continued ownership in general, would be inconsistent with the declared public policy of Nevada, in the sole discretion of the Gaming Commission. Any person required by the Gaming Commission to be found suitable shall apply for a finding of suitability within 30 days after the Gaming Commission's request that he or she should do so and, together with his or her application for suitability, deposit with the Nevada Gaming Control Board, or the Control Board, a sum of money which, in the sole discretion of the Control Board, will be adequate to pay the anticipated costs and charges incurred in the investigation and processing of that application for suitability, and deposit such additional sums as are required by the Control Board to pay final costs and charges. Additionally, under Ohio law, an institutional investor, which is broadly defined and includes any corporation that holds any amount of our stock, will be required to apply for and obtain a waiver of suitability determination.
Furthermore, any person required by a gaming authority to be found suitable, who is found unsuitable by the gaming authority, may not hold directly or indirectly the beneficial ownership of any voting security or the beneficial or record ownership of any nonvoting security or any debt security of any public corporation which is registered with the gaming authority beyond the time prescribed by the gaming authority. A violation of the foregoing may constitute a criminal offense. A finding of unsuitability by a particular gaming authority impacts that person's ability to associate or affiliate with gaming licensees in that particular jurisdiction and could impact the person's ability to associate or affiliate with gaming licensees in other jurisdictions.
Many jurisdictions also require any person who acquires beneficial ownership of more than a certain percentage of voting securities of a gaming company and, in some jurisdictions, non-voting securities, typically 5%, to report the acquisition to gaming authorities, and gaming authorities may require such holders to apply for qualification or a finding of suitability, subject to limited exceptions for “institutional investors” that hold a company's voting securities for investment purposes only.
Some jurisdictions may also limit the number of gaming licenses in which a person may hold an ownership or a controlling interest. In Indiana, for example, a person may not have an ownership interest in more than two Indiana riverboat owner's licenses.
If we are unable to effectively compete against our competitors, our profits will decline.
The gaming industry is highly competitive and our competitors vary considerably in size, quality of facilities, number of operations, brand identities, marketing, and growth strategies, financial strength and capabilities, level of amenities, management talent, and geographic diversity. We also compete with other non-gaming resorts and vacation areas, and with various other entertainment businesses. Our competitors in each market that we participate may have substantially greater financial, marketing, or other resources than we do, and there can be no assurance that they will not, in the future, engage in aggressive pricing action to compete with us. Although we believe we are currently able to compete effectively in each of the various markets in which we participate, we cannot assure you that we will be able to continue to do so or that we will be capable of maintaining or further increasing our current market share. Our failure to compete successfully in our various markets could adversely affect our business, financial condition, results of operations, and cash flow.
In recent years, many casino operators have been reinvesting in existing markets to attract new customers or to gain market share, thereby increasing competition in those markets. As companies have completed new expansion projects, supply has typically grown at a faster pace than demand in some markets, including Las Vegas, our largest market, and competition has increased significantly. For example, CityCenter, a large development of resorts and residences, opened in December 2009 in Las Vegas, and Revel, a resort and casino in Atlantic City, opened in May 2012. The expansion of existing casino entertainment properties, the increase in the number of properties and the aggressive marketing strategies of many of our competitors have increased competition in many markets in which we operate, and this intense competition is expected to continue. These competitive pressures have and are expected to continue to adversely affect our financial performance in certain markets, including Atlantic City.
In particular, our business may be adversely impacted by the additional gaming and room capacity in Nevada, New Jersey, New York, Connecticut, Pennsylvania, Mississippi, Missouri, Maryland, Michigan, Indiana, Iowa, Kansas, Illinois, Ohio, Louisiana, Ontario, South Africa, Uruguay, United Kingdom, Egypt, and/or other projects not yet announced which may be competitive in the other markets where we operate or intend to operate. Several states, such as Kentucky, Texas and Indian tribes are also considering enabling the development and operation of casinos or casino-like operations in their jurisdictions. In addition, our operations located in New Jersey may be adversely impacted by the expansion of gaming in Maryland, New York and Pennsylvania, and our operations located in Nevada may be adversely impacted by the expansion of gaming in California, respectively.

16



Use of the “Caesars” brand name, or any of our other brands, by entities other than us could damage the brands and our operations and adversely affect our business and results of operations.
Our “Caesars” brand remains the most recognized casino brand in the world and our operations benefit from the global recognition and reputation generated by our brands. Generally and through Caesars Global Living, we are actively pursuing gaming and non-gaming management, branding, and development opportunities in Asia and other parts of the world where our brands and reputation are already well-recognized assets. In September 2011, we announced a management and branding agreement for a non-gaming development, whose equity will be provided by a third party, which will be called Caesars Palace Longmu Bay. In addition, we will continue to expand our World Series of Poker tournaments to international jurisdictions where we believe there is a likelihood of legalization of online gaming, in order to grow the brand’s awareness. In connection with such opportunities, we intend to grant third parties licenses to use our brands. Our business and results of operations may be adversely affected by the management or the enforcement of the “Caesars” and the “World Series of Poker” brand names, or any of our other brands, by third parties outside of our exclusive control.
Any failure to protect our trademarks could have a negative impact on the value of our brand names and adversely affect our business.
The development of intellectual property is part of our overall business strategy, and we regard our intellectual property to be an important element of our success. For example, we own and manage the World Series of Poker tournaments, and we license trademarks for a variety of products and businesses related to this brand. While our business as a whole is not substantially dependent on any one trademark or combination of several of our trademarks or other intellectual property, we seek to establish and maintain our proprietary rights in our business operations and technology through the use of patents, copyrights, trademarks and trade secret laws. We file applications for and obtain patents, copyrights and trademarks in the United States and in foreign countries where we believe filing for such protection is appropriate. We also seek to maintain our trade secrets and confidential information by nondisclosure policies and through the use of appropriate confidentiality agreements. Despite our efforts to protect our proprietary rights, parties may infringe our trademarks and use information that we regard as proprietary and our rights may be invalidated or unenforceable. The laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the United States. Monitoring the unauthorized use of our intellectual property is difficult. Litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of resource. We cannot assure you that all of the steps we have taken to protect our trademarks in the United States and foreign countries will be adequate to prevent imitation of our trademarks by others. The unauthorized use or reproduction of our trademarks could diminish the value of our brand and our market acceptance, competitive advantages or goodwill, which could adversely affect our business.
We extend credit to a portion of our customers and we may not be able to collect gaming receivables from our credit players.
We conduct our gaming activities on a credit and cash basis at many of our properties. Any such credit we extend is unsecured. Table games players typically are extended more credit than slot players, and high-stakes players typically are extended more credit than customers who tend to wager lower amounts. High-end gaming is more volatile than other forms of gaming, and variances in win-loss results attributable to high-end gaming may have a significant positive or negative impact on cash flow and earnings in a particular quarter. We extend credit to those customers whose level of play and financial resources warrant, in the opinion of management, an extension of credit. These large receivables could have a significant impact on our results of operations if deemed uncollectible. While gaming debts evidenced by a credit instrument, including what is commonly referred to as a “marker,” and judgments on gaming debts are enforceable under the current laws of the jurisdictions in which we allow play on a credit basis and judgments in such jurisdictions on gaming debts are enforceable in all states under the Full Faith and Credit Clause of the U.S. Constitution, other jurisdictions may determine that enforcement of gaming debts is against public policy. Although courts of some foreign nations will enforce gaming debts directly and the assets in the U.S. of foreign debtors may be reached to satisfy a judgment, judgments on gaming debts from U.S. courts are not binding on the courts of many foreign nations.

17



The acquisition, development and construction of new hotels, casinos and gaming and non-gaming venues and the expansion of existing ones could have an adverse effect on our business, financial condition and results of operations due to various factors including delays, cost overruns and other uncertainties.
We intend to develop, construct and open or acquire new hotels, casinos and other gaming venues, as well as develop and manage non-gaming venues, in response to opportunities that may arise. Future development projects and acquisitions may require significant capital commitments, the incurrence of additional debt, guarantees of third party debt, the incurrence of contingent liabilities and an increase in depreciation and amortization expense, which could have an adverse effect upon our business, financial condition, results of operations and cash flow. The development and construction of new hotels, casinos and gaming venues and the expansion of existing ones, such as our recent construction of the Octavius Tower and redevelopment of the Nobu Tower at Caesars Palace in Las Vegas, the planned redevelopment of Bill's Gamblin' Hall in Las Vegas, the planned construction of Horseshoe Baltimore as well as the development and construction of non-gaming venues such as Project Linq in Las Vegas and Caesars Palace Longmu Bay in China, are susceptible to various risks and uncertainties, such as:
the existence of acceptable market conditions and demand for the completed project;
general construction risks, including cost overruns, change orders and plan or specification modification, shortages of equipment, materials or skilled labor, labor disputes, unforeseen environmental, engineering or geological problems, work stoppages, fire and other natural disasters, construction scheduling problems, and weather interferences;
changes and concessions required by governmental or regulatory authorities;
the ability to finance the projects, especially in light of our substantial indebtedness;
delays in obtaining, or inability to obtain, all licenses, permits and authorizations required to complete and/or operate the project; and
disruption of our existing operations and facilities.
Moreover, our development and expansion projects are sometimes jointly pursued with third parties or by licensing our brands to third parties. These joint development, expansion projects or license agreements are subject to risks, in addition to those disclosed above, as they are dependent on our ability to reach and maintain agreements with third parties.
For example, we made a bid with Rock Gaming LLC and other local investors for a video lottery terminal facility in Suffolk County Massachusetts and we can give no assurances that the bid will be awarded to us, that we will reach definitive agreements with the other parties that comprise the bid, or that the development project will be undertaken.
Our failure to complete any new development or expansion project, or consummate any joint development, expansion projects or projects where we license our brands, as planned, on schedule, within budget or in a manner that generates anticipated profits, could have an adverse effect on our business, financial condition, results of operations and cash flow.
We may sell or divest different properties or assets as a result of our evaluation of our portfolio of businesses. Such sales or divestitures would affect our costs, revenues, profitability and financial position.
From time to time, we evaluate our properties and our portfolio of businesses and may, as a result, sell or attempt to sell, divest or spin-off different properties or assets. For example, in May 2012, we announced an agreement to sell our Harrah's St. Louis property and, in November 2012, we completed the sale. We plan to dispose of the subsidiaries that hold our land concession in Macau and in the fourth quarter 2012, began discussions with interested investors regarding sale of those entities. These sales or divestitures affect our costs, revenues, profitability and financial position.
Divestitures have inherent risks, including possible delays in closing transactions (including potential difficulties in obtaining regulatory approvals), the risk of lower-than-expected sales proceeds for the divested businesses, and potential post-closing claims for indemnification. In addition, current economic conditions and relatively illiquid real estate markets may result in fewer potential bidders and unsuccessful sales efforts. Expected costs savings, which are offset by revenue losses from divested properties, may also be difficult to achieve or maximize due to our fixed cost structure.

18



We may not realize all of the anticipated benefits of current or potential future acquisitions.
Our ability to realize the anticipated benefits of acquisitions will depend, in part, on our ability to integrate the businesses of such acquired company with our businesses. The combination of two independent companies is a complex, costly and time consuming process. This process may disrupt the business of either or both of the companies, and may not result in the full benefits expected. The difficulties of combining the operations of the companies, including our recent acquisitions of Planet Hollywood in Las Vegas and Playtika Ltd., include, among others:
coordinating marketing functions;
undisclosed liabilities; unanticipated issues in integrating information, communications and other systems;
unanticipated incompatibility of purchasing, logistics, marketing and administration methods;
retaining key employees;
consolidating corporate and administrative infrastructures;
the diversion of management's attention from ongoing business concerns; and
coordinating geographically separate organizations.
We may be unable to realize in whole or in part the benefits anticipated for any current or future acquisitions.
The risks associated with our international operations could reduce our profits.
Some of our properties are located outside the United States, and our 2006 acquisition of London Clubs has increased the percentage of our revenue derived from operations outside the United States. International operations are subject to inherent risks including:
political and economic instability;
variation in local economies;
currency fluctuation;
greater difficulty in accounts receivable collection;
trade barriers; and
burden of complying with a variety of international laws.
For example, the political instability in Egypt due to the uprising in January 2011 has negatively affected our properties there.
Any violation of the Foreign Corrupt Practices Act or other similar laws and regulations could have a negative impact on us.
We are subject to risks associated with doing business outside of the United States, which exposes us to complex foreign and U.S. regulations inherent in doing business cross-border and in each of the countries in which it transacts business. We are subject to regulations imposed by the Foreign Corrupt Practices Act ("FCPA") and other anti-corruption laws that generally prohibit U.S. companies and their intermediaries from offering, promising, authorizing or making improper payments to foreign government officials for the purpose of obtaining or retaining business. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions as well as other penalties and the SEC and U.S. Department of Justice have increased their enforcement activities with respect to the FCPA. Internal control policies and procedures and employee training and compliance programs that we have implemented to deter prohibited practices may not be effective in prohibiting our employees, contractors or agents from violating or circumventing our policies and the law. If our employees or agents fail to comply with applicable laws or company policies governing our international operations, we may face investigations, prosecutions and other legal proceedings and actions which could result in civil penalties, administrative remedies and criminal sanctions. Any determination that we have violated the FCPA could have a material adverse effect on our financial condition. Compliance with international and U.S. laws and regulations that apply to our international operations increases our cost of doing business in foreign jurisdictions. We also deal with significant amounts of cash in our operations and are subject to various reporting and anti-money laundering regulations. Any violation of anti-money laundering laws or regulations by any of our resorts could have a negative effect on our results of operations.

19



The loss of the services of key personnel could have a material adverse effect on our business.
The leadership of our chief executive officer, Mr. Loveman, and other executive officers has been a critical element of our success. The death or disability of Mr. Loveman or other extended or permanent loss of his services, or any negative market or industry perception with respect to him or arising from his loss, could have a material adverse effect on our business. Our other executive officers and other members of senior management have substantial experience and expertise in our business and have made significant contributions to our growth and success. The unexpected loss of services of one or more of these individuals could also adversely affect us. We are not protected by key man or similar life insurance covering members of our senior management. We have employment agreements with our executive officers, but these agreements do not guarantee that any given executive will remain with us.
If we are unable to attract, retain and motivate employees, we may not be able to compete effectively and will not be able to expand our business.
Our success and ability to grow are dependent, in part, on our ability to hire, retain and motivate sufficient numbers of talented people, with the increasingly diverse skills needed to serve clients and expand our business, in many locations around the world. Competition for highly qualified, specialized technical and managerial, and particularly consulting, personnel is intense. Recruiting, training, retention and benefit costs place significant demands on our resources. Additionally, our substantial indebtedness and the recent downturn in the gaming, travel and leisure sectors have made recruiting executives to our business more difficult. The inability to attract qualified employees in sufficient numbers to meet particular demands or the loss of a significant number of our employees could have an adverse effect on us.
Work stoppages and other labor problems could negatively impact our future profits.
Some of our employees are represented by labor unions. A lengthy strike or other work stoppage at one of our casino properties or construction projects could have an adverse effect on our business and results of operations. From time to time, we have also experienced attempts to unionize certain of our non-union employees. While these efforts have achieved only limited success to date, we cannot provide any assurance that we will not experience additional and more successful union activity in the future. There has been a trend towards unionization for employees in Atlantic City and Las Vegas. The impact of this union activity is undetermined and could negatively impact our profits.
Acts of terrorism and war, natural disasters and severe weather may negatively impact our future profits.
Terrorist attacks and other acts of war or hostility have created many economic and political uncertainties. For example, a substantial number of our customers for our properties in Las Vegas use air travel. On September 11, 2001, acts of terrorism occurred in New York City, Pennsylvania and Washington, D.C. As a result of these terrorist acts, domestic and international travel was severely disrupted, which resulted in a decrease in customer visits to our properties in Las Vegas. We cannot predict the extent to which disruptions in air or other forms of travel as a result of any further terrorist act, security alerts or war, uprisings, or hostilities in places such as Iraq and Afghanistan, other countries throughout the world will continue to directly or indirectly impact our business and operating results. For example, our operations in Cairo, Egypt were negatively affected from the uprising there in January 2011. As a consequence of the threat of terrorist attacks and other acts of war or hostility in the future, premiums for a variety of insurance products have increased, and some types of insurance are no longer available. Given current conditions in the global insurance markets, we are substantially underinsured for losses and interruptions caused by terrorist acts and acts of war. If any such event were to affect our properties, we would likely be adversely impacted.
In addition, natural and man-made disasters such as major fires, floods, hurricanes, earthquakes and oil spills could also adversely impact our business and operating results. For example, four of our properties in Louisiana and Mississippi were closed for an extended period of time due to the damage sustained from Hurricanes Katrina and Rita in August and September 2005, respectively. Such events could lead to the loss of use of one or more of our properties for an extended period of time and disrupt our ability to attract customers to certain of our gaming facilities. If any such event were to affect our properties, we would likely be adversely impacted. Seven of our properties were closed during the first half of 2011 due to flooding and severe weather conditions. Additionally, in August 2011, our casinos in Atlantic City were closed during a busy summer weekend due to Hurricane Irene.

20



Our properties in Atlantic City were closed for five days and our property in Philadelphia was closed for two days in October and November 2012 due to Hurricane Sandy. Further, certain of these properties sustained minor damage from the storm, which totaled approximately $1 million . In addition, Hurricane Sandy significantly affected Atlantic City and surrounding areas in the northeast through flooding, wind and other water damage to properties and infrastructure, loss of power to residences and businesses and by creating a fuel shortage in New Jersey and surrounding areas. The regional storm damage in the northeast is likely to deter customers from visiting Atlantic City and our Atlantic City properties for some period of time. Our covered losses from property damage and business interruption did not exceed our deductible on this storm. Our results of operations in this region were significantly affected in the fourth quarter of 2012, with an estimated reduction in revenues of between $40 million and $45 million and a related reduction in operating income of between $35 million and $40 million .
In most cases, we have insurance that covers portions of any losses from a natural disaster, but in many cases it is subject to deductibles and maximum payouts. Although we may be covered by insurance from a natural disaster, the timing of our receipt of insurance proceeds, if any, is out of our control. In some cases, however, we may receive no proceeds from insurance, such as our August 2011 and October and November 2012 closings in Atlantic City.
Additionally, a natural disaster affecting one or more of our properties may affect the level and cost of insurance coverage we may be able to obtain in the future, which may adversely affect our financial position.
As our operations depend in part on our customers’ ability to travel, severe or inclement weather can also have a negative impact on our results of operations.
We are or may become involved in legal proceedings that, if adversely adjudicated or settled, could impact our financial condition.
From time to time, we are defendants in various lawsuits or other legal proceedings relating to matters incidental to our business. The nature of our business subjects us to the risk of lawsuits filed by customers, past and present employees, competitors, business partners, Indian tribes and others in the ordinary course of business. As with all legal proceedings, no assurance can be provided as to the outcome of these matters and in general, legal proceedings can be expensive and time consuming. For example, we may have potential liability arising from a class action lawsuit against Hilton Hotels Corporation relating to employee benefit obligations. We may not be successful in the defense or prosecution of these lawsuits, which could result in settlements or damages that could significantly impact our business, financial condition and results of operations.
We may incur impairments to goodwill, indefinite-lived intangible assets, or long-lived assets which could negatively affect our future profits.
Each year, we perform a preliminary annual assessment of goodwill as of September 30, or more frequently if impairment indicators exist. For our preliminary assessment, we determine 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 evaluate the aggregate fair value of all of our reporting units and other non-operating assets in comparison to our aggregate debt and equity market capitalization at September 30. Both EBITDA multiples and discounted cash flows are common measures used to value and buy or sell businesses in our industry. In the fourth quarter, we finalize our assessment of goodwill once we complete our fair value analysis for reporting units where a step two impairment test is required.
Each year, we perform an annual impairment assessment of other non-amortizing intangible assets as of September 30, or more frequently if impairment indicators exist. We determine the estimated fair value of our non-amortizing intangible assets by primarily using the Relief From Royalty Method and excess Earnings Method under the income approach.
We review the carrying value of our long-lived assets whenever events and 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. When performing this assessment, we consider current operating results, trends and prospects, as well as the effect of obsolescence, demand, competition, and other economic, legal, and regulatory factors.
We are dependent upon our properties for future cash flows and our continued success depends on our ability to draw customers to our properties. Significant negative industry or economic trends, reduced estimates of future cash flows, disruptions to our business, slower growth rates or lack of growth in our business have resulted in impairment charges during the years ended December 31, 2012, 2011, and 2010, and, if one or more of such events occurs in the future, additional impairment charges may be required in future periods. If we are required to record additional impairment charges, this could have a material adverse impact on our consolidated financial statements.

21



We may be required to pay our future tax obligation on our deferred cancellation of debt income.
Under the American Recovery and Reinvestment Act of 2009, or the ARRA, we received temporary federal tax relief under the Delayed Recognition of Cancellation of Debt Income, or CODI, rules. The ARRA contains a provision that allows for a deferral for tax purposes of CODI for debt reacquired in 2009 and 2010, followed by recognition of CODI ratably from 2014 through 2018. In connection with the debt that we reacquired in 2009 and 2010, we have deferred related CODI of $3.5 billion for tax purposes (net of Original Issue Discount ("OID") interest expense, some of which must also be deferred to 2014 through 2018 under the ARRA). We are required to include one-fifth of the deferred CODI, net of deferred and regularly scheduled OID, in taxable income each year from 2014 through 2018. Alternatively, the deferred CODI, net of deferred OID, could be accelerated into taxable income in a year an impairment transaction occurs. To the extent that our federal taxable income exceeds our available federal net operating loss carry forwards in those years, we will have a cash tax obligation. Our tax obligations related to CODI could be substantial and could materially and adversely affect our cash flows as a result of tax payments. For more information on the debt that we reacquired in 2009 and 2010, see "Management's Discussion and Analysis of Financial Condition and Results of Operation-Other Factors Affecting Net Income."
Our business is particularly sensitive to energy prices and a rise in energy prices could harm our operating results.
We are a large consumer of electricity and other energy and, therefore, higher energy prices may have an adverse effect on our results of operations. Accordingly, increases in energy costs may have a negative impact on our operating results. Additionally, higher electricity and gasoline prices which affect our customers may result in reduced visitation to our resorts and a reduction in our revenues. We may be indirectly impacted by regulatory requirements aimed at reducing the impacts of climate change directed at up-stream utility providers, as we could experience potentially higher utility, fuel, and transportation costs.
Our insurance coverage may not be adequate to cover all possible losses that our properties could suffer. In addition, our insurance costs may increase and we may not be able to obtain the same insurance coverage in the future.
We have comprehensive property and liability insurance policies for our properties in operation as well as those in the course of construction with coverage features and insured limits that we believe are customary in their breadth and scope. Market forces beyond our control may nonetheless limit the scope of the insurance coverage we can obtain or our ability to obtain coverage at reasonable rates. Certain types of losses, generally of a catastrophic nature, such as earthquakes, hurricanes and floods, or terrorist acts, or certain liabilities may be uninsurable or too expensive to justify obtaining insurance. As a result, we may not be successful in obtaining insurance without increases in cost or decreases in coverage levels. In addition, in the event of a substantial loss, the insurance coverage we carry may not be sufficient to pay the full market value or replacement cost of our lost investment or in some cases could result in certain losses being totally uninsured. As a result, we could lose some or all of the capital we have invested in a property, as well as the anticipated future revenue from the property, and we could remain obligated for debt or other financial obligations related to the property.
Compromises of our information systems or unauthorized access to confidential information or our customers' personal information could materially harm our reputation and business.
We collect and store confidential, personal information relating to our customers for various business purposes, including marketing and financial purposes, and credit card information for processing payments.  For example, we handle, collect and store personal information in connection with our customers staying at our hotels and enrolling in our Total Rewards program. We may share this personal and confidential information with vendors or other third parties in connection with processing of transactions, operating certain aspects of our business or for marketing purposes. Our collection and use of personal data are governed by state and federal privacy laws and regulations as well as the applicable laws and regulations in other countries in which we operate.  Privacy law is an area that changes often and varies significantly by jurisdiction.     We may incur significant costs in order to ensure compliance with the various applicable privacy requirements. In addition, privacy laws and regulations may limit our ability to market to our customers.

22



We assess and monitor the security of collection, storage and transmission of customer information on an ongoing basis.  We utilize commercially available software and technologies to monitor, assess and secure our network.   Further, the systems currently used for transmission and approval of payment card transactions, and the technology utilized in payment cards themselves, all of which can put payment card data at risk, are determined and controlled by the payment card industry, not us. Although we have taken steps designed to safeguard our customers' confidential personal information, our network and other systems and those of third parties, such as service providers, could be compromised by a third party breach of our system security or that of a third party provider or as a result by purposeful or accidental actions of third parties, our employees or those employees of a third party.   Advances in computer and software capabilities and encryption technology, new tools and other developments may increase the risk of such a breach. As a result of any security breach, customer information or other proprietary data may be accessed or transmitted by or to a third party. Despite these measures, there can be no assurance that we are adequately protecting our information.
Any loss, disclosure or misappropriation of, or access to, customers' or other proprietary information or other breach of our information security could result in legal claims or legal proceedings, including regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, including for failure to protect personal information or for misusing personal information, which could disrupt our operations, damage our reputation and expose us to claims from customers, financial institutions, regulators, payment card associations, employees and other persons, any of which could have an adverse effect on our financial condition, results of operations and cash flow.
Our obligation to fund multi-employer pension plans to which we contribute may have an adverse impact on us.
We contribute to and participate in various multi-employer pension plans for employees represented by certain unions. We are required to make contributions to these plans in amounts established under collective bargaining agreements. We do not administer these plans and, generally, are not represented on the boards of trustees of these plans. The Pension Protection Act enacted in 2006, or the PPA, requires under-funded pension plans to improve their funding ratios. Based on the information available to us, some of the multi-employer plans to which we contribute are either "critical" or "endangered" as those terms are defined in the PPA. We cannot determine at this time the amount of additional funding, if any, we may be required to make to these plans. However, plan assessments could have an adverse impact on our results of operations or cash flows for a given period. Furthermore, under current law, upon the termination of a multi-employer pension plan, or in the event of a withdrawal by us, which we consider from time to time, or a mass withdrawal or insolvency of contributing employers, we would be required to make payments to the plan for our proportionate share of the plan's unfunded vested liabilities. Any termination of a multi-employer plan, or mass withdrawal or insolvency of contributing employers, could require us to contribute an amount under a plan of rehabilitation or surcharge assessment that would have a material adverse impact on our consolidated financial condition, results of operations and cash flows.
An active trading market for our common stock may not develop.
Prior to our listing in February 2012, there was no public market for our common stock. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market or how liquid that market might become. Our shares may be less liquid than the shares of other newly public companies and there may be imbalances between supply and demand for our shares. As a result, our share price may experience significant volatility and may not necessarily reflect the value of our expected performance. If an active trading market does not develop, owners of our common stock may have difficulty selling any of our common stock.
Future sales or the possibility of future sales of a substantial amount of our common stock may depress the price of shares of our common stock.
Future sales or the availability for sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through future sales of equity securities.
As of March 1, 2013 , there were 125,362,197 shares outstanding, all of which are the same class of voting common stock. All of the outstanding shares of our common stock will be eligible for resale under Rule 144 or Rule 701 of the Securities Act of 1933, as amended ("Securities Act"), subject to volume limitations, applicable holding period requirements or other contractual restrictions. The Sponsors have the ability to cause us to register the resale of its shares, and our management members who hold shares will have the ability to include their shares in such registration.

23



In connection with the Co-Investors Transaction, we filed a shelf prospectus to register 22,339,143 shares of our common stock for resale on a continuous basis by the Participating Co-Investors, subject to the lockup agreements described herein. We may issue shares of common stock or other securities from time to time as consideration for future acquisitions and investments or for any other reason that our board of directors deems advisable. If any such acquisition or investment is significant, the number of shares of our common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those shares of common stock or other securities in connection with any such acquisitions and investments.
We cannot predict the size of future issuances of our common stock or other securities or the effect, if any, that future issuances and sales of our common stock or other securities, including future sales by the Sponsors, will have on the market price of our common stock. Sales of substantial amounts of common stock (including shares of common stock issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.
The price and trading volume of our common stock may fluctuate significantly.
The market price of our common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume of our common stock may fluctuate and cause significant price variations to occur. Volatility in the market price of our common stock may prevent a holder of our common stock from being able to sell their shares. The market price for our common stock could fluctuate significantly for various reasons, including:
our operating and financial performance and prospects;
our quarterly or annual earnings or those of other companies in our industry;
conditions that impact demand for our products and services;
the public's reaction to our press releases, other public announcements and filings with the SEC;
changes in earnings estimates or recommendations by securities analysts who track our common stock;
market and industry perception of our success, or lack thereof, in pursuing our growth strategy;
strategic actions by us or our competitors, such as acquisitions or restructurings;
changes in government and environmental regulation, including gaming taxes;
changes in accounting standards, policies, guidance, interpretations or principles;
arrival and departure of key personnel;
changes in our capital structure;
sales of common stock by us or members of our management team;
the expiration of contractual lockup agreements; and
changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in the gaming, lodging, hospitality and entertainment industries. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our share price.
Because we have not paid dividends since the Acquisition and do not anticipate paying dividends on our common stock in the foreseeable future, holders of our common stock should not expect to receive dividends on shares of our common stock.
We have no present plans to pay cash dividends to our stockholders and, for the foreseeable future, intend to retain all of our earnings for use in our business. The declaration of any future dividends by us is within the discretion of our Board and will be dependent on our earnings, financial condition and capital requirements, as well as any other factors deemed relevant by our Board.

24



We are a “controlled company” within the meaning of the NASDAQ rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements.
Hamlet Holdings controls a majority of our voting common stock. As a result, we are a “controlled company” within the meaning of NASDAQ corporate governance standards. Under the NASDAQ rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and we have elected not to comply with certain NASDAQ corporate governance requirements, including:
the requirement that a majority of the Board consists of independent directors;
the requirement that we have a nominating/corporate governance committee that is composed entirely of independent directors;
the requirement that we have a compensation committee that is composed entirely of independent directors; and
the requirement for an annual performance evaluation of the nominating/corporate governance and compensation committees.
As a result of these exemptions, we do not have a majority of independent directors nor do our nominating/corporate governance and compensation committees consist entirely of independent directors and we are not required to have an annual performance evaluation of the nominating/corporate governance and compensation committees. Accordingly, a holder of our common stock will not have the same protections afforded to stockholders of companies that are subject to all of the NASDAQ corporate governance requirements.
Our bylaws and certificate of incorporation contain provisions that could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.
Provisions of our bylaws and our certificate of incorporation may delay or prevent a merger or acquisition that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our directors. These provisions include:
establishing a classified board of directors;
establishing limitations on the removal of directors;
permitting only an affirmative vote of at least two-thirds of the Board to fix the number of directors;
prohibiting cumulative voting in the election of directors;
empowering only the Board to fill any vacancy on the Board, whether such vacancy occurs as a result of an increase in the number of directors or otherwise;
authorizing the issuance of “blank check” preferred stock without any need for action by stockholders;
eliminating the ability of stockholders to call special meetings of stockholders;
prohibiting stockholders from acting by written consent if less than 50.1% of our outstanding common stock is controlled by the Sponsors;
prohibiting amendments to the bylaws without the affirmative vote of at least two-thirds of the Board or the affirmative vote of at least two-thirds of the total voting power of the outstanding shares entitled to vote;
prohibiting amendments to the certificate of incorporation relating to stockholder meetings, amendments to the bylaws or certificate of incorporation, or the election or classification of the Board without the affirmative vote of two-thirds of the shares entitled to vote on any matter; and
establishing advance notice requirements for nominations for election to the Board or for proposing matters that can be acted on by stockholders at stockholder meetings.

25



Our issuance of shares of preferred stock could delay or prevent a change of control of us. Our Board has the authority to cause us to issue, without any further vote or action by the stockholders, shares of preferred stock, par value $0.01 per share, in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series. The issuance of shares of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares.
Together, these charter and statutory provisions could make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock. Furthermore, the existence of the foregoing provisions, as well as the significant common stock controlled by Hamlet Holdings, could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
PRIVATE SECURITIES LITIGATION REFORM ACT
This Form 10-K contains or may contain “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. We have based these forward-looking statements on our current expectations about future events. Further, statements that include words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or “pursue,” or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements. These forward-looking statements are found at various places throughout the report. These forward-looking statements, including, without limitation, those relating to future actions, new projects, strategies, future performance, the outcome of contingencies such as legal proceedings, and future financial results, wherever they occur in this report, are necessarily estimates reflecting the best judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors set forth above and from time to time in our filings with the Securities and Exchange Commission.
In addition to the risk factors set forth above, important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include without limitation:
the impact of our substantial indebtedness;
the effects of local and national economic, credit and capital market conditions on the economy in general, and on the gaming industry in particular;
the ability to realize the expense reductions from our cost savings programs;
access to available and reasonable financing on a timely basis;
the ability of our customer-tracking, customer loyalty and yield-management programs to continue to increase customer loyalty and same-store or hotel sales;
changes in laws, including increased tax rates, smoking bans, regulations or accounting standards, third-party relations and approvals, and decisions, disciplines and fines of courts, regulators and governmental bodies;
our ability to recoup costs of capital investments through higher revenues;
abnormal gaming holds (“gaming hold” is the amount of money that is retained by the casino from wagers by customers);
the effects of competition, including locations of competitors, competition for new licenses and operating and market competition;
the ability to timely and cost-effectively integrate companies that we acquire into our operations;
the potential difficulties in employee retention and recruitment as a result of our substantial indebtedness, the ongoing downturn in the gaming industry, or any other factor;

26



construction factors, including delays, increased costs of labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters and building permit issues;
litigation outcomes and judicial and governmental body actions, including gaming legislative action, referenda, regulatory disciplinary actions and fines and taxation;
acts of war or terrorist incidents, severe weather conditions, uprisings or natural disasters, including losses therefrom, including losses in revenues and damage to property, and the impact of severe weather conditions on our ability to attract customers to certain of our facilities, such as the amount of losses and disruption to our company as a result of Hurricane Sandy in late October 2012;
the effects of environmental and structural building conditions relating to our properties;
access to insurance on reasonable terms for our assets;
the impact, if any, of unfunded pension benefits under multi-employer pension plans; and
the other factors set forth under “Risk Factors” above.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events, except as required by law.

ITEM 1B.    Unresolved Staff Comments
None.


27



ITEM 2.    Properties
The following table sets forth information about our casino entertainment facilities as of December 31, 2012 :
Summary of Property Information
Property
 
Type of Casino
 
Casino
Space–
Sq. Ft.  (a)
 
Slot
Machines  (a)
 
Table
Games  (a)
 
Hotel
Rooms &
Suites  (a)
Atlantic City, New Jersey
 
 
 
 
 
 
 
 
 
 
Harrah’s Atlantic City
 
Land-based
 
158,500

 
2,630

 
180

 
2,590

Showboat Atlantic City
 
Land-based
 
108,900

 
2,290

 
110

 
1,330

Bally’s Atlantic City
 
Land-based
 
104,100

 
2,320

 
140

 
1,750

Caesars Atlantic City
 
Land-based
 
111,800

 
2,190

 
180

 
1,140

Las Vegas, Nevada
 
 
 
 
 
 
 
 
 
 
Harrah’s Las Vegas
 
Land-based
 
90,600

 
1,300

 
100

 
2,530

Rio
 
Land-based
 
117,300

 
1,080

 
90

 
2,520

Caesars Palace
 
Land-based
 
139,200

 
1,370

 
180

 
4,270

Paris Las Vegas
 
Land-based
 
95,300

 
1,030

 
90

 
2,920

Bally’s Las Vegas
 
Land-based
 
66,200

 
910

 
70

 
2,810

Flamingo Las Vegas (b)
 
Land-based
 
72,300

 
1,220

 
120

 
3,460

The Quad Resort & Casino (l)
 
Land-based
 
32,800

 
700

 
50

 
2,540

Bill’s Gamblin’ Hall & Saloon
 
Land-based
 
19,800

 
350

 
50

 
200

Hot Spot Oasis
 
Land-based
 
1,000

 
20

 

 

Planet Hollywood Resort and Casino
 
Land-based
 
64,500

 
1,100

 
90

 
2,500

Laughlin, Nevada
 
 
 
 
 
 
 
 
 
 
Harrah’s Laughlin
 
Land-based
 
56,000

 
930

 
40

 
1,510

Reno, Nevada
 
 
 
 
 
 
 
 
 
 
Harrah’s Reno
 
Land-based
 
41,600

 
790

 
40

 
930

Lake Tahoe, Nevada
 
 
 
 
 
 
 
 
 
 
Harrah’s Lake Tahoe
 
Land-based
 
57,500

 
820

 
70

 
510

Harveys Lake Tahoe
 
Land-based
 
71,500

 
760

 
70

 
740

Cleveland, Ohio
 
 
 
 
 
 
 
 
 
 
Horseshoe Cleveland (k)
 
Land-based
 
96,000

 
1,850

 
120

 

Chicago, Illinois area
 
 
 
 
 
 
 
 
 
 
Harrah’s Joliet (Illinois) (c)
 
Dockside
 
38,900

 
1,140

 
30

 
200

Horseshoe Hammond (Indiana)
 
Dockside
 
108,200

 
3,000

 
155

 

Metropolis, Illinois
 
 
 
 
 
 
 
 
 
 
Harrah’s Metropolis
 
Dockside
 
31,000

 
1,150

 
30

 
260

Southern Indiana
 
 
 
 
 
 
 
 
 
 
Horseshoe Southern Indiana
 
Dockside
 
86,600

 
1,750

 
110

 
500

Council Bluffs, Iowa
 
 
 
 
 
 
 
 
 
 
Harrah’s Council Bluffs
 
Dockside
 
28,000

 
830

 
20

 
250

Horseshoe Council Bluffs (d)
 
Greyhound racing
facility and land-
based casino
 
78,800

 
1,670

 
70

 

Tunica, Mississippi
 
 
 
 
 
 
 
 
 
 
Horseshoe Tunica
 
Dockside
 
63,000

 
1,460

 
90

 
510

Harrah’s Tunica
 
Dockside
 
136,000

 
1,340

 
70

 
1,360

Tunica Roadhouse Hotel & Casino
 
Dockside
 
31,000

 
730

 
30

 
130

Mississippi Gulf Coast
 
 
 
 
 
 
 
 
 
 
Grand Casino Biloxi
 
Dockside
 
31,300

 
750

 
30

 
490

North Kansas City, Missouri
 
 
 
 
 
 
 
 
 
 
Harrah’s North Kansas City
 
Dockside
 
60,100

 
1,520

 
60

 
390



28



Property
 
Type of Casino
 
Casino
Space–
Sq. Ft.  (a)
 
Slot
Machines  (a)
 
Table
Games  (a)
 
Hotel
Rooms &
Suites  (a)
New Orleans, Louisiana
 
 
 
 
 
 
 
 
 
 
Harrah’s New Orleans
 
Land-based
 
125,100

 
1,830

 
150

 
450

Bossier City, Louisiana
 
 
 
 
 
 
 
 
 
 
Louisiana Downs (e)
 
Thoroughbred
racing facility and land-based casino
 
12,000

 
1,070

 

 

Horseshoe Bossier City
 
Dockside
 
29,800

 
1,360

 
80

 
610

Chester, Pennsylvania
 
 
 
 
 
 
 
 
 
 
Harrah’s Philadelphia (f)
 
Harness racing
facility and land-
based casino
 
112,600

 
2,800

 
120

 

Phoenix, Arizona
 
 
 
 
 
 
 
 
 
 
Harrah’s Ak-Chin (g)
 
Indian Reservation
 
48,800

 
1,110

 
30

 
300

Cherokee, North Carolina
 
 
 
 
 
 
 
 
 
 
Harrah’s Cherokee (g)
 
Indian Reservation
 
176,800

 
3,870

 
140

 
1,110

San Diego, California
 
 
 
 
 
 
 
 
 
 
Harrah’s Rincon (g)
 
Indian Reservation
 
72,900

 
1,860

 
70

 
660

Punta del Este, Uruguay
 
 
 
 
 
 
 
 
 
 
Conrad Punta del Este Resort and Casino (h)
 
Land-based
 
44,500

 
550

 
70

 
290

Ontario, Canada
 
 
 
 
 
 
 
 
 
 
Caesars Windsor (i)
 
Land-based
 
100,000

 
2,300

 
80

 
760

United Kingdom
 
 
 
 
 
 
 
 
 
 
Golden Nugget
 
Land-based
 
5,100

 
50

 
20

 

Playboy Club London
 
Land-based
 
6,200

 
20

 
20

 

The Sportsman
 
Land-based
 
5,200

 
50

 
20

 

Rendezvous Brighton
 
Land-based
 
7,800

 
80

 
30

 

Rendezvous Southend-on-Sea
 
Land-based
 
8,700

 
50

 
30

 

Manchester235
 
Land-based
 
11,500

 
40

 
40

 

The Casino at the Empire
 
Land-based
 
20,900

 
130

 
50

 

Alea Nottingham
 
Land-based
 
10,000

 
50

 
20

 

Alea Glasgow
 
Land-based
 
15,000

 
50

 
30

 

Alea Leeds (m)
 
Land-based
 
10,300

 
50

 
30

 

Egypt
 
 
 
 
 
 
 
 
 
 
The London Clubs Cairo-Ramses (g)
 
Land-based
 
2,700

 
40

 
20

 

Caesars Cairo (g)
 
Land-based
 
5,500

 
30

 
20

 

South Africa
 
 
 
 
 
 
 
 
 
 
Emerald Safari (j)
 
Land-based
 
37,700

 
560

 
40

 
190

____________________
(a)  
Approximate.
(b)  
Includes O'Shea's Casino, which is adjacent to this property. O'Shea's Casino temporarily ceased operations on April 30, 2012 and is expected to reopen in 2013 as part of The Quad Resort & Casino.
(c)  
We have an 80% ownership interest in and manage this property.
(d)  
The property is owned by the Company, leased to the operator, and managed by the Company for the operator for a fee pursuant to an agreement that expires in October 2024. This information includes the Bluffs Run greyhound racetrack that operates at the property.
(e)  
We own a 49% share of a venture that owns a 150-room hotel located near the property.
(f)  
Prior to May 2012, this property operated under the Harrah's Chester name. We have a 99.5% ownership interest in and manage this property.
(g)  
Managed.
(h)  
We have an approximate 95% ownership interest and manage this property. In November 2012, we entered into a definitive agreement with Enjoy to sell 45% of Baluma S.A., our subsidiary that owns and operates Conrad. Under the terms of the agreement, we will have an approximate 52% ownership in this property. Please refer to Note 3 , “ Acquisitions, Investments, Dispositions and Divestitures ," to our consolidated financial statements appearing in Item 8 of this report for more details on this agreement.

29



(i)  
We operate this property and the province of Ontario owns the complex through the Ontario Lottery and Gaming Corporation.
(j)  
We have a 70% ownership interest in and manage this property.
(k)  
We manage this property and have a 20% interest in ROC which owns this property.
(l)  
Prior to December 2012, this property operated under the name Imperial Palace Hotel and Casino.
(m)  
We closed this casino on March 4, 2013.

ITEM 3.    Legal Proceedings
Litigation
The Supreme Court of Nevada decided in early 2008 that food purchased for subsequent use in the provision of complimentary and/or employee meals is exempt from use tax. Previously, such purchases were subject to use tax and the Company has claimed, but not recognized into earnings, a use tax refund totaling $32.2 million , plus interest, as a result of the 2008 decision. In early 2009 , the Nevada Department of Taxation ("Department”) audited our refund claim, but has taken the position that those same purchases are now subject to sales tax; therefore, they subsequently issued a sales tax assessment totaling $27.4 million plus interest after application of our refund on use tax.
On October 21, 2010 , the administrative law judge (“ALJ”) issued a decision and ruled in our favor on a number of key issues, including that complimentary employee meals are not subject to sales tax. Although both the Company and the Nevada Department of Taxation filed an appeal of the decision with the Nevada Tax Commission (“Commission”), the case was returned to the ALJ for further factual development. The ALJ issued a second decision on March 8, 2012 , reversing her previous, partially favorable ruling relating to the taxability of complimentary employee meals and affirmed the taxability of complimentary meals but limited the entire sales tax assessment to the amount of the Company's use tax refund claims resulting in no use tax refund awarded but no sales tax amounts due. The ALJ decision was affirmed in the Commission hearing on June 25, 2012 and the Commission's final decision was issued on July 31, 2012 . We filed a petition for judicial review with the District Court on August 7, 2012 . On March 1, 2013, the District Court judge ruled that employee meals are not subject to sales tax but affirmed the application of sales tax to complimentary patron meals. Additionally, the judge ordered a refund of the portion of our use tax refund claims filed prior to October 1, 2005 without any offsetting sales tax assessments relating to complimentary patron meals for those periods. We expect that the District Court decision will be appealed to the Nevada Supreme Court.
Subsequent to a written Commission decision issued in February 2012 for another gaming company, the Department has issued draft regulations requiring the collection of sales tax on the retail value of complimentary meals and the cost of employee meals. Although the Commission approved the regulation on June 25, 2012 , there are several additional approvals required, including by the Legislative Commission, before the regulation is finalized. On June 6, 2012 , the Department issued additional guidance regarding the payment of sales tax on complimentary and employee meals, maintaining that meals are taxable as of February 15, 2012 but that the payment of the tax is due, without penalty or interest, at the earlier of (a) one month after approval of the regulation by the Legislative Commission, (b) one month after a Nevada Supreme Court decision, (c) the effective date of any legislation or (d) June 30, 2013 . The Department stated that it provided this additional guidance regarding the deferral of payment requirements because the Legislative Commission has not had the opportunity to approve the regulation and because there are several ongoing appeals that have not been heard by the Tax Commission and the Nevada Supreme Court.
As of December 31, 2012 we had accrued $16.4 million in sales tax accruals on complementary meals. Due to uncertainty regarding the ultimate outcome of our pending litigation and/or the final approval and form of the pending regulation, we continue to record sales tax reserves against loss on this matter.
The Company is party to ordinary and routine litigation incidental to our business. We do not expect the outcome of any pending litigation to have a material effect on our consolidated financial position, results of operations, or cash flows.

ITEM 4.    Mine Safety Disclosures
Not applicable.


30



Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act
On February 12, 2013, certain investment funds affiliated with Apollo Global Management, LLC, one of our Sponsors, beneficially owned approximately 19.6% of the ordinary shares of LyondellBasell Industries N.V. (“LyondellBasell”) and have certain director nomination rights. LyondellBasell may be deemed to be under common control with Caesars, but this statement is not meant to be an admission that common control exists. As a result, it appears that we are required to provide disclosures as set forth herein pursuant to Section 219 of the new Iran Threat Reduction and Syria Human Rights Act of 2012 and Section 13(r) of the Exchange Act. The Annual Report on Form 10-K for the year ended December 31, 2012 filed by LyondellBasell with the SEC on February 12, 2013 contained the disclosure set forth below (with all references contained therein to “the Company” being references to LyondellBasell and its consolidated subsidiaries).
The disclosure below does not relate to any activities conducted by Caesars and does not involve Caesars or Caesars management. The disclosure relates solely to activities conducted by LyondellBasell and its consolidated subsidiaries.
Disclosure pursuant to Section 219 of the Iran Threat Reduction & Syria Human Rights Act
Certain non-U.S. subsidiaries of our predecessor, LyondellBasell AF, licensed processes to construct and operate manufacturing plants in Iran that produce polyolefin plastic material, which is used in the packaging of household and consumer goods. The subsidiaries also provided engineering support and supplied catalyst products to be used in these manufacturing operations. In 2009, the Company made the decision to suspend the pursuit of any new business dealings in Iran.
As previously disclosed by the Company, in 2010, our management made the further decision to terminate all business by the Company and its direct and indirect subsidiaries with the government, entities and individuals in Iran. The termination was made in accordance with all applicable laws and with the knowledge of U.S. Government authorities. As part of the termination, we entered into negotiations with Iranian counterparties in order to exit our contractual obligations. As described below, two transactions occurred under settlement agreements in early 2012, although the agreements to cease our activities with these counterparties were entered into in 2011. In January 2012, one of our non-U.S. subsidiaries received a final payment of approximately €3.5 million for a shipment of catalyst from an entity that is 50% owned by the National Petrochemical Company of Iran.
Our shipment of the catalyst was in February 2012 as part of the agreement related to our termination and cessation of all business under agreements with the counterparty. In 2012, the gross revenue from this limited activity was approximately, €4.2 million and profit attributable to it was approximately, €2.4 million.
In January and February of 2012, one of the Company's non-U.S. subsidiaries provided certain engineering documents relating to a polyolefin plastic process to a licensee comprising three Iranian companies, one of which is 20% owned by the National Oil Company of Iran. The provision of documents was the Company's final act with respect to the termination and cessation of all business under agreements with the counterparties. No gross revenue or profit was attributable to this activity in 2012. The transactions disclosed in this report do not constitute violations of applicable anti-money laundering laws or sanctions laws administered by the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC), and are not the subject of any enforcement actions under the Iran sanction laws.
We have not conducted, and do not intend to conduct, any further business activities in Iran or with Iranian counterparties.”


31



PART II

ITEM 5.
Market for the Company’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Effective February 8, 2012 , our common stock trades on the NASDAQ under the symbol “ CZR .” The following table sets forth the high and low sales prices for the common stock on the NASDAQ for each fiscal quarter of 2012. Subsequent to the Acquisition in 2008 , and prior to the above date, our outstanding common stock was privately held, and there was no established public trading market for our common stock; therefore, there are no high and low sales prices for the common stock available for 2011 .

High
 
Low
2012
 
 
 
First Quarter (from February 8, 2012)
$
17.90

 
$
9.00

Second Quarter
15.74

 
11.03

Third Quarter
11.67

 
6.38

Fourth Quarter
8.25

 
4.52

As of March 1, 2013 , there were 125,362,197 shares of common stock issued and outstanding that were held by 171 stockholders of record.
Dividends
We did not pay any cash dividends in the years ended December 31, 2012 or 2011 . We currently do not anticipate paying cash dividends on our common stock in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.
Recent Sales of Unregistered Securities
There have not been any sales by the Company of equity securities in the fiscal years ended December 31, 2012 , 2011 , or 2010 that have not been registered under the Securities Act.
Share Repurchases
The Company did not repurchase shares of our common stock during the quarter ended December 31, 2012 .

32



Performance Graph
The graph depicted below compares the cumulative total stockholder return on our common stock with the cumulative total return on the Standard & Poor's 500 Stock Index (“S&P 500”) and the Dow Jones U.S. Gambling Total Stock Market Index (“Dow Jones U.S. Gambling”) for the period beginning on February 8, 2012 (the date our common stock commenced trading on the NASDAQ Global Select Market) and ending on December 31, 2012 . NASDAQ OMX furnished the data. The performance graph assumes a $100 investment in our stock and each of the two indices, respectively, on February 8, 2012 , and that all dividends were reinvested. Stock price performance, presented for the period from February 8, 2012 to December 31, 2012 , is not necessarily indicative of future results.

 
 
2/8/2012
 
12/31/2012
CZR
 
$100.00
 
$44.96
S&P 500 Index
 
100.00
 
107.85
Dow Jones U.S. Gambling
 
100.00
 
98.69
The performance graph should not be deemed filed or incorporated by reference into any other of our filings under the Securities Act or the Exchange Act, unless we specifically incorporate the performance graph by reference therein.
Equity Compensation Plan Information
In February 2008, our Board of Directors approved the Harrah's Entertainment, Inc. Management Equity Incentive Plan, as amended (the "2008 Incentive Plan") and granted options to purchase our common stock to certain of our officers and employees. In February 2012, our Board of Directors adopted the 2012 Performance Incentive Plan, as amended (the "2012 Incentive Plan"), which is more fully discussed in Item 8. Financial Statements and Supplementary Data, Note 18 , “ Employee Benefit Plans .”
The table below sets forth information regarding our equity compensation plans as of December 31, 2012 :  
Equity compensation plans not approved by security holders

Number of securities to be
issued upon exercise of
outstanding options or
vesting of restricted stock

Weighted-average exercise
price of outstanding options

Number of securities
remaining available for
future issuance under equity
compensation plans
Stock Options (1)
 
8,478,148

 
$
10.51

 
7,303,449

Restricted Stock (2)
 
50,000

 

 
N/A

____________________
(1)  
The weighted average remaining contract life for the options set forth in this column is 9.4 years.  The number of securities to be issued upon exercise of outstanding options includes 231,918 shares related to a rollover option initially signed with an executive on January 27, 2008 that provided for the conversion of options to purchase shares of the Company prior to the Acquisition into options to purchase shares of the Company following the Acquisition (the "2008 Rollover Options"), which had an expiration date of June 17, 2012. On April 16, 2012, the Human Resources Committee of our Board of Directors approved an award to replace the 2008 Rollover Options with an option to purchase an equal amount of shares of our common stock pursuant to the 2012 Performance Incentive Plan (the "2012 Rollover Options"). The 2012 Rollover Options are fully vested, expire in April 2022 and were issued under the 2012 Incentive Plan.
(2)  
The shares of restricted common stock are issued under the 2012 Incentive Plan.

33



ITEM 6.    Selected Financial Data

The selected financial data set forth below for the periods indicated, should be read in conjunction with the consolidated financial statements and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, included elsewhere in this Form 10-K.
 
 
 
Successor
 
 
Predecessor
(In millions, except per share data)
 
2012
 
2011
 
2010
 
2009
 
Jan. 28, 2008
through
Dec. 31, 2008
 
 
Jan. 1, 2008
through
Jan. 27, 2008
OPERATING DATA
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
8,586.7

 
$
8,573.3

 
$
8,553.2

 
$
8,622.4

 
$
9,100.4

 
 
$
739.2

Write-downs, reserves, and project opening costs, net of recoveries
 
106.2

 
73.8

 
149.7

 
111.4

 
45.1

 
 
5.4

Intangible and tangible asset impairment charges
 
1,067.7

 
32.8

 
184.0

 
1,638.0

 
5,462.6

 
 

(Loss)/income from operations
 
(313.4
)
 
816.3

 
483.1

 
(674.7
)
 
(4,263.4
)
 
 
(38.5
)
Gains on early extinguishments of debt
 
136.0

 
47.9

 
115.6

 
4,965.5

 
742.1

 
 

(Loss)/income from continuing operations, net of income taxes
 
(1,382.7
)
 
(698.1
)
 
(849.4
)
 
811.0

 
(5,185.8
)
 
 
(100.6
)
(Loss)/income from discontinued operations, net of income taxes
 
(109.5
)
 
31.4

 
26.1

 
35.4

 
101.5

 
 
1.3

Net (loss)/income
 
(1,492.2
)
 
(666.7
)
 
(823.3
)
 
846.4

 
(5,084.3
)
 
 
(99.3
)
Net (loss)/income attributable to Caesars
 
(1,497.5
)
 
(687.6
)
 
(831.1
)
 
827.6

 
(5,096.3
)
 
 
(100.9
)
COMMON STOCK DATA
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted (loss)/earnings per share
 
 
 
 
 
 
 
 
 
 
 
 
 
From continuing operations
 
(11.08
)
 
(5.75
)
 
(8.63
)
 
3.78

 
(77.42
)
 
 
(0.55
)
From discontinued operations
 
(0.87
)
 
0.25

 
0.26

 
0.17

 
1.43

 
 
0.01

Net (loss)/income
 
(11.95
)
 
(5.50
)
 
(8.37
)
 
3.95

 
(75.99
)
 
 
(0.54
)
FINANCIAL POSITION DATA
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
27,998.1

 
$
28,515.6

 
$
28,587.7

 
$
28,979.2

 
$
31,048.6

 
 
$
23,371.3

Long-term debt
 
20,532.2

 
19,759.5

 
18,785.5

 
18,868.8

 
23,123.3

 
 
12,367.5

Stockholders’ (deficit)/equity
 
(411.7
)
 
1,006.7

 
1,672.6

 
(867.0
)
 
(1,360.8
)
 
 
6,733.4



34



ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with, and is qualified in its entirety by, the audited consolidated financial statements and the notes thereto and other financial information included elsewhere in this Form 10-K. Certain statements in this “Management's Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. See “Item 1A. Risk Factors— PRIVATE SECURITIES LITIGATION REFORM ACT” of this report.
Overview
We are the world’s most diversified casino-entertainment provider and the most geographically diverse U.S. casino-entertainment company. As of December 31, 2012 , we owned, operated, or managed, through various subsidiaries, 52 casinos in 13 U.S. states and seven countries. The majority of these casinos operate in the United States, primarily under the Caesars, Harrah’s, and Horseshoe brand names and in England. Our casino entertainment facilities include 33 land-based casinos, 11 riverboat or dockside casinos, three managed casinos on Indian lands in the United States, one managed casino in Cleveland, Ohio, one managed casino in Canada, one casino combined with a greyhound racetrack, one casino combined with a thoroughbred racetrack, and one casino combined with a harness racetrack. Our land-based casinos include nine in England, two in Egypt, one in Scotland, one in South Africa and one in Uruguay. As of December 31, 2012 , our facilities had an aggregate of approximately three million square feet of gaming space and approximately 43,000 hotel rooms. Our industry-leading customer loyalty program, Total Rewards, has over 45 million members. We use the Total Rewards system to market promotions and to generate customer play across our network of properties. In addition, we own an online gaming business, providing for real money casino, bingo, and poker games in the United Kingdom, alliances with online gaming providers in Italy and France, "play for fun" offerings in other jurisdictions, social games on Facebook and other social media websites, and mobile application platforms. We also own and manage the World Series of Poker tournament and brand.
Regional Aggregation
The executive officers of our company review operating results, assess performance, and make decisions related to the allocation of resources on a property-by-property basis. We believe, therefore, that each property is an operating segment and that it is appropriate to aggregate and present the operations of our company as one reportable segment. To provide more meaningful information than would be possible on a consolidated basis, our casino properties (as of December 31, 2012 , or otherwise noted below) have been grouped into seven regions as shown in the table below to facilitate discussion of our operating results:
Las Vegas
  
Atlantic City
  
Louisiana/Mississippi
  
Iowa/Missouri
Caesars Palace
  
Harrah’s Atlantic City
  
Harrah’s New Orleans
  
Harrah’s North Kansas City
Bally’s Las Vegas
  
Showboat Atlantic City
  
Harrah’s Louisiana Downs
  
Harrah’s Council Bluffs
Flamingo Las Vegas (a)
  
Bally’s Atlantic City
  
Horseshoe Bossier City
  
Horseshoe Council Bluffs/
Harrah’s Las Vegas
  
Caesars Atlantic City
  
Grand Biloxi
  
Bluffs Run
Paris Las Vegas
  
Harrah’s Philadelphia (c)
  
Harrah’s Tunica
  
 
Rio
  
 
  
Horseshoe Tunica
  
 
The Quad Resort & Casino (b)
  
 
  
Tunica Roadhouse Hotel &
  
 
Bill’s Gamblin’ Hall &
 
 
 
Casino
 
 
Saloon
  
 
  
 
  
 
Planet Hollywood Resort &
 
 
 
 
 
 
Casino
  
 
  
 
  
 
Illinois/Indiana
  
Other Nevada
  
Managed and International
Horseshoe Southern Indiana 
  
Harrah’s Reno
  
Harrah’s Ak-Chin (e)
Harrah’s Joliet (d)
  
Harrah’s Lake Tahoe
  
Harrah’s Cherokee (e)
Harrah’s Metropolis 
  
Harveys Lake Tahoe
  
Harrah’s Rincon (e)
Horseshoe Hammond 
  
Harrah’s Laughlin
  
Horseshoe Cleveland (f)
 
  
 
  
Conrad Punta del Este (g)
 
  
 
  
Caesars Windsor (h)
 
 
 
 
London Clubs International (i)


35



____________________
(a)  
Includes O'Shea's Casino, which is adjacent to this property. O'Shea's Casino temporarily ceased operations on April 30, 2012 and is expected to reopen in 2013 as part of The Quad Resort & Casino.
(b)  
Prior to December 2012, this property operated under the name Imperial Palace Hotel and Casino.
(c)  
Prior to May 2012, this property operated under the Harrah's Chester name. We have a 99.5% ownership interest in and manage this property.
(d)  
We have an 80% ownership interest in and manage this property.
(e)  
Managed.
(f)  
We manage this property and have a 20% interest in Rock Ohio Caesars, LLC, which owns this property.
(g)  
We have an approximate 95% ownership interest in and manage this property. In November 2012, we entered into a definitive agreement with Enjoy to sell 45% of Baluma S.A., our subsidiary that owns and operates Conrad. Under the terms of the agreement, we will have an approximate 52% ownership in this property. Please refer to Note 3 , “ Acquisitions, Investments, Dispositions and Divestitures ," to our consolidated financial statements appearing in Item 8 of this report for more details on this agreement.
(h)  
We operate this property and the province of Ontario owns the complex through the Ontario Lottery and Gaming Corporation.
(i)  
As of December 31, 2012, w e owned, operated, or managed 10 casino clubs in the provinces of the United Kingdom and two in Egypt. On March 4, 2013, we closed one of the casino clubs in the United Kingdom. We also have a 70% ownership interest in and manage one casino in South Africa.

Consolidated Operating Results
 
 
 
 
 
 
 
Percent
Favorable/(Unfavorable)
(Dollars in millions)
2012
 
2011
 
2010
2012 vs 2011
 
2011 vs 2010
Casino revenues
$
6,246.9

 
$
6,394.5

 
$
6,671.8

 
(2.3
)%
 
(4.2
)%
Net revenues
8,586.7

 
8,573.3

 
8,553.2

 
0.2
 %
 
0.2
 %
(Loss)/income from operations
(313.4
)
 
816.3

 
483.1

 
**

 
69.0
 %
Loss from continuing operations, net of income taxes
(1,382.7
)
 
(698.1
)
 
(849.4
)
 
(98.1
)%
 
17.8
 %
(Loss)/income from discontinued operations, net of income taxes
(109.5
)
 
31.4

 
26.1

 
**

 
20.3
 %
Net loss attributable to Caesars
(1,497.5
)
 
(687.6
)
 
(831.1
)
 
(117.8
)%
 
17.3
 %
Operating margin *
(3.6
)%
 
9.5
%
 
5.6
%
 
(13.1) pts

 
3.9 pts

Net revenues, (loss)/income from operations, and loss from continuing operations, net of income taxes for all periods presented in the table above exclude the results of the Harrah's St. Louis casino and the results of the subsidiaries that hold our land concession in Macau, both of which are presented as discontinued operations.
____________________
* Operating margin is calculated as (loss)/income from operations divided by net revenues.
** Not meaningful.
Year ended December 31, 2012 compared to year ended December 31, 2011     
Net revenues for 2012 increased $13.4 million or 0.2% from 2011 due mainly to higher revenues from our online businesses and from Caesars' management companies due in part to the opening of Horseshoe Cleveland in May 2012. These higher revenues were mostly offset by revenue declines in the Atlantic City Region resulting from hurricane-related property closures as well as continued competitive pressures in that region. All five properties in the Atlantic City Region had closures during the fourth quarter 2012 due to Hurricane Sandy, which made landfall on October 29, 2012. Harrah's Philadelphia reopened two days later and the Atlantic City properties reopened five days later. However, the region's economy has been slow to recover due to the devastation caused by the hurricane. We estimate that the negative impact of Hurricane Sandy on net revenues was approximately $40 million to $45 million .

36



For 2012 , loss from operations was $313.4 million compared with income from operations of $816.3 million in 2011 . This change was due largely to non-cash impairment charges that totaled $1,067.7 million , comprised of intangible asset impairment charges of $195.2 million related to goodwill, $209.0 million related to trademarks and $33.0 million related to gaming rights, as well as tangible asset impairment charges of $450.0 million related to the tangible assets of one of the properties in the Atlantic City Region and $180.5 million related to a previously halted development project in Biloxi, Mississippi. By comparison, non-cash intangible and tangible asset impairment charges were $32.8 million in 2011. Also contributing to the loss from operations in 2012 was an increase in depreciation expense associated with the opening of the Octavius Tower at Caesars Palace Las Vegas in January 2012, and increased corporate expenses and write-downs, reserves, and project opening costs, net of recoveries.
Net loss attributable to Caesars for 2012 increased $809.9 million or 117.8% from 2011 , due mainly to the increase in loss from operations and a net loss from our discontinued operations of $109.5 million, partially offset by increases in gains on early extinguishments of debt and the tax rate benefit as further described in "Other Factors Affecting Net Income" that follows herein.
Year ended December 31, 2011 compared to year ended December 31, 2010
Despite a decline in casino revenues, net revenues for 2011 increase d $20.1 million , or 0.2% , from 2010 , as favorable results in Las Vegas and from our international and online businesses, including revenues related to Playtika, which we acquired during the year, were somewhat offset by revenue declines at properties in the Midwest and Atlantic City.
For 2011 , income from operations increased $333.2 million , or 69.0% , from 2010 . This increase was due mainly to a $151.2 million decrease from 2010 of intangible and tangible non-cash impairment charges, the effects of cost-reduction efforts under cost savings programs, including Project Renewal, and a $75.9 million reduction in write-downs, reserves, recoveries, and project opening costs.
Net loss attributable to Caesars for 2011 decreased $143.5 million or 17.3% , compared with 2010 , due primarily to higher income from operations and an increase in the benefit for income taxes, partially offset by higher interest expense in 2011 , due mainly to certain interest rate swaps no longer qualifying for hedge accounting.
Performance Metrics
We measure performance in part through the tracking of trips by rated customers, which means a customer whose gaming activity is tracked through the Total Rewards customer-loyalty system ("trips"), and by spend per rated customer trip ("spend per trip"). A trip is created by a Total Rewards card holder engaging in one or more of the following activities while at one of our properties: (1) hotel stay, (2) gaming activity, or (3) a comp redemption, which means the receipt of a complimentary item given out by our casinos. In markets where we have multiple properties, customers often engage in trip generating activities at more than one property in a day. In these instances, we consider the market as a whole and do not count multiple trips. Customer spend means the cumulative rated theoretical spend (which is the amount of money expected to be retained by the casino based upon the mathematics underlying the particular game as a fraction of the amount of money wagered by the customer) across all game types for a specific customer. For the Atlantic City region, we refer to customers that stay at a hotel in one of its properties as lodgers and customers that may play at a casino located in one of its properties but do not stay at a hotel at such property as non-lodgers.
The following table reflects the percentage increase/(decrease) in trips and spend per trip for the U.S. regions for 2012 compared with 2011 :
 
 
Trips
 
Spend per Trip
Consolidated Caesars
 
(4.1
)%
 
0.9
 %
Las Vegas region
 
1.0
 %
 
3.2
 %
Atlantic City region:
 
 
 
 
   Lodgers
 
(10.2
)%
 
(0.8
)%
   Non-lodgers
 
(8.3
)%
 
(1.1
)%
All other regions
 
(2.5
)%
 
(0.5
)%


37



For 2012, trips decreased on a consolidated basis compared with 2011 , due mainly to hurricane-related property closures and competitive pressures in the Atlantic City Region, as well as modest declines in the rest of our domestic regions, except for Las Vegas where trips rose slightly. For 2012 , spend per trip increased from 2011 , due mainly to an increase in the Las Vegas region largely as a result of strength in the international high-end segment, which was partially offset by declines in Atlantic City and our other domestic regions. On a consolidated basis, cash average daily room rates for 2012 were relatively unchanged from 2011 as declines in the Atlantic City Region as a result of lost convention business in the fourth quarter 2012 due to the hurricane were offset by increases in our Iowa/Missouri and Louisiana/Mississippi regions. Total occupancy percentage decreased 0.6 percentage points in 2012 compared with 2011 due mainly to declines in the Atlantic City Region, partially offset by increases in several of our other domestic regions.
The following table reflects the percentage increase/(decrease) in trips and spend per trip for our U.S. regions for 2011 compared with 2010 :
 
 
Trips
 
Spend per Trip
Consolidated Caesars
 
(6.7
)%
 
3.4
 %
Las Vegas region
 
2.5
 %
 
2.7
 %
Atlantic City region:
 
 
 
 
   Lodgers
 
(0.2
)%
 
(2.2
)%
   Non-lodgers
 
(5.6
)%
 
(0.7
)%
All other regions
 
(9.8
)%
 
2.7
 %
For 2011 , trips on a consolidated basis declined from 2010 due to (i) new competition in the Atlantic City, Iowa/Missouri, and Illinois/Indiana regions, (ii) reduced access to one of our properties due to a bridge closure in the Illinois/Indiana region beginning in the first week of September 2011 that reopened in February 2012, (iii) temporary closures in the Atlantic City region during the third quarter of 2011 due to Hurricane Irene, (iv) temporary closures of seven properties in the Illinois/Indiana and Louisiana/Mississippi regions during the first half of 2011 due to flooding and severe weather conditions, and (v) the impact of marketing programs on trip frequency of certain customer segments in all U.S. regions. These decreases in trips were partially offset by an increase in trips for the Las Vegas region during 2011.
On a consolidated basis, cash average daily room rates for 2011 increased to $91 from $86 , or 6.4% , when compared to 2010 largely driven by the Las Vegas region. Total occupancy percentages in 2011 increased 1.4 percentage points when compared to 2010 .
Regional Operating Results

Las Vegas Region
 
 
 
 
 
 
 
Percent Favorable/(Unfavorable)
(Dollars in millions)
2012
 
2011
 
2010
2012 vs 2011
 
2011 vs 2010
Casino revenues
$
1,641.5

 
$
1,582.5

 
$
1,544.4

 
3.7
 %
 
2.5
%
Net revenues
3,029.9

 
3,013.1

 
2,834.8

 
0.6
 %
 
6.3
%
Income from operations
428.7

 
495.5

 
349.9

 
(13.5
)%
 
41.6
%
Operating margin*
14.1
%
 
16.4
%
 
12.3
%
 
(2.3) pts

 
4.1 pts

____________________
* Operating margin is calculated as income from operations divided by net revenues.

38



Net revenues for 2012 increased $16.8 million or 0.6% from 2011 due primarily to strength in the international, high-end gaming segment contributing to higher casino revenues and the January 2012 opening of 662 additional rooms in the Octavius Tower at Caesars Palace Las Vegas contributing to higher rooms revenue. Trips increased 1.0% in 2012 from 2011 and spend per trip increased 3.2% . In 2012 , hotel revenues increased 1.9%, cash average daily room rates were relatively unchanged and occupancy rates decreased 1.5 percentage points from 2011 . Revenues were negatively impacted by Project Linq construction activities in 2012, which included the closure of O’Shea’s casino and several retail outlets at Harrah’s Las Vegas earlier in 2012, and the ongoing renovation of The Quad Resort & Casino (formerly, the Imperial Palace Hotel and Casino). We estimate that Project Linq construction activities reduced 2012 net revenues by approximately $30 million to $40 million . Income from operations decreased $66.8 million , or 13.5% , from 2011, due primarily to an increase in property operating expenses and depreciation expense associated with the Octavius Tower at Caesars Palace Las Vegas, in addition to an increase of $19.7 million in write-downs, reserves, and project opening costs, net of recoveries related primarily to increased remediation costs in the region. We estimate that Project Linq construction activities reduced 2012 income from operations by approximately $15 million to $25 million .
Strengthening fundamentals in the overall Las Vegas market and the international, high-end gaming segment positively impacted our 2011 results in the region compared with 2010. Increases in trips, spend per trip, cash average daily room rates, and total occupancy contributed to a $178.3 million , or 6.3% increase in our Las Vegas region net revenues for 2011 from 2010 . Hotel revenues in the region increased 11.4% , cash average daily room rates increased 8.0% to $92 from $85 and total occupancy percentages rose 3.2 percentage points for 2011 , marking our highest occupancy percentage in the Las Vegas region in six years. For 2011 , income from operations increased $145.6 million , or 41.6% , from 2010 due to the impact of increased revenues and a decrease in remediation costs related to the properties in the region.
During 2012, we secured $185.0 million in financing to fund the complete renovation of Bill’s Gamblin’ Hall & Saloon into a boutique lifestyle hotel that includes a dayclub/nightclub. The renovation will include a complete remodeling of the guest rooms, casino floor, and common areas, the addition of a second floor restaurant, and the construction of an approximately 65,000 square foot rooftop pool and dayclub/nightclub. We will own the property and manage the casino, hotel, and food and beverage operations, and the dayclub/nightclub will be leased to a third party. Bill's Gamblin' Hall & Saloon temporarily closed in early February 2013 to accommodate these renovations. The renovated hotel, casino, and restaurant are expected to open in December 2013 and the dayclub/nightclub is expected to open in April 2014. Through December 31, 2012, $3.0 million had been spent on this project. See Note 8 , “ Debt —Bill's Credit Facility,” to the consolidated financial statements included in Item 8 of this report, for discussion of the financing related to this project.
During 2011, we commenced construction on Project Linq, a dining, entertainment, and retail development between the Flamingo casino and The Quad Resort & Casino, on the east side of the Las Vegas Strip, which is scheduled to open in phases beginning in late 2013. Project Linq also includes the construction of a 550-foot observation wheel, the High Roller, which is expected to open in early 2014. Through December 31, 2012, $240.6 million had been spent on this project, of which $187.9 million was spent in 2012. See Note 8 , “ Debt Octavius and Linq Projects ,” to the consolidated financial statements included in Item 8 of this report, for discussion of the financing related to Project Linq.
Atlantic City Region
 
 
 
 
 
 
 
Percent Favorable/(Unfavorable)
(Dollars in millions)
2012
 
2011
 
2010
2012 vs 2011
 
2011 vs 2010
Casino revenues
$
1,429.6

 
$
1,584.9

 
$
1,696.8

 
(9.8
)%
 
(6.6
)%
Net revenues
1,681.3

 
1,839.1

 
1,899.9

 
(8.6
)%
 
(3.2
)%
(Loss)/income from operations
(394.6
)
 
79.6

 
83.7

 
**

 
(4.9
)%
Operating margin*
(23.5
)%
 
4.3
%
 
4.4
%
 
(27.8) pts

 
(0.1) pts

____________________
* Operating margin is calculated as (loss)/income from operations divided by net revenues.
** Not meaningful.


39



For 2012 , net revenues decreased by $157.8 million , or 8.6% from 2011 , due mainly to continued competitive pressures and the negative impact of Hurricane Sandy which forced the closure of our properties in Atlantic City for five days and our property in Philadelphia for two days in the fourth quarter 2012. The hurricane related property closures contributed to a decline in trips during 2012 compared with 2011, and spend per trip declined slightly. We estimate that the negative impact of Hurricane Sandy on net revenues was approximately $40 million to $45 million . Loss from operations was $394.6 million for 2012 compared with income from operations of $79.6 million in 2011 . This change was due largely to a non-cash impairment charge of $450.0 million recorded in the fourth quarter 2012 related to tangible assets of one of the properties in the region, with no comparable charge in 2011, as well as the earnings impact of lower revenues. See Note 5, "Property and Equipment, net" to the consolidated financial statements included in Item 8 of this report, for discussion of the tangible asset impairments. We estimate that the negative impact of Hurricane Sandy on loss from operations was approximately $35 million to $40 million .
We expect that the region will continue to be challenged as a result of the slow recovery from the hurricane and competitive pressures.
Atlantic City region net revenues declined $60.8 million , or 3.2% , for 2011 from 2010 due to declines in trips and spend per trip in both lodger and non-lodger segments. Trip declines resulted from temporary closures of the properties in the region during the third quarter of 2011 due to Hurricane Irene, the continued effect of competition from new casinos and the mid-2010 introduction of table games in the Pennsylvania market. Income from operations declined $4.1 million , or 4.9% , for 2011 from 2010 due to lower revenues, which was mostly offset by reduced property operating expenses as a result of our cost reduction activities.
Louisiana/Mississippi Region
 
 
 
 
 
 
 
Percent Favorable/(Unfavorable)
(Dollars in millions)
2012
 
2011
 
2010
2012 vs 2011
 
2011 vs 2010
Casino revenues
$
999.7

 
$
1,012.0

 
$
1,096.4

 
(1.2
)%
 
(7.7
)%
Net revenues
1,101.9

 
1,104.4

 
1,193.4

 
(0.2
)%
 
(7.5
)%
(Loss)/income from operations
(222.3
)
 
122.0

 
69.9

 
**

 
74.5
 %
Operating margin*
(20.2
)%
 
11.0
%
 
5.9
%
 
(31.2) pts

 
5.1 pts

____________________
* Operating margin is calculated as (loss)/income from operations divided by net revenues.
** Not meaningful.
Net revenues in the region for 2012 were down slightly from 2011 , due mainly to increased competitive pressures from new competition in Biloxi, Mississippi beginning in May 2012 and Baton Rouge, Louisiana beginning in September 2012, as well as the negative impact from Hurricane Isaac in the third quarter 2012. Spend per trip in the region increased while trips to the region's properties declined. Loss from operations was $222.3 million in 2012 , compared with income from operations of $122.0 million in 2011 . This change was due mainly to non-cash impairment charges during 2012 of $334.7 million , comprised of intangible asset impairment charges of $153.2 million related to goodwill, $1.0 million related to gaming rights and tangible asset impairment charges of $180.5 million related to a halted development project in Biloxi, Mississippi. We also recorded a non-cash charge of $20.2 million in 2012 related to exit activities associated with the halted project.
Louisiana/Mississippi region net revenues decreased $89.0 million , or 7.5% , for 2011 from 2010 due to a decrease in trips, which were negatively impacted by the temporary closure of three properties in the first half of 2011 due to flooding and severe weather conditions. Income from operations increased $52.1 million , or 74.5% , in 2011 from 2010 . This increase was due mainly to reduced property operating expenses and a $48.0 million decrease from 2010 in impairment charges related to goodwill and other non-amortizing intangible assets, partially offset by the impact of lower revenues. Certain costs incurred during 2011 in connection with the closures of several properties due to flooding were not expensed but instead were recovered from, or recorded as receivables from, third-party insurance providers.

40



Iowa/Missouri Region
The following results for all periods exclude the Harrah's St. Louis casino which has been classified as a discontinued operation as a result of the sale of this property in 2012.
 
 
 
 
 
 
 
Percent Favorable/(Unfavorable)
(Dollars in millions)
2012
 
2011
 
2010
2012 vs 2011
 
2011 vs 2010
Casino revenues
$
428.0

 
$
435.7

 
$
442.3

 
(1.8
)%
 
(1.5
)%
Net revenues
459.8

 
466.7

 
473.0

 
(1.5
)%
 
(1.3
)%
Income from operations
123.1

 
105.6

 
105.4

 
16.6
 %
 
0.2
 %
Operating margin*
26.8
%
 
22.6
%
 
22.3
%
 
4.1 pts

 
0.3 pts

____________________
* Operating margin is calculated as income from operations divided by net revenues.
Net revenues during 2012 decreased $6.9 million or 1.5% from 2011 due to declines in casino revenues. Spend per trip increased while trips to the properties in the region declined, primarily as a result of the new competition in the Kansas City market beginning in the first quarter 2012. However, income from operations increased for 2012 from 2011 due mainly to reduced property operating expenses resulting from cost-savings initiatives.
Iowa/Missouri region net revenues declined $6.3 million , or 1.3% , for 2011 from 2010 as the impact of higher spend per trip was more than offset by lower trips largely resulting from modifications to marketing programs to certain customer segments. For 2011 , income from operations was relatively flat compared with 2010 as the decrease in net revenues was offset by lower property operating expenses as a result of our cost reduction activities.
Illinois/Indiana Region
 
 
 
 
 
 
 
Percent Favorable/(Unfavorable)
(Dollars in millions)
2012
 
2011
 
2010
2012 vs 2011
 
2011 vs 2010
Casino revenues
$
1,001.3

 
$
1,010.9

 
$
1,152.9

 
(0.9
)%
 
(12.3
)%
Net revenues
1,050.4

 
1,059.5

 
1,160.1

 
(0.9
)%
 
(8.7
)%
Income from operations
156.0

 
145.8

 
119.0

 
7.0
 %
 
22.5
 %
Operating margin*
14.9
%
 
13.8
%
 
10.3
%
 
1.1 pts

 
3.5 pts

____________________
* Operating margin is calculated as income from operations divided by net revenues.
Net revenues in 2012 decreased $9.1 million , or 0.9% from 2011 due primarily to a slight decline in casino revenues. Also, in the fourth-quarter 2011 we recognized revenues of $7.4 million related to the receipt of business interruption insurance proceeds for lost profits caused by property closures earlier that year due to flooding, with no comparable amounts received in 2012. These declines were partially offset by a $6.8 million decrease in promotional allowances. Trips were down year over year, due in part to continued competitive pressures in the region, despite the reopening earlier this year of the bridge that allows direct access by customers to the Company’s Southern Indiana property, which closed in September 2011. Spend per trip was also down. However, income from operations for 2012 increased from 2011, due mainly to reduced property operating expenses as a result of cost-savings initiatives.
Despite an increase in spend per trip, Illinois/Indiana region net revenues decreased $100.6 million , or 8.7% , for 2011 from 2010 , as trips declined due to the impact of temporary closures of four properties in the first half of 2011 as a result of flooding and severe weather conditions, reduced access to one of our properties in the region resulting from a bridge closure beginning in the first week of September 2011 that reopened in February 2012, and new competition. Income from operations for 2011 increased $26.8 million , or 22.5% , to $145.8 million from $119.0 million in 2010 . This increase was primarily due to lower property operating expenses and a $58.0 million decrease from 2010 in impairment charges related to goodwill and other non-amortizing intangible assets, partially offset by the impact of lower revenues and a favorable $23.5 million property tax adjustment recorded in the fourth quarter of 2010 that did not recur in 2011.

41



Other Nevada Region
 
 
 
 
 
 
 
Percent Favorable/(Unfavorable)
(Dollars in millions)
2012
 
2011
 
2010
2012 vs 2011
 
2011 vs 2010
Casino revenues
$
336.0

 
$
349.8

 
$
351.0

 
(3.9
)%
 
(0.3
)%
Net revenues
436.7

 
450.0

 
447.5

 
(3.0
)%
 
0.6
 %
(Loss)/income from operations
(23.6
)
 
46.6

 
(13.9
)
 
**

 
**

Operating margin*
(5.4
)%
 
10.4
%
 
(3.1
)%
 
(15.8) pts

 
13.5 pts

____________________
* Operating margin is calculated as (loss)/income from operations divided by net revenues.
** Not meaningful.
Net revenues in 2012 decreased $13.3 million or 3.0% from 2011 due largely to a decline in casino revenues resulting from the challenging competitive environment in the region during 2012. Trips and spend per trip declined in 2012 compared with 2011. Loss from operations in 2012 was $23.6 million compared with income from operations of $46.6 million . This change was due mainly to non-cash intangible asset impairment charges of $74.0 million recorded in 2012, primarily comprised of intangible asset impairment charges of $42.0 million related to goodwill and $32.0 million related to gaming rights. The impact of the above charges was partially offset by a decrease in property operating expenses.
Net revenues in the Other Nevada region for 2011 increased slightly from 2010 as an increase in number of trips more than offset a decrease in spend per trip. Income/(loss) from operations improved by $60.5 million for 2011 from 2010 primarily due to a $49.0 million decrease in impairment charges related to goodwill and other non-amortizing intangible assets, higher net revenues and lower property operating expenses.
Managed, International and Other
The Managed region includes companies that operate three Indian-owned casinos, as well as Horseshoe Cleveland and Caesars Windsor, and the results of Thistledown through August 2012 when the racetrack was contributed to Rock Ohio Caesars, LLC, a venture in which we hold a 20% ownership interest. Subsequent to August 2012, the Managed region includes the results of the subsidiary that will manage Thistledown once it commences video lottery terminal operations, which is expected to occur in the second quarter 2013. See Note 3 , " Acquisitions, Investments, Dispositions and Divestitures ,” to our consolidated financial statements appearing in Item 8 of this report for further discussion. The International region includes the results of our international operations. The Other region is comprised of corporate expenses, including administrative, marketing, and development costs, income from certain non-consolidated affiliates, and the results of Caesars Interactive Entertainment, Inc. ("CIE"), which consists of the businesses related to the World Series of Poker brand, an online real-money business in the U.K. and alliances with online gaming providers in Italy and France, and the results of Playtika Ltd., a social and mobile games developer.

42



In the fourth quarter 2012, we began discussions with interested investors on a sale of the subsidiaries that hold our land concession in Macau. As a result of this plan of disposal, the assets and liabilities have been classified as held for sale at December 31, 2012 and 2011 and its operating results have been classified as discontinued operations for all periods presented and are excluded from the table below.
 
 
 
 
 
 
 
Percent Favorable/(Unfavorable)
(Dollars in millions)
2012
 
2011
 
2010
2012 vs 2011
 
2011 vs 2010
Net revenues
 
 
 
 
 
 
 
 
 
     Managed
$
89.5

 
$
48.1

 
$
43.9

 
86.1
 %
 
9.6
 %
     International
461.5

 
458.7

 
428.1

 
0.6
 %
 
7.1
 %
     Other
275.7

 
133.7

 
72.5

 
106.2
 %
 
84.4
 %
          Total net revenues
$
826.7

 
$
640.5

 
$
544.5

 
29.1
 %
 
17.6
 %
Income/(loss) from operations
 
 
 
 
 
 
 
 
 
     Managed
$
7.0

 
$
6.0

 
$
11.9

 
16.7
 %
 
(49.6
)%
     International
37.4

 
54.9

 
26.9

 
(31.9
)%
 
104.1
 %
     Other
(425.1
)
 
(239.7
)
 
(269.7
)
 
(77.3
)%
 
11.1
 %
          Total loss from operations
$
(380.7
)
 
$
(178.8
)
 
$
(230.9
)
 
(112.9
)%
 
22.6
 %
For 2012 , net revenues increased $186.2 million , or 29.1% , from 2011 due mainly to increases associated with CIE, as well as increased revenues from our new managed casino, Horseshoe Cleveland, which opened in May 2012, including an increase in reimbursable expenses for Horseshoe Cleveland that is presented on a gross revenue basis, resulting in an increase in net revenues and an equally offsetting increase in operating expenses. Loss from operations increased $201.9 million , or 112.9% , from 2011 , due mainly to non-cash intangible asset impairment charges of $206.0 million related to trademarks, compared with non-cash intangible and tangible asset impairments of $29.8 million in 2011. Also contributing to the higher loss from operations are increases in corporate expense of $42.2 million resulting from the consolidation of certain functions at corporate and increased pension accruals and stock based compensation expense, partially offset by the income impact of increased revenues and a decrease of $19.0 million in write-downs, reserves, and project opening costs, net of recoveries related to lower efficiency project costs.
Net revenues in the Managed, International, and Other businesses, for 2011 , increased $96.0 million , or 17.6% , from 2010 due mainly to increases in spend per trip at our Uruguay and London Clubs properties and to the addition of revenues from our 2011 acquisition of Playtika. Net revenues for 2011 increased despite declines experienced by our two properties in Egypt due to uprisings earlier in the year. Loss from operations decreased $52.1 million , or 22.6% , due to the strong performance of our international businesses and the results of our online businesses, and by an $18.0 million decrease from 2010 in impairment charges related to goodwill and other non-amortizing intangible assets, partially offset by lower results at Thistledown.

Other Factors Affecting Net Income  
Expense/(income)  
 
 
 
 
 
 
Percent Favorable/(Unfavorable)
(Dollars in millions)
2012
 
2011
 
2010
2012 vs 2011
 
2011 vs 2010