Caesars Entertainment Corporation
CAESARS ENTERTAINMENT Corp (Form: 10-Q, Received: 08/09/2013 06:01:25)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2013
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File No. 1-10410
 _________________________
CAESARS ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
 _________________________
 
Delaware
 
62-1411755
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
One Caesars Palace Drive, Las Vegas, Nevada
 
89109
(Address of principal executive offices)
 
(Zip Code)
(702) 407-6000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
 _________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x      No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
x
 
 
 
 
Non-accelerated filer
o   (Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   o     No   x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
Outstanding at August 1, 2013
Common stock, $0.01 par value
126,294,496



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

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

2



PART I—FINANCIAL INFORMATION

Item 1.
Unaudited Financial Statements

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

December 31, 2012
Assets
 

 
Current assets
 

 
Cash and cash equivalents
$
1,810.7


$
1,757.5

Restricted cash
88.4

 
833.6

Receivables, net of allowance for doubtful accounts of $200.4 and $201.7
486.2


580.5

Deferred income taxes
124.1


114.9

Prepayments and other current assets
204.5


150.0

Inventories
46.3


52.0

Assets held for sale
5.4


5.1

Total current assets
2,765.6


3,493.6

Property and equipment, net
15,461.9


15,701.7

Goodwill
3,152.8


3,160.3

Intangible assets other than goodwill
3,881.7


3,985.7

Investments in and advances to non-consolidated affiliates
209.0


100.4

Restricted cash
246.0


364.6

Deferred charges and other
686.7


720.6

Assets held for sale
441.1

 
471.2

 
$
26,844.8


$
27,998.1

Liabilities and Stockholders’ Deficit
 

 
Current liabilities
 

 
Accounts payable
$
327.5


$
376.2

Interest payable
284.8


233.7

Accrued expenses
1,157.4


1,094.7

Current portion of long-term debt
158.5


879.9

Liabilities held for sale
3.6

 
3.8

Total current liabilities
1,931.8


2,588.3

Long-term debt
20,912.8


20,532.2

Deferred credits and other
757.8


823.0

Deferred income taxes
3,930.9


4,334.1

Liabilities held for sale
49.6

 
52.1

 
27,582.9


28,329.7

Commitments and contingencies (Note 17)


 


Stockholders’ equity/(deficit)
 

 
Common stock: voting; $0.01 par value; 128.5 and 127.5 shares issued
1.3


1.3

Treasury Stock: 2.2 and 2.1 shares
(16.3
)
 
(16.3
)
Additional paid-in capital
6,969.2


6,954.4

Accumulated deficit
(7,710.3
)

(7,280.2
)
Accumulated other comprehensive loss
(93.7
)

(70.9
)
Total Caesars stockholders’ deficit
(849.8
)

(411.7
)
Non-controlling interests
111.7


80.1

Total deficit
(738.1
)

(331.6
)
 
$
26,844.8


$
27,998.1

See accompanying Notes to Consolidated Condensed Financial Statements.

3


CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In millions, except per share data)
 
Quarter Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 
 
Casino
$
1,435.1

 
$
1,551.9

 
$
2,930.2

 
$
3,176.9

Food and beverage
386.1

 
385.3

 
766.2

 
767.4

Rooms
322.3

 
316.4

 
610.5

 
620.2

Management fees
17.2

 
12.3

 
27.8

 
21.9

Other
284.8

 
202.8

 
547.6

 
398.2

Less: casino promotional allowances
(287.3
)
 
(305.0
)
 
(581.1
)
 
(614.8
)
Net revenues
2,158.2

 
2,163.7

 
4,301.2

 
4,369.8

Operating expenses
 
 
 
 
 
 
 
Direct
 
 
 
 
 
 
 
Casino
819.6

 
898.1

 
1,654.4

 
1,822.9

Food and beverage
169.5

 
169.7

 
334.7

 
331.5

Rooms
82.2

 
80.7

 
155.5

 
155.8

Property, general, administrative, and other
593.8

 
520.9

 
1,175.2

 
1,031.7

Depreciation and amortization
141.3

 
175.5

 
303.0

 
355.0

Write-downs, reserves, and project opening costs, net of
recoveries
23.4

 
7.9

 
44.1

 
24.1

Intangible and tangible asset impairment charges
104.7

 
33.0

 
124.7

 
207.0

Loss on interests in non-consolidated affiliates
13.8

 
3.2

 
16.4

 
10.3

Corporate expense
41.3

 
41.3

 
77.3

 
93.5

Acquisition and integration costs
2.2

 
1.1

 
66.4

 
1.2

Amortization of intangible assets
41.1

 
43.2

 
82.5

 
86.4

Total operating expenses
2,032.9

 
1,974.6

 
4,034.2

 
4,119.4

Income from operations
125.3

 
189.1

 
267.0

 
250.4

Interest expense, net of interest capitalized
(540.1
)
 
(496.5
)
 
(1,114.8
)
 
(1,058.5
)
Gain on early extinguishments of debt
41.3

 
33.7

 
4.6

 
79.5

Gain on partial sale of subsidiary
44.1

 

 
44.1

 

Other income, including interest income
4.8

 
6.5

 
8.3

 
14.7

Loss from continuing operations before income taxes
(324.6
)
 
(267.2
)
 
(790.8
)
 
(713.9
)
Benefit for income taxes
115.7

 
105.9

 
406.0

 
264.2

Loss from continuing operations, net of income taxes
(208.9
)
 
(161.3
)
 
(384.8
)
 
(449.7
)
Discontinued operations
 
 
 
 
 
 
 
Loss from discontinued operations
(0.3
)
 
(84.4
)
 
(44.2
)
 
(70.2
)
Benefit/(provision) for income taxes

 
3.9

 
2.8

 
(3.0
)
Loss from discontinued operations, net of income taxes
(0.3
)
 
(80.5
)
 
(41.4
)
 
(73.2
)
Net loss
(209.2
)
 
(241.8
)
 
(426.2
)
 
(522.9
)
Less: net (income)/loss attributable to non-controlling interests
(3.0
)
 
0.1

 
(3.9
)
 
0.6

Net loss attributable to Caesars
$
(212.2
)
 
$
(241.7
)
 
$
(430.1
)
 
$
(522.3
)
Loss per share - basic and diluted



 






Loss per share from continuing operations
$
(1.69
)

$
(1.29
)

$
(3.10
)

$
(3.58
)
Loss per share from discontinued operations


(0.64
)

(0.33
)

(0.59
)
Net loss per share
$
(1.69
)
 
$
(1.93
)
 
$
(3.43
)
 
$
(4.17
)
Weighted-average common shares outstanding - basic and diluted
125.5

 
125.3

 
125.4

 
125.2


See accompanying Notes to Consolidated Condensed Financial Statements. 

4


CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(In millions)
 
Quarter Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Net loss
$
(209.2
)
 
$
(241.8
)
 
$
(426.2
)
 
$
(522.9
)
Other comprehensive income/(loss):
 
 
 
 
 
 
 
Defined benefit plan adjustments
0.2

 
1.5

 
4.8

 
2.3

Foreign currency translation adjustments
(5.6
)
 
(4.3
)
 
(25.7
)
 
0.3

Loss on derivatives reclassified into earnings

 
7.2

 
3.9

 
14.3

Unrealized (losses)/gains on available-for-sale investments
(4.8
)
 
0.2

 
(4.7
)
 
(0.1
)
Total other comprehensive (loss)/income, before income taxes
(10.2
)
 
4.6

 
(21.7
)
 
16.8

Income tax benefit/(expense) related to items of other
comprehensive (loss)/income
0.3

 
(1.7
)
 
(1.2
)
 
(4.6
)
Total other comprehensive (loss)/income, net of income taxes
(9.9
)
 
2.9

 
(22.9
)
 
12.2

Total comprehensive loss
(219.1
)
 
(238.9
)
 
(449.1
)
 
(510.7
)
Less: amounts attributable to non-controlling interests:
 
 
 
 
 
 
 
Net (income)/loss
(3.0
)
 
0.1

 
(3.9
)
 
0.6

Foreign currency translation adjustments
0.1

 
(0.5
)
 
0.1

 
(1.5
)
Total amounts attributable to non-controlling interests
(2.9
)
 
(0.4
)
 
(3.8
)
 
(0.9
)
Comprehensive loss attributable to Caesars
$
(222.0
)
 
$
(239.3
)
 
$
(452.9
)
 
$
(511.6
)

See accompanying Notes to Consolidated Condensed Financial Statements. 

5


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

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

 
$

 
$
6,885.1

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

 
$
46.7

 
$
1,053.4

Net loss
 

 

 

 
(522.3
)
 

 
(522.3
)
 
(0.6
)
 
(522.9
)
Share-based compensation
 

 

 
17.7

 

 

 
17.7

 

 
17.7

Initial public offering
 
0.6

 

 
16.6

 

 

 
17.2

 

 
17.2

Common stock issuances
 

 

 
0.2

 

 

 
0.2

 

 
0.2

Increase in treasury shares
 
*

 
(16.3
)
 
16.3

 

 

 

 

 

Contributions and contractual
obligations from non-controlling
interests, net of distributions
 

 

 

 

 

 

 
29.4

 
29.4

Other comprehensive income, net
of tax
 

 

 

 

 
10.7

 
10.7

 
1.5

 
12.2

Balance at June 30, 2012
 
$
1.3

 
$
(16.3
)
 
$
6,935.9

 
$
(6,305.0
)
 
$
(85.7
)
 
$
530.2

 
$
77.0

 
$
607.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2012
 
$
1.3

 
$
(16.3
)
 
$
6,954.4

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

 
$
(331.6
)
Net (loss)/income
 

 

 

 
(430.1
)
 

 
(430.1
)
 
3.9

 
(426.2
)
Share-based compensation
 

 

 
11.6

 

 

 
11.6

 

 
11.6

Common stock issuances
 
 *

 

 
12.6

 

 

 
12.6

 

 
12.6

Issuances of common stock under
stock incentive plans
 
 *

 

 
0.3

 

 

 
0.3

 

 
0.3

Increase in treasury shares
 

 
 *

 
(0.1
)
 

 

 
(0.1
)
 

 
(0.1
)
Contributions and contractual
obligations from non-controlling
interests
 

 

 

 

 

 

 
35.3

 
35.3

Decrease in non-controlling interests
including distributions and
write-downs
 

 

 

 

 

 

 
(7.5
)
 
(7.5
)
Other comprehensive loss, net of tax
 

 

 

 

 
(22.8
)
 
(22.8
)
 
(0.1
)
 
(22.9
)
Purchase of additional interest in
subsidiary
 

 

 
(9.6
)
 

 

 
(9.6
)
 

 
(9.6
)
Balance at June 30, 2013
 
$
1.3

 
$
(16.3
)
 
$
6,969.2

 
$
(7,710.3
)
 
$
(93.7
)
 
$
(849.8
)
 
$
111.7

 
$
(738.1
)
___________________ 
*
Amount rounds to zero.
See accompanying Notes to Consolidated Condensed Financial Statements.

6


CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions)
 
Six Months Ended June 30,
 
2013
 
2012
Cash flows from operating activities
 
 
 
Net loss
$
(426.2
)
 
$
(522.9
)
Adjustments to reconcile net loss to cash flows (used in)/provided by operating activities:
 
 
 
 Loss from discontinued operations
41.4


73.2

 Gain on early extinguishments of debt
(4.6
)
 
(79.5
)
Depreciation and amortization
391.9

 
447.7

Amortization of deferred finance costs and debt discount/premium
170.0

 
163.6

Reclassification from, and amortization of, accumulated other comprehensive loss
4.3

 
14.3

Non-cash write-downs and reserves, net of recoveries
17.3

 
2.6

Gain on partial sale of subsidiary
(44.1
)
 

Non-cash acquisition and integration costs
48.9

 

Unrealized (gains)/losses on fair value of derivatives
(66.5
)
 
17.1

Impairment of intangible and tangible assets
124.7

 
207.0

Loss on interests in non-consolidated affiliates
16.4

 
10.3

Stock-based compensation expense
9.7

 
33.2

Deferred income taxes
(408.9
)
 
(223.6
)
Change in deferred charges and other
(0.8
)
 
(13.9
)
Change in deferred credits and other
(8.3
)
 
(44.7
)
Change in current assets and liabilities:
 
 
 
Accounts receivable
75.5

 
(11.7
)
Prepayments and other current assets
(33.0
)
 
(39.8
)
Accounts payable
(32.0
)
 
(10.9
)
Interest payable
51.8

 
(7.2
)
Accrued expenses
23.4

 
55.6

Other
(7.9
)
 
1.1

Cash flows (used in)/provided by operating activities
(57.0
)
 
71.5

Cash flows from investing activities
 
 
 
Acquisitions of property and equipment, net of change in related payables
(320.3
)
 
(192.0
)
Change in restricted cash
863.8

 
100.7

Proceeds from partial sale of subsidiary, net of cash deconsolidated
50.4

 

Payments to acquire businesses, net of transaction costs and cash acquired

 
15.2

Investments in/advances to non-consolidated affiliates
(27.8
)
 
(13.9
)
Purchases of investment securities
(1.7
)
 
(18.9
)
Proceeds from the sale and maturity of investment securities
16.1

 
12.9

Other
(7.0
)
 
(4.2
)
Cash flows provided by/(used in) investing activities
573.5

 
(100.2
)
Cash flows from financing activities
 
 
 
Proceeds from the issuance of long-term debt
1,589.5

 
1,710.1

Debt issuance costs and fees
(47.3
)
 
(31.9
)
Borrowings under lending agreements

 
453.0

Repayments under lending agreements

 
(608.0
)
Cash paid for early extinguishments of debt
(2,010.3
)
 
(1,450.6
)
Cash paid for loan maturity extension fees
(23.3
)
 

Scheduled debt retirements
(7.1
)
 
(9.0
)
Purchase of additional interests in subsidiary

 
(9.6
)
Contributions from non controlling interest owners
35.3

 

Proceeds from sale of additional interest in a subsidiary

 
32.2

Issuance of common stock, net of fees
12.6

 
17.4

Other
(13.0
)
 
(11.1
)
Cash flows (used in)/provided by financing activities
(463.6
)
 
92.5

Cash flows from discontinued operations
 
 
 
Cash flows from operating activities
0.4

 
27.8

Cash flows from investing activities

 
(2.5
)
Cash flows from financing activities

 

Net cash provided by discontinued operations
0.4

 
25.3

Net increase in cash and cash equivalents
53.3

 
89.1

Change in cash classified as assets held for sale
(0.1
)
 
0.9

Cash and cash equivalents, beginning of period
1,757.5

 
891.2

Cash and cash equivalents, end of period
$
1,810.7

 
$
981.2

See accompanying Notes to Consolidated Condensed Financial Statements.

7


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

In these footnotes, the words “Company,” “Caesars,”“Caesars Entertainment,” “CEC,” “we,” “our,” and “us” refer to Caesars Entertainment Corporation, a Delaware corporation, and its subsidiaries, unless otherwise stated or the context requires otherwise.
Note 1 — Organization and Basis of Presentation
Organization
Our business is primarily conducted through a wholly-owned subsidiary, Caesars Entertainment Operating Company, Inc. ("CEOC"), although certain material properties are not owned by CEOC. As of June 30, 2013 , we owned, operated, or managed, through various subsidiaries, 52 casinos in 13 U.S. states and six countries. Of the 52 casinos, 39 are in the United States, including 20 land-based casinos, 10 riverboat or dockside casinos, three managed casinos on Indian lands, three managed casinos in Ohio, one casino combined with a greyhound racetrack, one casino combined with a thoroughbred racetrack, and one casino combined with a harness racetrack. Our 13 international casinos are comprised of eight land-based casinos in England, two in Egypt, one in Scotland, one in South Africa and one in Canada. In addition, through Caesars Interactive Entertainment, Inc. ("CIE"), a majority-owned subsidiary, 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, and social games on Facebook and other social media websites and mobile application platforms. Also through CIE, we own the World Series of Poker tournament and brand. We view each casino property and CIE as operating segments and aggregate such casino properties and CIE into one reportable segment.
On January 28, 2008, Caesars Entertainment was acquired by affiliates of Apollo Global Management, LLC (together with such affiliates, “Apollo”) and affiliates of TPG Capital, LP (together with such affiliates, “TPG” and, together with Apollo, the “Sponsors”) in an all-cash transaction (the “Acquisition”). Our common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “CZR.”
Basis of Presentation
The accompanying unaudited consolidated condensed financial statements of the Company have been prepared under the rules and regulations of the Securities and Exchange Commission ("SEC") applicable for interim periods and, therefore, do not include all information and footnotes necessary for complete financial statements in conformity with accounting principles generally accepted in the United States ("GAAP"). The results for the interim periods reflect all adjustments (consisting primarily of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations, and cash flows.
The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 2013 fiscal year.
The financial information for the quarter and six months ended June 30, 2012 is derived from our consolidated condensed financial statements and footnotes included in the Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 and has been revised to reflect the results of operations and cash flows of the Alea Leeds casino and the subsidiaries that hold a land concession in Macau as discontinued operations. See Note 3 , " Acquisitions, Investments, Dispositions and Divestitures " for further discussion.
We have revised certain other amounts for prior periods to conform to our 2013 presentation. This Form 10-Q filing should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012, as amended ("2012 10-K").


8

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


Note 2 — Recently Issued Accounting Pronouncements
Effective January 1, 2013, we adopted guidance issued by the Financial Accounting Standards Board ("FASB") on the reporting of reclassifications out of accumulated other comprehensive income. The guidance requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount is reclassified to net income in its entirety in the same reporting period. As this is a presentation and disclosure requirement, there was no impact on our consolidated financial position, results of operations or cash flows upon adoption.
In February 2013, the FASB issued new guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. The new guidance is effective for us January 1, 2014. We are currently assessing what impact, if any, the adoption of this new guidance will have on our consolidated financial position, results of operations and cash flows.
In March 2013, the FASB issued new guidance applicable to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The new guidance is effective for us January 1, 2014. We are currently assessing what impact, if any, the adoption of this new guidance will have on our consolidated financial position, results of operations and cash flows.
Note 3 Acquisitions, Investments, Dispositions and Divestitures
Acquisitions
Buffalo Studios, LLC and Bubbler Media
In December 2012, CIE purchased substantially all of the net assets of Buffalo Studios, LLC ("Buffalo"), a social and mobile games developer and owner of Bingo Blitz, for consideration of $45.2 million plus an earnout payment with an acquisition date fair value estimated at $5.6 million . During the first quarter 2013, the estimated fair value of the earnout was increased to $58.0 million , with a charge to acquisition and integration costs of $52.4 million . The estimated fair value of the earnout was reduced to $54.5 million during the second quarter 2013, resulting in a $3.5 million reduction in the earnout accrual, recorded in acquisition and integration costs.
In September 2012, CIE purchased the assets of Bubbler Media ("Bubbler") a social and mobile games developer based in Belarus, for consideration of approximately $7.5 million .
The purchase prices of Buffalo and Bubbler were allocated based on estimated fair values of the assets acquired and liabilities assumed, with the excess of the purchase price over the estimated fair value of the net tangible and intangible assets acquired recorded as goodwill. The preliminary purchase price allocations include total assets, liabilities and net assets acquired of Buffalo of $52.9 million , $7.7 million and $45.2 million , respectively. The preliminary purchase price allocations include net assets acquired of Bubbler of $7.5 million . The Company has not yet finalized its purchase price allocations for either of these transactions and is in the process of performing final reviews of the values assigned to assets acquired and liabilities assumed for both transactions.

9

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


Dispositions
Conrad Punta Del Este Resort and Casino
In November 2012, we signed a definitive agreement with Enjoy S.A. (“Enjoy”) to form a strategic relationship in Latin America and completed the transaction in May 2013. Under the terms of the agreement, Enjoy acquired 45% of Baluma S.A., our subsidiary that owns and operates the Conrad Punta Del Este Resort and Casino in Uruguay (the “Conrad”), in exchange for total consideration of $139.5 million . After customary deductions for expenses associated with the closing, we received $50.4 million in cash, net of $29.7 million of cash deconsolidated, a 4.5% equity stake in Enjoy, and a deferred cash payment of $31.9 million due by January 2014 , which is included in other current assets as of June 30, 2013 . The shares of Enjoy that we acquired are classified as available-for-sale securities. These securities are adjusted to their market value at every reporting period, with unrealized gains or losses recorded as a component of other comprehensive income.
In connection with the transaction, Enjoy assumed control of the Baluma S.A. board and primary responsibility for management of the Conrad. Upon completion of the transaction, we deconsolidated Baluma S.A. from our financial statements and began accounting for Baluma S.A. as an investment in non-consolidated affiliates utilizing the equity method of accounting.
Alea Leeds
On March 4, 2013, we permanently closed our Alea Leeds casino in England. As a result of the closure, during the quarter ended March 31, 2013, we recorded charges of $5.7 million related to the write-down of tangible and intangible assets, net of currency translation adjustment, and $15.8 million related to exit costs, comprised of non-cancellable contract costs of $15.1 million , employment related costs of $0.5 million and other costs in the amount of $0.2 million . During the quarter ended June 30, 2013 , the Company paid $1.0 million of exit-related costs, accreted interest expense of $0.5 million and recognized $0.2 million increase in the liability due mainly to the impact of currency translation adjustments. As of June 30, 2013 , $15.5 million remains accrued. We have presented the operations of Alea Leeds casino as discontinued operations in the Consolidated Condensed Statements of Operations for the quarter and six months ended June 30, 2013 and 2012 . See “Discontinued Operations” below.
Harrah's St. Louis
On November 2, 2012, the Company sold its Harrah's St. Louis casino and recorded a pre-tax gain of $9.3 million on the sale. As a result of working capital adjustments in connection with such sale, the Company recorded reductions to the originally recorded pre-tax gain of $0.7 million in the first quarter of 2013. We have presented the results of Harrah's Maryland Heights, LLC, previous owner of the Harrah's St. Louis casino, as discontinued operations in our Consolidated Condensed Statements of Operations for the quarter and six months ended June 30, 2012 . See “Discontinued Operations” below.
Macau Land Concession
During the second quarter of 2012, we determined that it was more likely than not that we would divest of our investment in a land concession in Macau prior to the end of the remaining 35 -year term of the concession (the “Macau Land Concession”). As a result, we performed an impairment assessment on the Macau Land Concession and recorded an impairment charge of $101.0 million .
In the fourth quarter of 2012, the Company began discussions with interested investors regarding a sale of the subsidiaries that hold the Macau Land Concession. As a result of this plan of disposal, the assets and liabilities have been classified as held for sale in our Consolidated Condensed Balance Sheets at June 30, 2013 and December 31, 2012 . See “ Held for Sale ” below.
We assess the fair value of the Macau Land Concession each reporting period and, as a result, recorded an adjustment to fair value that reduced book value by $21.0 million during the first quarter of 2013. There were no additional fair value adjustments recognized in the second quarter of 2013.
We have presented the operations of the business as discontinued operations in the Consolidated Condensed Statements of Operations for the quarters and six months ended June 30, 2013 and 2012. See “Discontinued Operations” below.
On August 6, 2013, the Company, along with certain of its wholly-owned subsidiaries, entered into a share purchase agreement with Pearl Dynasty Investments Limited (“Pearl Dynasty”), pursuant to which Pearl Dynasty will purchase from the Company all of the equity interests of the subsidiaries that hold the Macau Land Concession for a purchase price of $438.0 million subject to customary closing conditions. See Note 21, “Subsequent Events,” for further discussion.

10

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


Held for Sale
Assets and liabilities classified as held for sale relate to the subsidiaries that hold our land concessions in Macau and are as follows:
(In millions)
June 30, 2013
 
December 31, 2012
Assets
 
 
 
Cash and cash equivalents
$
4.8

 
$
4.7

Other current assets
0.6

 
0.4

     Assets held for sale, current
$
5.4

 
$
5.1

 
 
 
 
Property and equipment, net
$
441.1

 
$
471.2

     Assets held for sale, non-current
$
441.1

 
$
471.2

 
 
 
 
Liabilities
 
 
 
Accounts payable and accrued expenses
$
3.6

 
$
3.8

     Liabilities held for sale, current
$
3.6

 
$
3.8

 
 
 
 
Deferred credits and other
$
0.2

 
$
0.2

Deferred income taxes
49.4

 
51.9

     Liabilities held for sale, non-current
$
49.6

 
$
52.1

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

 
$
64.9

 
$

 
$
128.5

Macau
0.8

 
0.7

 
1.8

 
1.6

Alea Leeds

 
1.2

 
0.7

 
2.7

           Total net revenues
$
0.8

 
$
66.8

 
$
2.5

 
$
132.8

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

 
$
22.9

 
$
(0.7
)
 
$
41.9

Macau
0.2

 
(105.9
)
 
(20.5
)
 
(109.6
)
Alea Leeds
(0.5
)
 
(1.4
)
 
(23.0
)
 
(2.5
)
           Total pre-tax loss from discontinued
 operations
$
(0.3
)
 
$
(84.4
)
 
$
(44.2
)
 
$
(70.2
)
 
 
 
 
 
 
 
 
Income/(loss), net of income taxes
 
 
 
 
 
 
 
Harrah's St. Louis
$

 
$
14.1

 
$
(0.4
)
 
$
25.7

Macau
0.2

 
(93.2
)
 
(18.0
)
 
(96.4
)
Alea Leeds
(0.5
)
 
(1.4
)
 
(23.0
)
 
(2.5
)
           Total loss from discontinued operations, net of
 income taxes
$
(0.3
)
 
$
(80.5
)
 
$
(41.4
)
 
$
(73.2
)

11

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


Note 4 Proposed Strategic Transaction
On April 23, 2013, our board of directors approved the material terms of a proposed strategic transaction, pursuant to which the Company will form a new growth-oriented entity, Caesars Growth Partners, LLC (“Growth Partners”), to be owned by the Company and participating Caesars stockholders, including the Sponsors. Participating Caesars stockholders will own their interests in Growth Partners through Caesars Acquisition Company (“CAC”), a new company created to facilitate the transaction. CAC will hold all of the voting units of Growth Partners. The Company may not sell or transfer any units of Growth Partners without the consent of CAC prior to the fifth anniversary of the issuance. From and after the fifth anniversary of the issuance, the Company may transfer units of Growth Partners to a non-competitor of Caesars Entertainment. In addition, after the fifth anniversary of the issuance, the non-voting units of Growth Partners will be exchangeable into non-voting shares of CAC with terms equivalent to the non-voting units and with rights to have such shares registered under the Securities Act of 1933.
The Company intends to distribute non-transferrable subscription rights at no charge to Caesars stockholders on a pro rata basis. The subscription rights will afford each Caesars stockholder the right to acquire for cash at least the same pro rata ownership interest in CAC as such stockholder holds in the Company. CAC will use the proceeds from its sale of shares to acquire all of the voting interests in Growth Partners. The Company and its subsidiaries will contribute their shares of CIE and approximately $1.1 billion face value of senior notes previously issued by Caesars Entertainment Operating Company, Inc. (“CEOC Notes”) that are owned by another subsidiary of the Company, which together have been preliminarily valued at $1.275 billion , to Growth Partners in exchange for non-voting units. This valuation may be increased by up to $225.0 million if earnings from CIE’s social and mobile games business exceed a specified amount in 2015, in which case the Company or its subsidiaries will receive additional non-voting units of Growth Partners. As a result of these asset contributions, the Company's economic interest in Growth Partners at the closing of the transaction will be at least 57.0% , and may be as much as 77.0% , depending on the amount of proceeds raised by CAC through its sale of shares, prior to any potential valuation increase and certain other potential adjustments. Additionally, Growth Partners intends to use $360.0 million of proceeds received from CAC to purchase from a subsidiary of the Company the Planet Hollywood Resort & Casino in Las Vegas, the Company's joint venture interests in a casino under development in Baltimore ("Horseshoe Baltimore") and a financial stake in the management fee stream for both of those properties, equal to 50% of the management fee.
A subsidiary of Growth Partners will assume $513.2 million in face value debt outstanding related to Planet Hollywood. The purchase of Planet Hollywood and the assumption of the current debt outstanding related to Planet Hollywood by Growth Partners are subject to the receipt of approval of lenders of such outstanding debt and any requirements the lenders may impose. In the event the Company does not receive the required lenders' approval with respect to the purchase of Planet Hollywood by Growth Partners and the related assumption of the current debt outstanding related to Planet Hollywood, the Growth Partners transactions may not close. Alternatively, the Growth Partners transactions may be altered to not include Planet Hollywood.
The Company and Growth Partners will have the opportunity to work together to develop future projects. The Company will have the option to (1) pursue any potential project itself or (2) decline the project for itself, after which Growth Partners may elect or decline to pursue the project. The Company will have the first right to make an offer if Growth Partners plans to sell any assets acquired from the Company.
After the third anniversary of the closing of the transaction, the Company and/or its subsidiaries will have the right to acquire the voting units of Growth Partners, or at the election of CAC, the shares of CAC, subject to certain conditions, including shareholder and Board approval. Following the fifth anniversary of the closing of the transaction and until the eight years and six months anniversary of the closing of the transaction, the board of directors of CAC will have the right to cause a liquidation of Growth Partners, which means the sale or winding up of Growth Partners, or other monetization of all of its assets and the distribution of the proceeds remaining after satisfaction of all liabilities of Growth Partners to the holders of Growth Partners’ units. Unless otherwise agreed by the holders of the non-voting units, on the eight years and six months anniversary of the closing of the transaction, if CAC has not previously exercised its liquidation right, Growth Partners shall liquidate as described above.
On July 10, 2013, CAC filed a Registration Statement on Form S-1 with the SEC.
Note 5 — Restricted Cash
In December 2012, CEOC completed the offering of $750.0 million aggregate principal amount of 9.0% senior secured notes due 2020, the proceeds of which were placed into escrow and recorded as short-term restricted cash at December 31, 2012. On February 20, 2013, the escrow conditions were satisfied, and the cash was released from restriction.

12

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


Note 6 Property and Equipment, net
Property and equipment, net consists of the following:
(In millions)
June 30, 2013
 
December 31, 2012
Land and land improvements
$
7,095.6

 
$
7,208.8

Buildings, riverboats, and improvements
8,572.0

 
8,725.7

Furniture, fixtures, and equipment
2,567.8

 
2,491.0

Construction in progress
579.4

 
378.3

 
18,814.8

 
18,803.8

Less: accumulated depreciation
(3,352.9
)
 
(3,102.1
)
 
$
15,461.9

 
$
15,701.7

Depreciation expense, which is included in depreciation and amortization, corporate expense and loss from discontinued operations in our Consolidated Condensed Statements of Operations, is as follows:
 
Quarter Ended June 30,
 
Six Months Ended June 30,
(In millions)
2013
 
2012
 
2013
 
2012
Depreciation expense
$
142.8

 
$
184.7

 
$
306.4

 
$
374.4

Interest expense is capitalized on internally constructed assets at the applicable weighted-average borrowing rates of interest. Capitalization of interest ceases when the project is substantially complete or construction activity is suspended for more than a brief period of time.
Tangible Asset Impairments
Continuing Operations
We review the carrying value of our long-lived assets for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.
We have been in negotiations with potential investors on the possible sale of a real estate project owned by the Company, related to investments of the Casino Reinvestment Development Authority (“CRDA”), a New Jersey state governmental agency responsible for directing the spending of casino reinvestment funds for the benefit of Atlantic City. The Company estimated the fair value of the property based on a market value approach, and in June 2013, we recorded a tangible asset impairment of $22.4 million primarily related to our investment in this real estate project.
As a result of a possible transaction involving certain of our land holdings in Biloxi, Mississippi, we evaluated the recorded values of these holdings against their estimated future cash flows. As a result of our analysis, we recorded tangible asset impairments of $79.3 million in June 2013 to adjust the land holdings to fair value.
In March 2012, we recorded a tangible asset impairment on construction in progress of $167.5 million related to a halted development project in Biloxi, Mississippi, as well as a tangible asset impairment on a project in Spain for $6.5 million .
Discontinued Operations
We recorded fair value adjustments related to our land concession in Macau in the second quarter of 2012 and the first quarter of 2013 as further described in Note 3, " Acquisitions, Investments, Dispositions and Divestitures ."
Note 7 Goodwill and Other Intangible Assets
Each year, we perform an annual impairment assessment of goodwill and other non-amortizing intangible assets as of September 30, or more frequently if impairment indicators exist.

13

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


During each of the first and second quarters of 2013, due to various factors, including changes in projected earnings, we performed interim impairment assessments of goodwill and other non-amortizing intangible assets and, as a result, we recorded impairment charges of $20.0 million and $3.0 million , respectively, related to certain gaming rights.
During the second quarter of 2012, due to weak economic conditions in certain gaming markets, we performed an interim impairment assessment of non-amortizing intangible assets. This analysis resulted in an impairment charge of $33.0 million related to our trademark assets as a result of reduced revenues associated with these assets.
The following table sets forth changes in our goodwill and other intangible assets for the six months ended June 30, 2013 :
 
Amortizing
Intangible Assets
 
Non-Amortizing Intangible Assets
(In millions)
Goodwill
 
Other
Balance at December 31, 2012
$
1,027.6

 
$
3,160.3

 
$
2,958.1

Impairments

 

 
(23.0
)
Amortization expense
(82.5
)
 

 

Foreign currency translation
(0.4
)
 

 
(1.6
)
Additions
5.7

 

 

Disposals

 
(14.9
)
 

Other
(1.8
)
 
7.4

 
(0.4
)
Balance at June 30, 2013
$
948.6

 
$
3,152.8

 
$
2,933.1

During the second quarter of 2013, we recorded a $14.9 million reduction in goodwill in connection with the deconsolidation of Baluma S.A. upon the closing of the Conrad transaction described in Note 3, "Acquisitions, Investments, Dispositions and Divestitures."
The following table provides the gross carrying value and accumulated amortization for each major class of intangible assets other than goodwill:
 
June 30, 2013
 
December 31, 2012
(Dollars in millions)
Weighted
Average
Remaining
Useful Life
(in years)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Amortizing intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
6.5
 
$
1,456.9

 
$
(681.5
)
 
$
775.4

 
$
1,456.7

 
$
(618.0
)
 
$
838.7

Contract rights
1.5
 
144.1

 
(72.3
)
 
71.8

 
145.1

 
(66.3
)
 
78.8

Patented technology
3.3
 
160.8

 
(88.1
)
 
72.7

 
156.7

 
(76.6
)
 
80.1

Gaming rights
11.0
 
42.8

 
(14.1
)
 
28.7

 
42.8

 
(12.8
)
 
30.0

Trademarks
 

 

 

 
1.7

 
(1.7
)
 

 
 
 
$
1,804.6

 
$
(856.0
)
 
948.6

 
$
1,803.0

 
$
(775.4
)
 
1,027.6

Non-amortizing intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
Trademarks
 
 
 
 
 
 
1,699.0

 
 
 
 
 
1,699.7

Gaming rights
 
 
 
 
 
 
1,234.1

 
 
 
 
 
1,258.4

 
 
 
 
 
 
 
2,933.1

 
 
 
 
 
2,958.1

Total intangible assets other than goodwill
 
 
 
 
 
$
3,881.7

 
 
 
 
 
$
3,985.7


14

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


Note 8 Debt
The following table presents our outstanding debt as of June 30, 2013 and December 31, 2012 :
Detail of Debt (Dollars in millions)
 
Final
Maturity
 
Rate(s) at
June 30, 2013
 
Face Value at June 30, 2013
 
Book Value at June 30, 2013
 
Book Value at
Dec. 31, 2012
Credit Facilities (a)
 
 
 
 
 
 
 
 
 
 
Term Loans B1 - B3
 
2015
 
3.19% - 3.28%
 
$
29.1

 
$
29.1

 
$
1,025.8

Term Loan B4
 
2016
 
9.50%
 
965.0

 
951.2

 
954.5

Term Loan B5
 
2018
 
4.44%
 
991.9

 
988.9

 
1,218.8

Term Loan B6
 
2018
 
5.44%
 
2,431.9

 
2,396.5

 
2,812.6

Revolving Credit Facility
 
2014
 
 

 

 

Revolving Credit Facility
 
2017
 
 

 

 

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

 
2,063.2

 
2,060.2

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

 
1,250.0

 
1,250.0

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

 
2,951.9

 
1,486.9

CMBS Financing
 
2015
(c)  
3.68%
 
4,439.1

 
4,417.7

 
4,660.5

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

 
743.4

 
742.9

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

 
2,321.3

 
2,260.2

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

 
179.2

 
173.7

Chester Downs Senior Secured Notes
 
2020
 
9.25%
 
330.0

 
330.0

 
330.0

PHW Las Vegas Senior Secured Loan
 
2015
(d)  
3.05%
 
513.2

 
460.4

 
438.2

LINQ/Octavius Senior Secured Loan
 
2017
 
9.25%
 
450.0

 
446.8

 
446.5

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

 
181.5

 
181.4

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

 
478.6

 
478.6

Senior PIK Toggle Notes
 
2018
 
10.75%-11.5%
 
10.3

 
10.3

 
9.7

Unsecured Senior Debt (a)
 
 
 
 
 
 
 
 
 
 
5.375%
 
2013
 
5.375%
 
99.0

 
95.7

 
116.6

7.0%
 
2013
 
7.00%
 

 

 
0.6

5.625%
 
2015
 
5.625%
 
364.4

 
317.2

 
306.7

6.5%
 
2016
 
6.50%
 
248.7

 
206.6

 
200.9

5.75%
 
2017
 
5.75%
 
147.9

 
111.8

 
108.7

Floating Rate Contingent Convertible
Senior Notes
 
2024
 
0.57%
 
0.2

 
0.2

 
0.2

Other Unsecured Borrowings
 
 
 
 
 
 
 
 
 
 
Special Improvement District Bonds
 
2037
 
5.30%
 
62.9

 
62.9

 
64.3

Other
 
2014
 
—%
 
47.7

 
47.7

 
47.7

Capitalized Lease Obligations
 
to 2017
 
3.57% - 11.0%
 
29.2

 
29.2

 
35.9

Total Debt
 
 
 
 
 
23,662.0

 
21,071.3

 
21,412.1

Current Portion of Long-Term Debt
 
 
 
 
 
(175.2
)
 
(158.5
)
 
(879.9
)
Long-Term Debt
 
 
 
 
 
$
23,486.8

 
$
20,912.8

 
$
20,532.2

___________________
(a)
Guaranteed by Caesars Entertainment.
(b)  
Guaranteed by Caesars Entertainment and certain wholly-owned subsidiaries of CEOC
(c)  
Based on our ability and intent, assumes the exercise of extension options to move the maturity from 2014 to 2015, subject to certain conditions.
(d)  
Based on our ability and intent, assumes the exercise of extension options to move the maturity from 2013 to 2015, subject to certain conditions.

15

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


As of June 30, 2013 and December 31, 2012 , book values are presented net of unamortized discounts of $2,590.7 million and $2,691.0 million , respectively.
Current Portion of Long-Term Debt
Our current maturities of long-term debt include required interim principal payments on certain term loans under the senior secured credit facilities, the special improvement district bonds, other unsecured borrowings and capitalized lease obligations. The current portion of long-term debt also includes $26.0 million of 10.0% second-priority senior secured notes due 2018, $24.8 million of 10.0% second-priority senior secured notes due 2015 and $99.0 million of 5.375% unsecured senior debt due 2013. Our current maturities exclude the PHW Las Vegas senior secured loan due in December 2013 and the CMBS financing due in February 2014 based upon our ability and intent to exercise our options to extend the maturities to 2015.
The current portion of long-term debt at December 31, 2012 includes $750.0 million of 9.0% notes issued in December 2012 pending satisfaction of certain escrow conditions. On February 20, 2013, the escrow conditions were satisfied and the debt obligation was re-classified to long-term.
CEOC Credit Facilities
In connection with the Acquisition, CEOC entered into the senior secured credit facilities (the “Credit Facilities”). This financing is neither secured nor guaranteed by Caesars’ other direct, wholly-owned subsidiaries, including the subsidiaries that own properties that are security for the CMBS Financing, as defined in our 2012 10-K.
In January and February 2013, CEOC converted $133.9 million aggregate principal amount of original maturity revolver commitments held by consenting lenders to Term B-6 Loans and terminated $133.9 million principal amount of revolving commitments of extending lenders.
In connection with the February 2013 notes offering described in the CEOC Bond Offerings section below, CEOC received the requisite lenders’ consent and entered into a bank amendment to its Credit Facilities to, among other things: (i) use the net cash proceeds of the February 2013 notes offering to repay a portion of CEOC’s existing term loans as described in the CEOC Bond Offerings section below; (ii) obtain up to $75.0 million of extended revolving facility commitments with a maturity of January 28, 2017, which received all required regulatory approvals in April 2013, (iii) increase the accordion capacity under the Credit Facilities by an additional $650.0 million (which may be used to, among other things, establish extended revolving facility commitments under the Credit Facilities); (iv) modify the calculation of the senior secured leverage ratio for purposes of the maintenance test under the Credit Facilities to exclude the notes issued in February 2013; and (v) modify certain other provisions of the Credit Facilities.
As of June 30, 2013 , our Credit Facilities provide for senior secured financing of up to $4,633.4 million , consisting of (i) senior secured term loans in an aggregate principal amount of $4,417.9 million , comprised of $29.1 million maturing on January 28, 2015, $965.0 million  maturing on October 31, 2016, and $3,423.8 million maturing on January 28, 2018, and (ii) a senior secured revolving credit facility in an aggregate principal amount of up to $215.5 million , with $109.4 million maturing January 28, 2014 and $106.1 million maturing on January 28, 2017, including both a letter of credit sub-facility and a swingline loan sub-facility. The term loans under the Credit Facilities currently require scheduled quarterly payments of $2.5 million , with the balance due at maturity. As of June 30, 2013 $119.9 million of the revolving credit facility is committed to outstanding letters of credit. After consideration of the letter of credit commitments, $95.6 million of additional borrowing capacity was available to the Company under its revolving credit facility as of June 30, 2013 .
CEOC Notes
Issuances
In December 2012, CEOC completed the offering of $750.0 million aggregate principal amount of 9.0% senior secured notes due 2020. On February 20, 2013, when the proceeds were released from escrow, CEOC used $350.0 million of the proceeds to repay a portion of the existing term loans under the Credit Facilities at par.
In February 2013, CEOC completed the offering of $1,500.0 million aggregate principal amount of 9.0% senior secured notes due 2020. On March 27, 2013, when the proceeds were released from escrow, CEOC used $1,433.3 million of the proceeds to repay a portion of the existing term loans under the Credit Facilities at par.

16

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


As a result of these repayments, we recognized a loss on early extinguishment of debt of $29.4 million during the first quarter of 2013.
Open Market Purchases
During the second quarter 2013, we completed open market purchases of CEOC debt securities as follows: 
 
Debt (dollars in millions)
Maturity
 
Face Value
Cash Paid
5.375% Unsecured Senior Notes
2013
 
$
26.2

$
26.0

10.0% Second-Priority Senior Secured Notes
2018
 
25.0

14.9

In connection with the above transactions, we recorded a gain on early extinguishments of debt of $2.4 million , net of discounts. The above securities were repurchased by a non-CEOC subsidiary of Caesars Entertainment and are still outstanding for purposes of CEOC.
CMBS Financing and Open Market Purchases
In February 2013, we paid an extension fee of $23.3 million and exercised the option to extend the maturity of the CMBS Financing to 2014. The loan contains an additional extension option to extend its maturity from 2014 to 2015, subject to certain conditions. As part of the extension, we entered into a new interest rate cap agreement as further described in Note 9 , " Derivative Instruments ."
In June 2013, we purchased $225.0 million of face value of CMBS debt for $183.7 million , recognizing a pre-tax gain of $39.0 million , net of deferred finance charges.
Restrictive Covenants and Other Matters
Certain of our borrowings have covenants and requirements that include, among other things, the maintenance of specific levels of financial ratios. Failure to comply with these covenants can result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions, or cause an event of default. Specifically, the Credit Facilities require CEOC to maintain a senior secured leverage ratio of no more than 4.75 to 1.0 , which is the ratio of senior first priority secured debt to last twelve months ("LTM") Adjusted EBITDA - Pro Forma - CEOC Restricted. After giving effect to the February 2013 bank amendment to the Credit Facilities discussed above, this ratio excludes $3,700.0 million of first priority senior secured notes and up to $350.0 million aggregate principal amount of consolidated debt of subsidiaries that are not wholly owned. For purposes of calculating the senior secured leverage ratio, the amount of senior first priority secured debt is reduced by the amount of unrestricted cash on hand. As of June 30, 2013 , CEOC's senior secured leverage ratio was 4.33 to 1.0 .
In addition, certain covenants contained in CEOC's senior secured credit facilities and indentures covering its first priority senior secured notes and second priority senior secured notes restrict our ability to take certain actions such as incurring additional debt or making acquisitions if we are unable to meet a fixed charge coverage ratio (LTM Adjusted EBITDA-Pro Forma - CEOC Restricted to fixed charges) of at least 2.0 to 1.0 , a total first priority secured leverage ratio (first priority senior secured debt to LTM Adjusted EBITDA-Pro Forma - CEOC Restricted) of no more than 4.5 to 1.0 , and/or a consolidated leverage ratio (consolidated total debt to LTM Adjusted EBITDA-Pro Forma - CEOC Restricted) of no more than 7.25 to 1.0 . As of June 30, 2013 , CEOC's total first priority secured leverage ratio and consolidated leverage ratio were 7.29 to 1.0 and 13.60 to 1.0 , respectively. For the twelve months ended June 30, 2013 , CEOC's LTM Adjusted EBITDA-Pro Forma - CEOC Restricted was insufficient to cover fixed charges by $600.0 million . For purposes of calculating the fixed charge coverage ratio, fixed charges includes consolidated interest expense less interest income and any cash dividends paid on preferred stock (other than amounts eliminated in consolidation). For purposes of calculating the total first priority secured leverage ratio and the consolidated leverage ratio, the amounts of first priority senior secured debt and consolidated total debt, respectively, are reduced by the amount of unrestricted cash on hand. The covenants that provide for the fixed charge coverage ratio, total first priority secured leverage ratio, and consolidated leverage ratio described in this paragraph are not maintenance covenants.

17

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


Note 9 Derivative Instruments
Derivative Instruments – Interest Rate Swap Agreements
We use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. As of June 30, 2013 , we have entered into eight interest rate swap agreements for notional amounts totaling $5,750.0 million . The difference to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense for the related debt. Changes in the variable interest rates to be paid or received pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows.
The major terms of the interest rate swap agreements as of June 30, 2013 are as follows:
Effective Date
 
Notional Amount
(In millions)
 
Fixed Rate
Paid
 
Variable Rate Received as of June 30, 2013
 
Next Reset Date
 
Maturity Date
April 25, 2011
 
$
250.0

 
1.351
%
 
0.193
%
 
July 25, 2013
 
January 25, 2015
April 25, 2011
 
250.0

 
1.347
%
 
0.193
%
 
July 25, 2013
 
January 25, 2015
April 25, 2011
 
250.0

 
1.350
%
 
0.193
%
 
July 25, 2013
 
January 25, 2015
January 25, 2011
 
1,000.0

 
3.068
%
 
0.193
%
 
July 25, 2013
 
January 25, 2015
April 25, 2011
 
1,000.0

 
3.150
%
 
0.193
%
 
July 25, 2013
 
January 25, 2015
January 25, 2011
 
1,000.0

 
3.750
%
 
0.193
%
 
July 25, 2013
 
January 25, 2015
April 25, 2011
 
1,000.0

 
3.264
%
 
0.193
%
 
July 25, 2013
 
January 25, 2015
January 25, 2011
 
1,000.0

 
3.814
%
 
0.193
%
 
July 25, 2013
 
January 25, 2015
The variable rate on our interest rate swap instruments did not materially change as a result of the July 25, 2013 reset.
Derivative Instruments – Interest Rate Cap Agreements
In February 2013, in conjunction with exercising the option to extend the maturity of the CMBS Financing to 2014, we entered into a new interest rate cap agreement. The interest rate cap agreement, which is effective from February 13, 2013 and terminates February 13, 2015, is for a notional amount of $4,664.1 million at a LIBOR cap rate of 4.5% . Any future changes in fair value of the interest rate cap will be recognized in interest expense during the period in which the changes in value occur.
Derivative Instruments – Other
During the second quarter of 2012, the Company entered into a written put option (the “Option”) for certain preferred equity interests. The potential future aggregate cash payments of $13.9 million as of June 30, 2013 related to the Option may occur from time to time. Based on the structure of this security as a written put option, the obligation for these potential cash payments is not reflected in our Consolidated Condensed Balance Sheets. Additionally, the Option is recorded in our Consolidated Condensed Balance Sheets at its fair value, which was de minimis as of June 30, 2013 .

18

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


Derivative Instruments – Impact on Consolidated Condensed Financial Statements
None of our derivative instruments are offset, and the fair values of assets and liabilities are recognized in the Consolidated Condensed Balance Sheets. The following table represents the fair values of derivative instruments in the Consolidated Condensed Balance Sheets as of June 30, 2013 and December 31, 2012 :
 
 
Asset Derivatives
 
Liability Derivatives
  
June 30, 2013
 
December 31, 2012
 
June 30, 2013
 
December 31, 2012
(In millions)
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
 
$

 
 
 
$

 
Deferred credits
and other
 
$
(237.1
)
 
Deferred credits
and other
 
$
(306.4
)
Interest rate caps
Deferred charges
and other
 
0.1

 
 
 

 
 
 

 
 
 

Total derivatives
 
 
$
0.1

 
 
 
$

 
 
 
$
(237.1
)
 
 
 
$
(306.4
)
The following table represents the effect of derivative instruments in the Consolidated Condensed Statements of Operations for the quarters ended June 30, 2013 and 2012 :
(In millions)
 
Amount of (Gain) or Loss Recognized in AOCL
(Effective Portion)
 
Location of (Gain) or
Loss Reclassified
From AOCL Into Net Loss
(Effective Portion)
 
Amount of (Gain) or
Loss Reclassified
from AOCL into Net Loss
(Effective Portion)
 
Location of (Gain) or Loss Recognized in Net Loss
(Ineffective Portion)
 
Amount of (Gain) or Loss Recognized in Net Loss
(Ineffective Portion)
Derivatives designated as hedging instruments
 
Quarter Ended June 30, 2013
 
Quarter Ended June 30, 2012
 
 
 
Quarter Ended June 30, 2013
 
Quarter Ended June 30, 2012
 
 
 
Quarter Ended June 30, 2013
 
Quarter Ended June 30, 2012
Interest rate contracts
 
$

 
$

 
Interest expense
 
$

 
$
7.2

 
Interest expense
 
$

 
$


(In millions)

 
 
Amount of (Gain) or Loss Recognized in Net Loss
Derivatives not designated as hedging instruments

Location of (Gain) or Loss Recognized in Net Loss
 
Quarter Ended June 30, 2013
 
Quarter Ended June 30, 2012
Interest rate contracts
 
Interest expense
 
$
(45.5
)
 
$
(17.6
)

19

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


The following table represents the effect of derivative instruments in the Consolidated Condensed Statements of Operations for the six months ended June 30, 2013 and 2012 :
(In millions)
 
Amount of (Gain) or Loss Recognized in AOCL
(Effective Portion)
 
Location of (Gain) or
Loss Reclassified
From AOCL Into Net Loss
(Effective Portion)
 
Amount of (Gain) or
Loss Reclassified
from AOCL into Net Loss
(Effective Portion)
 
Location of (Gain) or Loss Recognized in Net Loss
(Ineffective Portion)
 
Amount of (Gain) or Loss Recognized in Net Loss
(Ineffective Portion)
Derivatives designated as hedging instruments
 
Six Months Ended June 30, 2013
 
Six Months Ended June 30, 2012
 
 
 
Six Months Ended June 30, 2013
 
Six Months Ended June 30, 2012
 
 
 
Six Months Ended June 30, 2013
 
Six Months Ended June 30, 2012
Interest rate contracts
 
$

 
$

 
Interest expense