Caesars Entertainment Corporation
CAESARS ENTERTAINMENT Corp (Form: 10-Q, Received: 08/06/2015 06:38:49)

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, 2015
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
x
Accelerated filer
o
 
 
 
 
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, 2015
Common stock, $0.01 par value
145,001,980



CAESARS ENTERTAINMENT CORPORATION
INDEX
 
 
 
Page
Item 1.
 
 
 
Consolidated Condensed Statements of Operations  and Comprehensive Income/(Loss)
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


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, 2015

December 31, 2014
Assets
 

 
Current assets
 

 
Cash and cash equivalents ($990 and $944 attributable to our VIE)
$
1,579


$
2,806

Restricted cash ($13 and $15 attributable to our VIE)
67

 
76

Receivables, net ($102 and $97 attributable to our VIE)
179


518

Due from affiliates ($24 and $0 attributable to our VIE)
24

 

Deferred income taxes ($6 and $5 attributable to our VIE)
6


5

Prepayments and other current assets ($50 and $27 attributable to our VIE)
153


225

Inventory ($4 and $3 attributable to our VIE)
14


43

Total current assets
2,022


3,673

Property and equipment, net ($2,634 and $2,570 attributable to our VIE)
7,655


13,456

Goodwill ($292 and $291 attributable to our VIE)
1,693


2,366

Intangible assets other than goodwill ($269 and $289 attributable to our VIE)
586


3,150

Restricted cash ($13 and $25 attributable to our VIE)
69


109

Deferred income taxes ($23 and $13 attributable to our VIE)
23

 
14

Deferred charges and other assets ($259 and $46 attributable to our VIE)
455


563

Total assets
$
12,503


$
23,331

 
 
 
 
Liabilities and Stockholders’ Equity/(Deficit)
 

 
Current liabilities
 

 
Accounts payable ($126 and $79 attributable to our VIE)
$
182


$
349

Due to affiliates ($24 and $0 attributable to our VIE)
24

 

Accrued expenses and other current liabilities ($222 and $242 attributable to our VIE)
644


1,199

Interest payable ($37 and $37 attributable to our VIE)
134


736

Deferred income taxes ($10 and $2 attributable to our VIE)
44


217

Current portion of long-term debt ($86 and $20 attributable to our VIE)
222

 
15,779

Total current liabilities
1,250


18,280

Long-term debt ($2,280 and $2,292 attributable to our VIE)
6,802


7,230

Deferred income taxes ($5 and $8 attributable to our VIE)
1,268


2,079

Deferred credits and other liabilities ($118 and $124 attributable to our VIE)
175


484

Total liabilities
9,495


28,073

Commitments and contingencies (Note 11)


 


Stockholders’ equity/(deficit)
 

 
Caesars stockholders’ equity/(deficit)
1,832


(4,997
)
Noncontrolling interests
1,176


255

Total stockholders’ equity/(deficit)
3,008


(4,742
)
Total liabilities and stockholders’ equity/(deficit)
$
12,503


$
23,331

See accompanying Notes to Consolidated Condensed Financial Statements.

3


CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)
(UNAUDITED)
(In millions, except per share data)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 
 
Casino
$
543

 
$
1,337

 
$
1,203

 
$
2,638

Food and beverage
203

 
377

 
429

 
750

Rooms
221

 
306

 
443

 
614

Interactive entertainment
186

 
145

 
363

 
269

Management fees

 
15

 
2

 
28

Other
121

 
168

 
235

 
304

Reimbursed management costs

 
68

 
9

 
129

Less: casino promotional allowances
(133
)
 
(276
)
 
(289
)
 
(559
)
Net revenues
1,141

 
2,140

 
2,395

 
4,173

Operating expenses
 
 
 
 
 
 
 
Direct expenses
 
 
 
 
 
 
 
Casino
278

 
791

 
634

 
1,579

Food and beverage
99

 
175

 
202

 
333

Rooms
57

 
80

 
113

 
160

Platform fees
51

 
41

 
100

 
76

Property, general, administrative, and other
305

 
510

 
646

 
1,004

Reimbursable management costs

 
68

 
9

 
129

Depreciation and amortization
96

 
157

 
198

 
305

Write-downs, reserves, and project opening costs, net of recoveries
24

 
52

 
66

 
76

Impairment of tangible and other intangible assets

 
17

 

 
50

Corporate expense
45

 
68

 
91

 
119

Acquisition and integration costs and other

 
54

 
6

 
65

Total operating expenses
955

 
2,013

 
2,065

 
3,896

Income from operations
186

 
127

 
330

 
277

Interest expense
(147
)
 
(654
)
 
(384
)
 
(1,246
)
Gain on deconsolidation of subsidiary and other gains/(losses)
7

 
(27
)
 
7,096

 
(27
)
Income/(loss) from continuing operations, before income taxes
46

 
(554
)
 
7,042

 
(996
)
Income tax benefit/(provision)
4

 
167

 
(188
)
 
309

Income/(loss) from continuing operations, net of income taxes
50

 
(387
)
 
6,854

 
(687
)
Discontinued operations
 
 
 
 
 
 
 
Loss from discontinued operations

 
(47
)
 
(7
)
 
(142
)
Income tax benefit/(provision)

 
2

 

 
13

Loss from discontinued operations, net of income taxes

 
(45
)
 
(7
)
 
(129
)
Net income/(loss)
50

 
(432
)
 
6,847

 
(816
)
Net income attributable to noncontrolling interests
(35
)
 
(34
)
 
(60
)
 
(37
)
Net income/(loss) attributable to Caesars
$
15

 
$
(466
)
 
$
6,787

 
$
(853
)
 
 
 
 
 
 
 
 
Earnings/(loss) per share - basic and diluted:



 






Basic earnings/(loss) per share from continuing operations
$
0.10


$
(2.92
)

$
46.93


$
(5.15
)
Basic loss per share from discontinued operations


(0.32
)

(0.04
)

(0.91
)
Basic earnings/(loss) per share
$
0.10

 
$
(3.24
)
 
$
46.89

 
$
(6.06
)
 
 
 
 
 
 
 
 
Diluted earnings/(loss) per share from continuing operations
$
0.10

 
$
(2.92
)
 
$
46.31

 
$
(5.15
)
Diluted loss per share from discontinued operations

 
(0.32
)
 
(0.04
)
 
(0.91
)
Diluted earnings/(loss) per share
$
0.10

 
$
(3.24
)
 
$
46.27

 
$
(6.06
)
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding - basic
145

 
144

 
145

 
141

Weighted-average common shares outstanding - diluted
147

 
144

 
147

 
141

 
 
 
 
 
 
 
 
Comprehensive income/(loss):
 
 
 
 
 
 
 
Other comprehensive loss, net of income taxes
$

 
$

 
$

 
$
(3
)
Comprehensive income/(loss)
50

 
(432
)
 
6,847

 
(819
)
Comprehensive loss attributable to noncontrolling interests
(35
)
 
(34
)
 
(60
)

(37
)
Comprehensive income/(loss) attributable to Caesars
$
15

 
$
(466
)
 
$
6,787

 
$
(856
)
See accompanying Notes to Consolidated Condensed Financial Statements. 

4


CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT)
(UNAUDITED)
(In millions)

 
Caesars Stockholders’ Equity/(Deficit)
 
 
 
 
 
Common
Stock
 
Treasury
Stock
 
Additional
Paid-in-
Capital
 

Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income/(Loss)
 
Total
Caesars
Stockholders’
Equity/(Deficit)
 
Noncontrolling
Interests
 
Total Equity/(Deficit)
Balance as of December 31, 2013
$
1

 
$
(16
)
 
$
7,231

 
$
(10,321
)
 
$
(17
)
 
$
(3,122
)
 
$
1,218

 
$
(1,904
)
Net income/(loss)

 

 

 
(853
)
 

 
(853
)
 
37

 
(816
)
Share-based compensation

 
(3
)
 
18

 

 

 
15

 

 
15

Common stock issuances
1

 

 
137

 

 

 
138

 

 
138

Other comprehensive loss, net of tax

 

 

 

 
(3
)
 
(3
)
 

 
(3
)
Allocation of minority interest resulting from sales and conveyances of subsidiary stock

 

 
754

 

 
4

 
758

 
(744
)
 
14

Other

 

 
2

 

 

 
2

 
(25
)
 
(23
)
Balance as of June 30, 2014
$
2

 
$
(19
)
 
$
8,142

 
$
(11,174
)
 
$
(16
)
 
$
(3,065
)
 
$
486

 
$
(2,579
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2014
$
1

 
$
(19
)
 
$
8,140

 
$
(13,104
)
 
$
(15
)
 
$
(4,997
)
 
$
255

 
$
(4,742
)
Net income

 

 

 
6,787

 

 
6,787

 
60

 
6,847

Elimination of CEOC noncontrolling interest and deconsolidation  (1)

 

 

 

 
16

 
16

 
854

 
870

Share-based compensation

 
(2
)
 
31

 

 

 
29

 

 
29

Decrease in noncontrolling interests, net of distributions and contributions

 

 

 

 

 

 
(8
)
 
(8
)
Other

 

 
(4
)
 

 
1

 
(3
)
 
15

 
12

Balance as of June 30, 2015
$
1

 
$
(21
)
 
$
8,167

 
$
(6,317
)
 
$
2

 
$
1,832

 
$
1,176

 
$
3,008

____________________
(1)  
See Note 4 , “ Deconsolidation of Caesars Entertainment Operating Company


See accompanying Notes to Consolidated Condensed Financial Statements.

5


CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions)

 
Six Months Ended June 30,
 
2015
 
2014
 
 
 
 
Cash flows provided by/(used in) operating activities
$
101

 
$
(387
)
 
 
 
 
Cash flows provided by/(used in) investing activities
 
 
 
Acquisitions of property and equipment, net of change in related payables
(227
)
 
(536
)
Deconsolidation of CEOC
(958
)
 

Change in restricted cash
11

 
(1,516
)
Proceeds received from sale of assets

 
28

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

 
(23
)
Other

 
3

Cash flows used in investing activities
(1,174
)
 
(2,044
)
 
 
 
 
Cash flows provided by/(used in) financing activities
 
 
 
Proceeds from the issuance of long-term debt
190

 
4,324

Debt issuance and extension costs and fees

 
(40
)
Repayments of long-term debt
(258
)
 
(1,304
)
Payment of contingent consideration
(32
)
 

Repurchase of management shares
(38
)
 

Issuance of common stock, net of fees

 
137

Proceeds from sales of noncontrolling interests

 
18

Distributions to noncontrolling interest owners
(15
)
 
(33
)
Other
6

 
(5
)
Cash flows provided by/(used in) financing activities
(147
)
 
3,097

 
 
 
 
Cash flows used in discontinued operations
 
 
 
Cash flows used in operating activities
(7
)
 
(6
)
Cash flows from investing activities

 
(1
)
Net cash used in discontinued operations
(7
)
 
(7
)
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
(1,227
)
 
659

Cash and cash equivalents, beginning of period
2,806

 
2,771

Cash and cash equivalents, end of period
$
1,579

 
$
3,430

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Cash paid for interest
$
403

 
$
1,150

Cash paid for income taxes
35

 
28

Non-cash investing and financing activities:
 
 
 
Change in accrued capital expenditures
(11
)
 
45


See accompanying Notes to Consolidated Condensed Financial Statements.

6


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

In this filing, the name “CEC” refers to the parent holding company, Caesars Entertainment Corporation, exclusive of its consolidated subsidiaries and variable interest entities, unless otherwise stated or the context otherwise requires. The words “Company,” “Caesars,” “Caesars Entertainment,” “we,” “our,” and “us” refer to Caesars Entertainment Corporation, inclusive of its consolidated subsidiaries and variable interest entities, unless otherwise stated or the context otherwise requires.
This Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014 (“ 2014 10-K”).
Note 1 - Organization
Organization
CEC is primarily a holding company with no independent operations of its own. It owns Caesars Entertainment Resort Properties, LLC (“CERP”) and an interest in Caesars Growth Partners, LLC (“CGP”). As of June 30, 2015 , CERP and CGP owned a total of 12 casinos in the United States, which are concentrated in Las Vegas, where there are eight .
CEC also owns 89% of Caesars Entertainment Operating Company, Inc. (“CEOC”). As described in Note 4 , “ Deconsolidation of Caesars Entertainment Operating Company ,” the results of CEOC and its subsidiaries are no longer consolidated with Caesars subsequent to CEOC’s voluntarily filing for reorganization under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) on January 15, 2015 .
Caesars Enterprise Services, LLC
In 2014, we launched Caesars Enterprise Services, LLC (“CES”), a services joint venture by and among CERP, CEOC and Caesars Growth Properties Holdings, LLC (“CGPH” and, together with CERP and CEOC, the “Members” and each a “Member”). CES provides certain corporate and administrative services for the Members’ casino properties, including substantially all of the 28 casinos owned by CEOC and nine casinos owned by unrelated third parties (including three Indian tribes). CES manages certain assets for the casinos to which it provides services and the other assets it owns, licenses or controls, and employs certain of the corresponding employees. Under the terms of the joint venture and the Omnibus License and Enterprise Services Agreement, we believe that CEC and its operating subsidiaries will continue to have access to the services historically provided to us by CEOC and its employees, its trademarks, and its programs despite the CEOC bankruptcy filing. Expenses incurred by CES that are not allocated to the properties directly are allocated to the Members according to their allocation percentages, subject to annual review. Therefore, CES is a "pass-through" entity that serves as an agent on behalf of the Members at a cost-basis, and is contractually required to fully allocate its costs. CES is designed to have no net income; therefore, any such net income or loss is immaterial and will be subject to allocation in the subsequent period.
Caesars Interactive Entertainment, Inc. (“CIE”)
We also include the results of CIE, a majority owned subsidiary of CGP that operates an online gaming business providing social games on Facebook and other social media websites and mobile application platforms; certain real money games in Nevada and New Jersey; and “play for fun” offerings in other jurisdictions. CIE also owns the World Series of Poker (“WSOP”) tournaments and brand and licenses trademarks for a variety of products and businesses related to this brand.
Reportable Segments
We view each casino property and CIE as operating segments and currently aggregate all such casino properties and CIE into three reportable segments based on management’s view of these properties, which aligns with their ownership and underlying credit structures: CERP, Caesars Growth Partners Casino Properties and Developments (“CGP Casinos”), and CIE. CGP Casinos is comprised of all subsidiaries of CGP excluding CIE. CEOC remained a reportable segment until its deconsolidation effective January 15, 2015 .

7

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


Going Concern
Overview
The accompanying consolidated financial statements have been prepared assuming that Caesars will continue as a going concern and do not include any adjustments that might result from the outcome of any uncertainties related to our going concern assessment. The following provides our analysis and the factors that were considered in reaching this conclusion.
Litigation
As described more fully below and in Note 5 , we are a defendant in litigation and other noteholder disputes relating to certain CEOC transactions dating back to 2010. These matters, if resolved against us, raise substantial doubt about Caesars’ ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note 5 .
CEC Liquidity
CEC is primarily a holding company with no independent operations, employees, or material debt issuances of its own. Its primary assets at June 30, 2015 consist of $350 million in cash and cash equivalents and its ownership interests in CEOC, CERP and CGP. The restrictions included in certain debt arrangements entered into by CERP and CGP (and/or their respective subsidiaries) do not allow for CERP, CGP, or their subsidiaries to provide dividends to CEC. In addition, CEC does not receive any financial benefit from CEOC during CEOC’s bankruptcy, as all earnings and cash flows are retained by CEOC for the benefit of its creditors.
CEC has no requirement to fund the operations of CERP, CGP, or their subsidiaries. Accordingly, CEC cash outflows are primarily used for corporate development opportunities and other corporate-level activity. Because CEC has no operations on its own and the restrictions on its subsidiaries under lending arrangements prevent the distribution of cash from the subsidiaries to the holding company, CEC is generally limited to raising additional capital through borrowings or equity transactions.
We have a number of material outstanding uncertainties for which we have not accrued any amounts, specifically the following, all of which are described in Note 5 , “ Litigation ,” unless otherwise noted:
Litigation commenced by Wilmington Savings Fund Society, FSB on August 4, 2014 (the “Delaware Second Lien Lawsuit”);
Litigation commenced by parties on September 3, 2014 and October 2, 2014 (the “Senior Unsecured Lawsuits”);
Litigation commenced by UMB Bank on November 25, 2014 (the “Delaware First Lien Lawsuit”);
Demands for payment made by Wilmington Savings Fund Society, FSB on February 13, 2015 (the “February 13 Notice”);
Demands for payment made by BOKF, N.A., on February 18, 2015 (see “February 18 Notice”);
Litigation commenced by BOKF, N.A. on March 3, 2015 (the “New York Second Lien Lawsuit”);
Litigation commenced by UMB Bank on June 15, 2015 (the “New York First Lien Lawsuit”);
Litigation commenced by Trustees of the National Retirement Fund in January 2015; and
The CEC Collection Guarantee which resulted from certain of the 2014 bank amendments (see “CEC Collection Guarantee” below).

In each of these matters, claims have been made or could be made against our ultimate parent holding company, CEC. In the event of an adverse outcome on one or all of the matters set forth above, it is likely that a reorganization under Chapter 11 of the Bankruptcy Code would be necessary due to the limited resources available at CEC to resolve such matters. Certain claims in the Parent Guarantee Lawsuits (defined below) subject to summary judgment motions could be decided as early as August 2015, and in the event of an adverse outcome on such claims, CEC would likely seek reorganization under Chapter 11 of the Bankruptcy Code soon thereafter. See Note 5 .
Guarantee of Collection
In 2014, CEOC amended its senior secured credit facilities (the “Bank Amendment”) resulting in, among other things, a modification of CEC’s guarantee under the senior secured credit facilities such that CEC’s guarantee will be limited to a guarantee of collection (“CEC Collection Guarantee”) with respect to obligations owed to the lenders who consent to the Bank Amendment. The CEC

8

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


Collection Guarantee requires the creditors to exhaust all rights and remedies at law and in equity that the creditors or their agents may have against CEOC or any of its subsidiaries and its and their respective property to collect, or obtain payment of, the guaranteed amounts, including, without limitation, through foreclosure or similar proceedings, a Chapter 11 case, a Chapter 7 case, or any other proceeding under a Debtor Relief Law with respect to CEOC or any of its subsidiaries, litigation, and collection on all applicable insurance policies, and termination of all commitments to advance additional funds to CEOC under the Loan Documents (it being understood that, in the event of a Chapter 11 case, the effective date of a plan of reorganization shall constitute the exhaustion of all remedies).
(In millions)
June 30, 2015
Maturities of debt guaranteed by such guarantee of collection, total
$
5,354

Estimated contractual interest payments guaranteed by such guarantee of collection, annually (1)
426

____________________
(1)  
Quarterly payments are normally scheduled to be paid on January 2nd, April 2nd, July 2nd, and October 2nd. The last quarterly payment was made on January 2nd, 2015. Payments have been stayed due to the CEOC bankruptcy. See Note 4 .
In July 2015, CEC and CEOC entered into a Fourth Amended and Restated Restructuring Support and Forbearance Agreement with certain holders of claims in respect of claims under CEOC’s first lien notes and other indebtedness (“First Lien Bond RSA”) under which certain offers have been made that are expected to reduce the liabilities associated with the CEC Collection Guarantee in conjunction with the overall restructuring of CEOC. The conclusion of these negotiations are highly uncertain because they are: (1) contingent upon the overall restructuring, (2) include many factors interconnected with the restructuring as described in the preceding paragraph, (3) assume the Caesars Acquisition Corporation (“CAC”) plan of merger, among other items. See Note 11 , “ Contractual Commitments and Contingent Liabilities - CEOC Reorganization.”
We assessed the fair value of the CEC Collection Guarantee under ASC460 as of the CEOC Petition Date (see Note 4). We applied a probability-weighted valuation method considering the possible scenarios at that time, and concluded that the CEC Collection Guarantee does not have a fair value materially higher than zero . Accordingly, as noted above under “CEC Liquidity,” we have not accrued any amounts due under the CEC Collection Guarantee.
Financial Condition as of December 31, 2014 and Financial Restructuring
Over the three-year period ended December 31, 2014 , we incurred cumulative net losses totaling $7.2 billion , primarily due to $7.0 billion of interest expense resulting from our highly-leveraged capital structure. As of December 31, 2014 , we had a total accumulated deficit of $13.1 billion and long term debt, including current portion of $15.8 billion , totaled $23.0 billion . Our cumulative cash flows from operating activities were negative $772 million over the three-year period, primarily due to total cash paid for interest of $5.7 billion .
The substantial majority of the preceding negative financial factors have occurred in our largest operating subsidiary, CEOC, which incurred cumulative net losses totaling $7.1 billion resulting from interest expense of $6.2 billion over the three-year period ended December 31, 2014 . As of December 31, 2014, CEOC had a total accumulated deficit of $11.4 billion and long term debt, including current portion of $15.8 billion , totaled $15.9 billion . CEOC has experienced negative cash flows from operating activities over the past three years, primarily due to cash paid for interest.
All of the foregoing factors raised substantial doubt about CEOC’s ability to continue as a going concern as of December 31, 2014 and contributed to CEOC’s decision to voluntarily file for reorganization under Chapter 11 of the Bankruptcy Code (see Note 4 ).
Caesars’ Financial Condition
During the six months ended June 30, 2015 , we recognized net income of $6.8 billion , which includes a $7.1 billion gain recognized upon the deconsolidation of CEOC, and generated operating cash flows of $101 million , which includes $220 million of negative operating cash flow attributable to CEOC prior its deconsolidation. As of June 30, 2015 , subsequent to the deconsolidation of CEOC, we had a total accumulated deficit of $6.3 billion and long term debt, including current portion of $222 million , totaled $7.0 billion .

9

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


Note 2 Basis of Presentation and Consolidation
Basis of Presentation
The accompanying unaudited consolidated condensed financial statements of Caesars 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 2015 fiscal year. All amounts presented in these consolidated condensed financial statements and notes thereto exclude the operating results and cash flows of CEOC subsequent to January 15, 2015 , and the assets, liabilities, and equity of CEOC as of June 30, 2015 .
Certain immaterial prior year amounts have been reclassified to conform to the current year’s presentation. The financial information for the six months ended June 30, 2014 reflects the results of operations and cash flows of the Showboat Atlantic City casino as discontinued operations consistent with the current period presentation. See Note 7 , “ Discontinued Operations .”
In our interim report on Form 10-Q for the period ended September 30, 2014 (“ September 2014 Form 10-Q ”), we recorded an adjustment to correct an error discovered subsequent to the issuance of the second quarter Form 10-Q. The amounts presented in this filing, therefore, are consistent with the previously corrected amounts as included in our nine month statement of cash flows included in our September 2014 Form 10-Q . The cash flows related to CGPH’s May 2014 financing that was both borrowed and repaid during the second quarter of 2014 had been (prior to correction in the third quarter of 2014) presented on a net, rather than gross, basis. The current presentation, all within financing activities, reflects $693 million in proceeds, $700 million in repayments, and $7 million in debt issuance costs and fees, instead of a net impact of zero as disclosed in our interim report on Form 10-Q for the period ended June 30, 2014. This reclassification only impacts the presentation of these amounts in cash flows from financing activities, and we do not believe the effects of the correction are material. No other reported items are affected by this correction.
Consolidation of Subsidiaries and Variable Interest Entities
We consolidate into our financial statements the accounts of all subsidiaries in which we have a controlling financial interest and variable interest entities (“VIEs”) for which we or one of our consolidated subsidiaries is the primary beneficiary. Control generally equates to ownership percentage, whereby (1) affiliates that are more than 50% owned are consolidated; (2) investments in affiliates of 50% or less but greater than 20% are generally accounted for using the equity method where we are have determined that we have significant influence over the entities; and (3) investments in affiliates of 20% or less are generally accounted for using the cost method.
We consolidate a VIE when we have both the power to direct the activities that most significantly impact the results of the VIE and the right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE. For VIEs that are under common control with affiliates, in lieu of an assessment of the power to direct the activities that most significantly impact the results of the VIE, we may be required to assess a number of other factors to determine the consolidating entity, including the following: (i) the closeness of the association that the VIE has with the businesses of the affiliated entities, (ii) the entity from which the VIE obtained its assets; (iii) the nature of ongoing management and other agreements; and (iv) the obligation to absorb losses and the right to receive residual returns that could potentially be significant to the VIE. Along with the VIEs that are consolidated in accordance with the above guidelines, we also hold variable interests in other VIEs that are not consolidated because we are not the primary beneficiary. We continually monitor both consolidated and unconsolidated VIEs to determine if any events have occurred that could cause the primary beneficiary to change. A change in determination could have a material impact on our financial statements.
Despite a majority financial interest, we may only possess non-substantive voting rights that do not confer upon us the ability to control key activities of the entity, such as determining operating budgets, payment of obligations, management of assets, and/or other activities necessary for the ordinary course of business. We continually monitor both consolidated and unconsolidated VIEs to determine if any events have occurred that could cause the primary beneficiary to change.
Consolidation of Caesars Growth Partners
Because the equity holders in CGP receive returns disproportionate to their voting interests and substantially all the activities of CGP are related to Caesars, CGP has been determined to be a VIE. CAC is the sole voting member of CGP. Common control exists between CAC and Caesars through the majority beneficial ownership of both by Hamlet Holdings (as defined in Note 18 , “ Related

10

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


Party Transactions ”). The assets held by CGP originally came from Caesars and continue to be intrinsically closely associated with Caesars through the nature of the business, as well as ongoing service and management agreements. Additionally, Caesars is expected to receive the majority of the benefits or absorb the majority of the losses from its higher economic participation in CGP. Since Caesars is more closely associated with CGP than CAC, we have determined that Caesars is the primary beneficiary of CGP and is required to consolidate them. Neither CAC nor CGP guarantees any of CEC’s debt, and the creditors or beneficial holders of CGP have no recourse to the general credit of CEC.
CGP generated net revenues of $574 million and $353 million for the three months ended June 30, 2015 and 2014, respectively, and $1,141 million and $579 million for the six months ended June 30, 2015 and 2014, respectively. Net income attributable to Caesars related to CGP was $8 million for the three months ended June 30, 2015 compared with net loss of $115 million for the three months ended June 30, 2014. Net income attributable to Caesars related to CGP was $6 million for the six months ended June 30, 2015 compared with net loss of $114 million for the six months ended June 30, 2014.
CGP is obligated to issue additional non-voting membership units to CEC in 2016 to the extent that the earnings from CIE’s social and mobile games business exceeds a specified threshold amount in 2015. CGP recorded a liability representing the fair value of the additional contingently issuable non-voting membership units of $230 million and $347 million as of June 30, 2015 and December 31, 2014 , respectively. Such liability is eliminated in our consolidation of CGP.
Consolidation of Caesars Enterprise Services
A steering committee acts in the role of a board of managers for CES with each Member entitled to appoint one representative to the steering committee. Each Member, through its representative, is entitled to a single vote on the steering committee, accordingly, the voting power of the Members does not equate to their ownership percentages. We have determined that because Caesars consolidates two of the Members (CERP and CGPH), Caesars is deemed to have a controlling financial interest in CES through our ownership of that interest.
As described in Note 4 , effective January 15, 2015 , CEOC is no longer a consolidated subsidiary. Therefore, CEOC’s ownership interest in CES, totaling $11 million , is accounted for as noncontrolling interest.
Consolidation Considerations for Caesars Entertainment Operating Company
As described in Note 4 , CEOC’s filing for reorganization was a reconsideration event for Caesars Entertainment to reevaluate whether consolidation of CEOC continued to be appropriate. We have concluded that CEOC is a VIE and that we are not the primary beneficiary of CEOC. See Note 18 , “ Related Party Transactions ,” for additional information on the carrying amounts and classification of assets and liabilities that relate to our variable interest in CEOC. In addition, as described in Note 1 , “ Organization - Guarantee of Collection ,” we have a guarantee of collection with respect to certain of CEOC’s debt obligations for which we have not accrued any amounts as of June 30, 2015 .
Note 3 Liquidity Considerations
We are a highly-leveraged company and had $7.2 billion in face value of debt outstanding as of June 30, 2015 . As a result, a significant portion of our liquidity needs are for debt service, including significant interest payments. Our estimated consolidated debt service obligation for the remainder of 2015 is $337 million , consisting of $47 million in principal maturities and $290 million in required interest payments. Our estimated consolidated debt service obligation for 2016 is $773 million , consisting of $202 million in principal maturities and $571 million in required interest payments.
Consolidated cash and cash equivalents, excluding restricted cash, as of June 30, 2015 as shown in the table below, includes amounts held by CERP, CGP, and CES, which are not readily available to CEC.
Cash and Available Revolver Capacity
 
June 30, 2015
(In millions)
CERP
 
CES
 
CGP
 
Parent
Cash and cash equivalents
$
206

 
$
99

 
$
891

 
$
383

Revolver capacity
270

 

 
160

 

Revolver capacity drawn or committed to letters of credit
(95
)
 

 
(60
)
 

Total
$
381

 
$
99

 
$
991

 
$
383


11

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

Future Maturities of Long-Term Debt
(In millions)
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
CERP
$
20

 
$
131

 
$
27

 
$
25

 
$
25

 
$
4,500

 
$
4,728

CGP
27

 
71

 
23

 
27

 
203

 
2,085

 
2,436

Total
$
47

 
$
202

 
$
50

 
$
52

 
$
228

 
$
6,585

 
$
7,164


Future Estimated Interest Payments
(In millions)
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
CERP
$
195

 
$
384

 
$
395

 
$
405

 
$
412

 
$
497

 
$
2,288

CGP
95

 
187

 
190

 
198

 
202

 
330

 
1,202

Total
$
290

 
$
571

 
$
585

 
$
603

 
$
614

 
$
827

 
$
3,490

See Note 12 , “ Debt ,” for details of our debt outstanding and related restrictive covenants, including the restrictions on our subsidiaries to pay dividends to CEC or otherwise transfer cash to CEC. This detail includes, among other information, a table presenting details of our individual borrowings outstanding as of June 30, 2015 and December 31, 2014, as well as discussion of recent changes in our debt outstanding, and changes in the terms of existing debt subsequent to June 30, 2015 .
Note 4 Deconsolidation of Caesars Entertainment Operating Company
Chapter 11 Filing for Reorganization
As previously disclosed in our 2014 10-K, on January 15, 2015 (the “Petition Date”), CEOC and certain of its United States subsidiaries (the “Debtors”) voluntarily filed for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for Northern District of Illinois in Chicago (the “Bankruptcy Court”) in order to implement a restructuring plan for balance sheet deleveraging. The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. CEC, exclusive of its subsidiaries, CERP, and CGP are separate entities with independent capital structures and have not filed for bankruptcy relief. In addition, all Caesars Entertainment properties, and those owned by CEOC, are continuing to operate in the ordinary course. Under the proposed plans, Caesars Entertainment will make substantial cash and other contributions as part of implementing the ultimate restructuring plans if they are agreed upon by the applicable parties and approved by the Bankruptcy Court (see Note 11 ).
Deconsolidation of CEOC
CEOC’s filing for reorganization was a reconsideration event for Caesars Entertainment to reevaluate whether consolidation of CEOC continued to be appropriate. We have concluded that CEOC is a VIE, subsequent to its filing for bankruptcy, because the holders of equity at risk (including us as an 89% equity holder) as a group no longer had the power to make the primary decisions. Our assessment focused on indicators that CEC did not have significant influence over the operating and financial policies of CEOC, primarily including:
CEOC expanded its board of directors and added two independent directors. The CEOC board then delegated certain key decision-making authority regarding the bankruptcy and related party matters to two committees, which are comprised of primarily the independent directors. Additionally, as a result of the bankruptcy proceedings, critical decisions are now subject to the overall jurisdiction of the Bankruptcy Court and the Creditors Committee (described below).
The Bankruptcy Court established the Creditors Committee to represent the rights of the creditors during the bankruptcy proceedings. Through the Creditors Committees, creditors have the right to object to recommendations presented by CEOC’s management or the Board of Directors.
CEOC’s executive leadership is comprised of individuals who are independent of CEC.
Accordingly, we are not the primary beneficiary of CEOC because we have concluded that the equity owners, including CEC, only possess non-substantive voting rights; CEC is not operating CEOC as debtor-in-possession as the CEC Board has ceded its authority to the Bankruptcy Court; CEC management cannot carry on activities necessary for the ordinary course of business without Bankruptcy Court approval; and CEOC still manages day-to-day operations, but does not have discretion to make significant

12

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

capital or operating budgetary changes or decisions, purchase or sell significant assets, or approve management or employee compensation arrangements. Ultimately, CEOC’s material decisions are still subject to review by the Creditors Committees and the Bankruptcy Court.
In addition to the above, we assessed the inherent uncertainties associated with the outcome of the Chapter 11 reorganization process and the anticipated duration thereof, and concluded that it was appropriate to deconsolidate CEOC effective on the Petition Date.
We further considered how to account for our continuing investment in CEOC after deconsolidation and concluded that for similar reasons, we do not have significant influence over CEOC during the pendency of the bankruptcy; therefore, Caesars Entertainment accounts for its investment in CEOC as a cost method investment subsequent to the deconsolidation.
Upon the deconsolidation of CEOC, Caesars Entertainment recognized a $7.1 billion gain and recorded a cost method investment in CEOC of zero due to the negative equity associated with CEOC’s underlying financial position. In addition, as of December 31, 2014, CEOC represented total assets of $11.0 billion , total liabilities of $18.6 billion , and total long-term debt of $15.9 billion . For the 2015 period prior to the deconsolidation, CEOC segment net revenues totaled $158 million , net loss attributable to Caesars totaled $76 million , and negative cash flow from operating activities totaled $220 million .
Related Party Relationship
Subsequent to the Petition Date, CEOC will continue to fund all expenses related to its operations that are being provided by CES and can continue to perform on its intercompany obligations to all Caesars entities. However, upon filing for Chapter 11 and the subsequent deconsolidation, transactions with CEOC are no longer eliminated in consolidation and are treated as related party transactions for Caesars Entertainment. These transactions include items such as casino management fees paid to CEOC, insurance expenses related to insurance coverage provided to CEOC by Caesars Entertainment, and rent payments by CEOC to CERP under the Octavius Tower lease agreement (see Note 18 , “ Related Party Transactions ”).
Note 5 Litigation
Litigation
Noteholder Disputes
On August 4, 2014, Wilmington Savings Fund Society, FSB, solely in its capacity as successor Indenture Trustee for the 10.00% Second-Priority Senior Secured Notes due 2018 (the "10.00% Second-Priority Notes"), on behalf of itself and, it alleges, derivatively on behalf of CEOC, filed a lawsuit (the "Delaware Second Lien Lawsuit") in the Court of Chancery in the State of Delaware against CEC and CEOC, CGP, CAC,CERP, CES, Eric Hession, Gary Loveman, Jeffrey D. Benjamin, David Bonderman, Kelvin L. Davis, Marc C. Rowan, David B. Sambur, and Eric Press. The lawsuit alleges claims for breach of contract, intentional and constructive fraudulent transfer, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and corporate waste. The lawsuit seeks (1) an award of money damages; (2) to void certain transfers, the earliest of which dates back to 2010; (3) an injunction directing the recipients of the assets in these transactions to return them to CEOC; (4) a declaration that CEC remains liable under the parent guarantee formerly applicable to the 10.00% Second-Priority Notes; (5) to impose a constructive trust or equitable lien on the transferred assets; and (6) an award to plaintiffs for their attorneys’ fees and costs. CEC believes this lawsuit is without merit and will defend itself vigorously. A motion to dismiss this action was filed by CEC and other defendants in September 2014, and the motion was argued in December 2014. During the pendency of its Chapter 11 bankruptcy proceedings, the action has been automatically stayed with respect to CEOC. Vice Chancellor Glasscock denied the motion to dismiss with respect to CEC on March 18, 2015. Subsequently, plaintiffs advised the judge presiding over the CEOC bankruptcy proceeding that they would pursue in this litigation only those claims alleging that CEC remains liable under the parent guarantee formerly applicable to the 10.00% Second-Priority Notes. Discovery in the action is underway, with a current deadline of September 30, 2015.
On August 5, 2014, CEC, along with CEOC, filed a lawsuit in the Supreme Court of the State of New York, County of New York, against certain institutional first and second lien note holders. The complaint states that such institutional first and second lien note holders have acted against the best interests of CEOC and other creditors, including for the purpose of inflating the value of their credit default swap positions or improving other unique securities positions. The complaint asserts claims for tortious interference with prospective economic advantage, declaratory judgment and breach of contract and seeks, among other things, (1) money damages; (2) a declaration that no default or event of default has occurred or is occurring and that CEC and CEOC have not breached their fiduciary duties or engaged in fraudulent transfers or other violation of law; and (3) a preliminary and permanent injunction prohibiting the defendants from taking further actions to damage CEC or CEOC. Defendants filed motions to dismiss this action in October 2014. On January 16, 2015, the claims against the first lien note holder defendant were voluntarily dismissed

13

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

and on June 29, 2015, the declaratory judgment claim against the second lien note holder defendants was also voluntarily dismissed. On July 6, 2015, the claim for tortious interference with prospective economic advantage brought by CEOC against the second lien note holders was voluntarily dismissed as well, without prejudice, leaving in the action only the tortious interference with prospective economic advantage claim brought by CEC against the second lien note holder defendants. On July 20, 2015, the Court granted the second lien note holder defendants’ motion to dismiss that claim and ordered that the action be marked disposed.
On September 3, 2014, holders of approximately $21 million of CEOC 6.50% Senior Unsecured Notes due 2016 and 5.75% Senior Unsecured Noted due 2017 (collectively, the “Senior Unsecured Notes”) filed suit in federal district court in Manhattan against CEC and CEOC, claiming broadly that an August 12, 2014 Note Purchase and Support Agreement between CEC and CEOC (on the one hand) and certain other holders of the Senior Unsecured Notes (on the other hand) impaired their own rights under the Trust Indenture Act of 1939 and the indentures governing the Senior Unsecured Notes. The lawsuit seeks both declaratory and monetary relief. On October 2, 2014, a holder of CEOC’s 6.50% Senior Unsecured Notes due 2016 purporting to represent a class of all persons who held these Notes from August 11, 2014 to the present filed a substantially similar suit in the same court, against the same defendants, relating to the same transactions. Both lawsuits (the "Senior Unsecured Lawsuits") have been assigned to the same judge. Although the claims against CEOC have been automatically stayed during its Chapter 11 bankruptcy proceedings, the court denied a motion to dismiss both lawsuits with respect to CEC, and discovery is ongoing with respect to the plaintiffs' claims against CEC.
On November 25, 2014, UMB Bank (“UMB”), as successor indenture trustee for CEOC's 8.50% Senior Secured Notes due 2020 (the “8.50% Senior Secured Notes”), filed a verified complaint (the "Delaware First Lien Lawsuit") in Delaware Chancery Court against CEC, CEOC, CERP, CAC, CGP, CES, and against individual past and present Board members Loveman, Benjamin, Bonderman, Davis, Press, Rowan, Sambur, Hession, Colvin, Kleisner, Swann, Williams, Housenbold, Cohen, Stauber, and Winograd, alleging generally that defendants improperly stripped CEOC of certain assets, wrongfully affected a release of CEC’s parent guarantee of the 8.50% Senior Secured Notes and committed other wrongs. Among other things, UMB Bank asked the court to appoint a receiver over CEOC. In addition, the suit pleads claims for fraudulent conveyances/transfers, insider preferences, illegal dividends, declaratory judgment (for breach of contract as regards to the parent guarantee and also as to certain covenants in the bond indenture), tortious interference with contract, breach of fiduciary duty, usurpation of corporate opportunities, and unjust enrichment, and seeks monetary, equitable and declaratory relief. The lawsuit has been automatically stayed with respect to CEOC during its Chapter 11 bankruptcy process. Pursuant to the First Lien Bond RSA, the lawsuit also has been stayed in its entirety, with the consent of all of the parties to it. The consensual stay will expire upon the termination of the First Lien Bond RSA.
On February 13, 2015, Caesars Entertainment received a Demand For Payment of Guaranteed Obligations (the “February 13 Notice”) from Wilmington Savings Fund Society, FSB, in its capacity as successor Trustee for CEOC’s 10.00% Second-Priority Notes. The February 13 Notice alleges that CEOC’s commencement of its voluntary Chapter 11 bankruptcy case constituted an event of default under the indenture governing the 10.00% Second-Priority Notes; that all amounts due and owing on the 10.00% Second-Priority Notes therefore immediately became payable; and that Caesars Entertainment is responsible for paying CEOC’s obligations on the 10.00% Second-Priority Notes, including CEOC’s obligation to timely pay all principal, interest, and any premium due on these notes, as a result of a parent guarantee provision contained in the indenture governing the notes that the February 13 Notice alleges is still binding. The February 13 Notice accordingly demands that Caesars Entertainment immediately pay Wilmington Savings Fund Society, FSB, cash in an amount of not less than $3.7 billion, plus accrued and unpaid interest (including without limitation the $184 million interest payment due December 15, 2014 that CEOC elected not to pay) and accrued and unpaid attorneys’ fees and other expenses. The February 13 Notice also alleges that the interest, fees and expenses continue to accrue.
On February 18, 2015, Caesars Entertainment received a Demand For Payment of Guaranteed Obligations (the “February 18 Notice”) from BOKF, N.A. (“BOKF”), in its capacity as successor Trustee for CEOC’s 12.75% Second-Priority Senior Secured Notes due 2018 (the “12.75% Second-Priority Notes”). The February 18 Notice alleges that CEOC’s commencement of its voluntary Chapter 11 bankruptcy case constituted an event of default under the indenture governing the 12.75% Second-Priority Notes; that all amounts due and owing on the 12.75% Second-Priority Notes therefore immediately became payable; and that CEC is responsible for paying CEOC’s obligations on the 12.75% Second-Priority Notes, including CEOC’s obligation to timely pay all principal, interest and any premium due on these notes, as a result of a parent guarantee provision contained in the indenture governing the notes that the February 18 Notice alleges is still binding. The February 18 Notice therefore demands that CEC immediately pay BOKF cash in an amount of not less than $750 million, plus accrued and unpaid interest, accrued and unpaid attorneys’ fees, and other expenses. The February 18 Notice also alleges that the interest, fees and expenses continue to accrue.

14

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

In accordance with the terms of the applicable indentures and as previously disclosed under Item 8.01 in our Current Report on Form 8-K filed August 22, 2014, CEC is not subject to the above-described guarantees. As a result, we believe the demands for payment are meritless.
On March 3, 2015, BOKF filed a lawsuit (the “New York Second Lien Lawsuit”) against CEC in federal district court in Manhattan, in its capacity as successor trustee for CEOC’s 12.75% Second-Priority Notes. On June 15, 2015, UMB filed lawsuit (the “New York First Lien Lawsuit” and, together with the Delaware Second Lien Lawsuit, the Delaware First Lien Lawsuit, the Senior Unsecured Lawsuits and the New York Second Lien Lawsuit, the “Parent Guarantee Lawsuits”) against CEC, also in federal district court in Manhattan, in its capacity as successor trustee for CEOC’s 11.25% Senior Secured Notes due 2017, 8.50% Senior Secured Notes due 2020, and 9.00% Senior Secured Notes due 2020. Plaintiffs in these actions allege that CEOC’s filing of its voluntary Chapter 11 bankruptcy case constitutes an event of default under the indenture governing these notes, causing all principal and interest to become immediately due and payable, and that CEC is obligated to make those payments pursuant to a parent guarantee provision in the indentures governing these notes that plaintiffs allege are still binding. Both plaintiffs bring claims for violation of the Trust Indenture Act of 1939, breach of contract, breach of duty of good faith and fair dealing and for declaratory relief and BOKF brings an additional claim for intentional interference with contractual relations. The cases have both been assigned to the same judge presiding over the other Parent Guarantee Lawsuits that are taking place in Manhattan. CEC filed its answer to the BOKF complaint on March 25, 2015, and its answer to the UMB complaint is due on August 10, 2015. On June 25, 2015, and June 26, 2015, BOKF and UMB, respectively, moved for partial summary judgment, specifically on their claims alleging a violation of the Trust Indenture Act of 1939, seeking both declaratory relief and damages. CEC filed its opposition to those motions on July 24, 2015, and the motions will be fully briefed by August 7, 2015. The parties are separately also engaged in discovery in both actions.
On March 11, 2015, CEOC filed an adversary proceeding in bankruptcy court requesting that the Parent Guarantee Lawsuits be enjoined against all defendants through plan confirmation; in subsequent submissions, CEOC stated that it sought a temporary stay of those lawsuits until 60 days after the issuance of a final report by the Bankruptcy Examiner. CEOC argued that contemporaneous prosecution of related claims against CEC would impair the bankruptcy court’s jurisdiction over the Debtors’ reorganization by threatening the Debtors’ ability to recover estate property for the benefit of all creditors, diminishing the prospects of a successful reorganization, and depleting property of the estate. On July 22, 2015, the bankruptcy court denied CEOC’s request. The bankruptcy court’s ruling does not address the merits of the Parent Guarantee Lawsuits.
We believe that the claims and demands described above against CEC are without merit and we intend to defend the company vigorously. The claims against CEOC have been stayed due to the Chapter 11 process and, in some instances, the actions against CEC have been allowed to continue. We believe that the Noteholder Disputes and the Parent Guarantee Lawsuits have a reasonably possible likelihood of an adverse outcome, but should these matters ultimately be resolved through litigation outside of the financial restructuring of CEOC (the “Financial Restructuring”), and should a court find in favor of the claimants in the Noteholder Disputes, such determination would likely lead to a reorganization under Chapter 11 of the Bankruptcy Code (see Note 1). We are not able to estimate a range of reasonably possible losses should any of the Noteholder Disputes ultimately be resolved against us, although they could potentially exceed $11 billion. (see Note 1 ).
CEC-CAC Merger Litigation
On December 30, 2014, Nicholas Koskie, on behalf of himself and, he alleges, all others similarly situated, filed a lawsuit (the “Merger Lawsuit”) in the Clark County District Court in the State of Nevada against CAC, CEC and members of the CAC board of directors Marc Beilinson, Philip Erlanger, Dhiren Fonseca, Don Kornstein, Karl Peterson, Marc Rowan, and David Sambur (the individual defendants collectively, the “CAC Directors”). The Merger Lawsuit alleges claims for breach of fiduciary duty against the CAC Directors and aiding and abetting breach of fiduciary duty against CAC and CEC. It seeks (1) an order directing the CAC Directors to fulfill alleged fiduciary duties to CAC in connection with the proposed merger between CAC and CEC announced on December 22, 2014 (the “Proposed Merger”), specifically by announcing their intention to (a) cooperate with bona fide interested parties proposing alternative transactions, (b) ensure that no conflicts exist between the CAC Directors’ personal interests and their fiduciary duties to maximize shareholder value in the Proposed Merger, or resolve all such conflicts in favor of the latter, and (c) act independently to protect the interests of the shareholders; (2) an order directing the CAC Directors to account for all damages suffered or to be suffered by plaintiff and the putative class as a result of the Proposed Merger; and (3) an award to plaintiff for his costs and attorneys’ fees. It is unclear whether the Merger Lawsuit also seeks to enjoin the Proposed Merger. CEC believes that this lawsuit is without merit and will defend itself vigorously. The deadline to respond to the Merger Lawsuit has been adjourned without a date by agreement of the parties.

15

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

Employee Benefit Obligations
In December 1998, Hilton Hotels Corporation (“Hilton”) spun-off its gaming operations as Park Place Entertainment Corporation (“Park Place”). In connection with the spin-off, Hilton and Park Place entered into various agreements, including an Employee Benefits and Other Employment Allocation Agreement dated December 31, 1998 (the “Allocation Agreement”) whereby Park Place assumed or retained, as applicable, certain liabilities and excess assets, if any, related to the Hilton Hotels Retirement Plan (the “Hilton Plan”) based on the benefits of Hilton employees and Park Place employees. CEOC is the ultimate successor to this Allocation Agreement. In 2013, a lawsuit was settled related to the Hilton Plan, which retroactively and prospectively increased total benefits to be paid under the Hilton Plan. In 2009, we received a letter from Hilton, notifying us of a lawsuit related to the Hilton Plan that alleged that CEC had a potential liability for the additional claims under the terms of the Allocation Agreement. Based on conversations between our representative and a representative of the defendants, we recorded a charge of $25 million during the second quarter 2010, representing CEC’s (including subsidiaries) allocated share of the total damages estimate.
In December 2013, we received a letter from Hilton notifying us that all final court rulings have been rendered in relation to this matter. We were subsequently informed that CEC’s obligation under the Allocation Agreement was approximately $54 million , and that approximately $19 million relates to contributions for historical periods and approximately $35 million relates to estimated future contributions. We met with Hilton representatives in March 2014 and had discussions subsequently. We cannot currently predict the ultimate outcome of this matter, but continue to believe that we may have various defenses against such claims, including defenses as to the amount of liabilities. On November 21, 2014, in response to a letter from Hilton, we agreed to attempt to mediate a resolution of the matter. On December 24, 2014, Hilton sued CEC and CEOC in federal court in Virginia primarily under the Employee Retirement Income Security Act (“ERISA”), and also under state contract and unjust enrichment law theories, for monetary and equitable relief in connection with this ongoing dispute. Hilton amended its lawsuit in January 2015 to remove CEOC as a defendant. We moved to dismiss the lawsuit in February 2015, and that motion was argued in March 2015. On April 14, 2015, the Court issued an Opinion dismissing with prejudice the unjust enrichment claim, and transferring the purported contract and ERISA claims to the Northern District of Illinois, as had been requested by CEC. The Northern District of Illinois subsequently referred the case to the Bankruptcy Court presiding over the CEOC bankruptcy, and the matter remains pending.
Other Matters
In January 2015, a majority of the Trustees of the National Retirement Fund (“NRF”), a multi-employer defined benefit pension plan, voted to expel CEC and its participating subsidiaries (“CEC Group”) from the plan. NRF claims that CEOC’s bankruptcy presents an “actuarial risk” to the plan because, depending on the outcome of the bankruptcy proceeding, CEC might no longer be liable to the plan for any partial or complete withdrawal liability. NRF has advised the CEC Group that its expulsion has triggered withdrawal liability with a present value of approximately $360 million, payable in 80 quarterly payments of about $6 million.
Prior to NRF’s vote, the CEC Group reiterated its commitment to remain in the plan and not seek rejection of any collective bargaining agreements in which the obligation to contribute to NRF exists. It is completely current with respect to pension contributions. We opposed the NRF actions in the appropriate legal forums including seeking a declaratory judgment in federal district court challenging NRF’s authority to expel the CEC Group and also seeking relief in the CEOC bankruptcy proceeding. The parties entered into a Standstill Agreement in March 2015 staying the CEC Group’s obligation to commence quarterly payments and instead continue making its monthly contributions, and also setting a briefing schedule in the bankruptcy proceeding for both CEOC’s motion that NRF’s action violated the automatic stay and our motion to extend the stay to encompass NRF’s collection lawsuit against CEC. Both matters have been fully briefed, but the Bankruptcy Court has yet to rule. NRF has filed a motion to dismiss the federal district court action asserting that the governing statute requires that the issue must first be arbitrated. All briefs have been submitted. Absent a resolution, we expect the Bankruptcy Court to set an argument schedule at another hearing set for August 19, 2015.
We believe our legal arguments against the actions undertaken by NRF are strong and will pursue them vigorously. Because legal proceedings with respect to this matter are at the preliminary stages, we cannot currently provide assurance as to the ultimate outcome of the matters at issue.

16

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

In recent years, governmental authorities have been increasingly focused on anti-money laundering (“AML”) policies and procedures, with a particular focus on the gaming industry. On October 11, 2013, CEOC’s subsidiary, Desert Palace, Inc. (the owner of and referred to herein as Caesars Palace), received a letter from the Financial Crimes Enforcement Network of the United States Department of the Treasury (“FinCEN”), stating that FinCEN is investigating Caesars Palace for alleged violations of the Bank Secrecy Act to determine whether it is appropriate to assess a civil penalty and/or take additional enforcement action against Caesars Palace. Caesars Palace responded to FinCEN’s letter on January 13, 2014. Additionally, we were informed in October 2013 that a federal grand jury investigation regarding anti-money laundering practices of CEC and its subsidiaries had been initiated. CEC and Caesars Palace have been fully cooperating with both the FinCEN and grand jury investigations since October 2013. On April 29, 2015, representatives of Caesars Palace met with representatives of the various governmental entities involved. At that meeting, the governmental parties reviewed with the representatives of Caesars Palace in general terms the results of their investigations and proposed a range of potential settlement outcomes, including fines in the range of $12 million to $20 million. Caesars Palace is a subsidiary of CEOC and, because of CEOC’s Chapter 11 bankruptcy filing on January 15, 2015, has been, together with CEOC’s other subsidiaries, deconsolidated from CEC’s financial results. Accordingly, we expect that any financial penalties imposed upon Caesars Palace would have a limited impact on CEC’s financial results.
Caesars is party to other ordinary and routine litigation incidental to our business. We do not expect the outcome of any such litigation to have a material effect on our consolidated financial position, results of operations, or cash flows, as we do not believe it is reasonably possible that we will incur material losses as a result of such litigation.
Note 6 Recently Issued Accounting Pronouncements
In May 2014, the FASB issued authoritative guidance amending the FASB Accounting Standards Codification and creating a new Topic 606, Revenue from Contracts with Customers . The new guidance is intended to clarify the principles for recognizing revenue and to develop a common revenue standard for United States GAAP applicable to revenue transactions. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Existing industry guidance will be eliminated, including revenue recognition guidance specific to the gaming industry. In addition, interim and annual disclosures will be substantially revised. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those reporting periods. Early adoption is not permitted. We will adopt this standard effective January 1, 2017. We are currently assessing the impact the adoption of this standard will have on our disclosures and results of operations.
In August 2014, the FASB issued authoritative guidance amending the existing requirements for disclosing information about an entity’s ability to continue as a going concern. This guidance explicitly requires management to assess an entity’s ability to continue as a going concern and to provide related footnote disclosure in certain circumstances. This guidance is effective for annual reporting periods ending after December 15, 2016, and for annual and interim reporting periods thereafter. Early adoption is permitted. We are currently assessing the impact the adoption of this standard will have and expect to adopt this standard effective for our year ending December 31, 2016.
In April 2015, the FASB issued authoritative guidance amending the existing requirements for the presentation of debt issuance costs. The amendments to the guidance require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. This guidance is effective for annual reporting periods beginning after December 15, 2015, including interim periods within those reporting periods. Early adoption is permitted and should be applied retrospectively. We adopted this standard effective for our quarter ended June 30, 2015. As of December 31, 2014 , we have reclassified $204 million of unamortized debt issuance costs from deferred charges and other assets to long-term debt in our Consolidated Condensed Balance Sheets. See Note 12 .

17

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

Note 7 Discontinued Operations
Discontinued Operations
The operating results of the following properties have been classified as discontinued operations for all periods presented and are excluded from the results of operations presented within this Form 10-Q. Discontinued operations primarily include the following properties, which were owned by CEOC and were deconsolidated effective January 15, 2015 (see Note 4 ).
Showboat Atlantic City in New Jersey, closed in August 2014
Harrah’s Tunica in Mississippi, closed in June 2014

 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In millions)
2015
 
2014
 
2015
 
2014
Net revenues
 
 
 
 
 
 
 
Showboat Atlantic City
$

 
$
46

 
$

 
$
82

Harrah’s Tunica

 
14

 

 
46

Other

 

 

 
2

Total net revenues
$

 
$
60

 
$

 
$
130

 
 
 
 
 
 
 
 
Pre-tax loss from operations
 
 
 
 
 
 
 
Showboat Atlantic City
$

 
$
(4
)
 
$
(6
)
 
$
(12
)
Harrah’s Tunica

 
(26
)
 

 
(96
)
Other

 
(17
)
 
(1
)
 
(34
)
Total pre-tax loss from discontinued operations
$

 
$
(47
)
 
$
(7
)
 
$
(142
)
 
 
 
 
 
 
 
 
Loss, net of income taxes
 
 
 
 
 
 
 
Showboat Atlantic City
$

 
$
(3
)
 
$
(6
)
 
$
1

Harrah’s Tunica

 
(26
)
 

 
(96
)
Other

 
(16
)
 
(1
)
 
(34
)
Total loss from discontinued operations, net of income taxes
$

 
$
(45
)
 
$
(7
)
 
$
(129
)
Note 8 Property and Equipment
(In millions)
June 30, 2015
 
December 31, 2014
Land and land improvements
$
3,578

 
$
6,218

Buildings, riverboats, and improvements
4,020

 
7,506

Furniture, fixtures, and equipment
1,254

 
2,685

Construction in progress
148

 
302

Total property and equipment
9,000

 
16,711

Less: accumulated depreciation
(1,345
)
 
(3,255
)
Total property and equipment, net
$
7,655

 
$
13,456

Capitalized interest was $9 million for the six months ended June 30, 2015 , primarily related to the Atlantic City Convention and Meeting Center construction and room renovation at The LINQ Hotel & Casino and Bally’s Hotel & Casino. Capitalized interest was $29 million for the six months ended June 30, 2014, primarily related to The LINQ Promenade and Horseshoe Baltimore.
Depreciation Expense
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In millions)
2015
 
2014
 
2015
 
2014
Depreciation expense (1)
$
72

 
$
140

 
$
148

 
$
269

____________________
(1)  
Included in depreciation and amortization, corporate expense, and income/(loss) from discontinued operations
Tangible Asset Impairments
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In millions)
2015
 
2014
 
2015
 
2014
Continuing operations
$

 
$
4

 
$

 
$
8

Discontinued operations

 

 

 
68

Total
$

 
$
4

 
$

 
$
76

Note 9 Goodwill and Other Intangible Assets
Changes in Carrying Value of Goodwill and other Intangible Assets
 
Amortizing Intangible Assets
 
Non-Amortizing Intangible Assets
(In millions)
 
Goodwill
 
Other
Balance as of December 31, 2014
$
636

 
$
2,366

 
$
2,514

Amortization
(46
)
 

 

CEOC goodwill and intangible assets
(152
)
 
(673
)
 
(2,366
)
Balance as of June 30, 2015
$
438

 
$
1,693

 
$
148

During the six months ended June 30, 2014 , we recorded impairment charges of $42 million in continuing operations related to certain gaming rights and trademarks as a result of declining financial results in certain of our markets. We determine the estimated fair values of our non-amortizing intangible assets by primarily using the Relief From Royalty Method and Excess Earnings Method under the income approach. During the six months ended June 30, 2015 , we incurred no impairment charges related to goodwill or other intangible assets.
We were not able to finalize our impairment assessment related to the goodwill of certain properties that had a triggering event in the fourth quarter of 2014. During the first quarter of 2015, we completed our fair value analysis, which confirmed there was no additional goodwill impairment required as of December 31, 2014.
Gross Carrying Value and Accumulated Amortization of Intangible Assets Other Than Goodwill
 
June 30, 2015
 
December 31, 2014
(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
5.9
 
$
893

 
$
(536
)
 
$
357

 
$
1,265

 
$
(736
)
 
$
529

Contract rights
9.6
 
3

 
(1
)
 
2

 
84

 
(81
)
 
3

Developed technology
2.6
 
118

 
(62
)
 
56

 
188

 
(109
)
 
79

Gaming rights
9.1
 
43

 
(20
)
 
23

 
47

 
(22
)
 
25

 
 
 
$
1,057

 
$
(619
)
 
438

 
$
1,584

 
$
(948
)
 
636

Non-amortizing intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
Gaming rights
 
22

 
 
 
 
 
934

Trademarks
 
126

 
 
 
 
 
1,580

 
 
 
 
 
 
 
148

 
 
 
 
 
2,514

Total intangible assets other than goodwill
 
$
586

 
 
 
 
 
$
3,150


18

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

Note 10 Fair Value Measurements
Investments
(In millions)
Balance 
 
Level 1
 
Level 2
 
Level 3
June 30, 2015
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Equity securities
$
4

 
$
4

 
$

 
$

Government bonds
68

 

 
68

 

Total assets at fair value
$
72

 
$
4

 
$
68

 
$

 


 


 


 


December 31, 2014
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Equity securities
$
15

 
$
15

 
$

 
$

Government bonds
70

 

 
70

 

Total assets at fair value
$
85

 
$
15

 
$
70

 
$

Investments consist of equity and debt securities that are traded in active markets, have readily determined market values and have maturity dates of greater than three months from the date of purchase. The majority of these investments are in deferred charges and other assets in our Consolidated Balance Sheets, while a portion is included in prepayments and other current assets. As of June 30, 2015 and December 31, 2014 , gross unrealized gains and losses on marketable securities were not material.
Derivative Instruments
Interest Rate Swap Agreements
As of December 31, 2014 , CEOC had eight interest rate swap agreements that were not designated as accounting hedges and had notional amounts totaling $5.8 billion and a total fair value liability of $6 million . These interest rate swaps expired and were settled for $17 million by Caesars during the first quarter of 2015. We did not renew the swap agreements or enter into any replacement instruments.
Effect of Non-designated Derivative Instruments on Net Loss
(In millions)
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Derivatives not designated as hedging instruments
 
Location of Loss Recognized in Net Loss
 
2015
 
2014
 
2015
 
2014
Net periodic cash settlements and accrued interest (1)
 
Interest expense
 
$

 
$
44

 
$

 
$
88

Total expense related to derivatives
 
Interest expense
 

 

 
7

 
9

___________________
(1)  
The derivative settlements under the terms of the interest rate swap agreements were recognized as interest expense and were paid monthly or quarterly prior to their expiration in January 2015.
Items Measured at Fair Value on a Non-recurring Basis
We had contingent earnout liabilities totaling $66 million as of December 31, 2014 , primarily related to the CIE acquisition of Pacific Interactive. The liabilities were paid during the first and second quarter of 2015.
We classify the items measured at fair value on a non-recurring basis within level 3 in the fair value hierarchy.

19

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

Note 11 Contractual Commitments and Contingent Liabilities
Contractual Commitments
During the six months ended June 30, 2015 , we have not entered into any material contractual commitments outside of the ordinary course of business that have materially changed our contractual commitments as compared to December 31, 2014 .
Interest Payments
As of June 30, 2015 , our estimated interest payments for the rest of the year ending December 31, 2015 are $290 million , for the years ended December 31, 2016 through 2019 are $571 million , $585 million , $603 million , and $614 million , respectively, and $827 million in total thereafter through maturity. See Note 12 for details of our debt outstanding.
Contingent Liabilities
Self-Insurance
Prior to the deconsolidation of CEOC, we were self-insured for employee medical (health, dental and vision) and risk insurance, including workers compensation, and our insurance claims and reserves included accruals of estimated settlements for known claims, as well as accruals of actuarial estimates of incurred but not reported claims. As of December 31, 2014 , we had total self-insurance liability accruals of $185 million . We continue to be self-insured for workers compensation and other risk insurance as of June 30, 2015 , with a total estimated self-insurance liability of $164 million , and estimated employee medical insurance claims of $15 million have been funded as of June 30, 2015 .
Deferred Compensation and Employee Benefits
Deferred Compensation Plans
As of June 30, 2015 , certain current and former employees of Caesars, and our subsidiaries and affiliates, have balances under the Harrah’s Entertainment, Inc. Executive Supplemental Savings Plan, the Harrah’s Entertainment, Inc. Executive Supplemental Savings Plan II, the Park Place Entertainment Corporation Executive Deferred Compensation Plan, the Harrah’s Entertainment, Inc. Deferred Compensation Plan, and the Harrah’s Entertainment, Inc. Executive Deferred Compensation Plan. These plans are deferred compensation plans that allow certain employees an opportunity to save for retirement and other purposes.
Each of the plans is now frozen and is no longer accepting contributions. However, participants may still earn returns on existing plan balances based upon their selected investment alternatives, which are reflected in their deferral accounts.
Plan obligations in respect of all of these plans were previously included in Caesars’ consolidated financial statements as liabilities due to the consolidation of CEOC. As of June 30, 2015 , Caesars has recorded in the accompanying financial statements $48 million in liabilities, representing the estimate of its obligations under the deferred compensation plans described above. The additional liability in respect of these plans that Caesars has not recorded is approximately $28 million , as it was determined that this portion of the liability was attributable to CEOC.
Trust Assets
CEC is a party to a trust agreement and an escrow agreement, each structured as so-called “rabbi trust” arrangements, which hold assets that may be used to satisfy obligations under the deferred compensation plans above. Amounts held pursuant to the trust agreement were approximately $66 million as of June 30, 2015 , and amounts held pursuant to the escrow agreement were approximately $56 million as of June 30, 2015 .
The accompanying financial statements record the assets held pursuant to the trust agreement as long-term restricted assets on CEC’s balance sheet. The accompanying financial statements do not record the assets held pursuant to the escrow agreement on CEC’s balance sheet as we continue to assess the escrow agreement and the propriety of the funds that were contributed in accordance with the agreement.
The amounts recorded as assets and liabilities are based upon Caesars’ current conclusions regarding ownership of assets and obligation to pay liabilities in respect of the plans and trust assets described above. These amounts may change as a result of many factors, including but not limited to the following: further analyses by Caesars, events occurring in connection with discussions with CEOC creditors, and CEOC’s Chapter 11 cases. Such changes, if they occur, could eliminate or reduce the assets or liabilities recorded on Caesars’ balance sheet, increase the asset for all or some portion of the assets held pursuant to the escrow agreement,

20

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

or increase the liabilities not recorded. Caesars believes that it may have claims to all or some portion of the assets held pursuant to the escrow agreement.
CEOC Reorganization
As described in Note 4 , the Debtors voluntarily filed for reorganization under Chapter 11 in January 2015 as contemplated by the Third Amended and Restated Restructuring Support and Forbearance Agreement entered into by CEC, CEOC and certain holders of claims in respect of claims under CEOC’s first lien notes and other indebtedness (the “First Lien Bond RSA”). Under the proposed restructuring plan contemplated by the First Lien Bond RSA, CEC will make substantial cash and other contributions as part of implementing the ultimate restructuring plan when it is voted on by the applicable parties and approved by the Bankruptcy Court. CEC has agreed to, among other things, (i) contribute $406 million for the restructuring and forbearance fees; (ii) contribute an additional $75 million to the Debtors if there is insufficient liquidity at closing of the restructuring; and (iii) purchase up to $969 million of new equity in the restructured Debtors. The completion of the previously announced merger of Caesars and CAC will allow CEC to make these contributions without the need for any significant outside financing. If the merger with CAC is not completed for any reason, CEC would still be liable for these contributions.
On July 20, 2015 (see Note 19 ), CEC and CEOC entered into a restructuring agreement with holders of a significant amount of CEOC’s second-lien notes (the “Second Lien Bond RSA”). The Second Lien Bond RSA provides for a substantial improvement in recoveries for second lien noteholders and adds to the group of creditors supporting CEOC’s restructuring plan. The Second Lien Bond RSA will go effective when holders owning greater than 50% of second lien debt sign the agreement.
Pursuant to the Second Lien Bond RSA, second lien noteholders who sign the agreement by the date holders owning greater than 50% of second lien debt sign the agreement (or 10 days after such date if occurring before August 19, 2015), shall receive a forbearance fee. Holders eligible to receive the fee will receive their pro rata share of at least $200 million in convertible notes to be issued by CEC in consideration for forbearing in respect to certain alleged defaults. These holders also have the potential to receive an additional $200 million of convertible notes either directly or through an enhanced class recovery as outlined more fully below.
In connection with the Second Lien Bond RSA, CEC and CEOC agreed to several improvements from the First Lien Bond RSA announced in January 2015, as follows:
CEC will contribute an additional $200 million of CEC convertible notes to the class of second lien noteholders if the class votes in favor of CEOC’s plan of reorganization. If the class does not vote in favor, the additional notes shall be distributed to second lien noteholders who have signed the Second Lien Bond RSA as an additional fee;
CEC will contribute approximately 5% common equity stake in PropCo (or cash) to the class of second lien noteholders;
CEC will contribute an additional approximately 5% common equity stake in PropCo (or cash) to the class of second lien noteholders if the class of second lien noteholders votes in favor of CEOC’s plan of reorganization. If the class does not vote in favor, the additional equity (or cash) shall be distributed to second lien noteholders who have signed the Second Lien Bond RSA as an additional fee;
Under certain conditions, second lien noteholders will have the opportunity to purchase, at plan value, a minimum of 2.5% of the PropCo Common Stock to be issued to first lien noteholders and a maximum of 100% of such stock;
CEC has agreed to grant PropCo a call right to purchase the real estate associated with Harrah’s New Orleans, consistent with the previously granted call right granted for the real estate underlying Harrah’s Atlantic City and Harrah’s Laughlin.
Except as detailed above, the Second Lien Bond RSA with the group of second-lien noteholders is consistent with the First Lien Bond RSA. The restructuring plan is subject to approval by the bankruptcy court and the receipt of required gaming regulatory approvals.
If there is not a comprehensive out of court restructuring of CEOC's debt securities or a prepackaged or prearranged in-court restructuring with requisite voting support from each of the first and second lien secured creditor classes in accordance with an agreement with CEC, CEOC and certain holders of CEOC’s outstanding 6.50% Senior Notes due 2016 and 5.75% Senior Notes due 2017 for a private refinancing (the “Notes Transaction”), CEOC and CEC agreed that CEC will be obligated to make an additional payment to CEOC of $35 million . We have accrued this liability in accrued expenses and other current liabilities on the consolidated condensed balance sheet.

21

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

On July 31, 2015, CEC and CEOC amended and restated the First Lien Bond RSA with certain holders of claims in respect of claims under CEOC’s first lien notes and other indebtedness.  Under the proposed restructuring plan contemplated by the amended and restated First Lien Bond RSA, CEC will, in addition to the contributions highlighted above, (a) pay to the first lien note holders upon the Debtors’ emergence from bankruptcy an amount equal to $25 million per month starting February 1, 2016 through the Debtors’ emergence from bankruptcy, (b) purchase from bank lenders that vote in favor of the plan of reorganization any claims of such bank lenders that survive the bankruptcy for an amount equal to 6.5% per annum (increasing by 25 basis points per quarter starting October 1, 2015 to a maximum of 8.1%) of the principal amount of such bank lenders’ claims immediately prior to the Debtors’ emergence from bankruptcy, less adequate protection payments received, and (c) guarantee the OpCo debt in addition to the lease payments. Should a majority of the subject bank lenders vote in favor of the plan, CEC may be required to record a material liability for such anticipated payments. We estimate this amount could be between $102 million and $561 million . These amounts are subject to change based upon the timing of the emergence of the Debtors from bankruptcy and the number of bank lenders voting in favor of the plan.
Note 12 Debt
Summary of Debt by Financing Structure
 
June 30, 2015
 
December 31, 2014

(In millions)
Face Value
 
Book Value
 
Book Value
CEOC
$

 
$

 
$
15,930

CERP
4,728

 
4,655

 
4,754

CGP
2,436

 
2,366

 
2,312

CEC
3

 
3

 
13

Total Debt
7,167

 
7,024

 
23,009

Current Portion of Long-Term Debt
(222
)
 
(222
)
 
(15,779
)
Long-Term Debt
$
6,945

 
$
6,802

 
$
7,230

Current Portion of Long-Term Debt
The current portion of long-term debt is $222 million as of June 30, 2015 . For CERP, the current portion of long-term debt is $133 million , which includes $95 million outstanding under CERP’s revolving credit facility as well as principal payments on its senior secured loan, other unsecured borrowings, and capitalized lease obligations. For CGP, the current portion of long-term debt is $86 million , which includes $60 million outstanding under the CGPH revolving credit facility as well as principal payments on term loans, special improvement district bonds, and various capitalized lease obligations.
Borrowings under the revolving credit facilities are each subject to separate note agreements executed based on the provisions of the applicable credit facility agreements, and each note has a contractual maturity of less than one year. The applicable credit facility agreements each have a contractual maturity of greater than one year and we have the ability to rollover the outstanding principal balances on a long-term basis; however, we currently intend to repay the principal balances within the following 12 months. Amounts borrowed under the revolving credit facilities are intended to satisfy short term liquidity needs and are classified as current.
Debt Discounts and Deferred Finance Charges
Debt discounts and deferred finance charges incurred in connection with the issuance of debt are capitalized and amortized to interest expense based on the related debt agreements primarily using the effective interest method. Unamortized discounts are written off and included in our gain or loss calculations to the extent we retire debt prior to its original maturity date. As described in Note 6 , “ Recently Issued Accounting Pronouncements ,” we adopted authoritative guidance amending the existing requirements for the presentation of debt issuance costs.
As of June 30, 2015 and December 31, 2014 , book values of debt are presented net of total unamortized discounts of $111 million and $2.4 billion , respectively, and total unamortized debt deferred finance charges of $32 million and $204 million , respectively.

22

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

Fair Value
As of June 30, 2015 and December 31, 2014 , our outstanding debt had fair values of $6.4 billion and $17.5 billion , respectively, and face values of $7.2 billion and $25.6 billion , respectively. We estimated the fair value of debt based on borrowing rates available as of June 30, 2015 and December 31, 2014 for debt with similar terms and maturities, and based on market quotes of our publicly traded debt. We classify the fair value of debt within level 1 and level 2 in the fair value hierarchy.
CEOC Debt
As described in Note 4 , we deconsolidated CEOC effective January 15, 2015 . Therefore, no amounts are reported for CEOC debt as of June 30, 2015 .
 
 
 
December 31, 2014
(In millions)
 
 
Book Value
Credit Facilities (1)
 
 
$
5,106

Secured Debt
 
 
9,884

Subsidiary-Guaranteed Debt
 
 
477

Unsecured Senior Debt
 
 
463

Other Unsecured Borrowings
 
 
77

Total CEOC Debt
 
 
16,007

Additional Debt Discount
 
 
(77
)
Total CEOC Debt, as consolidated
 
 
$
15,930

___________________
(1) CEC guarantees collection of amounts under the CEOC Credit Facilities (see Note 1 )
CERP Debt
 
June 30, 2015
 
December 31, 2014
Detail of Debt (Dollars in millions)
Final
Maturity
 
Rate(s)
 
Face Value
 
Book Value
 
Book Value
Secured Debt
 
 
 
 
 
 
 
 
 
CERP Term Loan
2020
 
7.00%
 
$
2,463

 
$
2,411

 
$
2,420

CERP Revolving Credit Facility
2018
 
various
 
95

 
95

 
180

CERP First Lien Notes
2020
 
8.00%
 
1,000

 
991

 
990

CERP Second Lien Notes
2021
 
11.00%
 
1,150

 
1,138

 
1,137

Capitalized Lease Obligations
to 2017
 
various
 
9

 
9

 
13

Other Unsecured Borrowings
 
 
 
 
 
 
 
 
 
Other
2016
 
0.00% - 6.00%
 
11

 
11

 
14

Total CERP Debt
 
4,728

 
4,655

 
4,754

Current Portion of CERP Long-Term Debt
 
(133
)
 
(133
)
 
(39
)
CERP Long-Term Debt
 
$
4,595

 
$
4,522

 
$
4,715

CERP Financing
CERP Credit Facilities
As of June 30, 2015 , the CERP Credit Facilities provided for an aggregate principal amount of up to $2.8 billion , composed of (i) senior secured term loans in an aggregate principal amount of $2.5 billion (“CERP Term Loans”) and a senior secured revolving credit facility in an aggregate principal amount of up to $270 million . The CERP Term Loans require scheduled quarterly payments of $6 million , with the balance due at maturity. As of June 30, 2015 , $95 million of borrowings were outstanding under the CERP revolving credit facility, and no amounts were committed to outstanding letters of credit.

23

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

CERP Notes
As of June 30, 2015 , the CERP Notes had an aggregate face value of $2.2 billion . The CERP Notes consist of (i) $1.0 billion aggregate principal amount of 8.0% first-priority senior secured notes due 2020 (“CERP First Lien Notes”) and (ii) $1.2 billion aggregate principal amount of 11.0% second-priority senior secured notes due 2021 (“CERP Second Lien Notes”).
CERP pledged a significant portion of its assets as collateral under the CERP Senior Secured Credit Facilities and the CERP Notes.
Registration Statement
In connection with the CERP Financing, CERP committed to register the CERP Notes originally issued pursuant to Rule 144A of the Securities Act of 1933, as amended (the “Initial CERP Notes”) under a registration statement with the SEC by November 17, 2014. Accordingly, CERP filed an initial registration statement on Form S-4 (the “Registration Statement”) on October 16, 2014, and amendments to such Registration Statement on November 25, 2014, December 24, 2014, and February 9, 2015. The Registration Statement was declared effective on February 10, 2015 (the “Effective Date”).
Since the Effective Date was not within 180 days following the CERP, LLC Merger, CERP incurred additional interest on the Initial CERP Notes of $2 million . Upon the consummation of the exchange offer on March 18, 2015, the Initial CERP Notes were exchanged and replaced with the CERP Notes. The terms of the CERP Notes are substantially identical to that of the Initial CERP Notes, except that the CERP Notes have no transfer restrictions or registration rights. The CERP Notes are co-issued, as well as fully and unconditionally guaranteed, jointly and severally, by CERP and each of its subsidiaries on a senior secured basis. CERP is a holding company that owns no operating assets and has no significant operations independent of its subsidiaries.
CERP Restrictive Covenants
The CERP Notes and CERP Credit Facilities include negative covenants, subject to certain exceptions, and contain customary events of default, subject to customary or agreed-upon exceptions, baskets and thresholds (including equity cure provisions in the case of the CERP Credit Facilities).
The CERP Credit Facilities also contain certain customary affirmative covenants and require that CERP maintains a senior secured leverage ratio (“SSLR”) of no more than 8.00 to 1.00, which is the ratio of first lien senior secured net debt to earnings before interest, taxes, depreciation and amortization, adjusted as defined (“CERP Adjusted EBITDA”). CERP is in compliance with the CERP Credit Facilities covenant as of June 30, 2015 .
CGP Debt
 
June 30, 2015
 
December 31, 2014
Detail of Debt (Dollars in millions)
Final
Maturity
 
Rate(s)
 
Face Value
 
Book Value
 
Book Value
Secured Debt
 
 
 
 
 
 
 
 
 
CGPH Term Loan (1)
2021
 
6.25%
 
$
1,163

 
$
1,129

 
$
1,133

CGPH Notes  (1)
2022
 
9.38%
 
675

 
660

 
659

Horseshoe Baltimore Credit and FF&E Facilities
to 2020
 
8.25% - 8.75%
 
330

 
316

 
316

Cromwell Credit Facility
2019
 
11.00%
 
183

 
177

 
178

Capital Lease Obligations
to 2017
 
various
 
2

 
2

 
4

CGPH Revolving Credit Facility
2019
 
5.44%
 
60

 
60

 

Other
2018
 
8.00%
 
5

 
4

 
4

Other Unsecured Borrowings
 
 
 
 
 
 
 
 
 
Special Improvement District Bonds
2037
 
5.30%
 
14

 
14

 
14

Other
2016
 
various
 
4

 
4

 
4

Total CGP Debt  (2)
 
2,436

 
2,366

 
2,312

Current Portion of CGP Long-Term Debt
 
(86
)
 
(86
)
 
(20
)
CGP Long-Term Debt
 
$
2,350

 
$
2,280

 
$
2,292

____________________
(1)  
Guaranteed by an indirect subsidiary of Caesars Growth Partners, LLC and certain of its wholly owned subsidiaries

24

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

(2)  
As of June 30, 2015 , CIE had $40 million drawn under a revolver arrangement with Caesars Entertainment. Accordingly, such debt is not considered outstanding in the above presentation.
CGPH Term Loan Credit Agreement
As of June 30, 2015 , the CGPH Term Loan Credit Agreement provided for the CGPH Term Loan with a face value of $1.2 billion and a $150 million revolving credit facility. As of June 30, 2015 , $60 million of borrowings were outstanding under the CGPH revolving credit facility, and no material amounts were committed to outstanding letters of credit.
The CGPH Term Loan is guaranteed by the direct parent of CGPH and certain subsidiaries of CGPH, and is secured by the direct parent’s equity interest in CGPH and substantially all of the existing and future assets of CGPH and the subsidiary guarantors.
The CGPH Term Loan includes customary negative covenants, subject to certain exceptions, and contains customary affirmative covenants and customary events of default, subject to customary or agreed-upon exceptions, baskets and thresholds (including equity cure provisions).
The CGPH Term Loan also requires that CGPH maintains an SSLR of no more than 6.00 to 1.00, which is the ratio of first lien senior secured net debt to earnings before interest, taxes, depreciation and amortization, adjusted as defined (“CGPH Adjusted EBITDA”). CGP is in compliance with the CGPH Term Loan covenants as of June 30, 2015 .
CGPH Notes
As of June 30, 2015 , the CGPH Notes had a face value of $675 million . The CGPH Notes include negative covenants, subject to certain exceptions, and contains affirmative covenants and events of default, subject to exceptions, baskets and thresholds (including equity cure provisions), all of the preceding being customary in nature.
The CGPH Notes are secured by substantially all of the existing and future property and assets of CGPH and the subsidiary guarantors (subject to exceptions). None of CEC, CERP, or CEOC guarantee the CGPH Notes.
Registration Rights Agreement. In connection with the issuance of the CGPH Notes, CGPH committed to register the CGPH Notes by April 17, 2015, which were originally issued pursuant to Rule 144A of the Securities Act of 1933, as amended (the “Initial CGPH Notes”). Accordingly, CGPH filed a registration statement on Form S-4 (the "Registration Statement") on March 30, 2015 and Amendments to such Registration Statement on May 18, 2015 and May 29, 2015. The Registration Statement was declared effective on June 26, 2015 (the “Effective Date”).
Since the Effective Date was not on or prior to April 17, 2015, CGPH incurred additional interest on the CGPH Notes beginning April 18, 2015, until the consummation of the exchange offer on July 28, 2015. Upon consummation of the exchange offer, the Initial CGPH Notes that were exchanged were replaced with new notes (the “Exchange Notes” and, together with the Initial CGPH Notes, the “CGPH Notes”), whose terms are substantially identical to that of the Initial CGPH Notes, except that the Exchange Notes have no transfer restrictions or registration rights. The CGPH Notes are guaranteed by CGPH and certain subsidiaries (subject to exceptions). In addition, CGPH is a holding company that owns no operating assets and has no significant operations independent of its subsidiaries.
Horseshoe Baltimore Credit and FF&E Facilities
As of June 30, 2015 , the Horseshoe Baltimore Credit Facility provided for an aggregate principal amount of up to $310 million , consisting of (i) a $300 million senior secured term facility with a seven-year maturity, which was fully drawn as of June 30, 2015 ; and (ii) a $10 million senior secured revolving facility with a five-year maturity, which remained undrawn as of June 30, 2015 . The Horseshoe Baltimore Credit Facility is secured by substantially all material assets of CBAC Borrower, LLC and its wholly-owned domestic subsidiaries.
As of June 30, 2015 , the Horseshoe Baltimore FF&E Facility provided for an aggregate principal amount of up to $30 million to be used to finance or reimburse the purchase price and certain related costs of furniture, furnishings and equipment (referred to as “FF&E”) or refinance the purchase price of FF&E purchased with other funds as part of the development of the Horseshoe Baltimore casino. As of June 30, 2015 , $30 million was outstanding on the Horseshoe Baltimore FF&E Facility.
The Horseshoe Baltimore Credit and FF&E Facilities include negative covenants, subject to certain exceptions, and contains affirmative covenants and events of default, subject to exceptions, baskets and thresholds (including equity cure provisions), all of the preceding being customary in nature.

25

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

The Horseshoe Baltimore Credit and FF&E Facilities also require that CBAC maintains an SSLR no more than 7.5 to 1.0 for the first three quarters, 6.0 to 1.0 for the next four quarters, and 4.75 to 1.0 for the remainder of the agreement beginning in the first quarter of 2016.
Management believes that CGP is in compliance with the Baltimore Credit Facility and Baltimore FF&E Facility covenants as of June 30, 2015 .
Cromwell Credit Facility
As of June 30, 2015 , The Cromwell holds a  $183 million senior secured credit facility (the “Cromwell Credit Facility”). The Cromwell Credit Facility contains certain affirmative and negative covenants and requires The Cromwell to maintain, for each of the second and third full fiscal quarters following its opening date, at least $7.5 million in consolidated EBITDA (the “Cromwell EBITDA”). In addition, beginning in the second quarter of 2015, and continuing through the first quarter of 2016, the Cromwell SSLR may not exceed 5.25 to 1.00, defined as the ratio of The Cromwell’s first lien senior secured net debt to Cromwell EBITDA. The Cromwell SSLR for the four fiscal quarters from the second quarter of 2016 through the first quarter of 2017 may not exceed 5.00 to 1.00. The Cromwell SSLR beginning in the second quarter of 2017 and for each fiscal quarter thereafter, may not exceed 4.75 to 1.00.
The Cromwell Credit Facility allows the right to cure noncompliance with the covenant by making a cash cure payment, subject to certain limitations. CGP is in compliance with the Cromwell covenants as of June 30, 2015 .
Note 13 Earnings Per Share
Basic earnings per share is computed by dividing income from continuing operations and income from discontinued operations, respectively, net of income taxes, by the weighted-average number of common shares outstanding for each period. Diluted earnings per share is computed by dividing income from continuing operations and income from discontinued operations, respectively, net of income taxes, by the sum of weighted-average number of shares of common shares outstanding and dilutive potential common shares.
Because Caesars generated net losses for the three and six months ended June 30, 2014 , the weighted-average basic shares outstanding was used in calculating diluted loss per share from continuing operations and diluted loss per share from discontinued operations, as using diluted shares would be anti-dilutive to loss per share.
Basic and Dilutive Net Earnings Per Share Reconciliation
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In millions, except per share data)
2015
 
2014
 
2015
 
2014
Income/(loss) from continuing operation, net of income taxes
15

 
(421
)
 
6,794

 
(724
)
Loss from discontinued operation, net of income taxes

 
(45
)
 
(7
)
 
(129
)
Net income/(loss) attributable to Caesars
15

 
(466
)
 
6,787

 
(853
)
 
 
 
 
 
 
 
 
Weighted average common share outstanding
145

 
144

 
145

 
141

Dilutive potential common shares:
 
 
 
 
 
 
 
Stock options
2

 

 
2