Caesars Entertainment Corporation
CAESARS ENTERTAINMENT Corp (Form: 10-K, Received: 02/15/2017 06:03:28)


SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
  FORM 10-K  
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED December 31, 2016
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-10410
 
CAESARS ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
 
Delaware
 
62-1411755
(State of incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
One Caesars Palace Drive, Las Vegas, Nevada
 
89109
(Address of principal executive offices)
 
(Zip code)
Registrant’s telephone number, including area code:
(702) 407-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class                  Name of each exchange on which registered     
Common stock, $0.01 par value             NASDAQ Global Select Market

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   o     No   x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes   o     No   x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   x     No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   x     No   o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer    o
Accelerated filer   x
Non-accelerated filer   o
Smaller reporting company   o
 
 
(Do not check if a smaller
reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   o     No   x
The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2016 was $444 million .
As of February 1, 2017 , the registrant had 147,184,937 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement for the Proxy Statement for our 2017 Annual Meeting of Stockholders, which we expect to file with the Securities and Exchange Commission on or about April 5, 2017 , are incorporated by reference into Part III.




CAESARS ENTERTAINMENT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 







PART I

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.
We also refer to (i) our Consolidated Financial Statements as our “Financial Statements,” (ii) our Consolidated Statements of Operations and Comprehensive Income as our “Statements of Operations,” and (iii) our Consolidated Balance Sheets as our “Balance Sheets.” References to numbered “Notes” refer to Notes to our Consolidated Financial Statements included in Item 8.
ITEM 1.
Business
Overview
Caesars Entertainment is a casino-entertainment and hospitality services provider. 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”). CEC also holds a majority interest in Caesars Entertainment Operating Company, Inc. (“CEOC”); however, as described in Note 2 , the results of CEOC and its subsidiaries are no longer consolidated with Caesars subsequent to CEOC and certain of its United States subsidiaries (the “Debtors”) voluntarily filing for reorganization under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) on January 15, 2015 .
The Caesars portfolio of properties, including the properties owned and operated by CEOC, represents the world’s most diversified casino-entertainment portfolio with entertainment facilities in more areas throughout the United States than any other participant in the gaming industry. We have established a rich history of industry-leading growth and expansion since we commenced operations in 1937. Our facilities typically include gaming offerings, food and beverage outlets, hotel and convention space, and non-gaming entertainment options. In addition to our brick and mortar assets, we operate an online gaming business that provides real money games in certain jurisdictions.
Announced Merger and CEOC Plan of Reorganization
In 2014, CEC and Caesars Acquisition Company (“CAC”) entered into a merger agreement, which was amended and restated on July 9, 2016 (the “Merger Agreement”). Pursuant to the Merger Agreement, among other things, CAC will merge with and into CEC, with CEC as the surviving company (the “Merger”). See Note 1 .
On January 13, 2017 , the Debtors filed an amended plan of reorganization (the “Third Amended Plan”) with the United States Bankruptcy Court for the Northern District of Illinois in Chicago (the “Bankruptcy Court”) that replaces all previously filed plans. CEC, CAC, the Debtors, and CEOC’s major creditor groups have agreed to support the Third Amended Plan. The Bankruptcy Court confirmed the Third Amended Plan on January 17, 2017. Although the Third Amended Plan has been confirmed by the Bankruptcy Court, we must still obtain regulatory approval in all of the jurisdictions in which we have gaming operations in order for CEOC to successfully emerge from bankruptcy, and we are unable to determine when all necessary requirements will be satisfied. In addition, the Third Amended Plan remains subject to completion of the Merger, certain financing transactions, and various other closing conditions. See Note 1 .

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Organizational Structure
The following diagram illustrates the key entities and subsidiaries in the Caesars Entertainment current organizational structure. This diagram does not include all legal entities and subsidiaries.
A2016CECORGDIAG.JPG ___________________________
(1)  
CEOC filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Code on January 15, 2015 and was no longer consolidated within CEC as a result. See Note 2 .
(2)  
CAC is party to the series of transactions that formed CGP and owns 100% of the voting membership units in CGP. Caesars owns 100% of the non-voting membership units in CGP and consolidates CGP as a variable interest entity. See Note 2 . See information about Caesars’ announced merger with CAC in Note 1 .
(3)  
Ownership held by Caesars Growth Properties Holding, LLC (“CGPH”), a subsidiary of CGP.
(4)  
Caesars Enterprise Services, LLC (“CES”) is a services joint venture formed by CEOC, CERP, and CGPH (collectively, the “Members”). See Note 1 .
(5)  
Our reportable segments currently include CERP and CGP. See Note 1 . CEOC remained a reportable segment until its deconsolidation effective January 15, 2015. See Note 2 .
As of December 31, 2016 , through our consolidated entities, we owned 12 casinos in the United States, with over one million square feet of gaming space and approximately 24,000 hotel rooms. Our properties are concentrated in Las Vegas, where eight of the twelve are located. See Item 2 for more information about our properties.
CERP owns six casinos in the United States and The LINQ promenade along with leasing Octavius Tower at Caesars Palace Las Vegas (“Octavius Tower”) to CEOC and gaming space at The LINQ promenade to CGP.
CGP owns six casinos in the United States and, through its subsidiary Caesars Interactive Entertainment, Inc. (“CIE”), owns and operates a regulated online real money gaming business and the World Series of Poker (“WSOP”) tournaments and brand. As discussed in Note 17 , on September 23, 2016 , CIE sold its social and mobile games business (“SMG Business”) for approximately $4.4 billion in cash.
CES provides certain corporate and administrative services for the Members’ casino properties, including substantially all of the casino properties owned by CEOC and casinos owned by unrelated third parties. CES also manages certain enterprise assets and the other assets it owns, licenses or controls, and employs certain of the corresponding employees. See Note 1 .

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Business Operations
Our consolidated business is composed of four complementary businesses that reinforce, cross-promote, and build upon each other: casino entertainment, food and beverage, rooms and hotel, and entertainment and other business operations.
Casino Entertainment Operations
Our casino entertainment operations include revenues from approximately 15,000 slot machines and 1,200 table games, as well as other games such as keno, poker, and race and sports books, all of which comprised approximately 49% of our total net revenues in 2016 . Slot revenues generate the majority of our gaming revenue and are a key driver of revenue, particularly in our properties located outside of the Las Vegas market. We are testing a number of skill-based games as we implement product offerings intended to appeal to all demographics, and expect to expand these offerings as required regulatory approvals are obtained.
Food and Beverage Operations
Our food and beverage operations generate revenues primarily from over 50 buffets, restaurants, bars, nightclubs, and lounges located throughout our casinos, as well as banquets and room service, and represented approximately 18% of our total net revenues in 2016 . Many of our properties include several dining options, ranging from upscale dining experiences to moderately-priced restaurants and buffets.
Rooms and Hotel Operations
Rooms and hotel operations revenue comprised approximately 21% of our total net revenues in 2016 and is primarily generated from hotel stays at our casino properties and our approximately 24,000 guest rooms and suites.
Our properties operate at various price and service points, allowing us to host a variety of casino guests who are visiting our properties for gaming and other casino entertainment options and non-casino guests who are visiting our properties for other purposes, such as vacation travel or conventions.
We have engaged in large capital reinvestment projects in recent years focusing primarily on room product across the United States. In the Las Vegas market, nearly 6,000 rooms have been renovated since 2014, across properties such as The LINQ Hotel & Casino, Planet Hollywood Resort & Casino, Paris Las Vegas, and Harrah’s Las Vegas. In addition, we plan to continue the roll out of self-check-in kiosks in Las Vegas in order to help reduce customer wait times and improve labor efficiencies.
Entertainment and Other Business Operations
We provide a variety of retail and entertainment offerings in our casinos and The LINQ promenade. We operate several entertainment venues across the United States, including The AXIS at Planet Hollywood, which was ranked as one of the top theater venues in the United States in 2016 based on ticket sales. This award winning theater hosts several prominent headliners, such as Jennifer Lopez, Lionel Richie, and Britney Spears. We recently announced that the Backstreet Boys will have performances starting in early 2017.
The LINQ promenade and our retail stores offer guests a wide range of options from high-end brands and accessories to souvenirs and decorative items. The LINQ promenade is an open-air dining, entertainment, and retail development located between The LINQ Hotel and the Flamingo Las Vegas, and also features The High Roller, our 550-foot observation wheel at The LINQ promenade.
In addition, CIE operates a regulated online real money gaming business in Nevada and New Jersey and owns the WSOP tournaments and brand, and also licenses WSOP trademarks for a variety of products and businesses related to this brand.
Sales and Marketing
We believe the Caesars portfolio of properties (including the CEOC properties) that operate under the Total Rewards program enable us to capture a larger share of our customers’ entertainment spending when they travel among markets versus that of a standalone property, which is core to our cross-market strategy. We believe that our high concentration of properties in the center of the Las Vegas Strip generates increased revenues and enables us to capture more of our customers’ gaming dollars than would be generated if the properties were operated separately.
We believe the Total Rewards program, in conjunction with this distribution system, allows us to capture a growing share of our customers’ entertainment spending and compete more effectively. Members earn Reward Credits at all Caesars-affiliated properties in the United States and Canada for on-property entertainment expenses, including gaming, hotel, dining, and retail shopping. Members may also earn Reward Credits through the Total Rewards Visa credit card and can redeem Reward Credits with our many partners, including Atlantis Paradise Island Resort and Norwegian Cruise Line. Total Rewards members can redeem Reward Credits

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for amenities or other items such as merchandise, gift cards, and travel. Total Rewards is structured in tiers (designated as Gold, Platinum, Diamond or Seven Stars), each with increasing member benefits and privileges.
Members are also provided promotional offers and rewards based on their engagement with Caesars-affiliated properties, aspects of their casino gaming play, and their preferred spending choices outside of gaming. Member information is also used for marketing promotions, including direct mail campaigns, electronic mail, our website, mobile devices, social media, and interactive slot machines.
Intellectual Property
The development of intellectual property is part of our overall business strategy. We regard our intellectual property to be an important element of our success. While our business as a whole is not substantially dependent on any one patent, trademark, copyright or combination of several of our intellectual property rights, we seek to establish and maintain our proprietary rights in our business operations and technology through the use of patents, trademarks, copyrights, and trade secret laws. We file applications for and obtain patents, trademarks, and copyrights in the United States and foreign countries where we believe filing for such protection is appropriate, including United States and foreign patent applications covering certain proprietary technology of CEOC. We also seek to maintain our trade secrets and confidential information by nondisclosure policies and through the use of appropriate confidentiality agreements. CEOC’s United States patents have varying expiration dates, the last of which is 2031.
We have not applied for the registration of all of our trademarks, copyrights, proprietary technology or other intellectual property rights, as the case may be, and may not be successful in obtaining all intellectual property rights for which we have applied. Despite our efforts to protect our proprietary rights, parties may infringe upon our intellectual property and use information that we regard as proprietary, and our rights may be invalidated or unenforceable. The laws of some foreign countries do not protect proprietary rights or intellectual property to as great an extent as do the laws of the United States. In addition, others may independently develop substantially equivalent intellectual property.
We own or have the right to use proprietary rights to a number of trademarks that we consider, along with the associated name recognition, to be valuable to our business, including the following:
CEOC’s marks include Caesars, Harrah’s, Horseshoe, Bally’s, and Total Rewards;
CERP’s marks include Rio, Flamingo, and Paris;
CIE’s marks include WSOP; and
CGP holds a license for the Planet Hollywood mark used in connection with the Planet Hollywood Resort & Casino in Las Vegas.
Omnibus License and Enterprise Services Agreement
The Members of CES entered into an Omnibus License and Enterprise Services Agreement (the “Omnibus Agreement”) in 2014, which granted various licenses to the Members through CES and allowed the Members to continue to use the intellectual property each of the properties owned or managed by the Members used in their associated businesses, including Total Rewards. See Note 1 for a complete discussion of CES and the Omnibus Agreement. Under the terms of the CES joint venture and the Omnibus License and Enterprise Services Agreement, we believe that Caesars and its other operating subsidiaries will continue to have access to the services historically provided to us by CEOC and its employees, trademarks, and programs despite the CEOC bankruptcy filing.
Competition
Casinos
The casino entertainment business is highly competitive. The industry is comprised of a diverse group of competitors that vary considerably in size and geographic diversity, quality of facilities and amenities available, marketing and growth strategies, and financial condition. In most markets, we compete directly with other casino facilities operating in the immediate and surrounding areas. Our Las Vegas Strip hotels and casinos also compete, in part, with each other. We also compete with other non-gaming resorts and vacation areas, various other entertainment businesses, and other forms of gaming, such as state lotteries, on-and off-track wagering, video lottery terminals, and card parlors. Our non-gaming offerings also compete with other retail facilities, amusement attractions, food and beverage offerings, and entertainment venues.
In recent years, many casino operators, including us, have been reinvesting in existing facilities, developing new casino or complementary facilities, and acquiring established facilities. These reinvestment and expansion efforts combined with aggressive marketing strategies by us and many of our competitors have resulted in increased competition in many markets.

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The expansion of casino properties and entertainment venues into new markets also presents competitive issues for us that have had a negative impact on our financial results. Atlantic City, in particular, has seen a decline of more than 50% compared with 2006 levels primarily due to the addition of gaming capacity associated with the expansion of gaming in Maryland, New York, and Pennsylvania. This has resulted in several casino closings in recent years, including CEOC’s Showboat Atlantic City casino and four competitor casinos since 2014. More recently, our property in Baltimore has also experienced competitive pressure.
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” See also Exhibit 99.1, “Gaming Overview,” to this Form 10-K. In addition, for a summary of key developments in 2016, see “ Summary of 2016 Events and Key Drivers of Annual Performance ” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Governmental Regulation
The gaming industry is highly regulated, and we must maintain our licenses and pay gaming taxes to continue our operations. Each of our casinos is subject to extensive regulation under the laws, rules, and regulations of the jurisdiction in which it is located. These laws, rules, and regulations generally concern the responsibility, financial stability, and character of the owners, managers, and persons with financial interests in the gaming operations. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. A more detailed description of the regulations to which we are subject is contained in Exhibit 99.1, “Gaming Overview,” to this Form 10-K.
Our businesses are subject to various foreign, federal, state, and local laws and regulations, in addition to gaming regulations. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, smoking, environmental matters, employees, currency transactions, taxation, zoning and building codes, construction, land use, and marketing and advertising. We also deal with significant amounts of cash in our operations and are subject to various reporting and anti-money laundering regulations. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or material differences in interpretations by courts or governmental authorities could adversely affect our operating results. See Item 1A, “Risk Factors” for additional discussion.
Employee Relations
We have approximately 31,000 employees throughout our organization. Approximately 17,000 of our employees are covered by collective bargaining agreements with certain of our subsidiaries, relating to certain casino, hotel, and restaurant employees. The majority of these employees are covered by the following agreements:
Employee Group
 
Approximate Number of Active Employees Represented
 
Union
 
Date on which Collective Bargaining Agreement Becomes Amendable
Las Vegas Culinary Employees
 
8,700
 
Culinary Workers Union, Local 226
 
Various up to
July 31, 2018
Atlantic City Food & Beverage and Hotel employees
 
1,600
 
UNITE HERE, Local 54
 
February 28, 2020
Las Vegas Bartenders
 
1,200
 
Bartenders Union, Local 165
 
Various up to
July 31, 2018
Las Vegas Dealers
 
1,800
 
Transport Workers Union of America and UAW
 
Various up to
September 30, 2019
Corporate Citizenship, Social Responsibility and Sustainability
Caesars Entertainment’s Board of Directors and senior executives are committed to maintaining our position as an industry leader in corporate citizenship, corporate social responsibility, and sustainability. In 2016, we continued to engage with our CEO-level external environmental sustainability advisory board with experts representing non-governmental organizations, business strategy, academia, and investors and used their advice to modify our citizenship priority focus for 2016 and 2017. In 2016, we published our seventh annual Citizenship Report in accordance with Global Reporting Initiative G4 framework.
Code of Commitment

For more than 15 years, our Code of Commitment has guided our approach to responsible and ethical business, compliance and anti-corruption. Training events reinforce our expectations of all employees.

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For the second year running, we were recognized on the Civic 50, an initiative organized by Points of Light and Bloomberg that recognizes companies for their commitment to improving the quality of life in their home communities. Caesars was the first company to develop responsible gaming programs informed by science, evaluated objectively and created in conjunction with leading researchers. In 2016, we confirmed our support for the UN Sustainable Development Goals and identified eight goals where we can make the most significant contribution and expand our impact in coming years.
Environmental Stewardship
Since 2007, we have advanced a strategy to contribute to global climate change and sustainability initiatives that reduce our impact on the environment. Our structured, data-driven CodeGreen program leverages the passion of our employees and engages our guests and suppliers. Between 2007 and 2015, we reduced energy consumption across our properties by 23.4% per air-conditioned sq. ft. and greenhouse gas emissions by 28.3%. Since 2008, we have reduced water consumption by 20.4%. In 2015, 38% of our total waste was recycled in addition to an overall 28% reduction in waste across our operations.
In 2016, Caesars surpassed its Green Key certification goal of having 90% of owned or managed North American hotel resort properties achieve a 4 Key rating or higher. Including the properties owned and operated by CEOC, thirty of our hotel resort properties are rated 4 Keys - more than any other casino-entertainment company in the world. Recently recognized by the Global Sustainable Tourism Council, Green Key is a rigorous program that ranks, certifies, and inspects hotels and resorts based on their commitment to sustainable operations. Green Key uses a rating system of 1 to 5 Keys, with 5 being the highest possible attainment.
For our work in 2016, Caesars Entertainment received “A” scores for carbon (A) and water (A-) impact and supplier engagement (A-) from the formerly named Carbon Disclosure Project (“CDP”), the international not-for-profit that drives sustainable economies. Thousands of companies submit annual climate disclosures to CDP for independent assessment against its scoring methodology. Caesars is one of 193 "A Listers" on its carbon disclosure, which has been produced at the request of 827 investors with assets of $100 trillion. Just 9% of the corporations participating in CDP’s climate change program are awarded a position on the Climate “A List.”
Diversity, Inclusion, and Employee Wellbeing
We create a dynamic and innovative working culture where individual growth is rewarded, recognized, and celebrated. Caesars is the only company in the casino entertainment industry to receive perfect scores on the Human Rights Campaign Corporate Equality Index for ten consecutive years, including 2016. We encourage diversity and the advancement of women, and in 2015, 34% of our managers belonged to minority groups and 42% of our managers were women. We continue to fund more than $15 million each year to support our Employee Wellness Program, including 29 nurses and coaches across our properties. The program proves itself year after year with improved health metrics for participating employees, more than $2,500 annual saving per employee on healthcare and insurance savings for Caesars due to lower health risk.
Community Investment
Established in 2002, the Caesars Foundation (the “Foundation”) is a private charitable foundation funded by a portion of operating income from our resorts. Since its inception, the Foundation has gifted more than $72 million to support vibrant communities. In 2015, our total community investment (including Caesars Foundation, corporate, mandated and discretionary giving, and the value of employee volunteering hours) amounted to $67.2 million. Employee volunteering in 2015 reached 260,000 hours - our highest annual level of volunteering on record.
Available Information
Our Internet address is www.caesars.com. We make available free of charge, on or through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). We also make available through our website all filings of our executive officers and directors on Forms 3, 4, and 5 under Section 16 of the Exchange Act. These filings are also available on the SEC’s website at www.sec.gov. Our Code of Business Conduct and Ethics is available on our website under the “Investor Relations” link. We will provide a copy of these documents without charge to any person upon receipt of a written request addressed to Caesars Entertainment Corporation, Attn: Corporate Secretary, One Caesars Palace Drive, Las Vegas, Nevada 89109. Reference in this document to our website address does not constitute incorporation by reference of the information contained on the website.

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ITEM 1A.     Risk Factors
Risk Related to CEC’s Ability to Continue as a Going Concern
There is a stay of the Noteholder Disputes in the Bankruptcy Court. If the stay were lifted and a court were to find in favor of the claimants in the Noteholder Disputes, it would likely have a material adverse effect on our business, financial condition, results of operations and cash flows and, absent an intervening event, a reorganization under Chapter 11 of the Bankruptcy Code would likely be necessary due to the limited resources available at CEC to resolve such matters. If the Third Amended Plan was not consummated, it would raise substantial doubt about CEC’s ability to continue as a going concern.
We are subject to a number of Noteholder Disputes, as described in Note 3 , all of which are currently stayed consensually or by order of the Bankruptcy Court, related to various transactions that CEOC has completed since 2010. Plaintiffs in certain of these actions raise allegations of breach of contract, intentional and constructive fraudulent transfer, and breach of fiduciary duty, among other claims. Although the Delaware First Lien Lawsuit has been subject to a consensual stay pursuant to the First Lien Bond RSA since CEOC’s filing for Chapter 11, and the Delaware Second Lien Lawsuit is not proceeding with respect to fraud or breach of fiduciary duty claims, should a court find in favor of the plaintiffs on such claims in any of the Noteholder Disputes, including the New York First Lien Lawsuit, the New York Second Lien Lawsuit or the Senior Unsecured Lawsuits, the transactions at issue in those lawsuits may be subject to rescission and/or the Company may be required to pay damages to the plaintiffs. In the event of an adverse outcome on one or all of these matters, 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. See Note 3 .
A number of the Noteholder Disputes also involve claims that CEC is liable for all amounts due and owing on certain notes issued by CEOC, based on allegations that provisions in the governing indentures pursuant to which CEC guaranteed CEOC’s obligations under those notes remain in effect (the “Guarantee Claims”). Such Guarantee Claims were most recently raised against Caesars Entertainment in a lawsuit filed on October 20, 2015 by Wilmington Trust, National Association in the United States District Court for the Southern District of New York (the “SDNY Court”). Adverse rulings on the Guarantee Claims in this action or any of the other Noteholder Disputes could negatively affect our position on such Guarantee Claims in other Noteholder Disputes, or with respect to potential claims by other holders of certain other notes issued by CEOC. If the court in any of these Noteholder Disputes were to find in favor of the plaintiffs on the Guarantee Claims, CEC may become obligated to pay all principal, interest, and other amounts due and owing on the notes at issue. If CEC became obligated to pay amounts owed on CEOC’s indebtedness as a result of the Guarantee Claims, 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.
On October 4, 2016, the Debtors, along with CEC, entered into, or amended and restated, restructuring support agreements with the Debtors’ major creditor groups. Under these agreements, the parties agreed to support the Third Amended Plan that will, if all conditions precedent to the effectiveness of the Third Amended Plan are satisfied or waived, result in a release of all claims against CEC relating to CEOC, including the claims in Parent Guarantee Lawsuits (as defined in Note 3 ), and all claims asserted by or on behalf of the Debtors’ estate or their representative creditors.
The Parent Guarantee Lawsuits are still enjoined, but in the event that the stay is lifted, the Third Amended Plan does not become effective, or the restructuring agreement with the official committee of second priority noteholders is terminated, and the Parent Guarantee Lawsuits proceed to judgment, given the inherent uncertainties of litigation, we have concluded that these matters raise substantial doubt about the Company’s ability to continue as a going concern. In the event of an adverse outcome on such matters, CEC would likely seek reorganization under Chapter 11 of the Bankruptcy Code soon thereafter.
If the Third Amended Plan is not consummated, we estimate that we would require additional sources of funding to meet our ongoing financial commitments primarily resulting from significant expenditures made to defend the Company against the matters disclosed in Note 1 under “Litigation.” As a result of the foregoing, there is substantial doubt about CEC's ability to continue as a going concern. See Note 1 .

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Risks Related to the Bankruptcy Proceedings
The consummation of the Third Amended Plan is subject to a number of significant conditions.
Although the Debtors believe that the effective date of the Third Amended Plan will occur in 2017, there can be no assurance as to such timing or that all conditions precedent will be satisfied. The consummation of the Third Amended Plan is subject to certain conditions precedent as described in the Third Amended Plan, including, among others, the completion of the Merger (as defined below) and conditions relating to the exit financing facilities, the receipt or filing of all applicable approvals or applications with applicable government entities, certain agreements with unions having been executed and ratified and regulations for funding relief in respect of certain of CEOC’s pension plans will have been adopted to CEOC’s satisfaction.
CEOC and a substantial majority of its wholly owned subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, and we and they are subject to the risks and uncertainties associated with bankruptcy proceedings.
As a result of CEOC’s highly-leveraged capital structure and the general decline in its gaming results between 2007 and 2014, on January 15, 2015, CEOC and the Debtors voluntarily filed for reorganization under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. Due to the commencement of the Chapter 11 proceedings, the operations and affairs of the Debtors are subject to the supervision and jurisdiction of the Bankruptcy Court.
We and CEOC are subject to a number of risks and uncertainties associated with the Chapter 11 proceedings, which may lead to potential adverse effects on our liquidity, results of operations, or business prospects. We cannot assure you of the outcome of the Chapter 11 proceedings. Risks associated with the Chapter 11 proceedings include the following:
the ability of the Debtors to continue as a going concern;
the ability of the Debtors to obtain Bankruptcy Court approval with respect to motions in the Chapter 11 proceedings and the outcomes of Bankruptcy Court rulings of the proceedings and appeals of such rulings in general;
the ability of the Debtors to comply with and to operate under the cash collateral order and any cash management orders entered by the Bankruptcy Court from time to time;
the length of time the Debtors will operate under the Chapter 11 proceedings and their ability to successfully emerge, including with respect to obtaining any necessary regulatory approvals;
the ability of the Debtors to complete the Third Amended Plan and Caesars Entertainment’s role in such plan of reorganization;
the likelihood of Caesars Entertainment losing control over the operation of the Debtors as a result of the restructuring process;
risks associated with third party motions, proceedings and litigation in the Chapter 11 proceedings, which may interfere with the Third Amended Plan;
our and the Debtors’ ability to maintain sufficient liquidity throughout the Chapter 11 proceedings;
increased costs being incurred by Caesars Entertainment and the Debtors related to the bankruptcy proceeding, other litigation, and any appeals of any rulings in such proceeding or other litigation;
our and the Debtors’ ability to manage contracts that are critical to our operation, and to obtain and maintain appropriate credit and other terms with customers, suppliers and service providers;
our and the Debtors’ ability to attract, retain and motivate key employees;
our ability to fund and execute our business plan;
whether our non-Debtor subsidiaries continue to operate their business in the normal course;
the disposition or resolution of all pre-petition claims against us and the Debtors; and
our ability to maintain existing customers and vendor relationships and expand sales to new customers.

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The Chapter 11 proceedings may disrupt our business and may materially and adversely affect our operations.
We have attempted to minimize the adverse effect of the Debtors’ Chapter 11 proceedings on our relationships with our employees, suppliers, customers and other parties. Nonetheless, our relationships with our customers, suppliers, and employees may be adversely impacted by negative publicity or otherwise and our operations could be materially and adversely affected. In addition, the Chapter 11 proceedings could negatively affect our ability to attract new employees and retain existing high performing employees or executives, which could materially and adversely affect our operations.
The Chapter 11 proceedings limit the flexibility of our management team in running the Debtors’ business.
While the Debtors’ operate their businesses as debtors-in-possession under supervision by the Bankruptcy Court, the Bankruptcy Court approval is required with respect to certain aspects of the Debtors’ business, and in some cases certain holders of claims against CEOC who have entered into the RSAs, prior to engaging in activities or transactions outside the ordinary course of business. Bankruptcy Court approval of non-ordinary course activities entails preparation and filing of appropriate motions with the Bankruptcy Court, negotiation with various parties-in-interest, including the statutory committees appointed in the Chapter 11 proceedings, and one or more hearings. Such committees and parties-in-interest may be heard at any Bankruptcy Court hearing and may raise objections with respect to these motions. This process could delay major transactions and limit the Debtors ability to respond quickly to opportunities and events in the marketplace. Furthermore, in the event the Bankruptcy Court does not approve a proposed activity or transaction, the Debtors could be prevented from engaging in non-ordinary course activities and transactions that they believe are beneficial to them.
Additionally, the terms of the final cash collateral order entered by the Bankruptcy Court will limit the Debtors’ ability to undertake certain business initiatives. These limitations may include, among other things, the Debtors’ ability to:
sell assets outside the normal course of business;
consolidate, merge, sell or otherwise dispose of all or substantially all of the Debtors’ assets;
grant liens;
incur debt for borrowed money outside the ordinary course of business;
prepay prepetition obligations; and
finance the Debtors’ operations, investments or other capital needs or to engage in other business activities that would be in the Debtors’ interests.
We will require significant liquidity to fund the Third Amended Plan, which may negatively affect our liquidity and ability to sustain operations.
As described in Note 1 , we have made material commitments to support for Restructuring. As a result of the Bankruptcy Court’s confirmation of the Third Amended Plan, we believe it is probable that certain obligations described in the Third Amended Plan and the RSAs will ultimately be settled, and therefore, we have accrued the items described in Note 1 that are estimable. We estimated the total consideration we expect to provide in support of the Restructuring, which includes a combination of cash, CEC common stock, and CEC Convertible Notes. Our estimated accrual does not include certain consideration that will be issued as part of the acquisition of New CEOC (as defined below), which will be recorded when the transaction is consummated, or other amounts that either do not currently represent obligations or that cannot be estimated at this time.
CEC does not currently have sufficient cash to meet its financial commitments to support the Restructuring that are due when the Debtors ultimately emerge from bankruptcy. The completion of the Merger (as defined below) is expected to allow CEC to fulfill its financial commitments in support of the Restructuring.
As a result of these payments and investments, less cash may be available in future periods for investments and operating expenses and, as a result, the implementation of the Third Amended Plan may have a negative impact on our liquidity and on our ability to sustain our operations.
Pursuant to the Third Amended Plan, CEOC will be divided into OpCo and PropCo, with certain of CEOC’s domestic real property interests being divested to PropCo, which may present large cash outflows, transaction costs and execution risk.
Pursuant to the Third Amended Plan, CEOC will be divided into two companies: OpCo and PropCo. OpCo, as CEOC’s successor (the “New CEOC”) and a wholly owned subsidiary of CEC, will operate CEOC’s properties and facilities. PropCo, as a subsidiary of a real estate investment trust to be wholly separate from CEC, will hold certain of CEOC’s domestic real property assets and

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related non-gaming fixtures and will lease those assets back to OpCo. As part of the Third Amended Plan, CEC and its subsidiaries will be entering into the certain agreements in connection the restructuring of CEOC, including management and lease support agreements, which will create certain material commitments for and impose ongoing obligations on the business of the Company after the effective date of the Third Amended Plan. This restructuring of CEOC will involve significant cash outflows, transaction costs and expenses, which may result in us having less cash available in future periods for investments and operating expenses.
Additionally, the implementation and execution of the Third Amended Plan, and the completion of the restructuring of CEOC contemplated thereunder, will be a complex, costly and time-consuming process. We will be required to devote management attention and resources and engage outside advisors and consultants to implement the Third Amended Plan and complete the restructuring. The failure to meet the challenges involved in implementing of the Third Amended Plan and completing the restructuring could cause an interruption of, or a loss of momentum in, the activities of the Company and could adversely affect our results of operations after the Debtors’ emergence from bankruptcy. The unsuccessful implementation of the Third Amended Plan and the failure to complete the restructuring could lead to additional litigation, bankruptcy proceedings and negotiations with creditors and other third parties, with increasing transaction costs and legal and financial liabilities. The overall implementation of the Third Amended Plan and the completion of the restructuring may also result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer and other business relationships and diversion of our management’s attention.
Under the Third Amended Plan, CEC and New CEOC will be required to enter into certain leasing and financial commitments, which may have a negative impact on our business and operating condition.
Pursuant to the Third Amended Plan, CEC and New CEOC will be entering into the certain restructuring documents, including the two Master Lease Agreements and the management and lease support agreements. Pursuant to the Master Lease Agreements, certain subsidiaries of PropCo will lease properties to New CEOC and New CEOC will be responsible for lease payments and other monetary obligations: (1) for the Caesars Palace Las Vegas property and (2) for certain domestic properties currently owned by CEOC other than Caesars Palace Las Vegas. CEC will guarantee all monetary obligations of New CEOC under the Master Lease Agreements pursuant to the terms of the management and lease support agreements. Under the call right agreements among PropCo, CEC, CERP, CGP and their respective applicable subsidiaries entered into pursuant to the Third Amended Plan, PropCo will have the right to purchase and leaseback interests in the real property and the related fixtures associated with Harrah’s Laughlin, Harrah’s Atlantic City and Harrah’s New Orleans properties, which could also impose additional lease payments and other obligations. CEC and PropCo will also enter into a right of first refusal agreement that will provide, among other things, (a) a grant by CEC (by and on behalf of itself and all of its majority owned subsidiaries) to PropCo (by and on behalf of itself and all of its majority owned subsidiaries) of a right of first refusal to own and lease to an affiliate of CEC certain non-Las Vegas domestic real estate that CEC or its affiliates may have the opportunity to acquire or develop and (b) a grant by PropCo to CEC of a right of first refusal to lease and manage certain non-Las Vegas domestic real estate that PropCo may have the opportunity to acquire or develop.
CEC and New CEOC also anticipate entering into certain proposed credit documents. Under the indenture that will govern the CEC Convertible Notes, CEC will issue approximately $1.1 billion of Convertible Notes at 5.00% per annum that will mature in 2024. Additionally, New CEOC will have funded debt obligations of approximately $1.2 billion (“New CEOC Debt”). The Third Amended Plan requires New CEOC to issue the New CEOC Debt to third parties, but if the New CEOC Debt is not fully syndicated, then the New CEOC Debt may be comprised of up to $917 million in first lien term loans and $318 million of first lien notes issued to the Debtors’ creditors under the Third Amended Plan (the “New CEOC Take-Back Debt”), subject to the consent of the applicable creditor groups. CEC will be required to guarantee the New CEOC Take-Back Debt. Under the terms of the guarantees of the New CEOC Take-Back Debt, CEC will provide a modified collection guarantee of the New CEOC Take-Back Debt, secured by a first-priority pledge of substantially all of the material assets of CEC, subject to certain exceptions.
After the Debtors’ emergence from bankruptcy, CEC will have certain obligations arising from the restructuring documents. If our businesses and properties fail to generate sufficient earnings, the payments required to service these leasing and financial commitments may materially and adversely limit our ability to make investments to maintain and grow our portfolio of businesses and properties. Additionally, we may be subject to other significant obligations under our guarantees if New CEOC is unable to satisfy its lease payments and monetary obligations under these arrangements, which could materially and adversely affect our business and operating results.
The restructuring documents will require us to comply with covenants on the conduct of business and generally impose restrictions on our business activities, including restrictions relating to the incurrence of debt, sales or dispositions of assets, acquisitions, the granting of liens, dividends and distributions and affiliate transactions. Compliance with the covenants and restrictions in the restructuring documents may constrain our ability to implement any growth plans as well as its flexibility to react and adapt to unexpected operational challenges and adverse changes in economic and legal conditions.  

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The merger with CAC is subject to various closing conditions, including governmental approvals, and other uncertainties and there can be no assurances as to whether and when it may be completed.
In 2014, CEC and CAC entered into a merger agreement, which was amended and restated on July 9, 2016 (the “Merger Agreement”), under which CAC will merge with and into Caesars Entertainment, with Caesars Entertainment continuing as the surviving corporation (the “Merger”). The consummation of the Merger is subject to a number of closing conditions, many of which are not within Caesars Entertainment’s control, and failure to satisfy such conditions may prevent, delay or otherwise materially adversely affect the completion of the transaction. These conditions include, among other things, obtaining (1) the required votes for the adoption of the Merger Agreement and the approval of the Merger by the our stockholders and the stockholders of CAC, (2) any necessary licenses, consents or other approvals required by gaming authorities to effect the Merger, (3) the authorization of NASDAQ for the listing of the shares of our common stock to be issued in connection with the Merger, (4) confirmation of the Third Amended Plan by the Bankruptcy Court, which was obtained on January 17, 2017, (5) receipt of certain tax opinions or rulings regarding certain tax aspects of the restructuring of CEOC, which rulings were received on January 5, 2017 and (6) receipt by each of CEC and CAC of the opinion of its respective counsel regarding the intended tax treatment of the Merger. It also is possible that a change, event, fact, effect or circumstance that could lead to a material adverse effect on Caesars Entertainment may occur, which may result in CAC not being obligated to complete the Merger. We cannot predict with certainty whether and when any of the required closing conditions will be satisfied or if an uncertainty resulting in a material adverse effect on Caesars Entertainment may arise. If the Merger does not receive, or timely receive, the required regulatory approvals and clearances, or if another event occurs delaying or preventing the Merger, such delay or failure to complete the Merger may cause uncertainty or other negative consequences that may materially and adversely affect Caesars Entertainment’s business, financial performance and operating results and the price per share for Caesar Entertainment’s common stock. There can be no assurance that the conditions to the Merger will be satisfied in a timely manner or at all. If conditions are not met or are incapable of being met, we and/or CAC may be entitled to terminate the Merger Agreement. In no event can the Merger be completed later than December 31, 2017, unless we and CAC otherwise mutually agree.
Additionally, we are subject to litigation which, if decided adversely, may increase the risk the conditions to completion of the Merger are not satisfied. Adverse rulings may result in reinstatement of our guarantee of certain CEOC debt which could increase the risk that conditions to completion of the Merger are not satisfied.
In the event that the pending Merger is not completed, the trading price of our common stock and our future business and financial results may be negatively impacted.
As noted above, the conditions to the completion of the Merger may not be satisfied. If the Merger is not completed for any reason, we may be subject to a number of risks, including:
the failure of the contemplated Third Amended Plan, for which completing the Merger is a condition, which failure will lead to further bankruptcy proceedings and negotiations with creditors as well as additional costs, litigation and legal liabilities;
the inability to achieve the global settlement of claims and comprehensive releases in favor of us and our affiliates provided for in the Third Amended Plan;
we would still being liable for significant transaction costs;
the focus of our management having been diverted from seeking other potential opportunities without realizing any benefits of the completed merger;
experiencing negative reactions from our customers, suppliers, regulators and employees;
certain litigation against us remaining outstanding and not being released; and
the price of our common stock declining significantly from current market price, which may reflect a market assumption that the Merger will be completed.
If the Merger is not completed, the risks described above may materialize and adversely affect our business, financial condition, financial results and stock price.
Following the Merger and the Third Amended Plan, the composition of our directors and officers will be different.
Upon completion of the Merger, the composition of our directors and officers will be different than the current composition. Our board of directors currently consists of eleven directors. The Merger Agreement provides that prior to the effective time of the

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Merger, that the directors and officers of CEC be mutually and reasonably agreed between us and CAC. Additionally, the Third Amended Plan requires that a certain number of independent directors be appointed to our board and that same director appointments be subject to the consent of some of the Debtors’ creditors.
With a different composition of our directors and officers, the management and direction of the Company following the Merger may be different than the current management and direction of the Company, and accordingly, may also result in new business plans and growth strategies as well as divergences from or alterations to existing ones. Any new business plans or growth strategies implemented by the new composition of our directors and officers or any divergences from or alternations to existing business plans and strategies, if unsuccessful, may lead to material unanticipated problems, expenses, liabilities, competitive responses, loss of customer and other business relationships, and an adverse impact on our operations and financial results.
As a result of the Chapter 11 proceedings, our historical financial information will not be indicative of our future financial performance.
Our capital structure and our corporate structure will be significantly altered under any plan of reorganization. As of January 15, 2015, CEOC was deconsolidated from our financial statements. Consequently, our results of operations following the deconsolidation will not be comparable to the financial condition and results of operations reflected in our historical financial statements for periods prior to the deconsolidation.
The Third Amended Plan will be based in large part upon assumptions and analyses developed by CEOC. If these assumptions and analyses prove to be incorrect, the Third Amended Plan may be unsuccessful in its execution, which could adversely affect Caesars Entertainment.
The Third Amended Plan to be implemented could affect both the Debtors’ capital structure and the ownership, structure and operation of the Debtors’ businesses and will reflect assumptions and analyses based on CEOC’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that CEOC considers appropriate under the circumstances. Whether actual future results and developments will be consistent with CEOC’s expectations and assumptions depends on a number of factors, including but not limited to (i) CEOC’s ability to substantially change the Debtors’ capital structure; (ii) CEOC’s ability to restructure the Debtors as a separate operating company and property company, with a real estate investment trust directly or indirectly owning and controlling the property company, (iii) the ability of the Debtors to obtain adequate liquidity and financing sources; (iv) our ability to maintain customers’ confidence in our viability as a continuing entity and to attract and retain sufficient business from them; (v) the Debtors’ ability to retain key employees; and (vi) the overall strength and stability of general economic conditions in the U.S. and in global markets. The failure of any of these factors could materially adversely affect the successful reorganization of the Debtors’ businesses.
In addition, the Third Amended Plan will rely upon financial projections, including with respect to revenues, capital expenditures, debt service, and cash flow as well as earnings before interest, taxes, depreciation and amortization (“EBITDA”). Financial forecasts are necessarily speculative, and it is likely that one or more of the assumptions and estimates that are the basis of these financial forecasts will not be accurate. The forecasts for the Debtors will be even more speculative than normal, because they may involve fundamental changes in the nature of the Debtors’ capital structure and corporate structure. Accordingly, CEOC expects that its actual financial condition and results of operations will differ, perhaps materially, from what CEOC has anticipated. Consequently, there can be no assurance that the results or developments contemplated by the Third Amended Plan to be implemented by the Debtors will occur or, even if they do occur, that they will have the anticipated effects on the Debtors and their subsidiaries’ businesses or operations. The failure of any such results or developments to materialize as anticipated could materially adversely affect us.
Risks Related to Our Business
Our substantial indebtedness and the fact that a significant portion of our cash flow is used to make interest payments could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from making debt service payments.
Caesars Entertainment is a highly-leveraged company and had $6.9 billion in debt outstanding as of December 31, 2016 . As a result, a significant portion of our liquidity needs are for debt service, including significant interest payments. Our estimated debt service (including principal and interest) is $659 million for 2017 and $8.8 billion thereafter to maturity. See Note 11 for details of our debt outstanding and related restrictive covenants.
Our substantial indebtedness and the restrictive covenants under the agreements governing such indebtedness could:
limit our ability to borrow money for our working capital, capital expenditures, development projects, debt service requirements, strategic initiatives or other purposes;

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make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness;
require that a substantial portion of our cash flow from operations be dedicated to the payment of interest and repayment of our indebtedness, thereby reducing funds available to us for other purposes;
limit our flexibility in planning for, or reacting to, changes in our operations or business;
make us more highly-leveraged than certain of our competitors, which may place us at a competitive disadvantage;
make us more vulnerable to downturns in our business or the economy;
restrict the availability for us to make strategic acquisitions, develop new gaming facilities, introduce new technologies or exploit business opportunities;
affect our ability to renew certain gaming and other licenses;
limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds or dispose of assets; and
expose us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, prospects and ability to satisfy our outstanding debt obligations.
We may be unable to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful.
We may be unable to generate sufficient cash flow from operations, or may be unable to draw under our senior secured credit facilities or otherwise, in an amount sufficient to fund our liquidity needs. Our operating cash inflows are typically used for operating expenses, debt service costs, working capital needs, and capital expenditures in the normal course of business. Our operating cash flow was negative $57 million in 2015 and $308 million in 2016 . Our estimated debt service (including principal and interest) is $659 million for 2017 and $8.8 billion thereafter to maturity. See Note 11 for details of our debt outstanding.
We may incur additional indebtedness, which could adversely affect our ability to pursue certain business opportunities.
We and our subsidiaries may incur additional indebtedness. Although the terms of the agreements governing our indebtedness contain restrictions on our ability to incur additional indebtedness, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.
For example, as of December 31, 2016 , CERP had $230 million of additional borrowing capacity available under its senior secured revolving credit facility, and CGP had a total of $160 million of additional borrowing capacity available under its senior secured revolving credit facilities.
Our subsidiary debt agreements allow for limited future issuances of additional secured notes or loans, which may include, in each case, indebtedness secured on a pari passu basis with the obligations under CGP’s or CERP's credit facilities and first lien notes. This indebtedness could be used for a variety of purposes, including financing capital expenditures, refinancing or repurchasing our outstanding indebtedness, including existing unsecured indebtedness, or for general corporate purposes. We have raised and expect to continue to raise debt, including secured debt, to directly or indirectly refinance our outstanding unsecured debt on an opportunistic basis, as well as development and acquisition opportunities. Additional indebtedness would require greater servicing payments, and accordingly, may affect our future liquidity and limit our ability to pursue certain opportunities and implement any growth plans in the future.
Our debt agreements contain restrictions that limit our flexibility in operating our business.
Our debt agreements contain, and any future indebtedness of ours would likely contain, a number of covenants that impose significant operating and financial restrictions, including restrictions on the issuer of the debt’s ability to, among other things:
incur additional debt or issue certain preferred shares;
pay dividends on or make distributions in respect of our capital stock or make other restricted payments;

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make certain investments;
sell certain assets;
create liens on certain assets;
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
enter into certain transactions with our affiliates; and
designate our subsidiaries as unrestricted subsidiaries.
As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.
We have pledged and will pledge a significant portion of our assets as collateral under our subsidiaries’ debt agreements. If any of our lenders accelerate the repayment of borrowings, there can be no assurance that we will have sufficient assets to repay our indebtedness.
We are required to satisfy and maintain specified financial ratios under our debt agreements. See Note 11 for further information. Our ability to meet the financial ratios under our debt agreements can be affected by events beyond our control, and there can be no assurance that we will be able to continue to meet those ratios.
A failure to comply with the covenants contained in the agreements that govern our indebtedness could result in an event of default under the facilities or the existing agreements, which, if not cured or waived, could have a material adverse effect on our business, financial condition and results of operations. In the event of any default under the indebtedness of CERP or CGP, the lenders thereunder:
will not be required to lend any additional amounts to such borrowers;
could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable and terminate all commitments to extend further credit; or
require such borrowers to apply all of our available cash to repay these borrowings.
Such actions by the lenders under CERP’s or CGP’s indebtedness could cause cross defaults under the other indebtedness of CERP and CGP, respectively. For instance, if CERP were unable to repay those amounts, the lenders under CERP’s credit facilities and the holders of CERP’s secured notes could proceed against the collateral granted to them to secure that indebtedness.
If the indebtedness under CERP’s or CGP’s credit facilities, or other indebtedness were to be accelerated, there can be no assurance that their assets would be sufficient to repay such indebtedness in full.
Repayment of our subsidiaries’ debt is dependent on cash flow generated by our subsidiaries.
Our subsidiaries currently own a significant portion of our assets and conduct a significant portion of our operations. Accordingly, repayment of our subsidiaries’ indebtedness is dependent, to a significant extent, on the generation of cash flow by our subsidiaries and their ability to make such cash available by dividend, debt repayment or otherwise. Our subsidiaries do not have any obligation to pay amounts due on our other subsidiaries’ indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our other subsidiaries’ indebtedness. Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries.
We are or may become involved in legal proceedings that, if adversely adjudicated or settled, could have a material adverse effect on our business, financial condition, results of operations, and prospects.
In addition to the Noteholder Disputes discussed above, we are also a defendant from time to time in various lawsuits or other legal proceedings relating to matters incidental to our business. The nature of our business subjects us to the risk of lawsuits filed by customers, past and present employees, competitors, business partners, Indian tribes and others in the ordinary course of business. As with all legal proceedings, no assurance can be provided as to the outcome of these matters and in general, legal proceedings can be expensive and time consuming. We may not be successful in the defense or prosecution of these lawsuits, which could result in settlements or damages that could significantly impact our business, financial condition and results of operations.

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The loss of the services of key personnel could have a material adverse effect on our business.
We believe that the leadership of our executive officers has been a critical element of our success. Any unforeseen loss of our chief executive officer’s services, or any negative market or industry perception with respect to him or arising from his loss, could have a material adverse effect on our businesses. Our other executive officers and other members of senior management have substantial experience and expertise in our businesses that we believe will make significant contributions to our growth and success. The unexpected loss of services of one or more of these individuals could also adversely affect us. We do not have key man or similar life insurance policies covering members of our senior management. We have employment agreements with our executive officers, but these agreements do not guarantee that any given executive will remain with us, and there can be no assurance that any such officers will remain with us.
If we cannot attract, retain and motivate employees, we may be unable to compete effectively, and lose the ability to improve and expand our businesses.
Our success and ability to grow depend, in part, on our ability to hire, retain, and motivate sufficient numbers of talented people with the increasingly diverse skills needed to serve clients and expand our business, in many locations around the world. We face intense competition for highly qualified, specialized technical, managerial, and consulting personnel. Recruiting, training, retention and benefit costs place significant demands on our resources. Additionally, our substantial indebtedness and CEOC’s Chapter 11 proceedings have made recruiting executives to our businesses more difficult, which may become even more difficult as the CEOC Chapter 11 proceedings progress. The inability to attract qualified employees in sufficient numbers to meet particular demands or the loss of a significant number of our employees could have an adverse effect on us.
We may sell or divest different properties or assets as a result of our evaluation of our portfolio of businesses. Such sales or divestitures could affect our costs, revenues, profitability and financial position.
From time to time, we evaluate our properties and our portfolio of businesses and may, as a result, sell or attempt to sell, divest or spin-off different properties or assets. These sales or divestitures affect our costs, revenues, profitability, financial position, liquidity and our ability to comply with our debt covenants. Divestitures have inherent risks, including possible delays in closing transactions (including potential difficulties in obtaining regulatory approvals), the risk of lower-than-expected sales proceeds for the divested businesses, and potential post-closing claims for indemnification. In addition, current economic conditions and relatively illiquid real estate markets may result in fewer potential bidders and unsuccessful sales efforts. Expected costs savings, which are offset by revenue losses from divested properties, may also be difficult to achieve or maximize due to our fixed cost structure.
Reduction in discretionary consumer spending resulting from a downturn in the national economy, the volatility and disruption of the capital and credit markets, adverse changes in the global economy and other factors could negatively impact our financial performance and our ability to access financing.
Changes in discretionary consumer spending or consumer preferences are driven by factors beyond our control, such as perceived or actual general economic conditions; high energy, fuel and other commodity costs; the cost of travel; the potential for bank failures; a soft job market; an actual or perceived decrease in disposable consumer income and wealth; increases in payroll taxes; increases in gaming taxes or fees; fears of recession and changes in consumer confidence in the economy; and terrorist attacks or other global events. Our business is susceptible to any such changes because our casino properties offer a highly discretionary set of entertainment and leisure activities and amenities. Gaming and other leisure activities we offer represent discretionary expenditures and participation in such activities may decline if discretionary consumer spending declines, including during economic downturns, during which consumers generally earn less disposable income. Particularly, we have business concentrations in gaming offerings and in Las Vegas, which are sensitive to declines in discretionary consumer spending and changes in consumer preferences. The economic downturn that began in 2008 and adverse conditions in the local, regional, national and global markets negatively affected our business and results of operations and may negatively affect our operations in the future. During periods of economic contraction, our revenues may decrease while most of our costs remain fixed and some costs even increase, resulting in decreased earnings. While economic conditions have improved and the gaming industry has partially recovered, there are no assurances that the gaming industry will continue to grow.

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Additionally, key determinants of our revenues and operating performance include hotel average daily rate (“ADR”), number of gaming trips and average spend per trip by our customers. Given that 2007 was the peak year for our financial performance and the gaming industry in the United States in general, we may not attain those financial levels in the near term, or at all. If we fail to increase ADR or any other similar metric in the near term, our revenues may not increase and, as a result, we may not be able to pay down our existing debt, fund our operations, fund planned capital expenditures or achieve expected growth rates, all of which could have a material adverse effect on our business, financial condition, results of operations and cash flow. Even an uncertain economic outlook may adversely affect consumer spending in our gaming operations and related facilities, as consumers spend less in anticipation of a potential economic downturn. Furthermore, other uncertainties, including national and global economic conditions, terrorist attacks or other global events, could adversely affect consumer spending and adversely affect our operations.
Growth in consumer demand for non-gaming offerings could negatively impact our gaming revenue.
Although recent trends have indicated a growing shift in customer demand for gambling over non-gaming offerings when visiting Las Vegas, there are no assurances that this trend will continue and that demand for non-gaming offerings will not increase. According to Las Vegas Convention and Visitors Authority, 47% of Las Vegas visitors in 2015 indicated that their primary reason to visit was for vacation or pleasure as opposed to solely for gambling as the main attraction, up from 41% of visitors in 2013, but down from 50% of visitors in 2011. To the extent the demand for non-gaming offerings replaces demand for gambling, our gaming revenues will decrease, which could have an adverse impact on our business and results of operations.
We are subject to extensive governmental regulation, which, under certain circumstances, could adversely impact our business, financial condition, and results of operations.
We are subject to extensive gaming regulations and political and regulatory uncertainty. Regulatory authorities in the jurisdictions where we operate have broad powers with respect to the licensing of casino operations and may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines and take other actions, any one of which could adversely impact our business, financial condition and results of operations. For example, revenues and income from operations were negatively impacted during July 2006 in Atlantic City by a three-day government-imposed casino shutdown. Furthermore, in many jurisdictions where we operate, licenses are granted for limited durations and require renewal from time to time. For example, in Iowa, our ability to continue our gaming operations is subject to a referendum every eight years or at any time upon petition of the voters in the county in which we operate; the most recent referendum which approved our ability to continue to operate our casinos occurred in November 2010. There can be no assurance that continued gaming activity will be approved in any referendum in the future. If we do not obtain the requisite approval in any future referendum, we will not be able to operate our gaming operations in Iowa, which would negatively impact our future performance.
From time to time, individual jurisdictions have also considered legislation or referendums, such as bans on smoking in casinos and other entertainment and dining facilities, which could adversely impact our operations. For example, the City Council of Atlantic City passed an ordinance in 2007 requiring that we segregate at least 75% of the casino gaming floor as a nonsmoking area, leaving no more than 25% of the casino gaming floor as a smoking area. Illinois also passed the Smoke Free Illinois Act which became effective January 1, 2008, and bans smoking in nearly all public places, including bars, restaurants, work places, schools and casinos. The Smoke Free Illinois Act also bans smoking within 15 feet of any entrance, window or air intake area of these public places. In January 2015, the City of New Orleans passed a ban on indoor smoking and use of electronic cigarettes, which became effective in April 2015. These smoking bans have adversely affected revenues and operating results at our properties. The likelihood or outcome of similar legislation in other jurisdictions and referendums in the future cannot be predicted, though any smoking ban would be expected to negatively impact our financial performance.
Furthermore, because we are subject to regulation in each jurisdiction in which we operate, and because regulatory agencies within each jurisdiction review our compliance with gaming laws in other jurisdictions, it is possible that gaming compliance issues in one jurisdiction may lead to reviews and compliance issues in other jurisdictions.
Our stockholders are subject to extensive governmental regulation and if a stockholder is found unsuitable by the gaming authority, that stockholder would not be able to beneficially own our common stock directly or indirectly.
In many jurisdictions, gaming laws can require any of our stockholders to file an application, be investigated, and qualify or have his, her or its suitability determined by gaming authorities. Gaming authorities have very broad discretion in determining whether an applicant should be deemed suitable. Subject to certain administrative proceeding requirements, the gaming regulators have the authority to deny any application or limit, condition, restrict, revoke or suspend any license, registration, finding of suitability or approval, or fine any person licensed, registered or found suitable or approved, for any cause deemed reasonable by the gaming authorities. For additional information on the criteria used in making determinations regarding suitability, see “Governmental Regulation.”

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For example, under Nevada gaming laws, each person who acquires, directly or indirectly, beneficial ownership of any voting security, or beneficial or record ownership of any non-voting security or any debt security, in a public corporation which is registered with the Nevada Gaming Commission, or the Gaming Commission, may be required to be found suitable if the Gaming Commission has reason to believe that his or her acquisition of that ownership, or his or her continued ownership in general, would be inconsistent with the declared public policy of Nevada, in the sole discretion of the Gaming Commission. Any person required by the Gaming Commission to be found suitable must apply for a finding of suitability within 30 days after the Gaming Commission's request that he or she should do so and, together with his or her application for suitability, deposit with the Nevada Gaming Control Board, or the Control Board, a sum of money which, in the sole discretion of the Control Board, will be adequate to pay the anticipated costs and charges incurred in the investigation and processing of that application for suitability, and deposit such additional sums as are required by the Control Board to pay final costs and charges.
Furthermore, any person required by a gaming authority to be found suitable, who is found unsuitable by the gaming authority, may not hold directly or indirectly the beneficial ownership of any voting security or the beneficial or record ownership of any nonvoting security or any debt security of any public corporation which is registered with the gaming authority beyond the time prescribed by the gaming authority. A violation of the foregoing may constitute a criminal offense. A finding of unsuitability by a particular gaming authority impacts that person's ability to associate or affiliate with gaming licensees in that particular jurisdiction and could impact the person's ability to associate or affiliate with gaming licensees in other jurisdictions.
Many jurisdictions also require any person who acquires beneficial ownership of more than a certain percentage of voting securities of a gaming company and, in some jurisdictions, non-voting securities, typically 5%, to report the acquisition to gaming authorities, and gaming authorities may require such holders to apply for qualification or a finding of suitability, subject to limited exceptions for “institutional investors” that hold a company's voting securities for investment purposes only. Under Maryland gaming laws, we may not sell or otherwise transfer more than 5% of the legal or beneficial interest in Horseshoe Baltimore without the approval of the Maryland Lottery and Gaming Control Commission, or the Maryland Commission, after the Maryland Commission determines that the transferee is qualified or grants the transferee an institutional investor waiver.
Some jurisdictions may also limit the number of gaming licenses in which a person may hold an ownership or a controlling interest. In Indiana, for example, a person may not have an ownership interest in more than two Indiana riverboat owner's licenses, and in Maryland an individual or business entity may not own an interest in more than one video lottery facility.
If we are unable to effectively compete against our competitors, our profits will decline.
The gaming industry is highly competitive and our competitors vary considerably in size, quality of facilities, number of operations, brand identities, marketing and growth strategies, financial strength and capabilities, and geographic diversity. We also compete with other non-gaming resorts and vacation areas, and with various other entertainment businesses. Our competitors in each market that we participate may have greater financial, marketing, or other resources than we do, and there can be no assurance that they will not engage in aggressive pricing action to compete with us. Although we believe we are currently able to compete effectively in each of the various markets in which we participate, we cannot ensure that we will be able to continue to do so or that we will be capable of maintaining or further increasing our current market share. Our failure to compete successfully in our various markets could adversely affect our business, financial condition, results of operations, and cash flow.
In recent years, many casino operators, including us, have been reinvesting in existing markets to attract new customers or to gain market share, thereby increasing competition in those markets. As companies have completed new expansion projects, supply has typically grown at a faster pace than demand in some markets, including Las Vegas, our largest market, and competition has increased significantly. For example, SLS Las Vegas opened in August 2014 on the northern end of the Strip, and the Genting Group has announced plans to develop a casino and hotel called Resorts World Las Vegas, which is expected to open in 2019 on the northern end of the Strip. Also, in response to changing trends, Las Vegas operators have been focused on expanding their non-gaming offerings, including upgrades to hotel rooms, new food and beverage offerings, and new entertainment offerings. MGM's The Park and joint venture with AEG, T-Mobile Arena, located between New York-New York and Monte Carlo, opened in April 2016 and includes retail and dining options and a 20,000 seat indoor arena for sporting events and concerts. In addition, in June 2016, MGM announced that the Monte Carlo Resort and Casino will undergo $450 million in non-gaming renovations focused on room, food and beverage and entertainment enhancements and is expected to re-open in late 2018 as two newly branded hotels. The expansion of existing casino entertainment properties, the increase in the number of properties and the aggressive marketing strategies of many of our competitors have increased competition in many markets in which we operate, and this intense competition is expected to continue. These competitive pressures have and are expected to continue to adversely affect our financial performance in certain markets, including Atlantic City.
In particular, our business may be adversely impacted by the additional gaming and room capacity in Nevada. In addition, our operations located in New Jersey may be adversely impacted by the expansion of gaming in Maryland, New York and Pennsylvania, and our operations located in Nevada may be adversely impacted by the expansion of gaming in California.

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Theoretical win rates for our casino operations depend on a variety of factors, some of which are beyond our control.
The gaming industry is characterized by an element of chance. Accordingly, we employ theoretical win rates to estimate what a certain type of game, on average, will win or lose in the long run. In addition to the element of chance, theoretical win rates are also affected by the spread of table limits and factors that are beyond our control, such as a player's skill and experience and behavior, the mix of games played, the financial resources of players, the volume of bets placed and the amount of time players spend gambling. As a result of the variability in these factors, the actual win rates at the casino may differ from theoretical win rates and could result in the winnings of our gaming customers exceeding those anticipated. The variability of these factors, alone or in combination, have the potential to negatively impact our actual win rates, which may adversely affect our business, financial condition, results of operations and cash flows.
We face the risk of fraud, theft, and cheating.
We face the risk that gaming customers may attempt or commit fraud or theft or cheat in order to increase winnings. Such acts of fraud, theft, or cheating could involve the use of counterfeit chips or other tactics, possibly in collusion with our employees. Internal acts of cheating could also be conducted by employees through collusion with dealers, surveillance staff, floor managers or other casino or gaming area staff. Additionally, we also face the risk that customers may attempt or commit fraud or theft with respect to our non-gaming offerings or against other customers. Such risks include stolen credit or charge cards or cash, falsified checks, theft of retail inventory and purchased goods, and unpaid or counterfeit receipts. Failure to discover such acts or schemes in a timely manner could result in losses in our gaming operations. Negative publicity related to such acts or schemes could have an adverse effect on our reputation, potentially causing a material adverse effect on our business, financial condition, results of operations and cash flows.
Use of the “Caesars” brand name, or any of our other brands, by entities other than us could damage the brands and our operations and adversely affect our business and results of operations.
The “Caesars” brand remains one of the most recognized casino brands in the world and our operations benefit from the global recognition and reputation generated by our brands. Generally, we are actively pursuing gaming and non-gaming management, branding, and development opportunities in Asia and other parts of the world where our brands and reputation are already well-recognized assets. In addition, we will continue to expand our World Series of Poker tournaments to international jurisdictions where we believe there is a likelihood of legalization of online gaming, in order to grow the brand’s awareness. In connection with such opportunities, we intend to grant third parties licenses to use our brands. Our business and results of operations may be adversely affected by the management or the enforcement of the “Caesars” and the “World Series of Poker” brand names, or any of our other brands, by third parties outside of our exclusive control.
Any failure to protect our trademarks could have a negative impact on the value of our brand names and adversely affect our business.
The development of intellectual property is part of our overall business strategy, and we regard our intellectual property to be an important element of our success. While our business as a whole is not substantially dependent on any one trademark or combination of several of our trademarks or other intellectual property, we seek to establish and maintain our proprietary rights in our business operations and technology through the use of patents, copyrights, trademarks and trade secret laws. Despite our efforts to protect our proprietary rights, parties may infringe our trademarks and use information that we regard as proprietary and our rights may be invalidated or unenforceable. The unauthorized use or reproduction of our trademarks could diminish the value of our brand and our market acceptance, competitive advantages or goodwill, which could adversely affect our business.
Additionally, we have not applied for the registration of all of our trademarks, copyrights, proprietary technology or other intellectual property rights, as the case may be, and may not be successful in obtaining all intellectual property rights for which we have applied. Despite our efforts to protect our proprietary rights, parties may infringe upon our intellectual property and use information that we regard as proprietary, and our rights may be invalidated or unenforceable. The laws of some foreign countries may not protect proprietary rights or intellectual property to as great an extent as do the laws of the United States. In addition, others may independently develop substantially equivalent intellectual property.

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We extend credit to a portion of our customers and we may not be able to collect gaming receivables from our credit players.
We conduct our gaming activities on a credit and cash basis at many of our properties. Any such credit we extend is unsecured. Table games players typically are extended more credit than slot players, and high-stakes players typically are extended more credit than customers who tend to wager lower amounts. High-end gaming is more volatile than other forms of gaming, and variances in win-loss results attributable to high-end gaming may have a significant positive or negative impact on cash flow and earnings in a particular quarter. We extend credit to those customers whose level of play and financial resources warrant, in the opinion of management, an extension of credit. These large receivables could have a significant impact on our results of operations if deemed uncollectible. While gaming debts evidenced by a credit instrument, including what is commonly referred to as a “marker,” and judgments on gaming debts are enforceable under the current laws of the jurisdictions in which we allow play on a credit basis and judgments in such jurisdictions on gaming debts are enforceable in all states under the Full Faith and Credit Clause of the U.S. Constitution, other jurisdictions may determine that enforcement of gaming debts is against public policy. Although courts of some foreign nations will enforce gaming debts directly and the assets in the U.S. of foreign debtors may be reached to satisfy a judgment, judgments on gaming debts from U.S. courts are not binding on the courts of many foreign nations.
The development and construction of new hotels, casinos and gaming and non-gaming venues and the expansion of existing ones could have an adverse effect on our business, financial condition and results of operations due to various factors including delays, cost overruns and other uncertainties.
We intend to develop, construct and open new hotels, casinos and other gaming venues, and develop and manage non-gaming venues, in response to opportunities that may arise. Future development projects may require significant capital commitments, the incurrence of additional debt, guarantees of third party debt, the incurrence of contingent liabilities and an increase in depreciation and amortization expense, which could have an adverse effect upon our business, financial condition, results of operations and cash flow. The development and construction of new hotels, casinos and gaming venues and the expansion of existing ones is susceptible to various risks and uncertainties, such as:
the existence of acceptable market conditions and demand for the completed project;
general construction risks, including cost overruns, change orders and plan or specification modification, shortages of construction resources, labor disputes, unforeseen environmental, engineering or geological problems, work stoppages, fire and other natural disasters, construction scheduling problems, and weather interferences;
changes and concessions required by governmental or regulatory authorities;
the ability to finance the projects, especially in light of our substantial indebtedness;
delays in obtaining, or inability to obtain, all licenses, permits and authorizations required to complete and/or operate the project; and
disruption of our existing operations and facilities.
Moreover, our development and expansion projects are sometimes jointly pursued with third parties or by licensing our brands to third parties. These joint development, expansion projects or license agreements are subject to risks, in addition to those disclosed above, as they are dependent on our ability to reach and maintain agreements with third parties.
Our failure to complete any new development or expansion project, or complete any joint development, expansion projects or projects where we license our brands, as planned, on schedule, within budget or in a manner that generates anticipated profits, could have an adverse effect on our business, financial condition, results of operations and cash flow.
We may pursue strategic acquisitions of third-party assets and businesses as a complement to our future growth strategy, which could raise material investment risk and affect our businesses and operations if integration is unsuccessful or the acquired assets and businesses perform poorly.
We intend to implement a growth plan centered on an organic growth strategy for our non-gaming entertainment, hospitality and leisure offerings. We also intend to pursue strategic acquisitions as a complement to the extent such acquisitions present attractive opportunities that would bolster our organic growth strategy. Additionally, we will also look to become a more active participant in certain high-growth social and mobile gaming opportunities in order to leverage our extensive experience and management expertise in the gaming industry and build an enhanced high growth portfolio.

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Our ability to realize the anticipated benefits of acquisitions will depend, in part, on our ability to integrate the businesses of such acquired company with our businesses. The combination of two independent companies is a complex, costly and time consuming process. This process may disrupt the business of either or both of the companies, and may not result in the full benefits expected. The difficulties of combining the operations of the companies include, among others:
coordinating marketing functions;
undisclosed liabilities; unanticipated issues in integrating information, communications and other systems;
unanticipated incompatibility of purchasing, logistics, marketing and administration methods;
retaining key employees;
consolidating corporate and administrative infrastructures;
the diversion of management's attention from ongoing business concerns; and
coordinating geographically separate organizations.
Additionally, even if integration is successful, the overall integration of acquired assets and businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer and other business relationships and diversion of management attention. There is also no guarantee that the acquired assets or businesses will generate any of the projected synergies and earnings growth, and the failure to realize such projected synergies and earnings growth may adversely affect our operating and financial results and derail any growth plans.
The risks associated with our existing and potential future international operations could reduce our profits.
Some of our properties are located outside the United States, and we are currently pursuing additional international opportunities. International operations are subject to inherent risks including:
political and economic instability;
variation in local economies;
currency fluctuation;
greater difficulty in accounts receivable collection;
trade barriers; and
burden of complying with a variety of international laws.
For example, the political instability in Egypt due to the uprising in January 2011 has negatively affected our properties there.
Any violation of the Foreign Corrupt Practices Act or other similar laws and regulations could have a negative impact on us.
We are subject to risks associated with doing business outside of the United States, which exposes us to complex foreign and U.S. regulations inherent in doing business cross-border and in each of the countries in which it transacts business. We are subject to requirements imposed by the Foreign Corrupt Practices Act (“FCPA”) and other anti-corruption laws that generally prohibit U.S. companies and their affiliates from offering, promising, authorizing or making improper payments to foreign government officials for the purpose of obtaining or retaining business. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions and other penalties and the SEC and U.S. Department of Justice have increased their enforcement activities with respect to the FCPA. Policies and procedures and employee training and compliance programs that we have implemented to deter prohibited practices may not be effective in prohibiting our employees, contractors or agents from violating or circumventing our policies and the law. If our employees or agents fail to comply with applicable laws or company policies governing our international operations, we may face investigations, prosecutions and other legal proceedings and actions which could result in civil penalties, administrative remedies and criminal sanctions. Any determination that we have violated any anti-corruption laws could have a material adverse effect on our financial condition. Compliance with international and U.S. laws and regulations that apply to our international operations increases our cost of doing business in foreign jurisdictions. We also deal with significant amounts of cash in our operations and are subject to various reporting and anti-money laundering regulations. Any violation of anti-money laundering laws (“AML”) or regulations, on which in recent years, governmental authorities have been increasingly focused, with a particular focus on the gaming industry, by any of our resorts could have a negative effect on our results of operations.

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Acts of terrorism, war, natural disasters, severe weather and political, economic and military conditions may impede our ability to operate or may negatively impact our financial results.
Terrorist attacks and other acts of war or hostility have created many economic and political uncertainties. For example, a substantial number of the customers of our properties in Las Vegas use air travel. As a result of terrorist acts that occurred on September 11, 2001, domestic and international travel was severely disrupted, which resulted in a decrease in customer visits to our properties in Las Vegas. We cannot predict the extent to which disruptions in air or other forms of travel as a result of any further terrorist act, security alerts or war, uprisings, or hostilities in places such as Iraq, Afghanistan and/or Syria or other countries throughout the world, and governmental responses to those acts or hostilities, will directly or indirectly impact our business and operating results. For example, our operations in Cairo, Egypt were negatively affected from the uprising there in January 2011. As a consequence of the threat of terrorist attacks and other acts of war or hostility in the future, premiums for a variety of insurance products have increased, and some types of insurance are no longer available. If any such event were to affect our properties, we would likely be adversely impacted.
In addition, natural and man-made disasters such as major fires, floods, hurricanes, earthquakes and oil spills could also adversely impact our business and operating results. Such events could lead to the loss of use of one or more of our properties for an extended period of time and disrupt our ability to attract customers to certain of our gaming facilities. If any such event were to affect our properties, we would likely be adversely impacted.
In most cases, we have insurance that covers portions of any losses from a natural disaster, but it is subject to deductibles and maximum payouts in many cases. Although we may be covered by insurance from a natural disaster, the timing of our receipt of insurance proceeds, if any, is out of our control. In some cases, however, we may receive no proceeds from insurance.
Additionally, a natural disaster affecting one or more of our properties may affect the level and cost of insurance coverage we may be able to obtain in the future, which may adversely affect our financial position.
As our operations depend in part on our customers' ability to travel, severe or inclement weather can also have a negative impact on our results of operations.
We may incur impairments to goodwill, indefinite-lived intangible assets, or long-lived assets, which could negatively affect our future profits.
We perform our annual impairment assessment of goodwill as of October 1, or more frequently if impairment indicators exist. We determine the estimated fair value of each reporting unit based on a combination of EBITDA and estimated future cash flows discounted at rates commensurate with the capital structure and cost of capital of comparable market participants, giving appropriate consideration to the prevailing borrowing rates within the casino industry in general. We also evaluate the aggregate fair value of all of our reporting units and other non-operating assets in comparison to our aggregate debt and equity market capitalization at the test date. Both EBITDA multiples and discounted cash flows are common measures used to value and buy or sell businesses in our industry.
We also perform an annual impairment assessment of other non-amortizing intangible assets as of October 1, or more frequently if impairment indicators exist. We determine the estimated fair value of our non-amortizing intangible assets by primarily using the Relief From Royalty Method and Excess Earnings Method under the income approach.
We review the carrying value of our long-lived assets whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. When performing this assessment, we consider current operating results, trends and prospects, as well as the effect of obsolescence, demand, competition, and other economic, legal, and regulatory factors.
Significant negative industry or economic trends, reduced estimates of future cash flows, disruptions to our business, slower growth rates or lack of growth in our business have resulted in impairment charges during the year ended December 31, 2014. If one or more of such events occurs in the future, additional impairment charges may be required in future periods. If we are required to record additional impairment charges, this could have a material adverse impact on our consolidated financial statements.
Our business is particularly sensitive to energy prices and a rise in energy prices could harm our operating results.
We are a large consumer of electricity and other energy and, therefore, higher energy prices may have an adverse effect on our results of operations. Accordingly, increases in energy costs may have a negative impact on our operating results. Additionally, higher electricity and gasoline prices which affect our customers may result in reduced visitation to our resorts and a reduction in our revenues. We may be indirectly impacted by regulatory requirements aimed at reducing the impacts of climate change directed at up-stream utility providers, as we could experience potentially higher utility, fuel, and transportation costs.

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CGP’s interests may conflict with our interests.
The interests of CGP could conflict with our interests. CGP is in a similar business to us and is required to first provide any potential development opportunities to us. However, we may decide to decline the opportunity for the Company’s business and permit CGP to pursue the development opportunity. A committee of our board of directors comprised of disinterested directors will consider potential development opportunities provided to us by CGP. If the committee declines an opportunity, that opportunity will be available to CGP and will not be available to our businesses. As a result, our business and growth prospects could be negatively impacted. Furthermore, the consideration of business opportunities may create potential or perceived conflicts of interests between our and CGP's businesses. While we may retain a portion of the financial stake in any management fee to be received in connection with an opportunity provided to CGP, there can be no assurances that such opportunity will be successful or that we will receive the expected fees from any opportunity.
Although certain employees of affiliates of Apollo Global Management, LLC (together with such affiliates, “Apollo”) and affiliates of TPG Capital, LP (together with such affiliates, “TPG” and, together with Apollo, the “Sponsors”) are on the boards of directors of Caesars Entertainment and CAC, the certificates of incorporation of both companies provide that neither the Sponsors nor directors have any obligation to present any corporate opportunity to Caesars Entertainment or CAC. Accordingly, the Sponsors may pursue gaming, entertainment or other activities outside of Caesars Entertainment or CAC and have no obligation to present such opportunity to Caesars Entertainment or CAC.
Work stoppages and other labor problems could negatively impact our future profits.
Some of our employees are represented by labor unions and, accordingly, we are subject to the risk of work stoppages or other labor disruptions from time to time.
We currently have five collective bargaining agreements covering various employees in Las Vegas expiring in 2017 , as well as three others that will expire in 2017 .
All agreements are subject to automatic extension unless one party gives 30 days’ prior notice of intent to terminate. No such notice has been given. We intend to negotiate renewal agreements for all collective bargaining agreements expiring and are hopeful that we will be able to reach agreements with the respective unions without any work stoppage. Work stoppages and other labor disruptions could have a material adverse impact on our operations. From time to time, we have experienced attempts by labor organizations to organize certain of our non-union employees. These efforts have achieved some success to date. We cannot provide any assurance that we will not experience additional and successful union activity in the future. The impact of this union activity is undetermined and could negatively impact our profits.
We may be subject to material environmental liability, including as a result of unknown environmental contamination.
The casino properties business is subject to certain federal, state and local environmental laws, regulations and ordinances which govern activities or operations that may have adverse environmental effects, such as emissions to air, discharges to streams and rivers and releases of hazardous substances and pollutants into the environment, as well as handling and disposal from municipal/non-hazardous waste, and which also apply to current and previous owners or operators of real estate generally. Federal examples of these laws include the Clean Air Act, the Clean Water Act, the Resource Conservation Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act and the Oil Pollution Act of 1990. Certain of these environmental laws may impose cleanup responsibility and liability without regard to whether the owner or operator knew of or caused particular contamination or release of hazardous substances. Should unknown contamination be discovered on our property, or should a release of hazardous substances occur on our property, we could be required to investigate and remediate the contamination and could also be held responsible to a governmental entity or third parties for property damage, personal injury or investigation and remediation costs incurred in connection with the contamination or release, which may be substantial. Moreover, such contamination may also impair our ability to use the affected property. Such liability could be joint and several in nature, regardless of fault, and could affect us even if such property is vacated. The potential for substantial costs and an inability to use the property could adversely affect our business.

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Our insurance coverage may not be adequate to cover all possible losses we could suffer, and, in the future, our insurance costs may increase significantly or we may be unable to obtain the same level of insurance coverage.
We may suffer damage to our property caused by a casualty loss (such as fire, natural disasters and acts of war or terrorism) that could severely disrupt our business or subject it to claims by third parties who are injured or harmed. Although we maintain insurance (including property, casualty, terrorism and business interruption), it may be inadequate or unavailable to cover all of the risks to which our business and assets may be exposed. In several cases we maintain extremely high deductibles or self-insure against specific losses. Should an uninsured loss (including a loss which is less than our deductible) or loss in excess of insured limits occur, it could have a significant adverse impact on our operations and revenues.
We generally renew our insurance policies on an annual basis. If the cost of coverage becomes too high, we may need to reduce our policy limits or agree to certain exclusions from our coverage in order to reduce the premiums to an acceptable amount. Among other factors, homeland security concerns, other catastrophic events or any change in the current U.S. statutory requirement that insurance carriers offer coverage for certain acts of terrorism could adversely affect available insurance coverage and result in increased premiums on available coverage (which may cause us to elect to reduce our policy limits) and additional exclusions from coverage. Among other potential future adverse changes, in the future we may elect to not, or may be unable to, obtain any coverage for losses due to acts of terrorism.
The success of third parties adjacent to our properties is important to our ability to generate revenue and operate our business and any deterioration to their success could materially adversely affect our revenue and result of operations.
In certain cases, we do not own the businesses and amenities adjacent to our properties. However, the adjacent third-party businesses and amenities stimulate additional traffic through our complexes, including the casinos, which are our largest generators of revenue. Any decrease in the popularity of, or the number of customers visiting, these adjacent businesses and amenities may lead to a corresponding decrease in the traffic through our complexes, which would negatively affect our business and operating results. Further, if newly opened properties are not as popular as expected, we will not realize the increase in traffic through our properties that we expect as a result of their opening, which would negatively affect our business projections.
Compromises of our information systems or unauthorized access to confidential information or our customers' personal information could materially harm our reputation and business.
We collect and store confidential, personal information relating to our customers for various business purposes, including marketing and financial purposes, and credit card information for processing payments. For example, we handle, collect and store personal information in connection with our customers staying at our hotels and enrolling in our Total Rewards program. We may share this personal and confidential information with vendors or other third parties in connection with processing of transactions, operating certain aspects of our business or for marketing purposes. Our collection and use of personal data are governed by state and federal privacy laws and regulations as well as the applicable laws and regulations in other countries in which we operate. Privacy law is an area that changes often and varies significantly by jurisdiction. We may incur significant costs in order to ensure compliance with the various applicable privacy requirements. In addition, privacy laws and regulations may limit our ability to market to our customers.
We assess and monitor the security of collection, storage and transmission of customer information on an ongoing basis. We utilize commercially available software and technologies to monitor, assess and secure our network. Further, the systems currently used for transmission and approval of payment card transactions, and the technology utilized in payment cards themselves, all of which can put payment card data at risk, are determined and controlled by the payment card industry, not us. Although we have taken steps designed to safeguard our customers' confidential personal information and important internal company data, our network and other systems and those of third parties, such as service providers, could be compromised, damaged, or disrupted by a third party breach of our system security or that of a third-party provider or as a result of purposeful or accidental actions of third parties, our employees or those employees of a third party, power outages, computer viruses, system failures, natural disasters or other catastrophic events. Our third-party information system service providers face risks relating to cybersecurity similar to ours, and we do not directly control any of such parties’ information security operations. Advances in computer and software capabilities and encryption technology, new tools and other developments may increase the risk of a security breach. As a result of any security breach, customer information or other proprietary data may be accessed or transmitted by or to a third party. Despite these measures, there can be no assurance that we are adequately protecting our information.
Any loss, disclosure or misappropriation of, or access to, customers' or other proprietary information, or other breach of our information security could result in legal claims or legal proceedings, including regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, including for failure to protect personal information or for misusing personal information, which could disrupt our operations, damage our reputation and expose us to claims from customers,

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financial institutions, regulators, payment card associations, employees and other persons, any of which could have an adverse effect on our financial condition, results of operations and cash flow.
Our obligation to contribute to multi-employer pension plans, or discontinuance of such obligations, may have an adverse impact on us.
We contribute to and participate in various multi-employer pension plans for employees represented by certain unions. We are required to make contributions to these plans in amounts established under collective bargaining agreements. We do not administer these plans and, generally, are not represented on the boards of trustees of these plans. The Pension Protection Act enacted in 2006, or the PPA, requires under-funded pension plans to improve their funding ratios. Based on the information available to us, some of the multi-employer plans to which we contribute are either “critical” or “endangered” as those terms are defined in the PPA. Specifically, the Pension Plan of the UNITE HERE National Retirement Fund is less than 65% funded. We cannot determine at this time the amount of additional funding, if any, we may be required to make to these plans. However, plan assessments could have an adverse impact on our results of operations or cash flows for a given period. Furthermore, under current law, upon the termination of a multi-employer pension plan, due to the withdrawal of all its contributing employers (a mass withdrawal), or in the event of a withdrawal by us, which we consider from time to time, we would be required to make payments to the plan for our proportionate share of the plan's unfunded vested liabilities, that would have a material adverse impact on our consolidated financial condition, results of operations and cash flows.
In January 2015, the Trustees of the National Retirement Fund (“NRF”), a multi-employer defined benefit pension plan, voted to expel the CEC controlled group (“CEC Group”) from NRF’s Legacy Plan. NRF claims that CEOC’s bankruptcy presents an “actuarial risk” to the Legacy Plan purportedly permitting such expulsion. The CEC affiliates that are included in the NRF Legacy Plan are Caesars Atlantic City, Bally’s Atlantic City, and Harrah’s Philadelphia (all of which are owned by CEOC and are not included in CEC’s results), as well as Harrah’s Atlantic City and the Las Vegas laundry. 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 , and has commenced litigation against CEC and CERP seeking payment of this withdrawal liability, which remains ongoing.
The CEC Group disputes NRF’s authority to take such action. Prior to NRF’s vote, the CEC Group reiterated its commitment to remain in the plan and not seek rejection of any collective bargaining agreement in which the obligation to contribute to NRF exists. CEOC is current with respect to pension contributions. The CEC Group is pursuing several litigation strategies to challenge NRF’s action, and CEC and CERP are vigorously opposing the litigation commenced by NRF. There can be no assurance that our strategies will have a successful outcome, and the CEC Group may become liable for the withdrawal liability, which would have an adverse impact on us.
Due to the participation of CEOC, CGPH, and CERP in CES, we may not control CES and our interests may not align with the interests of the other members of CES.
CEOC, CGPH, and CERP are members of CES, and each relies on CES to provide it and its subsidiaries with intellectual property licenses and property management services, among other services. CEOC, CGPH and CERP are each required to contribute as necessary to fund CES’ operating costs and capital requirements in proportion to their respective ownership interest in CES. The members of CES are required to fund its capital expenditures in agreed portions on an annual basis. The amount each member will be required to fund in future years will be subject to the review and approval of the CES steering committee. CEOC, CGPH and CERP, together, control CES through the CES steering committee, which is comprised of one representative from each of CEOC, CGPH and CERP. Conflicts of interest may arise between Caesars Entertainments’ subsidiaries. Most decisions by CES require the consent of two of the three steering committee members. To the extent we are unable to control the consent of at least two of the three steering committee members, we may be unable to cause CES to take actions that our in our interest. In addition, certain decisions by CES may not be made without unanimous consent of the members. These actions include any decision with respect to liquidation or dissolution of CES, merger, consolidation or sale of all or substantially all the assets of CES, usage of CES assets in a manner inconsistent with the purposes of CES, material amendment to CES’ operating agreement, admission of new investors to CES and filing of any bankruptcy or similar action by CES. Thus, the members may block certain actions by CES that are in our interest.

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We are controlled by the Sponsors, whose interests may not be aligned with ours.
The members of Hamlet Holdings LLC (“Hamlet Holdings”) are comprised of individuals affiliated with Apollo Global Management, LLC (“Apollo”) and affiliates of TPG Capital LP (“TPG”) (collectively, the “Sponsors”). As of December 31, 2016 , Hamlet Holdings beneficially owned a majority of our common stock pursuant to an irrevocable proxy providing Hamlet Holdings with sole voting and sole dispositive power over those shares, and, as a result, the Sponsors have the power to elect all of our directors. Moreover, Hamlet Holdings has the ability to vote on any transaction that requires the approval of our board of directors or our stockholders, including the approval of significant corporate transactions such as mergers and the sale of all or substantially all of our assets. As a result, Hamlet Holdings is in a position to exert a significant influence over us, and the direction of our business and results of operations. The interests of the Sponsors could conflict with or differ from the interests of other holders of our securities. For example, the concentration of ownership held by the Sponsors could delay, defer or prevent a change of control of us or impede a merger, takeover or other business combination which another stockholder may otherwise view favorably. Additionally, the Sponsors are in the business of making or advising on investments in companies they hold, and may from time to time in the future acquire interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. One or both of the Sponsors may also pursue acquisitions that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. A sale of a substantial number of shares of stock in the future by funds affiliated with the Sponsors or their co-investors could cause our stock price to decline. So long as Hamlet Holdings continues to hold the irrevocable proxy, they will continue to be able to strongly influence or effectively control our decisions.
In addition, we have an executive committee that serves at the discretion of our board of directors and is authorized to take such actions as it reasonably determines appropriate. Currently, the executive committee may act by a majority of its members, provided that at least one member affiliated with TPG and Apollo must approve any action of the executive committee.
Future sales or the possibility of future sales of a substantial amount of our common stock, including in connection with the Merger or the restructuring of CEOC, may depress the price of shares of our common stock.
Future sales or the availability for sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through future sales of equity securities.
As of December 31, 2016 , there were 147 million shares outstanding, all of which are the same class of voting common stock. All of the outstanding shares of our common stock will be eligible for resale under Rule 144 or Rule 701 of the Securities Act of 1933, as amended (“Securities Act”), subject to volume limitations, applicable holding period requirements or other contractual restrictions. The Sponsors have the ability to cause us to register the resale of its shares, and our management members who hold shares will have the ability to include their shares in such registration.
We sold 7 million shares of our common stock in 2014. In connection with the Merger, we expect to issue a significant number of shares of our common stock and, in connection with the Third Amended Plan, we expect to issue a significant number of shares of our common stock and a significant amount of notes that will be convertible into shares of our common stock. In addition, we may issue shares of common stock or other securities from time to time as consideration for future acquisitions and investments or for any other reason that our board of directors deems advisable. If any such acquisition or investment is significant, the number of shares of our common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those shares of common stock or other securities in connection with any such acquisitions and investments.
We cannot predict the size of future issuances of our common stock or other securities or the effect, if any, that future issuances and sales of our common stock or other securities, including future sales by the Sponsors, will have on the market price of our common stock. Sales of substantial amounts of common stock (including shares of common stock issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.
The price and trading volume of our common stock may fluctuate significantly.
The market price of our common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume of our common stock may fluctuate and cause significant price variations to occur. Volatility in the market price of our common stock may prevent a holder of our common stock from being able to sell their shares. The market price for our common stock could fluctuate significantly for various reasons, including:
our operating and financial performance and prospects;
our quarterly or annual earnings or those of other companies in our industry;

25



news or developments related to CEOC's ongoing Bankruptcy proceedings and negotiations with its creditors;
conditions that impact demand for our products and services;
the public's reaction to our press releases, other public announcements and filings with the SEC;
changes in earnings estimates or recommendations by securities analysts who track our common stock;
market and industry perception of our success, or lack thereof, in pursuing our growth strategy;
strategic actions by us or our competitors, such as acquisitions or restructurings;
changes in government and environmental regulation, including gaming taxes;
changes in accounting standards, policies, guidance, interpretations or principles;
arrival and departure of key personnel;
changes in our capital structure;
sales of common stock by us or members of our management team;
issuance of common stock in connection with the Merger;
the expiration of contractual lockup agreements; and
changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
In addition, the stock market experiences significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in the gaming, lodging, hospitality and entertainment industries. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our share price.
Because we have not paid dividends since being acquired by the Sponsors in 2008 and do not anticipate paying dividends on our common stock in the foreseeable future, holders of our common stock should not expect to receive dividends on shares of our common stock.
We have no present plans to pay cash dividends to our stockholders and, for the foreseeable future, intend to retain all of our earnings for use in our business. The declaration of any future dividends by us is within the discretion of our Board and will be dependent on our earnings, financial condition and capital requirements, as well as any other factors deemed relevant by our board of directors.
We are a “controlled company” within the meaning of the NASDAQ rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements.
Hamlet Holdings currently controls a majority of our voting common stock. As a result, we are a “controlled company” within the meaning of NASDAQ corporate governance standards. Under the NASDAQ rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and we have elected not to comply with certain NASDAQ corporate governance requirements, including:
a majority of the board of directors consists of independent directors;
a nominating/corporate governance committee that is composed entirely of independent directors;
a compensation committee that is composed entirely of independent directors; and
an annual performance evaluation of the nominating/corporate governance and compensation committees.

26



As a result of these exemptions, we do not have a majority of independent directors nor do our nominating/corporate governance and compensation committees consist entirely of independent directors and we are not required to have an annual performance evaluation of the nominating/corporate governance and compensation committees. Accordingly, a holder of our common stock will not have the same protections afforded to stockholders of companies that are subject to all of the NASDAQ corporate governance requirements.
Our bylaws and certificate of incorporation contain provisions that could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.
Provisions of our bylaws and our certificate of incorporation may delay or prevent a merger or acquisition that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our directors. These provisions include:
establishing a classified board of directors;
establishing limitations on the removal of directors;
permitting only an affirmative vote of at least two-thirds of the Board to fix the number of directors;
prohibiting cumulative voting in the election of directors;
empowering only the board of directors to fill any vacancy on the board of directors, whether such vacancy occurs as a result of an increase in the number of directors or otherwise;
authorizing the issuance of “blank check” preferred stock without any need for action by stockholders;
eliminating the ability of stockholders to call special meetings of stockholders;
prohibiting stockholders from acting by written consent if less than 50.1% of our outstanding common stock is controlled by the Sponsors;
prohibiting amendments to the bylaws without the affirmative vote of at least two-thirds of the board of directors or the affirmative vote of at least two-thirds of the total voting power of the outstanding shares entitled to vote;
prohibiting amendments to the certificate of incorporation relating to stockholder meetings, amendments to the bylaws or certificate of incorporation, or the election or classification of the board of directors without the affirmative vote of two-thirds of the shares entitled to vote on any matter; and
establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.
Our issuance of shares of preferred stock could delay or prevent a change of control of us. Our board of directors has the authority to cause us to issue, without any further vote or action by the stockholders, shares of preferred stock, par value $0.01 per share, in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series. The issuance of shares of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares.
Together, these charter and statutory provisions could make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock. Furthermore, the existence of the foregoing provisions, as well as the significant common stock controlled by Hamlet Holdings, could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

27



PRIVATE SECURITIES LITIGATION REFORM ACT
This Form 10-K contains or may contain “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. We have based these forward-looking statements on our current expectations about future events. Further, statements that include words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue,” “present,” “preserve,” or “pursue,” or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements. These forward-looking statements are found at various places throughout this report. These forward-looking statements, including, without limitation, those relating to future actions, new projects, strategies, future performance, the outcome of contingencies such as legal proceedings, the restructuring of CEOC and future financial results, wherever they occur in this report, are necessarily estimates reflecting the best judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors set forth above and from time to time in our filings with the Securities and Exchange Commission.
In addition to the risk factors set forth above, important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include without limitation:
the outcome of currently pending or threatened litigation and demands for payment by certain creditors and by the NRF against CEC;
the effects of CEOC’s bankruptcy on CEOC and its subsidiaries and affiliates, including Caesars Entertainment, and the interest of various creditors, equity holders and other constituents;
the ability to retain key employees during the restructuring of CEOC;
risks associated with third party motions in the Chapter 11 Case, which may hinder or delay CEOC's ability to consummate the Third Amended Plan;
the ability (or inability) of CEC and CEOC to satisfy the conditions to the effectiveness of the Third Amended Plan;
adverse effects of the Chapter 11 proceedings and related litigation on Caesars Entertainment’s liquidity or results of operations;
the effects of local and national economic, credit and capital market conditions on the economy, in general, and on the gaming industry, in particular;
the financial results of our consolidated businesses;
the impact of our substantial indebtedness and the restrictions in our debt agreements;
access to available and reasonable financing on a timely basis, including the ability of the Company to refinance its indebtedness on acceptable terms;
the ability of our customer tracking, customer loyalty, and yield management programs to continue to increase customer loyalty and same-store or hotel sales;
changes in laws, including increased tax rates, smoking bans, regulations or accounting standards, third-party relations and approvals, and decisions, disciplines and fines of courts, regulators and governmental bodies;
our ability to recoup costs of capital investments through higher revenues;
abnormal gaming holds (“gaming hold” is the amount of money that is retained by the casino from wagers by customers);
the effects of competition, including locations of competitors, competition for new licenses, and operating and market competition;
the ability to timely and cost-effectively integrate companies that we acquire into our operations;
the potential difficulties in employee retention and recruitment as a result of our substantial indebtedness or any other factor;

28



construction factors, including delays, increased costs of labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters, and building permit issues;
litigation outcomes and judicial and governmental body actions, including gaming legislative action, referenda, regulatory disciplinary actions, and fines and taxation;
acts of war or terrorist incidents, severe weather conditions, uprisings or natural disasters, including losses therefrom, losses in revenues and damage to property, and the impact of severe weather conditions on our ability to attract customers to certain of our facilities;
the effects of environmental and structural building conditions relating to our properties;
access to insurance on reasonable terms for our assets; and
the impact, if any, of unfunded pension benefits under multi-employer pension plans.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events, except as required by law.
ITEM 1B.
Unresolved Staff Comments
None.

29



ITEM 2.
Properties
As of December 31, 2016 , we owned the following casino properties. All amounts are approximations.
Property
Location
Casino
Space–
Sq. Ft.
 
Slot
Machines
 
Table
Games
 
Hotel
Rooms and
Suites
 
 
 
 
 
 
 
 
 
Bally’s Las Vegas
Las Vegas, NV
68,400

 
990

 
70

 
2,810

The Cromwell
Las Vegas, NV
40,000

 
390

 
50

 
190

Flamingo Las Vegas
Las Vegas, NV
72,300

 
1,090

 
110

 
3,460

Harrah’s Atlantic City
Atlantic City, NJ
155,200

 
2,180

 
180

 
2,590

Harrah’s Las Vegas
Las Vegas, NV
90,600

 
1,250

 
90

 
2,530

Harrah’s Laughlin
Laughlin, NV
56,000

 
910

 
40

 
1,510

Harrah’s New Orleans
New Orleans, LA
125,100

 
1,580

 
150

 
450

Horseshoe Baltimore
Baltimore, MD
122,000

 
2,200

 
180

 

The LINQ Hotel & Casino
Las Vegas, NV
31,900

 
760

 
70

 
2,250

Paris Las Vegas
Las Vegas, NV
95,300

 
1,020

 
100

 
2,920

Planet Hollywood Resort & Casino
Las Vegas, NV
64,500

 
1,080

 
100

 
2,500

Rio All-Suites Hotel & Casino
Las Vegas, NV
117,300

 
1,060

 
70

 
2,520

 

30



ITEM 3.
Legal Proceedings
We are subject to a number of Noteholder Disputes, all of which are currently stayed consensually or by order of the Bankruptcy Court, related to various transactions that CEOC has completed since 2010, as well as certain other litigation. See Note 3 for fu ll details of the matters outlined below.
Noteholder Disputes
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 (the “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 Wilmington Trust, National Association on October 20, 2015 (the “New York Senior Notes Lawsuit”)
Other Litigation
Litigation commenced by Nicholas Koskie on December 30, 2014 (the “Merger Lawsuit”)
Litigation commenced by Hilton on December 24, 2014 (the “Hilton Lawsuit”)
Litigation commenced by Trustees of the National Retirement Fund in January 2015 (“NRF Litigation”)
ITEM 4.
Mine Safety Disclosures
Not applicable.

31



PART II

ITEM 5.
Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock trades on the NASDAQ under the ticker symbol “CZR.” The following table sets forth the high and low sales prices for our common stock on the NASDAQ for each quarter during 2016 and 2015 .
 
2016
 
2015
 
High
 
Low
 
High
 
Low
First Quarter
$
9.64

 
$
5.65

 
$
16.00

 
$
8.78

Second Quarter
8.86

 
6.24

 
12.48

 
5.95

Third Quarter
10.84

 
5.39

 
10.61

 
3.30

Fourth Quarter
8.50

 
6.70

 
9.17

 
5.75

As of February 1, 2017 , there were 147,184,937 shares of common stock issued and outstanding that were held by 121 stockholders of record.
To date, we have not paid a cash dividend. Certain of our borrowings have covenants and requirements restricting or limiting the ability of CEC and its subsidiaries to, among other things, pay dividends on or make distributions in respect of their capital stock or make other restricted payments. See Note 11 for additional information on our covenants and restrictions.
There have not been any sales by CEC of equity securities during the years ended December 31, 2016 , 2015 , or 2014 , that have not been registered under the Securities Act. In addition, CEC did not repurchase shares of its common stock during the three months ended December 31, 2016 .
Performance Graph
The graph depicted below compares the cumulative total stockholder return on our common stock with the cumulative total return on the Standard & Poor's 500 Stock Index (“S&P 500”) and the Dow Jones U.S. Gambling Total Stock Market Index (“Dow Jones U.S. Gambling”) for the period beginning on February 8, 2012 (the date our common stock commenced trading on the NASDAQ Global Select Market) and ending on December 31, 2016 . NASDAQ OMX furnished the data. The performance graph assumes a $100 investment in our stock and each of the two indices, respectively, on February 8, 2012, and that all dividends were reinvested. Stock price performance, presented for the period from February 8, 2012 to December 31, 2016 , is not necessarily indicative of future results.

CAPTURE1.JPG


32




 
 
 
As of December 31,
 
2/8/2012
 
2012
 
2013
 
2014
 
2015
 
2016
CZR
$
100.00

 
$
44.96

 
$
139.96

 
$
101.95

 
$
51.27

 
$
55.23

S&P 500 Index
100.00

 
107.85

 
142.78

 
162.33

 
164.57

 
184.26

Dow Jones U.S. Gambling
100.00

 
98.69

 
168.43

 
139.72

 
116.41

 
147.66

The performance graph should not be deemed filed or incorporated by reference into any other of our filings under the Securities Act or the Exchange Act, unless we specifically incorporate the performance graph by reference therein.
Equity Compensation Plan Information
We maintain various long-term incentive plans for management, other personnel, and key service providers. The plans allow for granting stock-based compensation awards, including time-based and performance-based stock options, restricted stock units, restricted stock awards, stock grants, or a combination of awards. See Note 14 for a description of our stock-based compensation plans.
Equity compensation plans approved by security holders
 
Number of securities to be
issued upon exercise of
outstanding options or
vesting of restricted stock units
 
Weighted-average exercise
price of outstanding options
 
Number of securities
remaining available for
future issuance under equity
compensation plans
(2)
Stock options   (1)
 
9,820,168

 
$
11.69

 
8,331,449

Restricted stock units
 
8,447,922

 
N/A

 
N/A

____________________
(1)  
The weighted average remaining contractual life for the options set forth in this row is 6.2 years.
(2)  
Under the 2012 Incentive Plan, the type and form of awards that can be granted includes, but is not limited to, stock options, stock appreciation rights, restricted stock awards, and restricted stock units.


33



ITEM 6.
Selected Financial Data
The following selected financial data should be read in conjunction with the consolidated financial statements and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K.
(In millions, except per share data)
2016
 
2015 (1)
 
2014
 
2013
 
2012
OPERATING DATA
 
 
 
 
 
 
 
 
 
Net revenues
$
3,877

 
$
3,929

 
$
7,967

 
$
7,917

 
$
7,994

Impairment of goodwill

 

 
695

 
104

 
195

Impairment of tangible and other intangible assets (2)

 
1

 
299

 
2,727

 
430

Income/(loss) from operations
257

 
346

 
(555
)
 
(2,047
)
 
72

Interest expense
599

 
683

 
2,669

 
2,252

 
2,100

Deconsolidation and restructuring of CEOC and other (3)
(5,758
)
 
6,115

 
(95
)
 
28

 
161

Income/(loss) from continuing operations, net of income taxes
(6,127
)
 
5,897

 
(2,723
)
 
(2,748
)
 
(1,150
)
Discontinued operations, net of income taxes (4)
3,380

 
155

 
(143
)
 
(192
)
 
(353
)
Net income/(loss)
(2,747
)
 
6,052

 
(2,866
)
 
(2,940
)
 
(1,503
)
Net income/(loss) attributable to Caesars
(3,569
)
 
5,920

 
(2,783
)
 
(2,948
)
 
(1,508
)
COMMON STOCK DATA
 
 
 
 
 
 
 
 
 
Basic earnings/(loss) per share from:
 
 
 
 
 
 
 
 
 
Continuing operations
$
(47.52
)
 
$
39.80

 
$
(18.53
)
 
$
(21.43
)
 
$
(9.22
)
Discontinued operations (4)
23.11

 
1.08

 
(1.00
)
 
(1.50
)
 
(2.82
)
Net income/(loss)
$
(24.41
)
 
$
40.88

 
$
(19.53
)
 
$
(22.93
)
 
$
(12.04
)
Diluted earnings/(loss) per share from:
 
 
 
 
 
 
 
 
 
Continuing operations
$
(47.52
)
 
$
39.20

 
$
(18.53
)
 
$
(21.43
)
 
$
(9.22
)
Discontinued operations (4)
23.11

 
1.06

 
(1.00
)
 
(1.50
)
 
(2.82
)
Net income/(loss)
$
(24.41
)
 
$
40.26

 
$
(19.53
)
 
$
(22.93
)
 
$
(12.04
)
 
 
 
 
 
 
 
 
 
 
FINANCIAL POSITION DATA
 
 
 
 
 
 
 
 
 
Total assets
$
14,894

 
$
12,206

 
$
23,339

 
$
24,492

 
$
27,670

Current portion of long-term debt
89

 
187

 
15,779

 
197

 
880

Long-term debt   (5)
6,749

 
6,777

 
7,230

 
20,715

 
20,305

Noncontrolling interests (6)
1,759

 
1,246

 
255

 
1,218

 
80

Stockholders’ equity/(deficit)
(3,177
)
 
987

 
(4,997
)
 
(3,122
)
 
(412
)
____________________
(1)  
2015 reflects the deconsolidation of CEOC (see Note 2 ).
(2)  
See Note 6 and Note 7 for information about impairments.
(3)  
See Note 1 .
(4)  
See Note 17 .
(5)  
See Note 11 for information about debt.
(6)  
The decrease in 2014 was primarily due to the sale and grant of CEOC shares in May 2014, which reduced CEC’s ownership to approximately 89%. The increase in 2013 was primarily due to the formation of CGP (see Note 2 ).



34



ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
We also refer to (i) our Consolidated Financial Statements as our “Financial Statements,” (ii) our Consolidated Statements of Operations and Comprehensive Income as our “Statements of Operations,” and (iii) our Consolidated Balance Sheets as our “Balance Sheets.” Note references are to the notes to consolidated financial statements included in Item 8.
The following discussion should be read in conjunction with, and is qualified in its entirety by, the audited consolidated financial statements and the notes thereto and other financial information included elsewhere in this Form 10-K.
The statements in this discussion regarding our expectations regarding our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. Our actual results may differ materially from those contained in or implied by any forward-looking statements. See Item 1A, “Risk Factors—PRIVATE SECURITIES LITIGATION REFORM ACT” of this report.
Overview

Our business is operated through CEC, which is primarily a holding company with no independent operations of its own, and our two reportable segments. Through June 30, 2016, we aggregated the operating segments within Caesars Growth Partners (“CGP”) into two separate reportable segments: Caesars Growth Partners Casino Properties and Developments (“CGP Casinos”) and Caesars Interactive Entertainment (“CIE”). Subsequent to CIE’s sale of its social and mobile games business (the “SMG Business”) (see discussion under “Summary of 2016 Events” below), the remaining CIE business is not material, and we no longer consider CIE to be a separate reportable segment from CGP Casinos. Therefore, CGP Casinos and CIE have been combined for all periods presented to form the CGP segment. In addition, we deconsolidated Caesars Entertainment Operating Company (“CEOC”) from our results following its bankruptcy filing in January 2015, and therefore CEOC is not included in our financial results for the majority of 2015 and all of 2016, and is no longer a reportable segment. The Caesars Entertainment Resort Properties (“CERP”) and CGP segments include the following properties: (1)  
CERP (2)
 
CGP  
Flamingo Las Vegas
 
Bally’s Las Vegas
Harrah’s Atlantic City
 
The Cromwell
Harrah’s Las Vegas
 
Harrah’s New Orleans
Harrah’s Laughlin
 
Horseshoe Baltimore
Paris Las Vegas
 
The LINQ Hotel & Casino
Rio All-Suites Hotel & Casino
 
Planet Hollywood Resort & Casino
 
 
CIE Real-Money Online Gaming
 
 
CIE World Series of Poker
___________________
(1)  
CEOC remained a reportable segment until its deconsolidation effective January 15, 2015 (see Note 2 ).
(2)  
CERP also owns The LINQ promenade and Octavius Tower at Caesars Palace Las Vegas (“Octavius Tower”).


35



Summary of 2016 Events and Key Drivers of Annual Performance

The following are the significant events of 2016 and the key drivers of our performance. Accordingly, these key drivers are described here, and the remainder of the discussion and analysis of results should be read in conjunction with these explanations.
CEC Going Concern
As a result of the following circumstances, we have substantial doubt about CEC’s ability to continue as a going concern:
we have limited unrestricted cash available to meet the financial commitments of CEC, primarily resulting from significant expenditures made to (1) defend against the litigation matters disclosed below and (2) support a plan of reorganization for CEOC (the “Restructuring”);
we have made material future commitments to support the Restructuring described below; and
we are a defendant in litigation relating to certain CEOC transactions dating back to 2010 and other legal matters (see Note 3 ) that could result in one or more adverse rulings against us if the Restructuring is not completed.
In connection with the Restructuring and litigation noted above, during 2016 and 2015, CEC has incurred legal and professional fees and expenses at levels significantly higher than historical amounts. For example, as of December 31, 2016, we have accrued $6.6 billion of restructuring and support expenses, and during 2016 and 2015, we incurred $70 million and $73 million , respectively, in legal and professional fees associated with reorganization efforts and ongoing litigation. We expect to continue to incur additional expenses until CEOC’s successful emergence from bankruptcy.
The circumstances set forth above and described in more detail in Note 1 , individually and collectively, raise substantial doubt about CEC’s ability to continue as a going concern between now and the Effective Date of the Restructuring. CEC does not currently have sufficient cash to meet its financial commitments to support the Third Amended Plan or to satisfy the potential obligations that would arise in the event of an adverse ruling on one or all of the litigation matters disclosed below. The completion of the merger with Caesars Acquisition Company (“CAC”) is expected to allow CEC to fulfill its financial commitments in support of the Restructuring. However, if the Merger is not completed for any reason, CEC would still be liable for many of these obligations. In addition, although under the terms of the Restructuring, all related litigation is expected to be resolved, there remain the outstanding litigation matters that are currently stayed pending CEOC’s emergence from bankruptcy.
CEC entered into the CIE Proceeds and Reservation Rights Agreement (as amended on October 7, 2016) with CIE, CEOC and CAC (the “CIE Proceeds Agreement”), which allows for up to $235 million of the proceeds from the SMG Business sale to be distributed to CEC in order to pay certain fees in support of the Restructuring (“CEC Expense Amounts”). After taking into account the cash available to pay the CEC Expense Amounts under the CIE Proceeds Agreement and other sources of liquidity, CEC expects to have sufficient cash to meet its ongoing obligations as they come due for at least 12 months beyond the issuance date of these financial statements. However, there are restrictions governing when and how the cash designated for CEC Expense Amounts can be used (see Note 2 ). CEC also expects to gain access to the remaining proceeds from the sale of the SMG Business upon completion of the Merger, which will be used to fund its other commitments in support of the Restructuring.
If CEC is unable to access additional sources of cash when needed, in the event of a material adverse ruling on one or all of the litigation matters disclosed below, or if CEOC does not emerge from bankruptcy on a timely basis on terms and under circumstances satisfactory to CEC, it is likely that CEC would seek reorganization under Chapter 11 of the Bankruptcy Code.
CEOC Reorganization
On January 13, 2017 , the Debtors filed an amended plan of reorganization (the “Third Amended Plan”) with the United States Bankruptcy Court for the Northern District of Illinois in Chicago (the “Bankruptcy Court”) that replaces all previously filed plans. CEC, CAC, the Debtors and CEOC’s major creditor groups have agreed to support the Third Amended Plan. The Bankruptcy Court confirmed the Third Amended Plan on January 17, 2017 .
As part of the Third Amended Plan, it is anticipated that CEOC will be divided into two companies - OpCo and PropCo. OpCo will operate CEOC’s properties and facilities. PropCo will hold certain of CEOC’s real property assets and related fixtures and will lease those assets to OpCo. It is anticipated that OpCo will be a wholly owned consolidated subsidiary of CEC subsequent to the CEOC’s emergence, and that will contract with another subsidiary of CEC to manage the facilities to be leased from PropCo.
Although the Third Amended Plan has been confirmed by the Bankruptcy Court, we must still obtain regulatory approval in all of the jurisdictions in which we have gaming operations in order for CEOC to successfully emerge from bankruptcy, and we are

36



unable to determine when all necessary requirements will be satisfied. In addition, the Third Amended Plan remains subject to completion of the merger with CAC, certain financing transactions, and various other closing conditions.
CIE’s Sale of the SMG Business
On September 23, 2016 , CIE sold the SMG Business for cash consideration of $4.4 billion , subject to customary purchase price adjustments, and retained only its World Series of Poker and regulated online real money gaming businesses. This resulted in a pre-tax gain of approximately $4.2 billion . The SMG Business represented the majority of CIE’s operations and was classified as discontinued operations for the year ended December 31, 2016 . Historical results of the SMG Business have been recast as discontinued operations for the years ended December 31, 2015 and 2014 , and the related assets and liabilities have been recast as held for sale as of December 31, 2015 (see “Discontinued Operations” in the Discussion of Operating Results section below and Note 17 ).
Upon closing the sale of the SMG Business, all outstanding CIE stock-based compensation awards were deemed fully vested and subsequently canceled in return for the right to receive a cash payment. CIE’s stock-based compensation expense directly identifiable with employees of the SMG Business was $264 million , $29 million , and $38 million during the years ended December 31, 2016 , 2015 , and 2014 , respectively. These expense amounts were reclassified to discontinued operations for all periods presented in the Statements of Operations. Stock-based compensation expense not directly identifiable with employees of the SMG Business was $189 million , $31 million , and $49 million during the years ended December 31, 2016 , 2015 , and 2014 , respectively, and was included in property, general, administrative, and other in the Statements of Operations. For the year ended December 31, 2016, the majority of stock-based compensation expense resulted from the acceleration of the vesting of CIE stock-based compensation awards.
Discussion of Operating Results

As described above and in Note 1 , we deconsolidated CEOC effective January 15, 2015. Headings below labeled “CERP and CGP” represent the combined results of the entities that remain in the consolidated Caesars entity subsequent to the deconsolidation of CEOC, and do not include the results of CEOC or the SMG Business. Where we have presented an analysis of other factors affecting net income/(loss) and consolidated results by reportable segment, this information includes CEOC as a reportable segment for the first 15 days of 2015.
Segment results in this MD&A are presented consistent with the way Caesars management assesses the results subsequent to the deconsolidation of CEOC, which is a consolidated view that adjusts for the impact of certain transactions between reportable segments within Caesars for all periods presented. Therefore, the results of certain reportable segments presented in this filing differ from the financial statement information presented in their separate filings. “Other” includes parent, consolidating, and other adjustments to reconcile to consolidated Caesars results.
Consolidated Operating Results
 
Years Ended December 31,
 
 
 
2016
 
2015
 
 
(A)
 
(B)
 
 
 
 
 
(A) vs. (B)
 
CERP and CGP  (1)
CERP and CGP  (1)
CEOC  (2)
Consolidated Caesars
 
Fav/(Unfav)
(Dollars in millions)
 
$
 
%
Casino revenues
$
2,177

 
$
2,168

 
$
118

 
$
2,286

 
$
9

 
0.4
 %
Net revenues
3,877

 
3,771

 
158

 
3,929

 
106

 
2.8
 %
Income from operations
257

 
337

 
9

 
346

 
(80
)
 
(23.7
)%
Deconsolidation and restructuring of CEOC and other
(5,758
)
 
6,115

 

 
6,115

 
(11,873
)
 
*

Income/(loss) from continuing operations, net of income taxes
(6,127
)
 
5,975

 
(78
)
 
5,897

 
(12,102
)
 
*

Discontinued operations, net of income taxes
3,380

 
162

 
(7
)
 
155

 
3,218

 
*

Net income/(loss) attributable to Caesars
(3,569
)
 
6,005

 
(85
)
 
5,920

 
(9,574
)
 
*

Property EBITDA (3)
1,140

 
1,047

 
31

 
1,078

 
93

 
8.9
 %
Operating Margin (4)
6.6
%
 
8.9
%
 
5.7
%
 
8.8
%
 

 
(2.3) pts


37



 
Year Ended December 31,
 
 
 
 
 
2014
 
 
 
 
 
(C)
 
 
 
 
 
(B) vs. (C)
 
CERP and CGP  (1)
CEOC   (2)
Consolidated Caesars
Fav/(Unfav)
(Dollars in millions)
$
 
%
Casino revenues
$
1,923

 
$
3,495

 
$
5,418

 
$
245

 
12.7
%
Net revenues
3,372

 
4,595

 
7,967

 
399

 
11.8
%
Loss from operations
(245
)
 
(310
)
 
(555
)
 
582

 
*

Deconsolidation and restructuring of CEOC and other
142

 
(237
)
 
(95
)
 
5,973

 
*

Loss from continuing operations, net of income taxes
(382
)
 
(2,341
)
 
(2,723
)
 
6,357

 
*

Discontinued operations, net of income taxes
34

 
(177
)
 
(143
)
 
128

 
*

Net loss attributable to Caesars
(429
)
 
(2,354
)
 
(2,783
)
 
6,434

 
*

Property EBITDA   (3)
755

 
826

 
1,581

 
292

 
38.7
%
Operating Margin   (4)
(7.3
)%
 
(6.7
)%
 
(7.0
)%
 

 
16.2 pts

___________________
*
Not meaningful.
(1)  
Includes CERP and CGP segments and associated parent company and elimination adjustments.
(2)  
Includes CEOC segment and associated eliminations of intercompany transactions and other consolidating adjustments.
(3)  
See the “Reconciliation of Non-GAAP Financial Measures” section below.
(4)  
Calculated as income/(loss) from operations divided by net revenues.
Casino revenues, net revenues, income/(loss) from operations, and income/(loss) from continuing operations, net of income taxes for all periods presented in the table above exclude the results of our discontinued operations disclosed in Note 17 .
Analysis of Key Drivers of Revenue Performance for CERP and CGP
Net Revenues - by Category
 
Years Ended December 31,
 
2016 vs. 2015
 
2015 vs. 2014
 
 
Fav/(Unfav)
 
Fav/(Unfav)
(Dollars in millions)
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Casino
$
2,177

 
$
2,168

 
$
1,923

 
$
9

 
0.4
 %
 
$
245

 
12.7
%
Food and beverage
788

 
798

 
760

 
(10
)
 
(1.3
)%
 
38

 
5.0
%
Rooms
923

 
860

 
753

 
63

 
7.3
 %
 
107

 
14.2
%
Other
527

 
487

 
479

 
40

 
8.2
 %
 
8

 
1.7
%
Less: casino promotional allowances
(538
)
 
(542
)
 
(543
)
 
4

 
0.7
 %
 
1

 
0.2
%
Net revenues
$
3,877

 
$
3,771

 
$
3,372

 
$
106

 
2.8
 %
 
$
399

 
11.8
%

38



Increase/(Decrease) in Net Revenues by Category
Years Ended December 31, 2014 through December 31, 2016
A2016Q4CECF_CHART-04288.JPG
Net Revenues - Segment
 
Years Ended December 31,
 
2016 vs. 2015
 
2015 vs. 2014
 
 
Fav/(Unfav)
 
Fav/(Unfav)
(Dollars in millions)
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
CERP
$
2,195

 
$
2,154

 
$
2,065

 
$
41

 
1.9
%
 
$
89

 
4.3
%
CGP
1,697

 
1,620

 
1,319

 
77

 
4.8
%
 
301

 
22.8
%
Other
(15
)
 
(3
)
 
(12
)
 
(12
)
 
*

 
9

 
75.0
%
Total CERP and CGP
3,877

 
3,771

 
3,372

 
106

 
2.8
%
 
399

 
11.8
%
CEOC

 
164

 
4,812

 
*

 
*

 
*

 
*

Other

 
(6
)
 
(217
)
 
*

 
*

 
*

 
*

Total CEOC

 
158

 
4,595

 
*

 
*

 
*

 
*

Consolidated Caesars
$
3,877

 
$
3,929

 
$
7,967

 
*

 
*

 
*

 
*

Cash ADR (1)  
Years Ended December 31, 2014 , 2015 , and 2016
A2016Q4CECF_CHART-05825.JPG
____________________
(1)  
Average cash daily rate (“cash ADR”) is a key indicator by which we evaluate the performance of our properties and is determined by room revenue and rooms occupied.


39



CERP Performance
Net revenues increased $41 million , or 1.9% , in 2016 compared with 2015 primarily due to increases in rooms revenue and other revenues. Net revenues increased $89 million , or 4.3% , in 2015 compared with 2014 , primarily due to increases in casino revenues and rooms revenue. The increases were attributable to the following:
Rooms revenue increased $25 million in 2016 and $42 million in 2015 . The expansion of resort fees to all CERP properties during 2015, improved hotel yield as result of newly renovated rooms becoming available during 2016 at Harrah’s Las Vegas, and the opening of the Harrah’s Atlantic City Waterfront Conference Center (the “Atlantic City Conference Center”) in the third quarter 2015 drove an increase in CERP’s cash ADR from $102 in 2014 to $114 in 2015 and $124 in 2016 .
Scheduled room renovations caused a reduction of approximately 2% of room nights available during 2016 compared with 2015 , primarily at Paris Las Vegas and Harrah’s Las Vegas, which partially offset the 2016 increase in rooms revenue.
Casino revenues increased $32 million in 2015 compared with 2014 , due to a reduction in costs related to variable marketing programs, such as REEL REWARDS, discounts, and free play, that are treated as a reduction in revenue.
Other revenues increased $18 million in 2016 compared with 2015 , primarily due to new performers and additional scheduled performances at the Rio Las Vegas, which contributed to higher entertainment revenue in 2016.
CGP Performance
Net revenues increased $77 million , or 4.8% , in 2016 compared with 2015 primarily due to increases in rooms revenue and other revenues. Net revenues increased $301 million , or 22.8% , in 2015 compared with 2014 , primarily due to increases in casino revenues as well as improved food and beverage revenues and rooms revenues. The increases were attributable to the following:
Rooms revenue increased $38 million in 2016 and $65 million in 2015 . Room renovations at The LINQ Hotel & Casino (“The LINQ Hotel”) were substantially completed and available to guests in early May 2015, which resulted in increases in room nights available of approximately 14% in 2016 and 24% in 2015 compared with the corresponding prior year periods. In addition, the expansion of resort fees and improved hotel yield drove an increase in CGP’s cash ADR from $108 in 2014 to $123 in 2015 and $132 in 2016 .
Other revenues increased $35 million in 2016 compared with 2015 , primarily due to new performers at Planet Hollywood Resort & Casino, which contributed to higher entertainment revenue in 2016.
Casino revenues and food and beverage revenues increased $214 million and $28 million , respectively, in 2015 compared with 2014 , primarily due to higher volume at The LINQ Hotel after the completion of renovations, and the benefit of The Cromwell and Horseshoe Baltimore operating for the full year in 2015 after opening during 2014.
Partially offsetting the 2015 increase in casino revenues was a decline at Harrah’s New Orleans, which was mostly due to the New Orleans smoking ban that was enacted in April 2015.
Analysis of Key Drivers of Income/(Loss) from Operations Performance for CERP and CGP
Income from operations was $257 million in 2016 compared with $337 million in 2015 and a loss from operations of $245 million in 2014 . After net revenues, the key drivers of income/(loss) from operations during 2016 and 2015 were primarily property, administrative, general and other (including CIE stock-based compensation expense); impairments; corporate expense; and depreciation and amortization.

40



Income/(Loss) from Operations by Category - CERP and CGP
 
Years Ended December 31,
 
2016 vs. 2015
 
2015 vs. 2014
 
 
Fav/(Unfav)
 
Fav/(Unfav)
(Dollars in millions)
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Net revenues
$
3,877

 
$
3,771

 
$
3,372

 
$
106

 
2.8
 %
 
$
399

 
11.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Casino expense
1,128

 
1,122

 
1,071

 
(6
)
 
(0.5
)%
 
(51
)
 
(4.8
)%
Food and beverage
383

 
388

 
386

 
5

 
1.3
 %
 
(2
)
 
(0.5
)%
Rooms
249

 
223

 
209

 
(26
)
 
(11.7
)%
 
(14
)
 
(6.7
)%
Property, general, administrative, and other (“PGA & O”)
1,166

 
1,022

 
1,000

 
(144
)
 
(14.1
)%
 
(22
)
 
(2.2
)%
Depreciation and amortization
439

 
361

 
315

 
(78
)
 
(21.6
)%
 
(46
)
 
(14.6
)%
Impairments

 
1

 
435

 
1

 
100.0
 %
 
434

 
99.8
 %
Corporate expense
166

 
169

 
95

 
3

 
1.8
 %
 
(74
)
 
(77.9
)%
Other operating costs
89

 
148

 
106

 
59

 
39.9
 %
 
(42
)
 
(39.6
)%
Total operating expenses
3,620

 
3,434

 
3,617

 
(186
)
 
(5.4
)%
 
183

 
5.1
 %
Income/(loss) from operations
$
257

 
$
337

 
$
(245
)
 
$
(80
)
 
(23.7
)%
 
$
582

 
*

____________________
*
Not meaningful.

Increase/(Decrease) in Income/(Loss) from Operations
Years Ended December 31, 2014 through December 31, 2016
A2016Q4CECF_CHART-07162.JPG

41



Income/(Loss) from Operations - by Segment
 
Years Ended December 31,
 
2016 vs. 2015
 
2015 vs. 2014
 
 
Fav/(Unfav)
 
Fav/(Unfav)
(Dollars in millions)
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
CERP
$
389

 
$
411

 
$
(32
)
 
$
(22
)
 
(5.4
)%
 
$
443

 
*
CGP
20

 
253

 
(221
)
 
(233
)
 
(92.1
)%
 
474

 
*
Other
(152
)
 
(327
)
 
8

 
175

 
53.5
 %
 
(335
)
 
*
Total CERP and CGP
257

 
337

 
(245
)
 
(80
)
 
(23.7
)%

582

 
*
CEOC

 
9

 
(323
)
 
*

 
*

 
*

 
*
Other

 

 
13

 
*

 
*

 
*

 
*
Total CEOC

 
9

 
(310
)
 
*

 
*

 
*

 
*
Consolidated Caesars
$
257

 
$
346

 
$
(555
)
 
*

 
*

 
*

 
*
____________________
*    Not meaningful.
Impairments - by Segment  (1)  
 
Years Ended December 31,
(In millions)
2016
 
2015
 
2014
CERP
$

 
$

 
$
277

CGP

 
1

 
158

CEOC

 

 
559

Total
$

 
$
1

 
$
994

____________________
(1)  
See Notes  6 and 7 for additional information.
CERP Performance
Income from operations decreased $22 million in 2016 compared with 2015 primarily due to increases in direct rooms expenses and depreciation and amortization. Income from operations improved $443 million in 2015 compared with 2014 , primarily due to increased revenue combined with a reduction in impairment charges and direct operating expenses. The fluctuations were attributable to the following:
In 2016 , direct rooms expenses increased consistently with the increase in rooms revenues, and depreciation and amortization increased due to the removal and replacement of certain assets related to ongoing property renovation projects primarily at Harrah’s Las Vegas, Paris Las Vegas, and Flamingo Las Vegas, as well as depreciation expense related to the Atlantic City Conference Center, which opened during 2015. The increase in operating expenses more than offset the increase in net revenues described above.
In 2015 , the improvement was primarily attributable to the increase in net revenues and because there were no impairment charges during 2015 compared with $277 million during 2014 (see Note 7 ). In addition, cost savings initiatives implemented in the fourth quarter of 2014 also contributed to the reduction in operating expenses.

42



CGP Performance
Income from operations decreased $233 million in 2016 compared with 2015 and increased $474 million in 2015 compared with 2014 . CGP’s income from operations includes the effect of the change in the liability associated with CGP’s contingently issuable non-voting membership units due to CEC, which decreased CGP’s income from operations $117 million in 2016 and increased CGP’s income from operations $156 million in 2015 compared with the corresponding prior year periods. The units were issued to CEC during 2016, and no liability was outstanding for CGP as of December 31, 2016 (see Note 2 ). The effect of these changes is eliminated in consolidation with the offsetting amounts being reflected in “Other” in the “Income/(Loss) from Operations - by Segment” table above.
Excluding the effect of CGP’s contingently issuable non-voting membership units from both periods, CGP’s income/(loss) from operations decreased $116 million in 2016 and increased $318 million in 2015 compared with the corresponding prior year periods.
In 2016 , the decrease was primarily due to the accelerated vesting of CIE equity awards resulting in increases in CIE stock-based compensation expense. Stock-based compensation expense was $189 million in 2016 compared with $31 million in 2015. In addition, CIE incurred costs related to the sale of the SMG Business. Upon the closing of the SMG Business sale, all outstanding CIE stock-based compensation awards were deemed fully vested and were subsequently paid in cash in connection with the closing of the SMG Business sale, as described in Note 17 .
The portion of CIE’s stock-based compensation expense directly identifiable with employees of the SMG Business was reclassified to discontinued operations for all periods presented in the Statements of Operations (see Note 17 ). The portion of CIE’s stock-based compensation expense not directly identifiable with employees of the SMG Business was included in property, general, administrative, and other in the Statements of Operations. For the year ended December 31, 2016 , the majority of stock-based compensation expense resulted from the acceleration of the vesting of CIE stock-based compensation awards.
In 2015 , the improvement was primarily attributable to the increase in net revenues and because there were no material impairment charges during 2015 compared with $158 million during 2014 (see Note 7 ). In addition, cost savings initiatives also contributed to the reduction in operating expenses.
Other Performance
As described above, “Other” in the “Income/(Loss) from Operations - by Segment” table above includes the intercompany elimination that offsets the change in liability associated with CGP’s contingently issuable non-voting membership units. Excluding the effect of contingently issuable non-voting membership units, other loss from operations was $152 million in 2016 , $210 million in 2015 , and $31 million in 2014 .
During 2016 and 2015 , as described above and in Note 1 , CEC (the parent holding company) incurred expenses related to CEOC’s bankruptcy activity and the RSAs and incurred other legal expenses related to ongoing litigation. During 2015, CEC also accrued $35 million for a payment due to CEOC (see Note 1 ).
Interest Expense and Other Factors that Affect Net Income/(Loss)
Interest Expense
 
 
 
 
 
 
 
2016 vs. 2015
 
2015 vs. 2014
 
Years Ended December 31,
 
Fav/(Unfav)
 
Fav/(Unfav)
(Dollars in millions)
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
CEOC
$

 
$
87

 
$
2,184

 
$
87

 
*

 
$
2,097

 
*

CERP  
396

 
399

 
389

 
3

 
0.8
 %
 
(10
)
 
(2.6
)%
CGP
198

 
195

 
169

 
(3
)
 
(1.5
)%
 
(26
)
 
(15.4
)%
Other  (1)
5

 
2

 
(73
)
 
(3
)
 
(150.0
)%
 
(75
)
 
*

Total
$
599

 
$
683

 
$
2,669

 
84

 
*

 
$
1,986

 
*

____________________
*    Not meaningful.
(1)  
Activity in 2014 primarily consisted of the elimination of intercompany interest paid by CEOC for debt instruments held by CGP.

43



Other Factors Affecting Net Income/(Loss) (including CEOC)
 
 
 
 
 
 
 
2016 vs. 2015
 
2015 vs. 2014
 
Years Ended December 31,
 
Fav/(Unfav)
 
Fav/(Unfav)
(Dollars in millions)
2016
 
2015
 
2014
 
$
 
%
 
$
 
%
Interest expense
$
599

 
$
683

 
$
2,669

 
$
84

 
*
 
$
1,986

 
*

Deconsolidation and restructuring of CEOC and other
(5,758
)
 
6,115

 
(95
)
 
(11,873
)
 
*
 
6,210

 
*

Income tax benefit/(provision)
(27
)
 
119

 
596

 
(146
)
 
*
 
(477
)
 
(80.0
)%
Discontinued operations
3,380

 
155

 
(143
)
 
3,225

 
*
 
298

 
*

____________________
*    Not meaningful.
Interest expense is primarily attributable to the outstanding debt described in Note 11 . Interest expense decreased $84 million in 2016 compared with 2015 and $2.0 billion in 2015 compared with 2014 , both of which were primarily due to the deconsolidation of CEOC. Excluding the effect of the CEOC deconsolidation, interest expense increased $3 million in 2016 and $38 million in 2015 . The increase in 2015 was primarily due to:
a $26 million increase in interest associated with the CGPH Term Loan and CGPH Notes, which provided funding for the four properties CGP acquired from CEOC in May 2014, and the Horseshoe Baltimore Credit and FF&E Facilities after Horseshoe Baltimore construction was completed in the second quarter of 2014;
a $27 million reduction in capitalized interest due to CERP completing The LINQ promenade in the first quarter of 2014 and CGP completing The Cromwell in the second quarter of 2014 and Horseshoe Baltimore in the third quarter; and
a partially offsetting $15 milli