Caesars Entertainment Corporation
CAESARS ENTERTAINMENT OPERATING COMPANY, INC. (Form: 10-Q, Received: 08/14/2014 16:36:43)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2014
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File No. N/A
 _________________________
CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
(Exact name of registrant as specified in its charter)
 _________________________
 
Delaware
 
75-1941623
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
One Caesars Palace Drive, Las Vegas, Nevada
 
89109
(Address of principal executive offices)
 
(Zip Code)
(702) 407-6000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
 _________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x      No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
o
 
 
 
 
Non-accelerated filer
x   (Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   o     No   x
As of August 1, 2014, the Registrant had 1,448,936 shares of common stock outstanding. There is not a market for the Registrant's common stock; therefore, the aggregate market value of the Registrant's common stock held by non-affiliates is not calculable.



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

We have proprietary rights to a number of trademarks used in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 (this "Form 10-Q"), that are important to our business, including, without limitation, Caesars, Caesars Entertainment, Caesars Palace, Harrah’s, Total Rewards, Horseshoe, Paris Las Vegas, Flamingo, and Bally's. We have omitted the registered trademark (®) and trademark (™) symbols for such trademarks named in this Form 10-Q.
.

2


PART I—FINANCIAL INFORMATION

Item 1.
Unaudited Financial Statements
CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(In millions, except par value)
 
June 30, 2014

December 31, 2013
Assets
 

 
Current assets
 

 
Cash and cash equivalents
$
2,146.6


$
1,438.7

Restricted cash
19.0

 
14.2

Receivables, net
468.2


494.0

Prepayments and other current assets
162.0


190.7

Inventories
28.9


31.4

Due from affiliates
39.6


76.4

Total current assets
2,864.3


2,245.4

Property and equipment, net
6,341.7


8,852.4

Goodwill
934.8


1,271.2

Intangible assets other than goodwill
2,734.2


2,904.8

Investments in and advances to non-consolidated affiliates
149.2


152.2

Restricted cash
1,736.9


85.2

Deferred charges and other
439.7


482.6

Assets held for sale
6.7

 
11.9

 
$
15,207.5


$
16,005.7

Liabilities and Stockholders’ Deficit
 

 
Current liabilities
 

 
Accounts payable
$
236.2


$
344.1

Accrued expenses
883.1


842.4

Interest payable
313.4


308.1

Deferred income taxes
296.2


291.6

Current portion of long-term debt
167.6

 
113.4

Total current liabilities
1,896.5


1,899.6

Long-term debt
18,240.1


16,639.8

Deferred income taxes
1,408.2


1,586.0

Deferred credits and other
723.6


1,254.6

Notes payable to affiliate

 
300.8

 
22,268.4


21,680.8

Commitments and contingencies (Note 15)


 


Stockholders’ deficit
 

 
Common stock: voting; $0.001 par value; 1.4 shares issued and outstanding



Additional paid-in capital
2,967.5


3,570.8

Accumulated deficit
(10,013.3
)

(9,234.4
)
Accumulated other comprehensive loss
(40.4
)

(37.1
)
Total stockholders’ deficit
(7,086.2
)

(5,700.7
)
Noncontrolling interests
25.3


25.6

Total deficit
(7,060.9
)

(5,675.1
)
 
$
15,207.5


$
16,005.7

See accompanying Notes to Consolidated Condensed Financial Statements.

3


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In millions)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Revenues
 
 
 
 
 
 
 
Casino
$
976.0

 
$
1,105.7

 
$
1,992.6

 
$
2,286.4

Food and beverage
209.7

 
250.9

 
436.6

 
502.3

Rooms
139.1

 
194.7

 
300.1

 
373.3

Management fees
23.6

 
17.2

 
40.3

 
27.8

Other
87.4

 
86.9

 
161.3

 
171.3

Reimbursed management costs
114.5

 
79.7

 
216.9

 
150.7

Less: casino promotional allowances
(168.8
)
 
(197.6
)
 
(357.3
)
 
(403.1
)
Net revenues
1,381.5

 
1,537.5

 
2,790.5

 
3,108.7

Operating expenses
 
 
 
 
 
 
 
Direct
 
 
 
 
 
 
 
Casino
594.3

 
653.2

 
1,226.8

 
1,329.0

Food and beverage
86.6

 
105.2

 
174.6

 
209.0

Rooms
32.1

 
48.0

 
71.5

 
90.7

Property, general, administrative, and other
290.1

 
322.7

 
584.5

 
655.1

Reimbursable management costs
114.5

 
79.7

 
216.9

 
150.7

Depreciation and amortization
69.9

 
106.7

 
161.5

 
221.5

Write-downs, reserves, and project opening costs, net of recoveries
51.7

 
19.8

 
63.9

 
27.1

Impairment of intangible and tangible assets
17.4

 
82.9

 
29.8

 
102.9

Loss on interests in non-consolidated affiliates
6.5

 
15.7

 
3.0

 
18.7

Corporate expense
44.0

 
23.5

 
78.6

 
44.2

Acquisition and integration costs
(1.5
)
 
5.6

 
13.2

 
17.4

Amortization of intangible assets
12.9

 
22.5

 
27.8

 
45.1

Total operating expenses
1,318.5

 
1,485.5

 
2,652.1

 
2,911.4

Income from operations
63.0

 
52.0

 
138.4

 
197.3

Interest expense
(547.9
)
 
(527.1
)
 
(1,083.6
)
 
(1,073.1
)
Gain/(loss) on early extinguishment of debt
0.1

 
(0.1
)
 

 
(29.6
)
Gain/(loss) on partial sale of subsidiary
(3.1
)
 
44.1

 
(3.1
)
 
44.1

Other income, including interest income
4.9

 
5.2

 
5.9

 
7.7

Loss from continuing operations, before income taxes
(483.0
)
 
(425.9
)
 
(942.4
)
 
(853.6
)
Income tax benefit
171.8

 
67.6

 
276.9

 
276.2

Loss from continuing operations, net of income taxes
(311.2
)
 
(358.3
)
 
(665.5
)
 
(577.4
)
Discontinued operations
 
 
 
 
 
 
 
Loss from discontinued operations
(26.4
)
 
(7.4
)
 
(110.1
)
 
(33.9
)
Income tax benefit

 

 

 
0.4

Loss from discontinued operations, net of income taxes
(26.4
)
 
(7.4
)
 
(110.1
)
 
(33.5
)
Net loss
(337.6
)
 
(365.7
)
 
(775.6
)
 
(610.9
)
Less: net income attributable to noncontrolling interests
(1.1
)
 
(2.3
)
 
(3.3
)
 
(4.8
)
Net loss attributable to CEOC
$
(338.7
)
 
$
(368.0
)
 
$
(778.9
)
 
$
(615.7
)


See accompanying Notes to Consolidated Condensed Financial Statements. 

4


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(In millions)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Net loss
$
(337.6
)
 
$
(365.7
)
 
$
(775.6
)
 
$
(610.9
)
Other comprehensive income/(loss):
 
 
 
 
 
 
 
Benefit plan adjustments
(0.2
)
 
0.2

 
0.5

 
0.4

Foreign currency translation adjustments
1.2

 
(6.9
)
 
(1.6
)
 
(21.2
)
Change in fair market value of derivatives
(1.9
)
 

 
(2.1
)
 

Total other comprehensive loss, before income taxes
(0.9
)
 
(6.7
)
 
(3.2
)
 
(20.8
)
Income tax provision related to items of other comprehensive loss
0.1

 

 
(0.1
)
 
(0.1
)
Total other comprehensive loss, net of income taxes
(0.8
)
 
(6.7
)
 
(3.3
)
 
(20.9
)
Total comprehensive loss
(338.4
)
 
(372.4
)
 
(778.9
)
 
(631.8
)
Less: amounts attributable to noncontrolling interests:
 
 
 
 
 
 
 
Net loss
(1.1
)
 
(2.3
)
 
(3.3
)
 
(4.8
)
Foreign currency translation adjustments

 
0.1

 

 
0.1

Total amounts attributable to noncontrolling interests
(1.1
)
 
(2.2
)
 
(3.3
)
 
(4.7
)
Comprehensive loss attributable to CEOC
$
(339.5
)
 
$
(374.6
)
 
$
(782.2
)
 
$
(636.5
)

See accompanying Notes to Consolidated Condensed Financial Statements. 

5


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT)
(UNAUDITED)
(In millions)
 
 
 
 
 
 
 
Common Stock *
 
Additional
Paid-in-
Capital
 

Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income/(Loss)
 
Total
CEOC Stockholders' Equity/(Deficit)
 
Non-controlling
Interests
 
Total Equity/(Deficit)
Balance as of December 31, 2012
$

 
$
3,422.4

 
$
(6,205.0
)
 
$
(0.4
)
 
$
(2,783.0
)
 
$
42.2

 
$
(2,740.8
)
Net income/(loss)

 

 
(615.7
)
 

 
(615.7
)
 
4.8

 
(610.9
)
Share-based compensation

 
9.9

 

 

 
9.9

 

 
9.9

Other comprehensive loss, net of tax

 

 

 
(20.8
)
 
(20.8
)
 
(0.1
)
 
(20.9
)
Contributions from non-controlling interests

 

 

 

 

 
35.3

 
35.3

Distributions to non-controlling interests

 

 

 

 

 
(5.2
)
 
(5.2
)
Other

 
0.4

 

 
(0.1
)
 
0.3

 
(1.2
)
 
(0.9
)
Balance as of June 30, 2013
$

 
$
3,432.7

 
$
(6,820.7
)
 
$
(21.3
)
 
$
(3,409.3
)
 
$
75.8

 
$
(3,333.5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2013
$

 
$
3,570.8

 
$
(9,234.4
)
 
$
(37.1
)
 
$
(5,700.7
)
 
$
25.6

 
$
(5,675.1
)
Net income/(loss)

 

 
(778.9
)
 

 
(778.9
)
 
3.3

 
(775.6
)
Share-based compensation
*

 
21.5

 

 

 
21.5

 

 
21.5

Impact of derecognition of LINQ assets

 
(304.8
)
 

 

 
(304.8
)
 

 
(304.8
)
Impact of sale of properties to affiliate

 
(320.0
)
 

 

 
(320.0
)
 

 
(320.0
)
Distributions to non-controlling interests

 

 

 

 

 
(3.6
)
 
(3.6
)
Other comprehensive loss, net of tax

 

 

 
(3.3
)
 
(3.3
)
 

 
(3.3
)
Balance as of June 30, 2014
$

 
$
2,967.5

 
$
(10,013.3
)
 
$
(40.4
)
 
$
(7,086.2
)
 
$
25.3

 
$
(7,060.9
)
___________________ 
*     Amounts round to zero.

See accompanying Notes to Consolidated Condensed Financial Statements.

6



CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In millions)

 
Six Months Ended June 30,
 
2014
 
2013
Cash flows from operating activities
$
(376.2
)
 
$
(289.7
)
Cash flows from investing activities
 
 
 
Acquisitions of property and equipment, net of change in related payables
(240.3
)
 
(309.4
)
Change in restricted cash
(1,675.7
)
 
882.4

Proceeds from sales of properties, net of cash
1,615.2

 
50.4

Investments in/advances to non-consolidated affiliates and other

 
(5.1
)
Proceeds from the sale and maturity of investment securities
27.9

 

Other
3.9

 
(4.7
)
Cash flows from investing activities
(269.0
)
 
613.6

Cash flows from financing activities
 
 
 
Proceeds from the issuance of long-term debt
1,736.9

 
1,589.5

Debt issuance and extension costs and fees
(2.2
)
 
(47.3
)
Repayments under notes payable to affiliates
(300.8
)
 
(259.3
)
Cash paid for early extinguishments of debt
(0.2
)
 
(1,785.6
)
Scheduled debt and capital lease payments
(69.4
)
 
(7.1
)
Contributions from noncontrolling interest owners

 
35.3

Distributions to noncontrolling interest owners
(3.6
)
 
(5.2
)
Other

 
(5.2
)
Cash flows from financing activities
1,360.7

 
(484.9
)
Cash flows from discontinued operations
 
 
 
Cash flows from operating activities
(7.7
)
 
(2.5
)
Cash flows from investing activities
0.1

 

Cash flows from financing activities

 

Net cash from discontinued operations
(7.6
)
 
(2.5
)
Net increase/(decrease) in cash and cash equivalents
707.9

 
(163.5
)
Change in cash classified as assets held for sale

 
(0.1
)
Cash and cash equivalents, beginning of period
1,438.7

 
1,546.6

Cash and cash equivalents, end of period
$
2,146.6

 
$
1,383.0

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Cash paid for interest
$
949.6

 
$
900.9

Cash paid for income taxes
2.4

 
7.2

Non-cash investing and financing activities:
 
 
 
  Decrease in accrued capital expenditures
(21.8
)
 
(2.7
)


See accompanying Notes to Consolidated Condensed Financial Statements.

7


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

In these notes, the words “Company,” “CEOC,” “we,” “our,” and “us” refer to Caesars Entertainment Operating Company, Inc. and its consolidated subsidiaries, unless otherwise stated or the context requires otherwise.
Note 1 Organization and Basis of Presentation
Organization
We are a majority-owned subsidiary of Caesars Entertainment Corporation ("Caesars Entertainment" or "CEC"), a Delaware corporation. As of June 30, 2014 , we owned and operated or managed, through various subsidiaries, 50 casinos in 13 U.S. states and 5 countries. We view each casino property as an operating segment and aggregate such casino properties into one reportable segment.
On January 28, 2008, Caesars Entertainment was acquired by affiliates of Apollo Global Management, LLC (together with such affiliates, "Apollo") and affiliates of TPG Capital, LP (together with such affiliates, "TPG" and, together with Apollo, the "Sponsors") in an all-cash transaction (the "Acquisition"). A substantial portion of the financing of the Acquisition was comprised of bank and bond financing obtained by us. As a result of Caesars Entertainment's sale of 5% of its ownership in CEOC (see Note 10 , " Stockholders' Equity "), this financing became neither secured nor guaranteed for payment by Caesars Entertainment or its other wholly-owned subsidiaries.
Pursuant to a shared services agreement and management services agreement, we provide properties owned by Caesars Entertainment Resort Properties ("CERP") and Caesars Growth Partners, LLC ("CGP LLC"), respectively, with certain corporate management and administrative operations and such costs are reimbursed to us for providing such services (see Note 21 , " Related Party Transactions "). CERP and CGP LLC are not included in our consolidated financial statements.
Basis of Presentation
The accompanying unaudited consolidated condensed financial statements of the Company have been prepared under the rules and regulations of the Securities and Exchange Commission ("SEC") applicable for interim periods and, therefore, do not include all information necessary for complete financial statements in conformity with accounting principles generally accepted in the United States ("GAAP"). The results for the interim periods reflect all adjustments (consisting primarily of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations, and cash flows. The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 2014 fiscal year.
The financial information for the three and six months ended June 30, 2014 and 2013 reflects the results of operations and cash flows of the Golden Nugget and Harrah's Tunica casinos as discontinued operations. See Note 4 , " Dispositions, Divestitures, and Other Property Matters ."
In May 2014, Caesars Entertainment completed the sale of five percent of its ownership interest in us to certain qualified institutional buyers. Upon completion of this sale, the automatic release of Caesars Entertainment’s parent guarantee of certain debt issued by us was triggered in accordance with the applicable bond indentures. See Note 10 , " Stockholders' Equity ,” for more information on this sale. As a result, Caesars Entertainment no longer could rely upon the exception for guarantor financial statements provided by Rule 3-10 of the SEC's Regulation S-X ("Rule 3-10 exception"), which allows registrants to provide condensed consolidating financial information of guarantors and issuers if certain conditions are met. Accordingly, beginning in the second quarter of 2014, we are now required to file separate filings under the Securities Exchange Act of 1934, including the required standalone financial statements required by SEC Regulation S-X. Because we relied upon the Rule 3-10 exception as of December 31, 2013, we did not file an Annual Report on Form 10-K with the SEC; accordingly this Form 10-Q contains expanded disclosures on an interim basis.
Due to our continuing involvement with The LINQ subsequent to its sale to CERP, we consolidated the net assets and income statement impacts of The LINQ from the date of sale to CERP in October 2013 through May 5, 2014. As a result of our sale of The Quad described in Note 5 , " Property Transaction with CGP LLC " and the resulting assumption by CGP LLC of our lease of certain space in the LINQ, we no longer had such continuing involvement and we no longer consolidated The LINQ in our Consolidated Condensed Financial Statements. Due to our continuing involvement with Octavius Tower subsequent to its sale to

8

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

CERP in October 2013, we continue to consolidate the related assets and liabilities, as well as the results of operations, in our Consolidated Condensed Financial Statements.
Properties
As presented in the following table, as of June 30, 2014, of the 50 casinos that we own and operate or manage, we own and operate 21 casinos in the United States and nine internationally, most of which are located in England. We manage 20 casinos, of which six are owned by CERP and five are owned by CGP LLC. Casinos in the United States primarily consist of land-based and riverboat or dockside casinos, and all international casinos are land-based.

9

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Property
Location
Type of Casino
 
Casino
Space–
Sq. Ft.
 
Slot
Machines
 
Table
Games
 
Hotel
Rooms &
Suites
DOMESTIC
Bally’s Atlantic City
Atlantic City, N.J.
Land-based
124,100

 
1,940

 
170

 
1,260

Caesars Atlantic City
Atlantic City, N.J.
Land-based
119,700

 
1,750

 
150

 
1,140

Caesars Palace Las Vegas
Las Vegas, Nev.
Land-based
139,200

 
1,330

 
190

 
4,250

Harrah’s Council Bluffs
Council Bluffs, Iowa
Land-based
25,000

 
590

 
20

 
250

Harrah's Gulf Coast
Biloxi, Miss.
Dockside
31,300

 
630

 
30

 
490

Harrah’s Joliet  (a)
Joliet, Ill.
Dockside
38,900

 
1,100

 
30

 
200

Harrah’s Lake Tahoe
Lake Tahoe, Nev.
Land-based
45,100

 
830

 
70

 
510

Harrah's Louisiana Downs
Bossier City, La.
Thoroughbred racing facility and land-based casino
12,000

 
1,050

 

 

Harrah’s Metropolis
Metropolis, Ill.
Dockside
31,000

 
1,150

 
30

 
260

Harrah’s North Kansas City
N. Kansas City, Mo.
Dockside
60,100

 
1,500

 
60

 
390

Harrah’s Philadelphia  (a)
Chester, Pa.
Harness racing and land-based casino
112,600

 
2,800

 
130

 

Harrah’s Reno
Reno, Nev.
Land-based
40,200

 
750

 
40

 
930

Harrah’s Tunica (e)
Tunica, Miss.
Dockside
136,000

 
1,280

 
70

 
1,360

Harveys Lake Tahoe
Lake Tahoe, Nev.
Land-based
44,200

 
740

 
70

 
740

Horseshoe Bossier City
Bossier City, La.
Dockside
29,300

 
1,370

 
70

 
600

Horseshoe Council Bluffs  (b)(c)
Council Bluffs, Iowa
Greyhound racing and land-based casino
78,800

 
1,600

 
70

 

Horseshoe Hammond
Hammond, Ind.
Dockside
108,200

 
2,960

 
155

 

Horseshoe Southern Indiana
Elizabeth, Ind.
Dockside
86,600

 
1,720

 
100

 
500

Horseshoe Tunica
Tunica, Miss.
Dockside
63,000

 
1,210

 
90

 
510

Hot Spot Oasis
Las Vegas, Nev.
Land-based
1,000

 
15

 

 

Showboat Atlantic City (f)
Atlantic City, N.J.
Land-based
124,700

 
3,190

 
110

 
1,330

Tunica Roadhouse Hotel & Casino
Tunica, Miss.
Dockside
31,000

 
750

 
30

 
130

 
 
 
 
 
 
 
 
 
 
INTERNATIONAL
Conrad Punta del Este Resort and Casino  (d)
Uruguay
Land-based

 

 

 

Alea Glasgow
United Kingdom
Land-based
15,000

 
50

 
30

 

Alea Nottingham
United Kingdom
Land-based
10,000

 
50

 
20

 

The Casino at the Empire
United Kingdom
Land-based
20,900

 
120

 
50

 

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

 
550

 
40

 
190

Manchester235
United Kingdom
Land-based
11,500

 
40

 
40

 

Playboy Club London
United Kingdom
Land-based
6,200

 
30

 
20

 

Rendezvous Brighton
United Kingdom
Land-based
7,800

 
70

 
30

 

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

 
50

 
20

 

The Sportsman
United Kingdom
Land-based
5,200

 
40

 
20

 

____________________
(a)  
We have a majority ownership interest in and manage this property.
(b)  
The property is leased to the operator and managed by CEOC.
(c)  
We will cease greyhound racing at this facility by December 31, 2015. See Note 4 , " Dispositions, Divestitures, and Other Property Matters ."
(d)  
We have a majority ownership in this property but do not manage it. Our ownership is accounted for as an equity method investment.
(e)  
Harrah's Tunica was closed on June 2, 2014 and has been presented in discontinued operations for all periods presented.
(f)  
On June 27, 2014, we announced that we will close Showboat Atlantic City effective August 31, 2014.

10

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Liquidity Considerations
We are a highly leveraged company, and a significant amount of our liquidity needs are for debt service, including significant interest payments. As of June 30, 2014 , we had $20,771.2 million face value of outstanding indebtedness.
As a result of a general decline in gaming activity since 2007, with Atlantic City properties and our regional markets being more heavily impacted by this trend, we have experienced substantial net losses in recent years, resulting in total deficit of $7,060.9 million as of June 30, 2014 . We expect to experience operating and net losses for the remainder of 2014 and the foreseeable future.
During the quarter ended June 30, 2014, and in July 2014, we closed a number of transactions that are expected to have a material impact on our liquidity, debt guarantees, debt covenants and compliance, and debt maturities. These transactions include the following:
completion of the CGP LLC Property Transaction in which we sold to CGP LLC: (i)The Cromwell, The Quad Resort & Casino, Bally’s Las Vegas, and Harrah's New Orleans and (ii) 50% of the ongoing management fees and termination fees payable under the relevant property management agreements, all for an aggregate purchase price of $2,000.0 million , minus assumed debt and other customary closing adjustments (see Note 5 , " Property Transaction with CGP LLC ");
sale of 5% of our common stock by CEC, which resulted in the automatic release of CEC's parent guarantee of payment of certain of our outstanding debt in accordance with the terms of the underlying indentures (see Note 10 , “ Stockholders' Equity ”);
completion of the offering of $1,750.0 million aggregate principal amount of Incremental Term Loans due March 1, 2017 (see Note 9 , “ Debt ”);
transactions under which we reacquired and retired our 5.65% Senior Notes due 2015 (the "5.65% Notes") and our 10% Second-Priority Senior Secured Notes due 2015 (the "10% Notes") (see Note 9 , “ Debt ”):
$147.4 million of our scheduled 2015 debt maturities, consisting of $44.4 million of 5.625% Notes and $103.0 million of 10.00% Notes via tender offers; and
completion of the previously announced purchase of $740.5 million of 5.625% Notes and $83.2 million of 10.00% Notes due 2015, each under note purchase agreements with a significant third-party holder and a subsidiary of CGP LLC;
in total, we reacquired $784.9 million of 5.625% Notes and $186.2 million of 10.00% Notes due 2015.
repayment of approximately $794.6 million in aggregate principal amount of term loans in addition to the debt reacquired under the transactions above, approximately $29.0 million of which was due in 2015 (see Note 9 , “ Debt "); and
completed certain bank transactions that modified the then-existing covenants and other key terms included in the Credit Facilities (as defined in Note 22 , " Subsequent Events ") (“Bank Amendments”). The Bank Amendments included the following (see Note 9 , “ Debt ”):
modification of the financial maintenance covenant to increase our Senior Secured Leverage Ratio ("SSLR," which is defined and described in Note 9 , “ Debt ") from a ratio of 4.75 to 1.0 to a ratio of 7.25 to 1.0;
exclusion of incremental term loans incurred after March 31, 2014 (including the $1,750.0 million of Incremental Term Loans (as defined in Note 9 , “ Debt ”)) from the definition of SSLR for purposes of such covenant, which increases the amount of senior debt excluded for SSLR covenant purposes from $3,700.0 million to $5,450.0 million ;
modification of CEC’s guarantee under the senior secured credit facilities (the "Credit Facilities") such that CEC’s guarantee is limited to a guarantee of collection with respect to obligations owed to the lenders who consent to the Bank Amendment; and
modification of certain other provisions of our senior secured credit facilities.
For more information on the above-referenced transactions and the impact that these transactions have on our liquidity and capital structure, see Note 5 , " Property Transaction with CGP LLC ," and Note 9 , “ Debt ."

11

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

On a consolidated basis, cash and cash equivalents, excluding restricted cash, totaled $2,146.6 million as of June 30, 2014 compared with $1,438.7 million as of December 31, 2013. Restricted cash totaled $1,755.9 million as of June 30, 2014, consisting of cash held in escrow related to the Incremental Term Loans that were funded in June 2014 (see Note 9 , " Debt "). As a result of the closing of the Incremental Term Loan transaction on July 25, 2014, the escrow provisions were satisfied.
From time to time, depending upon market, pricing, and other conditions, and on our cash balances and liquidity, we may seek to acquire or exchange notes or other indebtedness through open market purchases, privately negotiated transactions, tender offers, redemption, exchange offers or otherwise, upon such terms and at such prices as we may determine (or as may be provided for in the indentures governing the notes), for cash or other consideration, including our common stock. In addition, we have considered and will continue to evaluate potential transactions to reduce net debt, such as debt for debt exchanges, debt for equity exchanges and other transactions.
We experienced negative operating cash flows of $376.2 million for the six months ended June 30, 2014 , and we expect to experience negative operating cash flows for the remainder of 2014 and the foreseeable future, and do not expect that our cash flow from operations will be sufficient to repay our indebtedness in the long-term and we will ultimately seek a refinancing, amendment, or restructuring of our debt, or if necessary, pursue additional debt or equity offerings.
Our ability to refinance or restructure our debt, or to issue additional debt or equity, will depend upon, among other things:
the condition of the capital markets at the time, which is beyond our control;
our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, many of which are beyond our control; and
our continued compliance with the terms and covenants in our credit facilities, indentures and loan agreements that govern our debt.
Under our Credit Facilities after giving effect to the Bank Amendment we are required to satisfy and maintain an SSLR of no more than 7.25 to 1.0, which is the ratio of senior first priority secured debt to LTM Adjusted EBITDA - Pro Forma - CEOC Restricted. This ratio excluded up to $3,700.0 million of first priority senior secured notes and up to $350.0 million aggregate principal amount of consolidated debt of subsidiaries that are not wholly owned. This ratio also reduces the amount of senior first priority secured debt by the amount of unrestricted cash on hand, which was $2,146.6 million as of June 30, 2014 . As of June 30, 2014 , the SSLR was 4.61 to 1.0. Subsequent to the Bank Amendments, the ratio excludes the $1,750.0 million of Incremental Term Loans.
We were in compliance with the terms and conditions of all of our loan agreements, including the Credit Facilities and indentures as of June 30, 2014. Failure to comply with these covenants can result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions, or cause an event of default. See "Bondholder Disputes" in Note 15 , " Litigation, Contractual Commitments and Contingent Liabilities ."
Based upon the effects of the Bank Amendment combined with our current operating forecast, we have a significant amount of room available under our SSLR covenant. We believe that we will have sufficient liquidity to fund our operations, that we will meet our debt service obligations, and that we will continue to be in compliance with the SSLR during the foreseeable future.
See Note 9 , " Debt ," for details on our debt outstanding and restrictive covenants related to certain of our borrowings. This detail includes, among other things, a table presenting details of our individual borrowings outstanding as of June 30, 2014 and December 31, 2013, as well as discussion of recent changes in our debt outstanding, and any changes in the terms of existing debt subsequent to December 31, 2013.
Note 2 Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash equivalents are highly liquid investments with original maturities of three months or less from the date of purchase and are stated at the lower of cost or market value.
Restricted Cash
As of June 30, 2014 and December 31, 2013 , we had $1,755.9 million and $99.4 million of restricted cash, respectively. Proceeds from bond offerings that are in escrow prior to closing and cash reserved under loan agreements for (a) development

12

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


projects and (b) certain expenditures incurred in the normal course of business, such as interest services, real estate taxes, casualty insurance, and capital improvements, are classified as restricted cash. The restricted cash, non-current as of June 30, 2014, is comprised of cash held in escrow related to the Incremental Term Loans that were funded in June 2014 (see Note 9 , " Debt "). As a result of the closing of the Incremental Term Loan transaction on July 25, 2014, these funds are no longer considered restricted.
Receivables
We issue credit to approved casino customers following background checks and investigations of creditworthiness. Business or economic conditions or other significant events could affect the collectibility of these receivables.
Accounts receivable are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems the account to be uncollectible. Recoveries of accounts previously written off are recorded when received. We reserve an estimated amount for gaming receivables that may not be collected to reduce receivables to their net carrying amount. Methodologies for estimating the allowance for doubtful accounts range from specific reserves to various percentages applied to aged receivables. Historical collection rates are considered, as are customer relationships, in determining specific reserves. Receivables are reported net of an allowance for doubtful accounts of $145.4 million and $139.8 million as of June 30, 2014 and December 31, 2013, respectively.
Casino Reinvestment Development Authority ("CRDA") Investment Obligations
The New Jersey Casino Control Act provides, among other things, for an assessment of licenses equal to 1.25% of gross gaming revenues in lieu of an investment alternative tax equal to 2.5% of gross gaming revenues. The Company may satisfy this investment obligation by investing in qualified eligible direct investments, by making qualified contributions, or by depositing funds with the CRDA. Funds deposited with the CRDA may be used to purchase bonds designated by the CRDA or, under certain circumstances, may be donated to the CRDA in exchange for credits against future CRDA investment obligations. We record an allowance for funds deposited to reduce the deposits to their expected eventual realizable value.
Long-Lived Assets
We have significant capital invested in our long-lived assets, and judgments are made in determining their estimated useful lives and salvage values and if or when an asset (or asset group) has been impaired. The accuracy of these estimates affects the amount of depreciation and amortization expense recognized in our financial results and whether we have a gain or loss on the disposal of an asset. We assign lives to our assets based on our standard policy, which is established by management as representative of the useful life of each category of asset.
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. We typically estimate the fair value of assets starting with a "Replacement Cost New" approach and then deduct appropriate amounts for both functional and economic obsolescence to arrive at the fair value estimates. Other factors considered by management in performing this assessment may include current operating results, trends, prospects, and third-party appraisals, as well as the effect of demand, competition, and other economic, legal, and regulatory factors. In estimating expected future cash flows for determining whether an asset is impaired, assets are grouped at the lowest level of identifiable cash flows, which, for most of our assets, is the individual property. These analyses are sensitive to management assumptions and the estimates of the obsolescence factors. Changes in these assumptions and estimates could have a material impact on the analyses and the consolidated financial statements.
Additions to property and equipment are stated at cost. We capitalize the costs of improvements that extend the life of the asset. We expense maintenance and repair costs as incurred. Gains or losses on the dispositions of property and equipment are recognized in the period of disposal. Interest expense is capitalized on internally constructed assets at the applicable weighted-average borrowing rates of interest. Capitalization of interest ceases when the project is substantially complete or construction activity is suspended for more than a brief period of time. Interest capitalized was $10.4 million for the six months ended June 30, 2014 and $40.8 million for the year ended December 31, 2013.
Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset or the related lease as follows:

13

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Useful Lives
Land improvements
 
 
12
years
Buildings
30
to
40
years
Leasehold improvements
5
to
15
years
Riverboats and barges
 
 
30
years
Furniture, fixtures, and equipment
2.5
to
20
years
Goodwill and Other Non-Amortizing Intangible Assets
The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. We determine the estimated fair values after review and consideration of relevant information including discounted cash flows, quoted market prices, and estimates made by management. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is recorded as goodwill.
We perform our annual goodwill impairment assessment 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 earnings before interest, taxes, depreciation and amortization ("EBITDA"), valuation multiples, 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. EBITDA multiples and discounted cash flows are common measures used to value businesses in our industry.
We 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.
The annual evaluation of goodwill and other non-amortizing intangible assets requires the use of estimates about future operating results, valuation multiples, and discount rates to determine their estimated fair value. Changes in these assumptions can materially affect these estimates. Thus, to the extent gaming volumes deteriorate further in the near future, discount rates increase significantly, or we do not meet our projected performance, we could have additional impairments to record in the future and such impairments could be material. This is especially true for any of our properties where goodwill and other non-amortizing intangible assets have been partially impaired as a result of a recent impairment analysis. As of June 30, 2014 , we had $3,494.4 million in total book value of goodwill and other non-amortizing intangible assets, a large portion of which have been impaired within the last two years and accordingly, are at risk of partial or total impairment should we experience minor adverse changes in our significant assumptions. Charges related to goodwill and intangible assets other than goodwill are recognized in impairment of intangible and tangible assets in the Consolidated Condensed Statements of Operations.
Debt Discounts or Premiums and Debt Issue Costs
Debt discounts or premiums and debt issue costs incurred in connection with the issuance of debt are capitalized and amortized to interest expense based on the related debt agreements primarily using the effective interest method. Unamortized discounts or premiums are written off and included in our gain or loss calculations to the extent we retire debt prior to its original maturity date. Unamortized debt issue costs are included in deferred charges and other in our Consolidated Condensed Balance Sheets.

14

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Total Rewards Point Liability Program
Our customer loyalty program, Total Rewards, offers incentives to customers who gamble at all of our casino entertainment facilities located in the U.S. and Canada for on-property entertainment expenses, including gaming, hotel, dining, and retail shopping. Under the program, customers are able to accumulate, or bank, reward credits over time that they may redeem at their discretion under the terms of the program. The reward credit balance will be forfeited if the customer does not earn a reward credit over the prior six-month period. As a result of the ability of the customer to bank the reward credits, we accrue the estimated cost of fulfilling the redemption of reward credits, after consideration of estimated forfeitures (referred to as "breakage"), as they are earned. The estimated value of reward credits is expensed as the reward credits are earned by customers and is included in direct casino expense. To arrive at the estimated cost associated with reward credits, estimates and assumptions are made regarding incremental marginal costs of the benefits, breakage rates, and the mix of goods and services for which reward credits will be redeemed. We use historical data to assist in the determination of estimated accruals. Such amounts are included within accrued expenses. See Note 8 , " Detail of Accrued Expenses ."
In addition to reward credits, customers at certain of our properties can earn points based on play that are redeemable in the form of credits playable at the gaming machine. We accrue the cost of redeemable points, after consideration of estimated breakage, as they are earned. The cost is recorded as a reduction to revenue and is included in casino promotional allowances.
Self-Insurance Accruals
We are insured for workers’ compensation, property, general liability and other insurance coverage through our parent, Caesars Entertainment. We are charged premiums by Caesars Entertainment based on our claims activity.  We are self-insured for employee health, dental, vision and other insurance and our insurance claims and reserves includes accruals of estimated settlements for known claims, as well as accruals of actuarial estimates of incurred but not reported claims ("IBNR"). In estimating these reserves, historical loss experience and judgments about the expected levels of costs per claim are considered. These claims are accounted for based on actuarial estimates of the undiscounted claims, including those claims incurred but not reported. We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly judgmental accruals. We regularly monitor the potential for changes in estimates, evaluate our insurance accruals, and adjust our recorded provisions.
CERP and CGP LLC properties also participate in our self-insured employee health programs and accordingly, our reserve includes estimates for claims and reserves, including IBNR claims, for CERP and CGP resort property employees. We charge CERP and CGP LLC through payroll charges on a per employee basis, based on their individual coverage elections.
Revenue Recognition
Casino revenues are measured by the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs and for chips in the customers’ possession. Food and beverage, rooms, and other operating revenues are recognized when services are performed. Advance deposits on rooms and advance ticket sales are recorded as customer deposits until services are provided to the customer. Sales taxes and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in net revenues or operating expenses.
The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as promotional allowances. See Note 11 , " Casino Promotional Allowances ."
Advertising
We expense the production costs of advertising the first time the advertising takes place. Advertising expense was $38.5 million and $35.2 million for the three months ended June 30, 2014 and 2013, respectively. Advertising expense was $72.7 million and $65.7 million for the six months ended June 30, 2014 and 2013, respectively.
Income Taxes
The effect on the income tax provision and deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We have provided a valuation allowance on certain foreign and state net operating losses ("NOLs"), and other federal, state, and foreign deferred tax assets. NOLs and other federal, state, and foreign deferred tax assets were not deemed realizable based upon near term estimates of future taxable income. We are included in the consolidated federal income tax return of Caesars and certain consolidated state tax returns of Caesars.  We also file separate state tax returns in certain states.  Our provision for federal and state income taxes is computed based on the statutory federal and state tax rates as if we had filed separate federal and state income tax returns. 

15

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


We classify reserves for tax uncertainties within accrued expenses and deferred credits and other in our Consolidated Condensed Balance Sheets, separate from any related income tax payable, which is also reported within accrued expenses, or deferred income taxes. Reserve amounts relate to any potential income tax liabilities resulting from uncertain tax positions, as well as potential interest or penalties associated with those liabilities.
Note 3 Recently Issued Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board ("FASB") issued authoritative guidance amending existing requirements for reporting discontinued operations. Under the new guidance, discontinued operations reporting will be limited to disposal transactions that represent strategic shifts having a major effect on operations and financial results. The amended guidance also enhances disclosures and requires assets and liabilities of a discontinued operation to be classified as such for all periods presented in the financial statements. Public entities will apply the amended guidance prospectively to all disposals occurring within annual periods beginning on or after December 15, 2014, and interim periods within those years. We will adopt this standard effective January 1, 2015. Due to the change in requirements for reporting discontinued operations described above, presentation and disclosures of future transactions after adoption may be different than under current standards.
In May 2014, the FASB issued authoritative guidance amending the FASB Accounting Standards Codification and creating a new Topic 606, Revenue from Contracts with Customers . The new guidance is expected to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP applicable to revenue transactions. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Existing industry guidance, including revenue recognition guidance specific to the gaming industry will be eliminated. In addition, interim and annual disclosures will be substantially revised. The amendments in this guidance are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. We will adopt this standard effective January 1, 2017. We are currently assessing the impact the adoption of this standard will have on our disclosures and results of operations.
Note 4 Dispositions, Divestitures, and Other Property Matters
Dispositions and Divestitures
Conrad Punta del Este Resort and Casino
In May 2013, we formed a strategic relationship with Enjoy S.A. (“Enjoy”) in Latin America. Enjoy acquired 45% of Baluma S.A., our subsidiary that owns and operates the Conrad Punta del Este Resort and Casino in Uruguay (the “Conrad”), in exchange for total consideration of $139.5 million . After customary deductions for expenses associated with the closing, we received $50.4 million in cash (net of $29.7 million of cash deconsolidated), a note receivable of $31.9 million , and a 4.5% equity stake in Enjoy. In connection with the transaction, Enjoy assumed control of the Baluma S.A. board and responsibility for management of the Conrad. Upon completion of the transaction, we deconsolidated Baluma S.A. from our financial statements and began accounting for Baluma S.A. as an investment in non-consolidated affiliates utilizing the equity method of accounting. Enjoy failed to make its required payment of $31.9 million in deferred purchase consideration on December 31, 2013.  In April 2014, the parties entered into a standstill agreement pursuant to which we agreed to forbear from exercising any rights or remedies for nonpayment and extended the time for making the required payment until October 15, 2014.  In exchange, Enjoy agreed to pay all interest accrued through December 31, 2013, pay an increased interest rate on the deferred purchase consideration of 12% effective January 1, 2014 and make monthly interest payments thereafter, and provide us with certain additional rights and protections to secure payment of the deferred purchase consideration on or before the revised due date of October 15, 2014. Enjoy has been making the required payments in a timely manner.
Suffolk Investment
Between 2011 and 2013, we invested $101.9 million in Sterling Suffolk, the owner of Suffolk Downs racecourse in East Boston, Massachusetts. This investment was comprised of a $41.9 million convertible preferred equity investment and a $60.0 million common equity ownership in Sterling Suffolk, recorded as an intangible asset representing the right to manage a potential future gaming facility. On October 18, 2013, Caesars agreed to withdraw its application as a qualifier in Massachusetts. In December 2013, we entered into a termination and release agreement with Sterling Suffolk (“Suffolk Agreement”), pursuant to which we terminated several agreements between us and Sterling Suffolk. Based on this termination and on our assessment of the recoverability of the investment, in the fourth quarter of 2013, we recorded an impairment charge totaling $101.9 million , the full amount of our cash investment. As part of the Suffolk Agreement, we agreed to place our common equity interest into a divestiture trust, and our convertible preferred interest was redeemed in exchange for a $28.5 million promissory note (“Suffolk Note”).

16

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


The Suffolk Note matures in April 2015, or earlier upon the occurrence of certain events. Given the uncertainty related to these events and the resulting risk of collection, we recorded a full reserve on the Suffolk Note during 2013.
Claridge Hotel Tower
In October 2013, we entered into an agreement to sell the Claridge Hotel Tower, which was part of the Bally's Atlantic City asset group, for $12.5 million , less customary closing adjustments. We received these proceeds in February 2014 upon the transaction closing. The Claridge Hotel Tower assets of $11.9 million were classified as assets held for sale as of December 31, 2013 .
Property Closures
Harrah's Tunica, Mississippi
Harrah’s Tunica casino closed effective June 2, 2014. As a result, we recorded intangible and tangible asset impairment charges totaling $65.0 million during the first quarter of 2014. In the second quarter of 2014, we recorded a charge for approximately $10.9 million related to accrued exit costs associated with the closure of this casino. We have presented the operations of the Harrah's Tunica casino as discontinued operations in the Consolidated Condensed Statements of Operations.
Showboat Atlantic City
In June 2014, we announced the closure of Showboat Atlantic City, effective August 31, 2014. As a result, we recorded a $4.8 million charge in the second quarter of 2014 for accrued severance costs. In periods subsequent to the closure, we will present the operations of Showboat Atlantic City as discontinued operations in the Consolidated Condensed Statements of Operations.
Golden Nugget
In February 2014, we permanently closed the Golden Nugget casino in London. As a result, in the first quarter of 2014, we recorded charges of $1.7 million related to the impairment of intangible and tangible assets and $13.1 million related to accrued exit costs. We have presented the operations of the Golden Nugget casino as discontinued operations in the Consolidated Condensed Statements of Operations.
Alea Leeds
In March 2013, we permanently closed our Alea Leeds casino in England. As a result of the closure, during the six months ended June 30, 2013, we recorded charges of $5.7 million related to the write-down of tangible and intangible assets, net of currency translation adjustment, and $15.8 million related to exit costs, primarily related to non-cancellable contract costs of $15.1 million . As of June 30, 2014, $17.1 million remains accrued for exit-related costs. We have presented the operations of Alea Leeds as discontinued operations in the Consolidated Condensed Statements of Operations for all periods presented.
During the three and six months ended June 30, 2014 , loss from discontinued operations, net of income taxes, was $26.4 million and $110.1 million , respectively, which was primarily related to our closure of Harrah's Tunica in Mississippi, and the Golden Nugget casino in London and compared with $7.4 million and $33.5 million during the three and six months ended June 30, 2013 , respectively, which also included the impact of the closure of the Alea Leeds casino.


17

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Discontinued Operations
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In millions)
2014
 
2013
 
2014
 
2013
Net revenues
 
 
 
 
 
 
 
Harrah's Tunica
$
14.3

 
$
33.8

 
$
46.4

 
$
68.0

Golden Nugget

 
3.1

 
1.3

 
5.2

 Alea Leeds

 

 

 
0.7

Other discontinued operations

 
0.8

 

 
1.8

Total net revenues
$
14.3

 
$
37.7

 
$
47.7

 
$
75.7

 
 
 
 
 
 
 
 
Pre-tax income/(loss) from operations
 
 
 
 
 
 
 
Harrah's Tunica
$
(25.6
)
 
$
(7.1
)
 
$
(93.4
)
 
$
(9.6
)
Golden Nugget
(0.3
)
 
(0.1
)
 
(15.7
)
 
(1.1
)
 Alea Leeds
(0.5
)
 
(0.5
)
 
(1.0
)
 
(23.0
)
Other discontinued operations

 
0.3

 

 
(0.2
)
Total pre-tax loss from discontinued operations
$
(26.4
)
 
$
(7.4
)
 
$
(110.1
)
 
$
(33.9
)
 
 
 
 
 
 
 
 
Income/(loss), net of income taxes
 
 
 
 
 
 
 
Harrah's Tunica
$
(25.6
)
 
$
(7.1
)
 
$
(93.4
)
 
$
(9.6
)
Golden Nugget
(0.3
)
 
(0.1
)
 
(15.7
)
 
(1.1
)
 Alea Leeds
(0.5
)
 
(0.5
)
 
(1.0
)
 
(23.0
)
Other discontinued operations

 
0.3

 

 
0.2

Total loss from discontinued operations, net of income taxes
$
(26.4
)
 
$
(7.4
)
 
$
(110.1
)
 
$
(33.5
)

Other Property Matters
Iowa Dog Racing Legislation
As a result of new legislation passed in May 2014 in the State of Iowa, we are required to cease our greyhound racing activities at our Horseshoe Council Bluffs casino in Council Bluffs, Iowa, effective December 31, 2015. The new legislation ("Iowa Dog Racing Legislation") requires that we pay a total of $65.0 million to the Iowa Racing and Gaming Commission over a seven-year period, beginning in January 2016. These exit costs were recorded at the present value of the future liability and will be accreted over the term of the payments. The liability related to the exit costs was $40.3 million as of June 30, 2014 .
Note 5 Property Transaction with CGP LLC
CGP LLC is a joint venture between Caesars Acquisition Company ("CAC") and subsidiaries of Caesars Entertainment. CAC directly owns 100% of the voting membership units of CGP LLC, and subsidiaries of Caesars Entertainment own 100% of the non voting membership units.
Property Transaction with CGP LLC
In May 2014, we sold to CGP LLC (hereafter collectively referred to as the " CGP LLC Property Transaction "):
(i)
Our subsidiaries that own the assets comprising The Cromwell, The Quad Resort & Casino, Bally’s Las Vegas, and Harrah’s New Orleans (collectively the "Properties");
(ii)
50% of the ongoing management fees and any termination fees payable under property management agreements to be entered between us and the owners of each of the Properties; and
(iii)
Certain intellectual property that is specific to each of the Properties.

18

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

In May 2014, we completed the CGP LLC Property Transaction for an aggregate purchase price of $2,000.0 million , minus assumed debt and other customary closing adjustments. The debt assumed consisted of the $185.0 million Bill's Credit Facility described in Note 9 , " Debt ." Because this debt was assumed by CGP LLC, we no longer are required to service this debt and it is not included in long-term debt on our Consolidated Condensed Balance Sheets as of June 30, 2014.
Under the terms of the management agreements entered into in connection with the CGP LLC Property Transaction , we manage each property. In addition, each property licenses enterprise-wide intellectual property from Caesars Licensing Company, LLC. We receive ongoing management fees during the term of the related property management agreement consisting of a (i) base management fee of 2% of monthly net operating revenues and (ii) an incentive management fee in an amount equal to 5% of EBITDA for each operating year.
In addition to the above, the agreements governing the CGP LLC Property Transaction also provide that CEC and we will indemnify CGP LLC for certain obligations, including:
(i)
the failure of CEC and us to perform or fulfill any of our covenants or breach any of our representations and warranties under the agreements;
(ii)
new construction and renovation of The Quad of up to 15% of amounts in excess of $223.1 million ; and
(iii)
certain other agreed upon matters.
Because this sale was made between parties under common control, the difference between the book value of the assets sold and the fair value of consideration received has been recorded as "Impact of Sale of Properties to Affiliate" within our Consolidated Condensed Statements of Stockholders' Equity/(Deficit). We have derecognized the sold assets and liabilities from our Consolidated Condensed Balance Sheets as of the date of sale for each property, which is May 5, 2014 for The Cromwell, The Quad Resort & Casino, and Bally’s Las Vegas and is May 20, 2014 for Harrah’s New Orleans). Accordingly, we have not reclassified the historical results of operations as discontinued operations. The book value of assets sold and liabilities transferred were $2,275.2 million and $284.9 million , respectivel y. 
Note 6 Property and Equipment, Net
(In millions)
June 30, 2014
 
December 31, 2013
Land and land improvements
$
2,705.7

 
$
4,042.7

Buildings, riverboats, and improvements
3,904.7

 
4,458.0

Furniture, fixtures, and equipment
1,647.5

 
1,791.4

Construction in progress
96.7

 
684.8

 
8,354.6

 
10,976.9

Less: accumulated depreciation
(2,012.9
)
 
(2,124.5
)
 
$
6,341.7

 
$
8,852.4

Depreciation expense is included in depreciation and amortization, corporate expense, and income from discontinued operations, and was as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In millions)
2014
 
2013
 
2014
 
2013
Depreciation expense
$
87.2

 
$
112.3

 
$
185.0

 
$
233.5

Tangible Asset Impairments
We review the carrying value of our long-lived assets for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. We have experienced deteriorating gaming volumes at properties in certain of our markets and, as a result, we continue to evaluate our options regarding participation in certain markets. As a result of our evaluations, we have closed two properties during 2014 and announced the closure of a third property, as described in Note 4 , " Dispositions, Divestitures, and Other Property Matters ". We also test properties or asset groups for impairment when those assets are more likely than not to be disposed of by sale or other means or when we identify evidence of deteriorating market values of assets in a region.
During the three and six months ended June 30, 2014 , we recorded tangible asset impairment charges totaling $4.0 million and $69.4 million , respectively, including $63.8 million recorded during the first quarter of 2014 as a result of our decision to close the Harrah’s Tunica casino. This property has been classified as discontinued operations; therefore, the impairment charge has been reflected in loss from discontinued operations on the Consolidated Condensed Statements of Operations.
During the three and six months ended June 30, 2013 , we recorded tangible asset impairment charges totaling $79.9 million and $85.4 million , respectively, primarily comprised of $79.3 million recorded during the second quarter of 2013 related to our land holdings in Biloxi, Mississippi.
Note 7 Goodwill and Other Intangible Assets

Changes in Carrying Value of Goodwill
(In millions)
Gross
 
Accumulated Impairment
 
Net
Balance at December 31, 2013
$
5,389.3

 
$
(4,118.1
)
 
$
1,271.2

Transfer of assets to CGP LLC
(336.4
)
 

 
(336.4
)
Balance at June 30, 2014
$
5,052.9

 
$
(4,118.1
)
 
$
934.8

Changes in Carrying Value of Intangible Assets Other Than Goodwill
(In millions)
Amortizing
 
Non-Amortizing
 
Total
Balance at December 31, 2013
$
315.7

 
$
2,589.1

 
2,904.8

Impairments
(1.2
)
 
(26.0
)
 
(27.2
)
Amortization expense
(28.6
)
 

 
(28.6
)
Transfer of assets to CGP LLC
(115.2
)
 

 
(115.2
)
Other
3.9

 
(3.5
)
 
0.4

Balance at June 30, 2014
$
174.6

 
$
2,559.6

 
$
2,734.2

As a result of declining financial results in certain markets, we recorded impairment charges during the three and six months ended June 30, 2014 , totaling $13.4 million and $27.2 million , respectively. The $13.4 million recorded during the three month period was related to trademarks. The $27.2 million recorded during the six month period was primarily comprised of $12.0 million related to certain gaming rights and $14.0 million related to trademarks due to lower than expected results. Gaming rights and trademarks are both classified as non-amortizing intangible assets.
During the three and six months ended June 30, 2013 , we recorded intangible asset impairment charges of $3.0 million and $23.0 million , respectively, related to certain gaming rights.


19

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Gross Carrying Value and Accumulated Amortization of Intangible Assets Other Than Goodwill
 
June 30, 2014
 
December 31, 2013
(Dollars in millions)
Weighted
Average
Remaining
Useful Life
(in years)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Amortizing intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
4.9
 
$
372.0

 
$
(215.6
)
 
$
156.4

 
$
583.7

 
$
(317.8
)
 
$
265.9

Contract rights
2.3
 
83.1

 
(80.2
)
 
2.9

 
82.6

 
(78.5
)
 
4.1

Developed technology
1.8
 
69.8

 
(55.8
)
 
14.0

 
69.8

 
(51.5
)
 
18.3

Gaming rights
0.0
 

 

 

 
42.8

 
(15.4
)
 
27.4

Trademarks
0.5
 
3.8

 
(2.5
)
 
1.3

 

 

 

 
 
 
$
528.7

 
$
(354.1
)
 
174.6

 
$
778.9

 
$
(463.2
)
 
315.7

Non-amortizing intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
Gaming rights
 
 
 
 
 
 
1,108.6

 
 
 
 
 
1,120.3

Trademarks
 
 
 
 
 
 
1,451.0

 
 
 
 
 
1,468.8

 
 
 
 
 
 
 
2,559.6

 
 
 
 
 
2,589.1

Total intangible assets other than goodwill
 
 
 
 
 
$
2,734.2

 
 
 
 
 
$
2,904.8

Estimated annual amortization expense for each of the five years from 2015 through 2019 is $42.5 million , $38.2 million , $27.0 million , $27.0 million , and $22.1 million , respectively.
Note 8 Detail of Accrued Expenses
 
As of June 30,
 
As of December 31,
(In millions)
2014
 
2013
Payroll and other compensation
$
146.7

 
$
180.3

Self-insurance claims and other employee benefit liabilities
56.2

 
42.2

Advance deposits
138.2

 
157.4

Accrued taxes
120.6

 
105.6

Total Rewards liability
45.8

 
50.1

Medical insurance payable to affiliate
39.3

 
32.7

Other accruals
336.3

 
274.1

Total accrued expenses
$
883.1

 
$
842.4



20

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Note 9 Debt
(Dollars in millions)
 
Final
Maturity
 
Rate(s)
 
Face Value
 
Book Value
 
Face
Value
 
Book
Value
 
 
 
 
June 30, 2014
 
December 31, 2013
Credit Facilities
 
 
 
 
 
 
 
 
 
 
 
 
Term Loans B1 - B3
 
2015
 
5.25%
 
$
29.0

 
$
29.0

 
$
29.0

 
$
29.0

Term Loan B4
 
2016
 
9.50%
 
955.0

 
945.0

 
959.8

 
948.1

Term Loan B5
 
2017
 
4.40% - 6.50%
 
991.9

 
989.6

 
991.9

 
989.3

Term Loan B6
 
2017
 
5.40% - 7.50%
 
2,431.9

 
2,403.2

 
2,431.9

 
2,399.9

Term Loan B7 (1)
 
2017
 
9.75%
 
1,750.0

 
1,736.9

 

 

Secured Debt
 
 
 
 
 
 
 
 
 
 
 
 
Senior Secured Notes
 
2017
 
11.25%
 
2,095.0

 
2,069.8

 
2,095.0

 
2,066.4

Senior Secured Notes
 
2020
 
8.50%
 
1,250.0

 
1,250.0

 
1,250.0

 
1,250.0

Senior Secured Notes
 
2020
 
9.00%
 
3,000.0

 
2,957.3

 
3,000.0

 
2,954.5

Second-Priority Senior Secured Notes
 
2018
 
12.75%
 
750.0

 
744.5

 
750.0

 
743.9

Second-Priority Senior Secured Notes
 
2018
 
10.00%
 
4,502.1

 
2,513.7

 
4,528.1

 
2,433.2

Second-Priority Senior Secured Notes
 
2015
 
10.00%
 
189.9

 
169.8

 
214.8

 
187.7

Chester Downs Senior Secured Notes
 
2020
 
9.25%
 
330.0

 
330.0

 
330.0

 
330.0

Bill's Gamblin' Hall & Saloon Credit Facility (2)
 
2019
 
 

 

 
185.0

 
179.8

Capitalized Lease Obligations
 
to 2017
 
various
 
14.6

 
14.6

 
16.7

 
16.7

Subsidiary-Guaranteed Debt (3)
 
 
 
 
 
 
 
 
 
 
 
 
Senior Notes
 
2016
 
10.75%
 
478.6

 
478.6

 
478.6

 
478.6

Senior PIK Toggle Notes
 
2018
 
10.75%/11.50%
 
15.5

 
15.5

 
14.7

 
14.7

Unsecured Senior Debt
 
 
 
 
 
 
 
 
 
 
 
 
5.625%
 
2015
 
5.625%
 
791.8

 
739.2

 
791.8

 
713.3

6.5%
 
2016
 
6.50%
 
573.2

 
505.4

 
573.2

 
490.1

5.75%
 
2017
 
5.75%
 
538.8

 
431.7

 
538.8

 
419.0

Floating Rate Contingent Convertible
Senior Notes
 
2024
 
0.24%
 

 

 
0.2

 
0.2

Other Unsecured Borrowings
 
 
 
 
 
 
 
 
 
 
 
 
Special Improvement District Bonds
 
2037
 
5.30%
 
46.9

 
46.9

 
62.9

 
62.9

Note payable to Caesars Entertainment (4)
 
2017
 
3.15%
 

 

 
285.4

 
285.4

Note payable to Caesars Entertainment  (4)
 
2019
 
11.00%
 

 

 
15.4

 
15.4

Other
 
2016 - 2021
 
0.00% - 6.00%
 
37.0

 
37.0

 
45.9

 
45.9

Total Debt
 
 
 
 
 
20,771.2

 
18,407.7

 
19,589.1

 
17,054.0

Current Portion of Long-Term Debt
 
 
 
 
 
(167.6
)
 
(167.6
)
 
(113.4
)
 
(113.4
)
Long-Term Debt
 
 
 
 
 
$
20,603.6

 
$
18,240.1

 
$
19,475.7

 
$
16,940.6

_________________
(1)  
The Term B7 Loans have a springing maturity to 90 days prior to March 1, 2017, if more than $500.0 million of our Term B-5 and Term B-6 Loans remain outstanding on such date.
(2)  
The property that secured this debt was sold to CGP LLC in May 2014. As part of this transaction, CGP LLC assumed this debt. See Note 5 , " Property Transaction with CGP LLC ."
(3)  
Guaranteed by certain wholly owned subsidiaries of CEOC.
(4)  
Repaid in the second quarter 2014.
As of June 30, 2014 and December 31, 2013 , book values of debt are presented net of unamortized discounts of $2,363.5 million and $2,535.1 million , respectively.

21

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

As of June 30, 2014 , our outstanding debt had a fair value of $15,952.6 million and a carrying value of $18,407.7 million . We calculated the fair value of the debt based on borrowing rates available as of June 30, 2014 , for debt with similar terms and maturities, and based on market quotes of our publicly traded debt. We classify the fair value of debt within level 1 and level 2 in the fair value hierarchy.
The following table summarizes the contractual maturities of the face value of our long-term debt as of June 30, 2014 , and does not reflect the impact of the "Repayment of 2015 Maturities" described below, which occurred subsequent to June 30, 2014 .
(In millions)
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Long-term debt
$
1,793.1

 
$
1,106.9

 
$
2,082.8

 
$
2,715.1

 
$
8,447.5

 
$
4,625.8

 
$
20,771.2

Notes payable to Caesars Entertainment
We have a credit facility with Caesars Entertainment pursuant to which Caesars Entertainment will make one or more unsecured loans to us in a maximum principal amount not to exceed $1.0 billion outstanding at any time. The entire outstanding amount, plus any accrued and unpaid interest, matures November 2017, and bears interest at a rate per annum equal to LIBOR, as defined in the credit agreement, plus 3.0%. Interest is payable quarterly in arrears or, at our election, such interest may be added to the loan balance owed to Caesars Entertainment. This facility was paid in full in the three months ended June 30, 2014. There was $285.4 million outstanding under the agreement as of December 31, 2013 .
In addition, a $15.4 million note payable to Caesars Entertainment partially funded the Bill’s renovation.  This note was repaid in full to CEC in conjunction with the May 2014 transaction described in Note 5 , " Property Transaction with CGP LLC ."
Repayment of 2015 maturities
On July 29, 2014, we announced that we had completed our previously announced cash tender offers for any and all of our 5.625% Notes and any and all of our 10.00% Notes. We received tenders from the holders of $44.4 million aggregate principal amount of the 5.625% Notes and $103.0 million aggregate principal amount of the 10.00% Notes by the expiration time. We accepted for purchase all of the notes validly tendered (and not validly withdrawn). We paid total consideration of $1,048.75 per $1,000 principal amount of the 5.625% Notes and total consideration of $1,022.50 per $1,000 principal amount of the 10.00% Notes, plus any accrued and unpaid interest from the last interest payment date to, but not including, the payment date. In addition, pursuant to note purchase agreements with a significant third-party holder and a subsidiary of CGP LLC, we purchased approximately $740.5 million in aggregate principal amount of the 5.625% Notes for a purchase price of $1,048.75 per $1,000 principal amount and approximately $83.2 million in aggregate principal amount of the 10.00% Notes for a purchase price of $1,022.50 per $1,000 principal amount, in each case, plus accrued and unpaid interest to, but not including, the closing date. As a result of the tender offers and the note purchases, we retired approximately 99.1% of the outstanding amount of the 5.625% Notes and approximately 98.0% of the outstanding amount of the 10.00% Notes.
Bank Transactions
On July 25, 2014, we announced that we closed amendments to our senior secured credit facilities that, upon their closing, provided for the following:
(i)
a modification of the financial maintenance covenant to increase the SSLR from a ratio of 4.75 to 1.0 to a ratio of 7.25 to 1.0 on a retroactive basis to 2008, accordingly this change is effective for our June 30, 2014 covenant compliance determination;
(ii)
an exclusion of the Incremental Term Loans incurred after March 31, 2014 from the definition of SSLR for purposes of such covenant to bring the amount of senior notes excluded for SSLR covenant purposes from $3,700.0 million to $5,450.0 million ;
(iii)
a modification of CEC’s guarantee under the senior secured credit facilities such that CEC’s guarantee will be limited to a guarantee of collection with respect to obligations owed to the lenders who consent to the Bank Amendment; and
(iv)
a modification of certain other provisions of the senior secured credit facilities.
In addition, we repaid approximately $794.6 million of outstanding term loans held by consenting lenders at par upon closing of the Bank Amendment.

22

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Credit Facilities Activity
We have certain senior secured credit facilities (the "Credit Facilities") that we entered into in connection with the Acquisition and have amended. This financing is neither secured nor guaranteed by Caesars Entertainment or its other direct subsidiaries.
In January and February 2013, we converted $133.9 million aggregate principal amount of original maturity revolver commitments held by consenting lenders to Term B6 Loans and terminated $133.9 million principal amount of revolving commitments of extending lenders.
In connection with the February 2013 notes offering described in the Notes Activity section below, we received the requisite lenders’ consent and entered into a bank amendment to the Credit Facilities to, among other things:
(i)
use the net cash proceeds to repay $1,433.3 million of our existing term loans as described in the Notes Activity section below;
(ii)
obtain up to $75.0 million of extended revolving facility commitments with a maturity of January 28, 2017;
(iii)
increase the accordion capacity under the Credit Facilities by an additional $650.0 million (which may be used to, among other things, establish extended revolving facility commitments under the Credit Facilities);
(iv)
modify the calculation of the senior secured leverage ratio for purposes of the maintenance test under the Credit Facilities to exclude the notes issued in February 2013; and
(v)
modify certain other provisions of the Credit Facilities.
In addition to the foregoing, we may elect to extend and/or convert additional term loans and/or revolver commitments from time to time.
In June 2014, we completed the offering of $1,750.0 million of incremental term loans ("Incremental Term Loans") due March 1, 2017, with a springing maturity to 90 days prior to March 1, 2017, if more than $500.0 million of our Term B-5 or Term B-6 Loans remain outstanding on such date. The net proceeds of the Incremental Term Loans were deposited in escrow and remained in escrow until all the escrow conditions were satisfied on July 25, 2014. The Incremental Term Loans require scheduled quarterly repayments of $4.4 million beginning in the third quarter of 2014.
As of June 30, 2014 , the Credit Facilities provide for senior secured financing of up to $6,263.9 million , consisting of (i) senior secured term loan facilities in an aggregate principal amount of $6,157.8 million and (ii) a senior secured revolving credit facility in an aggregate principal amount of up to $106.1 million , including both a letter of credit sub-facility and a swingline loan sub-facility. There were no amounts outstanding under the revolving credit facility at June 30, 2014 or during the year ended December 31, 2013. The term loans under the Credit Facilities currently require scheduled quarterly payments of $2.5 million , excluding the Incremental Term Loans, with the balance due at maturity. Quarterly repayments increase to $11.1 million in first quarter 2015, excluding the Incremental Term Loans. As of June 30, 2014 , the senior secured term loans are comprised of $29.0 million maturing January 2015, $955.0 million  maturing October 2016, and $3,423.8 million maturing January 2018, excluding the Incremental Term Loans. Certain of these maturities were repaid in July 2014 as described in "Repayment of 2015 Maturities" described above. As of June 30, 2014 $106.1 million of the revolving credit facility matures January 28, 2017 and $99.2 million is committed to outstanding letters of credit. After consideration of the letter of credit commitments, $6.9 million of additional borrowing capacity was available to the Company under its revolving credit facility as of June 30, 2014 .

23

CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Credit Facility Interest Rates

 
 
Interest Rates
 
 
Credit Facility
 
Contractual
 
As of June 30, 2014
 
 
 
 
Type