Description of Business and Basis of Presentation

We conduct business through our wholly owned subsidiaries, Caesars Entertainment Operating Company, Inc. ("CEOC") and Caesars Entertainment Resort Properties ("CERP") and their subsidiaries. We also consolidate Caesars Growth Partners, LLC ("CGP LLC"), which is a variable interest entity ("VIE") for which we have determined that we are the primary beneficiary. As of December 31, 2013, we owned, operated, or managed, through various subsidiaries and VIEs, 52 casinos in 13 U.S. states and 5 countries. Of the 52 casinos, 39 are in the United States and primarily consist of land-based and riverboat or dockside casinos. Our 13 international casinos are land-based casinos, most of which are located in England. See Item 2, "Properties."

We have an ownership interest in CGP LLC as well as obligations under the asset management and management services agreements that constitute variable interests in CGP LLC. Because the equity holders in CGP LLC receive returns disproportionate to their voting interests and substantially all the activities of CGP LLC are related to Caesars, CGP LLC has been determined to be a variable interest entity. We have determined that we are the primary beneficiary of CGP LLC and we have consolidated this entity. See Note 5, "Caesars Growth Partners, LLC Transactions."

Caesars Interactive Entertainment, Inc. ("CIE"), which is a majority owned subsidiary of CGP LLC, operates an online gaming business providing for certain real money games in Nevada, New Jersey, and the United Kingdom; "play for fun" offerings in other jurisdictions; and social games on Facebook and other social media websites and mobile application platforms, such as Slotomania. CIE also owns the World Series of Poker ("WSOP") tournaments and brand, and licenses trademarks for a variety of products and businesses related to this brand.

We view each casino property and CIE as operating segments and aggregate all such casino properties and CIE into one reportable segment.

On January 28, 2008, Caesars Entertainment was acquired by affiliates of Apollo Global Management, LLC (together with such affiliates, "Apollo") and affiliates of TPG Capital, LP (together with such affiliates, "TPG" and, together with Apollo, the "Sponsors") in an all-cash transaction ("the Acquisition"). As a result of the Acquisition and through February 7, 2012, our stock was not publicly traded. Effective February 8, 2012, as the result of our public offering, our common stock trades on the NASDAQ Global Select Market ("NASDAQ") under the symbol "CZR." In connection with the public offering, the Company effected a 1.742-for-1 split of its common stock. Unless otherwise stated, all applicable share and per-share data presented herein have been retroactively adjusted to give effect to this stock split. See Note 11, "Stockholders' Equity and Loss Per Share," for further information.

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 December 31, 2013, we had $23,589.3 million face value of outstanding indebtedness and our current debt service obligation for 2014 is $2,383.0 million, consisting of $197.1 million in principal maturities and $2,185.9 million in required interest payments. Our debt service obligation for 2015 is $3,223.7 million, consisting of $1,212.2 million in principal maturities and $2,011.5 million in required interest payments.

Following the U.S. recession of late 2007 through 2009, we have observed that gaming activity has remained well below the pre-recession levels. In addition, new competition in certain regional markets has negatively affected “same store” volumes, while overall slot volumes trends continue to weaken in most markets. These factors have negatively affected our results of operations, and may continue to negatively affect our results of operations in the future. During periods of economic weakness and in the face of continued weak consumer spending on gaming, our revenues may decrease while many of our costs remain fixed and some costs even increase, resulting in decreased earnings. As a result, we have experienced substantial net losses since 2010, as well as operating losses in 2012 and 2013, resulting in a net stockholders’ deficit of $3,122.0 million as of December 31, 2013. Further, we expect to experience operating and net losses in 2014 and beyond.

Our cash and cash equivalents, excluding restricted cash, totaled $2,771.2 million as of December 31, 2013 compared with $1,757.5 million as of December 31, 2012. Cash and cash equivalents as of December 31, 2013, includes $976.9 million held by CGP LLC, which is not available for our use to fund operations or satisfy our obligations. Caesars experienced negative operating cash flows of $109.4 million in 2013 and we also expect to experience negative operating cash flows in 2014 and beyond at our CEOC subsidiary.

In addition to cash flows from operations, available sources of cash include amounts available under our current revolving credit facility. At December 31, 2013, the facility provided for up to $215.5 million, with $109.4 million maturing on January 28, 2014. As of March 1, 2014 the facility provided for $106.1 million of borrowing capacity, of which $9.6 million remained as available borrowing capacity. In addition, CERP had $269.5 million available on its revolving credit facility at December 31, 2013.

As described more fully in Note 24, “Subsequent Events,” we recently announced that CGP LLC will acquire certain assets from CEOC for $2,000.0 million in cash, net of assumed debt. The transaction is expected to close in the second quarter 2014. The net cash proceeds will impact the calculation of the senior secured leverage ratio ("SSLR") covenant going forward to the extent it reduces first lien debt or increases cash of CEOC.

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 of the Company’s subsidiaries 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 do not expect that our cash flow from operations will be sufficient to repay our indebtedness in the long-term and we will have to ultimately seek a restructuring, amendment or refinancing 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 CEOC's Credit Facilities, we are required to satisfy and maintain specified financial ratios. Specifically, our credit facilities require CEOC to maintain an SSLR of no more than 4.75 to 1.0, which is the ratio of CEOC's senior first priority secured debt to LTM Adjusted EBITDA - Pro Forma - CEOC Restricted. This ratio excludes up to $3,700.0 million of CEOC 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 CEOC senior first priority secured debt by the amount of unrestricted CEOC cash on hand, which was $1,450.2 million as of December 31, 2013. As of December 31, 2013, the CEOC SSLR was 4.52 to 1.0.

While we were in compliance with the terms and conditions of all of our loan agreements, including CEOC’s Credit Facilities and indentures, as of December 31, 2013, in order to comply with the quarterly SSLR covenant under the CEOC Credit Facility in the future, we will need to achieve a certain amount of LTM Adjusted EBITDA - Pro-Forma - CEOC Restricted and/or reduced levels of total senior secured net debt (total senior secured debt less unrestricted cash). The factors that could impact the foregoing include (a) changes in gaming trips, spend per trip and hotel metrics, which we believe are correlated to consumer spending and confidence generally and spending by consumers for gaming and other entertainment activities, (b) our ability to effect cost savings initiatives, (c) our ability to complete asset sales, including the transaction described more fully in Note 24, (d) issuing additional second lien or unsecured debt, or project financing, (e) reducing net debt through open market purchases, privately negotiated transactions, redemptions, tender offers or exchanges, (f) equity issuances, (g) reductions in capital expenditures spending, or (h) a combination thereof.

In addition, under certain circumstances, the CEOC Credit Facilities allow us to apply cash contributions received by CEOC from CEC as an increase to LTM Adjusted EBITDA - Pro Forma - CEOC Restricted, if CEOC is unable to meet its SSLR, in order to cure any breach.

Based upon our current operating forecast, the expected closing of the CEOC asset sale to CGP LLC described above and in Note 24, and our ability to achieve one or more of the other factors noted above, including our ability to cure a breach of the SSLR, in certain circumstances, with cash contributions from CEC, we believe that we will have sufficient liquidity to fund our operations and meet our debt service obligations and that we will continue to be in compliance with the CEOC SSLR during the next twelve months.

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 December 31, 2013 and 2012 with maturities by year, as well as discussion of recent changes in our debt outstanding, and certain changes in the terms of existing debt for the year ended December 31, 2013.

Basis of Presentation and Use of Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), which require the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual amounts could differ from those estimates.

Certain prior year amounts have been reclassified to conform to the current year's presentation.

As described in Note 21, "Employee Benefit Plans," in the fourth quarter of 2013, we elected to change our method of accounting for actuarial gains and losses for our pension plan in the United Kingdom to a more preferable method permitted under GAAP. We believe this change was preferable because it will result in a method of amortization of gains and losses that accelerates recognition of such gains and losses into net income for events that have already occurred. We have applied this change in accounting principle retrospectively. In addition, we made other immaterial corrections to the accounting for the pension plan.

Principles of Consolidation

Our consolidated financial statements include the accounts of Caesars Entertainment and its subsidiaries after elimination of all intercompany accounts and transactions.

We consolidate into our financial statements the accounts of all 100% owned subsidiaries, partially-owned subsidiaries that we control and VIEs for which we are the primary beneficiary (See Note 2). Control generally equates to ownership percentage, (1) whereby affiliates that are more than 50% owned are consolidated; (2) investments in affiliates of 50% or less but greater than 20% are generally accounted for using the equity method; and (3) investments in affiliates of 20% or less are generally accounted for using the cost method.