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Organization Organization (Notes)
3 Months Ended
Mar. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]
Organization
Organization
As described in Note 4, “Deconsolidation of Caesars Entertainment Operating Company,” effective January 15, 2015, we deconsolidated Caesars Entertainment Operating Company, Inc. (“CEOC”), our majority owned subsidiary, subsequent to its voluntarily filing for reorganization under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”). As such, all amounts presented in these consolidated condensed financial statements and notes thereto exclude the operating results and cash flows of CEOC subsequent to January 15, 2015, and the assets, liabilities, and equity of CEOC as of March 31, 2015.
Following the deconsolidation of CEOC, our business is composed of our wholly owned subsidiary, Caesars Entertainment Resort Properties, LLC (“CERP”) and its subsidiaries, our consolidated variable interest entity (“VIE”), Caesars Growth Partners, LLC (“CGP LLC”) and its subsidiaries, and other direct subsidiaries of Caesars Entertainment. As of March 31, 2015, CERP and CGP LLC owned and operated a total of 12 casinos in the United States.
We also include the results of Caesars Interactive Entertainment, Inc. (“CIE”), a majority owned subsidiary of CGP LLC that operates an online gaming business providing for social games on Facebook and other social media websites and mobile application platforms; certain real money games in Nevada and New Jersey; and “play for fun” offerings in other jurisdictions. CIE also owns the World Series of Poker (“WSOP”) tournaments and brand and licenses trademarks for a variety of products and businesses related to this brand.
We view each casino property and CIE as operating segments and aggregated all such casino properties and CIE into four reportable segments based on management’s view of these properties, which aligns with their ownership and underlying credit structures: CEOC, CERP, Caesars Growth Partners Casino Properties and Developments (“CGP Casinos”), and CIE. CGP Casinos is comprised of all subsidiaries of CGP LLC excluding CIE. CEOC is a reportable segment; however, it was deconsolidated effective January 15, 2015.
This Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 10-K”).
Going Concern
The accompanying consolidated financial statements have been prepared assuming that CEC will continue as a going concern and do not include any adjustments that might result from the outcome of any uncertainties related to our going concern assessment. As described more fully below and in Note 5, “Litigation,” we are a defendant in litigation and other Noteholder Disputes relating to certain CEOC transactions dating back to 2010. These matters, if resolved against us, raise substantial doubt about CEC’s ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note 5.
As described more fully in Note 5, under the headings “Noteholder Disputes” and “Demands for Payment,” we are subject to currently pending or threatened litigation (the “Litigation”) and demands for payment by certain creditors asserting, among other things, that CEC is obligated under the former parent guarantee of certain CEOC defaulted debt (the “Demands” and, together with the Litigation, the “Noteholder Disputes”). The Litigation pending against CEOC, and in certain cases against CEC and its other subsidiaries, has been stayed due to the Chapter 11 bankruptcy process; however, certain Litigation and the Demands against CEC are continuing outside of the Chapter 11 bankruptcy process. The Company believes that the Litigation claims and Demands against CEC are without merit and intends to defend itself vigorously. At the present time, we believe it is not probable that a material loss will result from the outcome of these matters. The Noteholder Disputes are in their very preliminary stages and discovery has only recently begun in several of them including the Unsecured Note Lawsuits (as defined in Note 5).
We cannot provide assurance as to the outcome of the Noteholder Disputes or of the range of potential losses should the Noteholder Disputes ultimately be resolved against us, due to the inherent uncertainty of litigation and the stage of the related litigation. Should these matters ultimately be resolved through litigation outside of the CEOC Financial Restructuring, and were a court to find in favor of the claimants in any of these Noteholder Disputes, such determination could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Accordingly, we have concluded that the material uncertainty related to certain of the Litigation proceeding against CEC raises substantial doubt about the Company’s ability to continue as a going concern and resulted in the voluntary reorganization of CEOC.
Financial Condition and Other Matters
Over the three-year period ended December 31, 2014, we incurred cumulative net losses totaling $7.2 billion, primarily due to $7.0 billion of interest expense resulting from our highly-leveraged capital structure. During the three months ended March 31, 2015, we recognized net income of $6.8 billion, which includes an $7.1 billion gain recognized associated with the deconsolidation of CEOC. As of December 31, 2014, we had a total accumulated deficit of $13.1 billion and long term debt, including current portion of $15.8 billion, totaled $23.2 billion. Our cumulative cash flows from operating activities were negative $772 million over the three-year period, primarily due to cash paid for interest of $5.7 billion. As of March 31, 2015, subsequent to the deconsolidation of CEOC, we had a total accumulated deficit of $6.3 billion and long term debt, including current portion of $71 million, totaled $7.1 billion.
The substantial majority of the preceding negative financial factors have occurred in our largest operating subsidiary, CEOC, which incurred cumulative net losses totaling $7.1 billion resulting from interest expense of $6.2 billion over the three-year period ended December 31, 2014. As of December 31, 2014, CEOC had a total accumulated deficit of $11.4 billion and long term debt, including current portion of $15.8 billion, totaled $16.1 billion. CEOC has experienced negative cash flows from operating activities over the past three years, primarily due to cash paid for interest. All of the foregoing factors have raised substantial doubt about CEOC’s ability to continue as a going concern (see Note 4).