See accompanying Notes to Consolidated Condensed Financial Statements.

See accompanying Notes to Consolidated Condensed Financial Statements.

CEC is primarily a holding company with no independent operations of its own. Caesars Entertainment operates the business primarily through its wholly owned subsidiaries CEOC, LLC (“CEOC LLC”) and Caesars Resort Collection, LLC (“CRC”). As of March 31, 2020, Caesars Entertainment operateshas a total of 5351 properties in 1413 U.S. states and five5 countries outside of the U.S., including 49 casino properties. NineNaN casinos are in Las Vegas, which represented 45% of net revenues for the three months ended March 31, 2019.2020. In addition to our properties, other domestic and international properties, including Harrah’s Northern California, are authorized to use the brands and marks of Caesars Entertainment Corporation.

We lease certain real property assets from third parties, including VICI Properties Inc. and/or its subsidiaries (“VICI”(collectively, “VICI”).

The accompanying unaudited consolidated condensed financial statements of Caesars have been prepared under the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable for interim periods, and therefore, do not include all information and footnotes necessary for complete financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”). The results for the interim periods reflect all adjustments (consisting primarily of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations, and cash flows. The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 20192020 fiscal year.

GAAP requires 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. Management believes the accounting estimates are appropriate and reasonably determined. Actual amounts could differ from those estimates.

Reportable Segments

We view each property as an operating segment and aggregate all such properties into three3 regionally-focused reportable segments: (i) Las Vegas, (ii) Other U.S., and (iii) All Other, which is consistent with how we manage the business. See Note 15.

Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Balance Sheets that sum to amounts reported on the Statements of Cash Flows.

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

We consolidate all subsidiaries in which we have a controlling financial interest and variable interest entities (“VIEs”)VIEs for which we or one of our consolidated subsidiaries is the primary beneficiary. Control generally equates to ownership percentage, whereby (i) affiliates that are more than 50% owned are consolidated; (ii) investments in affiliates of 50% or less but greater than 20% are generally accounted for using the equity method where we have determined that we have significant influence over the entities; and (iii) investments in affiliates of 20% or less are generally accounted for usingas investments in equity securities.

We consider ourselves the cost method.

Consolidation of Korea Joint Venture

CEC has a joint venture to acquire, develop, own, and operate a casino resort project in Incheon, South Korea (the “Korea JV”). We determined that the Korea JV is a VIE and CEC is the primary beneficiary, and therefore, we consolidate the Korea JV into our financial statements. As of March 31, 2020, the construction schedule for the project has been delayed and discussions regarding the project costs between us and our JV partner remain ongoing. On February 11, 2020, the primary subcontractor notified us that construction on the project has ceased pending resolution of the go-forward options as explained below. In addition, the external debt financing by the Korea JV has also been delayed, which has affected the timing of equity capital contributions by us, and our joint venture partner, in accordance with our joint venture agreement. We are currently in discussions with our joint venture partner regarding the project costs and financing plan for the project and are evaluating all of our options under the terms of the joint venture agreement. Possible outcomes include completing the project and related financing as originally budgeted, adding an additional equity partner, selling all, or part, of the parties’ ownership interest in the Korea JV, liquidating the joint venture or taking any other steps including those that we may agree with our joint venture partner. These possible outcomes could result in a material impairment of assets of the Korea JV and could also change our conclusion that we are the primary beneficiary of the joint venture, which could result in a material charge upon deconsolidation of the joint venture. As reported by the joint venture and consolidated in our financial statements, as of March 31, 2020, total net assets of $125 million were primarily composed of property and equipment recorded at cost basis, net of construction payable, of which we have a 50% interest.

The Financial Accounting Standards Board (the “FASB”) issued the following authoritative guidance amending the FASB Accounting Standards Codification (“ASC”).

The following ASUs were not effective as of March 31, 2019:

Intangibles - Goodwill and Other - Internal-Use SoftwareReference Rate Reform - ASU 2018-152020-04::Amended guidance alignsis intended to provide relief to the requirementscompanies that have contracts, hedging relationships or other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate which is expected to be discontinued because of reference rate reform. The amendments provide optional expedients and exceptions for capitalizing implementation costs incurredapplying GAAP to contracts, hedging relationships, and other transactions if certain criteria are met. The amendments in this update are effective as of March 12, 2020 through December 31, 2022. The amendments in this update may be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a hosting arrangementdate within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. All other amendments should be applied on a prospective basis. We are currently assessing the effect the adoption of this standard will have on our prospective financial statements.

Income Taxes - ASU 2019-12:Amended guidance simplifies ASC 740 - Income Taxes by removing scope exceptions including: the incremental approach for intraperiod tax allocation when there is a service contract withloss from continuing operations and income or a gain from other items and the requirementsgeneral methodology for capitalizing implementation costs incurred to develop or obtain internal-use software. The accountingcalculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the service elementyear. The amendment also simplifies areas such as franchise tax, step up in tax basis of a hosting arrangement that is a service contract is not affected.goodwill in business combination, allocation of deferred tax to legal entities, inclusion of tax laws or rate change effect in annual effective tax rate computation, and income taxes for employee stock ownership plans. The amendments in this update are effective for public entities for fiscal years beginning after December 15, 2019,2020, and interim periods within those fiscal years. Early adoption is permitted. The amendments in this ASUupdate related to separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented. The amendments related to franchise taxes that are partially based on income should be applied on either retrospectivelya retrospective basis for all periods presented or prospectivelya modified retrospective basis through a cumulative-effect adjustment to all implementation costs incurred afterretained earnings as of the datebeginning of the fiscal year of adoption. All other amendments should be applied on a prospective basis. We are currently assessing the effect the adoption of this standard will have on our prospective financial statements.

Our property and equipment is subject to various operating leases for which we are the lessor. We lease our property and equipment related to our hotel rooms, convention space and retail space through various short-term and long-term operating leases. See Note 7 for further discussion of our leases.

Items Measured at Fair Value on a Recurring Basis

The following table shows the fair value of our financial assets and financial liabilities that are required to be measured at fair value as of the date shown:

Government Bonds

Investments primarily consist of debt securities held by our captive insurance entities that are traded in active markets, have readily determined market values, and have maturity dates of greater than three months from the date of purchase. These investments primarily represent collateral for several escrow and trust agreements with third-party beneficiaries and are recorded in Deferred charges and other assets while a portion is included in Prepayments and other current assets in our Balance Sheets.

Derivative Instruments

We do not purchase or hold any derivative financial instruments for trading purposes.

CEC Convertible Notes - Derivative Liability

The CEC Convertible Notes have a face value of $1.1 billion, aan initial term of 7 years, and a coupon rate of 5%.

As of March 31, 20192020 and December 31, 2018,2019, we estimated the fair value of the CEC Convertible Notes using a market-based approach that incorporated the value of both the straight debt and conversion features of the notes. The valuation model incorporated actively traded prices of the CEC Convertible Notes as of the reporting date, the value of CEC’s equity into which these notes could convert, and assumptions regarding the incremental cost of borrowing for CEC. Since theThe key assumption used in the valuation model is the actively traded price of CEC Convertible Notes butand the incremental cost of borrowing is an unobservable input, theindirectly observable input. The fair value for the conversion features of the CEC Convertible Notes wasis classified as Level 2.2 measurement.

Interest Rate Swap Derivatives

We use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. As of March 31, 2019,2020, we have entered into a total of ten10 interest rate swap agreements for notional amounts totaling $3.0 billion to fix the interest rate on $3.0 billion of variable rate debt. The interest rate swaps are designated as cash flow hedging instruments. The difference to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense at settlement. Changes in the variable interest rates to be received pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows.

The major terms of the interest rate swap agreements as of March 31, 20192020 are as follows:

The estimated fair values of our interest rate swap derivative instruments are derived from market prices obtained from dealer quotes for similar, but not identical, assets or liabilities. Such quotes represent the estimated amounts we would receive or pay to terminate the contracts. The interest rate swap derivative instruments are included in either Deferred charges and other assets or Deferred credits and other liabilities on our Balance Sheets. Our derivatives are recorded at their fair values, adjusted for the credit rating of the counterparty if the derivative is an asset, or adjusted for the credit rating of the Company if the derivative is a liability. None of our derivative instruments are offset and all were classified as Level 2.

The effect of derivative instruments designated as hedging instruments on the Balance Sheet for amounts transferred into Accumulated other comprehensive income/(loss) (“AOCI”) before tax was a loss of $21$65 million and a gain of $5$21 million respectively, during the three months ended March 31, 2020 and 2019, and 2018. The effect of derivative instrumentsrespectively. AOCI reclassified from AOCI to Interest expense on the Statements of Operations were immaterial and zero, respectively,was $7 million for the three months ended March 31, 2019 and 2018.2020. The estimated amount of existing losses that are reported in AOCI at the reporting date that are expected to be reclassified into earnings within the next 12 months is approximately $6$64 million.

The changes in AOCI by component, net of tax, for the three months endedquarterly periods through March 31, 20192020 and 20182019 are shown below.

CEC and Caesars Entertainment Operating Company, Inc. (“CEOC”) deposited cash, CEC common stock, and CEC Convertible Notes into an escrow trust to be distributed to satisfy certain remaining unsecured claims (excluding debt claims) as they become allowed (see Note 8)7). We have estimated the fair value of the remaining liability of those claims. Based on the valuation methodologyAs of the CEC Convertible Notes (see above),March 31, 2020, the fair value of the Disputed claims liability is classified as Level 2.

For the three months ended March 31, 20192020 and 2018,2019, the changes in fair value related to the disputed claims liability was a gain of $21 million and a loss of $6 million and income of $10 million, respectively, which were recorded as components of Other income/(loss) in the Statements of Operations.

Caesars is party to ordinary and routine litigation incidental to our business. We do not expect the outcome of any such litigation to have a material effect on our consolidated financial position, results of operations, or cash flows.flows, as we do not believe it is reasonably possible that we will incur material losses as a result of such litigation.

During the three months ended March 31, 2019,2020, we have not entered into any material contractual commitments outside of the ordinary course of business that have materially changed our contractual commitments as compared to December 31, 2018.2019.

Exit Cost Accruals

As of March 31, 20192020 and December 31, 2018,2019, exit costs were included in Accrued expenses and other current liabilities and Deferred credits and other liabilities on the accompanying Balance Sheets for accruals related to the following:

In September 2017, we filed our final notice to proceed with our planelected to exit the fully bundled sales system of NV Energy for our Nevada properties and purchase energy, capacity, and/or ancillary services from a provider other than NV Energy. The transition to unbundle electric service was completed in the first quarter of 2018 (the “Cease-Use Date”).providers. As a result, of our decisionwe are required to exit, an order from the Public Utilities Commission of Nevada required that we pay an aggregate exit fee of $48 million.and non-bypassable charges related to our Nevada properties until 2024. These fees are payable over three to six years at an aggregate present value of $33 million as of March 31, 2019 and were recorded in Accrued expenses and other current liabilities and Deferred credits and other liabilities on the Balance Sheets.

Sports Sponsorship/Partnership Obligations

We have agreements with certain professional sports leagues and teams, sporting event facilities and sports television networks for tickets, suites, and advertising, marketing, promotional and sponsorship opportunities. As of March 31, 2019,2020, obligations related to these agreements were $172$231 million with commitmentscontracts extending through 2034. We recognize expenses in the period services are rendered in accordance with the various agreements. In addition, assets or liabilities may be recorded related to the timing of payments as required by the respective agreement.

Golf Course Use Agreement

On October 6, 2017, certain golf course properties were sold to VICI and CEOC LLC entered into a golf course use agreement (the “Golf Course Use Agreement”) with VICI. VICI over a 35-year term (inclusive of all renewal periods), pursuant to which we incur (i) an annual payment of $10 million subject to escalation, (ii) an annual use fee of $3 million, subject to escalation beginning in the second year, and (iii) per-round fees. All of these payments are guaranteed by CEC.

An obligation of $144$146 million is recorded in Deferred credits and other liabilities as of March 31, 2019,2020, which represents the amount in whichthat the obligations of $10 million in annual payment obligationpayments to be made under the Golf Course Use Agreement exceeds the fair value of services being received.

Due to the termgovernment or tribe-mandated closures of our properties as a result of the Golf Course Use AgreementCOVID-19 public health emergency, on April 2, 2020, we announced that we would temporarily move to a smaller, targeted workforce focused on maintaining basic operations while our properties remain closed and that furloughs would affect approximately 90% of our employees at our domestic, owned properties in North America as well as our corporate employees. We paid two weeks of pay from the furlough notification date, after which continuesthe employees were allowed to use their annual allotted paid time off. For furloughed employees enrolled in the Caesars health benefit plans, we are paying 100% of health insurance premiums through October 2052. The amortizationthe earlier of June 30, 2020, or the date that such employees return to work. We have accrued $131 million associated with these costs as of March 31, 2020, within Accrued expenses and other current liabilities.

As described in Note 1, the CARES Act provides for, among other things, economic relief for certain benefits paid to employees while they are not providing services during this obligation for bothinterruption. Qualifying costs under the CARES Act are certain wages and benefits paid to employees who have no further service requirement. For the three months ended March 31, 20192020, we have recorded a benefit of approximately $34 million within Property, general, administrative, and 2018 was $3 million and is reflected in Interest expense inother on our Statements of Operations.

As previously disclosed in our 20182019 Annual Report, CEOC and certain of its U.S. subsidiaries (collectively, the “Debtors”) voluntarily filed for reorganization on January 15, 2015 (the “Petition Date”). The Debtors emerged from bankruptcy and consummated their reorganization pursuant to their third amended joint plan of reorganization (the “Plan”) on October 6, 2017 (the “Effective Date”). Prior to the Effective Date, CEOC’s financial statements included amounts classified as liabilities subject to compromise, which represented estimates of pre-petition obligations impacted by the Chapter 11 reorganization process. These amounts represented the Debtors’ then-current estimate of known or potential pre-petition obligations to be resolved in connection with CEOC’s emergence from bankruptcy.

Pursuant to the Plan, CEC and CEOC deposited cash, CEC common stock, and CEC Convertible Notes into an escrow trust to be distributed to satisfy certain remaining unsecured claims (excluding debt claims) as they become allowed. As claims are resolved,

As of March 31, 2019,2020, approximately $49$48 million in cash, 8 million shares of CEC common stock, and $32 million in principal value of CEC Convertible Notes remain in reserve for distribution to holders of disputed claims whose claims may ultimately become allowed in the escrow trust. The CEC common stock and CEC Convertible Notes held in the escrow trust are treated as not outstanding in CEC’s Financial Statements. We estimate that the number of shares, cash, and CEC Convertible Notes reserved is sufficient to satisfy the Debtors’ obligations under the Plan.

Self-Insurance

We are self-insured for workers compensation and other risk insurance, as well as health insurance. Our total estimated self-insurance liability was $175$167 million and $173$163 million respectively, as of March 31, 20192020 and December 31, 2018.2019, respectively.