(Mark One)
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
62-1411755
|
(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)
|
Large accelerated filer
|
x
|
Accelerated filer
|
o
|
|
|
|
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
o
|
|
|
|
|
|
|
Emerging growth company
|
o
|
Class
|
Outstanding at April 30, 2019
|
Common stock, $0.01 par value
|
672,710,410
|
|
|
Page
|
|
||
|
||
|
||
|
||
|
||
|
|
|
|
|
|
(In millions)
|
March 31, 2019
|
|
December 31, 2018
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents ($14 and $14 attributable to our VIEs)
|
$
|
1,395
|
|
|
$
|
1,491
|
|
Restricted cash
|
119
|
|
|
115
|
|
||
Receivables, net
|
449
|
|
|
457
|
|
||
Due from affiliates, net
|
5
|
|
|
6
|
|
||
Prepayments and other current assets ($4 and $6 attributable to our VIEs)
|
184
|
|
|
155
|
|
||
Inventories
|
39
|
|
|
41
|
|
||
Total current assets
|
2,191
|
|
|
2,265
|
|
||
Property and equipment, net ($169 and $137 attributable to our VIEs)
|
15,922
|
|
|
16,045
|
|
||
Goodwill
|
4,044
|
|
|
4,044
|
|
||
Intangible assets other than goodwill
|
2,961
|
|
|
2,977
|
|
||
Restricted cash
|
52
|
|
|
51
|
|
||
Deferred income taxes
|
10
|
|
|
10
|
|
||
Deferred charges and other assets ($32 and $35 attributable to our VIEs)
|
856
|
|
|
383
|
|
||
Total assets
|
$
|
26,036
|
|
|
$
|
25,775
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable ($69 and $41 attributable to our VIEs)
|
$
|
411
|
|
|
$
|
399
|
|
Accrued expenses and other current liabilities ($2 and $1 attributable to our VIEs)
|
1,169
|
|
|
1,217
|
|
||
Interest payable
|
137
|
|
|
56
|
|
||
Contract liabilities
|
161
|
|
|
144
|
|
||
Current portion of financing obligations
|
21
|
|
|
20
|
|
||
Current portion of long-term debt
|
64
|
|
|
164
|
|
||
Total current liabilities
|
1,963
|
|
|
2,000
|
|
||
Financing obligations
|
9,990
|
|
|
10,057
|
|
||
Long-term debt
|
8,789
|
|
|
8,801
|
|
||
Deferred income taxes
|
692
|
|
|
730
|
|
||
Deferred credits and other liabilities ($8 and $5 attributable to our VIEs)
|
1,480
|
|
|
849
|
|
||
Total liabilities
|
22,914
|
|
|
22,437
|
|
||
Commitments and contingencies (Note 8)
|
|
|
|
|
|
||
Stockholders’ equity
|
|
|
|
||||
Caesars stockholders’ equity
|
3,039
|
|
|
3,250
|
|
||
Noncontrolling interests
|
83
|
|
|
88
|
|
||
Total stockholders’ equity
|
3,122
|
|
|
3,338
|
|
||
Total liabilities and stockholders’ equity
|
$
|
26,036
|
|
|
$
|
25,775
|
|
|
Three Months Ended March 31,
|
||||||
(In millions, except per share data)
|
2019
|
|
2018
|
||||
Revenues
|
|
|
|
||||
Casino
|
$
|
1,083
|
|
|
$
|
983
|
|
Food and beverage
|
398
|
|
|
383
|
|
||
Rooms
|
386
|
|
|
367
|
|
||
Other revenue
|
181
|
|
|
172
|
|
||
Management fees
|
15
|
|
|
15
|
|
||
Reimbursed management costs
|
52
|
|
|
52
|
|
||
Net revenues
|
2,115
|
|
|
1,972
|
|
||
Operating expenses
|
|
|
|
||||
Direct
|
|
|
|
||||
Casino
|
618
|
|
|
562
|
|
||
Food and beverage
|
269
|
|
|
264
|
|
||
Rooms
|
117
|
|
|
114
|
|
||
Property, general, administrative, and other
|
460
|
|
|
427
|
|
||
Reimbursable management costs
|
52
|
|
|
52
|
|
||
Depreciation and amortization
|
247
|
|
|
280
|
|
||
Corporate expense
|
83
|
|
|
82
|
|
||
Other operating costs
|
29
|
|
|
66
|
|
||
Total operating expenses
|
1,875
|
|
|
1,847
|
|
||
Income from operations
|
240
|
|
|
125
|
|
||
Interest expense
|
(349
|
)
|
|
(330
|
)
|
||
Other income/(loss)
|
(138
|
)
|
|
184
|
|
||
Loss before income taxes
|
(247
|
)
|
|
(21
|
)
|
||
Income tax benefit/(provision)
|
29
|
|
|
(13
|
)
|
||
Net loss
|
(218
|
)
|
|
(34
|
)
|
||
Net loss attributable to noncontrolling interests
|
1
|
|
|
—
|
|
||
Net loss attributable to Caesars
|
$
|
(217
|
)
|
|
$
|
(34
|
)
|
|
|
|
|
||||
Loss per share - basic and diluted
|
|
|
|
|
|||
Basic and diluted loss per share
|
$
|
(0.32
|
)
|
|
$
|
(0.05
|
)
|
Weighted-average common shares outstanding
|
670
|
|
|
697
|
|
||
|
|
|
|
||||
Comprehensive loss
|
|
|
|
||||
Foreign currency translation adjustments
|
$
|
—
|
|
|
$
|
3
|
|
Change in fair market value of interest rate swaps, net of tax
|
(17
|
)
|
|
4
|
|
||
Other
|
2
|
|
|
1
|
|
||
Other comprehensive income/(loss), net of income taxes
|
(15
|
)
|
|
8
|
|
||
Comprehensive loss
|
(233
|
)
|
|
(26
|
)
|
||
|
|
|
|
||||
Amounts attributable to noncontrolling interests:
|
|
|
|
||||
Foreign currency translation adjustments
|
2
|
|
|
(2
|
)
|
||
Comprehensive (income)/loss attributable to noncontrolling interests
|
3
|
|
|
(2
|
)
|
||
Comprehensive loss attributable to Caesars
|
$
|
(230
|
)
|
|
$
|
(28
|
)
|
|
Caesars Stockholders’ Equity
|
|
|
|
|
||||||||||||||||||||||||||
(In millions)
|
Common
Stock
|
|
Treasury
Stock
|
|
Additional
Paid-in-
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income/(Loss)
|
|
Total
Caesars
Stockholders’
Equity
|
|
Noncontrolling
Interests
|
|
Total Stockholders’ Equity
|
||||||||||||||||
Balance as of December 31, 2017
|
$
|
7
|
|
|
$
|
(152
|
)
|
|
$
|
14,040
|
|
|
$
|
(10,675
|
)
|
|
$
|
6
|
|
|
$
|
3,226
|
|
|
$
|
71
|
|
|
$
|
3,297
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
|
(34
|
)
|
||||||||
Stock-based compensation
|
—
|
|
|
(12
|
)
|
|
22
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
||||||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
|
—
|
|
|
9
|
|
||||||||
Change in noncontrolling interest, net of distributions and contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
21
|
|
||||||||
Other
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||||
Balance as of March 31, 2018
|
$
|
7
|
|
|
$
|
(165
|
)
|
|
$
|
14,062
|
|
|
$
|
(10,709
|
)
|
|
$
|
15
|
|
|
$
|
3,210
|
|
|
$
|
92
|
|
|
$
|
3,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Balance as of December 31, 2018
|
$
|
7
|
|
|
$
|
(485
|
)
|
|
$
|
14,124
|
|
|
$
|
(10,372
|
)
|
|
$
|
(24
|
)
|
|
$
|
3,250
|
|
|
$
|
88
|
|
|
$
|
3,338
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(217
|
)
|
|
—
|
|
|
(217
|
)
|
|
(1
|
)
|
|
(218
|
)
|
||||||||
Stock-based compensation
|
—
|
|
|
(5
|
)
|
|
21
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
16
|
|
||||||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
(13
|
)
|
|
(2
|
)
|
|
(15
|
)
|
||||||||
Change in noncontrolling interest, net of distributions and contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
||||||||
Other
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||||||
Balance as of March 31, 2019
|
$
|
7
|
|
|
$
|
(487
|
)
|
|
$
|
14,145
|
|
|
$
|
(10,589
|
)
|
|
$
|
(37
|
)
|
|
$
|
3,039
|
|
|
$
|
83
|
|
|
$
|
3,122
|
|
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2019
|
|
2018
|
||||
Cash flows provided by operating activities
|
$
|
255
|
|
|
$
|
22
|
|
Cash flows from investing activities
|
|
|
|
||||
Acquisitions of property and equipment, net of change in related payables
|
(218
|
)
|
|
(85
|
)
|
||
Proceeds from the sale and maturity of investments
|
5
|
|
|
16
|
|
||
Payments to acquire investments
|
(7
|
)
|
|
(14
|
)
|
||
Other
|
2
|
|
|
—
|
|
||
Cash flows used in investing activities
|
(218
|
)
|
|
(83
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Debt issuance costs and fees
|
—
|
|
|
(1
|
)
|
||
Repayments of long-term debt and revolving credit facilities
|
(116
|
)
|
|
(16
|
)
|
||
Proceeds from the issuance of common stock
|
—
|
|
|
3
|
|
||
Taxes paid related to net share settlement of equity awards
|
(5
|
)
|
|
(12
|
)
|
||
Financing obligation payments
|
(5
|
)
|
|
(2
|
)
|
||
Contributions from noncontrolling interest owners
|
—
|
|
|
20
|
|
||
Distributions to noncontrolling interest owners
|
(2
|
)
|
|
—
|
|
||
Other
|
—
|
|
|
2
|
|
||
Cash flows used in financing activities
|
(128
|
)
|
|
(6
|
)
|
||
Net decrease in cash, cash equivalents, and restricted cash
|
(91
|
)
|
|
(67
|
)
|
||
Cash, cash equivalents, and restricted cash, beginning of period
|
1,657
|
|
|
2,709
|
|
||
Cash, cash equivalents, and restricted cash, end of period
|
$
|
1,566
|
|
|
$
|
2,642
|
|
|
|
|
|
||||
Supplemental Cash Flow Information:
|
|
|
|
||||
Cash paid for interest
|
$
|
231
|
|
|
$
|
247
|
|
Cash received/(paid) for income taxes
|
2
|
|
|
(2
|
)
|
||
Non-cash investing and financing activities:
|
|
|
|
||||
Change in accrued capital expenditures
|
(7
|
)
|
|
(2
|
)
|
(In millions)
|
March 31, 2019
|
|
December 31, 2018
|
||||
Cash and cash equivalents
|
$
|
1,395
|
|
|
$
|
1,491
|
|
Restricted cash, current
|
119
|
|
|
115
|
|
||
Restricted cash, non-current
|
52
|
|
|
51
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
1,566
|
|
|
$
|
1,657
|
|
(In millions)
|
March 31, 2019
|
|
December 31, 2018
|
||||
Land
|
$
|
4,774
|
|
|
$
|
4,871
|
|
Buildings, riverboats, and leasehold and land improvements
|
12,253
|
|
|
12,243
|
|
||
Furniture, fixtures, and equipment
|
1,621
|
|
|
1,563
|
|
||
Construction in progress
|
537
|
|
|
406
|
|
||
Total property and equipment
|
19,185
|
|
|
19,083
|
|
||
Less: accumulated depreciation
|
(3,263
|
)
|
|
(3,038
|
)
|
||
Total property and equipment, net
|
$
|
15,922
|
|
|
$
|
16,045
|
|
Depreciation Expense and Capitalized Interest
|
|||||||
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2019
|
|
2018
|
||||
Depreciation expense
|
$
|
229
|
|
|
$
|
264
|
|
Capitalized interest
|
5
|
|
|
2
|
|
Changes in Carrying Value of Goodwill and Other Intangible Assets
|
|||||||||||
|
Amortizing Intangible Assets
|
|
Non-Amortizing Intangible Assets
|
||||||||
(In millions)
|
|
Goodwill
|
|
Other
|
|||||||
Balance as of December 31, 2018
|
$
|
342
|
|
|
$
|
4,044
|
|
|
$
|
2,635
|
|
Amortization
|
(18
|
)
|
|
—
|
|
|
—
|
|
|||
Other
|
—
|
|
|
—
|
|
|
2
|
|
|||
Balance as of March 31, 2019
|
$
|
324
|
|
|
$
|
4,044
|
|
|
$
|
2,637
|
|
Estimated Fair Value
|
|||||||||||||||
(In millions)
|
Balance
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
March 31, 2019
|
|
|
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Government bonds
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
16
|
|
|
$
|
—
|
|
Derivative instruments - interest rate swaps
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Total assets at fair value
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Derivative instruments - interest rate swaps
|
$
|
38
|
|
|
$
|
—
|
|
|
$
|
38
|
|
|
$
|
—
|
|
Derivative instruments - CEC Convertible Notes
|
486
|
|
|
—
|
|
|
486
|
|
|
—
|
|
||||
Disputed claims liability
|
44
|
|
|
—
|
|
|
44
|
|
|
—
|
|
||||
Total liabilities at fair value
|
$
|
568
|
|
|
$
|
—
|
|
|
$
|
568
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2018
|
|
|
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Government bonds
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
Derivative instruments - interest rate swaps
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
||||
Total assets at fair value
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Derivative instruments - interest rate swaps
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
$
|
—
|
|
Derivative instruments - CEC Convertible Notes
|
324
|
|
|
—
|
|
|
324
|
|
|
—
|
|
||||
Disputed claims liability
|
45
|
|
|
—
|
|
|
45
|
|
|
—
|
|
||||
Total liabilities at fair value
|
$
|
391
|
|
|
$
|
—
|
|
|
$
|
391
|
|
|
$
|
—
|
|
•
|
Actively traded price of CEC Convertible Notes - $143.01 and $122.38, respectively
|
•
|
Incremental cost of borrowing - 6.0% and 7.0%, respectively
|
Effective Date
|
|
Notional Amount
(In millions)
|
|
Fixed Rate Paid
|
|
Variable Rate Received as of
March 31, 2019
|
|
Maturity Date
|
12/31/2018
|
|
250
|
|
2.274%
|
|
2.493%
|
|
12/31/2022
|
12/31/2018
|
|
200
|
|
2.828%
|
|
2.493%
|
|
12/31/2022
|
12/31/2018
|
|
600
|
|
2.739%
|
|
2.493%
|
|
12/31/2022
|
1/1/2019
|
|
250
|
|
2.153%
|
|
2.493%
|
|
12/31/2020
|
1/1/2019
|
|
250
|
|
2.196%
|
|
2.493%
|
|
12/31/2021
|
1/1/2019
|
|
400
|
|
2.788%
|
|
2.493%
|
|
12/31/2021
|
1/1/2019
|
|
200
|
|
2.828%
|
|
2.493%
|
|
12/31/2022
|
1/2/2019
|
|
250
|
|
2.172%
|
|
2.493%
|
|
12/31/2020
|
1/2/2019
|
|
200
|
|
2.731%
|
|
2.493%
|
|
12/31/2020
|
1/2/2019
|
|
400
|
|
2.707%
|
|
2.493%
|
|
12/31/2021
|
(In millions)
|
Unrealized Net Gains/(Losses) on Derivative Instruments
|
|
Foreign Currency Translation Adjustments
|
|
Other
|
|
Total
|
||||||||
Balances as of December 31, 2017
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
(3
|
)
|
|
$
|
6
|
|
Other comprehensive income before reclassifications
|
4
|
|
|
1
|
|
|
4
|
|
|
9
|
|
||||
Total other comprehensive income, net of tax
|
4
|
|
|
1
|
|
|
4
|
|
|
9
|
|
||||
Balances as of March 31, 2018
|
$
|
4
|
|
|
$
|
10
|
|
|
$
|
1
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
||||||||
Balances as of December 31, 2018
|
$
|
(13
|
)
|
|
$
|
(9
|
)
|
|
$
|
(2
|
)
|
|
$
|
(24
|
)
|
Other comprehensive income/(loss) before reclassifications
|
(17
|
)
|
|
2
|
|
|
2
|
|
|
(13
|
)
|
||||
Total other comprehensive income/(loss), net of tax
|
(17
|
)
|
|
2
|
|
|
2
|
|
|
(13
|
)
|
||||
Balances as of March 31, 2019
|
$
|
(30
|
)
|
|
$
|
(7
|
)
|
|
$
|
—
|
|
|
$
|
(37
|
)
|
(1)
|
Non-operating land assets previously considered as failed sale-leaseback financing obligations were determined to qualify for sale-leaseback accounting under ASC 842 and are now recognized as operating lease liabilities with corresponding ROU assets.
|
(2)
|
Operating leases previously considered as off-balance sheet obligations are now recognized as operating lease liabilities with corresponding ROU assets.
|
(3)
|
Accruals associated with future obligations for leases not in use have been applied against the carrying amount of the ROU assets.
|
(In millions)
|
Balance Sheet Classification
|
|
March 31, 2019
|
||
Assets
|
|
|
|
||
Operating lease ROU assets (1)
|
Deferred charges and other assets
|
|
$
|
456
|
|
Liabilities
|
|
|
|
||
Current operating lease liabilities (1)
|
Accrued expenses and other current liabilities
|
|
27
|
|
|
Non-current operating lease liabilities (1)
|
Deferred credits and other liabilities
|
|
488
|
|
(1)
|
As noted above, we have elected the short-term lease measurement and recognition exemption and do not establish ROU assets or liabilities for operating leases with terms of 12 months or less.
|
Maturity of Lease Liabilities as of March 31, 2019
|
|||
(In millions)
|
Operating Leases
|
||
Remaining 2019
|
$
|
51
|
|
2020
|
66
|
|
|
2021
|
66
|
|
|
2022
|
60
|
|
|
2023
|
57
|
|
|
Thereafter
|
917
|
|
|
Total
|
1,217
|
|
|
Less: present value discount
|
(702
|
)
|
|
Lease liability
|
$
|
515
|
|
Lease Costs
|
|||
(In millions)
|
Three Months Ended March 31, 2019
|
||
Operating lease expense
|
$
|
17
|
|
Short-term lease expense
|
19
|
|
|
Variable lease expense
|
1
|
|
|
Total lease costs
|
$
|
37
|
|
Other Information
|
|||
(In millions)
|
Three Months Ended March 31, 2019
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
||
Operating cash flows for operating leases
|
$
|
14
|
|
Weighted-Average Details
|
||
|
March 31, 2019
|
|
Weighted-average remaining lease term (in years)
|
22.9
|
|
Weighted-average discount rate
|
6.91
|
%
|
(1)
|
Financing obligation principal and interest payments are estimated amounts based on the future minimum lease payments and certain estimates based on contingent rental payments. Actual payments may differ from the estimates.
|
Maturity of Lease Receivables as of March 31, 2019
|
|||
(In millions)
|
Operating Leases
|
||
Remaining 2019
|
$
|
60
|
|
2020
|
72
|
|
|
2021
|
63
|
|
|
2022
|
61
|
|
|
2023
|
56
|
|
|
Thereafter
|
820
|
|
|
Total
|
$
|
1,132
|
|
(In millions)
|
Accrual Obligation End Date
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Future obligations under land lease agreements (1)(2)
|
December 2092
|
|
$
|
—
|
|
|
$
|
43
|
|
Iowa greyhound pari-mutuel racing fund
|
December 2021
|
|
24
|
|
|
33
|
|
||
Permanent closure of Alea Leeds (2)
|
January 2032
|
|
—
|
|
|
10
|
|
||
Unbundling of electric service provided by NV Energy
|
February 2024
|
|
56
|
|
|
58
|
|
||
Total
|
|
|
$
|
80
|
|
|
$
|
144
|
|
(1)
|
Associated with the abandonment of a construction project near the Mississippi Gulf Coast.
|
(2)
|
As a result of the adoption of ASC 842, as of January 1, 2019, accruals associated with future obligations for leases not in use have been applied against the carrying amount of the ROU assets. See Note 7.
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||
(Dollars in millions)
|
Final
Maturity
|
|
Rate(s) (1)
|
|
Face Value
|
|
Book Value
|
|
Book Value
|
||||||
Secured debt
|
|
|
|
|
|
|
|||||||||
CRC Revolving Credit Facility
|
2022
|
|
variable (2)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100
|
|
CRC Term Loan
|
2024
|
|
variable (3)
|
|
4,641
|
|
|
4,568
|
|
|
4,577
|
|
|||
CEOC LLC Revolving Credit Facility
|
2022
|
|
variable (4)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
CEOC LLC Term Loan
|
2024
|
|
variable (5)
|
|
1,481
|
|
|
1,480
|
|
|
1,483
|
|
|||
Unsecured debt
|
|
|
|
|
|
|
|||||||||
CEC Convertible Notes
|
2024
|
|
5.00%
|
|
1,083
|
|
|
1,083
|
|
|
1,083
|
|
|||
CRC Notes
|
2025
|
|
5.25%
|
|
1,700
|
|
|
1,668
|
|
|
1,668
|
|
|||
Special Improvement District Bonds
|
2037
|
|
4.30%
|
|
54
|
|
|
54
|
|
|
54
|
|
|||
Total debt
|
|
8,959
|
|
|
8,853
|
|
|
8,965
|
|
||||||
Current portion of long-term debt
|
|
(64
|
)
|
|
(64
|
)
|
|
(164
|
)
|
||||||
Long-term debt
|
|
$
|
8,895
|
|
|
$
|
8,789
|
|
|
$
|
8,801
|
|
|||
|
|
|
|
|
|
|
|||||||||
Unamortized discounts and deferred finance charges
|
|
|
|
$
|
106
|
|
|
$
|
110
|
|
|||||
Fair value
|
|
$
|
8,810
|
|
|
|
|
|
(1)
|
Interest rate is fixed, except where noted.
|
(2)
|
London Interbank Offered Rate (“LIBOR”) plus 2.13%.
|
(3)
|
LIBOR plus 2.75%.
|
(4)
|
LIBOR plus 2.00%.
|
(5)
|
LIBOR plus 2.00%.
|
Annual Estimated Debt Service Requirements as of March 31, 2019
|
|||||||||||||||||||||||||||
|
Remaining
|
|
Years Ended December 31,
|
|
|
|
|
||||||||||||||||||||
(In millions)
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
||||||||||||||
Annual maturities of long-term debt
|
$
|
48
|
|
|
$
|
64
|
|
|
$
|
64
|
|
|
$
|
64
|
|
|
$
|
64
|
|
|
$
|
8,655
|
|
|
$
|
8,959
|
|
Estimated interest payments
|
400
|
|
|
460
|
|
|
450
|
|
|
440
|
|
|
430
|
|
|
520
|
|
|
2,700
|
|
|||||||
Total debt service obligation (1)
|
$
|
448
|
|
|
$
|
524
|
|
|
$
|
514
|
|
|
$
|
504
|
|
|
$
|
494
|
|
|
$
|
9,175
|
|
|
$
|
11,659
|
|
(1)
|
Debt principal payments are estimated amounts based on maturity dates and potential borrowings under our revolving credit facilities. Interest payments are estimated based on the forward-looking LIBOR curve and include the estimated impact of the ten interest rate swap agreements (see Note 6). Actual payments may differ from these estimates.
|
Weighted-Average Number of Anti-Dilutive Shares Excluded from Calculation of EPS
|
|||||
|
Three Months Ended March 31,
|
||||
(In millions)
|
2019
|
|
2018
|
||
Stock-based compensation awards
|
23
|
|
|
25
|
|
CEC Convertible Notes
|
151
|
|
|
150
|
|
Total anti-dilutive common stock
|
174
|
|
|
175
|
|
Receivables
|
|||||||
(In millions)
|
March 31, 2019
|
|
December 31, 2018
|
||||
Casino
|
$
|
161
|
|
|
$
|
188
|
|
Food and beverage and rooms (1)
|
84
|
|
|
62
|
|
||
Entertainment and other
|
93
|
|
|
77
|
|
||
Contract receivables, net
|
338
|
|
|
327
|
|
||
Real estate leases
|
11
|
|
|
15
|
|
||
Other
|
100
|
|
|
115
|
|
||
Receivables, net
|
$
|
449
|
|
|
$
|
457
|
|
(1)
|
As a result of the adoption of ASC 842, as of January 1, 2019, revenue generated from the lease components of lodging arrangements and conventions as well as their associated receivables are no longer considered contract revenue or contract receivables under ASC 606, Revenue from Contracts with Customers. A portion of this balance relates to lease receivables under ASC 842. See Note 7 for further details.
|
Contract Liabilities
|
|||||||||||
(In millions)
|
Caesars Rewards
|
|
Customer Advance Deposits
|
|
Total
|
||||||
Balance as of December 31, 2018 (1)
|
$
|
66
|
|
|
$
|
83
|
|
|
$
|
149
|
|
Amount recognized during the period (2)
|
(32
|
)
|
|
(152
|
)
|
|
(184
|
)
|
|||
Amount accrued during the period
|
33
|
|
|
168
|
|
|
201
|
|
|||
Balance as of March 31, 2019 (3)
|
$
|
67
|
|
|
$
|
99
|
|
|
$
|
166
|
|
(1)
|
$5 million included within Deferred credits and other liabilities as of December 31, 2018.
|
(2)
|
Includes $15 million for Caesars Rewards and $51 million for Customer Advances recognized from the December 31, 2018 Contract liability balances.
|
(3)
|
$5 million included within Deferred credits and other liabilities as of March 31, 2019. Includes lodging arrangement and convention contract liabilities accounted for under ASC 842. See Note 7 for further details.
|
Composition of Stock-Based Compensation Expense
|
|||||||
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2019
|
|
2018
|
||||
Corporate expense
|
$
|
16
|
|
|
$
|
13
|
|
Property, general, administrative, and other
|
5
|
|
|
5
|
|
||
Total stock-based compensation expense
|
$
|
21
|
|
|
$
|
18
|
|
Outstanding at End of Period
|
|||||||||||||
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||
|
Quantity
|
|
Wtd Avg (1)
|
|
Quantity
|
|
Wtd Avg (1)
|
||||||
Stock options (2)
|
8,330,297
|
|
|
$
|
10.63
|
|
|
8,360,365
|
|
|
$
|
10.63
|
|
Restricted stock units (3)
|
16,204,046
|
|
|
11.17
|
|
|
13,455,092
|
|
|
11.51
|
|
||
Performance stock units (4)
|
2,417,300
|
|
|
8.69
|
|
|
1,466,183
|
|
|
6.79
|
|
||
Market-based stock units (5)
|
657,207
|
|
|
12.63
|
|
|
—
|
|
|
—
|
|
(1)
|
Represents weighted average exercise price for stock options, weighted average grant date fair value for RSUs, the price of CEC common stock as of the balance sheet date until a grant date is achieved for PSUs and the fair value of the MSUs determined using the Monte-Carlo simulation model.
|
(2)
|
During the three months ended March 31, 2019, there were no grants of stock options and no stock options were exercised.
|
(3)
|
During the three months ended March 31, 2019, 4.7 million RSUs were granted under the 2017 PIP and 1.8 million RSUs vested.
|
(4)
|
During the three months ended March 31, 2019, 953 thousand PSUs were granted under the 2017 PIP and no PSUs vested.
|
(5)
|
During the three months ended March 31, 2019, 657 thousand MSUs were granted under the 2017 PIP and no MSUs vested.
|
Income Tax Allocation
|
|||||||
|
Three Months Ended March 31,
|
||||||
(Dollars in millions)
|
2019
|
|
2018
|
||||
Loss before income taxes
|
$
|
(247
|
)
|
|
$
|
(21
|
)
|
Income tax benefit/(provision)
|
$
|
29
|
|
|
$
|
(13
|
)
|
Effective tax rate
|
11.7
|
%
|
|
(61.9
|
)%
|
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2019
|
|
2018
|
||||
Transactions with Horseshoe Baltimore
|
|
|
|
||||
Management fees
|
$
|
2
|
|
|
$
|
3
|
|
Allocated expenses
|
1
|
|
|
1
|
|
Condensed Statements of Operations - By Segment
|
|||||||||||||||||||
|
Three Months Ended March 31, 2019
|
||||||||||||||||||
(In millions)
|
Las Vegas
|
|
Other U.S.
|
|
All Other
|
|
Elimination
|
|
Caesars
|
||||||||||
Casino
|
$
|
274
|
|
|
$
|
744
|
|
|
$
|
65
|
|
|
$
|
—
|
|
|
$
|
1,083
|
|
Food and beverage (1)
|
255
|
|
|
137
|
|
|
6
|
|
|
—
|
|
|
398
|
|
|||||
Rooms (1)
|
299
|
|
|
86
|
|
|
1
|
|
|
—
|
|
|
386
|
|
|||||
Management fees
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
|||||
Reimbursed management costs
|
—
|
|
|
1
|
|
|
51
|
|
|
—
|
|
|
52
|
|
|||||
Entertainment and other
|
94
|
|
|
40
|
|
|
11
|
|
|
—
|
|
|
145
|
|
|||||
Total contract revenues
|
922
|
|
|
1,008
|
|
|
149
|
|
|
—
|
|
|
2,079
|
|
|||||
Real estate leases (2)
|
33
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|||||
Other revenues
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|||||
Net revenues
|
$
|
955
|
|
|
$
|
1,010
|
|
|
$
|
150
|
|
|
$
|
—
|
|
|
$
|
2,115
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
|
$
|
128
|
|
|
$
|
103
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
247
|
|
Income/(loss) from operations
|
226
|
|
|
116
|
|
|
(102
|
)
|
|
—
|
|
|
240
|
|
|||||
Interest expense
|
(83
|
)
|
|
(143
|
)
|
|
(123
|
)
|
|
—
|
|
|
(349
|
)
|
|||||
Other loss (3)
|
—
|
|
|
—
|
|
|
(138
|
)
|
|
—
|
|
|
(138
|
)
|
|||||
Income tax benefit (4)
|
—
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
29
|
|
|
Three Months Ended March 31, 2018
|
||||||||||||||||||
(In millions)
|
Las Vegas
|
|
Other U.S.
|
|
All Other
|
|
Elimination
|
|
Caesars
|
||||||||||
Casino
|
$
|
257
|
|
|
$
|
663
|
|
|
$
|
63
|
|
|
$
|
—
|
|
|
$
|
983
|
|
Food and beverage
|
242
|
|
|
134
|
|
|
7
|
|
|
—
|
|
|
383
|
|
|||||
Rooms
|
280
|
|
|
86
|
|
|
1
|
|
|
—
|
|
|
367
|
|
|||||
Management fees
|
—
|
|
|
1
|
|
|
16
|
|
|
(2
|
)
|
|
15
|
|
|||||
Reimbursed management costs
|
—
|
|
|
1
|
|
|
51
|
|
|
—
|
|
|
52
|
|
|||||
Entertainment and other
|
92
|
|
|
39
|
|
|
7
|
|
|
(1
|
)
|
|
137
|
|
|||||
Total contract revenues
|
871
|
|
|
924
|
|
|
145
|
|
|
(3
|
)
|
|
1,937
|
|
|||||
Other revenues
|
32
|
|
|
2
|
|
|
1
|
|
|
—
|
|
|
35
|
|
|||||
Net revenues (5)
|
$
|
903
|
|
|
$
|
926
|
|
|
$
|
146
|
|
|
$
|
(3
|
)
|
|
$
|
1,972
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
|
$
|
142
|
|
|
$
|
121
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
280
|
|
Income/(loss) from operations
|
148
|
|
|
86
|
|
|
(109
|
)
|
|
—
|
|
|
125
|
|
|||||
Interest expense
|
(78
|
)
|
|
(138
|
)
|
|
(114
|
)
|
|
—
|
|
|
(330
|
)
|
|||||
Other income (3)
|
2
|
|
|
2
|
|
|
180
|
|
|
—
|
|
|
184
|
|
|||||
Income tax provision (4)
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
(13
|
)
|
(1)
|
As a result of the adoption of ASC 842, as of January 1, 2019, revenue generated from the lease components of lodging arrangements and conventions are no longer considered contract revenue under ASC 606, Revenue from Contracts with Customers. A portion of these balances relate to lease revenues under ASC 842. See Note 7 for further details.
|
(2)
|
Real estate leases revenue includes $14 million of variable rental income.
|
(3)
|
Amounts include changes in fair value of the derivative liability related to the conversion option of the CEC Convertible Notes and the disputed claims liability as well as interest and dividend income.
|
(4)
|
Taxes are recorded at the consolidated level and not estimated or recorded to our Las Vegas and Other U.S. segments.
|
(5)
|
Certain prior year amounts have been reclassified to conform to the current year presentation of our reportable segments.
|
|
Three Months Ended March 31, 2019
|
||||||||||||||||||
(In millions)
|
Las Vegas
|
|
Other U.S.
|
|
All Other
|
|
Elimination
|
|
Caesars
|
||||||||||
Net income/(loss) attributable to Caesars
|
$
|
143
|
|
|
$
|
(26
|
)
|
|
$
|
(334
|
)
|
|
$
|
—
|
|
|
$
|
(217
|
)
|
Net loss attributable to noncontrolling interests
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||||
Income tax benefit (1)
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
|||||
Other loss (2)
|
—
|
|
|
—
|
|
|
138
|
|
|
—
|
|
|
138
|
|
|||||
Interest expense
|
83
|
|
|
143
|
|
|
123
|
|
|
—
|
|
|
349
|
|
|||||
Depreciation and amortization
|
128
|
|
|
103
|
|
|
16
|
|
|
—
|
|
|
247
|
|
|||||
Other operating costs (3)
|
3
|
|
|
12
|
|
|
14
|
|
|
—
|
|
|
29
|
|
|||||
Stock-based compensation expense
|
2
|
|
|
2
|
|
|
17
|
|
|
—
|
|
|
21
|
|
|||||
Other items (4)
|
1
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
25
|
|
|||||
Adjusted EBITDA
|
$
|
360
|
|
|
$
|
233
|
|
|
$
|
(31
|
)
|
|
$
|
—
|
|
|
$
|
562
|
|
|
Three Months Ended March 31, 2018
|
||||||||||||||||||
(In millions)
|
Las Vegas
|
|
Other U.S.
|
|
All Other
|
|
Elimination
|
|
Caesars
|
||||||||||
Net income/(loss) attributable to Caesars
|
$
|
72
|
|
|
$
|
(50
|
)
|
|
$
|
(56
|
)
|
|
$
|
—
|
|
|
$
|
(34
|
)
|
Income tax provision (1)
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
|||||
Other income (2)
|
(2
|
)
|
|
(2
|
)
|
|
(180
|
)
|
|
—
|
|
|
(184
|
)
|
|||||
Interest expense
|
78
|
|
|
138
|
|
|
114
|
|
|
—
|
|
|
330
|
|
|||||
Depreciation and amortization
|
142
|
|
|
121
|
|
|
17
|
|
|
—
|
|
|
280
|
|
|||||
Other operating costs (3)
|
28
|
|
|
6
|
|
|
32
|
|
|
—
|
|
|
66
|
|
|||||
Stock-based compensation expense
|
2
|
|
|
2
|
|
|
14
|
|
|
—
|
|
|
18
|
|
|||||
Other items (4)
|
1
|
|
|
1
|
|
|
27
|
|
|
—
|
|
|
29
|
|
|||||
Adjusted EBITDA
|
$
|
321
|
|
|
$
|
216
|
|
|
$
|
(19
|
)
|
|
$
|
—
|
|
|
$
|
518
|
|
(1)
|
Taxes are recorded at the consolidated level and not estimated or recorded to our Las Vegas and Other U.S. segments.
|
(2)
|
Amounts include changes in fair value of the derivative liability related to the conversion option of the CEC Convertible Notes and the disputed claims liability as well as interest and dividend income.
|
(3)
|
Amounts primarily represent costs incurred in connection with development activities and reorganization activities, and/or recoveries associated with such items, including acquisition and integration costs, contract exit fees including exiting the fully bundled sales system of NV Energy for electric service at our Nevada properties, lease termination costs, weather related property closure costs, severance costs, gains and losses on asset sales, demolition costs primarily at our Las Vegas properties for renovations, and project opening costs.
|
(4)
|
Amounts include other add-backs and deductions to arrive at Adjusted EBITDA but not separately identified such as professional and consulting services, sign-on and retention bonuses, business optimization expenses and transformation expenses, severance and relocation costs, litigation awards and settlements, and permit remediation costs.
|
Condensed Balance Sheets - By Segment
|
|||||||||||||||||||
|
March 31, 2019
|
||||||||||||||||||
(In millions)
|
Las Vegas
|
|
Other U.S.
|
|
All Other
|
|
Elimination
|
|
Caesars
|
||||||||||
Total assets
|
$
|
13,978
|
|
|
$
|
8,690
|
|
|
$
|
6,496
|
|
|
$
|
(3,128
|
)
|
|
$
|
26,036
|
|
Total liabilities
|
5,771
|
|
|
5,735
|
|
|
11,416
|
|
|
(8
|
)
|
|
22,914
|
|
|
December 31, 2018
|
||||||||||||||||||
(In millions)
|
Las Vegas
|
|
Other U.S.
|
|
All Other
|
|
Elimination
|
|
Caesars
|
||||||||||
Total assets
|
$
|
13,987
|
|
|
$
|
8,565
|
|
|
$
|
6,046
|
|
|
$
|
(2,823
|
)
|
|
$
|
25,775
|
|
Total liabilities
|
5,730
|
|
|
5,143
|
|
|
11,267
|
|
|
297
|
|
|
22,437
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2019
|
|
2018
|
||||
Depreciation expense
|
$
|
111
|
|
|
$
|
122
|
|
Interest expense
|
224
|
|
|
215
|
|
||
Rental payments (1)
|
155
|
|
|
174
|
|
(1)
|
Reflects cash paid for interest and principal related to our failed sale-leaseback financing obligations. An additional $74 million and $43 million, respectively, was accrued, but not paid, during the three months ended March 31, 2019 and 2018.
|
Consolidated Operating Results
|
||||||||||||||
|
Three Months Ended March 31,
|
|
Fav/(Unfav)
|
|||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Net revenues
|
$
|
2,115
|
|
|
$
|
1,972
|
|
|
$
|
143
|
|
|
7.3
|
%
|
Income from operations
|
240
|
|
|
125
|
|
|
115
|
|
|
92.0
|
%
|
|||
Interest expense
|
(349
|
)
|
|
(330
|
)
|
|
(19
|
)
|
|
(5.8
|
)%
|
|||
Other income/(loss)
|
(138
|
)
|
|
184
|
|
|
(322
|
)
|
|
*
|
|
|||
Net loss
|
(218
|
)
|
|
(34
|
)
|
|
(184
|
)
|
|
*
|
|
|||
Net loss attributable to Caesars
|
(217
|
)
|
|
(34
|
)
|
|
(183
|
)
|
|
*
|
|
|||
Adjusted EBITDA (1)
|
562
|
|
|
518
|
|
|
44
|
|
|
8.5
|
%
|
|||
Operating margin (2)
|
11.3
|
%
|
|
6.3
|
%
|
|
—
|
|
|
5.0 pts
|
|
*
|
Not meaningful.
|
(1)
|
See the “Reconciliation of Non-GAAP Financial Measures” discussion later in this MD&A for a reconciliation of Adjusted EBITDA.
|
(2)
|
Operating margin is calculated as income from operations divided by net revenues.
|
Net Revenues - Consolidated
|
||||||||||||||
|
Three Months Ended March 31,
|
|
Fav/(Unfav)
|
|||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Casino
|
$
|
1,083
|
|
|
$
|
983
|
|
|
$
|
100
|
|
|
10.2
|
%
|
Food and beverage
|
398
|
|
|
383
|
|
|
15
|
|
|
3.9
|
%
|
|||
Rooms
|
386
|
|
|
367
|
|
|
19
|
|
|
5.2
|
%
|
|||
Other revenue
|
181
|
|
|
172
|
|
|
9
|
|
|
5.2
|
%
|
|||
Management fees
|
15
|
|
|
15
|
|
|
—
|
|
|
—
|
%
|
|||
Reimbursed management costs
|
52
|
|
|
52
|
|
|
—
|
|
|
—
|
%
|
|||
Net revenues
|
$
|
2,115
|
|
|
$
|
1,972
|
|
|
$
|
143
|
|
|
7.3
|
%
|
Retail Value of Complimentaries
|
|||||||
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2019
|
|
2018
|
||||
Food and beverage
|
$
|
149
|
|
|
$
|
149
|
|
Rooms
|
114
|
|
|
108
|
|
||
Other
|
25
|
|
|
15
|
|
||
Total complimentaries
|
$
|
288
|
|
|
$
|
272
|
|
Net Revenues - Segment
|
||||||||||||||
|
Three Months Ended March 31,
|
|
Fav/(Unfav)
|
|||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Las Vegas
|
$
|
955
|
|
|
$
|
903
|
|
|
$
|
52
|
|
|
5.8
|
%
|
Other U.S.
|
1,010
|
|
|
926
|
|
|
84
|
|
|
9.1
|
%
|
|||
All Other
|
150
|
|
|
143
|
|
|
7
|
|
|
4.9
|
%
|
|||
Net revenues
|
$
|
2,115
|
|
|
$
|
1,972
|
|
|
$
|
143
|
|
|
7.3
|
%
|
Cash ADR (1)
|
|
Three Months Ended March 31, 2019 versus 2018
|
(1)
|
Cash average daily rate (“cash ADR”) is a key indicator by which we evaluate the performance of our properties and is determined by rooms revenues and rooms occupied.
|
•
|
Casino revenues increased $100 million in 2019 compared with 2018 primarily due to the acquisition of Centaur Holdings, LLC (“Centaur”) which was acquired in July 2018 and contributed $117 million in the Other U.S. segment. This increase was partially offset by a decrease of $36 million in the Other U.S. segment primarily due to a decrease in gaming volume as a result of increased competition in Atlantic City and inclement weather across some of our properties, which resulted in prolonged closures at certain properties. Our Las Vegas segment increased $17 million as a result of favorable hold and improved slot volumes.
|
•
|
Rooms revenues increased $19 million in 2019 compared with 2018 primarily due to an increase in occupancy rates and resort fee revenue in the Las Vegas region.
|
•
|
Food and beverage revenues increased $15 million in 2019 compared with 2018 primarily due to increased revenues from food and beverage outlets in the Las Vegas region.
|
Income from Operations by Category - Consolidated
|
||||||||||||||
|
Three Months Ended March 31,
|
|
Fav/(Unfav)
|
|||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Net revenues
|
$
|
2,115
|
|
|
$
|
1,972
|
|
|
$
|
143
|
|
|
7.3
|
%
|
Operating expenses
|
|
|
|
|
|
|
|
|||||||
Casino
|
618
|
|
|
562
|
|
|
(56
|
)
|
|
(10.0
|
)%
|
|||
Food and beverage
|
269
|
|
|
264
|
|
|
(5
|
)
|
|
(1.9
|
)%
|
|||
Rooms
|
117
|
|
|
114
|
|
|
(3
|
)
|
|
(2.6
|
)%
|
|||
Property, general, administrative, and other
|
460
|
|
|
427
|
|
|
(33
|
)
|
|
(7.7
|
)%
|
|||
Reimbursable management costs
|
52
|
|
|
52
|
|
|
—
|
|
|
—
|
%
|
|||
Depreciation and amortization
|
247
|
|
|
280
|
|
|
33
|
|
|
11.8
|
%
|
|||
Corporate expense
|
83
|
|
|
82
|
|
|
(1
|
)
|
|
(1.2
|
)%
|
|||
Other operating costs
|
29
|
|
|
66
|
|
|
37
|
|
|
56.1
|
%
|
|||
Total operating expenses
|
1,875
|
|
|
1,847
|
|
|
(28
|
)
|
|
(1.5
|
)%
|
|||
Income from operations
|
$
|
240
|
|
|
$
|
125
|
|
|
$
|
115
|
|
|
92.0
|
%
|
Income from Operations - Segment
|
||||||||||||||
|
Three Months Ended March 31,
|
|
Fav/(Unfav)
|
|||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Las Vegas
|
$
|
226
|
|
|
$
|
148
|
|
|
$
|
78
|
|
|
52.7
|
%
|
Other U.S.
|
116
|
|
|
86
|
|
|
30
|
|
|
34.9
|
%
|
|||
All Other
|
(102
|
)
|
|
(109
|
)
|
|
7
|
|
|
6.4
|
%
|
|||
Income from operations
|
$
|
240
|
|
|
$
|
125
|
|
|
$
|
115
|
|
|
92.0
|
%
|
•
|
Net revenues increased $143 million in 2019 compared with 2018 as explained above.
|
•
|
This increase was offset by an increase in operating expenses of $28 million in 2019 compared with 2018 primarily due to the acquisition of Centaur which contributed $96 million to the increase. In addition to the effect of Centaur, operating expenses decreased $68 million primarily due to the following:
|
◦
|
Depreciation and amortization decreased $44 million primarily as a result of assets that incurred depreciation in the first quarter of 2018 which were fully depreciated before the first quarter of 2019 as well as lower accelerated depreciation in 2019 compared with 2018 due to the removal and replacement of certain assets in connection with ongoing property renovation projects in the prior year.
|
◦
|
Other operating costs decreased $38 million primarily as a result of higher nonrecurring charges in the prior year related to additional exit fees of $27 million recognized for the termination of NV Energy utility contracts and $20 million in lease termination costs, partially offset by an increase in professional service costs of $6 million.
|
◦
|
These decreases were partially offset by an increase of $12 million primarily driven by higher costs in support of our technology infrastructure and expenses related to our sports partnerships (see Note 8). These costs are included in Property, general, administrative, and other in 2019.
|
Other Factors Affecting Net Loss - Consolidated
|
||||||||||||||
|
Three Months Ended March 31,
|
|
Fav/(Unfav)
|
|||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Interest expense
|
$
|
(349
|
)
|
|
$
|
(330
|
)
|
|
$
|
(19
|
)
|
|
(5.8
|
)%
|
Other income/(loss)
|
(138
|
)
|
|
184
|
|
|
(322
|
)
|
|
*
|
|
|||
Income tax benefit/(provision)
|
29
|
|
|
(13
|
)
|
|
42
|
|
|
*
|
|
Interest Expense
|
||||||||||||||
|
Three Months Ended March 31,
|
|
Fav/(Unfav)
|
|||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Failed sale-leasebacks
|
$
|
224
|
|
|
$
|
215
|
|
|
$
|
(9
|
)
|
|
(4.2
|
)%
|
CEOC LLC Term Loan
|
18
|
|
|
16
|
|
|
(2
|
)
|
|
(12.5
|
)%
|
|||
Golf Course Use Agreement
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
%
|
|||
CRC Term Loan
|
61
|
|
|
51
|
|
|
(10
|
)
|
|
(19.6
|
)%
|
|||
CRC Notes
|
22
|
|
|
24
|
|
|
2
|
|
|
8.3
|
%
|
|||
CEC Convertible Notes
|
14
|
|
|
14
|
|
|
—
|
|
|
—
|
%
|
|||
Other interest expense
|
7
|
|
|
7
|
|
|
—
|
|
|
—
|
%
|
|||
Total interest expense
|
$
|
349
|
|
|
$
|
330
|
|
|
$
|
(19
|
)
|
|
(5.8
|
)%
|
•
|
Failed sale-leaseback interest expense increased $9 million primarily as a result of the failed sale-leaseback financing obligations established for Octavius Tower at Caesars Palace and Harrah’s Philadelphia Casino and Racetrack, which were sold to VICI in the second half of 2018.
|
•
|
CRC Term Loan interest expense increased $10 million as a result of an increase in the floating London Interbank Offered Rate (“LIBOR”).
|
Reconciliation of Adjusted EBITDA
|
|||||||
|
Three Months Ended March 31,
|
||||||
(In millions)
|
2019
|
|
2018
|
||||
Net loss attributable to Caesars
|
$
|
(217
|
)
|
|
$
|
(34
|
)
|
Net loss attributable to noncontrolling interests
|
(1
|
)
|
|
—
|
|
||
Income tax (benefit)/provision
|
(29
|
)
|
|
13
|
|
||
Other (income)/loss (1)
|
138
|
|
|
(184
|
)
|
||
Interest expense
|
349
|
|
|
330
|
|
||
Depreciation and amortization
|
247
|
|
|
280
|
|
||
Other operating costs (2)
|
29
|
|
|
66
|
|
||
Stock-based compensation expense
|
21
|
|
|
18
|
|
||
Other items (3)
|
25
|
|
|
29
|
|
||
Adjusted EBITDA
|
$
|
562
|
|
|
$
|
518
|
|
(1)
|
Amounts include changes in fair value of the derivative liability related to the conversion option of the CEC Convertible Notes and the disputed claims liability as well as interest and dividend income.
|
(2)
|
Amounts primarily represent costs incurred in connection with development activities and reorganization activities, and/or recoveries associated with such items, including acquisition and integration costs, contract exit fees including exiting the fully bundled sales system of NV Energy for electric service at our Nevada properties, lease termination costs, weather related property closure costs, severance costs, gains and losses on asset sales, demolition costs primarily at our Las Vegas properties for renovations, and project opening costs.
|
(3)
|
Amounts include other add-backs and deductions to arrive at Adjusted EBITDA but not separately identified such as professional and consulting services, sign-on and retention bonuses, business optimization expenses and transformation expenses, severance and relocation costs, litigation awards and settlements, and permit remediation costs.
|
Segment Adjusted EBITDA (1)
|
||||||||||||||
|
Three Months Ended March 31,
|
|
Fav/(Unfav)
|
|||||||||||
(Dollars in millions)
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
Las Vegas
|
$
|
360
|
|
|
$
|
321
|
|
|
$
|
39
|
|
|
12.1
|
%
|
Other U.S.
|
233
|
|
|
216
|
|
|
17
|
|
|
7.9
|
%
|
|||
All Other
|
(31
|
)
|
|
(19
|
)
|
|
(12
|
)
|
|
(63.2
|
)%
|
|||
Adjusted EBITDA
|
$
|
562
|
|
|
$
|
518
|
|
|
$
|
44
|
|
|
8.5
|
%
|
(1)
|
See reconciliation of Net income/(loss) attributable to Caesars to Adjusted EBITDA by segment in Note 15.
|
Summary of Cash and Revolver Capacity
|
|||||||||||||||
|
March 31, 2019
|
||||||||||||||
(In millions)
|
CRC
|
|
CEOC LLC
|
|
Other
|
|
Caesars
|
||||||||
Cash and cash equivalents
|
$
|
328
|
|
|
$
|
392
|
|
|
$
|
675
|
|
|
$
|
1,395
|
|
Revolver capacity
|
1,000
|
|
|
200
|
|
|
—
|
|
|
1,200
|
|
||||
Revolver capacity committed to letters of credit
|
(37
|
)
|
|
(39
|
)
|
|
—
|
|
|
(76
|
)
|
||||
Total
|
$
|
1,291
|
|
|
$
|
553
|
|
|
$
|
675
|
|
|
$
|
2,519
|
|
(1)
|
Debt principal payments are estimated amounts based on maturity dates and potential borrowings under our revolving credit facility. Interest payments are estimated based on the forward-looking LIBOR curve and include the estimated impact of the ten interest rate swap agreements (see Note 6). Actual payments may differ from these estimates.
|
(2)
|
Financing obligation principal and interest payments are estimated amounts based on the future minimum lease payments and certain estimates based on contingent rental payments (as described below). Actual payments may differ from the estimates.
|
Summary of Consolidated Capital Expenditures
|
|||||||||||
|
Three Months Ended March 31,
|
|
Increase/
(Decrease) |
||||||||
(In millions)
|
2019
|
|
2018
|
|
|||||||
Maintenance (1)
|
$
|
153
|
|
|
$
|
74
|
|
|
$
|
79
|
|
Development (2)
|
65
|
|
|
11
|
|
|
54
|
|
|||
Total capital expenditures
|
$
|
218
|
|
|
$
|
85
|
|
|
$
|
133
|
|
|
|
|
|
|
|
||||||
Included in capital expenditures:
|
|
|
|
|
|
||||||
Capitalized payroll costs
|
$
|
8
|
|
|
$
|
2
|
|
|
|
||
Capitalized interest
|
5
|
|
|
2
|
|
|
|
(1)
|
Maintenance capital expenditures include room renovations as well as information technology, marketing, analytics, accounting, payroll, and other projects that benefit the operating structures.
|
(2)
|
Development capital expenditures include projects such as CAESARS FORUM, the casino resort project in Incheon, South Korea, and Centaur integration costs.
|
•
|
Hotel remodeling projects at Harrah’s Las Vegas, Paris Las Vegas, Harrah’s Atlantic City, and Horseshoe South Indiana; and
|
•
|
Information technology, marketing, analytics, accounting, payroll, and other projects that benefit the operating structures.
|
•
|
Development of CAESARS FORUM and Sportsbooks in various states; and
|
•
|
Development of a casino resort project in Incheon, South Korea through a joint venture.
|
•
|
our ability to respond to changes in the industry, particularly digital transformation, and to take advantage of the opportunity for legalized sports betting in multiple jurisdictions in the United States (which may require third-party arrangements and/or regulatory approval);
|
•
|
development of our announced convention center in Las Vegas, CAESARS FORUM, and certain of our other announced projects are subject to risks associated with new construction projects, including those described below;
|
•
|
we may not be able to realize the anticipated benefits of our acquisition of Centaur, including anticipated benefits from introducing table games to the acquired properties, which is subject to approvals and may not occur;
|
•
|
the impact of our operating structure following CEOC’s emergence from bankruptcy;
|
•
|
the effects of local and national economic, credit, and capital market conditions on the economy, in general, and on the gaming industry, in particular;
|
•
|
the effect of reductions in consumer discretionary spending due to economic downturns or other factors and changes in consumer demands;
|
•
|
foreign regulatory policies, particularly in mainland China or other countries in which our customers reside or where we have operations, including restrictions on foreign currency exchange or importation of currency, and the judicial enforcement of gaming debts;
|
•
|
the ability to realize improvements in our business and results of operations through our property renovation investments, technology deployments, business process improvement initiatives, and other continuous improvement initiatives;
|
•
|
the ability to take advantage of opportunities to grow our revenue;
|
•
|
the ability to use net operating losses to offset future taxable income as anticipated;
|
•
|
the ability to realize all of the anticipated benefits of current or potential future acquisitions;
|
•
|
the ability to effectively compete against our competitors;
|
•
|
the financial results of our consolidated businesses;
|
•
|
the impact of our substantial indebtedness, including its impact on our ability to raise additional capital in the future and react to changes in the economy, and lease obligations and the restrictions in our debt and lease agreements;
|
•
|
the ability to access available and reasonable financing or additional capital on a timely basis and on acceptable terms or at all, including our ability to refinance our indebtedness on acceptable terms;
|
•
|
the ability of our customer tracking, customer loyalty, and yield management programs to continue to increase customer loyalty and hotel sales;
|
•
|
changes in the extensive governmental regulations to which we are subject and (i) changes in laws, including increased tax rates, smoking bans, regulations, or accounting standards; (ii) third-party relations; and (iii) approvals, decisions, disciplines and fines of courts, regulators, and governmental bodies;
|
•
|
compliance with the extensive laws and regulations to which we are subject, including applicable gaming laws, the Foreign Corrupt Practices Act and other anti-corruption laws, and the Bank Secrecy Act and other anti-money laundering laws;
|
•
|
our ability to recoup costs of capital investments through higher revenues;
|
•
|
growth in consumer demand for non-gaming offerings;
|
•
|
abnormal gaming holds (“gaming hold” is the amount of money that is retained by the casino from wagers by customers);
|
•
|
the effects of competition, including locations of competitors, growth of online gaming, competition for new licenses, and operating and market competition;
|
•
|
our ability to protect our intellectual property rights and damages caused to our brands due to the unauthorized use of our brand names by third parties in ways outside of our control;
|
•
|
the ability to timely and cost-effectively integrate companies that we acquire into our operations;
|
•
|
the ability to execute on our brand licensing and management strategy is subject to third party agreements and other risks associated with new projects;
|
•
|
not being able to realize all of our anticipated cost savings;
|
•
|
the potential difficulties in employee retention, recruitment, and motivation, including in connection with our Chief Executive Officer transition;
|
•
|
our ability to retain our performers or other entertainment offerings on acceptable terms or at all;
|
•
|
the risk of fraud, theft, and cheating;
|
•
|
seasonal fluctuations resulting in volatility and an adverse effect on our operating results;
|
•
|
any impairments to goodwill, indefinite-lived intangible assets, or long-lived assets that we may incur;
|
•
|
construction factors, including delays, increased costs of labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters, and building permit issues;
|
•
|
the impact of adverse legal proceedings and judicial and governmental body actions, including gaming legislative action, referenda, regulatory disciplinary actions, and fines and taxation;
|
•
|
acts of war or terrorist incidents, severe weather conditions, uprisings, or natural disasters, including losses therefrom, losses in revenues and damage to property, and the impact of severe weather conditions on our ability to attract customers to certain facilities of ours;
|
•
|
fluctuations in energy prices;
|
•
|
work stoppages and other labor problems;
|
•
|
our ability to collect on credit extended to our customers;
|
•
|
the effects of environmental and structural building conditions relating to our properties and our exposure to environmental liability, including as a result of unknown environmental contamination;
|
•
|
a disruption, failure, or breach of our network, information systems, or other technology, or those of our vendors, on which we are dependent;
|
•
|
risks and costs associated with protecting the integrity and security of internal, employee, and customer data;
|
•
|
access to insurance for our assets on reasonable terms;
|
•
|
the impact, if any, of unfunded pension benefits under multi-employer pension plans; and
|
•
|
the other factors set forth under “Risk Factors” in our 2018 Annual Report.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
|
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
|
Exhibit Description
|
|
Filed Herewith
|
|
Form
|
|
Period Ending
|
|
Exhibit
|
|
Filing Date
|
3.1
|
|
|
X
|
|
|
|
|
|
|
|
5/1/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
†10.1
|
|
|
__
|
|
8-K
|
|
—
|
|
10.1
|
|
4/16/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
†10.2
|
|
|
__
|
|
10-K/A
|
|
12/31/2018
|
|
10.118
|
|
4/26/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
†10.3
|
|
|
__
|
|
10-K/A
|
|
12/31/2018
|
|
10.119
|
|
4/26/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
†10.4
|
|
|
X
|
|
|
|
|
|
|
|
5/1/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
|
X
|
|
|
|
|
|
|
|
5/1/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*32.1
|
|
|
X
|
|
|
|
|
|
|
|
5/1/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
X
|
|
|
|
|
|
|
|
|
*
|
|
Furnished herewith.
|
†
|
|
Denotes a management contract or compensatory plan or arrangement.
|
|
|
|
|
CAESARS ENTERTAINMENT CORPORATION
|
|
|
|
|
May 1, 2019
|
By:
|
/S/ KEITH A. CAUSEY
|
|
|
Keith A. Causey
|
|
|
Senior Vice President and Chief Accounting Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Caesars Entertainment Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/S/ ERIC HESSION
|
Eric Hession
|
Executive Vice President and Chief Financial Officer
(performing the functions of the principal executive officer)
|
/S/ ERIC HESSION
|
Eric Hession
|
Executive Vice President and Chief Financial Officer
(performing the functions of the principal executive officer)
|