falsedesktopCZR2020-03-31000085833920000060{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large Accelerated Filer\t☒\tAccelerated filer\t☐\nNon-accelerated filer\t☐\tSmaller reporting company\t☐\n\t\tEmerging growth company\t☐\n", "q10k_tbl_1": "\t\tPage\nPART I. FINANCIAL INFORMATION\t\t\nItem 1.\tUnaudited Financial Statements\t3\n\tConsolidated Condensed Balance Sheets\t3\n\tConsolidated Condensed Statements of Operations and Comprehensive Income/(Loss)\t4\n\tConsolidated Condensed Statements of Stockholders' Equity\t5\n\tConsolidated Condensed Statements of Cash Flows\t6\n\tNotes to Consolidated Condensed Financial Statements\t7\nItem 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t31\nItem 3.\tQuantitative and Qualitative Disclosures About Market Risk\t48\nItem 4.\tControls and Procedures\t48\nPART II. OTHER INFORMATION\t\t\nItem 1.\tLegal Proceedings\t49\nItem 1A.\tRisk Factors\t50\nItem 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t55\nItem 3.\tDefaults Upon Senior Securities\t55\nItem 4.\tMine Safety Disclosures\t55\nItem 5.\tOther Information\t55\nItem 6.\tExhibits\t56\nSignature\t\t58\n", "q10k_tbl_2": "(In millions)\tMarch 31 2020\tDecember 31 2019\nAssets\t\t\nCurrent assets\t\t\nCash and cash equivalents ($8 and $8 attributable to our VIEs)\t2677\t1755\nRestricted cash\t119\t117\nReceivables net\t389\t437\nDue from affiliates net\t54\t41\nPrepayments and other current assets ($5 and $4 attributable to our VIEs)\t182\t174\nInventories\t34\t35\nAssets held for sale\t29\t50\nTotal current assets\t3484\t2609\nProperty and equipment net ($202 and $212 attributable to our VIEs)\t14836\t14976\nGoodwill\t4011\t4012\nIntangible assets other than goodwill\t2772\t2824\nRestricted cash\t10\t12\nDeferred income taxes\t2\t2\nDeferred charges and other assets ($24 and $26 attributable to our VIEs)\t865\t910\nTotal assets\t25980\t25345\nLiabilities and Stockholders' Equity\t\t\nCurrent liabilities\t\t\nAccounts payable ($94 and $97 attributable to our VIEs)\t373\t444\nAccrued expenses and other current liabilities ($2 and $2 attributable to our VIEs)\t1229\t1323\nInterest payable\t137\t33\nContract liabilities\t153\t178\nCurrent portion of financing obligations\t24\t21\nCurrent portion of long-term debt\t876\t64\nTotal current liabilities\t2792\t2063\nFinancing obligations\t10096\t10070\nLong-term debt\t8793\t8478\nDeferred income taxes\t598\t555\nDeferred credits and other liabilities ($18 and $18 attributable to our VIEs)\t1370\t1968\nTotal liabilities\t23649\t23134\nCommitments and contingencies (Note 7)\t\t\nStockholders' equity\t\t\nCaesars stockholders' equity\t2257\t2131\nNoncontrolling interests\t74\t80\nTotal stockholders' equity\t2331\t2211\nTotal liabilities and stockholders' equity\t25980\t25345\n", "q10k_tbl_3": "\tThree Months Ended March 31\t\n(In millions except per share data)\t2020\t2019\nRevenues\t\t\nCasino\t958\t1083\nFood and beverage\t330\t398\nRooms\t317\t386\nOther revenue\t163\t181\nManagement fees\t9\t15\nReimbursed management costs\t51\t52\nNet revenues\t1828\t2115\nOperating expenses\t\t\nDirect\t\t\nCasino\t590\t618\nFood and beverage\t258\t269\nRooms\t115\t117\nProperty general administrative and other\t488\t460\nReimbursable management costs\t51\t52\nDepreciation and amortization\t256\t247\nImpairment of tangible and other intangible assets\t65\t0\nCorporate expense\t50\t83\nOther operating costs\t21\t29\nTotal operating expenses\t1894\t1875\nIncome/(loss) from operations\t(66)\t240\nInterest expense\t(333)\t(349)\nOther income/(loss)\t641\t(138)\nIncome/(loss) before income taxes\t242\t(247)\nIncome tax benefit/(provision)\t(54)\t29\nNet income/(loss)\t188\t(218)\nNet loss attributable to noncontrolling interests\t1\t1\nNet income/(loss) attributable to Caesars\t189\t(217)\nEarnings/(loss) per share - basic and diluted (see Note 10)\t\t\nBasic earnings/(loss) per share\t0.28\t(0.32)\nDiluted loss per share\t(0.36)\t(0.32)\nWeighted-average common shares outstanding - basic\t682\t670\nWeighted-average common shares outstanding - diluted\t837\t670\nComprehensive income/(loss)\t\t\nForeign currency translation adjustments\t(19)\t0\nChange in fair market value of interest rate swaps net of tax\t(52)\t(17)\nOther\t0\t2\nOther comprehensive loss net of income taxes\t(71)\t(15)\nComprehensive income/(loss)\t117\t(233)\nAmounts attributable to noncontrolling interests:\t\t\nForeign currency translation adjustments\t5\t2\nComprehensive loss attributable to noncontrolling interests\t6\t3\nComprehensive income/(loss) attributable to Caesars\t123\t(230)\n", "q10k_tbl_4": "\tCaesars Stockholders' Equity\t\t\t\t\t\t\t\n(In millions)\tCommon Stock\tTreasury Stock\tAdditional Paid-in- Capital\tAccumulated Deficit\tAccumulated Other Comprehensive Loss\tTotal Caesars Stockholders' Equity\tNoncontrolling Interests\tTotal Stockholders' Equity\nBalance as of December 31 2019\t7\t(510)\t14262\t(11567)\t(61)\t2131\t80\t2211\nNet income/(loss)\t0\t0\t0\t189\t0\t189\t(1)\t188\nStock-based compensation\t0\t(3)\t11\t0\t0\t8\t0\t8\nOther comprehensive loss net of tax\t0\t0\t0\t0\t(66)\t(66)\t(5)\t(71)\nOther\t0\t0\t0\t(5)\t0\t(5)\t0\t(5)\nBalance as of March 31 2020\t7\t(513)\t14273\t(11383)\t(127)\t2257\t74\t2331\nBalance as of December 31 2018\t7\t(485)\t14124\t(10372)\t(24)\t3250\t88\t3338\nNet loss\t0\t0\t0\t(217)\t0\t(217)\t(1)\t(218)\nStock-based compensation\t0\t(5)\t21\t0\t0\t16\t0\t16\nOther comprehensive loss net of tax\t0\t0\t0\t0\t(13)\t(13)\t(2)\t(15)\nChange in noncontrolling interest net of distributions and contributions\t0\t0\t0\t0\t0\t0\t(2)\t(2)\nOther\t0\t3\t0\t0\t0\t3\t0\t3\nBalance as of March 31 2019\t7\t(487)\t14145\t(10589)\t(37)\t3039\t83\t3122\n", "q10k_tbl_5": "\tThree Months Ended March 31\t\n(In millions)\t2020\t2019\nCash flows provided by/(used in) operating activities\t(20)\t255\nCash flows from investing activities\t\t\nAcquisitions of property and equipment net of change in related payables\t(184)\t(218)\nProceeds from the sale and maturity of investments\t9\t5\nPayments to acquire investments\t0\t(7)\nOther\t0\t2\nCash flows used in investing activities\t(175)\t(218)\nCash flows from financing activities\t\t\nProceeds from long-term debt and revolving credit facilities\t1138\t0\nRepayments of long-term debt and revolving credit facilities\t(16)\t(116)\nProceeds from the issuance of common stock\t1\t0\nTaxes paid related to net share settlement of equity awards\t(3)\t(5)\nFinancing obligation payments\t(3)\t(5)\nDistributions to noncontrolling interest owners\t0\t(2)\nCash flows provided by/(used in) financing activities\t1117\t(128)\nNet increase/(decrease) in cash cash equivalents and restricted cash\t922\t(91)\nCash cash equivalents and restricted cash beginning of period\t1884\t1657\nCash cash equivalents and restricted cash end of period\t2806\t1566\nSupplemental Cash Flow Information:\t\t\nCash paid for interest\t201\t231\nCash received/(paid) for income taxes\t(1)\t2\nNon-cash investing and financing activities:\t\t\nChange in accrued capital expenditures\t(36)\t(7)\n", "q10k_tbl_6": "(In millions)\tMarch 31 2020\tDecember 31 2019\nCash and cash equivalents\t2677\t1755\nRestricted cash current\t119\t117\nRestricted cash non-current\t10\t12\nTotal cash cash equivalents and restricted cash\t2806\t1884\n", "q10k_tbl_7": "(In millions)\tMarch 31 2020\tDecember 31 2019\nLand\t4211\t4218\nBuildings riverboats and leasehold and land improvements\t12454\t12022\nFurniture fixtures and equipment\t1804\t1762\nConstruction in progress\t327\t706\nTotal property and equipment\t18796\t18708\nLess: accumulated depreciation\t(3960)\t(3732)\nTotal property and equipment net\t14836\t14976\n", "q10k_tbl_8": "Changes in Carrying Value of Goodwill and Other Intangible Assets\t\t\t\n\tAmortizing Intangible Assets\tNon-Amortizing Intangible Assets\t\n(In millions)\tGoodwill\tOther\nBalance as of December 31 2019\t270\t4012\t2554\nAmortization\t(18)\t0\t0\nImpairments\t0\t0\t(32)\nOther\t0\t(1)\t(2)\nBalance as of March 31 2020 (1)\t252\t4011\t2520\n", "q10k_tbl_9": "Gross Carrying Value and Accumulated Amortization of Intangible Assets Other Than Goodwill\t\t\t\t\t\t\t\n\tMarch 31 2020\t\t\t\tDecember 31 2019\t\t\n(Dollars in millions)\tWeighted Average Remaining Useful Life (in years)\tGross Carrying Amount\tAccumulated Amortization\tNet Carrying Amount\tGross Carrying Amount\tAccumulated Amortization\tNet Carrying Amount\nAmortizing intangible assets\t\t\t\t\t\t\t\nTrade names and trademarks\t0.8\t14\t(9)\t5\t14\t(8)\t6\nCustomer relationships\t3.3\t1070\t(835)\t235\t1070\t(819)\t251\nContract rights\t4.7\t3\t(2)\t1\t3\t(2)\t1\nGaming rights and other\t4.2\t43\t(32)\t11\t43\t(31)\t12\n\t\t1130\t(878)\t252\t1130\t(860)\t270\nNon-amortizing intangible assets\t\t\t\t\t\t\t\nTrademarks\t\t\t\t776\t\t\t776\nGaming rights\t\t\t\t1491\t\t\t1525\nCaesars Rewards\t\t\t\t253\t\t\t253\n\t\t\t\t2520\t\t\t2554\nTotal intangible assets other than goodwill\t\t\t\t2772\t\t\t2824\n", "q10k_tbl_10": "Estimated Fair Value\t\t\t\t\n(In millions)\tBalance\tLevel 1\tLevel 2\tLevel 3\nMarch 31 2020\t\t\t\t\nAssets\t\t\t\t\nGovernment bonds\t4\t0\t4\t0\nTotal assets at fair value\t4\t0\t4\t0\nLiabilities\t\t\t\t\nDerivative instruments - interest rate swaps\t134\t0\t134\t0\nDerivative instruments - CEC Convertible Notes\t308\t0\t308\t0\nDisputed claims liability\t30\t0\t30\t0\nTotal liabilities at fair value\t472\t0\t472\t0\nDecember 31 2019\t\t\t\t\nAssets\t\t\t\t\nGovernment bonds\t13\t0\t13\t0\nTotal assets at fair value\t13\t0\t13\t0\nLiabilities\t\t\t\t\nDerivative instruments - interest rate swaps\t69\t0\t69\t0\nDerivative instruments - CEC Convertible Notes\t944\t0\t944\t0\nDisputed claims liability\t51\t0\t51\t0\nTotal liabilities at fair value\t1064\t0\t1064\t0\n", "q10k_tbl_11": "Effective Date\tNotional Amount (In millions)\tFixed Rate Paid\tVariable Rate Received as of March 31 2020\tMaturity Date\n12/31/2018\t250\t2.274%\t1.603%\t12/31/2022\n12/31/2018\t200\t2.828%\t1.603%\t12/31/2022\n12/31/2018\t600\t2.739%\t1.603%\t12/31/2022\n1/1/2019\t250\t2.153%\t1.603%\t12/31/2020\n1/1/2019\t250\t2.196%\t1.603%\t12/31/2021\n1/1/2019\t400\t2.788%\t1.603%\t12/31/2021\n1/1/2019\t200\t2.828%\t1.603%\t12/31/2022\n1/2/2019\t250\t2.172%\t1.603%\t12/31/2020\n1/2/2019\t200\t2.731%\t1.603%\t12/31/2020\n1/2/2019\t400\t2.707%\t1.603%\t12/31/2021\n", "q10k_tbl_12": "(In millions)\tUnrealized Net Gains/(Losses) on Derivative Instruments\tForeign Currency Translation Adjustments\tOther\tTotal\nBalances as of December 31 2019\t(54)\t(7)\t0\t(61)\nOther comprehensive loss before reclassifications\t(59)\t(14)\t0\t(73)\nAmounts reclassified from accumulated other comprehensive loss\t7\t0\t0\t7\nTotal other comprehensive loss net of tax\t(52)\t(14)\t0\t(66)\nBalances as of March 31 2020\t(106)\t(21)\t0\t(127)\nBalances as of December 31 2018\t(13)\t(9)\t(2)\t(24)\nOther comprehensive income/(loss) before reclassifications\t(17)\t2\t2\t(13)\nTotal other comprehensive income/(loss) net of tax\t(17)\t2\t2\t(13)\nBalances as of March 31 2019\t(30)\t(7)\t0\t(37)\n", "q10k_tbl_13": "(In millions)\tAccrual Obligation End Date\tMarch 31 2020\tDecember 31 2019\nIowa greyhound pari-mutuel racing fund\tDecember 2021\t17\t17\nUnbundling of electric service provided by NV Energy\tFebruary 2024\t46\t49\nTotal\t\t63\t66\n", "q10k_tbl_14": "\tMarch 31 2020\t\t\t\tDecember 31 2019\n(Dollars in millions)\tFinal Maturity\tRates\tFace Value\tBook Value\tBook Value\nSecured debt\t\t\t\t\t\nCRC Revolving Credit Facility\t2022\tvariable (1)\t975\t975\t0\nCRC Term Loan\t2024\tvariable (2)\t4595\t4534\t4541\nCEOC LLC Revolving Credit Facility\t2022\tvariable (3)\t161\t161\t0\nCEOC LLC Term Loan\t2024\tvariable (1)\t1216\t1216\t1218\nUnsecured debt\t\t\t\t\t\nCEC Convertible Notes\t2024\t5.00%\t1085\t1058\t1058\nCRC Notes\t2025\t5.25%\t1700\t1672\t1672\nSpecial Improvement District Bonds\t2037\t4.30%\t53\t53\t53\nTotal debt\t\t\t9785\t9669\t8542\nCurrent portion of long-term debt\t\t\t(876)\t(876)\t(64)\nLong-term debt\t\t\t8909\t8793\t8478\nUnamortized premiums discounts and deferred finance charges\t\t\t\t116\t123\nFair value\t\t\t8074\t\t\n", "q10k_tbl_15": "Annual Estimated Debt Service Requirements as of March 31 2020\t\t\t\t\t\t\t\n\tRemaining\tYears Ended December 31\t\t\t\t\t\n(In millions)\t2020\t2021\t2022\t2023\t2024\tThereafter\tTotal\nAnnual maturities of long-term debt\t864\t49\t359\t49\t6721\t1743\t9785\nEstimated interest payments\t380\t440\t410\t350\t340\t100\t2020\nTotal debt service obligation (1)\t1244\t489\t769\t399\t7061\t1843\t11805\n", "q10k_tbl_16": "Basic and Dilutive Net Earnings Per Share Reconciliation\t\t\n\tThree Months Ended March 31\t\n(In millions except per share data)\t2020\t2019\nNet income/(loss) attributable to Caesars\t189\t(217)\nDilutive effect of CEC Convertible Notes net of tax\t(492)\t0\nAdjusted net loss attributable to Caesars\t(303)\t(217)\nWeighted-average common shares outstanding - basic\t682\t670\nDilutive potential common shares: Stock-based compensation awards\t4\t0\nDilutive potential common shares: CEC Convertible Notes\t151\t0\nWeighted-average common shares outstanding - diluted\t837\t670\nBasic earnings/(loss) per share\t0.28\t(0.32)\nDiluted loss per share\t(0.36)\t(0.32)\n", "q10k_tbl_17": "Receivables net\t\t\n(In millions)\tMarch 31 2020\tDecember 31 2019\nCasino\t166\t186\nFood and beverage and rooms (1)\t59\t65\nEntertainment and other\t47\t82\nContract receivables net\t272\t333\nReal estate leases\t12\t16\nOther\t105\t88\nReceivables net\t389\t437\n", "q10k_tbl_18": "Contract Liabilities\t\t\t\n(In millions)\tCaesars Rewards\tCustomer Advance Deposits\tTotal\nBalance as of December 31 2019 (1)(2)\t70\t126\t196\nAmount recognized during the period (3)\t(28)\t(163)\t(191)\nAmount deferred during the period\t31\t141\t172\nBalance as of March 31 2020 (2)(4)\t73\t104\t177\n", "q10k_tbl_19": "Outstanding at End of Period\t\t\t\t\n\tMarch 31 2020\t\tDecember 31 2019\t\n\tQuantity\tWtd-Avg (1)\tQuantity\tWtd-Avg (1)\nStock options (2)\t1730807\t8.74\t2147750\t14.67\nRestricted stock units (3)\t6973066\t11.09\t8332150\t10.77\nPerformance stock units (4)\t1176989\t6.76\t1453663\t13.60\nMarket-based stock units (5)\t410078\t12.63\t434921\t12.63\n", "q10k_tbl_20": "Income Tax Allocation\t\t\n\tThree Months Ended March 31\t\n(Dollars in millions)\t2020\t2019\nIncome/(loss) before income taxes\t242\t(247)\nIncome tax benefit/(provision)\t(54)\t29\nEffective tax rate\t22.3%\t11.7%\n", "q10k_tbl_21": "Condensed Statements of Operations - By Segment\t\t\t\t\t\n\tThree Months Ended March 31 2020\t\t\t\t\n(In millions)\tLas Vegas\tOther U.S.\tAll Other\tElimination\tCaesars\nCasino\t249\t655\t54\t0\t958\nFood and beverage (1)\t210\t115\t5\t0\t330\nRooms (1)\t250\t66\t1\t0\t317\nManagement fees\t0\t0\t9\t0\t9\nReimbursed management costs\t0\t1\t50\t0\t51\nEntertainment and other\t88\t34\t12\t0\t134\nTotal contract revenues\t797\t871\t131\t0\t1799\nReal estate leases (2)\t25\t3\t0\t0\t28\nOther revenues\t0\t0\t1\t0\t1\nNet revenues\t822\t874\t132\t0\t1828\nDepreciation and amortization\t120\t115\t21\t0\t256\nIncome/(loss) from operations\t86\t(72)\t(80)\t0\t(66)\nInterest expense\t(82)\t(144)\t(107)\t0\t(333)\nOther income/(loss) (3)\t(2)\t3\t640\t0\t641\nIncome tax provision (4)\t0\t0\t(54)\t0\t(54)\n", "q10k_tbl_22": "\tThree Months Ended March 31 2019\t\t\t\t\n(In millions)\tLas Vegas\tOther U.S.\tAll Other\tElimination\tCaesars\nCasino\t274\t744\t65\t0\t1083\nFood and beverage (1)\t255\t137\t6\t0\t398\nRooms (1)\t299\t86\t1\t0\t386\nManagement fees\t0\t0\t15\t0\t15\nReimbursed management costs\t0\t1\t51\t0\t52\nEntertainment and other\t94\t40\t11\t0\t145\nTotal contract revenues\t922\t1008\t149\t0\t2079\nReal estate leases (2)\t33\t2\t0\t0\t35\nOther revenues\t0\t0\t1\t0\t1\nNet revenues\t955\t1010\t150\t0\t2115\nDepreciation and amortization\t128\t103\t16\t0\t247\nIncome/(loss) from operations\t226\t116\t(102)\t0\t240\nInterest expense\t(83)\t(143)\t(123)\t0\t(349)\nOther loss (3)\t0\t0\t(138)\t0\t(138)\nIncome tax benefit (4)\t0\t0\t29\t0\t29\n", "q10k_tbl_23": "\tThree Months Ended March 31 2020\t\t\t\t\n(In millions)\tLas Vegas\tOther U.S.\tAll Other\tElimination\tCaesars\nNet income/(loss) attributable to Caesars (1)\t2\t(212)\t399\t0\t189\nNet loss attributable to noncontrolling interests\t0\t(1)\t0\t0\t(1)\nIncome tax provision (2)\t0\t0\t54\t0\t54\nOther (income)/loss (3)\t2\t(3)\t(640)\t0\t(641)\nInterest expense\t82\t144\t107\t0\t333\nDepreciation and amortization\t120\t115\t21\t0\t256\nImpairment of tangible and other intangible assets\t0\t65\t0\t0\t65\nOther operating costs (4)\t8\t3\t10\t0\t21\nStock-based compensation expense\t2\t2\t6\t0\t10\nOther items (5)\t1\t2\t10\t0\t13\nAdjusted EBITDA\t217\t115\t(33)\t0\t299\n", "q10k_tbl_24": "\tThree Months Ended March 31 2019\t\t\t\t\n(In millions)\tLas Vegas\tOther U.S.\tAll Other\tElimination\tCaesars\nNet income/(loss) attributable to Caesars\t143\t(26)\t(334)\t0\t(217)\nNet loss attributable to noncontrolling interests\t0\t(1)\t0\t0\t(1)\nIncome tax benefit (2)\t0\t0\t(29)\t0\t(29)\nOther loss (3)\t0\t0\t138\t0\t138\nInterest expense\t83\t143\t123\t0\t349\nDepreciation and amortization\t128\t103\t16\t0\t247\nOther operating costs (4)\t3\t12\t14\t0\t29\nStock-based compensation expense\t2\t2\t17\t0\t21\nOther items (5)\t1\t0\t24\t0\t25\nAdjusted EBITDA\t360\t233\t(31)\t0\t562\n", "q10k_tbl_25": "Condensed Balance Sheets - By Segment\t\t\t\t\t\n\tMarch 31 2020\t\t\t\t\n(In millions)\tLas Vegas\tOther U.S.\tAll Other\tElimination\tCaesars\nTotal assets\t12960\t8088\t8063\t(3131)\t25980\nTotal liabilities\t5844\t5770\t12046\t(11)\t23649\n", "q10k_tbl_26": "\tDecember 31 2019\t\t\t\t\n(In millions)\tLas Vegas\tOther U.S.\tAll Other\tElimination\tCaesars\nTotal assets\t13138\t8509\t6829\t(3131)\t25345\nTotal liabilities\t5896\t5730\t11519\t(11)\t23134\n", "q10k_tbl_27": "Consolidated Operating Results\t\t\t\t\n\tThree Months Ended March 31\t\tFav/(Unfav)\t\n(Dollars in millions)\t2020\t2019\t$\t%\nNet revenues\t1828\t2115\t(287)\t(13.6)%\nIncome/(loss) from operations\t(66)\t240\t(306)\t*\nInterest expense\t(333)\t(349)\t16\t4.6%\nOther income/(loss)\t641\t(138)\t779\t*\nNet income/(loss)\t188\t(218)\t406\t*\nNet income/(loss) attributable to Caesars\t189\t(217)\t406\t*\nAdjusted EBITDA (1)\t299\t562\t(263)\t(46.8)%\nOperating margin (2)\t(3.6)%\t11.3%\t0\t(14.9) pts\n", "q10k_tbl_28": "Net Revenues - Consolidated\t\t\t\t\n\tThree Months Ended March 31\t\tFav/(Unfav)\t\n(Dollars in millions)\t2020\t2019\t$\t%\nCasino\t958\t1083\t(125)\t(11.5)%\nFood and beverage\t330\t398\t(68)\t(17.1)%\nRooms\t317\t386\t(69)\t(17.9)%\nOther revenue\t163\t181\t(18)\t(9.9)%\nManagement fees\t9\t15\t(6)\t(40.0)%\nReimbursed management costs\t51\t52\t(1)\t(1.9)%\nNet revenues\t1828\t2115\t(287)\t(13.6)%\n", "q10k_tbl_29": "Retail Value of Complimentaries\t\t\n\tThree Months Ended March 31\t\n(In millions)\t2020\t2019\nFood and beverage\t122\t149\nRooms\t88\t114\nOther\t23\t25\nTotal complimentaries\t233\t288\n", "q10k_tbl_30": "Net Revenues - Segment\t\t\t\t\n\tThree Months Ended March 31\t\tFav/(Unfav)\t\n(Dollars in millions)\t2020\t2019\t$\t%\nLas Vegas\t822\t955\t(133)\t(13.9)%\nOther U.S.\t874\t1010\t(136)\t(13.5)%\nAll Other\t132\t150\t(18)\t(12.0)%\nNet revenues\t1828\t2115\t(287)\t(13.6)%\n", "q10k_tbl_31": "Income/(Loss) from Operations by Category - Consolidated\t\t\t\t\n\tThree Months Ended March 31\t\tFav/(Unfav)\t\n(Dollars in millions)\t2020\t2019\t$\t%\nNet revenues\t1828\t2115\t(287)\t(13.6)%\nOperating expenses\t\t\t\t\nCasino\t590\t618\t28\t4.5%\nFood and beverage\t258\t269\t11\t4.1%\nRooms\t115\t117\t2\t1.7%\nProperty general administrative and other\t488\t460\t(28)\t(6.1)%\nReimbursable management costs\t51\t52\t1\t1.9%\nDepreciation and amortization\t256\t247\t(9)\t(3.6)%\nImpairment of tangible and other intangible assets\t65\t0\t(65)\t(100.0)%\nCorporate expense\t50\t83\t33\t39.8%\nOther operating costs\t21\t29\t8\t27.6%\nTotal operating expenses\t1894\t1875\t(19)\t(1.0)%\nIncome/(loss) from operations\t(66)\t240\t(306)\t*\n", "q10k_tbl_32": "Income/(Loss) from Operations - Segment\t\t\t\t\n\tThree Months Ended March 31\t\tFav/(Unfav)\t\n(Dollars in millions)\t2020\t2019\t$\t%\nLas Vegas\t86\t226\t(140)\t(61.9)%\nOther U.S.\t(72)\t116\t(188)\t*\nAll Other\t(80)\t(102)\t22\t21.6%\nIncome/(loss) from operations\t(66)\t240\t(306)\t*\n", "q10k_tbl_33": "Other Factors Affecting Net Income/(Loss) - Consolidated\t\t\t\t\n\tThree Months Ended March 31\t\tFav/(Unfav)\t\n(Dollars in millions)\t2020\t2019\t$\t%\nInterest expense\t(333)\t(349)\t16\t4.6%\nOther income/(loss)\t641\t(138)\t779\t*\nIncome tax benefit/(provision)\t(54)\t29\t(83)\t*\n", "q10k_tbl_34": "Interest Expense\t\t\t\t\n\tThree Months Ended March 31\t\tFav/(Unfav)\t\n(Dollars in millions)\t2020\t2019\t$\t%\nFailed sale-leasebacks\t226\t224\t(2)\t(0.9)%\nCEOC LLC Term Loan\t12\t18\t6\t33.3%\nGolf Course Use Agreement\t3\t3\t0\t-%\nCRC Term Loan\t61\t61\t0\t-%\nCRC Notes\t23\t22\t(1)\t(4.5)%\nCEC Convertible Notes\t14\t14\t0\t-%\nOther interest expense (1)\t(6)\t7\t13\t*\nTotal interest expense\t333\t349\t16\t4.6%\n", "q10k_tbl_35": "Reconciliation of Adjusted EBITDA\t\t\n\tThree Months Ended March 31\t\n(In millions)\t2020\t2019\nNet income/(loss) attributable to Caesars (1)\t189\t(217)\nNet loss attributable to noncontrolling interests\t(1)\t(1)\nIncome tax (benefit)/provision\t54\t(29)\nOther (income)/loss (2)\t(641)\t138\nInterest expense\t333\t349\nDepreciation and amortization\t256\t247\nImpairment of tangible and other intangible assets\t65\t0\nOther operating costs (3)\t21\t29\nStock-based compensation expense\t10\t21\nOther items (4)\t13\t25\nAdjusted EBITDA\t299\t562\n", "q10k_tbl_36": "Segment Adjusted EBITDA (1)\t\t\t\t\n\tThree Months Ended March 31\t\tFav/(Unfav)\t\n(Dollars in millions)\t2020\t2019\t$\t%\nLas Vegas\t217\t360\t(143)\t(39.7)%\nOther U.S.\t115\t233\t(118)\t(50.6)%\nAll Other\t(33)\t(31)\t(2)\t(6.5)%\nAdjusted EBITDA\t299\t562\t(263)\t(46.8)%\n", "q10k_tbl_37": "Summary of Cash and Revolver Capacity\t\t\t\t\n\tMarch 31 2020\t\t\t\n(In millions)\tCRC\tCEOC LLC\tOther\tCaesars\nCash and cash equivalents\t1700\t592\t385\t2677\nRevolver capacity\t25\t39\t0\t64\nRevolver capacity committed to letters of credit\t(25)\t(39)\t0\t(64)\nTotal\t1700\t592\t385\t2677\n", "q10k_tbl_38": "Financing Activities as of March 31 2020\t\t\t\t\t\t\t\n\tRemaining\tYears Ended December 31\t\t\t\t\t\n(In millions)\t2020\t2021\t2022\t2023\t2024\tThereafter\tTotal\nAnnual maturities of long-term debt\t864\t49\t359\t49\t6721\t1743\t9785\nEstimated interest payments\t380\t440\t410\t350\t340\t100\t2020\nTotal debt service payments (1)\t1244\t489\t769\t399\t7061\t1843\t11805\nFinancing obligations - principal\t17\t26\t28\t33\t37\t8490\t8631\nFinancing obligations - interest\t583\t788\t799\t814\t830\t24662\t28476\nTotal financing obligation payments (2)\t600\t814\t827\t847\t867\t33152\t37107\nTotal financing activities\t1844\t1303\t1596\t1246\t7928\t34995\t48912\n", "q10k_tbl_39": "\tThree Months Ended March 31\t\n(In millions)\t2020\t2019\nDepreciation expense\t110\t111\nInterest expense\t226\t224\nRental payments (1)\t133\t155\n", "q10k_tbl_40": "Summary of Consolidated Capital Expenditures\t\t\t\n\tThree Months Ended March 31\t\tIncrease/ (Decrease)\n(In millions)\t2020\t2019\nMaintenance\t109\t153\t(44)\nDevelopment\t75\t65\t10\nTotal capital expenditures\t184\t218\t(34)\nIncluded in capital expenditures:\t\t\t\nCapitalized payroll costs\t2\t8\t\nCapitalized interest\t8\t5\t\n", "q10k_tbl_41": "\t\t\tIncorporated by Reference\t\t\t\nExhibit Number\tExhibit Description\tFiled Herewith\tForm\tPeriod Ending\tExhibit\tFiling Date\n2.1\tAgreement and Plan of Merger dated as of June 24 2019 by and among Caesars Entertainment Corporation Eldorado Resorts Inc. and Colt Merger Sub Inc.\t0\t8-K\t0\t2.1\t6/25/2019\n2.2\tAmendment No. 1 to Agreement and Plan of Merger.\t0\t8-K\t0\t2.1\t8/16/2019\n3.1\tSecond Amended and Restated Certificate of Incorporation of Caesars Entertainment Corporation dated February 8 2012.\t__\t10-K\t12/31/2011\t3.7\t3/15/2012\n3.2\tAmendment dated October 6 2017 to the Second Amended and Restated Certificate of Incorporation of Caesars Entertainment Corporation dated February 8 2012.\t__\tS-8\t0\t4.2\t10/6/2017\n3.3\tAmendment dated October 6 2017 to the Second Amended and Restated Certificate of Incorporation of Caesars Entertainment Corporation dated February 8 2012.\t__\tS-8\t0\t4.3\t10/6/2017\n3.4\tAmendment dated October 6 2017 to the Second Amended and Restated Certificate of Incorporation of Caesars Entertainment Corporation dated February 8 2012.\t__\tS-8\t0\t4.4\t10/6/2017\n3.5\tCertificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Caesars Entertainment Corporation dated July 2 2019.\t__\t8-K\t0\t3.1\t7/2/2019\n3.6\tCertificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Caesars Entertainment Corporation dated July 2 2019.\t__\t8-K\t0\t3.2\t7/2/2019\n3.7\tBylaws of Caesars Entertainment Corporation dated March 28 2019.\t__\t10-Q\t3/31/2019\t3.1\t5/2/2019\n10.1\tAmended and Restated Casino Operating Contract dated April 1 2020 by and between Jazz Casino Company L.L.C. and the State of Louisiana by and through the Louisiana Gaming Control Board.\t0\t8-K\t0\t10.1\t4/6/2020\n10.2\tSecond Amended and Restated Lease Agreement dated April 3 2020 by and among Jazz Casino Company L.L.C. New Orleans Building Corporation and the City of New Orleans.\t0\t8-K\t0\t10.2\t4/6/2020\n10.3\tLetter agreement dated April 3 2020 by and among Jazz Casino Company L.L.C. New Orleans Building Corporation and the City of New Orleans.\t0\t8-K\t0\t10.3\t4/6/2020\n10.4\tFirst Amendment to the Amended and Restated Casino Operating Contract made and entered into as of April 9 2020 and made effective as of April 1 2020 by and between Jazz Casino Company L.L.C. and the State of Louisiana by and through the Louisiana Gaming Control Board.\t0\t8-K/A\t0\t10.4\t4/14/2020\n31.1\tCertification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\tX\t\t\t\t\n31.2\tCertification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.\tX\t\t\t\t\n*32.1\tCertification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\t0\t\t\t\t\n", "q10k_tbl_42": "\t\t\tIncorporated by Reference\t\t\t\nExhibit Number\tExhibit Description\tFiled Herewith\tForm\tPeriod Ending\tExhibit\tFiling Date\n*32.2\tCertification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.\t0\t\t\t\t\n101.INS\tXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.\tX\t\t\t\t\n101.SCH\tXBRL Taxonomy Extension Schema Document.\tX\t\t\t\t\n101.CAL\tXBRL Taxonomy Extension Calculation Linkbase Document.\tX\t\t\t\t\n101.DEF\tXBRL Taxonomy Extension Definition Linkbase Document\tX\t\t\t\t\n101.LAB\tXBRL Taxonomy Extension Label Linkbase Document\tX\t\t\t\t\n101.PRE\tXBRL Taxonomy Extension Presentation Linkbase Document\tX\t\t\t\t\n"}{"bs": "q10k_tbl_2", "is": "q10k_tbl_3", "cf": "q10k_tbl_2"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2020
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File No. 001-10410
_________________________
CAESARS ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
_________________________
Delaware
62-1411755
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
One Caesars Palace Drive
Las Vegas, Nevada89109
(Address of principal executive offices, including zip code)
(702)407-6000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
_________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, $0.01 par value
CZR
NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Net increase/(decrease) in cash, cash equivalents, and restricted cash
922
(91
)
Cash, cash equivalents, and restricted cash, beginning of period
1,884
1,657
Cash, cash equivalents, and restricted cash, end of period
$
2,806
$
1,566
Supplemental Cash Flow Information:
Cash paid for interest
$
201
$
231
Cash received/(paid) for income taxes
(1
)
2
Non-cash investing and financing activities:
Change in accrued capital expenditures
(36
)
(7
)
See accompanying Notes to Consolidated Condensed Financial Statements.
6
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
In this filing, the name “CEC” refers to the parent holding company, Caesars Entertainment Corporation, exclusive of its consolidated subsidiaries and variable interest entities (“VIEs”), unless otherwise stated or the context otherwise requires. The words “Company,” “Caesars,” “Caesars Entertainment,” “we,” “our,” and “us” refer to Caesars Entertainment Corporation, inclusive of its consolidated subsidiaries and variable interest entities, unless otherwise stated or the context otherwise requires.
This Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Annual Report”). Capitalized terms used but not defined in this Form 10-Q have the same meanings as in the 2019 Annual Report.
We also refer to (i) our Consolidated Condensed Financial Statements as our “Financial Statements,” (ii) our Consolidated Condensed Balance Sheets as our “Balance Sheets,” (iii) our Consolidated Condensed Statements of Operations and Comprehensive Income/(Loss) as our “Statements of Operations,” and (iv) our Consolidated Condensed Statements of Cash Flows as our “Statements of Cash Flows.”
Note 1 — Description of Business
Organization
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 has a total of 51 properties in 13 U.S. states and five countries outside of the U.S., including 49 casino properties. Nine casinos are in Las Vegas, which represented 45% of net revenues for the three months endedMarch 31, 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 (collectively, “VICI”).
Effect of the COVID-19 Public Health Emergency
A novel strain of coronavirus (“COVID-19”) was declared a public health emergency by the United States Department of Health and Human Services on January 31, 2020. On March 13, 2020, the President of the United States issued a proclamation declaring a national emergency concerning COVID-19. As a result of the COVID-19 public health emergency, we began to receive directives from various governmental and tribal bodies for the closure of certain properties, and consistent with such directives, on March 17, 2020, we announced the temporary shutdown of our owned properties in North America. When required by governmental bodies, our international properties also shut down following such directives. COVID-19 is present in nearly all regions around the world and has resulted in travel restrictions and business slowdowns or shutdowns in affected areas. Our properties remained closed as of March 31, 2020, and as a result, the COVID-19 public health emergency continues to affect our business significantly. There is significant uncertainty as to the length of time for which these closures will remain in effect. Furthermore, there can be no assurance even after reopening as to the time required for our operations to recover to levels prior to these closures, or whether future closures related to COVID-19 could occur.
The COVID-19 public health emergency has had significant and far-reaching effects on our business and our industry. In addition to the lost revenues from the closure of our properties, we also observed a significant increase in postponements and cancellations, specifically in our Las Vegas region, of convention reservations during the quarter ended March 31, 2020, as well as convention reservations in the second and third quarters of 2020. In addition, many of our entertainment venues have canceled or postponed scheduled performances (see Note 11 for further discussion). Further, some of our tenants have requested temporary rent relief in the form of extended payment periods. We have also made efforts to reach agreements with our vendors for extended payment terms. The interruptions in our business have reduced our revenues and projected revenues across most of our revenue streams. However, our online and mobile games continue to operate and provide entertainment for our customers at home.
To manage the business through this period of uncertainty, we took steps to begin operating with a smaller, targeted workforce that is focused on maintaining basic operations while our properties remain closed. On April 2, 2020, we announced furloughs that would affect approximately 90% of our employees at our domestic, owned properties in North America as well as our corporate employees. As part of our ongoing efforts, we also took steps to support our employees through the effects of these difficult actions (see Note 7 for further discussion).
7
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act is a relief package intended to assist many aspects of the American economy. Two provisions of the CARES Act will serve to aid the Company’s liquidity position, the employee retention credit and the deferral of employer-related FICA taxes.
First, the employee retention credit provides employers a refundable federal tax credit equal to 50% of the first $10,000 of qualified wages and benefits paid to employees while they are not performing services after March 12, 2020 and before January 1, 2021. Contributions to qualified medical plans also constitute creditable amounts. The credit is available to offset all federal employment withholdings owed in a particular quarter including both the employer and employee share of social security, Medicare taxes and withholdings for federal income taxes. To the extent that the credit exceeds employment withholdings, the employer may request a refund of prior taxes paid.
Second, employers are permitted to defer the employer share of social security taxes otherwise owed on dates beginning March 27, 2020 and ending December 31, 2020. Half of the total deferred payments are payable on December 31, 2021 and the remaining half are payable on December 31, 2022. The Company intends to take full advantage of this tax deferral provision. The amount of the deferral is based on wages paid from April through December, which we are unable to estimate at this time. See Note 7 for additional discussion of the CARES Act.
As a precautionary measure, on March 16, 2020, we announced that we had fully drawn the remaining available amounts under each of the CRC Revolving Credit Facility and CEOC Revolving Credit Facility in order to increase our cash position and preserve liquidity and financial flexibility in light of the uncertainty and general volatility in the global financial markets. In accordance with the terms of each of the revolving credit facilities, the proceeds from these borrowings may be used in the future for working capital, general corporate or other purposes permitted by each of the revolving credit facilities. The amounts drawn under these revolving credit facilities are subject to financial covenants which are sensitive to EBITDA. Due to the closure of our properties, EBITDA has been significantly affected whereby it is reasonably possible that we would be unable to maintain compliance with the financial covenants thereunder. We are in process of obtaining waivers for these financial covenants through September 30, 2021; however, they are not yet in place (see Note 8 for further discussion). As a result, for liquidity modeling purposes we have assumed that a required repayment of $826 million of the revolver borrowing will be repaid within the next twelve months.
As an added measure, we are also in the process of obtaining relief for certain minimum capital expenditure requirements under our lease agreements. Although we expect such relief to be granted, we have not assumed a reduction in our capital expenditures for liquidity modeling purposes.
After considering the measures that we have taken in order to maintain our basic operations while our properties remain closed, we estimate incurring approximately $9.0 million to $9.5 million per day of cash outflows which include operating expenses, rent, interest, debt service, and capital expenditures. Until our operations resume, we expect to continue to incur such cash operating expenses which will result in negative cash flows from operations. As more fully described in Note 5, management has considered multiple scenarios with which our properties begin to reopen and profitability returns. Based on the assumptions in these scenarios, we believe our current liquidity is sufficient to support our operations for the next 12 months. However, these significant assumptions are highly subject to uncertainty and change related to events outside of our control, specifically as to when our properties may be allowed to open, at what levels of capacity, and customer demand.
The uncertain duration of government or tribe-mandated closures of our properties and the overall deterioration of general economic conditions have materially affected significant inputs that are used to determine the fair value of certain of our indefinite-lived assets including goodwill. Accordingly, during the three months ended March 31, 2020, we recorded impairments to certain intangible assets. See Note 5 for further discussion.
In preparation of reopening, we continue to take cautionary actions in response to the COVID-19 public health emergency. First and foremost, we are focusing on the health and safety of our employees. We have implemented real time changes in operating procedures to accommodate social distancing guidelines. We have enhanced security measures at many of our properties while they are closed and implemented additional cleaning and disinfection procedures in order to maintain healthy and secure operating environments, which we expect to continue for the foreseeable future.
We continue to monitor the rapidly evolving situation and guidance from domestic and international authorities, including federal, state and local public health authorities, and may take additional actions based on such authorities’ recommendations. In these circumstances, there may be developments outside of our control that require us to adjust our operating plan. Given the dynamic nature of this situation, the full extent of the effects of the COVID-19 public health emergency on our future financial condition, results of operations or cash flows is highly uncertain.
8
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
For a more extensive discussion of the possible impacts of the COVID-19 public health emergency on our business, financial condition and results of operations, please refer to “Risk Factors” in Part II, Item 1A of this report.
Proposed Merger of Caesars Entertainment Corporation with Eldorado Resorts, Inc.
On June 24, 2019, Caesars, Eldorado Resorts, Inc., a Nevada corporation (“Eldorado”), and Colt Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Eldorado (“Merger Sub”), entered into an Agreement and Plan of Merger (as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 15, 2019, and as it may be further amended from time to time, the “Merger Agreement”), pursuant to which, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Caesars (the “Merger”), with Caesars continuing as the surviving corporation and a direct wholly owned subsidiary of Eldorado. On November 15, 2019, the respective stockholders of Caesars and Eldorado voted to approve the Merger. The transaction is expected to close mid-2020. In connection with the Merger, Eldorado will change its name to Caesars Entertainment, Inc.
Based on the terms and subject to the conditions set forth in the Merger Agreement, the aggregate consideration payable by Eldorado in respect of outstanding shares of common stock of Caesars (“Caesars Common Stock”) will be (a) an amount of cash equal to (i) the sum of (A) $8.40 plus (B) an amount equal to $0.003333 (the “Ticking Fee”) for each day from March 25, 2020 until the closing date of the Merger (the “Closing Date”), multiplied by (ii) a number of shares of Caesars Common Stock (the “Aggregate Caesars Share Amount”) equal to (A) 682,161,838 (which includes 8,327,528 shares being held in escrow trust as of May 6, 2020 to satisfy unsecured claims pursuant to the Third Amended Joint Plan of Reorganization, filed with the U.S. Bankruptcy Court for the Northern District of Illinois in Chicago on January 13, 2017, at Docket No. 6318) plus (B) the number of shares of Caesars Common Stock issued after June 24, 2019 and prior to the effective time of the Merger pursuant to the exercise of certain equity awards issued under Caesars stock plans or conversion of the CEC Convertible Notes (as defined below) (the “Aggregate Cash Amount”); and (b) a number of shares of common stock of Eldorado (“Eldorado Common Stock”) equal to 0.0899 multiplied by the Aggregate Caesars Share Amount (the “Aggregate Eldorado Share Amount”). Each holder of shares of Caesars Common Stock will be entitled to elect to receive, for each share of Caesars Common Stock held by such holder, either an amount of cash or a number of shares of Eldorado Common Stock, with value (based on the Eldorado Common Stock VWAP, as defined below) equal to the Per Share Amount. The “Per Share Amount” is equal to (a) (i) the Aggregate Cash Amount, plus (ii) the product of (A) the Aggregate Eldorado Share Amount and (B) the volume weighted average price of a share of Eldorado Common Stock for a ten trading day period, starting with the opening of trading on the 11th trading day prior to the anticipated Closing Date to the closing of trading on the second to last trading day prior to the anticipated Closing Date (the “Eldorado Common Stock VWAP”), divided by (b) the Aggregate Caesars Share Amount.
Elections by Caesars stockholders are subject to proration such that the aggregate amount of cash paid in exchange for outstanding shares of Caesars Common Stock in the Merger will not exceed the Aggregate Cash Amount and the aggregate number of shares of Eldorado Common Stock issued in exchange for shares of Caesars Common Stock in the Merger will not exceed the Aggregate Eldorado Share Amount. Based on the number of shares of Eldorado Common Stock and Caesars Common Stock, and the principal amount of the CEC Convertible Notes, outstanding as of March 31, 2020, and assuming the Merger occurred on that date, Caesars stockholders who receive shares of Eldorado Common Stock in exchange for their shares of Caesars Common Stock in the Merger and holders of the CEC Convertible Notes (assuming that all CEC Convertible Notes are converted immediately following consummation of the Merger into $8.42 in cash (which incorporates the Ticking Fee for each day from March 25, 2020 until March 31, 2020) and 0.0899 shares of Eldorado Common Stock for each share of Caesars Common Stock into which such CEC Convertible Notes were convertible immediately prior to the Merger) would be issued an aggregate of approximately 77 million shares of Eldorado Common Stock and would hold approximately 49.8%, in the aggregate, of the issued and outstanding shares of Eldorado Common Stock.
Outstanding options and other equity awards issued under Caesars’ stock plans will be treated in the manner set forth in the Merger Agreement. Upon completion of the Merger, any unexercised, vested, in-the-money stock options that are outstanding will be canceled in exchange for the Per Share Amount (or applicable portion thereof) in cash, reduced by the applicable exercise price. Unvested service-vesting stock options and restricted stock units will be converted into stock options and restricted stock units for Eldorado Common Stock and will retain their original vesting schedules. Performance-based stock options are expected to be canceled in connection with the consummation of the Merger. Performance stock units that are subject to total stockholder return performance-vesting conditions will be converted into performance stock units for Eldorado Common Stock and will continue to vest in accordance with their original terms, except the total stockholder return vesting conditions will be adjusted to be based on Eldorado’s total stockholder return performance. Performance stock units that are tied to earnings before interest, taxes, depreciation and amortization (“EBITDA”) and earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”) performance
9
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
conditions will vest at closing and be exchanged for the Per Share Amount (or applicable portion thereof) in cash. For EBITDA- and EBITDAR-based performance stock units that are eligible to vest in respect of performance achieved during the year in which the closing occurs, such vesting will be based on performance of applicable goals through the end of the month prior to the close and extrapolated through the remainder of the performance period and for EBITDA- and EBITDAR-based performance stock units that are eligible to vest in respect of a performance period that has not yet commenced as of the Closing Date, such vesting will be based on target-level performance.
The Merger Agreement contains customary representations and warranties by each of Caesars and Eldorado, and each party has agreed to customary covenants. Each of Caesars’ and Eldorado’s obligation to consummate the Merger remains subject to the satisfaction or waiver of certain conditions, including among others, the expiration or termination of any applicable waiting period under the HSR Act, the receipt of required regulatory approvals and other customary closing conditions. Other conditions to completing the Merger, such as obtaining stockholder approvals with respect to the Merger from each party’s stockholders and effecting certain amendments to the indenture governing the CEC Convertible Notes, have been satisfied.
The Merger Agreement also contains termination rights for each of Caesars and Eldorado under certain circumstances. If the Merger Agreement is terminated in certain circumstances relating to entry by Caesars into an alternative transaction, Caesars will be required to pay Eldorado a termination fee of approximately $418.4 million. The Merger Agreement also provides that Eldorado will be obligated to pay a termination fee of approximately $836.8 million to Caesars if the Merger Agreement is terminated (i) due to a law or order relating to gaming or antitrust laws that prohibits or permanently enjoins the consummation of the transactions, (ii) because the required regulatory approvals were not obtained prior to June 24, 2020 (subject to automatic extension to a date no later than December 24, 2020 upon satisfaction of certain conditions to extension set forth in the Merger Agreement) or (iii) due to Eldorado willfully and materially breaching certain obligations with respect to the actions required to be taken by Eldorado to obtain required antitrust approvals.
Pursuant to the terms of the indenture governing the CEC Convertible Notes, on November 27, 2019, Caesars entered into a supplemental indenture to provide for conversion of the CEC Convertible Notes at and after the effective time of the Merger into the weighted average, per share of Caesars Common Stock, of the types and amounts of the merger consideration received by holders of Caesars Common Stock who affirmatively make a merger consideration election (or, if no holders of Caesars Common Stock make such an election, the types and amounts of merger consideration actually received by such holders of Caesars Common Stock).
Potential Divestitures
We are considering divestiture opportunities for non-strategic assets and properties. If the completion of a sale is more likely than not to occur, we may recognize impairment charges for certain of our properties to the extent current expected proceeds are below our carrying value for such properties.
Note 2 — Basis of Presentation and Principles of Consolidation
Basis of Presentation and Use of Estimates
The accompanying unaudited consolidated condensed financial statements of Caesars have been prepared under the rules and regulations of the Securities and Exchange Commission 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 2020 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.
10
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Reportable Segments
We view each property as an operating segment and aggregate all such properties into three 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.
(In millions)
March 31, 2020
December 31, 2019
Cash and cash equivalents
$
2,677
$
1,755
Restricted cash, current
119
117
Restricted cash, non-current
10
12
Total cash, cash equivalents, and restricted cash
$
2,806
$
1,884
Consolidation of Subsidiaries and Variable Interest Entities
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 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 as investments in equity securities.
We consider ourselves the primary beneficiary of a VIE when we have both the power to direct the activities that most significantly affect the results of the VIE and the right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE. We review our investments for VIE consideration if a reconsideration event occurs to determine if the investment continues to qualify as a VIE. If we determine an investment no longer qualifies as a VIE, there may be a material effect to our financial statements.
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.
Emerald Resort & Casino, South Africa Disposition
In May 2019, we entered into an initial agreement to sell Emerald Resort & Casino located in South Africa, in which we own a 70% interest while the remaining 30% is owned by local minority partners. During 2020, the original agreement expired and we began negotiations for a revised sales price due to deterioration of the market in South Africa. The property closure, the uncertainty
11
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
of the timing of reopening, and the recovery period resulting from the COVID-19 public health emergency have further affected these negotiations. As a result, we have recorded a corresponding valuation allowance of $9 million related to the Assets held for sale on our Balance Sheet. This charge has been recorded in Other income/(loss) on our Statements of Operations for the three months endedMarch 31, 2020. The following table summarizes assets and liabilities classified as held for sale within our All Other segment.
(In millions)
March 31, 2020
Cash and cash equivalents
$
4
Property and equipment, net
20
Goodwill
5
Intangible assets other than goodwill
7
Other
2
Less: valuation allowance
(9
)
Assets held for sale
$
29
Current liabilities
$
2
Deferred credits and other liabilities
3
Liabilities held for sale included in Accrued expenses and other current liabilities
$
5
Harrah’s Reno Disposition
We lease certain real property assets for Harrah’s Reno from VICI. In December 2019, Caesars and VICI entered into an agreement to sell Harrah’s Reno to an affiliate of CAI Investments for $50 million. The proceeds of the transaction are expected to be split 75% to VICI and 25% to Caesars, while the annual rent payments under the Non-CPLV Master Lease between Caesars and VICI will remain unchanged. These assets and liabilities are not presented as held for sale in our Balance Sheets as the sale is contingent upon the closing of the Merger.
Bally’s Atlantic City Hotel & Casino Disposition
We lease certain real property assets for Bally’s Atlantic City Hotel & Casino (“Bally’s Atlantic City”) from VICI. In April 2020, Caesars and VICI entered into agreements to sell the operations of Bally’s Atlantic City and the real property on which it is located to Twin River Worldwide Holding, Inc. for approximately $25 million, which we expect to close within the next twelve months, subject to regulatory approvals and other closing conditions. Caesars will receive approximately $6 million from the sale and VICI will receive approximately $19 million from the sale, while the annual payments under the Non-CPLV Master Lease between Caesars and VICI will remain unchanged. In association with this sale, we recorded an impairment charge to Property and equipment, net in the amount of $33 million during the three months endedMarch 31, 2020 as the carrying value was higher than the fair value. Bally’s Atlantic City is included in our Other U.S. segment.
The Financial Accounting Standards Board (the “FASB”) issued the following authoritative guidance amending the FASB Accounting Standards Codification (“ASC”).
Effective January 1, 2020, we adopted the following Accounting Standards Updates (“ASU”), none of which had a material effect on our financial statements:
•
ASU 2018-18, Collaborative Arrangements
•
ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software
The following ASUs were not effective as of March 31, 2020:
12
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
New Developments
Reference Rate Reform - ASU 2020-04:Amended guidance is intended to provide relief to the companies 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 applying 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 date 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.
Previously Disclosed
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 loss from continuing operations and income or a gain from other items and the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendment also simplifies areas such as franchise tax, step up in tax basis of 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, 2020, and interim periods within those fiscal years. Early adoption is permitted. The amendments in this update 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 a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning 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.
Note 4 — Property and Equipment
(In millions)
March 31, 2020
December 31, 2019
Land
$
4,211
$
4,218
Buildings, riverboats, and leasehold and land improvements
12,454
12,022
Furniture, fixtures, and equipment
1,804
1,762
Construction in progress
327
706
Total property and equipment
18,796
18,708
Less: accumulated depreciation
(3,960
)
(3,732
)
Total property and equipment, net
$
14,836
$
14,976
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.
Depreciation Expense and Capitalized Interest
Three Months Ended March 31,
(In millions)
2020
2019
Depreciation expense
$
238
$
229
Capitalized interest
8
5
13
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 5 — Goodwill and Other Intangible Assets
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, 2019
$
270
$
4,012
$
2,554
Amortization
(18
)
—
—
Impairments
—
—
(32
)
Other
—
(1
)
(2
)
Balance as of March 31, 2020 (1)
$
252
$
4,011
$
2,520
____________________
(1)
In addition to the reporting units disclosed in our annual report on Form 10-K, an additional reporting unit within our Other U.S. Segment with $39 million of associated goodwill has a negative carrying value. The fair value of the reporting unit exceeds the carrying value.
Gross Carrying Value and Accumulated Amortization of Intangible Assets Other Than Goodwill
March 31, 2020
December 31, 2019
(Dollars in millions)
Weighted
Average
Remaining
Useful Life
(in years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortizing intangible assets
Trade names and trademarks
0.8
$
14
$
(9
)
$
5
$
14
$
(8
)
$
6
Customer relationships
3.3
1,070
(835
)
235
1,070
(819
)
251
Contract rights
4.7
3
(2
)
1
3
(2
)
1
Gaming rights and other
4.2
43
(32
)
11
43
(31
)
12
$
1,130
$
(878
)
252
$
1,130
$
(860
)
270
Non-amortizing intangible assets
Trademarks
776
776
Gaming rights
1,491
1,525
Caesars Rewards
253
253
2,520
2,554
Total intangible assets other than goodwill
$
2,772
$
2,824
Due to the adverse effect of the COVID-19 public health emergency on the global economy and financial markets and the resulting closure of our properties beginning in mid-March 2020, including the resulting negative operating cash flows, we revised our expected future cash flows from our properties. While the disruption caused by the COVID-19 public health emergency is expected to be temporary, it has significantly affected our projected future cash flows, which is an indication of potential impairment within our reporting units.
To test for potential impairments of our goodwill and other intangible assets, we utilized an income approach which is sensitive to the Company’s projected future cash flows. Significant assumptions and estimates that we have utilized to project our future cash flows include the dates upon which our properties will reopen and the estimated time needed for our operations to recover to levels prior to the COVID-19 public health emergency. Our projections consider various scenarios as to when our properties begin to open, such as towards the end of the second quarter of 2020 or in the third quarter of 2020. Our scenarios also consider recovery rates that assume that our properties gradually return to operating levels experienced prior to the COVID-19 public health emergency over the course of 1 to 3 years. We are uncertain of the likelihood of any of these scenarios over any others and, accordingly, have applied equal weighting to them to develop our estimate. The discount rate utilized incorporates the additional return a market participant would require for the high degree of uncertainty related to the future cash flows.
14
CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
As a result of our estimate, we recognized an impairment charge related to gaming rights of $32 million related to two of our properties in our Other U.S. segment during the three months ended March 31, 2020 which has been recorded within Impairment of tangible and other intangible assets on our Statement of Operations.
These significant assumptions are highly subject to uncertainty and to change, including factors which may be outside of our control (such as the dates upon which our properties are allowed to reopen). We may record material impairments in the future if these assumptions change or events develop or progress other than as we assumed.
Note 6 — Fair Value Measurements
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: