UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): September 14, 2017 (September 14, 2017)
CAESARS ENTERTAINMENT CORPORATION
(Exact Name of Registrant as Specified in Charter)
| Delaware | 001-10410 | 62-1411755 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
One Caesars Palace Drive, Las Vegas, Nevada 89109
(Address of Principal Executive Offices)(Zip Code)
(702) 407-6000
(Registrant’s telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
| Item 7.01 | Regulation FD Disclosure |
On September 14, 2017, senior management of Caesars Entertainment Corporation (“CEC”) will begin using the investor presentation attached as Exhibit 99.1 (the “Investor Presentation”) to this report in connection with its participation in the Bank of America Merrill Lynch 2017 Gaming and Lodging Conference in New York City, New York.
The information set forth in this Item 7.01 of this Current Report on Form 8-K is being furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any of CEC’s filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing. The filing of this Item 7.01 of this Current Report on Form 8-K shall not be deemed an admission as to the materiality of any information herein that is required to be disclosed solely by reason of Regulation FD.
| Item 9.01 | Financial Statements and Exhibits |
| Exhibit |
Description | |
| 99.1 | September 14, 2017 Presentation at Bank of America Merrill Lynch 2017 Gaming and Lodging Conference | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CAESARS ENTERTAINMENT CORPORATION | ||||||
| Date: September 14, 2017 | By: | /s/ SCOTT E. WIEGAND | ||||
| Name: | Scott E. Wiegand | |||||
| Title: | Senior Vice President, Deputy General Counsel and Corporate Secretary | |||||
Exhibit 99.1
Caesars
Entertainment
Forward Looking Statements
Certain information in this presentation and discussed on the conference call which this
presentation accompanies constitutes forward-looking information within the meaning of the
Private Securities Litigation Reform Act of 1995. This information is based on the Company’s
current expectations and actual results could vary materially depending on risks and
uncertainties that may affect the Company’s operations, markets, services, prices and other
factors as discussed in the Company’s filings with the Securities and Exchange Commission.
These risks and uncertainties include, but are not limited to, industry and economic conditions,
and competitive, legal, governmental and technological factors. There is no assurance that
the
Company’s expectations will be realized.
The forward-looking information in this presentation and discussed on the conference call which
this presentation accompanies reflects the opinion of management as of today. Please be
advised that developments subsequent to this call are likely to cause this information to
become outdated with the passage of time. The Company assumes no obligation to update
any
forward-looking information contained in this presentation or discussed on the conference
call which this presentation accompanies should circumstances change,
except as otherwise
required by securities and other applicable laws.
2
Use of Non-GAAP Measures
The following non-GAAP measures will be used in the presentation and discussed on the
conference call which this presentation accompanies:
| • |
|
Adjusted EBITDA/EBITDAR and Adjusted EBITDA Margin |
| • |
|
Property EBITDA |
| • |
|
CEC + CEOC, or enterprise-wide financial measures |
Definitions of these non-GAAP measures, reconciliations to their nearest GAAP measures, and
the reasons management believes these measures provide useful information for investors,
can
be found on Slide 4 and in the Appendix to this presentation, beginning on Slide 31.
| 3 |
Important Information About
Presentation of Results
On January 15, 2015, Caesars Entertainment
Operating Company, Inc. (‘CEOC”) filed a voluntary bankruptcy petition under Chapter 11 of the United
States Bankruptcy Code, resulting in the
deconsolidation of CEOC effective as of such date. As such, amounts presented in this presentation exclude the
operating results of CEOC subsequent to
January 15, 2015, unless otherwise stated, and analysis of our operating results in this presentation and as may be
discussed on the conference call which
this presentation accompanies include those components that remain in the consolidated Caesars Entertainment
Corporation (“CEC”) entity subsequent to the
deconsolidation of CEOC. “CEC” represents Caesars Entertainment Resort Properties, LLC (“CERP”), Caesars
Growth Partners, LLC (“CGP”)
and associated parent company and elimination adjustments that represent the current Caesars Entertainment Corporation
consolidated structure. Through
June 30, 2016, we aggregated the operating segments within CGP into two separate reportable segments: CGP Casino
Properties and Caesars Interactive
Entertainment (“CIE”). On September 23, 2016, CIE sold its social and mobile games business (the “SMG Business”) for
cash consideration of
$4.4 billion, subject to customary purchase price adjustments, and retained only its World Series of Poker (“WSOP”) and regulated
online real money
gaming businesses. The SMG Business represented the majority of CIE’s operations and is being classified as a discontinued operation for
all periods presented
effective in the third quarter of 2016. After excluding the SMG Business from CIE’s continuing operations, CIE is no longer considered a
separate reportable
segment from CGP Casinos based on management’s view. Therefore, CGP Casinos and CIE have been combined for all periods
presented to form the CGP segment.
However, we are also providing certain supplemental information as if we had continued to consolidate CEOC throughout the second quarter of 2017.
This information includes both stand-alone CEOC financials and key metrics for the second quarter of 2017, and certain financial information for CEC as if
CEOC remained a consolidated entity during the quarter. This information within this presentation may be different from CEOC’s standalone results
separately provided due to immaterial adjustments, rounding, and basis of presentation differences. CEC has committed to a material amount of
payments to support CEOC’s restructuring, which would result in the reacquisition of CEOC’s operations if the restructuring is made on terms consistent with
the current Restructuring Support Agreements to which CEC is a party (“RSAs”) and the Third Amended Joint Plan of Reorganization confirmed by the
Bankruptcy Court on January 15, 2017 (the “Plan”). In addition, compensation of management is in part determined by reference to certain of such
financial information. As a result, we believe this supplemental information is useful to investors who are trying to understand the results of the entire
“Caesars” enterprise, including CEOC and consistent with the management services provided across the system’s properties.
As a result of the deconsolidation of CEOC, CEC generates no direct economic benefits from CEOC’s results. This supplemental information is non-GAAP. It
is not preferable to GAAP results provided elsewhere in this presentation or discussed on the conference call this presentation accompanies, but is used by
management as an analytical tool to assess the results of all properties owned, managed or branded by a Caesars entity, regardless of consolidation.
Additionally, the results are not necessarily indicative of future performance or of the results that would be reported should the reorganization of CEOC
contemplated by the RSAs and the Plan be successfully completed.
Supplemental materials have
been posted on the Caesars Entertainment Investor Relations website at
http://investor.caesars.com/financials.cfm
| 4 |
Important Information
About Projections
The projections contained in this presentation represent
projections for the CEC entity post-Merger and Emergence, or “New CEC” (the “New CEC
Projections”). Upon the request of CEC and CAC, Caesars
Enterprise Services (“CES”) management and personnel that provide corporate and
management services to CEC’s and CAC’s respective properties
(“CES Management”) prepared and developed the New CEC Projections, with input
from CEC, CEOC, CAC, and others, as applicable, during the annual budgeting
cycle in late 2016 and are consistent with the 2017 annual plan and
corresponding long range plan. The New CEC Projections do not incorporate any impact or
adjustments to projections based on current 2017 year-todate
performance. Additionally, the New CEC Projections reflect CES Management’s judgment (at the time
the projections were prepared) of future
operating and business conditions, which are subject to change.
Although CES Management believes its assumptions to be reasonable, it is important to note that CEC and CAC can provide no assurance that such
assumptions will be realized. Projections include a range of outcomes by their nature. The New CEC Projections were prepared to include projections
that CES Management believed, at the time of preparation in 2017, to be the most likely case. CEC and CAC have not included nor does CEC or CAC
anticipate including the associated ranges. The New CEC Projections include certain information that represents non-GAAP measures. CEC and CAC
are unable to reconcile Adjusted EBITDAR, which is a forward-looking non-GAAP measure, to its nearest GAAP measure because the nearest GAAP
financial measure is not accessible on a forward-looking basis, as described further below. The New CEC Projections did not include, among other
things, the following material items:
| • |
|
Fair Value adjustments and the related income statement effects required as a result of the reacquisition of CEOC and its consolidation by CEC |
subsequent to CEOC’s Emergence from bankruptcy;
| • |
|
The effect of the adoption of ASU 2014-09, Revenue from Contracts With Customers (Topic 606), which CEC is required to adopt by January 1, 2018; |
| • |
|
The effect of the adoption of ASU 2016-02, Leases (Topic 842), which CEC is required to adopt by January 1, 2019; |
| • |
|
Depreciation expense on a GAAP basis as the New CEC Projections are prepared at a much higher level than GAAP would prescribe; |
| • |
|
Stock compensation expense as the New CEC Projections do not include expected future grants; and |
| • |
|
Adjustments that may be required if future changes are made to consolidation conclusions. |
Because the items noted above are expected to have a material effect on the GAAP results, the nearest GAAP
financial measure, Net Income, is
unavailable without an unreasonable effort.
Although presented with numerical specificity, the New CEC Projections reflect numerous assumptions and estimates as to future events made by CES
Management. The long range projections assume organic top line growth of 2.0%—3.0% across the New CEC portfolio, 1.75% per annum fixed cost
increases, and renovation of hotel room product at many of CEC’s Las Vegas properties during the forecast period. Although acquisitions, divestitures,
and development prospects are regularly evaluated by CEC and CAC, the New CEC Projections do not include any costs or contributions from these
| 5 | inorganic opportunities due to the speculative nature of such prospects. |
Important Information
About Projections (continued)
The New CEC Projections included in this
presentation are not fact and should not be relied upon as being necessarily indicative of future
results, and readers of this information are cautioned not to
place undue reliance thereon. Neither CEC’s independent auditors nor any other
independent accountants have compiled, examined, or performed any procedures
with respect to the New CEC Projections, nor have they
expressed any opinion or any other form of assurance on such information or its achievability, and assume no
responsibility for, and disclaim any
association with, the New CEC Projections. The assumptions and estimates underlying the projected financial information are
inherently uncertain
and, though considered reasonable by CES Management as of the date of the projected financial information’s preparation, are subject to a
wide variety of significant business, economic, and competitive risks and uncertainties that could cause actual results to differ materially from
those contained in the New CEC Projections. Accordingly, there can be no assurance that the New CEC Projections are indicative of the future
performance of CEC or that actual results will not differ materially from those presented in the New CEC Projections. Inclusion of the New CEC
Projections in this presentation should not be regarded as a representation by any person that the results contained in the New CEC Projections will
be achieved.
| 6 |
LAS VEGAS FUNDAMENTALS
ARE STRONG
| 2 | 0 0 6 – 2 0 1 6 |
POST EMERGENCE, CZR WILL HAVE
SIGNIFICANT LAS VEGAS EXPOSURE
2016 PROPERTY EBITDA
A D J U S T E D F O R E X P E C T E D F U L L—Y E A R
L E A S E P A Y M E N T T O R E I T 1
NOTE: Las Vegas market growth data sourced from the Las
Vegas Convention and Visitor Authority “LVCVA” and University of Nevada Las Vegas, Center for Gaming Research.
1. Caesars pro-forma EBITDA post expected
annual property lease/rent payments totaling $640 mm to the REIT in the year following emergence.
2. Las Vegas property EBITDA is less Caesars Palace Las Vegas
expected annual rent of $165 million in the year following emergence.
3. Regional property EBITDA is less expected annual rent of $465 million in the year
following emergence.
4. Other property EBITDA is less expected annual rent payment of $10 million for golf courses in the year following emergence.
+10% +1.1M +11% +5%
VISITATION
TO 42.9M
ROOM
NIGHTS
OCCUPIED
AVERAGE
ROOM RATE
LAS VEGAS2
NONLAS
VEGAS
DOMESTIC3
OTHER4
66%
3% 31%
Positioned to Take Advantage of
Strong Macro Trends in Las Vegas
TOTAL
DEPLANED
AIR
PASSENGERS
| 7 |
Aligned With Significant Shifts in Las
Vegas Market Drivers
More people visiting for broader
experiences outside of gaming
We have shifted with these trends
with innovative non-gaming offerings
GAMING
REVENUES
LAS VEGAS
-4.1%
NON-GAMING
REVENUES
LAS VEGAS
+25.0%
Las Vegas gaming revenues
declined between 2006 and 2016
while non-gaming revenues
significantly increased
45%
55%
2006 2016
Gaming Non-Gaming
TOTAL
REVENUES
LAS VEGAS
+12.9%
| 8 |
53%
47%
CAESARS ENTERTAINTMENT
LAS VEGAS REVENUES
NOTE: Las Vegas market revenue growth data sourced from the University of
Nevada Las Vegas, Center for Gaming Research.
Our
Transformation
Cornerstone
Initiatives
Primed For
Growth
9
Delivering Strong Performance
ENTERPRISE WIDE FINANCIAL & OPERATIONAL HIGHLIGHTS1
+$718 M
ADJUSTED EBITDA
IMPROVEMENT
+773bps
ADJUSTED
EBITDA MARGIN
>$2 B
AGGREGATE CAPITAL
DEPLOYED
~$16 B
EXPECTED
REDUCTION
IN DEBT 2
Note: All information is displayed on an enterprise wide basis, which is defined as CEC + CEOC; Reflects sale of CIE SMG business.
1. Metrics measure change from 2014 to Q2 2017 TTM.
2. Reduction in financial debt is
enterprise wide total $25.6 billion less $9.6 billion upon emergence, not adjusted for lease liability.
10
Transformational Financial Execution
Management generated ~$718 million of incremental EBITDA while CEOC operated in bankruptcy
NET
REVENUE
$ MI L L I O N S
+2.3%
CAGR
$7,967
20141 Q2 2017 LTM
1.9%
CAGR
Note: All information is displayed on an enterprise wide (CEC + CEOC) basis.
1. As CEC consolidated CEOC for the full year 2014, this represents US GAAP.
EBITDA MARGIN
$ MI L L I O N S
ADJUSTED EBITDA &
+773 bps +20.4%
CAGR
$2,180
$1,462
2014 Q2 2017 LTM
18.4%
26.1%
+17.3%
CAGR
11
$8,358
Overall customer service
score at an all-time high
Currently at our highest
employee satisfaction scores
OVERALL SERVICE SCORE1
A N N U A L T I E R W E I G H T E D S H A R E O F A ’ S
EMPLOYEE OPINION SURVEY2
1. Overall Service raw score profile increase from 2014 to 2015 partially attributable to change from 5-point to 10-point scale; 2015 was baselined to account for
the scale change.
2. Employee Opinion Survey score ranges from 1 (less favorable) to 5 (more favorable); adjustments to the survey’s methodology were
introduced in 2015.
54.1%
55.3%
56.6%
67.3% 68.6%
2012 2013 2014 2015 2016
4.09 4.09
4.14
4.19
4.23
2012 2013 2014 2015 2016
Record Customer and Employee
Engagement Support Strong Performance
12
Our
Transformation
Cornerstone
Initiatives
Primed For
Growth
13
Our Plan to Maximize Performance
Invigorating
hospitality and
loyalty marketing
programs
Investing in
Caesars’
infrastructure
to enhance
long-term value
Instituting a
continuous
improvement-focused
operating model
Inspiring a sales
and service
culture
CORNERSTONE INITIATIVES
14
50M+ 7%
TOTAL REWARDS
MEMBERS
1M+
‘PLAY BY TR’
APP INSTALLS
INCREASE IN
VIP REVENUE
#1 Gaming Position
in the U.S.
NOTE: VIP represents $400+ players
15
Invigorating Hospitality and Loyalty Marketing Programs
Total Rewards Loyalty Program Enhances
Customer Engagement and Consolidates Play
Total Rewards properties capture more than their
fair share of gaming revenues
Total Rewards’ “network effect”
can have
powerful impacts on property performance
Note: “Fair
Share” is defined as expected share of revenue based on number of units in the location; Data for Iowa, Indiana/Illinois, Kansas
City, New Orleans and NW
Louisiana are based on gross gaming revenue; all other markets are based on net gaming revenue.
IMPACTS OF PARTICIPATING
IN TOTAL REWARDS
| 1 | 2 M O N T H S P R I O R V S . 1 2 M O N T H S P O S T |
49%
26%
5%
FLAMINGO
ACQUIRED 2006
PLANET
HOLLYWOOD
ACQUIRED 2009
EBITDA GROSS GAMING REVENUE RETAIL REVENUE F&B REVENUE
232%
23% 27%
19%
14%
16
“FAIR SHARE” ANALYSIS OF KEY LOCATIONS
ACTUAL VS
“EXPECTED” REVENUE, Q2 2017
149% 144% 137%
121% 119% 118% 117% 108%
95% 85%
OTHER
NEVADA
TUNICA
NEW
ORLEANS
KANSAS
CITY
NW
LOUISIANA
INDIANA/
ILLINOIS
GULF
COAST
LAS
VEGAS
IOWA
ATLANTIC CITY/
PHILADELPHIA
“Fair
Share”
100%
Invigorating Hospitality and Loyalty Marketing Programs
Investing in Hotel Product,
Gaming and Non-Gaming
Offerings to Drive Revenue
Growth
17
Investing in Caesars’ Infrastructure to Enhance Long-Term Value
Recapitalization of Hotel Room Product
Offers Additional Hotel Revenue Upside
LAS VEGAS RENOVATION TIMELINE
C U M U L A T I V E R O O M S
>15K Las Vegas Room Renovations Over Five Years
RENOVATED NON-RENOVATED2
2014 2015 2016 2017E 2018E-
2020E
25,000
20,000
15,000
10,000
5,000
0 9%
15%
32%
50%
88%
Planet Hollywood, Harrah’s Atlantic City,
Horseshoe Southern Indiana completed
Caesars Palace Las Vegas, Harrah’s Las Vegas,
Harrah’s New Orleans, Flamingo Las Vegas,
Laughlin and Bally’s Las
Vegas projects underway
~6,000 Room Renovations in 2017
18
Investing in Caesars’ Infrastructure to Enhance Long-Term Value
Investing in Caesars’ Infrastructure to Enhance Long-Term Value
Maintaining Our Leadership in Gaming
BUILDING ON OUR STRONG GAMING PLATFORMS THROUGH
INNOVATIVE OFFERINGS
Largest gaming position in the U.S.
Working to change
traditional slot and table play with new features, such as the
implementation of side bets
First to offer skills-based gambling machines, in partnership with Gamblit, Gameco &
Sci Games
Enhancing gaming floor rewards through Play by TR app
Testing new technologies and platforms to enhance relationships with our existing customer
base while engaging a new generation of gamers
ONLINE WORLD
SERIES OF POKER
MOBILE
GAMBLING
SPORTS BETTING
PLATFORMS
FANTASY
SPORTS
ESPORTS
EVENTS
VIRTUAL REALITY
EXPERIENCES
19
MR CHOW GORDON
RAMSAY
BOBBY
FLAY
NOBU
MATSUHISA
GIADA DE
LAURENTIIS
GUY
FIERI
STEVE
MARTORANO
GUY
SAVOY
Average 210% increase in revenue of restaurant location when
introducing
celebrity chef concept
Investing in Caesars’ Infrastructure to Enhance Long-Term Value
New and Unique Food & Beverage Offerings
Boost Traffic and Revenue Across Our
Properties
20
Investing in Caesars’ Infrastructure to Enhance Long-Term Value
First-Class Entertainment that
Appeals to a Broad Customer Base
MAKING OUR LAS VEGAS VENUES THE DESTINATION FOR ENTERTAINMENT THIS SUMMER
Jennifer Lopez: ALL
I HAVE achieved second-highest average ticket price worldwide in Q2
“Circus1903: The Golden Age of Circus” now at Paris Las Vegas after successful runs
in New York
and Los Angeles
Backstreet Boys announced extension of their
successful “Larger Than Life” AXIS residency into 2018
First rock band residency at The Colosseum at Caesars Palace featuring the iconic The Who
BUILDING ON OUR SUCCESSFUL HEADLINER RESIDENCY STRATEGY
21
Net Revenue per
Full-Time
Employee
Increased +22% from
2014-2016
Instituting A Continuous Improvement-Focused Operating Model
22
Note: Change in Net Revenue per FTE is on an enterprise wide (CEC + CEOC) basis, from 2014 to 2016.
We Have Deployed a More Efficient
Operating Model to Improve Performance
MARKETING SPEND AS
A % OF NET REVENUE1
NET REVENUE PER
FULL-TIME EMPLOYEE
$ T H O U S A N D S
Significant operating enhancements and a culture of continuous improvement
has delivered
record marketing efficiency and strong margin gains
jRollout of technology
enhancements
jCentralization of functions and
shared services
jLean efficiency initiatives and
process engineering
jOptimization of marketing
programs
1. Marketing spend includes reel rewards while excluding customer discounts and match
play. Net revenue excludes reel rewards.
2014 2015 2016
23% 22%
27%
2014 2015 2016
$167
$194
$204
+22%
23
Instituting A Continuous Improvement-Focused Operating Model
Our Success is Underpinned
by Strong Customer and
Employee Engagement
Inspiring A Sales and Service Culture
24
j+7% in non-gaming revenue per
full time employee in 2016
jPositive shift in guest perception
of employees suggestions
jFurther sharpen sales skills and
increase accountability
jInitial roll out in Las Vegas
properties and Call Center
43,000 guest facing employees
participated in proprietary sales
and service training
Additional training underway
for employees in selling roles to
support further top line upside
Inspiring A Sales and Service Culture
Sales Training Programs
Continue to Grow Revenue
25
Primed For
Growth
Our
Transformation
Cornerstone
Initiatives
26
Significant Opportunity for
Continued Growth in
Free Cash Flow Generation
27
Strong Free Cash Flow Generation
Note: All information is displayed on an enterprise wide basis. See slide 33 for details on the presentation of FCF.
1. Enterprise wide Adjusted EBITDA figures exclude CIE SMG Business. See Appendix for Adjusted EBITDA reconciliation.
2. We plan to spend ~$670 million this year, and in the next few years that will drop to $500-580 million as we continue to capture the ADR upside opportunity still available
across some of properties. Over the longer-term,
we estimate steady state capex for the enterprise to be ~$425 million.
3. Expected lease expense which assumes $640 million rent payment to the REIT in the year following emergence.
4. Interest Expense: Pro forma projected interest reflecting CERP and CGPH Term Loan repricings plus upper end of estimated additional savings of $100-125 million as a result
of other potential debt refinancings.
ENTERPRISE WIDE (CEC + CEOC) ILLUSTRATIVE FREE
CASH FLOW
$ M I L L I O N S
jRevenue initiatives and
improved operating
model has driven
improvement in cash flow
Q2 2017 LTM Enterprise
Wide Adjusted EBITDA1 $2,180
425
640
Less Steady State Capital Expenditure2
Less Expected Lease Payments3
Less Expected Interest Expense4 512
$603
28
DEBT1
$ B I L L I O N S
NET LEVERAGE1,2
D E B T / A D J U S T E D E B I T D A R
FIXED CHARGES5
$ M I L L I O N S
New CEC Emergence Projected Credit Statistics
1. Reflects sale of CIE SMG business and
includes capitalized lease obligation at emergence as referenced in the 8k filed June 5, 2017.
2. 2014 leverage based on debt as of December 31, 2014 and
2014 Adjusted EBITDA.
3.
4.
Projected net leverage at emergence with convert based on projected debt of $9.6 bn and capitalized lease obligation as referenced in the 8k filed June 5, 2017 & 2Q
FY17 LTM Adjusted EBITDA.
Projected net leverage at emergence without convert and capitalized lease obligation as referenced in the 8k filed June 5, 2017
based on projected debt of $14.7 bn less $1.1 bn projected convert
less $5.1bn capitalized lease obligation & 2Q FY17 LTM Adjusted EBITDA less projected
annual rent payment of $640 mm to REIT in the year following emergence.
5. Fixed charges assume interest expense of: CEC 2016 actual interest expense, pro forma
projected interest reflecting CERP and CGPH Term Loan repricing plus upper end of estimated
additional savings of $100-125 million as a result of other
potential debt refinancings.
2014 PROJECTED AT
EMERGENCE
$23.5
$14.7
WITH CAPITALIZED
LEASE AND CONVERT
14.0x
5.7x
WITH CAPITALIZED
LEASE AND CONVERT3
2014 PROJECTED AT
EMERGENCE
4.2x
BASE4
$2,670
$1,152
2014 PROJECTED AT
EMERGENCE
CAPITALIZED LEASE CONVERT CAPITALIZED LEASE CONVERT
$8.5
BASE $640
RENT
$512
INTEREST
EXPENSE
Significantly Reduce Leverage and
Cost of Capital Upon Emergence
29
Emergence Significantly
Reduces Balance Sheet
Leverage, Unlocking New
Opportunities for Growth
30
Expand Distribution Network
GLOBAL
DEVELOPMENT
LAS VEGAS
REAL ESTATE
DEVELOPMENT
TRADITIONAL
M&A
BRANDING
AND
LICENSING
31
Optimize Network in Domestic and
International Landscapes
Domestic Landscape International Landscape
M&ATRANSACTIONS M&A VOLUME
ANNOUNCED1
Active M&A environment in Gaming sector
Resolution of bankruptcy and improved
capital structure will enhance flexibility for M&A
$4.2
Considering gaming legislation
Experience working in South America via Punta
del Este joint venture
Bidding environment values integrity,
collaboration and partnerships, all CZR strengths
Preliminary approval for foreigners-only
destination
received
SOUTH KOREA
JAPAN
BRAZIL
1. Source: Financial community research
| 4 |
| 8 |
| 1 |
$1.7
$1.3
2014 2015 2016 2014 2015 2016
32
Las Vegas Asset Activation
DEVELOP & MONETIZE
UNDERUTILIZED ASSETS
Real estate portfolio
includes large
undeveloped commercial
scale properties adjacent
to the Las Vegas strip
~7 acres
IN FRONT OF CAESARS PALACE
~39 acres
ADJACENT TO THE LINQ
~50 acres
ADJACENT TO BALLY’S, PARIS &
PLANET HOLLYWOOD
33
Strongest Loyalty Program in
the Gaming Industry
Significant Presence in
Growing Las Vegas
Proven Management
Execution
Strong Free Cash Flow
Profile
Network Expansion
Opportunities
Caesars Entertainment Remains
Well Placed to Create Value
34
Implied Multiple vs. 2018 Peer Group
$11.70
61 million
8.7%
$8.2
7.6
Total Enterprise Value $15.8
Plus: Capitalized Rent Expense 5.0
Total Enterprise Value (+Capitalized Leases) $20.8
Pro Forma 2018 EBITDAR 2.4
Implied TEV/EBITDAR Multiple 8.8x
13.1x
13.0x
10.9x
12.3x
10.6x
10.2x
9.4x
7.5x
6.9x
8.9x
Caesars 8.8x
Total Average 10.2x
CURRENT IMPLIED TRADING MULTIPLE – CZR STOCK PEERS 2018E EBITDAR MULTIPLES
$ B I L L I O
N S , E X C E P T S H A R E D A T A
Sources: CZR SEC filings, Bloomberg
Wynn
Resorts
Las Vegas Sands
MGM
Destination GroupAverage
Churchill Downs
Red Rock Resorts
Boyd Gaming
CZR Share Price (9/12/17)
CEC shares of Non-Sponsor Holders
Implied Market Capitalization
Ownership for CEC Non-Sponsor Holders
Equity Value
Plus: Net Debt
$ 0.71
35
Penn
Pinnacle
Regional Average
Excluding Caesars
Appendix
36
Caesars Operating Structure
Post Emergence
Note: Simplified structure chart does not reflect the
intermediate companies for each casino property.
CES
PUBLIC STOCKHOLDERS
CZR
New CEOC CERP CGP
37
Appendix: Presentation of FCF
Free Cash Flow is defined as the cash generated after paying expenses required to maintain operations
and is comprised of Adjusted EBITDA less (i) expected steady state capital expenditures, (ii) expected lease
payments, and (iii) expected interest expense. Management believes that Free Cash Flow is a useful
measure to describe the Company’s financial performance and measures the Company’s ability to
generate additional cash from business operations. Projected data is used by management to provide
meaningful financial information on a forward-looking basis by adjusting for (i) expected steady state
capital expenditures, which are estimated at $425 million; (ii) expected lease payments, which assumes
$640 million rent payment to the REIT in the year following emergence; and (iii) estimated interest expense
of $512 million, which reflects the CERP and CGPH Term Loan repricings plus estimated additional savings
as a result of other potential debt refinancing. The Company expects capital expenditures to be higher in
the short-term ($670 million are expected for 2017 dropping to $500 million to $580 million a few years
thereafter), but believes capital expenditures will decline over the next few years as the Company
continues to capture the ADR upside opportunity available at some properties.
Free cash flow
is considered a non-GAAP financial measure and should not be construed as an alternative
to net income/(loss) as an indicator of operation performance or an
alternative to cash flow provided by
operating activities as a measure of liquidity as determined by U.S. GAAP. Because not all companies use
identical calculations, the presentation of Free Cash Flow may not be comparable to other similarly titled
measures of other companies.
38
Reconciliation Of Non-GAAP
Information: Notes
Because we deconsolidated CEOC upon its Chapter 11 filing
we are also providing certain supplemental
information as if we had continued to consolidate CEOC throughout the second quarter of 2017. This information
includes both stand-alone CEOC financials and key metrics for the second quarter of 2017, and certain financial
information for CEC as if CEOC remained a consolidated entity during the quarter. This information within this
presentation may be different from CEOC’s standalone results separately provided due to immaterial adjustments,
rounding, and basis of presentation differences. CEC has committed to a material amount of payments to support
CEOC’s restructuring, which would result in the reacquisition of CEOC’s operations if the restructuring is made on
terms consistent with Restructuring Support Agreements to which CEC is a party (“RSAs”) and the Third Amended
Joint Plan of Reorganization confirmed by the Bankruptcy Court on January 15, 2017 (the “Plan”). In addition,
compensation of management is in part determined by reference to certain of such financial information. As a
result, we believe this supplemental information is useful to investors who are trying to understand the results of the
entire “Caesars” enterprise, including CEOC and consistent with the management services provided across the
system’s properties.
| • |
|
As a result of the above, “CEC” in the following reconciliations represents GAAP results for CEC as reported for |
the period ended June 30, 2017 and 2016.
| • |
|
As a result of the above, “CEC+CEOC” in the following reconciliations represents Non-GAAP results as it includes |
CEOC for both the 2016 and 2017 periods.
39
Reconciliation Of Non-GAAP Information:
Q2 2017 LTM Adjusted EBITDA
| (1) | (2) (3) (3)-(2)+(1) |
(In millions)
Six Months
Ended June
30, 2017
Six Months
Ended June
30, 2016
Year Ended
December 31,
2016
LTM
June 30, 2017
Net income/(loss) attributable to company $ (1,988) $ (2,385) $ (3,569) $ (3,172)
Net income/(loss) attributable to non-controlling interests 38 68 822 792
Net
income from discontinued operations—(58) (3,380) (3,322)
Income tax (benefit)/provision 103 10 27 120
Restructuring of CEOC and other (a) 1,873 2,263 5,758 5,368
Interest expense 289 301 599
587
Income/(loss) from operations 315 199 257 373
Depreciation and
amortization 198 215 439 422
Other operating costs (b) 15 42 89 62
Corporate expense 73 81 166 158
CIE stock-based compensation—43 189 146
Property EBITDAR $ 601 $ 580 $ 1,140 $ 1,161
Corporate expense
(73) (235) (226) (158)
Stock-based compensation expense (c) 15 24 40 31
Other items (d) 20 28 56 48
Adjusted EBITDAR, CEC $ 563 $ 397 $ 1,010 $ 1,082
Adjusted EBITDA Margin, CEC 28.7% 20.4% 26.1% 27.7%
Adjusted EBITDAR, CEOC (e) $ 553 $
595 $ 1,140 $ 1,098
Adjusted EBITDA Margin, CEOC 25.4% 26.4% 25.1% 24.6%
Adjusted EBITDAR, CEC + CEOC $ 1,116 $ 992 $ 2,150 $ 2,180
Adjusted EBITDA
Margin, CEC + CEOC 27.0% 23.6% 25.5% 26.1%
Rent expense — —
Adjusted EBITDA $ 1,116 $ 992 $ 2,150 $ 2,180
CAESARS ENTERTAINMENT
CORPORATION
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME/(LOSS)
ATTRIBUTABLE TO CAESARS ENTERTAINMENT CORPORATION
TO LTM PROPERTY EBITDA AND LTM ADJUSTED EBITDA
40
Reconciliation Of Non-GAAP Information:
2014 Adjusted EBITDA
(In millions) 2014
Net income/(loss) attributable to company $ (2,783)
Net income/(loss) attributable to
non-controlling interests (83)
Net income from discontinued operations 143
Income tax (benefit)/provision (596)
Restructuring of CEOC and other
(a) 95
Interest expense 2,669
Income/(loss) from operations (555)
Depreciation and amortization 658
Impairments of goodwill 695
Impairments of tangible and intangible assets 299
Other operating costs (b) 203
Corporate expense 232
CIE stock-based compensation 49
EBITDA attributable to discontinued operations (7)
Property EBITDAR $ 1,574
Corporate expense (232)
Stock-based compensation expense (c) 45
Other items (d) 75
Adjusted EBITDAR $ 1,462
Adjusted EBITDA Margin 18.4%
Rent expense -
Adjusted EBITDA $ 1,462
CAESARS ENTERTAINMENT CORPORATION
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET INCOME/(LOSS) ATTRIBUTABLE TO CAESARS
ENTERTAINMENT CORPORATION
TO LTM PROPERTY EBITDA AND LTM ADJUSTED EBITDA
41
Reconciliation Of Non-GAAP Information:
LTM Q2 2017 Net Revenue
(In millions)
| (1) | (2) (3) (3)-(2)+(1) |
Six Months
Ended June
30, 2017
Six Months
Ended June 30,
2016
Year Ended
December 31,
2016
LTM
June 30,
2017
Other (7) (9) (15) (13)
CEC $ 1,965 $ 1,942 $ 3 ,877 $ 3,900
CEOC (e) 2,173 2,256 4,541 4,458
CEC + CEOC $ 4,138 $ 4,198 $ 8 ,418 $ 8,358
Net Revenues by Entity
CAESARS ENTERTAINMENT CORPORATION
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET REVENUES TO CAESARS ENTERTAINMENT CORPORATION
42
Reconciliation Of Non-GAAP
Information: Notes
Adjusted EBITDA is defined as EBITDA further adjusted to
exclude certain non-cash and other items as
exhibited in the above reconciliation, and is presented as a supplemental measure of the Company’s
performance. Management believes that Adjusted EBITDA provides investors with additional information and
allows a better understanding of the results of operational activities separate from the financial impact of
decisions made for the long-term benefit of the Company. In addition, compensation of management is in
part determined by reference to certain of such financial information. As a result, we believe this
supplemental information is useful to investors who are trying to understand the results of the Company.
Adjusted EBITDA Margin is the ratio of Adjusted EBITDA to Net Revenue and is presented for the same reasons
as Adjusted EBITDA noted above.
Because not all companies use identical calculations, the
presentation of Adjusted EBITDA may not be
comparable to other similarly titled measures of other companies.
a) Primarily represents CEC’s estimated costs in connection with the restructuring of CEOC.
b) Amounts primarily represent costs incurred in connection with property openings and expansion projects at existing
properties, costs associated with the development activities and reorganization activities, and/or recoveries associated with
such items.
c) Amounts represent stock-based compensation expense related to shares, stock
options, and restricted stock units granted
to the Company’s employees.
d) Amounts represent add-backs and deductions from EBITDA permitted under certain indentures. Such add-backs and
deductions include litigation awards and settlements, costs associated with CEOC’s restructuring and related litigation,
severance and relocation costs, sign-on and retention bonuses, permit remediation costs, and business optimization
expenses.
e) Includes eliminations of intercompany transactions and other consolidating
adjustments.
43
CAESARS ENTERTAINMENT