October 31, 2012

Caesars Entertainment Reports Third Quarter of 2012 Results

LAS VEGAS, Oct. 31, 2012 /PRNewswire/ -- Caesars Entertainment Corporation (NASDAQ: CZR) today reported the following financial results for the third quarter of 2012:

  • Net revenues and Adjusted EBITDA remain flat
  • August debt transactions consummated in October extend maturities, boost liquidity and increase balance sheet cash
  • First wave of Linq tenants announced in October
  • Total Rewards receives customer-loyalty industry's top award

(Logo: http://photos.prnewswire.com/prnh/20120607/LA21221LOGO)

The table below highlights certain GAAP and non-GAAP financial measures:


Quarter Ended 
September 30,


Percent

Favorable/

(Unfavorable)


Nine Months Ended
September 30,


Percent

Favorable/

(Unfavorable)

(Dollars in millions, except per share data)

2012


2011



2012


2011


Net revenues

$

2,198.4



$

2,189.7



0.4

%


$

6,572.5



$

6,467.5



1.6

%

(Loss)/income from operations (1)

(220.6)



179.8



*


(82.3)



606.0



*

Loss from continuing operations, net of income taxes

(506.2)



(184.6)



(174.2)

%


(1,054.8)



(506.5)



(108.3)

%

Income from discontinued operations, net of income taxes

2.8



11.2



(75.0)

%


28.5



35.2



(19.0)

%

Net loss attributable to Caesars

(505.5)



(164.0)



(208.2)

%


(1,027.8)



(467.0)



(120.1)

%

Diluted loss per share (2)

(4.03)



(1.31)



(207.6)

%


(8.21)



(3.73)



(120.1)

%

Property EBITDA (3)

512.2



497.2



3.0

%


1,587.0



1,523.8



4.1

%

Adjusted EBITDA (4)  

484.5



482.5



0.4

%


1,517.6



1,477.6



2.7

%



















* Not meaningful.





See footnotes following Caesars Entertainment Operating Company, Inc. results later in this release.


Management Commentary

"We continued to make significant progress during the third quarter on a strategy designed to position our company for future growth," said Gary Loveman, Caesars Entertainment chairman, chief executive officer and president. "We continued to refinance our nearest-term maturities and improve our financial flexibility. In August 2012, we issued $750 million in new debt due 2020, with proceeds used to refinance debt maturing in 2014 and 2015 and to increase liquidity. In conjunction with this transaction, which closed in October, we extended the maturity of approximately $958 million of term loans from 2015 to 2018 and beyond, and repaid approximately $479 million of term loans under our credit facilities. 

"We moved forward with the expansion of our distribution network into growth markets while we continued to invest in our hub markets of Las Vegas and Atlantic City," Loveman said. "We've started taking reservations for the highly anticipated opening of the Nobu Hotel at Caesars Palace in Las Vegas next January. We've also announced an eclectic and exciting mix of tenants who've already signed contracts to be part of the Linq retail, dining and entertainment experience at the center of the Las Vegas Strip.

"Our consortium with Rock Gaming and others is proceeding with plans to open a gaming facility in Baltimore in the middle of 2014, and we will apply for a license to build a full-scale gaming-destination resort in Boston in an alliance with Suffolk Downs," he said. "We've also begun booking meetings and conventions for the spring 2013 opening of the new $450 million Horseshoe Cincinnati being developed by Rock Ohio Caesars LLC, a joint venture in which we have a 20% ownership interest.

"Our focus on increasing the relevance and reach of our core brands gained recognition when COLLOQUY, a global provider of publications, education and research, granted our Total Rewards customer-loyalty program its most prestigious honor, the Master of Enterprise Loyalty Award," Loveman said. "What was particularly gratifying was that we were nominated and selected for the honor by external audiences and expert judges over all other leading loyalty-marketing programs globally.

"Thanks primarily to growth in our interactive operations and a continued emphasis on expense reductions, we achieved about the same net revenues and Adjusted EBITDA as in the third quarter of 2011, despite more competitive markets and the challenges posed by the continuing weakness of the U.S. economy," Loveman said. "Reflecting the sluggish economic conditions, customer visitation declined in all regions and spend per trip declined in several regions. However, Las Vegas saw a nearly 8 percent increase in per trip customer spending and Iowa-Missouri and Louisiana-Mississippi experienced modest increases in spend per trip.

"As we enter the fourth quarter, we remain focused on increasing revenues, strengthening our capital structure, investing in growth opportunities in new markets, increasing our brand recognition and controlling expenses," he said. "In fact, our efforts to streamline our cost structure resulted in Property EBITDA gains in three of our six domestic regions, including the struggling Atlantic City Region.

"During this quarter, we expect to complete the previously announced sale of Harrah's St. Louis for $610 million and plan to use the proceeds from the sale to reinvest in our core properties and invest in growth opportunities," Loveman said. "One example is our anticipated renovation and rebranding of the Imperial Palace, which we are renaming The Quad. We expect to upgrade significant portions of that property, including the casino, public spaces and guest rooms. The reconfiguration of the casino and its entrances will enable direct access from the Linq and make the Quad what we believe to be one of the most easily accessible casinos on the Strip."

Financial Results

As a result of the pending sale, the assets and liabilities of the Harrah's St. Louis casino included in the sale are classified as held for sale in the consolidated summary balance sheets shown later in this release and the results of the Harrah's St. Louis casino are presented as Discontinued Operations in the consolidated summary of operations for the third quarter and nine-month periods of 2012 and 2011, also shown later in this release.

Net revenues for the third quarter of 2012 increased 0.4% compared with the year-earlier period, due mainly to an increase in other revenues from the Company's interactive operations, which include Playtika Ltd., and higher revenues from Caesars' management companies resulting from the opening of Horseshoe Cleveland earlier this year. These increases were largely offset by lower casino revenues in all but the Las Vegas and Illinois/Indiana regions.

Loss from operations for the third quarter of 2012 was $220.6 million compared with income from operations of $179.8 million in the prior-year quarter.  This change was due mainly to non-cash charges totaling $419.0 million, comprised of intangible asset impairments of $247.0 million related to goodwill, $127.0 million related to trademarks and $32.0 million related to gaming rights, and a tangible asset impairment of $13.0 million.

Net loss attributable to Caesars for the third quarter of 2012 was $505.5 million, up $341.5 million, or 208.2%, from the third quarter of 2011.  Higher net losses in the third quarter of 2012 reflect the impairment charges discussed above, increased interest expense for the third quarter of 2012 and changes in the tax rate benefit as further described in "Other Items" that follows later in this release.

For the third quarter of 2012, Property EBITDA and Adjusted EBITDA increased $15.0 million, or 3.0%, and $2.0 million, or 0.4%, respectively, from 2011 primarily driven by the income impact of higher revenues. 

Performance Metrics

The Company measures its performance in part through the tracking of trips by rated customers, which means a customer whose gaming activity is tracked through the Total Rewards customer-loyalty system ("trips"), and by spend per rated customer trip ("spend per trip").

The following table reflects the percentage increase/(decrease) in trips and spend per trip for the U.S. regions for the third quarter and the nine-month periods of 2012, compared with the same periods in 2011.


Quarter Ended
September 30,


Nine Months Ended
September 30,


Trips


Spend per Trip


Trips


Spend per Trip

Consolidated Caesars

(4.9)

%


1.3

%


(1.9)

%

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