Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2018
or
o
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. 1-10410
 _________________________
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, Nevada
 
89109
(Address of principal executive offices)
 
(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)
 _________________________
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  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x     No  o
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. (Check one):
Large accelerated filer
o
Accelerated filer
x
 
 
 
 
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
 
 
 
Emerging growth company
o
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.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Outstanding at April 30, 2018
Common stock, $0.01 par value
698,233,150



CAESARS ENTERTAINMENT CORPORATION
INDEX
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 



2


PART I—FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)

(In millions)
March 31, 2018

December 31, 2017
Assets
 

 
Current assets
 

 
Cash and cash equivalents ($58 and $58 attributable to our VIEs)
$
2,485


$
2,558

Restricted cash
115

 
116

Receivables, net
439


494

Due from affiliates, net
7

 
11

Prepayments and other current assets ($5 and $2 attributable to our VIEs)
235


239

Inventories
42


39

Total current assets
3,323


3,457

Property and equipment, net ($67 and $57 attributable to our VIEs)
15,975


16,154

Goodwill
3,817


3,815

Intangible assets other than goodwill
1,597


1,609

Restricted cash
42


35

Deferred income taxes
2

 
2

Deferred charges and other assets ($30 and $0 attributable to our VIEs)
395


364

Total assets
$
25,151


$
25,436

 
 
 
 
Liabilities and Stockholders’ Equity
 

 
Current liabilities
 

 
Accounts payable ($6 and $3 attributable to our VIEs)
$
239


$
318

Accrued expenses and other current liabilities
1,163


1,326

Interest payable
78


38

Current portion of contract liabilities
143

 
129

Current portion of financing obligations
10

 
9

Current portion of long-term debt
64

 
64

Total current liabilities
1,697


1,884

Contract liabilities
7

 
2

Financing obligations
9,388

 
9,355

Long-term debt
8,837


8,849

Deferred income taxes
589


577

Deferred credits and other liabilities
1,331


1,472

Total liabilities
21,849


22,139

Commitments and contingencies (Note 7)


 


Stockholders’ equity
 

 
Caesars stockholders’ equity
3,210


3,226

Noncontrolling interests
92


71

Total stockholders’ equity
3,302


3,297

Total liabilities and stockholders’ equity
$
25,151


$
25,436


See accompanying Notes to Consolidated Condensed Financial Statements.

3



CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)


 
Three Months Ended March 31,
(In millions, except per share data)
2018
 
2017
Revenues
 
 
 
Casino
$
983

 
$
390

Food and beverage
383

 
206

Rooms
367

 
247

Other revenue
172

 
123

Management fees
15

 

Reimbursed management costs
52

 

Net revenues
1,972

 
966

Operating expenses
 
 
 
Direct
 
 
 
Casino
562

 
222

Food and beverage
264

 
141

Rooms
114

 
80

Property, general, administrative, and other
427

 
231

Reimbursable management costs
52

 

Depreciation and amortization
280

 
102

Corporate expense
82

 
41

Other operating costs
66

 
(1
)
Total operating expenses
1,847

 
816

Income from operations
125

 
150

Interest expense
(330
)
 
(147
)
Restructuring and support expenses and other
184

 
(464
)
Loss before income taxes
(21
)
 
(461
)
Income tax provision
(13
)
 
(47
)
Net loss
(34
)
 
(508
)
Net loss attributable to noncontrolling interests

 
1

Net loss attributable to Caesars
$
(34
)
 
$
(507
)
 
 
 
 
Loss per share - basic and diluted



 
Basic and diluted loss per share
$
(0.05
)
 
$
(3.44
)
Weighted-average common stock outstanding
697

 
147


See accompanying Notes to Consolidated Condensed Financial Statements.

4



CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT)
(UNAUDITED)



 
Caesars Stockholders’ Equity/(Deficit)
 
 
 
 
(In millions)
Common
Stock
 
Treasury
Stock
 
Additional
Paid-in-
Capital
 

Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income/(Loss)
 
Total
Caesars
Stockholders’
Equity/(Deficit)
 
Noncontrolling
Interests
 
Total Equity/(Deficit)
Balance as of December 31, 2016
$
1

 
$
(29
)
 
$
8,676

 
$
(10,306
)
 
$
(1
)
 
$
(1,659
)
 
$
53

 
$
(1,606
)
Net loss

 

 

 
(507
)
 

 
(507
)
 
(1
)
 
(508
)
Stock-based compensation

 
(7
)
 
13

 

 

 
6

 

 
6

Change in noncontrolling interest, net of distributions and contributions

 

 

 

 

 

 
(3
)
 
(3
)
Balance as of March 31, 2017
$
1

 
$
(36
)
 
$
8,689

 
$
(10,813
)
 
$
(1
)
 
$
(2,160
)
 
$
49

 
$
(2,111
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2017
$
7

 
$
(152
)
 
$
14,051

 
$
(10,686
)
 
$
6

 
$
3,226

 
$
71

 
$
3,297

Net loss

 

 

 
(34
)
 

 
(34
)
 

 
(34
)
Stock-based compensation

 
(12
)
 
22

 

 

 
10

 

 
10

Other comprehensive income, net of tax

 

 

 

 
9

 
9

 

 
9

Change in noncontrolling interest, net of distributions and contributions

 

 

 

 

 

 
21

 
21

Other

 
(1
)
 

 

 

 
(1
)
 

 
(1
)
Balance as of March 31, 2018
$
7

 
$
(165
)
 
$
14,073

 
$
(10,720
)
 
$
15

 
$
3,210

 
$
92

 
$
3,302



See accompanying Notes to Consolidated Condensed Financial Statements.

5



CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)


 
Three Months Ended March 31,
(In millions)
2018
 
2017
Cash flows provided by operating activities
$
22

 
$
119

Cash flows from investing activities
 
 
 
Acquisitions of property and equipment, net of change in related payables
(85
)
 
(72
)
Proceeds from the sale and maturity of investments
16

 
5

Payments to acquire investments
(14
)
 
(16
)
Cash flows used in investing activities
(83
)
 
(83
)
Cash flows from financing activities
 
 
 
Debt issuance costs and fees
(1
)
 

Repayments of long-term debt and revolving credit facilities
(16
)
 
(54
)
Proceeds from the issuance of common stock
3

 
4

Taxes paid related to net share settlement of equity awards
(12
)
 
(7
)
Financing obligation payments
(2
)
 

Contributions from noncontrolling interest owners
20

 

Distributions to noncontrolling interest owners

 
(5
)
Other
2

 

Cash flows used in financing activities
(6
)
 
(62
)
 
 
 
 
Net decrease in cash, cash equivalents, and restricted cash
(67
)
 
(26
)
Cash, cash equivalents, and restricted cash, beginning of period
2,709

 
4,658

Cash, cash equivalents, and restricted cash, end of period
$
2,642

 
$
4,632

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Cash paid for interest
$
247

 
$
75

Cash received for income taxes
(2
)
 

Non-cash investing and financing activities:
 
 
 
Change in accrued capital expenditures
(2
)
 
(2
)

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, 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, 2017 (“2017 Annual Report”). Capitalized terms used but not defined in this Form 10-Q have the same meanings as in the 2017 Annual Report.
We also refer to (i) our Consolidated Condensed Financial Statements as our “Financial Statements,” (ii) our Consolidated Condensed Statements of Operations as our “Statements of Operations,” (iii) our Consolidated Condensed Balance Sheets as our “Balance Sheets,” and (iv) our Consolidated Condensed Statements of Cash Flows as our “Statements of Cash Flows.”
Note 1Description 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”). Caesars Entertainment operates a total of 47 casino properties in 13 U.S. states and five countries. Nine casinos are in Las Vegas, which represented 46% of net revenues for the three months ended March 31, 2018.
We lease certain real property assets from VICI Properties Inc. (“VICI”).
CEOC’s Emergence from Bankruptcy and CEC’s Merger with Caesars Acquisition Company
As previously disclosed in our 2017 Annual Report, Caesars Entertainment Operating Company, Inc. (“CEOC”) and certain of its U.S. subsidiaries (collectively, the “Debtors”) voluntarily filed for reorganization on January 15, 2015, at which time CEC deconsolidated CEOC. The Debtors emerged from bankruptcy and consummated their reorganization pursuant to their third amended joint plan of reorganization (the “Plan”) on October 6, 2017 (the “Effective Date”). As part of its emergence from bankruptcy, CEOC reorganized into an operating company separate from its real property assets. The operating company was acquired by CEC on the Effective Date and immediately merged with and into CEOC LLC. CEOC LLC operates the properties and facilities formerly held by CEOC and leases the properties and facilities from VICI.
Pursuant to the merger agreement with Caesars Acquisition Company (“CAC”), on the Effective Date, CAC merged with and into CEC, with CEC as the surviving company (the “CAC Merger”). The CAC Merger was accounted for as a reorganization of entities under common control, which resulted in CAC being consolidated into Caesars at book value as an equity transaction for all periods presented (see Note 2).
Note 2Basis 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 (the “SEC”) applicable for interim periods, and therefore, do not include all information and footnotes necessary for complete financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”). The results for the interim periods reflect all adjustments (consisting primarily of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations, and cash flows. The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 2018 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.

7



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Adoption of New Revenue Recognition Standard
On January 1, 2018, we adopted the new accounting standard Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, and all related amendments. See Note 10 for additional information and details on the effects of adopting the new standard.
Reportable Segments
We view each casino property as an operating segment and aggregate all such casino 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 14.
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, 2018
 
December 31, 2017
Cash and cash equivalents
$
2,485

 
$
2,558

Restricted cash, current
115

 
116

Restricted cash, non-current
42

 
35

Total cash, cash equivalents, and restricted cash
$
2,642

 
$
2,709

Merger with CAC
The following table reconciles the previously-reported net revenues and net income/(loss) of Caesars to the amounts reported in the Statements of Operations after giving effect to the CAC Merger (see Note 1).
Reconciliation of Net Revenues and Net Income/(Loss)
(In millions)
Three Months Ended March 31, 2017
Net revenues
 
Caesars previously reported
$
963

CAC previously reported

Adoption of new revenue recognition standard (1)
3

As currently reported
$
966

 
 
Net income/(loss)
 
Caesars previously reported
$
(524
)
CAC previously reported
2

Elimination and consolidation adjustments
14

As currently reported
$
(508
)
____________________
(1) 
See Adoption of New Revenue Recognition Standard above.
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 variable interest entities (“VIEs”) for which we or one of our consolidated subsidiaries is the primary beneficiary. Control generally equates to ownership percentage, whereby (1) affiliates that are more than 50% owned are consolidated; (2) investments in affiliates of 50% or less but greater than 20% are

8



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


generally accounted for using the equity method where we have determined that we have significant influence over the entities; and (3) investments in affiliates of 20% or less are generally accounted for using the cost method.
Consolidation of Korea Joint Venture
During 2017, CEC formed a joint venture referred to herein as the Korea JV. The purpose of the Korea JV is to acquire, develop, own, and operate a casino resort project in Incheon, South Korea. We determined that the Korea JV is a VIE and CEC is the primary beneficiary of the Korea JV, and therefore, consolidates the Korea JV into its financial statements as of December 31, 2017.
Note 3Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board (the “FASB”) issued the following authoritative guidance amending the FASB Accounting Standards Codification (“ASC”).
During the three months ended March 31, 2018, we adopted the following ASUs:
ASU 2016-16, Income Taxes (see Note 12).
ASU 2014-09, Revenue from Contracts with Customers (see Note 10).
During the three months ended March 31, 2018, the following ASUs became effective, but there was no effect on our financial statements:
ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.
ASU 2018-04, Investments — Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273.
ASU 2017-09, Compensation - Stock Compensation.
ASU 2017-01, Business Combinations.
ASU 2016-18, Statement of Cash Flows.
ASU 2016-01, Financial Instruments - Overall.
The following amendments to the FASB ASC were not effective through our quarter ended March 31, 2018:
Previously Disclosed
Income Statement - Reporting Comprehensive Income - February 2018: Amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings effectively eliminating the stranded tax effects resulting from the Tax Cuts and Jobs Act (the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018) (the “Tax Act”). Because the amendments only relate to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Amendments in this update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. We are currently assessing the effect the adoption of this standard will have on our financial statements.
Leases - February 2016 (amended January 2018): The amended guidance requires most lease obligations to be recognized as a right-of-use (“ROU”) asset with a corresponding liability on the balance sheet. The guidance requires additional qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from leases. Operating leases, including agreements relating to slot machines, will be recorded on the balance sheet as an ROU asset with a corresponding lease liability, which will be amortized using the effective interest rate method as payments are made. Leases embedded in other arrangements will be accounted for separately by allocating payments between lease and nonlease components. As a practical expedient, lessees

9



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


are permitted to make an accounting policy election by class of underlying asset to account for each lease and nonlease component as a single lease component. The amended guidance will not require us to re-evaluate land easements that exist or expired before adoption that were not previously accounted for as a lease under Topic 840.
This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The guidance should be implemented for the earliest period presented using a modified retrospective approach. We plan to adopt the new standard on its effective date of January 1, 2019. We are currently assessing our processes and system capabilities. The qualitative and quantitative effects of adoption are still being analyzed as we are in the process of cataloging our existing lease contracts and identifying arrangements containing embedded leases.
Financial Instruments - Credit Losses - June 2016 (amended January 2017): Amended guidance replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of broader range of reasonable and supportable information to inform credit loss estimates. Amendments affect entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. Amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the effect the adoption of this standard will have on our financial statements.
Note 4Property and Equipment
(In millions)
March 31, 2018
 
December 31, 2017
Land and land improvements
$
4,856

 
$
4,930

Buildings, riverboats and leasehold improvements
11,985

 
11,751

Furniture, fixtures, and equipment
1,365

 
1,277

Construction in progress
154

 
329

Total property and equipment
18,360

 
18,287

Less: accumulated depreciation
(2,385
)
 
(2,133
)
Total property and equipment, net
$
15,975

 
$
16,154

Depreciation Expense and Capitalized Interest
 
Three Months Ended March 31,
(In millions)
2018
 
2017
Depreciation expense
$
264

 
$
87

Capitalized interest
2

 
1

Note 5Goodwill 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, 2017
$
355

 
$
3,815

 
$
1,254

Other

 
2

 
4

Amortization
(16
)
 

 

Balance as of March 31, 2018
$
339

 
$
3,817

 
$
1,258


10



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Gross Carrying Value and Accumulated Amortization of Intangible Assets Other Than Goodwill
 
March 31, 2018
 
December 31, 2017
(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
 
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
4.7
 
$
1,030

 
$
(709
)
 
$
321

 
$
1,030

 
$
(693
)
 
$
337

Contract rights
6.8
 
3

 
(2
)
 
1

 
3

 
(2
)
 
1

Gaming rights and other
6.3
 
43

 
(26
)
 
17

 
43

 
(26
)
 
17

 
 
 
$
1,076

 
$
(737
)
 
339

 
$
1,076

 
$
(721
)
 
355

Non-amortizing intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Trademarks
 
790

 
 
 
 
 
790

Gaming rights
 
215

 
 
 
 
 
211

Total Rewards
 
253

 
 
 
 
 
253

 
 
1,258

 
 
 
 
 
1,254

Total intangible assets other than goodwill
 
$
1,597

 
 
 
 
 
$
1,609

Note 6Fair 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:
Estimated Fair Value
(In millions)
Balance 
 
Level 1
 
Level 2
 
Level 3
March 31, 2018
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Government bonds
$
26

 
$

 
$
26

 
$

Derivative instruments - interest rate swaps
11

 

 
11

 

Total assets at fair value
$
37

 
$

 
$
37

 
$

Liabilities
 
 
 
 
 
 
 
Derivative instruments - interest rate swaps
$
6

 
$

 
$
6

 
$

Derivative instruments - CEC Convertible Notes
856

 

 

 
856

Disputed claims liability
102

 

 

 
102

Total liabilities at fair value
$
964

 
$

 
$
6

 
$
958

December 31, 2017
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Equity securities
$
8

 
$
8

 
$

 
$

Government bonds
25

 

 
25

 

Total assets at fair value
$
33

 
$
8

 
$
25

 
$

Liabilities
 
 
 
 
 
 
 
Derivative instruments - CEC Convertible Notes
$
1,016

 
$

 
$

 
$
1,016

Disputed claims liability
112

 

 

 
112

Total liabilities at fair value
$
1,128

 
$

 
$

 
$
1,128


11



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Changes in Level 3 Fair Value Measurements
 
Three Months Ended March 31, 2018
(In millions)
Derivative Instruments
 
Disputed Claims Liability
Balance as of beginning of period
$
1,016

 
$
112

Change in fair value recorded in Restructuring and support expenses and other
(160
)
 
(10
)
Balance as of end of period
$
856

 
$
102

Equity Securities
Investments in equity securities are traded in active markets and have readily determined market values. These investments were included in Prepayments and other current assets on our Balance Sheets. Gross unrealized gains and losses on marketable securities were not material as of December 31, 2017.
Government Bonds
Investments primarily consist of debt securities held by our captive insurance entities that are traded in active markets, have readily determined market values, and have maturity dates of greater than three months from the date of purchase. These investments primarily represent collateral for several escrow and trust agreements with third-party beneficiaries and are recorded in Deferred charges and other assets while a portion is included in Prepayments and other current assets in our Balance Sheets.
Derivative Instruments
We do not purchase or hold any derivative financial instruments for trading purposes.
CEC Convertible Notes - Derivative Liability
On the Effective Date, CEC issued $1.1 billion aggregate principal amount of 5.00% convertible senior notes maturing in 2024 (the “CEC Convertible Notes”) to CEOC’s creditors pursuant to the terms of the Plan. The CEC Convertible Notes were issued pursuant to the Indenture, dated as of October 6, 2017.
The CEC Convertible Notes are convertible at the option of holders into a number of shares of CEC common stock that is equal to approximately 0.139 shares of CEC common stock per $1.00 principal amount of CEC Convertible Notes, which is equal to an initial conversion price of $7.19 per share. If all the shares were issued on the Effective Date, they would have represented approximately 17.9% of the shares of CEC common stock outstanding on a fully diluted basis. The holders of the CEC Convertible Notes can convert them at any time after issuance. CEC can convert the CEC Convertible Notes beginning in October 2020 if the last reported sale price of CEC common stock equals or exceeds 140% of the conversion price for the CEC Convertible Notes in effect on each of at least 20 trading days during any 30 consecutive trading day period. As of March 31, 2018, an immaterial amount of the CEC Convertible Notes were converted into shares of CEC common stock. An aggregate of 156 million shares of CEC common stock are issuable upon conversion of the CEC Convertible Notes. As of March 31, 2018, the remaining life of the CEC Convertible Notes is 6.50 years.
Management analyzed the conversion features for derivative accounting consideration under ASC Topic 815, Derivatives and Hedging, (“ASC 815”) and determined that the CEC Convertible Notes contains bifurcated derivative features and qualifies for derivative accounting. In accordance with ASC 815, CEC has bifurcated the conversion features of the CEC Convertible Notes and recorded a derivative liability. The CEC Convertible Notes derivative features are not designated as hedging instruments. The derivative features of the CEC Convertible Notes are carried on CEC’s Balance Sheet at fair value in Deferred credits and other liabilities. The derivative liability is marked-to-market each measurement period, and any unrealized change in fair value is recorded as a component of Restructuring and support expenses and other in the Statements of Operations. The derivative liability associated with the CEC Convertible Notes will remain in effect until such time as the underlying convertible notes are exercised or terminated and the resulting derivative liability will be transitioned from a liability to equity as of such date.
Valuation Methodology
We estimated the fair value of the CEC Convertible Notes using a binomial lattice valuation model that incorporated the value of both the straight debt and conversion features of the notes. The CEC Convertible Notes have a face value of $1.1 billion, a term

12



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


of 7 years, a coupon rate of 5%, and are convertible into 156 million shares of CEC common stock. The valuation model incorporated assumptions regarding the incremental cost of borrowing for CEC, the value of CEC’s equity into which these notes could convert, the expected volatility of such equity, and the risk-free rate.
Key Assumptions as of March 31, 2018 -
Incremental cost of borrowing - 5.5%
Expected volatility - 30%
Risk-free rate - 2.7%
Since the key assumptions used in the valuation model, including CEC’s estimated incremental cost of borrowing and the expected volatility of CEC’s equity, were significant unobservable inputs, the fair value for the conversion features of the CEC Convertible Notes was classified as Level 3.
Interest Rate Swap Derivatives
We use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. During the three months ended March 31, 2018, we entered into four additional interest rate swap agreements to fix the interest rate on $1.0 billion of variable rate debt. As of March 31, 2018, we have entered into a total of eight interest rate swap agreements for notional amounts totaling $2.0 billion. The interest rate swaps are designated as cash flow hedging instruments. The difference to be paid or received under the terms of the interest rate swap agreements will be accrued as interest rates change and recognized as an adjustment to interest expense for the related debt beginning on December 31, 2018. Changes in the variable interest rates to be paid or received pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows.
The major terms of the interest rate swap agreements as of March 31, 2018 are as follows:
Effective Date
 
Notional Amount
(In millions)
 
Fixed Rate Paid
 
Variable Rate Received as of
March 31, 2018
 
Maturity Date
12/31/2018
 
250
 
2.274%
 
N/A
 
12/31/2022
12/31/2018
 
200
 
2.828%
 
N/A
 
12/31/2022
1/1/2019
 
250
 
2.153%
 
N/A
 
12/31/2020
1/1/2019
 
250
 
2.196%
 
N/A
 
12/31/2021
1/1/2019
 
400
 
2.788%
 
N/A
 
12/31/2021
1/1/2019
 
200
 
2.828%
 
N/A
 
12/31/2022
1/2/2019
 
250
 
2.172%
 
N/A
 
12/31/2020
1/2/2019
 
200
 
2.731%
 
N/A
 
12/31/2020
Valuation Methodology
The estimated fair values of our interest rate swap derivative instruments are derived from market prices obtained from dealer quotes for similar, but not identical, assets or liabilities. Such quotes represent the estimated amounts we would receive or pay to terminate the contracts. The interest rate swap derivative instruments are included in either Deferred charges and other assets or Deferred credits and other liabilities on our Balance Sheets. Our derivatives are recorded at their fair values, adjusted for the credit rating of the counterparty if the derivative is an asset, or adjusted for the credit rating of the Company if the derivative is a liability. None of our derivative instruments are offset and all were classified as Level 2.
The effect of derivative instruments designated as hedging instruments on the Balance Sheet for amounts transferred into Accumulated other comprehensive income was $5 million for the quarter ended March 31, 2018.
Disputed Claims Liability
CEC and CEOC deposited cash, CEC common stock, and CEC Convertible Notes into an escrow trust to be distributed to satisfy certain remaining unsecured claims (excluding debt claims) as they become allowed (see Note 7). As key assumptions used in the

13



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


valuation model, including assumptions for the conversion features of the CEC Convertible Notes, include significant unobservable inputs, the fair value of the liability is classified as Level 3.
Note 7Litigation, Contractual Commitments, and Contingent Liabilities
Litigation
Caesars is party to ordinary and routine litigation incidental to our business. We do not expect the outcome of any such litigation to have a material effect on our consolidated financial position, results of operations, or cash flows, as we do not believe it is reasonably possible that we will incur material losses as a result of such litigation.
Contractual Commitments
Except as described in Note 6, during the three months ended March 31, 2018, we have not entered into any material contractual commitments outside of the ordinary course of business that have materially changed our contractual commitments as compared to December 31, 2017.
Exit Cost Accruals
As of March 31, 2018 and December 31, 2017, exit costs of $93 million and $101 million, respectively, were included in Accrued expenses and other current liabilities and Deferred credits and other liabilities on the accompanying Balance Sheets for accruals related to the Iowa greyhound pari-mutuel racing fund, future obligations under land lease agreements associated with the abandonment of a construction project near the Mississippi Gulf Coast, and the permanent closure of three international properties.
NV Energy
In September 2017, we filed our final notice to proceed with our plan to exit the fully bundled sales system of NV Energy for our Nevada casino properties and purchase energy, capacity, and/or ancillary services from a provider other than NV Energy. The transition to unbundle electric service was completed in the first quarter of 2018 (the “Cease-Use Date”). As a result of our decision to exit, an order from the Public Utilities Commission of Nevada required that we pay an aggregate exit fee of $48 million. These fees are payable over three to six years at an aggregate present value of $39 million as of March 31, 2018 and are recorded in Accrued expenses and other current liabilities and Deferred credits and other liabilities on the Balance Sheets.
For six years following the Cease-Use Date, we will also be required to make ongoing payments to NV Energy for non-bypassable rate charges, which primarily relate to each entity’s share of NV Energy’s portfolio of above-market renewable energy contracts and the costs of decommissioning and remediation of coal-fired power plants. As of the effective date of the transition, total fees incurred are $31 million, which was recorded at a present value of $27 million in Accrued expenses and other current liabilities and Deferred credits and other liabilities on the Balance Sheets as of March 31, 2018. The amount will be adjusted in the future if actual fees incurred differ from our estimates.
Golf Course Properties
Concurrently with the execution of the leases CEOC LLC maintains with VICI, certain golf course properties (the “Golf Course Properties”) were sold to VICI, and CEOC LLC entered into a golf course use agreement (the “Golf Course Use Agreement”) with VICI. An obligation of $143 million is recorded in Deferred credits and other liabilities as of March 31, 2018 representing the fair value of the $10 million in annual payments to be made under the Golf Course Use Agreement, which exceeds the fair value of services being received.
The obligation is being amortized using the effective interest method over the term of the Golf Course Use Agreement which continues through October 2052. The amortization on this obligation for the quarter ended March 31, 2018 was $3 million and reflected in Interest expense in our Statement of Operations.
Resolution of Disputed Claims
Prior to the Effective Date, CEOC’s financial statements included amounts classified as liabilities subject to compromise, which represented estimates of pre-petition obligations impacted by the Chapter 11 reorganization process. These amounts represented the Debtors’ then-current estimate of known or potential pre-petition obligations to be resolved in connection with CEOC’s emergence from bankruptcy.

14



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Following the Effective Date, actions to enforce or otherwise affect repayment of liabilities preceding January 15, 2015 (the “Petition Date”), as well as pending litigation against the Debtors related to such liabilities, generally have been permanently enjoined. Any unresolved claims will continue to be subject to the claims reconciliation process under the supervision of the Bankruptcy Court. CEOC LLC will continue the process of reconciling such claims to the amounts listed by the Debtors in their schedules of assets and liabilities, as amended. The amounts submitted by claimants that remain unresolved total approximately $892 million. We estimate the fair value of these claims to be $102 million as of March 31, 2018, which is based on management’s estimate of the claim amounts that the Bankruptcy Court will ultimately allow and the fair value of the underlying CEC common stock and CEC Convertible Notes held in escrow for the purpose of resolving those claims.
Pursuant to the Plan, CEC and CEOC deposited cash, CEC common stock, and CEC Convertible Notes into an escrow trust to be distributed to satisfy certain remaining unsecured claims (excluding debt claims) as they become allowed. As claims are resolved, the claimants receive distributions of CEC common stock, cash or cash equivalents, and/or CEC Convertible Notes from the reserves on the same basis as if such distributions had been made on or about the Effective Date. To the extent that any of the reserved shares, cash, and convertible notes remain undistributed upon resolution of the remaining disputed claims, such amounts will be returned to CEC.
As of March 31, 2018, approximately $53 million in cash, 9 million shares of CEC common stock, and $34 million in principal value of CEC Convertible Notes remain in reserve for distribution to holders of disputed claims whose claims may ultimately become allowed in the escrow trust. The CEC common stock and CEC Convertible Notes held in the escrow trust are treated as not outstanding in CEC’s Financial Statements. We estimate that the number of shares, cash, and CEC Convertible Notes reserved is sufficient to satisfy the Debtors’ obligations under the Plan.
Contingent Liabilities
Self-Insurance
We are self-insured for workers compensation and other risk insurance, as well as health insurance effective in the first quarter of 2017 when the liability related to certain health insurance contracts was transferred from CEOC to Caesars Enterprise Services, LLC (“CES”). Our total estimated self-insurance liability was $182 million and $192 million, respectively, as of March 31, 2018 and December 31, 2017.

15



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Note 8Debt
 
March 31, 2018
 
December 31, 2017
(Dollars in millions)
Final
Maturity
 
Rate(s) (1)
 
Face Value
 
Book Value
 
Book Value
Secured debt
 
 
 
 
 
 
CRC Revolving Credit Facility
2022
 
variable (2)
 
$

 
$

 
$

CRC Term Loan
2024
 
variable (3)
 
4,689

 
4,608

 
4,616

CEOC LLC Revolving Credit Facility
2022
 
variable (4)
 

 

 

CEOC LLC Term Loan
2024
 
variable (5)
 
1,496

 
1,494

 
1,499

Unsecured debt
 
 
 
 
 
 
CEC Convertible Notes
2024
 
5.00%
 
1,078

 
1,078

 
1,078

CRC Notes
2025
 
5.25%
 
1,700

 
1,665

 
1,664

Special Improvement District Bonds
2037
 
4.30%
 
56

 
56

 
56

Total debt
 
9,019

 
8,901

 
8,913

Current portion of long-term debt
 
(64
)
 
(64
)
 
(64
)
Long-term debt
 
$
8,955

 
$
8,837

 
$
8,849

 
 
 
 
 
 
 
Unamortized discounts and deferred finance charges
 
 
 
$
118

 
$
121

Fair value
 
$
9,011

 
 
 
 
____________________
(1) 
Interest rate is fixed, except where noted.
(2) 
London Interbank Offered Rate (“LIBOR”) plus 2.25%
(3) 
LIBOR plus 2.75%
(4) 
LIBOR plus 2.00%
(5) 
LIBOR plus 2.50%. On April 16, 2018, the interest rate was repriced to LIBOR plus 2.00%, see CEOC LLC Term Loan Repricing section below.
Annual Estimated Debt Service Requirements as of March 31, 2018
 
Remaining
 
Years Ended December 31,
 
 
 
 
(In millions)
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
Total
Annual maturities of long-term debt
$
48

 
$
64

 
$
64

 
$
64

 
$
64

 
$
8,715

 
$
9,019

Estimated interest payments
380

 
470

 
480

 
480

 
480

 
1,010

 
3,300

Total debt service obligation (1)
$
428

 
$
534

 
$
544

 
$
544

 
$
544

 
$
9,725

 
$
12,319

___________________
(1) 
Debt principal payments are estimated amounts based on maturity dates and potential borrowings under our revolving credit facilities. Interest payments are estimated based on the forward-looking LIBOR curve. Actual payments may differ from these estimates.
Current Portion of Long-Term Debt
The current portion of long-term debt as of March 31, 2018 and December 31, 2017 includes the principal payments on the term loans, other unsecured borrowings, and special improvement district bonds that are expected to be paid within 12 months.
Although there are no outstanding amounts under the revolving credit facilities as of March 31, 2018, borrowings under the revolving credit facilities are each subject to the provisions of the applicable credit facility agreements. The applicable credit facility agreements each have a contractual maturity of greater than one year. Amounts borrowed under the revolving credit facilities are intended to satisfy short term liquidity needs and would be classified as current.
Fair Value
The fair value of debt has been calculated primarily based on the borrowing rates available as of March 31, 2018 based on market quotes of our publicly traded debt. We classify the fair value of debt within Level 1 and Level 3 in the fair value hierarchy.

16



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


CEOC LLC Term Loan Repricing
On April 16, 2018, CEOC LLC entered into Amendment No. 1 to the Credit Agreement, dated as of October 6, 2017 (as amended, the “CEOC LLC Credit Agreement”) that, among other things, reduces the interest rate margins applicable to CEOC LLC’s existing approximately $1.5 billion term loan facility from LIBOR plus 2.50% to LIBOR plus 2.00%.
Terms of Outstanding Debt
Restrictive Covenants
The CRC Credit Agreement, CEOC LLC Credit Agreement, and the indentures related to the CEC Convertible Notes and CRC Notes contain covenants which are standard and customary for these types of agreements. These include negative covenants, which, subject to certain exceptions and baskets, limit the Company’s ability to (among other items) incur additional indebtedness, make investments, make restricted payments, including dividends, grant liens, sell assets and make acquisitions.
The CRC Revolving Credit Facility and CEOC LLC Revolving Credit Facility include maximum first-priority net senior secured leverage ratio financial covenants of 6.35:1 and 3.50:1, respectively, which are applicable solely to the extent that certain testing conditions are satisfied.
Guarantees
The borrowings under the CRC Credit Agreement and CEOC LLC Credit Agreement are guaranteed by the material, domestic, wholly owned subsidiaries of CRC and CEOC LLC, respectively, (subject to exceptions) and substantially all of the applicable existing and future property and assets that serve as collateral for the borrowings.
The CRC Notes are guaranteed on a senior unsecured basis by each wholly owned, domestic subsidiary of CRC that is a subsidiary guarantor with respect to the CRC Senior Secured Credit Facilities.
Note 9Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing the applicable income amounts by the weighted-average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing the applicable income amounts by the sum of weighted-average number of shares of common stock outstanding and dilutive potential common stock.
For a period in which Caesars generated a net loss, the weighted-average basic shares outstanding was used in calculating diluted loss per share because using diluted shares would have been anti-dilutive to loss per share.
Basic and Dilutive Net Earnings Per Share Reconciliation
 
Three Months Ended March 31,
(In millions, except per share data)
2018
 
2017
Net loss attributable to Caesars
$
(34
)
 
$
(507
)
Weighted-average common stock outstanding
697

 
147

Basic and diluted loss per share
$
(0.05
)
 
$
(3.44
)
Weighted-Average Number of Anti-Dilutive Shares Excluded from Calculation of EPS
 
Three Months Ended March 31,
(In millions)
2018
 
2017
Stock options
9

 
11

Restricted stock units and awards
16

 
8

CEC Convertible Notes
150

 

Total anti-dilutive common stock
175

 
19


17



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Note 10Revenue Recognition
Adoption of New Revenue Recognition Standard
In May 2014, the FASB issued a new standard related to revenue recognition, ASU 2014-09, Revenue from Contracts with Customers. We adopted the standard effective January 1, 2018, using the full retrospective method, which requires the Company to recast each prior reporting period presented consistent with the new standard. The most significant effects of adopting the new standard related to the accounting for our Total Rewards customer loyalty program and casino promotional allowances.
Total Rewards affects revenue from our four core businesses: casino entertainment, food and beverage, rooms and hotel, and entertainment and other business operations. Previously, the Company accrued a liability based on the estimated cost of fulfilling the redemption of Reward Credits, after consideration of estimated forfeitures (referred to as “breakage”), based upon the cost of historical redemptions. Upon adoption of the new accounting standard, Reward Credits are no longer recorded at cost, and a deferred revenue model is used to account for the classification and timing of revenue recognized as well as the classification of related expenses when Reward Credits are redeemed. This results in a portion of casino revenues being recorded as deferred revenue as Reward Credits are earned. Revenue is recognized in a future period based on when and for what good or service the Reward Credits are redeemed (e.g., a hotel room).
Additionally, we previously recorded promotional allowances in a separate line item within net revenues. As part of adopting the new standard, promotional allowances are no longer presented separately. Alternatively, revenue is recognized based on relative standalone selling prices for transactions with more than one performance obligation. For example, when a casino customer is given a complimentary room, we are required to allocate a portion of the casino revenues earned from the customer to rooms revenues based on the standalone selling price of the room. As a result of this change, we are reporting substantially lower casino revenues; however, there is no material effect on total net revenues.
Effect of Adopting New Revenue Recognition Standard - Balance Sheets
(In millions)
Previously Reported
 
ASC Adjustments
 
As Recast
December 31, 2017
 
 
 
 
 
Receivables, net
$
496

 
$
(2
)
 
$
494

Property and equipment, net (1)
16,228

 
(74
)
 
16,154

Accrued expenses and other current liabilities (2)
1,459

 
(133
)
 
1,326

Current portion of contract liabilities (2)

 
129

 
129

Contract liabilities

 
2

 
2

Financing obligations (1)
9,429

 
(74
)
 
9,355

Deferred credits and other liabilities
1,473

 
(1
)
 
1,472

Stockholders’ equity
3,296

 
1

 
3,297

December 31, 2016
 
 
 
 
 
Stockholders’ deficit
$
(1,609
)
 
$
3

 
$
(1,606
)
____________________
(1) 
The conditions that were considered prohibited forms of continuing involvement related to our sale of the Golf Course Properties (see Note 7) are no longer considered continuing involvement under the new revenue recognition standard. As of result of adopting the new standard on full retrospective basis, we are now reflecting this transaction as a completed sale in the period in which it occurred.
(2) 
Adjustments are primarily related to the reclassification of assets and liabilities to in accordance with the new accounting and disclosure requirements.



18



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Effect of Adopting New Revenue Recognition Standard - Statement of Operations
 
Three Months Ended March 31, 2017
 
Prior to Adoption
 
Post Adoption
(In millions)
CEC
 
CAC
 
Eliminations
 
Total
 
Total
Net revenues
$
963

 
$

 
$

 
$
963

 
$
966

Total operating expenses
805

 
9

 

 
814

 
816

Income/(loss) from operations
158

 
(9
)
 

 
149

 
150

Net income/(loss)
(524
)
 
2

 
14

 
(508
)
 
(508
)
Disaggregation of Revenue by Segment
 
Three Months Ended March 31, 2018
(In millions)
Las Vegas
 
Other U.S.
 
All Other
 
Eliminations
 
Total
Casino
$
262

 
$
663

 
$
58

 
$

 
$
983

Food and beverage
242

 
134

 
7

 

 
383

Rooms
280

 
86

 
1

 

 
367

Management fees

 
1

 
15

 
(1
)
 
15

Reimbursed management costs

 
1

 
51

 

 
52

Entertainment and other
90

 
39

 
9

 
(1
)
 
137

Total contract revenues
874

 
924

 
141

 
(2
)
 
1,937

Other
32

 
2

 
1

 

 
35

Net revenues
$
906

 
$
926

 
$
142

 
$
(2
)
 
$
1,972

 
Three Months Ended March 31, 2017
(In millions)
Las Vegas
 
Other U.S.
 
All Other
 
Eliminations
 
Total
Casino
$
196

 
$
186

 
$
8

 
$

 
$
390

Food and beverage
161

 
45

 

 

 
206

Rooms
215

 
32

 

 

 
247

Entertainment and other
62

 
13

 
4

 

 
79

Total contract revenues
634

 
276

 
12

 

 
922

Other
40

 
4

 

 

 
44

Net revenues
$
674

 
$
280

 
$
12

 
$

 
$
966

Accounting Policy
We analyze our revenues based upon the type of services we provide and the geographic location of the related property. We recognize revenue when control over the goods and services we provide has transferred to the customer, which is generally when the services are performed and when we have no substantive performance obligation remaining. Sales and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in net revenues or operating expenses.
Casino Revenues
Casino revenues include revenues generated by our casino operations and casino related activities such as poker, pari-mutuel wagering, and tournaments, less sales incentives and other adjustments. Casino revenues are measured by the aggregate net difference between gaming wins and losses. Jackpots, other than the incremental amount of progressive jackpots, are recognized at the time they are won by customers. We accrue the incremental amount of progressive jackpots as the progressive machine is played, and the progressive jackpot amount increases, with a corresponding reduction to casino revenues. Funds deposited by

19



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


customers in advance along with chips and slot vouchers in a customer’s possession are recognized as a liability until such amounts are redeemed or used in gaming play by the customer.
Non-Gaming Revenues
Rooms revenue, food and beverage revenue, and entertainment and other revenue include: (i) the actual amounts paid for such services (less any amounts allocated to unperformed performance obligations, such as Reward Credits described below); (ii) the value of Reward Credits redeemed for such services; and (iii) the portion of the transaction price allocated to complimentary goods or services provided in conjunction with other revenue-generating activities. Rooms revenue is generally recognized over the course of the customer’s reservation period. Food and beverage and entertainment and other revenues are recognized when services are performed or events are held. Amounts paid in advance, such as advance deposits on rooms and advance ticket sales, are recorded as a liability until the goods or services are provided to the customer (see Contract Liabilities below).
Other Revenue
Other revenue primarily includes revenue from third-party real estate leasing arrangements at our casino properties. Rental income is recognized ratably over the lease term with contingent rental income being recognized when the right to receive such rental income is established according to the lease agreements.
Total Rewards Loyalty Program
Caesars’ customer loyalty program, Total Rewards, grants Reward Credits to Total Rewards Members based on on-property spending, including gaming, hotel, dining, and retail shopping at all Caesars-affiliated properties. Members may redeem Reward Credits for complimentary or discounted goods and services such as rooms, food and beverages, merchandise, entertainment, and travel accommodations. Members are able to accumulate Reward Credits over time that they may redeem at their discretion under the terms of the program. A member’s Reward Credit balance is forfeited if the member does not earn a Reward Credit for a continuous six-month period.
Because of the significance of the Total Rewards program and the ability for customers to accumulate Reward Credits based on their past play, we have determined that Reward Credits granted in conjunction with other earning activity represent a performance obligation. As a result, for transactions in which Reward Credits are earned, we allocate a portion of the transaction price to the Reward Credits that are earned based upon the relative standalone selling prices (“SSP”) of the goods and services involved. When the activity underlying the “earning” of the Reward Credits has a wide range of selling prices and is highly variable, such as in the case of gaming activities, we use the residual approach in this allocation by computing the value of the Reward Credits as described below and allocating the residual amount to the gaming activity. This allocation results in a significant portion of the transaction price being deferred and presented as a Contract Liability on our accompanying Balance Sheets. Any amounts allocated to the Contract Liabilities are recognized as revenue when the Reward Credits are redeemed in accordance with the specific recognition policy of the activity for which the credits are redeemed. This balance is further described below under Contract Liabilities.
Our Total Rewards loyalty program includes various tiers that offer different benefits, and members are able to earn credits towards tier status, which generally enables them to receive discounts similar to those provided as complimentaries described below. We have determined that any such discounts received as a result of tier status do not represent material rights, and therefore, we do not account for them as distinct performance obligations.
We have determined the SSP of a Reward Credit by computing the redemption value of credits expected to be redeemed. Because Reward Credits are not otherwise independently sold, we analyzed all Reward Credit redemption activity over the preceding calendar year and determined the redemption value based on the fair market value of the goods and services for which the Reward Credits were redeemed. We have applied the practical expedient under the portfolio approach to our Reward Credit transactions because of the similarity of gaming and other transactions and the homogeneity of Reward Credits.
As part of determining the SSP for Reward Credits, we also determined that there is generally an amount of Reward Credits that are not redeemed, which is considered “breakage.” We recognize the expected breakage proportionally with the pattern of revenue recognized related to the redemption of Reward Credits. We periodically reassess our customer behaviors and revise our expectations as deemed necessary on a prospective basis.

20



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Complimentaries
As part of our normal business operations, we often provide lodging, transportation, food and beverage, entertainment and other goods and services to our customers at no additional charge. Such complimentaries are provided in conjunction with other revenue‑earning activities and are generally provided to encourage additional customer spending on those activities. Accordingly, we allocate a portion of the transaction price we receive from such customers to the complimentary goods and services. We perform this allocation based on the SSP of the underlying goods and services, which is determined based upon the weighted-average cash sales prices received for similar services at similar points during the year.
Retail Value of Complimentaries
 
Three Months Ended March 31,
(In millions)
2018
 
2017
Food and beverage
$
149

 
$
151

Rooms
108

 
115

Other
15

 
14

 
$
272

 
$
280

Receivables and Contract Liabilities
We issue credit to approved casino customers following investigations of creditworthiness. Business or economic conditions or other significant events could affect the collectibility of these receivables. Accounts receivable are non-interest bearing and are initially recorded at cost.
Marker play represents a significant portion of our overall table games volume. We maintain strict controls over the issuance of markers and aggressively pursue collection from those customers who fail to pay their marker balances timely. These collection efforts include the mailing of statements and delinquency notices, personal contacts, the use of outside collection agencies and civil litigation. Markers are generally legally enforceable instruments in the United States. Markers are not legally enforceable instruments in some foreign countries, but the United States assets of foreign customers may be reached to satisfy judgments entered in the United States. We consider the likelihood and difficulty of enforceability, among other factors, when we issue credit to customers who are not residents of the United States.
Accounts are written off when management deems the account to be uncollectible. Recoveries of accounts previously written off are recorded when received. We reserve an estimated amount for gaming receivables that may not be collected to reduce the Company’s receivables to their net carrying amount. Methodologies for estimating the allowance for doubtful accounts range from specific reserves to various percentages applied to aged receivables. Historical collection rates are considered, as are customer relationships, in determining specific reserves. As with many estimates, management must make judgments about potential actions by third parties in establishing and evaluating our reserves for allowance for doubtful accounts. Receivables are reported net of the allowance for doubtful accounts.
Receivables
(In millions)
March 31, 2018
 
December 31, 2017
Casino
$
144

 
$
173

Food and beverage and rooms
81

 
59

Entertainment and other
76

 
79

Contract receivables, net
301

 
311

Other
138

 
183

Receivables, net
$
439

 
$
494


21



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Allowance for Doubtful Accounts
(In millions)
Contracts
 
Other
 
Total
Balance as of December 31, 2017
$
44

 
$
7

 
$
51

Provision for doubtful accounts
7

 
(4
)
 
3

Write-offs less recoveries
(3
)
 
1

 
(2
)
Balance as of March 31, 2018
$
48

 
$
4

 
$
52

Our Contract Liabilities primarily consist of outstanding obligations relating to our Total Rewards customer loyalty program and customer advances on goods and services yet to be provided. Contract Liabilities amounted to $150 million and $131 million as of March 31, 2018 and December 31, 2017, respectively. During the three months ended March 31, 2018, we recognized approximately $50 million of revenues related to customer advances and $15 million of revenues related to Reward Credit redemptions, which was previously included in our Contract Liabilities balance as of December 31, 2017.
Generally, customer advances and their corresponding performance obligations are satisfied within 12 months of the date of receipt of advanced payment. As of March 31, 2018, $65 million of revenues has been deferred related to Reward Credits earned under the Total Rewards loyalty program. While Rewards Credits are generally redeemed by customers over a four-year period from when they were earned, of the total Reward Credits expected to be redeemed, approximately 90% are redeemed within one year and approximately 10% are redeemed beyond one year.
Note 11Stock-Based Compensation
We maintain long-term incentive plans for management, other personnel, and key service providers. The plans allow for granting stock-based compensation awards, based on CEC common stock (NASDAQ symbol “CZR”), including time-based and performance-based stock options, restricted stock units, restricted stock awards, stock grants, or a combination of awards.
Composition of Stock-Based Compensation Expense
 
Three Months Ended March 31,
(In millions)
2018
 
2017
Corporate expense
$
13

 
$
8

Property, general, administrative, and other
5

 
1

Total stock-based compensation expense (1)
$
18

 
$
9

____________________
(1) 
As a result of the consolidation of CEOC LLC beginning on the Effective Date, $11 million of stock-based compensation expense was recorded for three months ended March 31, 2018 as compared to the three months ended March 31, 2017 which includes $1 million due to the CAC Merger.
Outstanding at End of Period
 
March 31, 2018
 
December 31, 2017
 
Quantity (1)
 
Wtd Avg (2)
 
Quantity
 
Wtd Avg (2)
Stock options (3)
8,820,888

 
$
10.44

 
9,227,890

 
$
10.36

Restricted stock units (4)
14,121,592

 
12.04

 
17,274,659

 
11.22

____________________
(1) 
Granted 114,136 restricted stock units related to CEC common stock during the three months ended March 31, 2018. No stock options granted during the three months ended March 31, 2018.
(2) 
Represents weighted average exercise price for stock options and weighted average fair value for restricted stock units.
(3) 
During the three months ended March 31, 2018, 378,016 stock options were exercised.
(4) 
During the three months ended March 31, 2018, 3,042,607 restricted stock units vested.
Note 12Income Taxes
Caesars’ provision for income taxes during the interim reporting period for the three months ended March 31, 2018 has been calculated by applying an estimate of the annual effective tax rate (“AETR”) for the full year to “ordinary” income or loss (pre-

22



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. We utilized a discrete effective tax rate method, as allowed by ASC 740-270 Income Taxes, Interim Reporting, to calculate taxes for the three months ended March 31, 2017. We determined that as small changes in estimated “ordinary” income would result in significant changes in the estimated AETR, the historical method would not provide a reliable estimate for the three months ended March 31, 2017.
Effective January 1, 2018, we adopted ASU 2016-16, Income Taxes (Topic 740), which provides amended guidance regarding intra-entity transfers of assets other than inventory, which requires the recognition of any related income tax consequences when such transfers occur.
The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance for the accounting of the effects of the Tax Act. SAB 118 provides a measurement period that should not be extended past a year from the enactment date for companies to complete the accounting of the Tax Act under ASC Topic 740, Income Taxes (“ASC 740”). Companies that do not complete the accounting under ASC 740 for the tax effects of the Tax Act, must record a provisional estimate of the tax effects of the Tax Act. If a provisional estimate cannot be determined, a company should continue to apply ASC 740 based on the tax laws in effect immediately before the enactment of the Tax Act.
As of March 31, 2018, the Company has not completed the accounting for the tax effects of the Tax Act; however, the Company has made a reasonable estimate of the effects on the existing deferred tax balances and accrued a provisional income tax benefit of approximately $1.2 billion which was included in the period ended December 31, 2017. The amount of the estimated income tax benefit is (i) $797 million related to the net deferred tax benefit of the corporate rate reduction and (ii) $442 million related to the net deferred tax benefit of deferred tax assets which are now realizable due to the changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. No changes have been made to this estimated provisional income tax benefit for the period ended March 31, 2018.
In order to complete the accounting requirements under ASC 740, the Company needs to (i) evaluate the impact of additional guidance, if any, from the FASB and external providers on its application of ASC 740 to the calculation; (ii) evaluate the impact of further guidance from Treasury and/or the Internal Revenue Service (“IRS”) on the technical application of the law with regard to our facts; (iii) evaluate the impact of further guidance from the state tax authorities regarding their conformity to the provisions of the Tax Act; and (iv) complete the analysis of the revaluation of deferred tax assets and liabilities as the Company is still analyzing certain aspects of the Tax Act. The accounting for the tax effects for the Tax Act will be completed in 2018.
The Tax Act also includes provisions for Global Intangible Low-Taxed Income (“GILTI”), which imposes taxes on foreign income in excess of a deemed return on tangible assets of foreign corporations. Because of the complexities of the new provisions, the Company is continuing to evaluate how the provisions will be accounted for under GAAP. Companies are allowed to make an accounting policy election of either (i) account for GILTI as a component of income tax expense in the period in which the Company is subject to the rules (the “period cost method”), or (ii) account for GILTI in the Company’s measurement of deferred taxes (the “deferred method”). The Company has not elected a method and will do so after completing its analysis of the GILTI provisions of the Tax Act depending on the analysis of the Company’s global income. Therefore, we have not recorded any potential deferred tax effects related to the GILTI in our financial statements and have no policy election regarding whether to record deferred taxes on GILTI or use the period cost method. We have however, included an estimate of the current GILTI impact in our AETR for 2018. We expect to complete the accounting during the measurement period.
Income Tax Allocation
 
Three Months Ended March 31,
(Dollars in millions)
2018
 
2017
Loss before income taxes
$
(21
)
 
$
(461
)
Income tax provision
$
(13
)
 
$
(47
)
Effective tax rate
(61.9
)%
 
(10.2
)%
We classify reserves for tax uncertainties within Deferred credits and other liabilities on the Balance Sheets, separate from any related income tax payable, which is also reported within Accrued expenses and other current liabilities, or Deferred income taxes. Reserve amounts relate to any potential income tax liabilities resulting from uncertain tax positions, as well as potential interest or penalties associated with those liabilities.

23



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. We have provided a valuation allowance on certain federal and state deferred tax assets that were not deemed realizable based upon estimates of future taxable income.
The effective tax rate related to the loss before income taxes for the three months ended March 31, 2018 differed from the expected federal tax rate of 21% primarily due to losses not tax benefitted and nondeductible expenses. The effective tax rate for the three months ended March 31, 2017 differed from the expected federal tax rate of 35% primarily due to losses not tax benefitted, including accrued restructuring and support expenses, and state deferred tax expense. Effective January 1, 2017, CEC elected to no longer treat Caesars Entertainment Resort Properties, LLC (“CERP”) as a corporation for income tax purposes, which resulted in additional state deferred tax expense due to additional state filing requirements for CEC.
We file income tax returns, including returns for our subsidiaries, with federal, state, and foreign jurisdictions. We are under regular and recurring audit by the Internal Revenue Service on open tax positions, and it is possible that the amount of the liability for unrecognized tax benefits could change during the next 12 months.
Note 13Related Party Transactions
 
Three Months Ended March 31,
(In millions)
2018
 
2017
Transactions with Sponsors and their affiliates
 
 
 
Expenses paid to Sponsors’ portfolio companies
$
1

 
$

Transactions with Horseshoe Baltimore
 
 
 
Management fees
3

 

Reimbursements and allocated expenses
1

 

Transactions with CEOC
 
 
 
Shared services allocated expenses to CEOC

 
96

Shared services allocated expenses from CEOC

 
23

Management fees incurred

 
11

Octavius Tower lease revenue

 
9

Other expenses incurred

 
4

Transactions with Sponsors and their Affiliates
The members of Hamlet Holdings LLC (“Hamlet Holdings”) are comprised of individuals affiliated with Apollo Global Management, LLC and affiliates of TPG Capital LP (collectively, the “Sponsors”). On the Effective Date, we entered into a “Termination Agreement” with the Sponsors and their affiliates, pursuant to which certain agreements terminated. Prior to that date, the Company was controlled by the Sponsors through Hamlet Holdings. Subsequent to the Effective Date, the Company is no longer controlled by the Sponsors.
Additionally, we may engage in transactions with companies owned or controlled by affiliates of our former Sponsors in the normal course of business. Amounts paid to the Sponsors’ portfolio companies are included in the table above and we believe such transactions are conducted at fair value.
Transactions with Horseshoe Baltimore
Upon our deconsolidation of Horseshoe Baltimore effective August 31, 2017, Horseshoe Baltimore, which remains 41% owned by us, is now held as an equity method investment and considered to be a related party. These related party transactions include items such as casino management fees, reimbursement of various costs incurred by CEOC LLC on behalf of Horseshoe Baltimore, and the allocation of other general corporate expenses. A summary of the transactions with Horseshoe Baltimore subsequent to the deconsolidation is provided in the table above.

24



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Transactions with CEOC
Upon its filing for reorganization under Chapter 11 of the Bankruptcy Code and its subsequent deconsolidation, transactions with CEOC were no longer eliminated in consolidation and were considered related party transactions for Caesars. A summary of these transactions is provided in the table above. However, subsequent to CEOC’s emergence from bankruptcy on the Effective Date, CEOC’s successor, CEOC LLC, became a wholly owned subsidiary of CEC, and therefore will no longer be treated as a related party going forward. The following activities, to the extent that they continued subsequent to the Effective Date, are eliminated in consolidation from that point forward.
CEOC Shared Services Agreement
Pursuant to a shared services agreement, CEOC provided Caesars with certain corporate and administrative services, and the costs of these services were allocated to Caesars. Certain services are now provided by CES.
Prior to the deconsolidation of CEOC, we were self-insured for employee medical (health, dental, and vision) and risk products, including workers compensation and surety bonds, and our insurance claims and reserves included accruals of estimated settlements for known claims, as well as accruals of actuarial estimates of incurred but not reported claims.
Services Joint Venture
CES provides certain corporate and administrative services to its members, and the costs of these services are allocated among the members. CES allocates costs including amounts for insurance coverage.
Management Fees
Caesars Growth Partners, LLC (“CGP”) pays a management fee to CEOC for the CGP properties that are managed by CEOC or CES.
Octavius Tower Lease Agreement
Under the Octavius Tower lease agreement, CEOC LLC leases the Octavius Tower at Caesars Palace for $35 million annually. CRC owns Octavius Tower.
LINQ Access and Parking Easement Agreements
Under the LINQ Access and Parking easement agreements, subsidiaries of CEOC granted easements for access and parking behind The LINQ Promenade and The LINQ Hotel & Casino to CERP and CGP and certain of their subsidiaries. Together, CERP and CGP paid approximately $2 million annually. Amounts are included within Other expenses incurred in the table above. The parking lot was sold to VICI upon CEOC’s emergence from bankruptcy but was partially repurchased by CRC as part of the purchase of approximately 18 acres of land adjacent to the Harrah’s Las Vegas property with the other portion still owned by VICI with the easements to CRC running with the land.
Service Provider Fee
CEOC, CERP and CGP had a shared services agreement under which CERP and CGP paid for certain indirect corporate support costs. Amounts are included within Other expenses incurred in the table above.
Cross Marketing and Trademark License Agreement
Caesars Interactive Entertainment, LLC (“CIE”) and CEOC have a Cross Marketing and Trademark License Agreement. The agreement granted CIE the exclusive right to use various brands of Caesars Entertainment in connection with social and mobile games and online real money gaming in exchange for a 3.0% royalty. This agreement also provides for cross marketing and promotional activities between CIE and CEOC, including participation by CIE in Caesars’ Total Rewards customer loyalty program. CEOC also receives a revenue share from CIE for customer referrals. Amounts are included within Other expenses incurred in the table above.

25



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Equity Incentive Awards
Caesars maintained an equity incentive awards plan under which CEC issued time-based and performance-based stock options, restricted stock units and restricted stock awards to CEOC employees. Although awards under the plan resulted in the issuance of shares of CEC common stock, because CEOC was no longer a consolidated subsidiary of CEC, we accounted for these awards as nonemployee awards subsequent to the date of deconsolidation.
Employee Benefit Plans
CEC maintains a defined contribution savings and retirement plan in which employees of specified CEC subsidiaries may participate. The plan provides for, among other things, pre-tax, Roth and after-tax contributions by employees. The plan also provides for employer matching contributions. Under the plan, participating employees may elect to contribute a percentage of their eligible earnings (subject to certain IRS and plan limits). In addition, employees subject to certain collective bargaining agreements receive benefits through the multi-employer retirement plans sponsored by the organization in which they are a member. The expenses related to contributions for a participant in the CEC plan or a multi-employer plan are allocated to the properties at which the participant is employed.
Total Rewards Loyalty Program
Until the Effective Date, the total estimated cost for Total Rewards was accrued by CEOC; on the Effective Date, administration of Total Rewards was transferred from CEOC LLC to CES as an equity contribution.
Due from/to Affiliates
Amounts due to or from affiliates for each counterparty represent the net receivable or payable as of the end of the reporting period primarily resulting from the transactions described above and are settled on a net basis by each counterparty in accordance with the legal and contractual restrictions governing transactions by and among Caesars’ consolidated entities and CEOC. The amount due from CEOC represents the maximum exposure to loss as a result of Caesars’ involvement with CEOC.
As of March 31, 2018 and December 31, 2017, Due from affiliates, net was $7 million and $11 million, respectively, and represented transactions with Horseshoe Baltimore.
Note 14Segment Reporting
We view each casino property as an operating segment and aggregate such casino 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.
The results of each reportable segment presented below are consistent with the way management assesses these results and allocates resources, which is a consolidated view that adjusts for the effect of certain transactions between reportable segments within Caesars.
“All Other” includes managed, international and other properties as well as parent, consolidating, and other adjustments to reconcile to consolidated Caesars results.

26



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


Condensed Statements of Operations - By Segment
 
Three Months Ended March 31, 2018
(In millions)
Las Vegas
 
Other U.S.
 
All Other
 
Elimination
 
Caesars
Net revenues
$
906

 
$
926

 
$
142

 
$
(2
)
 
$
1,972

Depreciation and amortization
142

 
121

 
17

 

 
280

Income/(loss) from operations
148

 
86

 
(109
)
 

 
125

Interest expense
(78
)
 
(138
)
 
(114
)
 

 
(330
)
Restructuring and support expenses and other
2

 
2

 
180

 

 
184

Income tax provision

 

 
(13
)
 

 
(13
)
 
Three Months Ended March 31, 2017
(In millions)
Las Vegas
 
Other U.S.
 
All Other
 
Elimination
 
Caesars
Net revenues
$
674

 
$
280

 
$
12

 
$

 
$
966

Depreciation and amortization
79

 
21

 
2

 

 
102

Income/(loss) from operations
152

 
29

 
(31
)
 

 
150

Interest expense
(5
)
 
(7
)
 
(135
)
 

 
(147
)
Restructuring and support expenses and other

 

 
(464
)
 

 
(464
)
Income tax provision

 

 
(47
)
 

 
(47
)
Adjusted EBITDA - by Segment
Adjusted EBITDA is presented as a measure of the Company’s performance. Adjusted EBITDA is defined as revenues less operating expenses and is comprised of net income/(loss) before (i) interest expense, net of interest capitalized and interest income, (ii) income tax (benefit)/provision, (iii) depreciation and amortization, (iv) corporate expenses, and (v) certain items that we do not consider indicative of its ongoing operating performance at an operating property level.
In evaluating Adjusted EBITDA you should be aware that, in the future, we may incur expenses that are the same or similar to some of the adjustments in this presentation. The presentation of Adjusted EBITDA should not be construed as an inference that future results will be unaffected by unusual or unexpected items.
Adjusted EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net income/(loss) as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (as determined in accordance with GAAP). Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies within the industry. Adjusted EBITDA is included because management uses Adjusted EBITDA to measure performance and allocate resources, and believes that Adjusted EBITDA provides investors with additional information consistent with that used by management.
 
Three Months Ended March 31, 2018
(In millions)
Las Vegas
 
Other U.S.
 
All Other
 
Elimination
 
Caesars
Net income/(loss) attributable to company
$
72

 
$
(50
)
 
$
(56
)
 
$

 
$
(34
)
Income tax provision

 

 
13

 

 
13

Restructuring and support expenses and other
(2
)
 
(2
)
 
(180
)
 

 
(184
)
Interest expense
78

 
138

 
114

 

 
330

Depreciation and amortization
142

 
121

 
17

 

 
280

Other operating costs (1)
28

 
6

 
32

 

 
66

Stock-based compensation expense
2

 
2

 
14

 

 
18

Other items (2)
1

 
1

 
27

 

 
29

Adjusted EBITDA
$
321

 
$
216

 
$
(19
)
 
$

 
$
518


27



CAESARS ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


 
Three Months Ended March 31, 2017
(In millions)
Las Vegas
 
Other U.S.
 
All Other
 
Elimination
 
Caesars
Net income/(loss) attributable to company
$
147

 
$
23

 
$
(677
)
 
$

 
$
(507
)
Net loss attributable to noncontrolling interests

 
(1
)
 

 

 
(1
)
Income tax provision

 

 
47

 

 
47

Restructuring and support expenses and other

 

 
464

 

 
464

Interest expense
5

 
7

 
135

 

 
147

Depreciation and amortization
79

 
21

 
2

 

 
102

Other operating costs (1)
6

 
1

 
(8
)
 

 
(1
)
Stock-based compensation expense
1

 

 
8

 

 
9

Other items (2)
1

 
1

 
13

 

 
15

Adjusted EBITDA
$
239

 
$
52

 
$
(16
)
 
$

 
$
275

____________________
(1) 
Amounts primarily represent costs incurred in connection with costs associated with the development activities and reorganization activities, and/or recoveries associated with such items.
(2) 
Other items includes other add-backs and deductions to arrive at Adjusted EBITDA but not separately identified such as 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.
Condensed Balance Sheets - By Segment
 
March 31, 2018
(In millions)
Las Vegas
 
Other U.S.
 
All Other
 
Elimination
 
Caesars
Total assets
$
14,062

 
$
6,727

 
$
7,399

 
$
(3,037
)
 
$
25,151

Total liabilities
5,196

 
4,996

 
11,554

 
103

 
21,849

 
December 31, 2017
(In millions)
Las Vegas
 
Other U.S.
 
All Other
 
Elimination
 
Caesars
Total assets
$
14,145

 
$
6,864

 
$
7,459

 
$
(3,032
)
 
$
25,436

Total liabilities
5,239

 
5,012

 
11,780

 
108

 
22,139


28


Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
In this filing, the name “CEC” refers to the parent holding company, Caesars Entertainment Corporation, exclusive of its consolidated subsidiaries and variable interest entities, 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.
We also refer to (i) our Consolidated Condensed Financial Statements as our “Financial Statements,” (ii) our Consolidated Condensed Statements of Operations as our “Statements of Operations,” (iii) our Consolidated Condensed Balance Sheets as our “Balance Sheets,” and (iv) our Consolidated Condensed Statements of Cash Flows as our “Statements of Cash Flows.” References to numbered “Notes” refer to Notes to Consolidated Condensed Financial Statements included in Item 1, “Unaudited Financial Statements.”
The following discussion and analysis of the financial position and operating results of Caesars Entertainment for the three months ended March 31, 2018 and 2017 should be read in conjunction with the unaudited consolidated condensed financial statements and the notes thereto and other financial information included elsewhere in this Form 10-Q as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (“2017 Annual Report”). Capitalized terms used but not defined in this Form 10-Q have the same meanings as in the 2017 Annual Report.
The statements in this discussion regarding our expectations regarding our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. Our actual results may differ materially from those contained in or implied by any forward-looking statements. See “CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS” below in this report.
Overview

CEC is primarily a holding company with no independent operations of its own. Caesars Entertainment operates its business primarily through its wholly owned subsidiaries CEOC, LLC (“CEOC LLC”) and Caesars Resort Collection, LLC (“CRC”).
We view each casino property as an operating segment and aggregate such casino 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. The way in which Caesars management assesses results and allocates resources is aligned with these segments.
Summary of Significant Events

The following are the significant events and drivers of performance. Accordingly, the remainder of the discussion and analysis of results should be read in conjunction with this summary.
Adoption of New Revenue Recognition Standard
On January 1, 2018, we adopted the new accounting standard Accounting Standards Update 2014-09, Revenue from Contracts with Customers, and all related amendments using the full retrospective method and have recast revenue and expenses for all prior periods presented. See Note 10 for additional information.
CEOC’s Emergence from Bankruptcy and CEC’s Merger with Caesars Acqui