SEC Filing | Caesars Entertainment, Inc.

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eri-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-36629

CAESARS ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)


Delaware			46-3657681
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

100 West Liberty Street, Suite 1150, Reno, Nevada 89501

(Address and zip code of principal executive offices)

(775) 328-0100

(Registrant’s telephone number, including area code)

Eldorado Resorts, Inc.

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.00001 par value	CZR	NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the Registrant’s Common Stock, $0.00001 par value per share, outstanding as of July 31, 2020 was 160,833,608.

CAESARS ENTERTAINMENT, INC.

QUARTERLY REPORT FOR THE THREE MONTHS ENDED

JUNE 30, 2020

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION			2
Item 1.	FINANCIAL STATEMENTS	2
	Consolidated Balance Sheets at June 3 0 , 2020 (unaudited) and December 31, 2019	3
	Consolidated Statements of Operations for the Three and Six Months Ended June 3 0 , 2020 and 2019 (unaudited)	4
	Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 3 0 , 2020 and 2019 (unaudited)	5
	Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 3 0 , 2020 and 2019 (unaudited)	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 3 0 , 2020 and 2019 (unaudited)	7
	Condensed Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	52
Item 4.	CONTROLS AND PROCEDURES	52
PART II. OTHER INFORMATION			54
Item 1.	LEGAL PROCEEDINGS	54
Item 1A.	RISK FACTORS	56
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	57
Item 3.	DEFAULTS UPON SENIOR SECURITIES	57
Item 4.	MINE SAFETY DISCLOSURES	57
Item 5.	OTHER INFORMATION	57
Item 6.	EXHIBITS	58
SIGNATURES			59

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

CAESARS ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)


	June 30, 2020		December 31, 2019
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	950,483	$	206,317
Restricted cash and investments	9,035		3,507
Marketable securities	36,071		34,634
Accounts receivable, net	44,305		53,899
Due from affiliates	585		3,806
Inventories	17,369		18,379
Prepaid expenses	33,096		30,966
Assets held for sale	443,793		253,135
Total current assets	1,534,737		604,643
Investment in and advances to unconsolidated affiliates	134,939		135,828
Property and equipment, net	2,418,687		2,614,524
Gaming licenses and other intangibles, net	1,056,429		1,111,398
Goodwill	810,187		909,717
Right-of-use assets	127,550		188,219
Other assets, net	65,918		76,224
Total assets	$	6,148,447	$	5,640,553
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	111	$	246,175
Accounts payable	40,079		61,951
Accrued property, gaming and other taxes	32,035		43,050
Accrued payroll and related	42,676		62,337
Accrued interest	36,496		36,480
Income taxes payable	25,188		23,898
Short-term lease obligation	13,933		19,991
Accrued other liabilities	153,810		157,079
Liabilities related to assets held for sale	131,674		37,485
Total current liabilities	476,002		688,446
Long-term financing obligation to GLPI	975,792		970,519
Long-term debt, less current portion	2,670,739		2,324,541
Deferred income taxes	144,973		197,266
Long-term lease obligation	98,040		176,932
Other long-term liabilities	166,452		165,592
Total liabilities	4,531,998		4,523,296
Commitments and contingencies (Note 14)
STOCKHOLDERS' EQUITY:
Common stock, 200,000,000 shares authorized, 98,565,678 and 77,569,117 issued and outstanding, net of treasury shares, par value $0.00001 as of June 30, 2020 and December 31, 2019, respectively	1		1
Paid-in capital	1,534,373		759,547
Retained earnings	90,829		366,463
Treasury stock at cost, 223,823 shares held at June 30, 2020 and December 31, 2019	(9,131)		(9,131)
Accumulated other comprehensive income	377		377
Total stockholders’ equity	1,616,449		1,117,257
Total liabilities and stockholders’ equity	$	6,148,447	$	5,640,553

The accompanying condensed notes are an integral part of these consolidated financial statements.

CAESARS ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
REVENUES:
Casino and pari-mutuel commissions	$	101,479	$	457,162	$	441,228	$	927,848
Food and beverage	6,567		75,356		62,813		150,637
Hotel	8,916		78,391		57,292		143,175
Other	9,508		26,212		38,206		51,284
Net revenues	126,470		637,121		599,539		1,272,944
EXPENSES:
Casino and pari-mutuel commissions	43,354		203,240		202,510		413,546
Food and beverage	8,250		59,497		61,505		119,882
Hotel	5,846		25,136		28,114		48,786
Other	1,179		10,723		10,360		21,972
Marketing and promotions	5,105		32,080		30,058		64,381
General and administrative	64,862		117,431		156,537		237,319
Corporate	13,050		21,051		29,532		37,805
Impairment charges	—		—		160,758		958
Depreciation and amortization	48,939		56,533		99,372		114,290
Total operating expenses	190,585		525,691		778,746		1,058,939
(Loss) gain on sale or disposal of property and equipment	(65)		(366)		1,393		21,952
Transaction expenses	(12,697)		(7,292)		(21,991)		(9,186)
Loss from unconsolidated affiliates	(1,450)		(1,222)		(1,702)		(617)
Operating (loss) income	(78,327)		102,550		(201,507)		226,154
OTHER EXPENSE:
Interest expense, net	(68,136)		(71,798)		(134,600)		(145,308)
Loss on extinguishment of debt	—		—		(158)		—
Unrealized gain (loss) on investments and marketable securities	12,806		(1,398)		(10,202)		(2,858)
Total other expense	(55,330)		(73,196)		(144,960)		(148,166)
(Loss) income before income taxes	(133,657)		29,354		(346,467)		77,988
Benefit (provision) for income taxes	33,661		(10,418)		70,833		(20,823)
Net (loss) income	$	(99,996)	$	18,936	$	(275,634)	$	57,165
Net (loss) income per share of common stock:
Basic	$	(1.25)	$	0.24	$	(3.49)	$	0.74
Diluted	$	(1.25)	$	0.24	$	(3.49)	$	0.73
Weighted average basic shares outstanding	80,053,676		77,682,759		79,009,373		77,625,303
Weighted average diluted shares outstanding	80,053,676		78,725,289		79,009,373		78,657,552

The accompanying condensed notes are an integral part of these consolidated financial statements.

CAESARS ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(dollars in thousands)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net (loss) income	$	(99,996)	$	18,936	$	(275,634)	$	57,165
Other comprehensive income, net of tax	—		—		—		—
Comprehensive (loss) income, net of tax	$	(99,996)	$	18,936	$	(275,634)	$	57,165

The accompanying condensed notes are an integral part of these consolidated financial statements.

CAESARS ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in thousands)

(unaudited)


	Common Stock										Treasury Stock
	Shares	Amount		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Shares	Amount		Total
Balance, December 31, 2019	77,792,940	$	1	$	759,547	$	366,463	$	377	223,823	$	(9,131)	$	1,117,257
Issuance of restricted stock units	356,367	—		5,742		—		—		—	—		5,742
Net loss	—	—		—		(175,638)		—		—	—		(175,638)
Shares withheld related to net share settlement of stock awards	(122,590)	—		(7,152)		—		—		—	—		(7,152)
Balance, March 31, 2020	78,026,717	$	1	$	758,137	$	190,825	$	377	223,823	$	(9,131)	$	940,209
Issuance of restricted stock units	71,887	—		4,229		—		—		—	—		4,229
Issuance of common stock, net	20,700,000	—		772,392		—		—		—	—		772,392
Net loss	—	—				(99,996)		—		—	—		(99,996)
Exercise of stock options	15,300	—		62		—		—		—	—		62
Shares withheld related to net share settlement of stock awards	(24,403)	—		(447)		—		—		—	—		(447)
Balance, June 30, 2020	98,789,501	$	1	$	1,534,373	$	90,829	$	377	223,823	$	(9,131)	$	1,616,449

Balance, December 31, 2018	77,438,889	$	1	$	748,076	$	290,206	$	1	223,823	$	(9,131)	$	1,029,153
Cumulative change in accounting principle, net of tax	—	—		—		(4,744)		—		—	—		(4,744)
Issuance of restricted stock units	330,641	—		4,948		—		—		—	—		4,948
Net income	—	—		—		38,229		—		—	—		38,229
Shares withheld related to net share settlement of stock awards	(106,542)	—		(4,322)		—		—		—	—		(4,322)
Balance, March 31, 2019	77,662,988	$	1	$	748,702	$	323,691	$	1	223,823	$	(9,131)	$	1,063,264
Issuance of restricted stock units	169,248	—		6,509		—		—		—	—		6,509
Net income	—	—		—		18,936		—		—	—		18,936
Shares withheld related to net share settlement of stock awards	(65,312)	—		(3,190)		—		—		—	—		(3,190)
Balance, June 30, 2019	77,766,924	$	1	$	752,021	$	342,627	$	1	223,823	$	(9,131)	$	1,085,519

The accompanying condensed notes are an integral part of these consolidated financial statements.

CAESARS ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)


	Six Months Ended June 30,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(275,634)	$	57,165
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	99,372		114,290
Amortization of deferred financing costs, discount and debt premium	8,497		9,186
Deferred revenue	(3,752)		(3,182)
Equity in loss of unconsolidated affiliates	1,702		617
Loss on extinguishment of debt	158		—
Lease amortization	1,699		1,332
Unrealized loss on investments	10,202		2,858
Stock compensation expense	9,971		11,457
Gain on sale of property and equipment	(1,393)		(21,952)
Impairment charges	160,758		958
Benefit for deferred income taxes	(52,293)		(6,671)
Other	1,513		631
Change in operating assets and liabilities:
Accounts receivable	6,391		(3,786)
Prepaid expenses and other assets	(10,633)		3,347
Income taxes payable	1,291		(8,636)
Accounts payable and accrued other liabilities	(38,312)		(29,756)
Net cash (used in) provided by operating activities	(80,463)		127,858

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net	(41,014)		(97,114)
Purchase of restricted investments	(116)		—
Sale of restricted investments	—		4,985
Proceeds from sale of businesses, property and equipment, net of cash sold	543		167,609
Investment in unconsolidated affiliates	(812)		—
Net cash (used in) provided by investing activities	(41,399)		75,480

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under Revolving Credit Facility	465,000		—
Payments under Revolving Credit Facility	(357,000)		(245,000)
Payments on Term Loan	(10,000)		—
Debt issuance costs	—		(449)
Proceeds from issuance of common stock	772,392		—
Proceeds from exercise of stock options	62		—
Taxes paid related to net share settlement of equity awards	(7,599)		(7,512)
Payments on other long-term payables	(144)		(243)
Net cash (used in) provided by financing activities	862,711		(253,204)


	Six Months Ended June 30,
	2020		2019
Increase (decrease) in cash, cash equivalents and restricted cash	740,849		(49,866)
Cash, cash equivalents and restricted cash, beginning of period	216,578		246,691
Cash, cash equivalents and restricted cash, end of period	$	957,427	$	196,825
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO AMOUNTS REPORTED WITHIN THE CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents	$	950,483	$	183,139
Restricted cash	3,017		7,258
Restricted and escrow cash included in other assets, net	3,927		6,428
Total cash, cash equivalents and restricted cash	$	957,427	$	196,825

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	126,485	$	134,083
Income taxes (refunded) paid, net	(17,352)		38,210
NON-CASH FINANCING ACTIVITIES:
Payables for capital expenditures	4,129		14,525

The accompanying condensed notes are an integral part of these consolidated financial statements.

CAESARS ENTERTAINMENT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Organization and Basis of Presentation

Organization

The accompanying consolidated financial statements include the accounts of Caesars Entertainment, Inc., a Delaware corporation formerly known as Eldorado Resorts, Inc. (“ERI” or “Eldorado”), and its consolidated subsidiaries which may be referred to as the “Company,” “we,” “our,” or “us” within these financial statements.

The Company is a geographically diversified gaming and hospitality company with 23 gaming facilities in 11 states as of June 30, 2020. As of June 30, 2020, the Company’s properties were located in Colorado, Florida, Illinois, Indiana, Iowa, Mississippi, Missouri, Louisiana, Nevada, New Jersey and Ohio, and featured approximately 23,900 slot machines, video lottery terminals (“VLTs”) and e-tables, approximately 660 table games and approximately 11,300 hotel rooms. On July 20, 2020, the Company completed the merger in which a wholly-owned subsidiary of the Company merged with and into Caesars Entertainment Corporation (“Former Caesars”) with Former Caesars surviving as a wholly-owned subsidiary of the Company (the “Merger”) pursuant to the Agreement and Plan of Merger dated as of June 24, 2019 (as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 15, 2019, the “Merger Agreement”). As a result of the Merger, the Company currently owns an aggregate of 54 domestic properties in 16 states with approximately