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 March 31, 2023
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File No. 001 - 36629
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address and zip code of principal executive offices)
(775 ) 328-0100
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
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.
☒ | 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 April 27, 2023 was 215,204,165 .
CAESARS ENTERTAINMENT, INC.
TABLE OF CONTENTS
| Page | ||||||||
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
CAESARS ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
| (In millions) | March 31, 2023 | December 31, 2022 | |||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventories | |||||||||||
| Prepayments and other current assets | |||||||||||
| Total current assets | |||||||||||
| Investments in and advances to unconsolidated affiliates | |||||||||||
| Property and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets other than goodwill | |||||||||||
| Other assets, net | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued interest | |||||||||||
| Accrued other liabilities | |||||||||||
| Current portion of long-term debt | |||||||||||
| Total current liabilities | |||||||||||
| Long-term financing obligation | |||||||||||
| Long-term debt | |||||||||||
| Deferred income taxes | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 7) | |||||||||||
| Caesars stockholders’ equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
CAESARS ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended March 31, | |||||||||||
| (In millions, except per share data) | 2023 | 2022 | |||||||||
| REVENUES: | |||||||||||
| Casino | $ | $ | |||||||||
| Food and beverage | |||||||||||
| Hotel | |||||||||||
| Other | |||||||||||
| Net revenues | |||||||||||
| EXPENSES: | |||||||||||
| Casino | |||||||||||
| Food and beverage | |||||||||||
| Hotel | |||||||||||
| Other | |||||||||||
| General and administrative | |||||||||||
| Corporate | |||||||||||
| Depreciation and amortization | |||||||||||
| Transaction and other costs, net | ( | ||||||||||
| Total operating expenses | |||||||||||
| Operating income (loss) | ( | ||||||||||
| OTHER EXPENSE: | |||||||||||
| Interest expense, net | ( | ( | |||||||||
| Loss on extinguishment of debt | ( | ||||||||||
| Other income | |||||||||||
| Total other expense | ( | ( | |||||||||
| Loss from continuing operations before income taxes | ( | ( | |||||||||
| Benefit for income taxes | |||||||||||
| Loss from continuing operations, net of income taxes | ( | ( | |||||||||
| Discontinued operations, net of income taxes | ( | ||||||||||
| Net loss | ( | ( | |||||||||
| Net (income) loss attributable to noncontrolling interests | |||||||||||
| Net loss attributable to Caesars | $ | ( | $ | ( | |||||||
| Net loss per share - basic and diluted: | |||||||||||
| Basic loss per share from continuing operations | $ | ( | $ | ( | |||||||
| Basic loss per share from discontinued operations | ( | ||||||||||
| Basic loss per share | $ | ( | $ | ( | |||||||
| Diluted loss per share from continuing operations | $ | ( | $ | ( | |||||||
| Diluted loss per share from discontinued operations | ( | ||||||||||
| Diluted loss per share | $ | ( | $ | ( | |||||||
| Weighted average basic shares outstanding | |||||||||||
| Weighted average diluted shares outstanding | |||||||||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
CAESARS ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| Three Months Ended March 31, | |||||||||||
| (In millions) | 2023 | 2022 | |||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Foreign currency translation adjustments | ( | ||||||||||
| Change in fair market value of interest rate swaps, net of tax | |||||||||||
| Other | |||||||||||
| Other comprehensive income (loss), net of tax | ( | ||||||||||
| Comprehensive loss | ( | ( | |||||||||
| Comprehensive (income) loss attributable to noncontrolling interests | |||||||||||
| Comprehensive loss attributable to Caesars | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
CAESARS ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
| Caesars Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | Shares | Amount | Shares | Amount | Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Amount | Noncontrolling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Shares withheld related to net share settlement of stock awards | — | — | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares withheld related to net share settlement of stock awards | — | — | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
CAESARS ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended March 31, | |||||||||||
| (In millions) | 2023 | 2022 | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net cash provided by (used in) operating activities | $ | $ | ( | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Purchase of property and equipment, net | ( | ( | |||||||||
| Proceeds from sale of businesses, property and equipment, net of cash sold | |||||||||||
| Proceeds from the sale of investments | |||||||||||
| Proceeds from insurance related to property damage | |||||||||||
| Other | ( | ||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Proceeds from long-term debt and revolving credit facilities | |||||||||||
| Repayments of long-term debt and revolving credit facilities | ( | ( | |||||||||
| Financing obligation payments | ( | ||||||||||
| Debt issuance and extinguishment costs | ( | ||||||||||
| Taxes paid related to net share settlement of equity awards | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| CASH FLOWS FROM DISCONTINUED OPERATIONS: | |||||||||||
| Cash flows from operating activities | ( | ||||||||||
| Cash flows from investing activities | ( | ||||||||||
| Cash flows from financing activities | |||||||||||
| Net cash from discontinued operations | ( | ||||||||||
| Effect of foreign currency exchange rates on cash | ( | ||||||||||
| Decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||||
| RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO AMOUNTS REPORTED WITHIN THE CONSOLIDATED CONDENSED BALANCE SHEETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Restricted and escrow cash included in other assets, net | |||||||||||
| Cash and cash equivalents and restricted cash held for sale - discontinued operations | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||||
| Interest paid | $ | $ | |||||||||
| Income taxes paid, net | |||||||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||
| Payables for capital expenditures | |||||||||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying consolidated condensed financial statements include the accounts of Caesars Entertainment, Inc., a Delaware corporation, and its consolidated subsidiaries which may be referred to as the “Company,” “CEI,” “Caesars,” “we,” “our,” or “us” within these financial statements.
This Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”). Capitalized terms used but not defined in this Form 10-Q have the same meanings as in the 2022 Annual Report.
We also refer to (i) our Consolidated Condensed Financial Statements as our “Financial Statements,” (ii) our Consolidated Condensed Balance Sheets as our “Balance Sheets,” (iii) our Consolidated Condensed Statements of Operations and Consolidated Condensed Statements of Comprehensive Income (Loss) as our “Statements of Operations,” and (iv) our Consolidated Condensed Statements of Cash Flows as our “Statements of Cash Flows.”
Note 1. Organization and Description of Business
Organization
The Company is a geographically diversified gaming and hospitality company that was founded in 1973 by the Carano family with the opening of the Eldorado Hotel Casino in Reno, Nevada. Beginning in 2005, the Company grew through a series of acquisitions, including the acquisition of MTR Gaming Group, Inc. in 2014, Isle of Capri Casinos, Inc. in 2017, Tropicana Entertainment, Inc. in 2018, Caesars Entertainment Corporation in 2020 and William Hill PLC on April 22, 2021. The Company’s ticker symbol on the NASDAQ Stock Market is “CZR.”
Description of Business
The Company owns, leases, brands or manages an aggregate of 51 domestic properties in 16 states with approximately 52,100 slot machines, video lottery terminals and e-tables, approximately 2,800 table games and approximately 47,200 hotel rooms as of March 31, 2023. The Company operates and conducts sports wagering across 30 jurisdictions in North America, 22 of which offer mobile sports betting, and operates regulated online real money gaming businesses in six jurisdictions in North America. In addition, we have other domestic and international properties that are authorized to use the brands and marks of Caesars Entertainment, Inc., as well as other non-gaming properties. The Company’s primary source of revenue is generated by our casino properties’ gaming operations, including retail and online sports betting, as well as online gaming, and the Company utilizes its hotels, restaurants, bars, entertainment, racing, retail shops and other services to attract customers to its properties.
The Company’s operations for retail and mobile sports betting, online casino, and online poker are included under the Caesars Digital segment. As part of the Caesars Digital segment, the Company has made significant investments into the interactive business in recent years, including the acquisition of William Hill PLC and strategic expansions into new markets as legalization permits. The Company has utilized significant marketing campaigns with distinguished actors, athletes and media personalities promoting the Caesars Sportsbook app. The Company expects to continue to expand its operations in the Caesars Digital segment as new jurisdictions legalize retail and online gaming and sports betting.
Divestitures
We periodically divest of assets in order to raise capital, as a result of a determination that the assets are not core to our business, or due to regulatory requirement. A summary of recently completed divestitures of our properties as of March 31, 2023 is as follows:
| Segment | Property | Date Sold | Sales Price | |||||||||||||||||
| Regional | Belle of Baton Rouge Casino & Hotel | May 5, 2022 | * | |||||||||||||||||
| Discontinued operations: | ||||||||||||||||||||
| N/A | William Hill International | July 1, 2022 | £ | |||||||||||||||||
___________________
*Not meaningful.
For the three months ended March 31, 2022, the operations of Belle of Baton Rouge Casino & Hotel resulted in $4 million in net revenues and the discontinued operations of William Hill International included net revenues of $419 million and net loss of $303 million.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited Financial Statements contain all adjustments, all of which are normal and recurring, considered necessary for a fair presentation. The results of operations for these interim periods are not necessarily indicative of the operating results for other quarters, for the full year or any future period.
The presentation of financial information herein for the periods before the Company’s divestitures of various properties is not fully comparable to the periods after the sale dates.
Consolidation of Subsidiaries and Variable Interest Entities
Our Financial Statements include the accounts of Caesars Entertainment, Inc. 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 (i) affiliates that are more than 50% owned are consolidated; (ii) investments in affiliates of 50% or less but greater than 20% are generally accounted for using the equity method where we have determined that we have significant influence over the entities; and (iii) investments in affiliates of 20% or less are generally accounted for as investments in equity securities.
We consider ourselves the primary beneficiary of a VIE when we have both the power to direct the activities that most significantly affect the results of the VIE and the right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE. We review investments for VIE consideration if a reconsideration event occurs to determine if the investment qualifies, or continues to qualify, as a VIE. If we determine an investment qualifies, or no longer qualifies, as a VIE, there may be a material effect to our Financial Statements.
Cash and Cash Equivalents
Cash equivalents include highly-liquid investments with original maturities of three months or less at the date of purchase including investments in money market funds that can be redeemed immediately at the current net asset value per share. A money market fund is a mutual fund whose investments are primarily in short-term debt securities designed to maximize current income with liquidity and capital preservation, usually maintaining per share net asset value at a constant amount, such as one dollar. Cash and cash equivalents also include cash maintained for gaming operations. The carrying amounts approximate the fair value because of the short maturity of those instruments (Level 1).
Restricted Cash
Restricted cash includes certificates of deposit and similar instruments that are subject to remeasurement on a recurring basis, as well as cash deposits which are restricted under certain operating agreements or restricted for future capital expenditures in the normal course of business.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Interest Expense, Net
| Three Months Ended March 31, | |||||||||||
| (In millions) | 2023 | 2022 | |||||||||
| Interest expense | $ | $ | |||||||||
| Capitalized interest | ( | ( | |||||||||
| Interest income | ( | ( | |||||||||
| Total interest expense, net | $ | $ | |||||||||
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Note 3. Investments in and Advances to Unconsolidated Affiliates
Pompano Joint Venture
In April 2018, the Company entered into a joint venture with Cordish Companies (“Cordish”) to plan and develop a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the casino at the Company’s Pompano property. As the managing member, Cordish will operate the business and manage the development, construction, financing, marketing, leasing, maintenance and day-to-day operation of the various phases of the project. Additionally, Cordish will be responsible for the development of the master plan for the project with the Company’s input and will submit it for the Company’s review and approval.
While the Company holds a 50 % variable interest in the joint venture, it is not the primary beneficiary; as such, the investment in the joint venture is accounted for using the equity method. The Company participates evenly with Cordish in the profits and losses of the joint venture, which are included in Transaction and other costs, net on the Statements of Operations. As of March 31, 2023 and December 31, 2022, the Company’s investment in the joint venture was $81 million and $80 million, respectively, and is recorded in Investments in and advances to unconsolidated affiliates on the Balance Sheets. The Company has no further obligation to contribute additional real estate or cash as of March 31, 2023.
NeoGames
The Company held an investment in NeoGames S.A., a global leader of iLottery solutions and services to national and state-regulated lotteries, and other investments. On March 14, 2022, the Company sold its investment at fair value for $26 million and recorded a loss of $34 million during the three months ended March 31, 2022, which is included within Other income on the Statements of Operations.
Note 4. Property and Equipment
| (In millions) | March 31, 2023 | December 31, 2022 | |||||||||
| Land | $ | $ | |||||||||
| Buildings, riverboats, and leasehold and land improvements | |||||||||||
| Furniture, fixtures, and equipment | |||||||||||
| Construction in progress | |||||||||||
| Total property and equipment | |||||||||||
| Less: accumulated depreciation | ( | ( | |||||||||
| Total property and equipment, net | $ | $ | |||||||||
A portion of our property and equipment is subject to various operating leases for which we are the lessor. Leased property includes our hotel rooms, convention space and retail space through various short-term and long-term operating leases.
| Depreciation Expense | |||||||||||
| Three Months Ended March 31, | |||||||||||
| (In millions) | 2023 | 2022 | |||||||||
| Depreciation expense | $ | $ | |||||||||
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 5. Goodwill and Intangible Assets, net
The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The Company determines the estimated fair values after review and consideration of relevant information including discounted cash flows, quoted market prices and estimates made by management. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is recorded as goodwill.
| Changes in Carrying Value of Goodwill and Other Intangible Assets | |||||||||||||||||
| Non-Amortizing Intangible Assets | |||||||||||||||||
| (In millions) | Amortizing Intangible Assets | Goodwill | Other | ||||||||||||||
Balances as of December 31, 2022 | $ | $ | $ | ||||||||||||||
| Amortization expense | ( | — | — | ||||||||||||||
Balances as of March 31, 2023 | $ | $ | $ | ||||||||||||||
| Gross Carrying Value and Accumulated Amortization of Intangible Assets Other Than Goodwill | |||||||||||||||||||||||||||||||||||||||||
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Useful Life | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||||||
| Amortizing intangible assets | |||||||||||||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Gaming rights and other | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Trademarks | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Reacquired rights | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Technology | ( | ( | |||||||||||||||||||||||||||||||||||||||
| $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||
| Non-amortizing intangible assets other than Goodwill | |||||||||||||||||||||||||||||||||||||||||
| Trademarks | |||||||||||||||||||||||||||||||||||||||||
| Gaming rights | |||||||||||||||||||||||||||||||||||||||||
| Caesars Rewards | |||||||||||||||||||||||||||||||||||||||||
| Total amortizing and non-amortizing intangible assets other than Goodwill, net | $ | $ | |||||||||||||||||||||||||||||||||||||||
Amortization expense with respect to intangible assets for the three months ended March 31, 2023 and 2022 totaled $36 million and $57 million, respectively, which is included in Depreciation and amortization in the Statements of Operations.
| Estimated Five-Year Amortization | |||||||||||||||||||||||||||||||||||
| Remaining 2023 | Years Ended December 31, | ||||||||||||||||||||||||||||||||||
| (In millions) | 2024 | 2025 | 2026 | 2027 | 2028 | ||||||||||||||||||||||||||||||
| Estimated annual amortization expense | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 6. Fair Value Measurements
Items Measured at Fair Value on a Recurring Basis
The following table sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the Balance Sheets:
| March 31, 2023 | |||||||||||||||||||||||
| (In millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Marketable securities | $ | $ | $ | $ | |||||||||||||||||||
| Total assets at fair value | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||
| (In millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Marketable securities | $ | $ | $ | $ | |||||||||||||||||||
| Total assets at fair value | $ | $ | $ | $ | |||||||||||||||||||
Restricted Cash
The estimated fair values of the Company’s restricted cash are based upon quoted prices available in active markets (Level 1) or quoted prices for similar assets in active and inactive markets (Level 2) and represent the amounts the Company would expect to receive if the Company sold the instruments classified as restricted cash. Restricted cash classified as Level 1 includes cash equivalents held in short-term certificate of deposit accounts or money market type funds. Restricted cash that is not subject to remeasurement on a recurring basis is not included in the table above.
Marketable Securities
Marketable securities consist primarily of trading securities held by the Company’s captive insurance subsidiary and deferred compensation plans. The estimated fair values of the Company’s marketable securities are determined on an individual asset basis based upon quoted prices of identical assets available in active markets (Level 1), quoted prices of identical assets in inactive markets, or quoted prices for similar assets in active and inactive markets (Level 2), and represent the amounts the Company would expect to receive if the Company sold these marketable securities.
Derivative Instruments
The Company does not purchase or hold any derivative financial instruments for trading purposes.
Forward Contracts
The Company entered into several foreign exchange forward contracts with third parties to hedge the risk of fluctuations in the foreign exchange rates between USD and GBP. During the three months ended March 31, 2022, the Company recorded a gain of $21 million, related to forward contracts, which has been recorded in Other income (loss) on the Statements of Operations. All forward contracts were settled as of July 1, 2022.
Interest Rate Swap Derivatives
The Company used interest rate swaps to manage the mix of debt between fixed and variable rate instruments. The term of the last interest rate swaps ended on December 31, 2022.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Accumulated Other Comprehensive Income (Loss)
The changes in Accumulated other comprehensive income (loss) by component, net of tax, for the three months ended March 31, 2023 and 2022 are shown below.
| (In millions) | Unrealized Net Gains on Derivative Instruments | Foreign Currency Translation Adjustments | Other | Total | |||||||||||||||||||
Balances as of December 31, 2021 | $ | $ | ( | $ | ( | $ | |||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | |||||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||||||||
Balances as of March 31, 2022 | $ | $ | ( | $ | ( | $ | |||||||||||||||||
Balances as of December 31, 2022 | $ | $ | ( | $ | ( | $ | |||||||||||||||||
| Other comprehensive income (loss) before reclassifications | |||||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | |||||||||||||||||||||||
Balances as of March 31, 2023 | $ | $ | $ | $ | |||||||||||||||||||
Note 7. Litigation, Commitments and Contingencies
Litigation
General
We are party to various legal proceedings, which have arisen in the normal course of our business. Such proceedings can be costly, time consuming and unpredictable and, therefore, no assurance can be given that the final outcome of such proceedings will not materially impact our consolidated financial condition or results of operations. Estimated losses are accrued for these proceedings when the loss is probable and can be estimated. While we maintain insurance coverage that we believe is adequate to mitigate the risks of such proceedings, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters. The current liability for the estimated losses associated with these proceedings is not material to our consolidated financial condition and those estimated losses are not expected to have a material impact on our results of operations.
COVID-19 Insurance Claims
The COVID-19 public health emergency had a significant impact on the Company’s business and employees, as well as the communities where the Company operates and serves. The Company purchased broad property insurance coverage to protect against “all risk of physical loss or damage” and resulting business interruption, unless specifically excluded by policies. The Company submitted claims for losses incurred as a result of the COVID-19 public health emergency which exceed $2 billion. The insurance carriers under the Company’s insurance policies have asserted that the policies do not cover losses incurred by the Company as a result of the COVID-19 public health emergency and have refused to make payments under the applicable policies. Therefore, on March 19, 2021, the Company filed a lawsuit against its insurance carriers in the state court in Clark County, Nevada. On June 8, 2021, the Company filed an amended complaint. Litigation is proceeding and there can be no assurance as to the outcome of the litigation.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Contractual Commitments
Capital Commitments
Harrah’s New Orleans
In April 2020, the Company and the State of Louisiana, by and through the Louisiana Gaming Control Board, entered into an Amended and Restated Casino Operating Contract. Additionally, the Company, New Orleans Building Corporation and the City entered into a Second Amended and Restated Lease Agreement. Based on these amendments related to Harrah’s New Orleans, the Company is required to make a capital investment of $325 million on or around Harrah’s New Orleans by July 15, 2024. The capital investment will involve the rebranding of the property to Caesars New Orleans which includes a renovation and full interior and exterior redesign, updated casino floor, new culinary experiences and a new 340 -room hotel tower. The project has a current capital plan of approximately $430 million, and as of March 31, 2023, total capital expenditures have been $145 million since the project began.
Atlantic City
As required by the New Jersey Gaming Control Board, in 2020, the Company funded $400 million in escrow to provide funds for a three year capital expenditure plan in the state of New Jersey. The capital plan includes significant room renovations at both Caesars Atlantic City and Harrah’s Atlantic City, as well as the addition of new celebrity partnered restaurants. As of March 31, 2023 and December 31, 2022, the restricted cash balance remaining in the escrow account was $88 million and $118 million, respectively. This amount is currently included in restricted cash in Other assets, net.
Sports Sponsorship/Partnership Obligations
The Company has agreements with certain professional sports leagues and teams, sporting event facilities and media companies for tickets, suites, advertising, marketing, promotional and sponsorship opportunities including communication with partner customer databases. Additionally, a selection of such partnerships provide Caesars with exclusivity to access the aforementioned rights within the casino and/or sports betting category. As of March 31, 2023 and December 31, 2022, obligations related to these agreements were $847 million and $898 million, respectively, with contracts extending through 2040. These obligations include leasing of event suites that are generally considered short-term leases for which the Company does not record a right of use asset or lease liability. The Company recognizes expenses in the period services are received in accordance with the various agreements. In addition, assets or liabilities may be recorded related to the timing of payments as required by the respective agreement.
Self-Insurance
The Company is self-insured for workers compensation and other risk insurance, as well as health insurance and general liability. The Company’s total estimated self-insurance liability as of March 31, 2023 and December 31, 2022, was $208 million and $203 million, respectively, which is included in Accrued other liabilities in our Balance Sheets.
The assumptions utilized by our actuaries are subject to significant uncertainty and if outcomes differ from these assumptions or events develop or progress in a negative manner, the Company could experience a material adverse effect and additional liabilities may be recorded in the future.
Contingencies
Weather Disruption - Lake Charles
On August 27, 2020, Hurricane Laura made landfall on Lake Charles, Louisiana as a Category 4 storm severely damaging the Isle of Capri Casino Hotel Lake Charles. During the three months ended March 31, 2022, the Company reached a final settlement agreement with the insurance carriers for a total amount of $128 million, before our insurance deductible of $25 million. Insurance proceeds received to replace damaged property were in excess of the respective carrying value of the damaged assets resulting in a gain of $38 million during the three months ended March 31, 2022, which is included in Transaction and other costs, net in our Statements of Operations. The construction of our new land-based casino, Horseshoe Lake Charles, was completed and the property reopened in December 2022.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 8. Long-Term Debt
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||
| (Dollars in millions) | Final Maturity | Rates | Face Value | Book Value | Book Value | ||||||||||||||||||||||||
| Secured Debt | |||||||||||||||||||||||||||||
| Baltimore Revolving Credit Facility | 2023 | variable | $ | $ | $ | ||||||||||||||||||||||||
| Baltimore Term Loan | 2024 | variable | |||||||||||||||||||||||||||
| CRC Term Loan | N/A | N/A | |||||||||||||||||||||||||||
| CRC Incremental Term Loan | N/A | N/A | |||||||||||||||||||||||||||
| CEI Revolving Credit Facility | 2028 | variable | |||||||||||||||||||||||||||
| CEI Term Loan A | 2028 | variable | |||||||||||||||||||||||||||
| CEI Term Loan B | 2030 | variable | |||||||||||||||||||||||||||
| CRC Senior Secured Notes | 2025 | ||||||||||||||||||||||||||||
| CEI Senior Secured Notes due 2025 | 2025 | ||||||||||||||||||||||||||||
Convention Center Mortgage Loan (a) | 2025 | ||||||||||||||||||||||||||||
| CEI Senior Secured Notes due 2030 | 2030 | ||||||||||||||||||||||||||||
| Unsecured Debt | |||||||||||||||||||||||||||||
| CEI Senior Notes due 2027 | 2027 | ||||||||||||||||||||||||||||
| CEI Senior Notes due 2029 | 2029 | ||||||||||||||||||||||||||||
| Special Improvement District Bonds | 2037 | ||||||||||||||||||||||||||||
| Long-term notes and other payables | |||||||||||||||||||||||||||||
| Total debt | |||||||||||||||||||||||||||||
| Current portion of long-term debt | ( | ( | ( | ||||||||||||||||||||||||||
| Deferred finance charges associated with the CEI Revolving Credit Facility | ( | ( | |||||||||||||||||||||||||||
| Long-term debt | $ | $ | $ | ||||||||||||||||||||||||||
| Unamortized discounts and deferred finance charges | $ | $ | |||||||||||||||||||||||||||
| Fair value | $ | ||||||||||||||||||||||||||||
____________________
(a)As described below, Convention Center Mortgage Loan was repaid on May 1, 2023.
Annual Estimated Debt Service Requirements as of March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||