0000858339-13-000041.txt : 20130729 0000858339-13-000041.hdr.sgml : 20130729 20130729160526 ACCESSION NUMBER: 0000858339-13-000041 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20130729 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20130729 DATE AS OF CHANGE: 20130729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAESARS ENTERTAINMENT Corp CENTRAL INDEX KEY: 0000858339 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 621411755 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10410 FILM NUMBER: 13992558 BUSINESS ADDRESS: STREET 1: ONE CAESARS PALACE DRIVE CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 7024076000 MAIL ADDRESS: STREET 1: ONE CAESARS PALACE DRIVE CITY: LAS VEGAS STATE: NV ZIP: 89109 FORMER COMPANY: FORMER CONFORMED NAME: HARRAHS ENTERTAINMENT INC DATE OF NAME CHANGE: 19950727 FORMER COMPANY: FORMER CONFORMED NAME: PROMUS COMPANIES INC DATE OF NAME CHANGE: 19920703 8-K 1 form8-k.htm 8-K Q2 2013 Form 8-K Earnings Release and Prepared Remarks




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K
 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
July 29, 2013 (July 29, 2013)
Date of Report (Date of earliest event reported)
 
Caesars Entertainment Corporation
(Exact name of registrant as specified in its charter)
 
Delaware
 
001-10410
 
62-1411755
(State of Incorporation)
 
(Commission File Number)
 
(IRS Employer
 
 
 
 
Identification Number)
 
 
One Caesars Palace Drive
 
 
 
 
Las Vegas, Nevada 89109
 
 
 
 
(Address of principal executive offices)
(Zip Code)
 
 
 
(702) 407-6000
(Registrant’s telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


 

 
 
 


Item 2.02
Results of Operations and Financial Condition.
Attached and incorporated herein by reference as Exhibit 99.1 and Exhibit 99.2, respectively, are copies of the press release and prepared remarks of the Registrant, each dated July 29, 2013, reporting the Registrant’s second-quarter 2013 financial results.
The information, including exhibits attached hereto, in this Current Report is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as otherwise expressly stated in such filing.
Item 9.01
Financial Statements and Exhibits.
(d) Exhibits. The following exhibits are being filed herewith:
 
 
99.1
Text of press release, dated July 29, 2013.
 
99.2
Prepared remarks, dated July 29, 2013.




 SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
CAESARS ENTERTAINMENT CORPORATION
 
 
 
 
Date: July 29, 2013
By:
 
/S/    MICHAEL D. COHEN        
 
 
 
Michael D. Cohen
 
 
 
Senior Vice President, Deputy General Counsel
and Corporate Secretary



EXHIBIT INDEX
 
 
Exhibit
Number
  
Document Description
99.1
  
Text of press release, dated July 29, 2013.
99.2
 
Prepared remarks, dated July 29, 2013.





 EX-99.1 2 ex991earningsrelease.htm EXHIBIT 2013 Q2 Ex 99.1 Earnings Release


Exhibit 99.1


Contact:
 
Gary Thompson - Media
 
Jennifer Garrison - Investors
 
 
Caesars Entertainment Corporation
 
Caesars Entertainment Corporation
 
 
(702) 407-6529
 
(702) 407-6407
Caesars Entertainment Reports Financial Results for the Second Quarter 2013

LAS VEGAS, July 29, 2013 - Caesars Entertainment Corporation (NASDAQ: CZR) today reported the following second quarter 2013 results.

•
Significant progress made in development of Las Vegas hospitality corridor, including The LINQ and High Roller
•
Challenging conditions in the gaming industry impact second quarter gaming results; positive underlying trends in food and beverage and hotel are emerging
•
Financing closed and ground broken in July 2013 for Horseshoe Baltimore, scheduled to open in third quarter 2014
•
Strategic transaction to form Caesars Growth Partners and Caesars Acquisition Company moves forward
•
Company buys back approximately $275 million face value of debt, and maintains $1.9 billion in liquidity


Summary Financial Data
The table below highlights certain GAAP and non-GAAP financial measures:
 
Quarter Ended June 30,
 
Percent
Favorable/
(Unfavorable)
 
Six Months Ended June 30,
 
Percent
Favorable/
(Unfavorable)
(In millions, except per share data)
2013
 
2012
 
 
2013
 
2012
 
Net revenues (1)
$
2,158.2

 
$
2,163.7

 
(0.3
)%
 
$
4,301.2

 
$
4,369.8

 
(1.6
)%
Income from operations (1), (2)
125.3

 
189.1

 
(33.7
)%
 
267.0

 
250.4

 
6.6
 %
Loss from continuing operations, net of income
taxes (1)
(208.9
)
 
(161.3
)
 
(29.5
)%
 
(384.8
)
 
(449.7
)
 
14.4
 %
Loss from discontinued operations, net of income
taxes
(0.3
)
 
(80.5
)
 
99.6
 %
 
(41.4
)
 
(73.2
)
 
43.4
 %
Net loss attributable to Caesars 
(212.2
)
 
(241.7
)
 
12.2
 %
 
(430.1
)
 
(522.3
)
 
17.7
 %
Basic and diluted loss per share (3)
(1.69
)
 
(1.93
)
 
12.4
 %
 
(3.43
)
 
(4.17
)
 
17.7
 %
Property EBITDA (4)
492.8

 
518.3

 
(4.9
)%
 
979.9

 
1,074.8

 
(8.7
)%
Adjusted EBITDA (5)  
470.5

 
512.4

 
(8.2
)%
 
940.2

 
1,035.6

 
(9.2
)%
(1) - (5) See footnotes following Caesars Entertainment Operating Company, Inc. results later in this release.

Management Commentary

“We reached a number of key milestones against our strategic initiatives in recent months, including breaking ground on Horseshoe Baltimore; setting a new attendance record at the World Series of Poker; beginning construction on our meetings facility in Atlantic City; and executing on our hospitality investments in Las Vegas,” said Gary Loveman, chairman, chief executive officer and president of Caesars Entertainment Corporation.

“We are also making progress on our strategic transaction to form Caesars Acquisition Company and Caesars Growth Partners and have proactively improved our liquidity profile and balance sheet,” Loveman said.


1


“While challenging conditions in the gaming industry impacted our gaming revenues during the second quarter, we are beginning to observe positive underlying trends resulting directly from the investments we've made to enhance our hospitality footprint, particularly in Las Vegas,” Loveman said. “Our performance also reflects our focus on managing operating expenses without sacrificing service.”

Loveman concluded, “We are excited about our prospects in 2014 and beyond, particularly in light of the improving economic conditions and consumer sentiment, favorable underlying business trends and projects that are scheduled to come online.”


Consolidated Financial Results

Net Revenues

Net revenues were relatively flat in the second quarter 2013 compared with the second quarter 2012. The decline in casino revenues of $116.8 million, or 7.5%, was largely offset by increases in non-gaming revenues, coupled with lower promotional allowances. The decline in casino revenues was driven by lower overall visitation to the Company's properties resulting from increased competition in Atlantic City and our other U.S. regional markets outside of Las Vegas and an elimination of marketing activities identified as less profitable. Additionally, on a comparative basis, the Company experienced lower hold percentages in Las Vegas, partially offset by higher hold percentages in Atlantic City and other regional markets, which also contributed to lower casino revenues.

Consistent with the first quarter of 2013, revenues in the second quarter dropped most significantly in Atlantic City due to continued competitive pressure in the region. Revenues in Las Vegas continued to be negatively impacted by the construction activities related to the LINQ, the ongoing renovation of The Quad Resort & Casino and the closure of Bill's Gamblin' Hall & Saloon in February 2013 for renovation. The renovated hotel and casino are expected to re-open as the Gansevoort Las Vegas in early 2014 and the dayclub/nightclub is expected to open in the first half of 2014. 
On a consolidated basis, cash average daily room rates increased from $95 in the second quarter 2012 to $103 in 2013 as higher rates attributable to resort fees in Las Vegas and other properties in Nevada more than offset the lower rates in Atlantic City. Total occupancy percentage decreased 1.7 percentage points to 91% in the second quarter 2013 from 2012 due mainly to the disruption caused by construction activities related to the renovation of the Quad in Las Vegas.
Revenues for the Company's Managed properties increased $71.2 million for the second quarter 2013 when compared to the second quarter 2012 due to new managed projects, including Horseshoe Cleveland (opened in May 2012), Horseshoe Cincinnati (opened in March 2013), Thistledown Racino (commenced video lottery terminal operations in April 2013) and the management company for Caesars Windsor, which the Company is now consolidating since increasing its ownership from 50% to 100% in June 2012. A large portion of these revenues represent reimbursable payroll expenses, which are presented on a gross basis as revenue and expense, thus resulting in no income from operations.
Income from Operations
Second quarter 2013 income from operations decreased $63.8 million, or 33.7%, compared with the second quarter 2012. This was primarily due to non-cash intangible and tangible asset impairment charges of $104.7 million in the second quarter 2013, compared with non-cash intangible asset impairment charges of $33.0 million in the second quarter 2012. Aside from the change in impairment charges, income from operations increased $7.9 million due mainly to the second quarter benefit from decreases in certain costs when compared to the prior year quarter. The decrease in expenses included a $34.2 million decrease in depreciation and amortization expense due to increasing numbers of assets becoming fully depreciated in 2013, an approximately $18 million reversal of a sales tax reserve related to the Nevada complimentary meals sales tax matter, which the Company settled during the quarter, and decreases in expenses resulting from the Company's cost savings initiatives. These expense reductions were partially offset by the income impact of the decline in revenues discussed above and higher remediation costs.
Net Loss and EBITDA measures
Net loss attributable to Caesars decreased $29.5 million, or 12.2%, in the second quarter 2013 from 2012. The decrease was due to a variety of factors, including an $80.2 million favorable change in the loss from discontinued operations, net of income taxes, an increase in gain on early extinguishments of debt, an increase in the benefit for income taxes and a gain of $44.1 million related to the sale of 45% of Baluma S.A., which owns the Conrad Punta Del Este Resort and Casino, to Enjoy S.A. for total consideration of $139.5 million. These favorable changes were partially offset by a decrease in income from operations as described above, combined with a $43.6 million increase in interest expense, net of interest capitalized. These factors are further described in "Additional Financial Information" that follows later in this release.

2


The declines in second quarter 2013 Property EBITDA and Adjusted EBITDA from 2012 are primarily driven by the factors described above, including reductions as a result of the sale of Harrah's St. Louis in November 2012. Further details on these non-GAAP financial measures are found later in this release.
Regional Operational Results
To provide more meaningful information than would be possible on either a consolidated basis or an individual property basis, the Company's casino properties and other operations have been grouped into four regions. Operating results for each of the regions are provided below.
Las Vegas
 
Quarter Ended June 30,
 
Percent
Favorable/
(Unfavorable)
 
Six Months Ended June 30,
 
Percent
Favorable/
(Unfavorable)
(In millions)
2013
 
2012
 
 
2013
 
2012
 
Net revenues
$
745.9

 
$
780.7

 
(4.5
)%
 
$
1,497.5

 
$
1,552.3

 
(3.5
)%
Income from operations
125.8

 
127.8

 
(1.6
)%
 
230.1

 
247.9

 
(7.2
)%
Property EBITDA (4)
210.6

  
214.4

 
(1.8
)%
 
408.5

  
425.7

 
(4.0
)%
Las Vegas properties include Bally's Las Vegas, Bill's Gamblin' Hall & Saloon ("Bill's"), Caesars Palace, Flamingo Las Vegas, Harrah's Las Vegas, Paris Las Vegas, Planet Hollywood Resort & Casino, The Quad Resort & Casino (the "Quad") and Rio. Bill's temporarily closed in early February 2013 to accommodate previously disclosed renovations and is expected to reopen in phases beginning in early 2014 as Gansevoort Las Vegas.
Net revenues decreased $34.8 million, or 4.5%, in the second quarter 2013 compared with the prior year quarter, driven by declines in casino revenues, partially offset by increases in rooms and food and beverage revenues. Construction activities associated with the LINQ project and activities associated with the renovation of the Quad and the renovation-related closure of Bill's Gamblin' Hall & Saloon have also unfavorably impacted the revenues in the region. The Company estimates that the LINQ project negatively impacted second quarter 2013 revenues in Las Vegas by approximately $6 million to $9 million and reduced income from operations and Property EBITDA by approximately $4 million to $7 million.
Casino revenues were down $63.1 million, or 15.5%, in the second quarter 2013 compared with the prior year quarter due to weaker gaming volumes, a decline in hold percentage as well as the negative impact of the LINQ project mentioned above, while visitation remained flat.
However, food and beverage revenues increased $18.1 million, or 8.9%, in the second quarter 2013 compared with the prior year quarter due to the addition of several new restaurant offerings such as Bacchanal Buffet and Nobu at Caesars Palace and Gordon Ramsay-branded restaurants at Caesars Palace, Paris, and Planet Hollywood.
Hotel revenues increased $12.8 million, or 6.3%, in the second quarter 2013 compared with the prior year, as the implementation of resort fees in March 2013, partially offset by a change in the mix of group business, led to an increase in cash average daily room rates from $97 in 2012 to $107 in 2013. However, the region's occupancy percentage declined 1.3 percentage points to 95% in 2013, primarily due to the disruption caused by construction activities related to the renovation of the Quad.
Overall, property operating expenses in the region declined $31.1 million in the second quarter 2013 compared with the prior year quarter largely due to a reversal of a sales tax reserve of $14.1 million related to the Nevada complimentary meals sales tax matter, which the Company settled during the quarter, as well as decreases in fixed expenses attributable to the Company's cost-savings initiatives, partially offset by an increase in variable costs associated with higher Food and Beverage revenues. Depreciation expense in the region decreased as a result of assets becoming fully depreciated, while write-downs, reserves, and project opening costs, net of recoveries increased as a result of additional remediation costs in 2013 when compared with 2012.
The overall reduction in property operating expenses largely offset lower revenues resulting in a slight decline in Property EBITDA of $3.8 million, or 1.8%, in the second quarter 2013 compared with the prior year quarter.

3


Atlantic City
  
Quarter Ended June 30,
 
Percent
Favorable/
(Unfavorable)
 
Six Months Ended June 30,
 
Percent
Favorable/
(Unfavorable)
(In millions)
2013
 
2012
 
 
2013
 
2012
 
Net revenues
$
400.1

 
$
436.5

 
(8.3
)%
 
$
765.4

 
$
868.9

 
(11.9
)%
Income/(loss) from operations
1.9

 
16.3

 
(88.3
)%
 
(1.3
)
 
35.1

 
(103.7
)%
Property EBITDA (4)
63.1

  
67.1

 
(5.9
)%
 
114.3

 
137.1

 
(16.6
)%
Atlantic City properties include Bally's Atlantic City, Caesars Atlantic City, Harrah's Atlantic City, Harrah's Philadelphia and Showboat Atlantic City.

Atlantic City continues to be affected by the continuing competitive environment which has caused a significant decline in visitation to the region's properties as compared to 2012. This traffic decline has contributed in overall revenue declines, partially offset by lower promotional allowances and improved gaming hold. Net revenues declined $36.4 million, or 8.3%, in the second quarter 2013 compared with the prior year quarter, an improvement compared with the Company's first quarter 2013 results in the region, which were largely affected by sharp visitation declines in the wake of Hurricane Sandy.

Operating expenses in the second quarter 2013 were lower than in 2012 as a result of a continued focus on controlling costs to align the cost structure with lower revenue levels, including more efficient marketing spending and other cost-savings initiatives, and lower depreciation expense. These reductions in operating expenses were partially offset by non-cash tangible asset impairment charges of $22.4 million recorded in the second quarter 2013, primarily related to the Company's investment in a real estate project initiated by the Casino Reinvestment Development Authority (“CRDA”), a New Jersey state governmental agency responsible for directing the spending of casino reinvestment funds for the benefit of Atlantic City.
Property operating expense reductions attributable to the Company's focus on controlling costs to align the cost structure with lower revenue levels nearly offset revenue declines, resulting in a decrease in Property EBITDA of $4.0 million, or 5.9%, in the second quarter 2013 compared with the prior year quarter.
Other U.S.
 
Quarter Ended June 30,
 
Percent
Favorable/
(Unfavorable)
 
Six Months Ended June 30,
 
Percent
Favorable/
(Unfavorable)
(In millions)
2013
 
2012
 
 
2013
 
2012
 
Net revenues
$
748.1

 
$
756.6

 
(1.1
)%
 
$
1,497.3

 
$
1,552.5

 
(3.6
)%
Income from operations
44.3

 
111.7

 
(60.3
)%
 
145.8

 
62.5

 
133.3
 %
Property EBITDA (4)
182.3

 
177.6

 
2.6
 %
 
360.6

 
364.3

 
(1.0
)%
Other U.S. properties include Grand Casino Biloxi, Harrah's Council Bluffs, Harrah's Joliet, Harrah's Lake Tahoe, Harrah's Laughlin, Harrah's Metropolis, Harrah's New Orleans, Harrah's North Kansas City, Harrah's Reno, Harrah's Tunica, Harveys Lake Tahoe, Horseshoe Bossier City, Horseshoe Council Bluffs, Horseshoe Hammond, Horseshoe Southern Indiana, Horseshoe Tunica, Louisiana Downs and Tunica Roadhouse Hotel and Casino. On November 2, 2012, Caesars sold its Harrah's St Louis casino; therefore, the results in the table above exclude those of the Harrah's St. Louis casino for all periods presented.
Net revenue declines were attributable to lower visitation to the properties driven by competition within the regional markets and an elimination of marketing activities identified as less profitable, partially offset by improved hold. Income from operations decreased $67.4 million or 60.3%, primarily due to a $79.3 million non-cash impairment charge related to land holdings in Mississippi, with no comparable impairment charges in the prior year quarter. A continued focus on controlling costs, coupled with a $9.4 million decrease in depreciation expense and a $3.4 million reversal of a sales tax reserve related to the Nevada complimentary meals sales tax matter, partially offset the impact of the above impairment charges. Property EBITDA rose $4.7 million, or 2.6%, in the second quarter 2013 compared with the prior year quarter primarily due to decreases in property operating expenses as a result of our cost savings programs, partially offset by the income impact of lower revenues.

4


Managed, International, Other
 
Quarter Ended June 30,
 
Percent
Favorable/
(Unfavorable)
 
Six Months Ended June 30,
 
Percent
Favorable/
(Unfavorable)
(In millions)
2013
 
2012
 
 
2013
 
2012
 
Net revenues
 
 
 
 
 
 
 
 
 
 
 
Managed
$
85.2

 
$
14.0

 
508.6
 %
 
$
157.0

 
$
25.0

 
528.0
 %
International
92.5

 
100.3

 
(7.8
)%
 
216.6

 
230.7

 
(6.1
)%
Other
86.4

 
75.7

 
14.2
 %
 
167.4

 
140.4

 
19.2
 %
Total net revenues
$
264.1

 
$
190.0

 
39.0
 %
 
$
541.0

 
$
396.1

 
36.6
 %
(Loss)/income from operations
 
 
 
 
 
 
 
 
 
 
 
Managed
$
7.7

 
$
3.0

 
156.7
 %
 
$
12.4

 
$
5.0

 
148.0
 %
International
0.8

 
5.2

 
(84.6
)%
 
22.5

 
26.9

 
(16.4
)%
Other
(55.2
)
 
(74.9
)
 
26.3
 %
 
(142.5
)
 
(127.0
)
 
(12.2
)%
Total loss from operations
$
(46.7
)
 
$
(66.7
)
 
30.0
 %
 
$
(107.6
)
 
$
(95.1
)
 
(13.1
)%

Managed properties include companies that operate three Indian-owned casinos, as well as Horseshoe Cleveland, Horseshoe Cincinnati (which opened in March 2013) and Caesars Windsor, and the results of Thistledown Racetrack ("Thistledown") through August 2012 when the racetrack was contributed to Rock Ohio Caesars, LLC, a joint venture in which Caesars holds a 20% ownership interest. Upon commencement of video lottery terminal operations in April 2013, the Managed region includes the results of the subsidiary that manages Thistledown. International properties include the results of Caesars' international operations. On May 31, 2013, the Company sold 45% of its equity interest in Conrad Punta del Este and, as a result of this transaction, no longer consolidates this International property's results, but instead accounts for it as an equity method investment. The above table includes the consolidated results of Conrad Punta del Este through May 31, 2013 and the equity method income or loss in (loss)/income from operations beginning June 1, 2013. Other is comprised of corporate expenses, including administrative, marketing, and development costs, income from certain non-consolidated affiliates, and the results of Caesars Interactive Entertainment, Inc. ("CIE"), which consists of the businesses related to the World Series of Poker® (“WSOP”) brand, an online real-money business in the U.K. and alliances with online gaming providers in Italy and France, and the results of the Company's social and mobile games businesses.
In the fourth quarter 2012, the Company began discussions with interested parties with respect to a sale of the subsidiaries that hold the Company's land concession in Macau. As a result of this plan of disposal, those assets and liabilities have been classified as held for sale at June 30, 2013 and December 31, 2012 and their operating results have been classified as discontinued operations for all periods presented and are excluded from the table above.
On March 4, 2013, the Company closed the Alea Leeds casino in England and its operating results have been classified as discontinued operations for all periods presented and are excluded from the table above.

Managed

Revenues for the Company's Managed properties increased $71.2 million in the second quarter 2013 compared with the prior year quarter, primarily due to new managed projects, including Horseshoe Cleveland (opened in May 2012), Horseshoe Cincinnati (opened in March 2013), Thistledown Racino (commenced video lottery terminal operations in April 2013) and the management company for Caesars Windsor, the results of which have been consolidated into the Company's financial statements since June 2012 when the Company increased its 50% ownership to 100%. A large portion of these revenues represent reimbursable payroll expenses, which are presented on a gross basis as revenue and expense, thus resulting in no income from operations.

International

During the second quarter 2013, the Company sold 45% of its equity interests in Conrad Punta Del Este in Uruguay to Enjoy S.A. for total consideration of $139.5 million. Subsequent to the sale, Enjoy S.A. assumed control of the property and as a result, the Company no longer consolidates the property which resulted in a decrease in revenues and income from operations in the second quarter 2013 compared with 2012.

Other

Net revenues increased during the second quarter for the company's social and mobile games business, mostly related to CIE's late 2012 acquisition of substantially all of the assets of Buffalo Studios, LLC ("Buffalo"). This acquisition also increased the company's second quarter expenses, but resulted in an overall decrease to loss from operations. Loss from operations decreased $19.7 million, or 26.3%, resulting from the net impact of the Buffalo acquisition previously mentioned and from $33.0 million of non-cash intangible asset impairment charges in the second quarter 2012 that did not recur in 2013.



5


Additional Financial Information
Interest Expense, Net of Interest Capitalized

Interest expense, net of interest capitalized, increased by $43.6 million, or 8.8%, in the second quarter 2013, due primarily to  higher interest rates as a result of the amendment and extension of the maturities of CEOC's debt combined with higher debt balances, compared with the year-ago quarter, partially offset by higher mark-to-market gains on derivatives in 2013.
Gain on Early Extinguishments of Debt

During the second quarter 2013 the Company recognized $41.3 million in gains on early extinguishments of debt, net of deferred finance charges. The gains were primarily related to the purchase of $225.0 million of aggregate face value CMBS Loans for $183.7 million, resulting in a gain of $39.0 million, net of deferred finance charges and open market repurchases of approximately $51.2 million face value of outstanding debt of CEOC for $40.9 million, resulting in a gain of $2.4 million, net of discount.

During the second quarter 2012 the Company recognized $33.7 million in gains on early extinguishments of debt, net of deferred finance charges, primarily related to the purchase of $83.7 million of aggregate face value CMBS Loans for $50.2 million.
Benefit for Income Taxes

The effective tax rate benefit for the second quarter of 2013 and 2012 was 35.6% and 39.6%, respectively. The effective rate benefit in the second quarter of 2013 was lower than 2012 primarily due to lower tax benefits from foreign operations.
Loss from Discontinued Operations, Net of Income Taxes
Loss from discontinued operations, net of income taxes improved significantly compared to the second quarter 2012, which included a $101.0 million non-cash impairment charge related to the Macau land concession and $14.1 million of income related to the Harrah's St. Louis casino with no comparable amounts recorded in the second quarter 2013.
Liquidity
Caesars had $1.9 billion in liquidity as of June 30, 2013, comprised of $1.8 billion of cash and $215.5 million of revolver capacity,  partially offset by $119.9 million of revolver capacity committed to letters of credit.  The $1.9 billion in liquidity does not include $334.4 million of restricted cash. 
The total face value of debt outstanding was $23.7 billion as of June 30, 2013.
Cost-Savings Initiatives

Caesars Entertainment has undertaken comprehensive cost-reduction efforts to rightsize expenses with business levels. The Company estimates that its cost-savings programs produced $66.9 million in incremental cost savings for the second quarter of 2013 compared with the same period in 2012. Additionally, as of June 30, 2013, the Company expects that these and additional new cost-savings programs will produce additional annual cost-savings of $148.4 million, based on the full implementation of current projects that are in process. As the Company realizes savings or identifies new cost-reduction activities, this amount will change.


6


Caesars Entertainment Operating Company, Inc. Results
As a substantial portion of the debt of Caesars Entertainment's consolidated group is issued by Caesars Entertainment Operating Company, Inc. ("CEOC"), the Company believes it is meaningful to provide information on the results of operations of CEOC, which are summarized below. CEOC's Summary of Operations, Supplemental Information, and Reconciliation of Net Loss Attributable to CEOC to Adjusted EBITDA, LTM Adjusted EBITDA-Pro Forma and LTM Adjusted EBITDA-Pro Forma - CEOC Restricted, can be found at the end of this release.
 
Quarter Ended June 30,
 
Percent
Favorable/
(Unfavorable)
 
Six Months Ended June 30,
  
Percent
Favorable/
(Unfavorable)
(In millions)
2013
 
2012
 
 
2013
 
2012
  
Net revenues (1)
$
1,583.5

 
$
1,608.2

 
(1.5
)%
 
$
3,201.4

 
$
3,284.2

  
(2.5
)%
Income from operations (1), (2)
71.9

 
143.6

 
(49.9
)%
 
222.0

 
153.8

  
44.3
 %
Loss from continuing operations, net of
income taxes (1)
(259.5
)
 
(196.5
)
 
(32.1
)%
 
(426.7
)
 
(533.4
)
 
20.0
 %
(Loss)/income from discontinued operations,
net of income taxes
(0.3
)
 
(80.5
)
 
99.6
 %
 
(41.4
)
 
(73.2
)
 
43.4
 %
Net loss attributable to CEOC
(262.0
)
 
(278.7
)
 
6.0
 %
 
(472.9
)
 
(607.6
)
  
22.2
 %
Property EBITDA (4)
350.9

 
406.0

 
(13.5
)%
 
724.1

 
843.6

  
(14.2
)%
Adjusted EBITDA (5)
329.1

 
384.4

 
(14.4
)%
 
679.3

 
788.0

  
(13.8
)%

(1)
Net revenues, income from operations, and loss from continuing operations, net of income taxes for all periods presented in the table above exclude the results of the Harrah's St. Louis casino which was sold in November 2012, the results of Alea Leeds casino which was closed in March 2013 and the results of the subsidiaries that hold the Company's land concession in Macau, all of which are presented as discontinued operations.
(2)  
Income from operations for Caesars includes intangible and tangible asset impairment charges of $104.7 million and $33.0 million, for the second quarter of 2013 and 2012, respectively, and includes intangible and tangible asset impairment charges of $124.7 million and $207.0 million for the six months ended June 30, 2013 and 2012, respectively. Income from operations for CEOC includes intangible and tangible asset impairment charges of $80.3 million and $33.0 million, for the second quarter of 2013 and 2012, respectively and includes intangible and tangible asset impairment charges of $100.3 million and $207.0 million for the six months ended June 30, 2013 and 2012, respectively.
(3) 
Basic and diluted loss per share for Caesars for the periods shown includes loss per share from discontinued operations. In the second quarter of 2013 loss from discontinued operations, net of income taxes resulted in no earnings per share. Loss per share from discontinued operations for the second quarter of 2012 was $0.64 per share. Loss per share from discontinued operations for the six months ended June 2013 and 2012 was $0.33 per share and $0.59 per share, respectively.
(4)
Property EBITDA is a non-GAAP financial measure that is defined and reconciled to its most comparable GAAP measure later in this release. Property EBITDA is included because the Company's management uses Property EBITDA to measure performance and allocate resources, and believes that Property EBITDA provides investors with additional information consistent with that used by management.
(5)  
Adjusted EBITDA is a non-GAAP financial measure that is defined and reconciled to its most comparable GAAP measure later in this release. Adjusted EBITDA is included because management believes that Adjusted EBITDA provides investors with additional information that allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the Company. Adjusted EBITDA does not include the pro forma effect of adjustments related to properties, yet-to-be-realized cost savings from the Company's profitability improvement programs, discontinued operations and LTM Adjusted EBITDA-Pro forma of CEOC's unrestricted subsidiaries.

Conference Call Information

Caesars Entertainment Corporation (NASDAQ: CZR) will host a conference call at 2 p.m. Pacific Time Monday, July 29, 2013 to review its second-quarter results. The call will be accessible in the Investor Relations section of www.caesars.com.

If you would like to ask questions and be an active participant in the call, you may dial 877-637-3723, or 832-412-1752 for international callers, and enter Conference ID 14390108 approximately 10 minutes before the call start time. A recording of the live call will be available on the Company's web site for 90 days after the event.

7


About Caesars
Caesars Entertainment Corporation is the world's most diversified casino-entertainment provider and the most geographically diverse U.S. casino-entertainment company. Since its beginning in Reno, Nevada, 75 years ago, Caesars has grown through development of new resorts, expansions and acquisitions and now operates casinos on four continents. The Company's resorts operate primarily under the Caesars®, Harrah's® and Horseshoe® brand names. Caesars also owns the World Series of Poker® and the London Clubs International family of casinos. Caesars is focused on building loyalty and value with its guests through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership. The Company is committed to environmental sustainability and energy conservation and recognizes the importance of being a responsible steward of the environment. For more information, please visit www.caesars.com.
Forward Looking Information
This release includes “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue,” “pursue,” or the negative or other variations thereof or comparable terminology. In particular, they include statements relating to, among other things, future actions, new projects, strategies, future performance, the outcomes of contingencies, and future financial results of Caesars. These forward-looking statements are based on current expectations and projections about future events.

Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified, and, consequently, the actual performance of Caesars may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors, as well as other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission (including the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” contained therein):

•
the ability to satisfy the conditions to the closing of the previously announced Caesars Growth Partners transaction, including receipt of required regulatory approvals;
•
the previously announced Caesars Growth Partners transaction may not consummate on the terms contemplated or at all;
•
the impact of the Company's substantial indebtedness and the restrictions in the Company's debt agreements;
•
access to available and reasonable financing on a timely basis, including the ability of the Company to refinance its indebtedness on acceptable terms;
•
the effects of local and national economic, credit, and capital market conditions on the economy, in general, and on the gaming industry, in particular;
•
the ability to realize the expense reductions from cost savings programs;
•
changes in the extensive governmental regulations to which the Company and its stockholders are subject, and changes in laws, including increased tax rates, smoking bans, regulations or accounting standards, third-party relations and approvals, and decisions, disciplines, and fines of courts, regulators, and governmental bodies;
•
the ability of the Company's customer-tracking, customer loyalty, and yield-management programs to continue to increase customer loyalty and same-store or hotel sales;
•
the effects of competition, including locations of competitors and operating and market competition;
•
the ability to recoup costs of capital investments through higher revenues;
•
abnormal gaming holds (“gaming hold” is the amount of money that is retained by the casino from wagers by customers);
•
the ability to timely and cost-effectively integrate companies that the Company acquires into its operations;
•
the potential difficulties in employee retention and recruitment as a result of the Company's substantial indebtedness or any other factor;
•
construction factors, including delays, increased costs of labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters, and building permit issues;

8


•
litigation outcomes and judicial and governmental body actions, including gaming legislative action, referenda, regulatory disciplinary actions, and fines and taxation;
•
acts of war or terrorist incidents, severe weather conditions, uprisings or natural disasters, including losses therefrom, including losses in revenues and damage to property, and the impact of severe weather conditions on the Company's ability to attract customers to certain of its facilities, such as the amount of losses and disruption to the Company as a result of Hurricane Sandy in late October 2012;
•
the effects of environmental and structural building conditions relating to the Company's properties;
•
access to insurance on reasonable terms for the Company's assets; and
•
the impact, if any, of unfunded pension benefits under multi-employer pension plans.

Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. Caesars disclaims any obligation to update the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated or, if no date is stated, as of the date of this release.

9


CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In millions, except per share data)
 
Quarter Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 
 
Casino
$
1,435.1

 
$
1,551.9

 
$
2,930.2

 
$
3,176.9

Food and beverage
386.1

 
385.3

 
766.2

 
767.4

Rooms
322.3

 
316.4

 
610.5

 
620.2

Management fees
17.2

 
12.3

 
27.8

 
21.9

Other
284.8

 
202.8

 
547.6

 
398.2

Less: casino promotional allowances
(287.3
)
 
(305.0
)
 
(581.1
)
 
(614.8
)
Net revenues
2,158.2

 
2,163.7

 
4,301.2

 
4,369.8

Operating expenses
 
 
 
 
 
 
 
Direct
 
 
 
 
 
 
 
Casino (a)
819.6

 
898.1

 
1,654.4

 
1,822.9

Food and beverage (a)
169.5

 
169.7

 
334.7

 
331.5

Rooms (a)
82.2

 
80.7

 
155.5

 
155.8

Property, general, administrative, and other (a)
593.8

 
520.9

 
1,175.2

 
1,031.7

Depreciation and amortization
141.3

 
175.5

 
303.0

 
355.0

Write-downs, reserves, and project opening costs, net of
recoveries
23.4

 
7.9

 
44.1

 
24.1

Intangible and tangible asset impairment charges
104.7

 
33.0

 
124.7

 
207.0

Loss on interests in non-consolidated affiliates
13.8

 
3.2

 
16.4

 
10.3

Corporate expense
41.3

 
41.3

 
77.3

 
93.5

Acquisition and integration costs
2.2

 
1.1

 
66.4

 
1.2

Amortization of intangible assets
41.1

 
43.2

 
82.5

 
86.4

Total operating expenses
2,032.9

 
1,974.6

 
4,034.2

 
4,119.4

Income from operations
125.3

 
189.1

 
267.0

 
250.4

Interest expense, net of interest capitalized
(540.1
)
 
(496.5
)
 
(1,114.8
)
 
(1,058.5
)
Gain on early extinguishments of debt
41.3

 
33.7

 
4.6

 
79.5

Gain on partial sale of subsidiary
44.1

 
—

 
44.1

 
—

Other income, including interest income
4.8

 
6.5

 
8.3

 
14.7

Loss from continuing operations before income taxes
(324.6
)
 
(267.2
)
 
(790.8
)
 
(713.9
)
Benefit for income taxes
115.7

 
105.9

 
406.0

 
264.2

Loss from continuing operations, net of income taxes
(208.9
)
 
(161.3
)
 
(384.8
)
 
(449.7
)
Discontinued operations
 
 
 
 
 
 
 
Loss from discontinued operations
(0.3
)
 
(84.4
)
 
(44.2
)
 
(70.2
)
Benefit/(provision) for income taxes
—

 
3.9

 
2.8

 
(3.0
)
Loss from discontinued operations, net of income taxes
(0.3
)
 
(80.5
)
 
(41.4
)
 
(73.2
)
Net loss
(209.2
)
 
(241.8
)
 
(426.2
)
 
(522.9
)
Less: net (income)/loss attributable to non-controlling interests
(3.0
)
 
0.1

 
(3.9
)
 
0.6

Net loss attributable to Caesars
$
(212.2
)
 
$
(241.7
)
 
$
(430.1
)
 
$
(522.3
)
Loss per share - basic and diluted
 
 
 
 
 
 
 
Loss per share from continuing operations
$
(1.69
)
 
$
(1.29
)
 
$
(3.10
)
 
$
(3.58
)
Loss per share from discontinued operations
—

 
(0.64
)
 
(0.33
)
 
(0.59
)
Net loss per share
$
(1.69
)
 
$
(1.93
)
 
$
(3.43
)
 
$
(4.17
)
(a) Property operating expenses are comprised of casino, food and beverage, rooms, and property, general, administrative and other expenses.
 

10


CAESARS ENTERTAINMENT CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEETS
(UNAUDITED)
(In millions)
June 30, 2013
 
December 31, 2012
Assets
 
 
 
Current assets
 
 
 
           Cash and cash equivalents
$
1,810.7

 
$
1,757.5

           Restricted Cash (a)
88.4

 
833.6

           Assets held for sale (b)
5.4

 
5.1

           Other current assets
861.1

 
897.4

Total current assets
2,765.6

 
3,493.6

Property and equipment, net
15,461.9

 
15,701.7

Goodwill and other intangible assets
7,034.5

 
7,146.0

Restricted cash
246.0

 
364.6

Assets held for sale (b)
441.1

 
471.2

Other long-term assets
895.7

 
821.0

 
$
26,844.8

 
$
27,998.1

Liabilities and Stockholders’ Deficit
 
 
 
Current liabilities
 
 
 
           Current portion of long-term debt (a)
$
158.5

 
$
879.9

           Liabilities held for sale (b)
3.6

 
3.8

           Other current liabilities
1,769.7

 
1,704.6

Total current liabilities
1,931.8

 
2,588.3

Long-term debt
20,912.8

 
20,532.2

Liabilities held for sale (b)
49.6

 
52.1

Other long-term liabilities
4,688.7

 
5,157.1

 
27,582.9

 
28,329.7

Total Caesars stockholders’ deficit
(849.8
)
 
(411.7
)
Non-controlling interests
111.7

 
80.1

Total deficit
(738.1
)
 
(331.6
)
 
$
26,844.8

 
$
27,998.1


(a)
The balance of restricted cash at December 31, 2012 includes $750.0 million of escrow proceeds related to the Company's December 13, 2012 bond offering and the related debt obligation is included in the current portion of long-term debt. Escrow conditions were met in February 2013, at which time the cash was released from restriction and the debt obligation was re-classified to long-term.
(b)  
The balances at June 30, 2013 and December 31, 2012 relate to the subsidiaries that hold the Company's land concession in Macau.

11


CAESARS ENTERTAINMENT CORPORATION
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT CORPORATION
TO PROPERTY EBITDA
(UNAUDITED)
Property EBITDA is presented as a supplemental measure of the Company's performance. Property EBITDA is defined as revenues less property operating expenses and is comprised of net income/(loss) before (i) interest expense, net of interest capitalized and interest income, (ii) (benefit)/provision for income taxes, (iii) depreciation and amortization, (iv) corporate expenses, and (v) certain items that the Company does not consider indicative of its ongoing operating performance at an operating property level. In evaluating Property EBITDA you should be aware that, in the future, the Company may incur expenses that are the same or similar to some of the adjustments in this presentation. The presentation of Property EBITDA should not be construed as an inference that future results will be unaffected by unusual or unexpected items.
Property EBITDA is a non-GAAP financial measure commonly used in the Company's 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). Property EBITDA may not be comparable to similarly titled measures reported by other companies within the industry. Property EBITDA is included because management uses Property EBITDA to measure performance and allocate resources, and believes that Property EBITDA provides investors with additional information consistent with that used by management.
The following tables reconcile net loss attributable to Caesars to Property EBITDA for the periods indicated.
 
Quarter Ended June 30, 2013
(In millions)
Las
Vegas
 
Atlantic
City
 
Other U.S. (a)
 
Managed, Int'l and Other 
 
Discontinued Operations
 
Total
Net loss attributable to Caesars
 
 
 
 
 
 
 
 
 
 
$
(212.2
)
Net loss attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
3.0

Net loss
 
 
 
 
 
 
 
 
 
 
(209.2
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
0.3

Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(208.9
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(115.7
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(324.6
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(4.8
)
Gain on partial sale of subsidiary
 
 
 
 
 
 
 
 
 
 
(44.1
)
Gain on early extinguishments of debt
 
 
 
 
 
 
 
 
 
 
(41.3
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
540.1

Income/(loss) from operations
$
125.8

 
$
1.9

 
$
44.3

 
$
(46.7
)
 
 
 
125.3

Depreciation and amortization
58.0

 
32.1

 
42.7

 
8.5

 
 
 
141.3

Amortization of intangible assets
19.0

 
4.0

 
9.3

 
8.8

 
 
 
41.1

Intangible and tangible asset impairment charges
—

 
22.4

 
82.3

 
—

 
 
 
104.7

Write-downs, reserves, and project opening costs, net of
recoveries
10.1

 
2.7

 
4.0

 
6.6

 
 
 
23.4

Acquisition and integration costs
—

 
—

 
—

 
2.2

 
 
 
2.2

(Income)/loss on interests in non-consolidated affiliates
(2.2
)
 
—

 
(0.2
)
 
16.2

 
 
 
13.8

Corporate expense
—

 
—

 
—

 
41.3

 
 
 
41.3

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
(0.3
)
 
(0.3
)
Property EBITDA
$
210.6

 
$
63.1

 
$
182.3

 
$
37.1

 
$
(0.3
)
 
$
492.8


(a) - See Appendix A, "Supplemental Regional Information," for a breakdown of Other U.S.

12


CAESARS ENTERTAINMENT CORPORATION
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT CORPORATION
TO PROPERTY EBITDA
(UNAUDITED)
 
Quarter Ended June 30, 2012
(In millions)
Las
Vegas
 
Atlantic
City
 
Other U.S
 
Managed,
Int'l and Other 
 
Discontinued Operations
 
Total
Net loss attributable to Caesars
 
 
 
 
 
 
 
 
 
 
$
(241.7
)
Net loss attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
(0.1
)
Net loss
 
 
 
 
 
 
 
 
 
 
(241.8
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
80.5

Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(161.3
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(105.9
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(267.2
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(6.5
)
Gains on early extinguishments of debt
 
 
 
 
 
 
 
 
 
 
(33.7
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
496.5

Income/(loss) from operations
$
127.8

 
$
16.3

 
$
111.7

 
$
(66.7
)
 
 
 
189.1

Depreciation and amortization
64.9

 
44.9

 
52.1

 
13.6

 
 
 
175.5

Amortization of intangible assets
19.0

 
4.0

 
9.3

 
10.9

 
 
 
43.2

Intangible and tangible asset impairment charges
—

 
—

 
—

 
33.0

 
 
 
33.0

Write-downs, reserves, and project opening costs, net of
recoveries
3.5

 
0.3

 
4.7

 
(0.6
)
 
 
 
7.9

Acquisition and integration costs
—

 
—

 
—

 
1.1

 
 
 
1.1

(Income)/loss on interests in non-consolidated affiliates
(0.8
)
 
1.5

 
(0.2
)
 
2.7

 
 
 
3.2

Corporate expense
—

 
—

 
—

 
41.3

 
 
 
41.3

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
24.0

 
24.0

Property EBITDA
$
214.4

 
$
67.1

 
$
177.6

 
$
35.2

 
$
24.0

 
$
518.3


13


CAESARS ENTERTAINMENT CORPORATION
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT CORPORATION
TO PROPERTY EBITDA
(UNAUDITED)
 
Six Months Ended June 30, 2013
(In millions)
Las
Vegas
 
Atlantic
City
 
Other U.S.
 
Managed, Int'l and Other 
 
Discontinued Operations
 
Total
Net loss attributable to Caesars
 
 
 
 
 
 
 
 
 
 
$
(430.1
)
Net income attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
3.9

Net loss
 
 
 
 
 
 
 
 
 
 
(426.2
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
41.4

Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(384.8
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(406.0
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(790.8
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(8.3
)
Gain on partial sale of subsidiary
 
 
 
 
 
 
 
 
 
 
(44.1
)
Gains on early extinguishments of debt
 
 
 
 
 
 
 
 
 
 
(4.6
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
1,114.8

Income/(loss) from operations
$
230.1

 
$
(1.3
)
 
$
145.8

 
$
(107.6
)
 
 
 
267.0

Depreciation and amortization
119.5

 
74.5

 
90.0

 
19.0

 
 
 
303.0

Amortization of intangible assets
37.9

 
8.0

 
18.4

 
18.2

 
 
 
82.5

Intangible and tangible asset impairment charges
—

 
22.4

 
102.3

 
—

 
 
 
124.7

Write-downs, reserves, and project opening costs, net of
recoveries
23.7

 
10.7

 
4.4

 
5.3

 
 
 
44.1

Acquisition and integration costs
—

 
—

 
—

 
66.4

 
 
 
66.4

(Income)/loss on interests in non-consolidated affiliates
(2.7
)
 
—

 
(0.3
)
 
19.4

 
 
 
16.4

Corporate expense
—

 
—

 
—

 
77.3

 
 
 
77.3

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
(1.5
)
 
(1.5
)
Property EBITDA
$
408.5

 
$
114.3

 
$
360.6

 
$
98.0

 
$
(1.5
)
 
$
979.9


 
Six Months Ended June 30, 2012
(In millions)
Las
Vegas
 
Atlantic
City
 
Other U.S.
 
Managed, Int'l and Other 
 
Discontinued Operations
 
Total
Net loss attributable to Caesars
 
 
 
 
 
 
 
 
 
 
$
(522.3
)
Net loss attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
(0.6
)
Net loss
 
 
 
 
 
 
 
 
 
 
(522.9
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
73.2

Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(449.7
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(264.2
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(713.9
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(14.7
)
Gains on early extinguishments of debt
 
 
 
 
 
 
 
 
 
 
(79.5
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
1,058.5

Income/(loss) from operations
$
247.9

 
$
35.1

 
$
62.5

 
$
(95.1
)
 
 
 
250.4

Depreciation and amortization
134.3

 
89.6

 
104.1

 
27.0

 
 
 
355.0

Amortization of intangible assets
37.9

 
8.0

 
18.4

 
22.1

 
 
 
86.4

Intangible and tangible asset impairment charges
—

 
—

 
167.5

 
39.5

 
 
 
207.0

Write-downs, reserves, and project opening costs, net of
recoveries
7.2

 
2.2

 
12.0

 
2.7

 
 
 
24.1

Acquisition and integration costs
—

 
—

 
—

 
1.2

 
 
 
1.2

(Income)/loss on interests in non-consolidated affiliates
(1.6
)
 
2.2

 
(0.3
)
 
10.0

 
 
 
10.3

Corporate expense
—

 
—

 
—

 
93.5

 
 
 
93.5

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
46.9

 
46.9

Property EBITDA
$
425.7

 
$
137.1

 
$
364.3

 
$
100.8

 
$
46.9

 
$
1,074.8



14


CAESARS ENTERTAINMENT CORPORATION SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT CORPORATION TO ADJUSTED EBITDA AND LTM ADJUSTED EBITDA-PRO FORMA
(UNAUDITED)
Adjusted EBITDA is defined as earnings before interest expense, income taxes, and depreciation and amortization ("EBITDA") further adjusted to exclude certain non-cash and other items required or permitted in calculating covenant compliance under the indenture governing CEOC's secured credit facilities.
Last twelve months ("LTM") Adjusted EBITDA-Pro Forma is defined as Adjusted EBITDA further adjusted to include pro forma adjustments related to properties, estimated cost savings yet-to-be-realized and adjustments for discontinued operations.
Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma are presented as supplemental measures of the Company's performance and management believes that Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma provide investors with additional information and allow a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the Company.
Because not all companies use identical calculations, the presentation of Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma may not be comparable to other similarly titled measures of other companies.
The following table reconciles net loss attributable to Caesars to Adjusted EBITDA for the periods indicated:
(In millions)
Quarter Ended June 30,
 
2013
 
2012
Net loss attributable to Caesars
$
(212.2
)
 
$
(241.7
)
Interest expense, net of interest capitalized and interest income
535.2

 
490.2

Benefit for income taxes (a)
(115.7
)
 
(109.8
)
Depreciation and amortization (b)
185.2

 
229.2

EBITDA
392.5

 
367.9

Project opening costs, abandoned projects and development costs (c)
15.1

 
2.0

Acquisition and integration costs (d)
2.2

 
1.1

Gains on early extinguishments of debt (e)
(41.3
)
 
(33.7
)
Net income/(loss) attributable to non-controlling interests, net of (distributions) (f)
(0.2
)
 
(1.5
)
Impairments of intangible and tangible assets (g)
104.7

 
134.0

Non-cash expense for stock compensation benefits (h)
6.1

 
21.6

Gain on sale on partial sale of subsidiary (i)
(44.1
)
 
—

Other items (j)
35.5

 
21.0

               Adjusted EBITDA 
$
470.5

 
$
512.4




15


The following table reconciles net loss attributable to Caesars to Adjusted EBITDA for the periods indicated, and reconciles net loss attributable to Caesars to LTM Adjusted EBITDA-Pro Forma for the last twelve months ended June 30, 2013.
 
(1)
 
(2)
 
(3)
 
 
(In millions)
Six Months Ended June 30, 2013
 
Six Months Ended June 30, 2012
 
Year Ended December 31, 2012
 
(1)-(2)+(3)
LTM
Net loss attributable to Caesars
$
(430.1
)
 
$
(522.3
)
 
$
(1,497.5
)
 
$
(1,405.3
)
Interest expense, net of interest capitalized and interest income
1,106.7

 
1,045.2

 
2,079.2

 
2,140.7

Benefit for income taxes (a)
(408.8
)
 
(261.2
)
 
(820.4
)
 
(968.0
)
Depreciation and amortization (b)
392.2

 
463.8

 
931.1

 
859.5

EBITDA
660.0

 
725.5

 
692.4

 
626.9

Project opening costs, abandoned projects and development costs (c)
34.4

 
10.0

 
71.7

 
96.1

Acquisition and integration costs (d)
66.4

 
1.2

 
6.1

 
71.3

Gain on early extinguishments of debt (e)
(4.6
)
 
(79.5
)
 
(136.0
)
 
(61.1
)
Net income/(loss) attributable to non-controlling interests, net of
(distributions) (f)
(1.3
)
 
(3.4
)
 
(3.3
)
 
(1.2
)
Impairments of intangible and tangible assets (g)
151.4

 
308.0

 
1,168.7

 
1,012.1

Non-cash expense for stock compensation benefits (h)
9.7

 
33.2

 
55.1

 
31.6

     Adjustments for recoveries from insurance claims for flood
losses (k)
—

 
(6.6
)
 
(6.6
)
 
—

Gain on sale of discontinued operations (l)
0.7

 
—

 
(9.3
)
 
(8.6
)
Gain on sale on partial sale of subsidiary (i)
(44.1
)
 
—

 
—

 
(44.1
)
Other items (j)
67.6

 
47.2

 
98.9

 
119.3

               Adjusted EBITDA
$
940.2

 
$
1,035.6

 
$
1,937.7

 
1,842.3

Proforma adjustments related to properties (m)
 
 
 
 
 
 
9.0

Pro forma adjustment for estimated cost savings yet-to-be-realized (n)
 
 
 
 
 
 
148.4

Pro forma adjustments for discontinued operations (o)
 
 
 
 
 
 
(14.3
)
              LTM Adjusted EBITDA-Pro Forma
 
 
 
 
 
 
$
1,985.4


(a) 
Amounts include a benefit for income taxes related to discontinued operations of $0.0 million and $3.9 million for the second quarter of 2013 and 2012, respectively, a benefit for income taxes related to discontinued operations of $2.8 million for the six months ended June 30, 2013, and a provision for income taxes related to discontinued operations of $3.0 million and $50.1 million for the six months ended June 30, 2012 and for the year ended December 31, 2012, respectively.
(b) 
Amounts include depreciation and amortization related to discontinued operations of $7.3 million for the second quarter of 2012 and depreciation and amortization related to discontinued operations of $0.2 million, $16.1 million and $29.0 million for the six months ended June 30, 2013 and 2012 and for the year ended December 31, 2012, respectively. There was no depreciation and amortization related to discontinued operations for the second quarter of 2013.
(c) 
Amounts represent pre-opening costs incurred in connection with new property openings and expansion projects at existing properties, as well as any non-cash write-offs of abandoned development projects. Amounts include reserves related to the closure of Alea Leeds in March 2013 which are included in loss from discontinued operations of $15.8 million for the six months ended June 30, 2013. There were no reserves related to discontinued operations for the second quarter of 2013 and 2012, the six months ended June 30, 2012 and for the year ended December 31, 2012.
(d) 
Amounts include certain costs associated with acquisition and development activities and reorganization activities which are infrequently occurring costs.
(e) 
Amounts represent the difference between the fair value of consideration paid and the book value, net of deferred financing costs, of debt retired through debt extinguishment transactions, which are capital structure-related, rather than operational-type costs.
(f) 
Amounts represent minority owners’ share of income/(loss) from the Company's majority-owned consolidated subsidiaries, net of cash distributions to minority owners, which is a non-cash item as it excludes any cash distributions.
(g) 
Amounts represent non-cash charges to impair intangible and tangible assets primarily resulting from changes in the business outlook in light of economic conditions. Amounts include impairment charges related to discontinued operations of $101.0 million for the quarter ended June 30, 2012 and impairment charges related to discontinued operations of $26.7 million, $101.0 million and $101.0 million for the six months ended June 30, 2013 and 2012 and for the year ended December 31, 2012, respectively. There were no impairment charges related to discontinued operations for the second quarter of 2013.
(h) 
Amounts represent non-cash stock-based compensation expense related to stock options and restricted stock granted to the Company's employees.
(i) 
Amounts represent the gain recognized on the sale of 45% of Baluma S.A to Enjoy.

16


(j) 
Amounts represent add-backs and deductions from EBITDA, whether permitted and/or required under the indentures governing CEOC’s existing notes and the credit agreement governing CEOC’s senior secured credit facilities, included in arriving at LTM Adjusted EBITDA-Pro Forma but not separately identified. Such add-backs and deductions include litigation awards and settlements, severance and relocation costs, permit remediation costs, gains and losses from disposals of assets, costs incurred in connection with implementing the Company's efficiency and cost-saving programs, the Company's insurance policy deductibles incurred as a result of catastrophic events such as floods and hurricanes, non-cash equity in earnings of non-consolidated affiliates (net of distributions), and adjustments to include controlling interests' portion of Baluma S.A. adjusted EBITDA.
(k) 
Amounts represent adjustments for insurance claims related to lost profits during the floods that occurred in 2011.
(l) 
Amount represents the gain recognized on the sale of the Harrah's St. Louis casino.
(m) 
Amounts represent the estimated annualized impact of operating results related to newly completed construction projects, combined with the estimated annualized EBITDA impact associated with properties acquired during the period.
(n) 
Amount represents adjustments to reflect the impact of annualized run-rate cost savings and anticipated future cost savings to be realized from the Company's announced Project Renewal and other profitability improvement and cost-savings programs.
(o) 
Per CEOC's senior secured credit facilities, EBITDA related to the Company's discontinued operations are deducted from LTM Adjusted EBITDA - Pro Forma.



17


The following tables present the Consolidated Condensed Statement of Operations and Supplemental Information for Caesars Entertainment Operating Company, Inc. ("CEOC"), a wholly owned subsidiary of Caesars Entertainment Corporation, for the periods indicated.
Caesars Entertainment Operating Company, Inc.
Consolidated Condensed Statements of Operations
(Unaudited)
(In millions)
Quarter Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Revenues
 
 
 
 
 
 
 
Casino
$
1,136.5

 
$
1,247.1

 
$
2,348.7

 
$
2,564.0

Food and beverage
256.0

 
253.7

 
512.5

 
508.1

Rooms
199.6

 
198.1

 
382.5

 
389.3

Management fees
17.2

 
12.3

 
27.8

 
21.9

Other
177.6

 
115.4

 
344.8

 
241.7

Less: casino promotional allowances
(203.4
)
 
(218.4
)
 
(414.9
)
 
(440.8
)
Net revenues
1,583.5

 
1,608.2

 
3,201.4

 
3,284.2

Operating expenses
 

 
 
 
 
 
 
Direct
 
 
 
 
 
 
 
Casino (a)
676.0

 
738.5

 
1,370.6

 
1,501.6

Food and beverage (a)
107.8

 
103.9

 
213.7

 
205.2

Rooms (a)
49.1

 
48.4

 
92.6

 
92.7

Property, general, administrative, and other (a)
399.4

 
335.4

 
798.9

 
688.0

Depreciation and amortization
110.5

 
135.8

 
237.7

 
276.1

Write-downs, reserves, and project opening costs, net
of recoveries
11.7

 
5.8

 
18.9

 
20.0

Intangible and tangible asset impairment charges
80.3

 
33.0

 
100.3

 
207.0

Loss on interests in non-consolidated affiliates
15.7

 
3.2

 
18.7

 
10.8

Corporate expense
32.6

 
32.5

 
64.7

 
76.8

Acquisition and integration costs
5.6

 
0.9

 
17.4

 
0.9

Amortization of intangible assets
22.9

 
27.2

 
45.9

 
51.3

Total operating expenses
1,511.6

 
1,464.6

 
2,979.4

 
3,130.4

Income from operations
71.9

 
143.6

 
222.0

 
153.8

Interest expense, net of interest capitalized
(523.5
)
 
(475.6
)
 
(1,077.0
)
 
(1,014.1
)
Loss on early extinguishments of debt
(0.1
)
 
—

 
(36.8
)
 
—

Gain on partial sale of subsidiary
44.1

 
—

 
44.1

 
—

Other income, including interest income
6.5

 
6.7

 
10.3

 
14.4

Loss from continuing operations before income taxes
(401.1
)
 
(325.3
)
 
(837.4
)
 
(845.9
)
Benefit for income taxes
141.6

 
128.8

 
410.7

 
312.5

Loss from continuing operations, net of income taxes
(259.5
)
 
(196.5
)
 
(426.7
)
 
(533.4
)
Discontinued operations
 
 
 
 
 
 
 
Loss from discontinued operations
(0.3
)
 
(84.4
)
 
(44.2
)
 
(70.2
)
Benefit/(provision) for income taxes
—

 
3.9

 
2.8

 
(3.0
)
Loss from discontinued operations, net of
income taxes
(0.3
)
 
(80.5
)
 
(41.4
)
 
(73.2
)
Net loss
(259.8
)
 
(277.0
)
 
(468.1
)
 
(606.6
)
Less: net income attributable to non-controlling
interests
(2.2
)
 
(1.7
)
 
(4.8
)
 
(1.0
)
Net loss attributable to CEOC
$
(262.0
)
 
$
(278.7
)
 
$
(472.9
)
 
$
(607.6
)
(a) Property operating expenses are comprised of casino, food and beverage, rooms, and property, general, administrative and other expenses.

18


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT
OPERATING COMPANY, INC. TO PROPERTY EBITDA
(UNAUDITED)
Property EBITDA is presented as a supplemental measure of CEOC's performance. Property EBITDA is defined as revenues less property operating expenses and is comprised of net income/(loss) before (i) interest expense, net of interest capitalized and interest income, (ii) (benefit)/provision for income taxes, (iii) depreciation and amortization, (iv) corporate expenses, and (v) certain items that the Company does not consider indicative of CEOC's ongoing operating performance at an operating property level. In evaluating Property EBITDA you should be aware that in the future, CEOC may incur expenses that are the same or similar to some of the adjustments in this presentation. The presentation of Property EBITDA should not be construed as an inference that CEOC's future results will be unaffected by unusual or unexpected items.
Property EBITDA is a non-GAAP financial measure commonly used in the Company's 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). Property EBITDA may not be comparable to similarly titled measures reported by other companies within the industry. Property EBITDA is presented because management uses Property EBITDA to measure performance and allocate resources, and believes that Property EBITDA provides investors with additional information consistent with that used by management.
The following tables reconcile net loss attributable to CEOC to Property EBITDA for the periods indicated.
 
Quarter Ended June 30, 2013
(In millions)
Las
Vegas
 
Atlantic
City
 
Other U.S. (a)
 
Managed,
Int'l and Other 
 
Discontinued Operations
 
Total
Net loss attributable to CEOC
 
 
 
 
 
 
 
 
 
 
$
(262.0
)
Net income attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
2.2

Net loss
 
 
 
 
 
 
 
 
 
 
(259.8
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
0.3

Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(259.5
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(141.6
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(401.1
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(6.5
)
Gain on partial sale of subsidiary
 
 
 
 
 
 
 
 
 
 
(44.1
)
Loss on early extinguishments of debt
 
 
 
 
 
 
 
 
 
 
0.1

Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
523.5

Income/(loss) from operations
$
31.3

 
$
21.2

 
$
35.1

 
$
(15.7
)
 
 
 
71.9

Depreciation and amortization
39.2

 
21.6

 
41.7

 
8.0

 
 
 
110.5

Amortization of intangible assets
8.2

 
3.0

 
6.3

 
5.4

 
 
 
22.9

Intangible and tangible asset impairment charges
—

 
(2.0
)
 
82.3

 
—

 
 
 
80.3

Write-downs, reserves, and project opening costs, net of
recoveries
6.5

 
2.5

 
4.0

 
(1.3
)
 
 
 
11.7

Acquisition and integration costs
—

 
—

 
—

 
5.6

 
 
 
5.6

(Income)/loss on interests in non-consolidated affiliates
—

 
—

 
(0.2
)
 
15.9

 
 
 
15.7

Corporate expense
—

 
—

 
—

 
32.6

 
 
 
32.6

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
(0.3
)
 
(0.3
)
Property EBITDA
$
85.2

 
$
46.3

 
$
169.1

 
$
50.6

 
$
(0.3
)
 
$
350.9


(a) - See Appendix A, "Supplemental Regional Information," for a breakdown of Other U.S.


19


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT
OPERATING COMPANY, INC. TO PROPERTY EBITDA
(UNAUDITED)
 
Quarter Ended June 30, 2012
(In millions)
Las
Vegas
 
Atlantic
City
 
Other U.S.
 
Managed,
Int'l and Other 
 
Discontinued Operations
 
Total
Net loss attributable to CEOC
 
 
 
 
 
 
 
 
 
 
$
(278.7
)
Net income attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
1.7

Net loss
 
 
 
 
 
 
 
 
 
 
(277.0
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
80.5

Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(196.5
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(128.8
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(325.3
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(6.7
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
475.6

Income/(loss) from operations
$
64.0

 
$
7.4

 
$
106.0

 
$
(33.8
)
 
 
 
143.6

Depreciation and amortization
39.8

 
32.1

 
50.3

 
13.6

 
 
 
135.8

Amortization of intangible assets
8.2

 
3.0

 
6.3

 
9.7

 
 
 
27.2

Intangible and tangible asset impairment charges
—

 
—

 
—

 
33.0

 
 
 
33.0

Write-downs, reserves, and project opening costs, net of
 recoveries
1.3

 
0.3

 
4.7

 
(0.5
)
 
 
 
5.8

Acquisition and integration costs
—

 
—

 
—

 
0.9

 
 
 
0.9

Loss/(income) on interests in non-consolidated affiliates
—

 
0.8

 
(0.2
)
 
2.6

 
 
 
3.2

Corporate expense
—

 
—

 
—

 
32.5

 
 
 
32.5

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
24.0

 
24.0

Property EBITDA
$
113.3

 
$
43.6

 
$
167.2

 
$
57.9

 
$
24.0

 
$
406.0


20


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT
OPERATING COMPANY, INC. TO PROPERTY EBITDA
(UNAUDITED)
 
Six Months Ended June 30, 2013
(In millions)
Las
Vegas
 
Atlantic
City
 
Other U.S.
 
Managed,
Int'l and Other 
 
Discontinued Operations
 
Total
Net loss attributable to CEOC
 
 
 
 
 
 
 
 
 
 
$
(472.9
)
Net income attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
4.8

Net loss
 
 
 
 
 
 
 
 
 
 
(468.1
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
41.4

Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(426.7
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(410.7
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(837.4
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(10.3
)
Gain on partial sale of subsidiary
 
 
 
 
 
 
 
 
 
 
(44.1
)
Loss on early extinguishments of debt
 
 
 
 
 
 
 
 
 
 
36.8

Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
1,077.0

Income/(loss) from operations
$
82.0

 
$
18.0

 
$
130.6

 
$
(8.6
)
 
 
 
222.0

Depreciation and amortization
80.1

 
51.8

 
87.7

 
18.1

 
 
 
237.7

Amortization of intangible assets
16.3

 
5.9

 
12.6

 
11.1

 
 
 
45.9

Intangible and tangible asset impairment charges
—

 
(2.0
)
 
102.3

 
—

 
 
 
100.3

Write-downs, reserves, and project opening costs, net of
recoveries
13.7

 
3.5

 
4.4

 
(2.7
)
 
 
 
18.9

Acquisition and integration costs
—

 
—

 
—

 
17.4

 
 
 
17.4

(Income)/loss on interests in non-consolidated affiliates
—

 
—

 
(0.3
)
 
19.0

 
 
 
18.7

Corporate expense
—

 
—

 
—

 
64.7

 
 
 
64.7

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
(1.5
)
 
(1.5
)
Property EBITDA
$
192.1

 
$
77.1

 
$
337.3

 
$
119.1

 
$
(1.5
)
 
$
724.1


 
Six Months Ended June 30, 2012
(In millions)
Las
Vegas
 
Atlantic
City
 
Other U.S.
 
Managed,
Int'l and Other 
 
Discontinued Operations
 
Total
Net loss attributable to CEOC
 
 
 
 
 
 
 
 
 
 
$
(607.6
)
Net income attributable to non-controlling interests
 
 
 
 
 
 
 
 
 
 
1.0

Net loss
 
 
 
 
 
 
 
 
 
 
(606.6
)
Loss from discontinued operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
73.2

Net loss from continuing operations, net of income taxes
 
 
 
 
 
 
 
 
 
 
(533.4
)
Benefit for income taxes
 
 
 
 
 
 
 
 
 
 
(312.5
)
Loss from continuing operations before income taxes
 
 
 
 
 
 
 
 
 
 
(845.9
)
Other income, including interest income
 
 
 
 
 
 
 
 
 
 
(14.4
)
Interest expense, net of interest capitalized
 
 
 
 
 
 
 
 
 
 
1,014.1

Income/(loss) from operations
$
128.9

 
$
18.5

 
$
49.2

 
$
(42.8
)
 
 
 
153.8

Depreciation and amortization
84.5

 
63.9

 
100.6

 
27.1

 
 
 
276.1

Amortization of intangible assets
16.3

 
5.9

 
12.6

 
16.5

 
 
 
51.3

Intangible and tangible asset impairment charges
—

 
—

 
167.5

 
39.5

 
 
 
207.0

Write-downs, reserves, and project opening costs, net of
recoveries
3.3

 
2.0

 
12.0

 
2.7

 
 
 
20.0

Acquisition and integration costs
—

 
—

 
—

 
0.9

 
 
 
0.9

Loss/(income) on interests in non-consolidated affiliates
—

 
1.1

 
(0.3
)
 
10.0

 
 
 
10.8

Corporate expense
—

 
—

 
—

 
76.8

 
 
 
76.8

EBITDA attributable to discontinued operations
 
 
 
 
 
 
 
 
$
46.9

 
46.9

Property EBITDA
$
233.1

 
$
91.4

 
$
341.7

 
$
130.5

 
$
46.9

 
$
843.6



21


CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO CAESARS ENTERTAINMENT
OPERATING COMPANY, INC.
TO ADJUSTED EBITDA, LTM ADJUSTED EBITDA-PRO FORMA AND
LTM ADJUSTED EBITDA-PRO FORMA - CEOC RESTRICTED
(UNAUDITED)
Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain non-cash and other items required or permitted in calculating covenant compliance under the indenture governing CEOC's the credit facility.
LTM Adjusted EBITDA-Pro Forma is defined as Adjusted EBITDA further adjusted to include pro forma adjustments related to properties, estimated cost savings yet-to-be-realized and discontinued operations.
Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma are presented as supplemental measures of CEOC's performance and management believes that Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma provide investors with additional information and allow a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of CEOC.
Adjusted EBITDA and LTM Adjusted EBITDA-Pro Forma include the results and adjustments of CEOC on a consolidated basis without the exclusion of CEOC's unrestricted subsidiaries, and therefore, are different than the calculations used to determine compliance with debt covenants under the credit facility. The reconciliation of net loss attributable to CEOC to LTM Adjusted EBITDA-Pro Forma on the following page includes an additional calculation to exclude the LTM Adjusted EBITDA-Pro Forma of the unrestricted subsidiaries of CEOC resulting in an amount used to determine compliance with debt covenants ("LTM Adjusted EBITDA-Pro Forma - CEOC Restricted").
Because not all companies use identical calculations, the presentation of CEOC's Adjusted EBITDA, LTM Adjusted EBITDA-Pro Forma, and LTM Adjusted EBITDA-Pro Forma - CEOC Restricted may not be comparable to other similarly titled measures of other companies.
The following table reconciles net loss attributable to CEOC to Adjusted EBITDA for the periods indicated:
 
Quarter Ended June 30,
(In millions)
2013
 
2012
Net loss attributable to CEOC
$
(262.0
)
 
$
(278.7
)
Interest expense, net of capitalized interest and interest income
516.9

 
469.5

Benefit for income taxes (a)
(141.6
)
 
(132.7
)
Depreciation and amortization (b)
136.5

 
173.4

EBITDA  
249.8

 
231.5

Project opening costs, abandoned projects and development costs (c)
14.7

 
2.0

Acquisition and integration costs (d)
5.6

 
0.9

Loss on early extinguishment of debt (e)
0.1

 
—

Net income/(loss) attributable to non-controlling interests, net of (distributions) (f)
(0.9
)
 
0.4

Impairments of intangible and tangible assets (g)
80.3

 
134.0

Non-cash expense for stock compensation benefits (h)
11.4

 
5.2

Gain on sale on partial sale of subsidiary (i)
(44.1
)
 
—

Other items (j)
12.2

 
10.4

               Adjusted EBITDA 
$
329.1

 
$
384.4


22



The following table reconciles net loss attributable to CEOC to Adjusted EBITDA for the periods indicated, and reconciles net loss attributable to CEOC to LTM Adjusted EBITDA-Pro Forma, and LTM Adjusted EBITDA-Pro Forma - CEOC Restricted for the last twelve months ended June 30, 2013.
 
(1)
 
(2)
 
(3)
 
 
(In millions)
Six Months Ended June 30, 2013
 
Six Months Ended June 30, 2012
 
Year Ended December 31, 2012
 
(1)-(2)+(3)
LTM
Net loss attributable to CEOC
$
(472.9
)
 
$
(607.6
)
 
$
(1,627.4
)
 
$
(1,492.7
)
Interest expense, net of capitalized interest and interest income
1,066.9

 
1,001.2

 
1,995.7

 
2,061.4

Benefit for income taxes (a)
(413.5
)
 
(309.5
)
 
(884.5
)
 
(988.5
)
Depreciation and amortization (b)
290.3

 
349.8

 
701.7

 
642.2

EBITDA  
470.8

 
433.9

 
185.5

 
222.4

Project opening costs, abandoned projects and development costs (c)
33.9

 
10.0

 
55.9

 
79.8

Acquisition and integration costs (d)
17.4

 
0.9

 
5.8

 
22.3

Loss on early extinguishments of debt (e)
36.8

 
—

 
—

 
36.8

Net income/(loss) attributable to non-controlling interests, net of (distributions) (f)
(0.4
)
 
(1.8
)
 
(4.2
)
 
(2.8
)
Impairments of intangible and tangible assets (g)
127.0

 
308.0

 
1,165.7

 
984.7

Non-cash expense for stock compensation benefits (h)
13.9

 
16.5

 
33.4

 
30.8

     Adjustments for recoveries from insurance claims for
     flood losses (k)
—

 
(6.6
)
 
(6.6
)
 
—

Gain on sale of discontinued operations (l)
0.7

 
—

 
(9.3
)
 
(8.6
)
Gain on sale on partial sale of subsidiary (i)
(44.1
)
 
—

 
—

 
(44.1
)
Other items (j)
23.3

 
27.1

 
53.3

 
49.5

               Adjusted EBITDA
$
679.3

 
$
788.0

 
$
1,479.5

 
1,370.8

Proforma adjustments related to properties (m)
 
 
 
 
 
 
9.0

Pro forma adjustment for estimated cost savings yet-to-be-realized (n)
 
 
 
 
 
 
105.5

Pro forma adjustments for discontinued operations (o)
 
 
 
 
 
 
(14.3
)
               LTM Adjusted EBITDA-Pro Forma
 
 
 
 
 
 
1,471.0

LTM Adjusted EBITDA-Pro forma of CEOC's unrestricted
subsidiaries
 
 
 
 
 
 
(112.6
)
LTM Adjusted EBITDA-Pro Forma - CEOC Restricted
 
 
 
 
 
 
$
1,358.4


(a) 
Amounts include a benefit for income taxes related to discontinued operations of $0.0 million and $3.9 million for the second quarter of 2013 and 2012, respectively, a benefit for income taxes related to discontinued operations of $2.8 million for the six months ended June 30, 2013, and a provision for income taxes related to discontinued operations of $3.0 million and $50.1 million for the six months ended June 30, 2012 and for the year ended December 31, 2012, respectively.
(b)
Amounts include depreciation and amortization related to discontinued operations of $7.3 million for the second quarter of 2012 and depreciation and amortization related to discontinued operations of $0.2 million, $16.1 million and $29.0 million for the six months ended June 30, 2013 and 2012 and for the year ended December 31, 2012, respectively. There was no depreciation and amortization related to discontinued operations for the second quarter of 2013.
(c)
Amounts represent pre-opening costs incurred in connection with new property openings and expansion projects at existing properties, as well as any non-cash write-offs of abandoned development projects. Amounts include reserves related to the closure of Alea Leeds in March 2013 which are included in loss from discontinued operations of $15.8 million for the six months ended June 30, 2013. There were no reserves related to discontinued operations for the second quarter of 2013 and 2012, the six months ended June 30, 2012 and for the year ended December 31, 2012.
(d) 
Amounts include certain costs associated with acquisition and development activities and reorganization activities which are infrequently occurring costs.
(e) 
Amounts represent the difference between the fair value of consideration paid and the book value, net of deferred financing costs, of debt retired through debt extinguishment transactions, which are capital structure-related, rather than operational-type costs.
(f) 
Amounts represent minority owners’ share of income/(loss) from CEOC's majority-owned consolidated subsidiaries, net of cash distributions to minority owners, which is a non-cash item as it excludes any cash distributions.

23


(g) 
Amounts represent non-cash charges to impair intangible and tangible assets primarily resulting from changes in the business outlook in light of economic conditions. Amounts include impairment charges related to discontinued operations of $101.0 million for the quarter ended June 30, 2012 and impairment charges related to discontinued operations of $26.7 million, $101.0 million and $101.0 million for the six months ended June 30, 2013 and 2012 and for the year ended December 31, 2012, respectively. There were no impairment charges related to discontinued operations for the second quarter of 2013.
(h) 
Amounts represent non-cash stock-based compensation expense related to stock options and restricted stock granted to CEOC's employees.
(i) 
Amounts represent the gain recognized on the sale of 45% of Baluma S.A to Enjoy.
(j) 
Amounts represent add-backs and deductions from EBITDA, whether permitted and/or required under the indentures governing CEOC’s existing notes and the credit agreement governing CEOC’s senior secured credit facilities, included in arriving at LTM Adjusted EBITDA-Pro Forma - CEOC Restricted but not separately identified. Such add-backs and deductions include litigation awards and settlements, severance and relocation costs, permit remediation costs, gains and losses from disposals of assets, costs incurred in connection with implementing the Company's efficiency and cost-saving programs, CEOC's insurance policy deductibles incurred as a result of catastrophic events such as floods and hurricanes, non-cash equity in earnings of non-consolidated affiliates (net of distributions), and adjustments to include controlling interests' portion of Baluma S.A. adjusted EBITDA.
(k) 
Amounts represent adjustments for insurance claims related to lost profits during the floods that occurred in 2011.
(l) 
Amount represents the gain recognized on the sale of the Harrah's St. Louis casino.
(m) 
Amounts represent the estimated annualized impact of operating results related to newly completed construction projects, combined with the estimated annualized EBITDA impact associated with properties acquired during the period.
(n) 
Amount represents adjustments of CEOC to reflect the impact of annualized run-rate cost-savings and anticipated future cost savings to be realized from the Company's announced Project Renewal and other profitability improvement and cost savings programs.
(o) 
Per CEOC's senior secured credit facilities, EBITDA related to the Company's discontinued operations are deducted from LTM Adjusted EBITDA - Pro Forma.



24


APPENDIX A
SUPPLEMENTAL REGIONAL INFORMATION
The following tables are provided for prior quarter comparative purposes only. The reconciliation of net loss attributable to Caesars to Property EBITDA is located in the body of this release.


CAESARS ENTERTAINMENT CORPORATION
(UNAUDITED)
 
 
Quarter Ended June 30, 2013
(In millions)
 
Louisiana/
Mississippi
Region
 
Iowa/
Missouri
Region
 
Illinois/
Indiana
Region
 
Other
Nevada
Region
 
Other U.S.
Net Revenue
 
$
268.1

 
$
115.9

 
$
258.7

 
$
105.4

 
$
748.1

 
 
 
 
 
 
 
 
 
 
 
Income/(loss) from operations
 
$
(54.6
)
 
$
35.9

 
$
47.5

 
$
15.5

 
44.3

Depreciation and amortization
 
15.1

 
6.7

 
17.0

 
3.9

 
42.7

Amortization of intangible assets
 
5.5

 
—

 
0.3

 
3.5

 
9.3

Intangible and tangible asset impairment charges
 
79.3

 
—

 
3.0

 
—

 
82.3

Write-downs, reserves, and project opening costs, net of recoveries
 
5.0

 
(1.0
)
 
—

 
—

 
4.0

(Income)/loss on interests in non-consolidated affiliates
 
(0.2
)
 
—

 
—

 
—

 
(0.2
)
Property EBITDA
 
$
50.0

 
$
41.6

 
$
67.8

 
$
22.9

 
$
182.3



CAESARS ENTERTAINMENT OPERATING COMPANY, INC.
(UNAUDITED)
 
 
Quarter Ended June 30, 2013
(In millions)
 
Louisiana/
Mississippi
Region
 
Iowa/
Missouri
Region
 
Illinois/
Indiana
Region
 
Other
Nevada
Region
 
Other U.S.
Net Revenue
 
$
268.1

 
$
115.9

 
$
258.7

 
$
66.7

 
$
709.4

 
 
 
 
 
 
 
 
 
 
 
Income/(loss) from operations
 
$
(54.6
)
 
$
35.9

 
$
47.5

 
$
6.3

 
35.1

Depreciation and amortization
 
15.1

 
6.7

 
17.0

 
2.9

 
41.7

Amortization of intangible assets
 
5.5

 
—

 
0.3

 
0.5

 
6.3

Intangible and tangible asset impairment charges
 
79.3

 
—

 
3.0

 
—

 
82.3

Write-downs, reserves, and project opening costs, net of recoveries
 
5.0

 
(1.0
)
 
—

 
—

 
4.0

(Income)/loss on interests in non-consolidated affiliates
 
(0.2
)
 
—

 
—

 
—

 
(0.2
)
Property EBITDA
 
$
50.0

 
$
41.6

 
$
67.8

 
$
9.7

 
$
169.1



25
 EX-99.2 3 ex992preparedremarks-czr2q.htm EXHIBIT Ex. 99.2 Prepared Remarks - CZR2Q13EarningsScript-07-25-131040pm-clean
        

Exhibit 99.2
Caesars Entertainment Corporation (CZR)
Second Quarter 2013 Earnings Announcement
July 29, 2013    
Prepared Remarks

Caesars is posting a copy of these prepared remarks and its press release to its Investor Relations website. These prepared remarks are offered to provide stockholders and analysts with additional time and detail for analyzing our results in advance of our quarterly conference call. As previously scheduled, the conference call will begin today, July 29 at 2:00 p.m. PT (5:00 p.m. ET)]. To access the live broadcast, please visit the Investor Relations section of Caesars’ website at www.caesars.com. A reconciliation between GAAP and non-GAAP results is provided in the tables in the press release.

1

        



Caesars Entertainment
2Q13 Script
Eric Hession:
Good afternoon, and welcome to the Caesars Entertainment second quarter 2013 results conference call. Joining me today are Gary Loveman, Chief Executive Officer, and Donald Colvin, Chief Financial Officer.
Following our prepared remarks, we will turn the call over for your questions. A copy of our press release, today's prepared remarks and a replay of this conference call will be available in the investor relations section of our website at caesars.com.
Before I turn the call over to Gary, I would like to call your attention to the following information. The Safe Harbor disclaimer in our public documents covers this call and the simultaneous live webcast at caesars.com. The forward looking statements made during this conference call reflect the opinion of management as of the date of this call. There are risks and uncertainties with such statements which are detailed in our filings with the SEC. Please be advised that developments subsequent to this call are likely to cause these statements to become outdated with the passage of time. We do not intend, however, to update the information provided today prior to our next quarterly conference call. Further, today we are reporting second quarter 2013 results. These results are not necessarily indicative of results in future periods. Also, please note that prior to this call we furnished a Form 8-K of this afternoon's press release to the SEC.
Property EBITDA and adjusted EBITDA are non-GAAP financial measures. Reconciliations of net income/loss to property EBITDA and net income/loss to adjusted EBITDA can be found in the tables in our press release.

2

        

This call, the webcast and its replay are the property of Caesars. It is not for rebroadcast or use by any other party without the prior written consent of Caesars. If you do not agree with these terms, please disconnect now. By remaining on the line, you agree to be bound by these terms.
I would now like to turn the call over to our CEO, Gary Loveman.
Gary Loveman:
Thank you Eric, and welcome to today's call.
In the three months since we last spoke, we have achieved key milestones against many of our strategic initiatives. We:
•
Made progress on the execution of the Growth Partners transaction;
•
Executed on our hospitality investments in Las Vegas;
•
Broke ground and closed financing on Horseshoe Baltimore;
•
Began construction on our meetings facility in Atlantic City; and
•
Had a record-breaking year at the World Series of Poker.
These represent a few of our recent achievements, as we advance our strategy to:
•
Reinvigorate and expand our core markets, particularly Las Vegas, with a focus on hospitality;
•
Expand our distribution network through our in-place domestic development pipeline and social and mobile games business; and
•
Pursue real money online gaming.
These objectives, coupled with our intense focus on improving our capital structure and reducing operating expenses, are central to our goal of enhancing shareholder value and positioning the company for long-term success.

3

        

While conditions in the gaming industry remained difficult during the second quarter with visitation and casino revenues down across much of our network, we are beginning to observe several tangible, positive underlying trends resulting from the enhancements we have made to our footprint, particularly in Las Vegas.
In the last year, we have opened nine new dining offerings in Las Vegas, including the Bacchanal Buffet and Nobu restaurant at Caesars Palace. These new choices have begun to drive sustained growth in F&B results, with second quarter F&B revenues in Las Vegas increasing 8.9% year-over-year.
Las Vegas hotel revenues also demonstrated positive momentum in the second quarter with a 6.3% year-over-year increase. The implementation of resort fees at the beginning of March is having a positive impact on revenues and has had a minimal impact on occupancy levels at our properties. We anticipate resort fees will provide an incremental boost prospectively.
We are optimistic that the positive trends related to Las Vegas F&B and hotel revenue will gain momentum, particularly in 2014, as the business disruption from our construction projects in Las Vegas ends and new projects come online and gain traction.
We have also seen some encouraging developments in our Groups business. Based on the forward calendar, we expect the Groups business to strengthen in 2014, improving from the relatively soft trends we are experiencing this year. We estimate the business will grow by high single digits year-over-year in 2014.
In Atlantic City, we began construction on what will be the largest meeting and conference center in the Northeast. The 250,000-square-foot facility will have 125,000 square feet to host corporate meetings and will be located on the Southwest corner of the Harrah's Atlantic City property. It will connect seamlessly to existing meeting space. We believe our state-of-the-art facility will attract new segments of visitation to the market, particularly mid-week, and absorb excess hotel room and restaurant capacity. We are excited about the opportunity to capture a share of the $16 billion convention and meetings market in the Northeast.

4

        

We are also encouraged by improving consumer sentiment. According to a recent polling of our customers, optimism about the economy and the labor market has improved since the beginning of the year. They are reporting lower debt and higher savings and their feedback indicates a rebound in discretionary spending. More broadly, the Thomson Reuters/University of Michigan Index of Consumer Sentiment rose in July to the highest level in six years, reflecting strong consumer confidence. We hope these trends will continue and ultimately translate into increased visitation and spending at our properties.
Increases in passenger traffic at McCarran in recent months also bode well for our business. After a slow start in the first quarter of this year, passenger traffic in the second quarter outpaced last year's traffic. International passenger traffic is up 5.5% year-over-year.
One of our top priorities is to enhance and develop our hospitality offerings. Over the last five years, we have invested approximately $1 billion to reinvigorate and expand our Las Vegas asset. To oversee our hospitality efforts, Tom Arasi joined the company as President of Hospitality. Tom has extensive experience in the hospitality, casino and real estate industries, giving him the ideal background to lead these efforts. He is responsible for all initiatives companywide related to food and beverage, hotels, nightclubs and nightlife, and pools and spas. One of his key responsibilities is to develop and execute our hospitality corridor strategy on the East side of the Strip.
Our hospitality initiatives in Las Vegas are focused on The Linq and the properties that surround it. This development will bring an unparalleled experience to the center of the Strip and attract many of the 20 million plus visitors who cross in front of its entrance each year. In addition to the leasing revenue from our tenants and ticket revenue from the High Roller observation wheel, we expect to benefit from increased traffic to our properties and increased ADRs, F&B and gaming revenue.
At the Linq site, the Vortex, a visually-dynamic architectural element adorned with LED-lights, has been erected, and the facade at the front of the site is nearly complete. We plan to open the retail, dining and entertainment offerings in phases beginning at the end of 2013. Some tenants, including the Yard House,

5

        

have already taken possession of their spaces. Our construction teams are making good progress assembling the rim of the High Roller wheel and assembling the cabins. We plan to open the High Roller in the second quarter of 2014.
Our property renovation and room upgrade initiatives in Las Vegas are moving forward at a rapid pace. At Gansevoort Las Vegas, formerly Bill's, we have completed most of the internal demolition. We plan to reopen early next year, with Drai's night and day club opening in the first half of 2014. At The Quad, we recently reopened approximately 40% of the casino floor. We expect to reopen the rest of the casino floor in the third quarter and to complete renovations by the end of the year.
We are proceeding with room upgrades at the Roman Tower of Caesars Palace and the South Tower of Bally's, which we are rebranding the Jubilee Tower. Nearly half of the 756 rooms in the South tower are out of service and in various phases of demolition and construction. The new room inventory will begin to come online by the end of the summer with a substantial number of the renovated rooms available by the end of the third quarter.
Consistent with our re-invigoration efforts, we are testing new marketing initiatives to drive new visitation and engage our customers. These efforts include a well-received fuel rewards program, which addresses one of our customers' biggest pain points. In digital, we have experienced double digit growth in bookings from the re-launched Caesars.com and are testing new ways of engaging our customers online. During the quarter, we have also seen increased adoption and usage of the Total Rewards credit card, which launched earlier in the year.
Turning to our domestic expansion efforts, our joint venture in Ohio now has three properties up and running with related management fees contributing to our results. Horseshoe Cleveland celebrated its one-year anniversary in May, and Horseshoe Cincinnati just completed its first full quarter of operation. ThistleDown Racino, which opened on April 9, has generated nearly $29 million of gross gaming revenue in less than three months, and early results indicate the property is appealing to a unique customer segment with a

6

        

complementary product to nearby Horseshoe Cleveland. We also believe that ThistleDown is increasing the overall Cleveland gaming market. These three properties have attracted more than 8 million visitors and 825,000 new Total Rewards members. 
As I mentioned earlier, our consortium in Baltimore recently completed financing and broke ground on the Horseshoe property there. The property is scheduled to open in the third quarter of 2014. Like our other recent urban developments, Horseshoe Baltimore will have an outward-facing design, three premier restaurants, several bars and restaurants and a multi-purpose entertainment space.
In Massachusetts, we are making progress toward establishing host community agreements with the cities of Boston and Revere, a crucial step in our efforts to win a license to develop a $1 billion resort casino at the Suffolk Downs thoroughbred track in East Boston. We are confident our proposal has the best location, will become an integral part of the Boston community and will attract both local guests and tourists from across the country and around the world.
Now moving to our social and mobile games business, which remains an important part of our efforts to foster brand loyalty and expand our customer base. According to Eilers Research, we are now the No. 1 global publisher in the $1.2 billion social casino-style games market, driven by the strength of our leading slots, casino and bingo franchises.
During the quarter, we further expanded our market leadership, adding new games to our platform as CIE acquired the popular World Series of Poker social and mobile game title from Electronic Arts. The acquisition gives CIE global rights and ownership of the title. The game is available on the Facebook platform, on the Amazon Kindle, Android devices and iOS.
The World Series of Poker tournament in Las Vegas also logged another successful year with record attendance and the second largest prize pool in the event's 44-year history. The Main Event drew more than 6,300 participants, competing for a prize pool of nearly $60 million.

7

        

CIE is also preparing to launch real money online poker in Nevada under the World Series of Poker brand, subject to regulatory approvals. In New Jersey, we have submitted our application for an online gaming license and are working closely with state regulators. We hope to launch online gaming in New Jersey by the end of the year, subject to regulatory approvals.
On the international front, we were disappointed that the government ministries in South Korea declined our consortium's application for preapproval to develop an integrated resort in Incheon. We have a 90-day period to appeal the decision and are currently evaluating our options.
Our performance in the second quarter reflects an intensified focus on managing our operating expenses in the face of a business environment that has yet to recover. We have sought and found new ways to reduce our cost base without sacrificing service.
We are also acting aggressively to improve the company's capital structure. We are making tangible progress on the execution of our strategic transaction to form Caesars Growth Partners. Earlier in July, we publicly filed an S-1 related to this transaction. The Nevada gaming regulators have approved the transaction, and we are pursuing approval from regulators in other jurisdictions. When complete, the transaction will benefit Caesars in many ways, including:
•
the creation of a more flexible vehicle to fund growth projects;
•
a cash infusion to Caesars; and
•
participation in the future upside of assets transferred to Growth Partners and future growth investments through a majority economic stake in Growth Partners.
The transaction is an important step in our efforts to strengthen our balance sheet, and it positions the company to make strategic investments in our future growth.
In addition to publicly filing the S-1, we opportunistically purchased debt, issued equity and completed the sale of Conrad Punta Del Este in Uruguay. Caesars' liquidity position of more than $1.9 billion as of June

8

        

30, 2013, and our debt maturity profile, provide operational flexibility and a runway for the recovery of the core business and for new growth opportunities to generate returns.
The milestones I have described are important components of our strategy to enhance value and position our business for future growth. I am pleased with the tangible results we are beginning to see from our recent investments, and am optimistic that our in-progress projects will begin positively impacting our results in the coming quarters. With that, I will turn the call over to Donald for additional commentary on our financial performance and balance sheet.
Donald Colvin:
Thank you Gary.
While second quarter results were impacted by industry conditions similar to the first quarter, we benefitted from several positive factors. We are seeing returns on our significant investments in Las Vegas, and are benefitting from our decision to implement resort fees. As Gary mentioned, F&B revenues and cash ADRs in Las Vegas both grew in the first half of the year, up approximately 9% and 4%, respectively, year-over-year. Also, we took additional steps during the quarter to improve our longer term liquidity and balance sheet profile. We repurchased CMBS debt, issued equity through our At-the-Market equity offering program and bought back CEOC debt. In addition, we remained focused on optimizing our cost structure to help mitigate the impact of lower gaming volumes across our network and are enforcing stricter cost controls. Companywide, direct operating expenses were down approximately 7% and corporate expense was down approximately 17% in the first half of 2013 compared to the prior year. Additionally, our salary and wage expense in our domestic owned properties was down 3% and our full-time employees were down 6% year-over-year in the second quarter. Despite these efforts, we are investing heavily in the business and earn extraordinarily high service scores from our guests.
We reported second quarter net revenue of $2.2 billion, which was relatively flat year-over-year, as a decline in casino revenue was largely offset by increases in F&B, rooms and managed revenue as well as lower

9

        

promotional allowances. Our topline decline is largely driven by a combination of macroeconomic conditions, competition and a shift in marketing strategy to be more targeted with our promotions, particularly in the regional markets.
Income from operations totaled $125.3 million, down $63.8 million compared to the prior year. The 33.7% decline was primarily driven by higher non-cash asset impairment charges.
Adjusted EBITDA declined 8.2% to $470.5 million and Property EBITDA declined 4.9% to $492.8 million compared with the year-earlier period. The primary driver of the decline was lower gaming revenue, partially offset by lower operating expense driven in part by our cost reduction efforts and lower variable marketing spend. The year-ago quarter also benefitted from $24 million of adjusted EBITDA and property EBITDA primarily attributable to Harrah's St. Louis, which was sold in the fourth quarter of 2012. Our cost savings programs produced approximately $67 million in incremental cost savings during the quarter.
System-wide hotel revenue increased by 2.5%, driven by an 8.2% increase in cash ADR due to resort fees. Revenue gains were partially offset by lower hotel occupancy, which declined by 1.7 percentage points to 91.0%. Las Vegas occupancy also declined 1.3 percentage points to 94.6%.
You will note that we have included some color on the impact of hold at the regional level, as it was a meaningful driver in Las Vegas, Atlantic City and other regional markets.
Taking a look at our performance in Las Vegas, second quarter net revenue decreased 4.5% year-over-year to $745.9 million, due to lower casino revenue and disruptions related to development and construction activities, partially offset by an increase in hotel and F&B revenue.
Casino revenue in Las Vegas declined approximately 15.5% year-over-year, primarily due to unfavorable hold and weaker gaming volumes. As Gary discussed, we are very pleased with the momentum of our F&B revenue performance, which was up approximately 9% year-over-year, as our new restaurant offerings in the market are beginning to gain traction. Our three Gordon Ramsay restaurants, in particular, are doing

10

        

significantly better than the investment model estimates. Hotel revenue was up approximately 6%, driven by a 10% increase in cash ADR due to resort fees, partially offset by the decrease in occupancy resulting from the impact of renovation and construction activities.
We estimate that revenue was reduced by approximately $6 to $9 million due to the impact of Linq-related construction activities, compared to $10 to $15 million a year ago.
Property EBITDA in Las Vegas declined 1.8% to $210.6 million, primarily due to the income impact of lower revenue including the effect of unfavorable hold, partially offset by lower operating expense, which included the reversal of an approximately $14 million sales tax reserve related to the Nevada complimentary meals sales tax matter, which settled during the quarter, and cost decreases attributable to our cost savings initiatives.
The impact of Linq-related construction activities reduced property EBITDA by an estimated $4 to $7 million during the quarter, compared to $5 to 10 million a year ago.
Looking forward, our Las Vegas results will benefit from the full impact of resort fees, as well as improved fundamentals, demonstrated in the quarter by improved ADRs and F&B revenues.
Now turning to the Atlantic City region. Net revenue declined by 8.3% year-over-year to $400.1 million, as gaming revenue was down due to lower visitation driven primarily by competitive dynamics in the region, partially offset by favorable hold.
Atlantic City's property EBITDA during the quarter was down 5.9% year-over-year to $61.3 million. The decrease was driven by the impact of the revenue decline, partially offset by lower operating expense, and more efficient marketing spend.
Overall market volume declines in Atlantic City remain steep, but are returning to pre-Sandy levels. That said, our share has declined slightly there. We are driving marketing efficiencies and focusing on EBITDA,

11

        

as we align our cost structure with the current, lower visitation levels. Also note that the anniversary of Hurricane Sandy is in the fourth quarter of this year.
Looking at other regional markets, which include domestic wholly-owned properties outside of Las Vegas and Atlantic City, revenue declined 1.1% year-over-year to $748.1 million. Despite favorable hold, casino revenue was lower across our regional network, driven by lower visitation. We faced increased competition in certain areas of our regional footprint with a notable impact on operations in our Louisiana/Mississippi region, particularly in Tunica. We also implemented a more targeted marketing strategy, focused on eliminating unprofitable marketing activities.
Property EBITDA rose 2.6% to $182.3 million, due to a decline in property operating expense, which benefitted from our cost control initiatives, and favorable taxes in the Illinois/Indiana and Iowa/Missouri regions, which more than offset lower revenue.
Looking ahead, the factors that drove first half results will likely continue to impact our regional performance.
Turning to our Managed, International and Other businesses, net revenue increased 39.0% to $264.1 million compared to the prior year period, driven by higher reimbursable revenue from Horseshoe Cleveland, Horseshoe Cincinnati, Thistledown Racino and Caesars Windsor, increased management fees from our Ohio properties and an increase in revenue at CIE.
Now, let's take a look at our balance sheet and liquidity. We are making progress on the Growth Partners transaction with the recent public filing of the S-1. We are focused on further improvements to our balance sheet that will provide the company the flexibility to capitalize on growth opportunities.
As I mentioned, we raised additional capital during the quarter through our At-the-Market equity offering program, and used it to buy back CEOC debt. The implied equity value at the selling price is appealing when the discount on the repurchased debt is taken in to consideration. Since inception, we have issued approximately 915.5 thousand new shares, nearly all in the second quarter. Also during the quarter, we

12

        

repurchased $225 million face value of CMBS mezzanine debt and $51 million face value of total CEOC debt.
We also completed the sale of 45% of the Conrad Punta Del Este Resort and Casino in Uruguay to Enjoy S.A., for approximately $115 million and a 4.5% equity stake in Enjoy, for a total consideration of $139.5 million. With the completion of the transaction, Enjoy has assumed management control of the property. We plan to use the cash received for general corporate purposes.
Total face value of debt was $23.7 billion at quarter-end. Debt, net of $1.8 billion of cash, was $21.9 billion, not including restricted cash. CEOC and CMBS cash balances were $1.4 billion and $172 million, respectively at June 30, 2013. Restricted cash was $334 million, and includes project funds that have been raised but not spent on The Linq and Gansevoort, as well as reserve funds for the CMBS properties and Planet Hollywood. The intercompany loan from CEC to CEOC was $285.4 million compared to $485.4 million at the end of March. Total debt repurchased during the quarter was around $275 million.
Caesars had $1.9 billion in liquidity at quarter-end, which included the $1.8 billion of cash, $215 million of revolver capacity, less $120 million of the revolver capacity committed to letters of credit. Included in our cash balance is $80 million received so far of the $115 million of cash proceeds from the sale of Conrad Punta del Este. Included in the revolver capacity is the $75 million of extended revolver as part of the February amendment to our senior secured credit facility, which closed in April.
Capital expenditures during the second quarter were over $150 million. We spent approximately $140 million in CEOC, primarily on The Linq, Baltimore and Gansevoort, and approximately $10 million in CMBS, primarily on Linq-related upgrades at the Flamingo.
Our expectations for planned capital expenditures for full year 2013 are $1.0 to $1.1 billion. To help you better understand how we are allocating our capital expenditures, we wanted to provide our 2013 spend expectations broken out in a number of ways. We expect:

13

        

•
Approximately $300 million to be financed and approximately $750 million to be spent directly from the balance sheet;
•
Approximately $500 million to be allocated to project-related CapEx and approximately $550 million to maintenance CapEx. Included in the $500 million of project-related CapEx is approximately $300 million of project financing associated with The Linq, Gansevoort, Baltimore, and other development projects that we have previously financed, plus approximately $200 million of our equity. Included in the $550 million of maintenance CapEx is spending on room upgrades and facilities, especially in Las Vegas.
•
We plan to spend approximately $945 million in CEOC and approximately $85 million in CMBS, with the remainder to be spent primarily in CEC due to the Atlantic City Meeting Facility.
Going forward, we remain focused on driving efficiency, decreasing costs and further improving our balance sheet with the successful execution of the Growth Partners transaction being our first priority.
With that, I will hand it back to Gary for his final remarks.

Gary Loveman:
Thank you Donald.
We remain committed to investing in our core markets, brands and capabilities; expanding the reach of our network domestically and through the social and mobile games business; and pursuing real-money online gaming. We are encouraged by many of the underlying trends that we have seen in our core business in Las Vegas, including growth in F&B and lodging revenues and the prospect of improvement in the groups business. We believe these trends will gain momentum, particularly in 2014.
With housing values rebounding, a relatively strong stock market and an improving labor market, we hope to benefit from improving macroeconomic trends and consumer sentiment. We believe sustained improvement in the economy has the potential to translate into higher consumer spending at our properties.

14

        

While the current environment presents some near-term challenges, we are excited about our prospects in 2014 and beyond, particularly in light of the improving economic conditions, favorable underlying business trends, several of our projects coming online and the prospective changes to our capital structure.
We are now happy to take your questions.
###


15

        

Safe Harbor Statement
These prepared remarks include “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue,” “pursue,” or the negative or other variations thereof or comparable terminology. In particular, they include statements relating to, among other things, future actions, new projects, strategies, future performance, the outcomes of contingencies, and future financial results of Caesars. These forward-looking statements are based on current expectations and projections about future events.
Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified, and, consequently, the actual performance of Caesars may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors, as well as other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission (including the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” contained therein):
•
the ability to satisfy the conditions to the closing of the previously announced Caesars Growth Partners transaction, including receipt of required regulatory approvals;
•
the previously announced Caesars Growth Partners transaction may not consummate on the terms contemplated or at all;
•
the impact of the Company's substantial indebtedness and the restrictions in the Company's debt agreements;
•
access to available and reasonable financing on a timely basis, including the ability of the Company to refinance its indebtedness on acceptable terms;
•
the effects of local and national economic, credit, and capital market conditions on the economy, in general, and on the gaming industry, in particular;
•
the ability to realize the expense reductions from cost savings programs;
•
changes in the extensive governmental regulations to which the Company and its stockholders are subject, and changes in laws, including increased tax rates, smoking bans, regulations or accounting standards, third-party relations and approvals, and decisions, disciplines, and fines of courts, regulators, and governmental bodies;
•
the ability of the Company's customer-tracking, customer loyalty, and yield-management programs to continue to increase customer loyalty and same-store or hotel sales;
•
the effects of competition, including locations of competitors and operating and market competition;
•
the ability to recoup costs of capital investments through higher revenues;
•
abnormal gaming holds (“gaming hold” is the amount of money that is retained by the casino from wagers by customers);
•
the ability to timely and cost-effectively integrate companies that the Company acquires into its operations;
•
the potential difficulties in employee retention and recruitment as a result of the Company's substantial indebtedness or any other factor;
•
construction factors, including delays, increased costs of labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters, and building permit issues;
•
litigation outcomes and judicial and governmental body actions, including gaming legislative action, referenda, regulatory disciplinary actions, and fines and taxation;

16

        

•
acts of war or terrorist incidents, severe weather conditions, uprisings or natural disasters, including losses therefrom, including losses in revenues and damage to property, and the impact of severe weather conditions on the Company's ability to attract customers to certain of its facilities, such as the amount of losses and disruption to the Company as a result of Hurricane Sandy in late October 2012;
•
the effects of environmental and structural building conditions relating to the Company's properties;
•
access to insurance on reasonable terms for the Company's assets; and
•
the impact, if any, of unfunded pension benefits under multi-employer pension plans.

Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. Caesars disclaims any obligation to update the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated or, if no date is stated, as of the date of these prepared remarks.



17

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