EX-99.2 2 exhibit992-cecproformafina.htm UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION Exhibit 99.2 - CEC Proforma Financials
Exhibit 99.2

CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA FINANCIAL STATEMENTS
The following unaudited consolidated condensed pro forma financial statements of Caesars Entertainment Corporation and its consolidated entities (collectively, “Caesars Entertainment,” “CEC,” “we,” or “our”) are included herein:
•
Unaudited consolidated condensed pro forma balance sheet as of September 30, 2014;
•
Unaudited consolidated condensed pro forma statement of operations for the nine months ended September 30, 2014;
•
Unaudited consolidated condensed pro forma statement of operations for the year ended December 31, 2013; and
•
Notes to unaudited consolidated condensed pro forma financial statements.
The following unaudited consolidated condensed pro forma financial statements (“pro forma financial statements”) are based upon the historical consolidated financial statements of Caesars Entertainment, adjusted to reflect the deconsolidation of Caesars Entertainment Operating Company, Inc. and its consolidated subsidiaries (“CEOC”) as a result of CEOC implementing its financial restructuring plan to deleverage its balance sheet by voluntarily filing for reorganization under Chapter 11 of the United States Bankruptcy Code on January 15, 2015 (“Petition Date”). As a result of this filing, we concluded that CEC will no longer control CEOC as of the Petition Date, and therefore, CEOC will be deconsolidated from the CEC consolidated financial statements prospectively. Subsequent to the deconsolidation, we will account for our investment in CEOC using the cost method of accounting, which is reflected as a pro forma adjustment in the unaudited consolidated condensed pro forma balance sheet (“pro forma balance sheet”). See “Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements” for explanations our other adjustments.
The pro forma financial statements of Caesars Entertainment should be read in conjunction with the historical consolidated financial statements of Caesars Entertainment and the related notes included in our 2013 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014, and the CEOC Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014, as filed with the Securities and Exchange Commission.
CEC prepared the unaudited consolidated condensed interim financial statements included herein on the same basis as the annual audited CEC consolidated financial statements and included all adjustments, consisting of normal and recurring adjustments that are considered necessary to present fairly the financial position and results of operations for the unaudited periods. The summary financial information as of and for the nine months ended September 30, 2014, is not necessarily indicative of the results that may be obtained for a full year for CEC or CEOC.
The unaudited consolidated condensed pro forma balance sheet (“pro forma balance sheet”) reflects the deconsolidation of CEOC assuming the Chapter 11 filing had occurred on September 30, 2014, while the unaudited consolidated condensed pro forma statements of operations (“pro forma statements of operations”) give effect to the deconsolidation assuming the Chapter 11 filing had occurred on January 1, 2013. The pro forma adjustments are based on the best available information including certain assumptions that Caesars Entertainment management believes are reasonable. Management believes that such adjustments are appropriate and directly attributable to the deconsolidation of CEOC. The pro forma adjustments assume that all Caesars Entertainment properties, including those owned by CEOC, are open for business and are continuing to operate in the ordinary course. This includes that all properties are continuing to host meetings and events and provide the facilities, amenities and experiences that guests expect and that the entertainers who perform at these properties will continue to do so according to their ordinary schedule.
Caesars Entertainment, Caesars Entertainment Resort Properties, LLC (“CERP”), and Caesars Growth Partners, LLC (“CGP LLC”), which are separate entities with independent capital structures, have not filed for bankruptcy relief. In addition, the pro forma adjustments do not include any adjustments to reflect the Restructuring Support Forbearance Agreement (“RSA”), including the reorganization of the CEOC corporate structure by separating CEOC’s operating

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assets and real property assets into two companies, or the Plan of Reorganization. For tax purposes, CEC has not made any assumptions regarding the ultimate form of the reorganization and the impact, if any, of a continuing equity investment in CEOC. As such, the pro forma adjustments do not include the deferred tax impacts of any outside basis difference in CEOC. Accordingly, actual results could differ materially from the pro forma presentation included herein depending on these factors, among others.
The pro forma financial statements are provided for illustrative purposes only and are not indicative of the operating results or financial position that would have occurred had the deconsolidation of CEOC occurred on September 30, 2014 for the pro forma balance sheet, or on January 1, 2013 for the pro forma statements of operations for the nine months ended September 30, 2014, and the year ended December 31, 2013. Readers should not rely on the pro forma financial statements as being indicative of the historical operating results that Caesars Entertainment would have achieved if the deconsolidation had occurred on such dates or any future operating results or financial position that it will experience after the effective date of the Chapter 11 filing including the final result and affect of any potential outcome resulting from the planned restructuring of CEOC.


2


CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 2014
(In millions)


 
 
 
(a)
 
(b)
 
 
 
 
 
Historical CEC Consolidated
 
Less: Deconsolidation of CEOC
 
Eliminations
 
Pro Forma Adjustments
 
Pro Forma CEC Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
3,182

 
$
1,480

 
$
—

 
$
—

 
$
1,702

Restricted cash
62

 
—

 
—

 
—

 
62

Receivables, net
623

 
562

 
115

 
—

 
176

Deferred income taxes
4

 
—

 
—

 
—

 
4

Prepayments and other current assets
246

 
121

 
4

 
—

 
129

Inventory
45

 
29

 
—

 
—

 
16

Total current assets
4,162

 
2,192

 
119

 
—

 
2,089

Property and equipment, net
13,485

 
5,916

 
—

 
 
 
7,569

Goodwill
2,773

 
753

 
(10
)
 
—

 
2,010

Intangible assets other than goodwill
3,223

 
2,566

 
—

 
—

 
657

Investments in and advances to non-consolidated affiliates
169

 
143

 
—

 
—

 
26

Restricted cash
42

 
8

 
8

 
—

 
42

Deferred income taxes
24

 
—

 
—

 
—

 
24

Deferred charges and other
611

 
440

 
215

 
—

 
386

Investment in CEOC
—

 
—

 
—

 
60

(h)
60

Assets held for sale
3

 
3

 
—

 
—

 
—

Total assets
$
24,492

 
$
12,021

 
$
332

 
$
60

 
$
12,863

 
 
 
 
 
 
 
 
 
 

3


CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 2014
(In millions)


 
 
 
(a)
 
(b)
 
 
 
 
 
Historical CEC Consolidated
 
Less: Deconsolidation of CEOC
 
Eliminations
 
Pro Forma Adjustments
 
Pro Forma CEC Consolidated
Liabilities and Stockholders’ Equity/(Deficit)
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Accounts payable
$
431

 
$
248

 
$
99

 
$
—

 
$
282

Accrued expenses and other current liabilities
1,319

 
806

 
9

 
—

 
522

Interest payable
594

 
412

 
7

 
—

 
189

Deferred income taxes
314

 
228

 
—

296

—

 
86

Current portion of long-term debt
141

 
82

 
4

 
—

 
63

Total current liabilities
2,799

 
1,776

 
119

 
—

 
1,142

Long-term debt
22,889

 
16,045

 
—

 
89

(f)
6,933

Deferred income taxes
2,077

 
949

 
—

 
(5
)
(c)
1,123

Deferred credits and other
441

 
564

 
222

 
—

 
99

Total liabilities
28,206

 
19,334

 
341

 
84

 
9,297

Stockholders’ equity/(deficit)
 
 
 
 
 
 
 
 


Common stock, voting
2

 
—

 
—

 
—

 
2

Treasury stock
(19
)
 
—

 
—

 
—

 
(19
)
Additional paid-in capital
8,104

 
2,827

 
13

 
(724
)
(g)
4,566

Accumulated deficit
(12,082
)
 
(10,142
)
 
(22
)
 
(99
)
(d)
(2,061
)
Accumulated other comprehensive loss
(17
)
 
(22
)
 
—

 
(4
)
(g)
1

Total Caesars stockholders’ equity/(deficit)
(4,012
)
 
(7,337
)
 
(9
)
 
(827
)
 
2,489

Noncontrolling interests
298

 
24

 
—

 
803

(g)
1,077

Total stockholders’ equity/(deficit)
(3,714
)
 
(7,313
)
 
(9
)
 
(24
)
 
3,566

Total liabilities and stockholders’ equity/(deficit)
$
24,492

 
$
12,021

 
$
332

 
$
60

 
$
12,863

See accompanying Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements.


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CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2014
(In millions, except per share data)



 
 
 
(e)
 
(b)
 
 
 
 
 
Historical CEC Consolidated
 
Less: Deconsolidation of CEOC
 
Eliminations
 
Pro Forma Adjustments
 
Pro Forma CEC Consolidated
Revenues
 
 
 
 
 
 
 
 
 
Casino
$
4,047

 
$
2,838

 
$
—

 
$
—

 
$
1,209

Food and beverage
1,144

 
614

 
—

 
—

 
530

Rooms
915

 
402

 
—

 
—

 
513

Management fees
44

 
68

 
24

 
—

 
—

Other
892

 
199

 
33

 
—

 
726

Reimbursed management costs
197

 
312

 
115

 
—

 
—

Less: casino promotional allowances
(854
)
 
(494
)
 
—

 
—

 
(360
)
Net revenues
6,385

 
3,939

 
172

 
—

 
2,618

Operating expenses
 
 
 
 
 
 
 
 
 
Direct
 
 
 
 
 
 
 
 
 
Casino
2,413

 
1,744

 
—

 
—

 
669

Food and beverage
516

 
250

 
—

 
—

 
266

Rooms
242

 
96

 
—

 
—

 
146

Property, general, administrative, and other
1,680

 
821

 
57

 
—

 
916

Reimbursable management costs
197

 
312

 
115

 
—

 
—

Depreciation and amortization
371

 
200

 
—

 
—

 
171

Write-downs, reserves, and project opening costs, net of recoveries
95

 
59

 
4

 
—

 
40

Impairment of intangible and tangible assets
549

 
418

 
(23
)
 
—

 
108

Loss on interests in non-consolidated affiliates
9

 
9

 
—

 
—

 
—

Corporate expense
193

 
133

 
—

 
—

 
60

Acquisition and integration costs
71

 
17

 
—

 
—

 
54

Amortization of intangible assets
100

 
39

 
—

 
—

 
61

Total operating expenses
6,436

 
4,098

 
153

 
—

 
2,491

Income/(loss) from operations
(51
)
 
(159
)
 
19

 
—

 
127


5

CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2014
(In millions, except per share data)


 
 
 
(e)
 
(b)
 
 
 
 
 
Historical CEC Consolidated
 
Less: Deconsolidation of CEOC
 
Eliminations
 
Pro Forma Adjustments
 
Pro Forma CEC Consolidated
Interest expense
(1,954
)
 
(1,633
)
 
(119
)
 
—

 
(440
)
Gain/(loss) on early extinguishment of debt
(95
)
 
(113
)
 
52

 
—

 
70

Loss on partial sale of subsidiary
(3
)
 
(3
)
 
—

 
—

 
—

Other income, including interest income
5

 
18

 
56

 
—

 
43

Loss from continuing operations, before income taxes
(2,098
)
 
(1,890
)
 
8

 
—

 
(200
)
Income tax benefit
479

 
444

 
—

 
5

(c)
40

Loss from continuing operations, net of income taxes
(1,619
)
 
(1,446
)
 
8

 
5

 
(160
)
Discontinued operations
 
 
 
 
 
 
 
 


Loss from discontinued operations
(188
)
 
(170
)
 
3

 
—

 
(15
)
Income tax benefit
11

 
11

 
—

 
—

 
—

Loss from discontinued operations, net of income taxes
(177
)
 
(159
)
 
3

 
—

 
(15
)
Net loss
(1,796
)
 
(1,605
)

11


5

 
(175
)
Net (income)/loss attributable to noncontrolling interests
35

 
(3
)
 
—

 
(104
)
(g)
(66
)
Net loss attributable to Caesars
$
(1,761
)
 
$
(1,608
)
 
$
11

 
$
(99
)
 
$
(241
)
Loss per share
 
 
 
 
 
 
 
 


Loss per share from continuing operations
$
(11.16
)
 

 
 
 
 
 
$
(1.59
)
Loss per share from discontinued operations
(1.25
)
 

 
 
 

 
(0.11
)
Net loss per share
$
(12.41
)
 

 
 
 
 
 
$
(1.70
)
Weighted-average common shares outstanding
142

 
 
 
 
 
 
 
142


See accompanying Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements.



6


CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
Year Ended December 31, 2013
(In millions, except per share data)



 
 
 
(e)
 
(b)
 
 
 
 
 
Historical CEC Consolidated
 
Less: Deconsolidation of CEOC
 
Eliminations
 
Pro Forma Adjustments
 
Pro Forma CEC Consolidated
Revenues
 
 
 
 
 
 
 
 
 
Casino
$
5,809

 
$
4,641

 
$
—

 
$
—

 
$
1,168

Food and beverage
1,510

 
996

 
—

 
—

 
514

Rooms
1,220

 
742

 
—

 
—

 
478

Management fees
57

 
59

 
2

 
—

 
—

Other
875

 
385

 
45

 
—

 
535

Reimbursed management costs
268

 
285

 
19

 
—

 
2

Less: casino promotional allowances
(1,179
)
 
(827
)
 
—

 
—

 
(352
)
Net revenues
8,560

 
6,281

 
66

 
—

 
2,345

Operating expenses
 
 
 
 
 
 
 
 
 
Direct
 
 
 
 
 
 
 
 
 
Casino
3,281

 
2,690

 
—

 
—

 
591

Food and beverage
658

 
412

 
—

 
—

 
246

Rooms
305

 
174

 
—

 
—

 
131

Property, general, administrative, and other
2,170

 
1,423

 
40

 
—

 
787

Reimbursable management costs
268

 
285

 
19

 
—

 
2

Depreciation and amortization
565

 
401

 
—

 
—

 
164

Write-downs, reserves, and project opening costs, net of recoveries
104

 
86

 
—

 
—

 
18

Impairment of intangible and tangible assets
3,019

 
1,955

 
(6
)
 
—

 
1,058

Loss on interests in non-consolidated affiliates
18

 
21

 
—

 
—

 
(3
)
Corporate expense
161

 
138

 
8

 
—

 
31

Acquisition and integration costs
81

 
13

 
—

 
—

 
68

Amortization of intangible assets
165

 
90

 
—

 
—

 
75

Total operating expenses
10,795

 
7,688

 
61

 
—

 
3,168

Loss from operations
(2,235
)
 
(1,407
)
 
5

 
—

 
(823
)

7


CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
Year Ended December 31, 2013
(In millions, except per share data)


 
 
 
(e)
 
(b)
 
 
 
 
 
Historical CEC Consolidated
 
Less: Deconsolidation of CEOC
 
Eliminations
 
Pro Forma Adjustments
 
Pro Forma CEC Consolidated
Interest expense
(2,253
)
 
(2,119
)
 
(184
)
 
—

 
(318
)
Gain/(loss) on early extinguishment of debt
(30
)
 
(32
)
 
—

 
—

 
2

Gain on partial sale of subsidiary
44

 
44

 
—

 
—

 
—

Other income, including interest income
14

 
15

 
184

 
—

 
183

Loss from continuing operations, before income taxes
(4,460
)
 
(3,499
)
 
5

 
—

 
(956
)
Income tax benefit
1,550

 
1,242

 
(2
)
 
—

 
306

Loss from continuing operations, net of income taxes
(2,910
)
 
(2,257
)
 
3

 
—

 
(650
)
Discontinued operations
 
 
 
 
 
 
 
 
 
Loss from discontinued operations
(30
)
 
(30
)
 
—

 
—

 
—

Income tax provision
—

 
—

 
—

 
—

 
—

Loss from discontinued operations, net of income taxes
(30
)
 
(30
)
 
—

 
—

 
—

Net loss
(2,940
)
 
(2,287
)

3


—

 
(650
)
Net income attributable to noncontrolling interests
(8
)
 
(4
)
 
—

 
—

 
(4
)
Net loss attributable to Caesars
$
(2,948
)
 
$
(2,291
)
 
$
3

 
$
—

 
$
(654
)
Loss per share
 
 
 
 
 
 
 
 
 
Loss per share from continuing operations
$
(22.70
)
 
 
 
 
 
 
 
$
(5.07
)
Loss per share from discontinued operations
(0.23
)
 
 
 
 
 
 
 
—

Net loss per share
$
(22.93
)
 
 
 
 
 
 
 
$
(5.07
)
Weighted-average common shares outstanding
129

 
 
 
 
 
 
 
129


See accompanying Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements.





8

CAESARS ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED PRO FORMA FINANCIAL STATEMENTS

(a)
Reflects the deconsolidation of CEOC’s assets and liabilities (including CEOC’s intercompany balances with CEC and its remaining consolidated entities) at their carrying amounts included in CEC’s financial statements as of September 30, 2014.
(b)
Represents adjustments to remove the effect of intercompany amounts and transactions that were included in CEC’s historical financial statements. The adjustment to retained earnings also includes the estimated impact from the gain on deconsolidation due to the de-recognition of the carrying amounts of CEOC’s assets and liabilities and accumulated other comprehensive loss previously consolidated in CEC’s historical consolidated financial statements as of September 30, 2014. The pro forma statements of operations do not include the estimated gain on deconsolidation as it is not expected to have a continuing impact due to its non-recurring nature. The following are the primary intercompany amounts and transactions reflected in the adjustments:
1.
Amounts recorded as trade accounts payable for pro forma financial statement presentation. Prior to the deconsolidation of CEOC, these amounts were considered intercompany trade accounts payable and were eliminated in consolidation. Subsequent to the deconsolidation, these amounts are recorded as balances with CEC (related party accounts payable).
2.
Management fee revenue related to CEOC’s management of certain casinos on behalf of CGP LLC, which after the deconsolidation of CEOC will be considered third party transactions and are expected to have a continuing impact. Prior to the deconsolidation, these amounts were considered intercompany transactions between consolidated entities and eliminated in consolidation.
3.
Interest expense related to CEOC notes held by CEC and CGP LLC during the periods presented. Prior to the deconsolidation, these amounts were considered intercompany interest income from CEOC and were eliminated in consolidation.
4.
Gains and losses recognized on the extinguishment of CEOC debt and other CEOC debt transactions related to debt instruments held by CGP LLC. Prior to the deconsolidation, these amounts were considered intercompany transactions with CEOC and were eliminated in consolidation.
(c)
Represents the impact of additional deferred taxes as a result of the deconsolidation of CEOC.
(d)
The adjustment to retained earnings reflects the net impact of amounts as a result of the pro-forma adjustments column.
(e)
Reflects the deconsolidation of CEOC’s statement of operations (including CEOC’s intercompany transactions with CEC and remaining consolidated entities) included in CEC’s financial statements for the periods ended September 30, 2014 and December 31, 2013.
(f)
Represents other than temporary impairment of a discount recognized by CEC on CEOC notes that were distributed by CGP LLC through a dividend to a non-consolidated affiliate.
(g)
Represents the amount of the accumulated stockholders’ deficit and net income allocated to the noncontrolling interests’ ownership in CEOC. Prior to the deconsolidation, this amount was recorded as a reduction in the accumulated stockholders’ deficit.
(h)
Represents our investment in CEOC using the cost method of accounting as of September 30, 2014, based on the estimated fair value of the CEOC enterprise, net of the fair value of CEOC debt.

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