Document

0000858339-19-000122.txt : 20190502 0000858339-19-000122.hdr.sgml : 20190502 20190501183820 ACCESSION NUMBER: 0000858339-19-000122 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20190501 ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190502 DATE AS OF CHANGE: 20190501 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: 19789145 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 a2019q1cec8-kcrcquarterlyr.htm 8-K Document

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

May 1, 2019 (May 1, 2019)

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

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

Item 7.01 Regulation FD Disclosure.

On May 1, 2019, Caesars Entertainment Corporation provided the Quarterly Report for the fiscal quarter ended March 31, 2019 (the “CRC LLC Quarterly Report”) of its wholly owned subsidiary Caesars Resort Collection, LLC (“CRC LLC”) as required under a certain indenture of CRC LLC. Attached and incorporated herein by reference as Exhibit 99.1 is a copy of the CRC LLC Quarterly Report.

The information contained in this Current Report on Form 8-K, including the exhibit furnished herewith, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise incorporated by reference in any filing pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such a filing. The furnishing of the information in this report, including the exhibit furnished herewith, is not intended to, and does not, constitute a determination or admission as to the materiality or completeness of such information.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.



Exhibit No.	Description
99.1	Caesars Resort Collection, LLC Quarterly Report For the Three Months Ended March 31, 2019

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:	May 1, 2019	By:	/S/ KEITH A. CAUSEY
			Keith A. Causey
			Senior Vice President and Chief Accounting Officer

EX-99.1 2 a2019q1crcex991-quarterlyr.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1

Caesars Resort Collection, LLC

Quarterly Report For the Three Months Ended March 31, 2019

CAESARS RESORT COLLECTION, LLC

INDEX



		Page
PART I. FINANCIAL INFORMATION
Item 1.	Unaudited Financial Statements	3
	Consolidated Condensed Balance Sheets	3
	Consolidated Condensed Statements of Operations and Comprehensive Income	4
	Consolidated Condensed Statements of Member’s Equity	5
	Consolidated Condensed Statements of Cash Flows	6
	Notes to Consolidated Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	31

PART I—FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

CAESARS RESORT COLLECTION, LLC

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED)



(In millions)	March 31, 2019		December 31, 2018
Assets
Current assets
Cash and cash equivalents ($79 and $19 attributable to our VIEs)	$	328	$	322
Restricted cash	18		12
Receivables, net ($12 and $14 attributable to our VIEs)	159		145
Due from affiliates, net ($99 and $138 attributable to our VIEs)	99		138
Prepayments and other current assets ($61 and $40 attributable to our VIEs)	129		98
Inventories	13		15
Total current assets	746		730
Property and equipment, net ($144 and $129 attributable to our VIEs)	7,464		7,412
Goodwill	1,887		1,887
Intangible assets other than goodwill	1,628		1,643
Restricted cash	—		5
Deferred income taxes	4		4
Prepaid management fees to related parties	141		144
Deferred charges and other assets ($28 and $18 attributable to our VIEs)	241		96
Total assets	$	12,111	$	11,921

Liabilities and Member's Equity
Current liabilities
Accounts payable ($73 and $78 attributable to our VIEs)	$	235	$	253
Due to affiliates, net ($102 and $1 attributable to our VIEs)	106		4
Accrued expenses and other current liabilities ($123 and $172 attributable to our VIEs)	563		585
Interest payable	50		26
Contract liabilities ($71 and $69 attributable to our VIEs)	133		118
Current portion of financing obligations	12		11
Current portion of long-term debt	47		147
Total current liabilities	1,146		1,144
Financing obligations	1,105		1,108
Long-term debt	6,201		6,210
Long-term debt to related party ($15 and $15 attributable to our VIEs)	15		15
Deferred income taxes	623		627
Deferred credits and other liabilities ($13 and $7 attributable to our VIEs)	310		156
Total liabilities	9,400		9,260
Commitments and contingencies (Note 7)
Member’s equity
CRC member’s equity	2,687		2,632
Noncontrolling interests	24		29
Total member’s equity	2,711		2,661
Total liabilities and member’s equity	$	12,111	$	11,921

See accompanying Notes to Consolidated Condensed Financial Statements.

CAESARS RESORT COLLECTION, LLC

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)



	Three Months Ended March 31,
(In millions)	2019			2018
Revenues
Casino	$	438		$	330
Food and beverage	206			194
Rooms	251			237
Other revenue	113			117
Net revenues	1,008			878
Operating expenses
Direct
Casino	238			175
Food and beverage	133			128
Rooms	77			75
Property, general, administrative, and other	231			211
Management fees to related parties	11			10
Depreciation and amortization	106			103
Corporate expense	29			33
Other operating costs	12			52
Total operating expenses	837			787
Income from operations	171			91
Interest expense	(106		)	(97		)
Other income	1			3
Income/(loss) before income taxes	66			(3		)
Income tax benefit/(provision)	(18		)	1
Net income/(loss)	$	48		$	(2	)

Comprehensive income
Change in fair market value of interest rate swaps, net of tax	$	(17	)	$	4
Other comprehensive income/(loss), net of income taxes	(17		)	4
Comprehensive income	$	31		$	2

See accompanying Notes to Consolidated Condensed Financial Statements.

CAESARS RESORT COLLECTION, LLC

CONSOLIDATED CONDENSED STATEMENTS OF MEMBER’S EQUITY

(UNAUDITED)



	CRC Member’s Equity
(In millions)	Contributed Capital		Accumulated Deficit			Accumulated Other Comprehensive Income/(Loss)			Total CRC Member’s Equity			Noncontrolling Interests			Total Member’s Equity
Balance as of December 31, 2017	$	3,850	$	(1,672	)	$	—		$	2,178		$	43		$	2,221
Net loss	—		(2		)	—			(2		)	—			(2		)
Other comprehensive income, net of tax	—		—			5			5			—			5
Stock-based compensation and other	7		—			—			7			—			7
Change in noncontrolling interest, net of distributions and contributions	—		—			—			—			(3		)	(3		)
Balance as of March 31, 2018	$	3,857	$	(1,674	)	$	5		$	2,188		$	40		$	2,228

Balance as of December 31, 2018	$	4,028	$	(1,383	)	$	(13	)	$	2,632		$	29		$	2,661
Net income	—		48			—			48			—			48
Income tax-related contributions by parent	16		—			—			16			—			16
Other comprehensive loss, net of tax	—		—			(17		)	(17		)	—			(17		)
Stock-based compensation and other	8		—			—			8			—			8
Change in noncontrolling interest, net of distributions and contributions	—		—			—			—			(5		)	(5		)
Balance as of March 31, 2019	$	4,052	$	(1,335	)	$	(30	)	$	2,687		$	24		$	2,711

See accompanying Notes to Consolidated Condensed Financial Statements.

CAESARS RESORT COLLECTION, LLC

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)



	Three Months Ended March 31,
(In millions)	2019			2018
Cash flows provided by operating activities	$	305		$	91
Cash flows from investing activities
Acquisitions of property and equipment, net of change in related payables	(184		)	(49		)
Payments to acquire investments	—			(7		)
Cash flows used in investing activities	(184		)	(56		)
Cash flows from financing activities
Proceeds from long-term debt to related party	—			15
Repayments of long-term debt and revolving credit facility	(112		)	(12		)
Financing obligation payments	(2		)	(2		)
Cash flows provided by/(used in) financing activities	(114		)	1
Net increase in cash, cash equivalents, and restricted cash	7			36
Cash, cash equivalents, and restricted cash, beginning of period	339			1,051
Cash, cash equivalents, and restricted cash, end of period	$	346		$	1,087

Supplemental Cash Flow Information:
Cash paid for interest	$	81		$	69
Non-cash investing and financing activities:
Change in accrued capital expenditures	(34		)	4
Contribution from parent in settlement of taxes	16			—

See accompanying Notes to Consolidated Condensed Financial Statements.

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

In this report, the name “CRC LLC” refers to the parent holding company, Caesars Resort Collection, LLC, exclusive of its consolidated subsidiaries and variable interest entities, unless otherwise stated or the context otherwise requires. The words “CRC,” “Company,” “we,” “our,” and “us” refer to Caesars Resort Collection, LLC, inclusive of its consolidated subsidiaries and variable interest entities, unless otherwise stated or the context otherwise requires.

This Quarterly Report should be read in conjunction with our Annual Report For the Fiscal Year Ended December 31, 2018 (“2018 Annual Report”). Capitalized terms used but not defined in this Quarterly Report have the same meanings as in the 2018 Annual Report.

We also refer to (i) our Consolidated Condensed Financial Statements as our “Financial Statements,” (ii) our Consolidated Condensed Balance Sheets as our “Balance Sheets,” (iii) our Consolidated Condensed Statements of Operations and Comprehensive Income as our “Statements of Operations,” and (iv) our Consolidated Condensed Statements of Cash Flows as our “Statements of Cash Flows.”

Note 1 — Organization and Basis of Presentation and Consolidation

Organization

CRC LLC is wholly owned by Caesars Entertainment Corporation (“CEC,” “Caesars,” and “Caesars Entertainment”) and operates 13 properties, primarily in Las Vegas. CRC also owns The LINQ Promenade. Prior to CRC’s sale of Octavius Tower at Caesars Palace Las Vegas (“Octavius Tower”) to VICI Properties Inc. and/or its subsidiaries (collectively, “VICI”) on July 11, 2018, CRC owned Octavius Tower and leased it to VICI. We lease certain real property assets from VICI for Harrah’s Las Vegas.

We view each property as an operating segment and aggregate such properties into one reportable segment, which is consistent with how we manage the business.

Basis of Presentation and Use of Estimates

The Financial Statements include all revenues, costs, assets and liabilities directly attributable to us. The accompanying Financial Statements also include allocations of certain general corporate expenses of CEC. These allocations of general corporate expenses may not reflect the expense we would have incurred if we were a stand-alone company nor are they necessarily indicative of our future costs. Our transactions with CEC and its other subsidiaries and affiliated entities have been identified as transactions between related parties and are disclosed in Note 11.

Our Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) as applicable for interim periods, and therefore, do not include all information and footnotes necessary for complete financial statements. The results for the interim periods reflect all adjustments (consisting primarily of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations, and cash flows. The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 2019 fiscal year.

GAAP requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Management believes the accounting estimates are appropriate and reasonably determined. Actual amounts could differ from those estimates.

Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Balance Sheets that sum to amounts reported on the Statements of Cash Flows.



(In millions)	March 31, 2019		December 31, 2018
Cash and cash equivalents	$	328	$	322
Restricted cash, current	18		12
Restricted cash, non-current	—		5
Total cash, cash equivalents, and restricted cash	$	346	$	339

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Consolidation of Subsidiaries and Variable Interest Entities

Our consolidated financial statements include the accounts of CRC and its subsidiaries after elimination of all intercompany accounts and transactions.

We consolidate all subsidiaries in which we have a controlling financial interest and variable interest entities (“VIEs”) for which we or one of our consolidated subsidiaries is the primary beneficiary. Control generally equates to ownership percentage, whereby (i) affiliates that are more than 50% owned are consolidated; (ii) investments in affiliates of 50% or less but greater than 20% are generally accounted for using the equity method where we have determined that we have significant influence over the entities; and (iii) investments in affiliates of 20% or less are generally accounted for using the cost method.

Subsequent Events

The Company completed its subsequent events review through May 1, 2019, the date on which the financial statements were available to be issued, and noted no items requiring disclosure.

Note 2 — Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (the “FASB”) issued the following authoritative guidance amending the FASB Accounting Standards Codification (“ASC”).

In 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), and all related amendments (see Note 6 ).

The following ASUs were yet effective as of March 31, 2019:

Previously Disclosed

Collaborative Arrangements - ASU 2018-18: Amended guidance makes targeted improvements to GAAP for collaborative arrangements including: (i) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when the collaborative arrangement participant is a customer in the context of a unit of account, (ii) adding unit-of-account guidance in ASC 808 to align with the guidance in ASC 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of ASC 606, and (iii) requiring that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under ASC 606 is precluded if the collaborative arrangement participant is not a customer. The amendments in this update are effective for nonpublic entities for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted. The amendments should be applied retrospectively to the date of initial application of ASC 606. An entity may elect to apply the amendments in this ASU retrospectively either to all contracts or only to contracts that are not completed at the date of initial application of ASC 606. An entity should disclose its election. An entity may elect to apply the practical expedient for contract modifications that is permitted for entities using the modified retrospective transition method in ASC 606. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Intangibles - Goodwill and Other - Internal-Use Software - ASU 2018-15: Amended guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement that is a service contract is not affected. The amendments in this update are effective for nonpublic entities for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption is permitted. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Fair Value Measurement - ASU 2018-13: Amended guidance modifies fair value measurement disclosure requirements including (i) removing certain disclosure requirements such as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (ii) modifying certain disclosure requirements such as the nonpublic entity requirement to disclose transfers into and out of Level 3 of the fair value hierarchy, and (iii) adding certain disclosure requirements such as changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

end of the reporting period. The amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Financial Instruments - Credit Losses - ASU 2016-13 (amended through April 2019): Amended guidance replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Amendments affect entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. Amendments are effective for nonpublic entities for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted. An entity will apply the amendments in this ASU through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The effect of a prospective transition approach is to maintain the same amortized cost basis before and after the effective date of this ASU. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Note 3 — Property and Equipment



(In millions)	March 31, 2019			December 31, 2018
Land	$	3,561		$	3,561
Buildings and leasehold and land improvements	4,644			4,631
Furniture, fixtures, and equipment	1,090			1,051
Construction in progress	358			264
Total property and equipment	9,653			9,507
Less: accumulated depreciation	(2,189		)	(2,095		)
Total property and equipment, net	$	7,464		$	7,412

Our property and equipment is subject to various operating leases for which we are the lessor. We lease our property and equipment related to our hotel rooms, convention space and retail space through various short-term and long-term operating leases. See Note 6 for further discussion of our leases.

Depreciation Expense and Capitalized Interest

	Three Months Ended March 31,
(In millions)	2019		2018
Depreciation expense	$	91	$	89
Capitalized interest	5		2

Note 4 — Goodwill and Other Intangible Assets

Changes in Carrying Value of Goodwill and Other Intangible Assets

	Amortizing Intangible Assets			Non-Amortizing Intangible Assets
(In millions)	Amortizing Intangible Assets			Goodwill		Other
Balance as of December 31, 2018	$	216		$	1,887	$	1,427
Amortization	(15		)	—		—
Balance as of March 31, 2019	$	201		$	1,887	$	1,427

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Gross Carrying Value and Accumulated Amortization of Intangible Assets Other Than Goodwill

	March 31, 2019								December 31, 2018
(Dollars in millions)	Weighted Average Remaining Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortizing intangible assets
Trade names and trademarks	1.8	$	14	$	(4	)	$	10	$	14	$	(3	)	$	11
Customer relationships	2.9	934		(758		)	176		934		(745		)	189
Contract rights	5.8	3		(2		)	1		3		(2		)	1
Gaming rights and other	5.3	43		(29		)	14		43		(28		)	15
		$	994	$	(793	)	201		$	994	$	(778	)	216
Non-amortizing intangible assets
Trademarks							37							37
Gaming rights							1,390							1,390
							1,427							1,427
Total intangible assets other than goodwill							$	1,628						$	1,643

Note 5 — Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

The following table shows the fair value of our financial assets and financial liabilities that are required to be measured at fair value as of the date shown:

Estimated Fair Value

(In millions)	Balance		Level 1		Level 2		Level 3
March 31, 2019
Asset - Interest rate swap derivatives	$	1	$	—	$	1	$	—
Liability - Interest rate swap derivatives	38		—		38		—

December 31, 2018
Asset - Interest rate swap derivatives	$	6	$	—	$	6	$	—
Liability - Interest rate swap derivatives	22		—		22		—

Derivative Instruments

We do not purchase or hold any derivative financial instruments for trading purposes.

Interest Rate Swap Derivatives

We use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. As of March 31, 2019, we have entered into a total of ten interest rate swap agreements for notional amounts totaling $3.0 billion to fix the interest rate on variable rate debt. The interest rate swaps are designated as cash flow hedging instruments.

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The major terms of the interest rate swap agreements as of March 31, 2019 are as follows:



Effective Date	Notional Amount (In millions)	Fixed Rate Paid	Variable Rate Received as of March 31, 2019	Maturity Date
12/31/2018	250	2.274%	2.493%	12/31/2022
12/31/2018	200	2.828%	2.493%	12/31/2022
12/31/2018	600	2.739%	2.493%	12/31/2022
1/1/2019	250	2.153%	2.493%	12/31/2020
1/1/2019	250	2.196%	2.493%	12/31/2021
1/1/2019	400	2.788%	2.493%	12/31/2021
1/1/2019	200	2.828%	2.493%	12/31/2022
1/2/2019	250	2.172%	2.493%	12/31/2020
1/2/2019	200	2.731%	2.493%	12/31/2020
1/2/2019	400	2.707%	2.493%	12/31/2021

Valuation Methodology

The estimated fair values of our interest rate swap derivative instruments are derived from market prices obtained from dealer quotes for similar, but not identical, assets or liabilities. Such quotes represent the estimated amounts we would receive or pay to terminate the contracts. The interest rate swap derivative instruments are included in either Deferred charges and other liabilities assets or Deferred credits and other liabilities on our Balance Sheets. Our derivatives are recorded at their fair values, adjusted for the credit rating of the counterparty if the derivative is an asset, or adjusted for the credit rating of the Company if the derivative is a liability. None of our derivative instruments are offset and all were classified as Level 2.

Financial Statement Impact

The effect of derivative instruments designated as hedging instruments on the Balance Sheet for amounts transferred into Accumulated other comprehensive income/(loss) (“AOCI”) before tax was a loss of $21 million and a gain of $5 million, respectively, during the three months ended March 31, 2019 and 2018. The effect of derivative instruments reclassified from AOCI to Interest expense on the Statements of Operations were immaterial and zero, respectively, for the three months ended March 31, 2019 and 2018. The estimated amount of existing losses that are reported in AOCI at the reporting date that are expected to be reclassified into earnings within the next 12 months is approximately $6 million.

Accumulated Other Comprehensive Income/(Loss)

The changes in AOCI by component, net of tax, for the three months ended March 31, 2019 and 2018 are shown below.



(In millions)	Unrealized Net Gains/(Losses) on Derivative Instruments			Other		Total
Balances as of December 31, 2017	$	—		$	—	$	—
Other comprehensive income before reclassifications	4			1		5
Total other comprehensive income, net of tax	4			1		5
Balances as of March 31, 2018	$	4		$	1	$	5

Balances as of December 31, 2018	$	(13	)	$	—	$	(13	)
Other comprehensive loss before reclassifications	(17		)	—		(17		)
Total other comprehensive loss, net of tax	(17		)	—		(17		)
Balances as of March 31, 2019	$	(30	)	$	—	$	(30	)

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 6 — Leases

Adoption of New Lease Accounting Standard

In February 2016, the FASB issued a new standard related to leases, ASU 2016-02, Leases (Topic 842) (“ASC 842”). We adopted the standard effective January 1, 2019, using the retrospective approach applied as of the beginning of the period of adoption. The Company elected to utilize the transition guidance within the new standard that permits us to (i) continue to report under legacy lease accounting guidance for comparative periods consistent with previously issued financial statements; and (ii) carryforward our prior conclusions about lease identification, lease classification, and initial direct costs. The most significant effects of adopting the new standard relate to the recognition of right-of-use (“ROU”) assets and liabilities for leases classified as operating leases when the Company is the lessee in the arrangement. Adopting the new standard did not affect our accounting related to leases when the Company is the lessor in the arrangement.

We assess whether an arrangement is or contains a lease at the inception of the agreement. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term using our incremental borrowing rate, which is consistent with interest rates of similar financing arrangements based on the information available at the commencement date. The ROU assets were also adjusted to include any prepaid lease payments and reduced by any previously accrued lease liabilities. The terms of our leases used to determine the ROU asset and lease liability take into account options to extend when it is reasonably certain that we will exercise those options. Lease expense is recognized on a straight-line basis over the lease term. Additionally, we have elected the short-term lease measurement and recognition exemption and do not establish ROU assets or lease liabilities for operating leases with terms of 12 months or less.

Effect of Adopting New Lease Standard - January 1, 2019 Balance Sheet

(In millions)	Prior to Adoption		Effect of Adoption ⁽¹⁾		Post Adoption
Deferred charges and other assets	$	96	$	154	$	250
Accrued expenses and other current liabilities	585		16		601
Deferred credits and other liabilities	156		138		294

____________________


⁽¹⁾	Operating leases previously considered as off-balance sheet obligations are now recognized as operating lease liabilities with corresponding ROU assets.

Lessee Arrangements

Operating Leases

We lease real estate and equipment used in our operations from third parties. As of March 31, 2019, the remaining term of our operating leases ranged from 1 to 19 years with various automatic extensions. In addition to minimum rental commitments, certain of our operating leases provide for contingent rentals based on a percentage of revenues in excess of specified amounts.

The following are additional details related to leases recorded on our Balance Sheet as of March 31, 2019:



(In millions)	Balance Sheet Classification	March 31, 2019
Assets
Operating lease ROU assets ⁽¹⁾	Deferred charges and other assets	$	150
Liabilities
Current operating lease liabilities ⁽¹⁾	Accrued expenses and other current liabilities	14
Non-current operating lease liabilities ⁽¹⁾	Deferred credits and other liabilities	137

____________________


⁽¹⁾	As noted above, we have elected the short-term lease measurement and recognition exemption and do not establish ROU assets or liabilities for operating leases with terms of 12 months or less.

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Maturity of Lease Liabilities as of March 31, 2019

(In millions)	Operating Leases
Remaining 2019	$	19
2020	25
2021	25
2022	21
2023	20
Thereafter	119
Total	229
Less: present value discount	(78		)
Lease liability	$	151

Lease Costs

(In millions)	Three Months Ended March 31, 2019
Operating lease expense	$	7
Short-term lease expense	10
Total lease costs	$	17

Other Information

(In millions)	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	6

Weighted-Average Details

	March 31, 2019
Weighted-average remaining lease term (in years)	10.7
Weighted-average discount rate	8.0	%

Finance Leases

We have finance leases for certain equipment. As of March 31, 2019, our finance leases had remaining lease terms of up to 4 years, some of which include options to extend the lease terms in one month increments. Our finance lease ROU assets and liabilities were immaterial to our Financial Statements as of March 31, 2019.

Failed Sale-Leaseback Financing Obligations

We lease certain real estate assets of Harrah’s Las Vegas from VICI (the “HLV Lease”). The HLV Lease provides for annual fixed rent (subject to escalation) of $87 million during an initial term, then rent consisting of both base rent and variable percentage rent elements, and has a 15-year initial term and four five-year renewal options, subject to certain restrictions. The HLV Lease includes escalation provisions beginning in year two of the initial term and continuing through the renewal terms. The HLV Lease also includes provisions for contingent rental payments calculated, in part, based on increases or decreases of net revenue of the underlying lease properties, commencing in year eight of the initial term and continuing through the renewal terms.

The HLV Lease was evaluated as a sale-leaseback of real estate. We determined that this transaction did not qualify for sale-leaseback accounting, and we have accounted for the transaction as a financing.

For a failed sale-leaseback transaction, we continue to reflect the real estate assets on our Balance Sheets in Property and equipment, net as if we were the legal owner, and we continue to recognize depreciation expense over the estimated useful lives. We do not

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

recognize rent expense related to the HLV Lease, but we have recorded a liability for the failed sale-leaseback obligations and the majority of the periodic lease payments are recognized as interest expense in the Statements of Operations.

Annual Estimated Failed Sale-Leaseback Financing Obligation Service Requirements as of March 31, 2019

	Remaining		Years Ended December 31,
(In millions)	2019		2020		2021		2022		2023		Thereafter		Total
Financing obligations - principal	$	8	$	13	$	15	$	17	$	20	$	725	$	798
Financing obligations - interest	58		76		75		74		73		1,705		2,061
Total financing obligation payments ⁽¹⁾	$	66	$	89	$	90	$	91	$	93	$	2,430	$	2,859

____________________


⁽¹⁾	Financing obligation principal and interest payments are estimated amounts based on the future minimum lease payments and certain estimates based on contingent rental payments. Actual payments may differ from the estimates.

Lessor Arrangements

Lodging Arrangements

Lodging arrangements are considered short-term and generally consist of lease and nonlease components. The lease component is the predominant component of the arrangement and consists of the fees charged for lodging. The nonlease components primarily consist of resort fees and other miscellaneous items. As the timing and pattern of transfer of both the lease and nonlease components are over the course of the lease term, we have elected to combine the revenue generated from lease and nonlease components into a single lease component based on the predominant component in the arrangement. During the three months ended March 31, 2019, we recognized approximately $251 million in lease revenue related to lodging arrangements, which is included in Rooms revenue in the Statement of Operations.

Conventions

Convention arrangements are considered short-term and generally consist of lease and nonlease components. The lease component is the predominant component of the arrangement and consists of fees charged for the use of meeting space. The nonlease components primarily consist of food and beverage and audio/visual services. Revenue from conventions is included in Food and beverage revenue in the Statement of Operations, and during the three months ended March 31, 2019, we recognized approximately $6 million in lease revenue related to conventions.

Real Estate Operating Leases

We enter into long-term real estate leasing arrangements with third-party lessees at our properties. As of March 31, 2019, the remaining terms of these operating leases ranged from 1 to 86 years, some of which include options to extend the lease term for up to 5 years. In addition to minimum rental commitments, certain of our operating leases provide for contingent rentals based on a percentage of revenues in excess of specified amounts. In addition, to maintain the value of our leased assets, certain leases include specific maintenance requirements of the lessees or maintenance is performed by the Company on behalf of the lessees.

Maturity of Lease Receivables as of March 31, 2019

(In millions)	Operating Leases
Remaining 2019	$	38
2020	44
2021	39
2022	39
2023	35
Thereafter	343
Total	$	538

Related Party Lease Arrangements

Refer to Note 11 for additional information on our related party lease arrangements.

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 7 — Litigation, Contractual Commitments, and Contingent Liabilities

Litigation

The Company is party to ordinary and routine litigation incidental to our business. We do not expect the outcome of any such litigation to have a material effect on our consolidated financial position, results of operations, or cash flows, as we do not believe it is reasonably possible that we will incur material losses as a result of such litigation.

Contractual Commitments

During the three months ended March 31, 2019, we have not entered into any material contractual commitments outside of the ordinary course of business that have materially changed our contractual commitments as compared to December 31, 2018.

NV Energy

In September 2017, CEC filed its final notice to proceed with its plan to exit the fully bundled sales system of NV Energy for its Nevada properties and purchase energy, capacity, and/or ancillary services from a provider other than NV Energy. The transition to unbundle electric service was completed in the first quarter of 2018 (the “Cease-Use Date”). As a result of the decision to exit, an order from the Public Utilities Commission of Nevada required that we pay an aggregate exit fee of $33 million related to CRC’s properties. These fees are payable over three to six years at an aggregate present value of $23 million and $24 million, respectively, as of March 31, 2019 and December 31, 2018 and were recorded in Accrued expenses and other current liabilities and Deferred credits and other liabilities on the Balance Sheets.

For six years following the Cease-Use Date, we will also be required to make ongoing payments to NV Energy for non-bypassable rate charges, which primarily relate to each entity’s share of NV Energy’s portfolio of above-market renewable energy contracts and the costs of decommissioning and remediation of coal-fired power plants. As of the effective date of the transition, the portion of these fees attributable to CRC was $24 million, which was accrued at its present value in the first quarter of 2018. As of both March 31, 2019 and December 31, 2018, $18 million was recorded in Accrued expenses and other current liabilities and Deferred credits and other liabilities on the Balance Sheets. The amount will be adjusted in the future if actual fees incurred differ from our estimates.

Sports Sponsorship/Partnership Obligations

We have agreements with certain professional sports teams for advertising, marketing, promotional, and sponsorship opportunities. As of March 31, 2019, obligations related to these agreements were $171 million with commitments extending through 2034.

Contingent Liabilities

Uncertainties

Since 2009, Harrah’s New Orleans has undergone audits by state and local departments of revenue related to sales taxes on hotel rooms, parking and entertainment complimentaries. The periods that have been or are currently being audited are 2004 through 2016. In connection with these audits, certain periods have been paid under protest or are currently in various stages of litigation. As a result of these audits, Harrah’s New Orleans had accrued contingent liabilities of $10 million and $9 million, respectively, at March 31, 2019 and December 31, 2018.

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 8 — Debt



		March 31, 2019							December 31, 2018
(Dollars in millions)	Final Maturity	Rate(s)⁽¹⁾	Face Value			Book Value			Book Value
Secured debt
CRC Revolving Credit Facility	2022	variable ⁽²⁾	$	—		$	—		$	100
CRC Term Loan	2024	variable ⁽³⁾	4,641			4,568			4,577
Unsecured debt
CRC Notes	2025	5.25%	1,700			1,668			1,668
Special Improvement District Bonds	2037	4.30%	12			12			12
Total debt			6,353			6,248			6,357
Current portion of long-term debt			(47		)	(47		)	(147		)
Long-term debt			$	6,306		$	6,201		$	6,210

Unamortized discounts and deferred finance charges						$	105		$	108
Fair value			$	6,250

____________________


⁽¹⁾	Interest rate is fixed, except where noted.


⁽²⁾	London Interbank Offered Rate (“LIBOR”) plus 2.13%.


⁽³⁾	LIBOR plus 2.75%.

Annual Estimated Debt Service Requirements as of March 31, 2019

	Remaining 2019		Years Ended December 31,
(In millions)	Remaining 2019		2020		2021		2022		2023		Thereafter		Total
Annual maturities of long-term debt	$	36	$	47	$	47	$	47	$	48	$	6,128	$	6,353
Estimated interest payments	280		340		330		320		310		410		1,990
Total debt service payments ⁽¹⁾	$	316	$	387	$	377	$	367	$	358	$	6,538	$	8,343

___________________


⁽¹⁾	Debt principal payments are estimated amounts based on maturity dates and potential borrowings under our revolving credit facility. Interest payments are estimated based on the forward-looking LIBOR curve and include the estimated impact of the ten interest rate swap agreements (see Note 5). Actual payments may differ from these estimates.

Current Portion of Long-Term Debt

The current portion of long-term debt as of March 31, 2019 and December 31, 2018 includes the principal payments on the term loan, other unsecured borrowings, and special improvement district bonds that are expected to be paid within 12 months.

Borrowings under the revolving credit facility are subject to the provisions of the credit facility agreement, which has a contractual maturity of greater than one year. Amounts borrowed under the revolving credit facility, if any, are intended to satisfy short-term liquidity needs and would be classified as current. As of March 31, 2019, $37 million of our revolving credit facility was committed to outstanding letters of credit.

Fair Value

The fair value of debt has been calculated primarily based on the borrowing rates available as of March 31, 2019 based on market quotes of our publicly traded debt. We classify the fair value of debt within Level 1 in the fair value hierarchy.

Terms of Outstanding Debt

Restrictive Covenants

The CRC Credit Agreement and the indenture related to the CRC Notes contain covenants which are standard and customary for these types of agreements. These include negative covenants, which, subject to certain exceptions and baskets, limit the Company’s

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

ability to (among other items) incur additional indebtedness, make investments, make restricted payments, including dividends, grant liens, sell assets and make acquisitions.

The CRC Revolving Credit Facility includes a maximum first-priority net senior secured leverage ratio financial covenant of 6.35:1, which is applicable solely to the extent that certain testing conditions are satisfied.

Guarantees

The borrowings under the CRC Credit Agreement are guaranteed by the material, domestic, wholly owned subsidiaries of CRC (subject to exceptions) and substantially all of the applicable existing and future property and assets of CRC and its subsidiaries serve as collateral for the borrowings.

The CRC Notes are guaranteed on a senior unsecured basis by each wholly owned, domestic subsidiary of CRC that is a subsidiary guarantor with respect to the CRC Senior Secured Credit Facilities.

Note 9 — Revenue Recognition

Disaggregation of Revenue by Region

	Three Months Ended March 31, 2019
(In millions)	Las Vegas		Other U.S.		Total
Casino	$	196	$	242	$	438
Food and beverage ⁽¹⁾	159		47		206
Rooms ⁽¹⁾	220		31		251
Entertainment and other	70		18		88
Total contract revenues	645		338		983
Real estate leases ⁽²⁾	24		1		25
Net revenues	$	669	$	339	$	1,008

____________________


⁽¹⁾	As a result of the adoption of ASC 842, as of January 1, 2019, revenue generated from the lease components of lodging arrangements and conventions are no longer considered contract revenue under ASC 606, Revenue from Contracts with Customers. A portion of these balances relate to lease revenues under ASC 842. See Note 6 for further details.


⁽²⁾	Real estate leases revenue includes $9 million of variable rental income.



	Three Months Ended March 31, 2018
(In millions)	Las Vegas		Other U.S.		Total
Casino	$	192	$	138	$	330
Food and beverage	152		42		194
Rooms	205		32		237
Entertainment and other	70		7		77
Total contract revenues	619		219		838
Other revenues	39		1		40
Net revenues ⁽¹⁾	$	658	$	220	$	878

____________________


⁽¹⁾	Certain prior year amounts have been reclassified to conform to the current year presentation of our disaggregation of revenue.

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Receivables

(In millions)	March 31, 2019		December 31, 2018
Casino	$	37	$	40
Food and beverage and rooms ⁽¹⁾	58		37
Entertainment and other	36		28
Contract receivables, net	131		105
Real estate leases	7		8
Other	21		32
Receivables, net	$	159	$	145

____________________

⁽¹⁾

As a result of the adoption of ASC 842, as of January 1, 2019, revenue generated from the lease components of lodging arrangements and conventions as well as their associated receivables are no longer considered contract revenue or contract receivables under ASC 606, Revenue from Contracts with Customers. A portion of this balance relates to lease receivables under ASC 842. See Note 6 for further details.

Contract Liabilities

(In millions)	Caesars Rewards			Customer Advance Deposits			Total
Balance as of December 31, 2018 ⁽¹⁾	$	66		$	55		$	121
Amount recognized during the period ⁽²⁾	(32		)	(104		)	(136		)
Amount accrued during the period	33			118			151
Balance as of March 31, 2019 ⁽³⁾	$	67		$	69		$	136

____________________


⁽¹⁾	$3 million included within Deferred credits and other liabilities as of December 31, 2018.


⁽²⁾	Includes $15 million for Caesars Rewards and $34 million for Customer Advances recognized from the December 31, 2018 Contract liability balances.


⁽³⁾	$3 million included within Deferred credits and other liabilities as of March 31, 2019. Includes lodging arrangement and convention contract liabilities accounted for under ASC 842. See Note 6 for further details.

In addition, Contract liabilities related to Caesars Rewards was reduced by $8 million during the three months ended March 31, 2019 representing the revenue related to Reward Credits redeemed at Caesars-affiliated properties that are not consolidated with CRC (see Note 11).

Note 10 — Income Taxes

We have allocated U.S. taxes based upon the separate return method for CRC financial reporting purposes. Historically, we have treated U.S. taxes paid or refunds received by CEC for CRC as equity contributions or distributions. Although there is no formal tax sharing agreement in place between the CRC entities and CEC for U.S. income tax purposes, CRC may make payments to CEC or its subsidiaries for U.S. taxes that would have been paid if CRC was a standalone taxpayer.

Income Tax Allocation

	Three Months Ended March 31,
(Dollars in millions)	2019			2018
Income/(loss) before income taxes	$	66		$	(3	)
Income tax benefit/(provision)	$	(18	)	$	1
Effective tax rate	27.3		%	33.3		%

We classify reserves for tax uncertainties within Deferred credits and other liabilities on the Balance Sheets, separate from any related income tax payable, which is also reported within Accrued expenses and other current liabilities, or Deferred income taxes. Reserve amounts relate to any potential income tax liabilities resulting from uncertain tax positions, as well as potential interest or penalties associated with those liabilities.

The effective tax rate for the three months ended March 31, 2019 differed from the expected federal tax rate of 21% primarily due to nondeductible expenses and state taxes. The effective tax rate for the three months ended March 31, 2018 differed from the expected federal tax rate of 21% primarily due to excess tax benefits related to stock-based compensation.

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

We believe that it is reasonably possible that the total amount of unrecognized tax benefits as of March 31, 2019 will not materially change within the next 12 months. Audit outcomes and the timing of audit settlements are subject to significant uncertainty. Although we believe that an adequate provision has been made for such issues, there is the possibility that the ultimate resolution of such issues could have an adverse effect on our earnings. Conversely, if these issues are resolved favorably in the future, the related provision would be reduced, thus having a favorable impact on earnings.

Note 11 — Related Party Transactions



	Three Months Ended March 31,
(In millions)	2019		2018
CEOC LLC Shared Services Agreement
Service provider fee	$	—	$	1
Management fees to related parties	11		10
Transactions with CEC and other affiliates
Employee benefits and incentive awards	12		10
Other related party transactions
Lease revenue received	1		10
Lease payments	—		1

CEOC LLC Shared Services Agreement

Pursuant to a shared services agreement, CEOC, LLC (“CEOC LLC”) provides Caesars Entertainment with certain corporate and administrative services, and the costs of these services are allocated among all of Caesars Entertainment’s operating subsidiaries (including the Company). Many of these corporate and administrative services are now provided by Caesars Enterprise Services, LLC (“CES”).

Service Provider Fee

Under the shared services agreements, CRC pays for certain indirect corporate support costs. CEOC LLC is authorized to charge CRC for an amount equal to 39.5% of unallocated corporate support costs.

Management Fees to Related Parties

Prepaid management fees to related parties represents (i) our 50% interest in the management fee revenues of PHW Manager, LLC, recognized as a long-term prepaid asset of $70 million amortized over 35 years starting in October 2013, and (ii) our 50% interest in the management fee revenues of the Harrah’s New Orleans Management Company, The Quad Manager, LLC, Bally’s Las Vegas Manager, LLC and Cromwell Manager, LLC, recognized as a long-term prepaid asset of $138 million amortized over 15 years starting in May 2014. The amortization periods represent the terms of the related management contracts. As of March 31, 2019 and December 31, 2018, the payable balance related to these fees and recorded in Payables to related parties on the Balance Sheets was $3 million and $2 million, respectively.

Transactions with CEC and Other Affiliates

Employee Benefit Plans

CEC maintains a defined contribution savings and retirement plan in which employees of CRC may participate. The plan provides for, among other things, pre-tax, Roth, and after-tax contributions by employees. The plan also provides for employer matching contributions. Under the plan, participating employees may elect to contribute a percentage of their eligible earnings (subject to certain Internal Revenue Service and plan limits). In addition, employees subject to certain collective bargaining agreements receive benefits through the multi-employer retirement plans sponsored by the organization in which they are a member. The expenses related to contributions for a participant in the CEC plan or a multi-employer plan are allocated to the properties at which the participant is employed.

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Equity Incentive Awards

CEC maintains an equity incentive awards plan under which CEC may issue time-based and performance-based stock options, restricted stock units and restricted stock awards to CRC employees. Although awards under the plan result in the issuance of shares of CEC common stock, because CRC is a consolidated subsidiary of CEC, the amounts are included in CRC stock-based compensation expense as a component of total compensation for CRC employees.

Other Related Party Transactions

Bally’s Las Vegas—JGB Vegas Retail Lease Agreement

Bally’s Las Vegas leases land to JGB Vegas Retail Lessee, LLC (“JGB Lessee”) under a ground lease that includes annual base rent payments with annual escalations as well as an annual percentage of revenue payable should JGB Lessee revenues exceed a breakpoint as defined in the lease agreement, which is paid on a monthly basis. Rental payments began in February 2015. GB Investor, LLC, a wholly owned subsidiary of Caesars Entertainment, has an approximate 10% ownership interest in JGB Lessee. Revenues from the ground lease are currently being recognized straight-line over the term of the lease starting in December 2013 upon transfer of rights to the property through February 2035.

Octavius Tower Lease Agreement

Under the prior Octavius Tower lease arrangement, VICI leased the Octavius Tower from us, and CEOC LLC and its applicable subsidiaries then sub-leased the Octavius Tower from VICI pursuant to the long-term lease agreement with VICI relating to Caesars Palace. On July 11, 2018, we sold the real estate assets of the Octavius Tower to VICI. CEOC LLC and its applicable subsidiaries continue to lease the Octavius Tower under the current terms of the long-term lease agreement with VICI relating to Caesars Palace.

LINQ Access and Parking Easement Lease Agreement

Under the LINQ Access and Parking Easement lease agreement, subsidiaries of CEOC LLC granted easements to us and certain of our subsidiaries to use the parking lot behind The LINQ Promenade and The LINQ Hotel & Casino. The parking lot was sold to VICI upon Caesars Entertainment Operating Company, Inc.’s emergence from bankruptcy but was partially repurchased by us as part of the purchase of approximately 18 acres of land adjacent to the Harrah’s Las Vegas property with the other portion still owned by VICI with the easements to us running with the land. We pay approximately $1 million annually for the easements to CEOC LLC for the remaining portion owned by VICI.

World Series of Poker Agreements

Pursuant to multiple agreements with Caesars Interactive Entertainment, LLC (“CIE”), a wholly owned subsidiary of Caesars Entertainment, we are allowed to host various World Series of Poker events in Las Vegas and Atlantic City, including the annual Main Event at Rio All-Suites Hotel & Casino. CRC pays CIE $2 million per year for the right to host World Series of Poker tournaments in Las Vegas and pays to host certain World Series of Poker circuit events in Atlantic City. The Main Event agreement has expired but the events continue under these payment terms.

Caesars Rewards Loyalty Program

Caesars’ customer loyalty program, Caesars Rewards, grants Reward Credits to Caesars Rewards Members based on on-property spending, including gaming, hotel, dining, and retail shopping at participating properties. Members may redeem Reward Credits for complimentary or discounted goods and services such as rooms, food and beverages, merchandise, free play, entertainment, and travel accommodations. Members are able to accumulate Reward Credits over time that they may redeem at their discretion under the terms of the program. A member’s Reward Credit balance is forfeited if the member does not earn at least one Reward Credit during a continuous six-month period.

The total estimated liability related to Reward Credits accumulated by customers is accrued by CES. The liability is reduced as Reward Credits are redeemed by customers, and the related revenue is recognized at the property at which the Reward Credits are redeemed. These amounts related to other CEC properties are included in Due from affiliates, net on the Balance Sheets.

CAESARS RESORT COLLECTION, LLC

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Centralized Transactions

In addition, the Company participates with other Caesars Entertainment subsidiaries in marketing, purchasing, insurance, employee benefit and other programs that are defined, negotiated and managed by Caesars Entertainment on an enterprise-wide basis. The Company believes that participating in these consolidated programs is beneficial in comparison to the cost and terms for similar programs that it could negotiate on a standalone basis.

Due from/to Affiliates

Amounts due from or to affiliates for each counterparty represent the net receivable or payable as of the end of the reporting period primarily resulting from the transactions described above and are settled on a net basis by each counterparty in accordance with the legal and contractual restrictions governing transactions by and among CRC’s affiliated entities. Due from affiliates, net was $99 million and $138 million, respectively, as of March 31, 2019 and December 31, 2018. Due to affiliates, net was $106 million and $4 million, respectively, as of March 31, 2019 and December 31, 2018.

CEC Promissory Note

CES has an intercompany loan with CEC for a $15 million promissory note that CEC paid to the Buena Vista Gaming Authority on behalf of CES. As of March 31, 2019 and December 31, 2018, the intercompany loan was included in Long-term debt to related party on the Balance Sheets.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial position and operating results of CRC for the three months ended March 31, 2019 and 2018 should be read in conjunction with the unaudited consolidated condensed financial statements and the notes thereto and other financial information included elsewhere in this report as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) presented in CRC’s Annual Report included as Exhibit 99.1 in a Form 8-K filed by Caesars Entertainment Corporation for the fiscal year ended December 31, 2018 (“2018 Annual Report”) on February 21, 2019. Capitalized terms used but not defined in this Quarterly Report have the same meanings as in the 2018 Annual Report.

The statements in this discussion regarding our expectations regarding our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. Our actual results may differ materially from those contained in or implied by any forward-looking statements. See “CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS” below in this report.

Overview

Summary of Significant Events

Adoption of New Lease Accounting Standard

On January 1, 2019, we adopted the new accounting standard Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), and all related amendments. See Note 6 for additional information and details on the effects of adopting the new standard.

Discussion of Operating Results

Analysis of Key Drivers of Consolidated Operating Results

The following represents the discussion and analysis of the results of operations and key metrics focusing on the key drivers of performance.

Consolidated Operating Results

	Three Months Ended March 31,						Percent Favorable/ (Unfavorable)
(Dollars in millions)	2019			2018			Percent Favorable/ (Unfavorable)
Casino	$	438		$	330		32.7	%
Food and beverage	206			194			6.2	%
Rooms	251			237			5.9	%
Other revenue	113			117			(3.4	)%
Net revenues	$	1,008		$	878		14.8	%

Total operating expenses	$	837		$	787		(6.4	)%
Income from operations	171			91			87.9	%
Net income/(loss)	48			(2		)	*
Adjusted EBITDA⁽¹⁾	301			264			14.0	%
Operating margin ⁽²⁾	17.0		%	10.4		%	6.6 pts

____________________


*	Not meaningful.


⁽¹⁾	See the “Reconciliation of Non-GAAP Financial Measures” discussion later in this MD&A for a reconciliation of Adjusted EBITDA.


⁽²⁾	Operating margin is calculated as income from operations divided by net revenues.

Three Months Ended March 31, 2019 vs. 2018

Net revenues increased $130 million, or 14.8%, for the first quarter of 2019 compared with the corresponding prior year period, primarily due to the following:

•

Casino revenues increased $108 million, or 32.7%, in 2019 compared with 2018 primarily due to the acquisition of Centaur Holdings, LLC (“Centaur”), which was acquired in July 2018 and contributed $117 million, and favorable hold and improved slot volumes at our Las Vegas properties. This was partially offset by a decrease in gaming volume due to increased competition at our Atlantic City property.


•	Rooms revenues increased $14 million, or 5.9%, in 2019 compared with 2018 primarily due to an increase in occupancy rates and resort fee revenue at our Las Vegas properties.


•	Food and beverage revenues increased $12 million, or 6.2%, in 2019 compared with 2018 primarily due to increased revenues from food and beverage outlets at our Las Vegas properties.

Operating Expenses

Operating expenses increased $50 million, or 6.4%, for the first quarter of 2019 compared with the corresponding prior year period, primarily due to the acquisition of Centaur which contributed $96 million to the increase. In addition to the effect of Centaur, operating expenses decreased $46 million primarily due to the following:


•	Other operating costs decreased $41 million primarily as a result of higher nonrecurring charges in the prior year related to additional exit fees of $21 million recognized for the termination of NV Energy utility contracts and $20 million in lease termination costs.


•	Depreciation and amortization decreased $8 million primarily as a result of lower accelerated depreciation in 2019 compared with 2018 due to the removal and replacement of certain assets in connection with ongoing property renovation projects in the prior year.

Other Factors Affecting Net Income/(Loss)

	Three Months Ended March 31,						Percent Favorable/ (Unfavorable)
(Dollars in millions)	2019			2018			Percent Favorable/ (Unfavorable)
Interest expense	$	(106	)	$	(97	)	(9.3	)%
Other income	1			3			(66.7	)%
Income tax benefit/(provision)	(18		)	1			*

Interest Expense

Interest expense increased $9 million for the first quarter of 2019 compared with the same period in 2018 primarily as a result of an increase in the floating London Interbank Offered Rate (“LIBOR”) related to the CRC Term Loan.

Income Tax Benefit/(Provision)

For the three months ended March 31, 2019 and 2018, the income tax benefit/(provision) was a provision of $18 million and a benefit of $1 million, respectively. The effective tax rate for the three months ended March 31, 2019 differed from the expected federal tax rate of 21% primarily due to nondeductible expenses and state taxes. The effective tax rate for the three months ended March 31, 2018 differed from the expected federal tax rate of 21% primarily due to excess tax benefits related to stock-based compensation. See Note 10 for additional information.

Reconciliation of Non-GAAP Financial Measures

Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) is presented as a measure of the Company’s performance. Adjusted EBITDA is defined as revenues less operating expenses and is comprised of net income/(loss) before (i) interest expense, net of interest capitalized and interest income, (ii) income tax (benefit)/provision, (iii) depreciation and amortization, (iv) corporate expenses, and (v) certain items that we do not consider indicative of its ongoing operating performance at an operating property level.

In evaluating Adjusted EBITDA you should be aware that, in the future, we may incur expenses that are the same or similar to some of the adjustments in this presentation. The presentation of Adjusted EBITDA should not be construed as an inference that future results will be unaffected by unusual or unexpected items.

Adjusted EBITDA is a non-GAAP financial measure commonly used in our industry and should not be construed as an alternative to net income/(loss) as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (as determined in accordance with generally accepted accounting principles, “GAAP”). Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies within the industry. Adjusted EBITDA is included because management uses Adjusted EBITDA to measure performance and allocate resources, and believes that Adjusted EBITDA provides investors with additional information consistent with that used by management.

Reconciliation of Adjusted EBITDA

	Three Months Ended March 31,
(In millions)	2019			2018
Net income/(loss)	$	48		$	(2	)
Income tax (benefit)/provision	18			(1		)
Other income	(1		)	(3		)
Interest expense	106			97
Depreciation and amortization	106			103
Other operating costs ⁽¹⁾	12			52
Stock-based compensation expense	8			7
Other items ⁽²⁾	4			11
Adjusted EBITDA	$	301		$	264

____________________

⁽¹⁾

Amounts primarily represent costs incurred in connection with development activities and reorganization activities, and/or recoveries associated with such items, including acquisition and integration costs, contract exit fees including exiting the fully bundled sales system of NV Energy for electric service at our Nevada properties, lease termination costs, gains and losses on asset sales, demolition costs primarily at our Las Vegas properties for renovations, and project opening costs.


⁽²⁾	Amounts include other add-backs and deductions to arrive at Adjusted EBITDA but not separately identified such as professional and consulting services, sign-on and retention bonuses, business optimization expenses for IT transformation, severance and relocation costs, and permit remediation costs.

Liquidity and Capital Resources

As of March 31, 2019, our cash and cash equivalents totaled $328 million. During the three months ended March 31, 2019, we repaid the $100 million outstanding balance on our revolving credit facility and the total capacity available under this revolving credit facility is $1 billion as of March 31, 2019. Our operating activities yielded operating cash flows of $305 million, an increase of $214 million, or 235.2%, compared with the three months ended March 31, 2018.

We believe that our cash flows from operations are sufficient to cover planned capital expenditures for ongoing property renovations as well as estimated interest and principal payments due on long-term debt and our financing obligation during the next 12 months. However, if needed, our existing cash and cash equivalents and availability under our revolving credit facility is available to further support operations during the next 12 months and the foreseeable future. In addition, restrictions under our lending arrangements generally prevent the distribution of cash from our subsidiaries to CEC, except for certain restricted payments.

During the three months ended March 31, 2019, we paid $81 million in interest related to our debt and financing obligations including $62 million of interest associated with our debt and $19 million of interest related to our financing obligation.

Our ability to fund our operations, pay our debt and financing obligations, and fund planned capital expenditures depends, in part, upon economic and other factors that are beyond our control, and disruptions in capital markets and restrictive covenants related to our existing debt could impact our ability to fund liquidity needs, pay indebtedness and financing obligations, and secure additional funds through financing activities.

We cannot assure you that our business will generate sufficient cash flows from operations, or that future borrowings will be available to us, to fund our liquidity needs and pay our indebtedness. If we are unable to meet our liquidity needs or pay our indebtedness when it is due, we may have to reduce or delay refurbishment and expansion projects, reduce expenses, sell assets, or attempt to restructure our debt. Any such actions could negatively impact our competitive position and revenue generation.

Debt Activity and Lease-Related Obligations

We are a highly-leveraged company and had $6.4 billion in face value of debt outstanding and $1.1 billion in a failed sale-leaseback financing obligation as of March 31, 2019. As a result, a significant portion of our liquidity needs are for debt service, including significant interest and principal payments associated with our financing obligation for Harrah’s Las Vegas with VICI. As detailed in the table below, our estimated debt service (including principal and interest) is $316 million for the remainder of 2019 and $8.0 billion thereafter to maturity and our estimated financing obligation is $66 million for the remainder of 2019 and $2.8 billion thereafter to maturity.

Financing Activities as of March 31, 2019

	Remaining 2019		Years Ended December 31,
(In millions)	Remaining 2019		2020		2021		2022		2023		Thereafter		Total
Annual maturities of long-term debt	$	36	$	47	$	47	$	47	$	48	$	6,128	$	6,353
Estimated interest payments	280		340		330		320		310		410		1,990
Total debt service payments⁽¹⁾	316		387		377		367		358		6,538		8,343
Financing obligation - principal	8		13		15		17		20		725		798
Financing obligation - interest	58		76		75		74		73		1,705		2,061
Total financing obligation payments⁽²⁾	66		89		90		91		93		2,430		2,859
Total financing activities	$	382	$	476	$	467	$	458	$	451	$	8,968	$	11,202

____________________


⁽¹⁾	Debt principal payments are estimated amounts based on maturity dates and potential borrowings under our revolving credit facility. Interest payments are estimated based on the forward-looking LIBOR curve and include the estimated impact of the ten interest rate swap agreements (see Note 5). Actual payments may differ from these estimates.


⁽²⁾	Financing obligation principal and interest payments are estimated amounts based on the future minimum lease payments and certain estimates based on contingent rental payments (as described below). Actual payments may differ from the estimates.

For our amended lease with VICI, we assume the renewal is probable and include renewal commitments in the estimated financing obligation in the table above. In addition, the future lease payment amounts included in the table above represent the contractual lease payments adjusted for estimated escalations, as determined by the underlying lease agreement. The estimates are based on the terms and conditions known at the inception of the lease, as amended. However, a portion of the actual payments will be determined in the period in which they are due, and therefore, actual lease payments may differ from our estimates.

We are continually evaluating opportunities to improve our capital structure and will seek to refinance our debt obligations or otherwise engage in transactions impacting our capital structure when market and other conditions are attractive to us. These transactions may involve refinancing or new senior credit facilities, tender or exchange offers, issuance of new bonds and/or sale-leasebacks.

Capital Spending and Development

We incur capital expenditures in the normal course of business and we perform ongoing refurbishment and maintenance at our existing properties to maintain our quality standards. We also continue to pursue development and acquisition opportunities for additional casino entertainment and other hospitality facilities that meet our strategic and return on investment criteria. Cash used for capital expenditures in the normal course of business is typically made available from cash flows generated by our operating activities, while cash used for development projects is typically funded from established debt programs, specific project financing, and additional debt offerings.

Capital expenditures were $184 million during the three months ended March 31, 2019 in support of our ongoing property renovations, an increase of $135 million, or 275.5%, compared with the three months ended March 31, 2018. Our projected capital expenditures for 2019 range from $550 million to $650 million primarily for the development of CAESARS FORUM. Under our lease agreement with VICI for Harrah’s Las Vegas, we are required to spend certain minimum amounts on capital expenditures.

Our planned development projects, if they proceed, will require significant capital commitments, individually and in the aggregate, and, if completed, may result in significant additional revenues. The commitment of capital, the timing of completion, and the commencement of operations of development projects are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate political and regulatory bodies. We must also comply with covenants and restrictions set forth in our debt agreements.

There are various risks and uncertainties and the expected capital expenditures set forth above may change for various reasons, including our financial performance and market conditions.

We are considering divestiture opportunities of non-strategic assets and properties. If a sale completion is more likely than not to occur, to the extent expected proceeds are below our carrying value, we may recognize impairments which may be material.

Related Party Transactions

For a description of the nature and extent of related party transactions, see Note 11.

Critical Accounting Policies and Estimates

For information on critical accounting policies and estimates, see “Critical Accounting Policies and Estimates” in MD&A of the 2018 Annual Report. There have been no changes to these policies during the three months ended March 31, 2019.

Recently Issued Accounting Standards

See Note 2 for discussion of the adoption and potential effects of recently issued accounting standards.

Contractual Obligations and Commitments

Material changes to our aggregate indebtedness, if any, are described in Note 8.

Except as described in Note 7, as of March 31, 2019, there have been no material changes outside of the ordinary course of business to our other known contractual obligations, which are set forth in the table included in Item 7 in our 2018 Annual Report.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains or may contain “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. We have based these forward-looking statements on our current expectations about future events. Further, statements that include words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue,” “present,” or “pursue,” or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements. These forward-looking statements are found at various places throughout this report. These forward-looking statements, including, without limitation, those relating to future actions, new projects, strategies, future performance, the outcome of contingencies such as legal proceedings, and future financial results, wherever they occur in this report, are necessarily estimates reflecting the best judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors set forth above and from time to time in our filings with the Securities and Exchange Commission.

Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include without limitation:


•	our ability to respond to changes in the industry, particularly digital transformation, and to take advantage of the opportunity for legalized sports betting in multiple jurisdictions in the United States (which may require third-party arrangements and/or regulatory approval);


•	development of our announced convention center in Las Vegas, CAESARS FORUM, and certain of our other announced projects are subject to risks associated with new construction projects, including those described below;


•	we may not be able to realize the anticipated benefits of our acquisition of Centaur, including anticipated benefits from introducing table games to the acquired properties, which is subject to approvals and may not occur;


•	the impact of our substantial indebtedness, including its impact on our ability to raise additional capital in the future and react to changes in the economy, and lease obligations and the restrictions in our debt and lease agreements;


•	the effects of local and national economic, credit and capital market conditions on the economy, in general, and on the gaming industry, in particular;


•	our ability to effectively compete against our competitors;


•	the effect of reductions in consumer discretionary spending due to economic downturns or other factors and changes in consumer demands;


•	foreign regulatory policies, particularly in mainland China or other countries in which our customers reside or where we have operations, including restrictions on foreign currency exchange or importation of currency, and the judicial enforcement of gaming debts;


•	the ability to realize improvements in our business and results of operations through our property renovation investments, technology deployments, business process improvement initiatives and other continuous improvement initiatives;


•	our ability to realize all of the anticipated benefits of current or potential future acquisitions;


•	our dependence on the Las Vegas market and lack of geographical diversification;


•	the dependence on the success of third parties adjacent to our properties to generate revenue for our business;


•	uncertainty in the completion of projects neighboring our properties that are expected to be beneficial to our properties;


•	our ability to access available and reasonable financing or additional capital on a timely basis and on acceptable terms or at all, including our ability to refinance our indebtedness on acceptable terms;


•	growth in consumer demand for non-gaming offerings;


•	abnormal gaming holds (“gaming hold” is the amount of money that is retained by the casino from wagers by customers);


•	our ability to recoup costs of capital investments through higher revenues;


•	the possibility that we may not be able to host the World Series of Poker’s Main Event and the resulting negative impact on our revenues;


•	our ability to attract, retain and motivate employees; including in connection with Caesars Entertainment’s Chief Executive Officer transition;


•	our ability to retain our performers or other entertainment offerings on acceptable terms or at all;


•	the risk of fraud, theft and cheating;


•	our ability to protect our intellectual property rights and damages caused to our brands or the Planet Hollywood brand due to the unauthorized use of our brand names or, in the case of Planet Hollywood, the license being used by third-parties in ways outside of our control;


•	the ability to timely and cost-effectively integrate companies that we acquire into our operations;


•	the ability to execute on our brand licensing and management strategy is subject to third party agreements and other risks associated with new projects;


•	not being able to realize all of our anticipated cost savings;


•	seasonal fluctuations resulting in volatility and an adverse effect on our operating results;


•	any impairments to goodwill, indefinite-lived intangible assets, or long-lived assets that we may incur;


•	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;


•	acts of war or terrorist incidents, severe weather conditions, uprisings or natural disasters, including losses therefrom, losses in revenues and damage to property, and the impact of severe weather conditions on our ability to attract customers to certain facilities of ours;


•	fluctuations in energy prices;


•	work stoppages and other labor problems;


•	our ability to collect on credit extended to our customers;


•	the impact of adverse legal proceedings and judicial and governmental body actions, including gaming legislative action, referenda, regulatory disciplinary actions, and fines and taxation;


•	the effects of environmental and structural building conditions relating to our properties;


•	our exposure to environmental liability, including as a result of unknown environmental contamination;


•	access to insurance for our assets on reasonable terms;


•	the impact, if any, of unfunded pension benefits under multi-employer pension plans;


•	a disruption, failure, or breach of our network, information systems, or other technology, or those of our vendors, on which we are dependent;


•	risks and costs associated with protecting the integrity and security of internal, employee, and customer data;


•	changes in the extensive governmental regulations to which we are subject and (i) changes in laws, including increased tax rates, smoking bans, regulations, or accounting standards; (ii) third-party relations; and (iii) approvals, decisions, disciplines and fines of courts, regulators, and governmental bodies;


•	compliance with the extensive laws and regulations to which we are subject, including applicable gaming laws and other anti-corruption laws and the Bank Secrecy Act and other anti-money laundering laws;


•	our dependence on the management of Caesars Entertainment, CEOC LLC and Caesars Enterprise Services, LLC to render services to us and operate our properties, and provide us with access to intellectual property rights, the Caesars Rewards customer loyalty program, customer databases and other services, rights and information;


•	differences in our interests and those of our ultimate parent entity, Caesars Entertainment or its other subsidiaries, including CEOC LLC;


•	the failure of Caesars Entertainment to protect the trademarks that are licensed to us;


•	risks related to CEOC LLC’s emergence from bankruptcy; and


•	the other factors set forth under “Risk Factors” in our 2018 Annual Report.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Of our $6.4 billion face value of debt, as of March 31, 2019, we have entered into ten interest rate swap agreements to fix the interest rate on $3.0 billion of variable rate debt, and $1.6 billion of debt remains subject to variable interest rates for the term of the agreement. While we may enter into agreements limiting our exposure to higher interest rates, any such agreements may not offer complete protection from this risk. We do not purchase or hold any derivative financial instruments for trading purposes. See Note 5 for additional information.

There have been no other material changes to our market risk in 2019. For information on our exposure to market risk, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our 2018 Annual Report.

Item 4. Controls and Procedures

Item 4, “Controls and Procedures,” has been omitted from this report pursuant to Section 4.02 of the CRC Indenture.

PART II—OTHER INFORMATION


Item 1.	Legal Proceedings

The Company is party to ordinary and routine litigation incidental to our business. See Note 7.


Item 1A.	Risk Factors

The following supplements our risk factor set forth in our 2018 Annual Report entitled “We extend credit to a portion of our customers and we may not be able to collect gaming receivables from our credit customers.” This supplemental risk factor specifically updates our discussion of foreign enforcement of gaming debts.

We extend credit to a portion of our customers, and we may not be able to collect gaming receivables from our credit customers.

We conduct our gaming activities on a credit and cash basis at many of our properties. Any such credit we extend is unsecured. Table games players typically are extended more credit than slot players, and high-stakes players typically are extended more credit than customers who tend to wager lower amounts. High-end gaming is more volatile than other forms of gaming, and variances in win-loss results attributable to high-end gaming may have a significant positive or negative impact on cash flow and earnings in a particular quarter. We extend credit to those customers whose level of play and financial resources warrant, in the opinion of management, an extension of credit. These large receivables could have a significant impact on our results of operations if deemed uncollectible. Gaming debts evidenced by a credit instrument, including what is commonly referred to as a “marker,” and judgments on gaming debts are enforceable under the current laws of the jurisdictions in which we allow play on a credit basis, and judgments on gaming debts in such jurisdictions are enforceable in all U.S. states under the Full Faith and Credit Clause of the U.S. Constitution. However, other jurisdictions may determine that enforcement of gaming debts is against public policy. Although courts of some foreign nations will enforce gaming debts directly and the assets in the U.S. of foreign debtors may be reached to satisfy a judgment, judgments on gaming debts from U.S. courts are not binding on the courts of many foreign nations.

In addition, in November 2017, the Chinese government adopted new rules to control the cross-border transportation of cash and bearer negotiable instruments, specifically to reduce the international transfer of cash in connection with activities that are illegal in China, including gambling. The Chinese government has recently taken steps to prohibit the transfer of cash for the payment of gaming debts. These developments may have the effect of reducing the collectability of gaming debts of players from China. It is unclear whether these and other measures will continue to be in effect or become more restrictive in the future. These and any future foreign currency control policy developments that may be implemented by foreign jurisdictions could significantly impact our business, financial condition and results of operations.

For a discussion of additional risk factors that could cause actual results to differ materially from those anticipated, please refer to our 2018 Annual Report.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

None.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Mine Safety Disclosures

Not applicable.


Item 5.	Other Information

None.


Item 6.	Exhibits

There have been no new exhibits requiring disclosure during the three months ended March 31, 2019.