 Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter! |
Gaming News
Caesars Entertainment reports financial results for Q2 201411 August 2014LAS VEGAS, Nevada -- (PRESS RELEASE) -- Caesars Entertainment Corporation (CZR) today reported the following second quarter 2014 results and recent developments:
"For the second quarter, our business demonstrated continued strength in Las Vegas driven in part by our hospitality investments, which was offset by the persistent softness in the regional markets and Atlantic City," said Gary Loveman, chairman, chief executive officer and president of Caesars Entertainment Corporation. "The LINQ and High Roller are stimulating greater traffic to Caesars' affiliated properties in the vicinity and we are focused on maximizing their potential. As we look ahead, we are excited about further expanding and enhancing our network with the opening of Horseshoe Baltimore and the potential development of an integrated resort in South Korea. We believe the advances we are making across the enterprise coupled with ongoing capital structure initiatives aimed at reducing leverage at CEOC will produce a positive impact on our business." Basis of Presentation In the discussion below, the words "Company," "Caesars," "Caesars Entertainment," "CEC," "we," "our," and "us" refer to Caesars Entertainment Corporation and its consolidated entities, unless otherwise stated or the context requires otherwise. The financial results presented herein include Caesars with its consolidated entities, Caesars Entertainment Operating Company, Inc. ("CEOC") and Caesars Entertainment Resort Properties ("CERP"), and Caesars Growth Partners, LLC ("CGP LLC"), which is consolidated as a variable interest entity. Due to CEOC's continuing involvement with The LINQ and Octavius Tower of Caesars Palace Las Vegas, CEOC continued to consolidate both of these properties and their related net assets and income statement impacts into CEOC's financial results subsequent to CERP's ownership of this property in October 2013, through May 5, 2014, at which point CEOC no longer consolidated the results of The LINQ. CEOC continues to consolidate the results of the Octavius Tower. CEOC results herein are presented on a consolidated view, which eliminates the impact of consolidating The LINQ and Octavius Tower subsequent to its transfer from CEOC to CERP. This transaction has been accounted for as a financing transaction in accordance with GAAP instead of as a completed real estate sale. This accounting treatment results in these properties being reported as part of both CEOC and CERP on a standalone basis, and therefore, they are not presented within the CEOC results in this earnings release. In addition, the CEOC results discussed below give effect to any adjustments recorded to present CEOC on a standalone basis, with other consolidating or eliminating adjustments being presented in "Other" in the following tables. During the fourth quarter 2013, the Company recast prior CEOC results to reflect a number of items necessary to present CEOC on a standalone basis, including: (1) changes in accounting for income taxes to a standalone basis of reporting, (2) a change in methodology for pension accounting to the immediate recognition method of accounting for actuarial gains and losses, (3) a correction of prior period errors in CEOC financial reports for intercompany insurance, and (4) a correction of previously identified immaterial errors. These adjustments were reflected on CEOC's standalone reporting and did not impact consolidated CEC results. CGP LLC results below are reflective of CGP LLC as consolidated into CEC results; accordingly the results of the four properties which CGP LLC acquired in 2014 from CEOC are included in CGP LLC only after the date of acquisition. As a result, the presentation of CGP LLC's results in this release differs from the financial statement information of CGP LLC presented in "Caesars Growth Partners Results" and CGP LLC's presentation of its results on a stand-alone basis. "Other" includes consolidating adjustments, eliminating adjustments and other adjustments to reconcile to consolidated CEC results. For example, management fees paid to CEOC related to Planet Hollywood by CGP LLC are included in CEOC adjusted net revenues below, and eliminated in Other. Consolidated net revenues increased 3.0% in 2014 compared with the 2013 quarter, primarily due to growth in the social and mobile gaming business of Caesars Interactive Entertainment, Inc. ("CIE"), partially offset by a 1.9% decline in casino revenues. The opening of The LINQ (within CERP) at the end of the first quarter 2014 and the opening of The Cromwell (within CGP LLC) during the second quarter 2014 has also increased revenues over the comparable prior year period. CEOC completed the sale of four properties (The Cromwell, Bally's Las Vegas, The Quad Resort & Casino, and Harrah's New Orleans) to CGP LLC in May 2014, following the sale of Planet Hollywood Resort & Casino to CGP LLC in October 2013. The sales of these five properties (the "Property Sales") drove an increase in CGP LLC results and a related decrease in CEOC results. CEOC net revenues declined $175.2 million, or 11.4%, compared with the prior year quarter, primarily due to a decline in casino revenue of $129.7 million, or 11.7%, mainly due to the Property Sales and the partial sale of our Conrad Punta del Este casino in Uruguay (the "Conrad") in the second quarter 2013, as well as the persistent softness in certain regional markets and Atlantic City. These decreases are partially offset by particularly strong results at Caesars Palace Las Vegas on VIP baccarat play and favorable hold. The regional markets and Atlantic City together experienced a decline of 8.3% in net revenues in the second quarter compared with the prior year, excluding the impact of the Property Sales. CERP net revenues increased $11.7 million, or 2.2%, compared with the prior year quarter. Revenues increased from the opening of The LINQ and the High Roller in 2014 and the resulting third-party revenues. Partially offsetting this increase was a casino revenue decline totaling $16.6 million, or 5.6%, on unfavorable hold and lower volumes, in particular slot volumes in Atlantic City. CGP LLC net revenues increased $280.2 million compared with the 2013 quarter, due to strong growth in the social and mobile games business at CIE and the inclusion of revenues since the date of the acquisitions of the five properties CGP LLC acquired from CEOC. CIE's social and mobile gaming business increased net revenues by $70.6 million for second quarter 2014 compared with the same period in 2013 as a result of CIE's first quarter 2014 acquisition of Pacific Interactive and continued strength in its existing offerings. The revenues generated by the acquired casino properties subsequent to their acquisition by CGP LLC were $207.9 million in the second quarter of 2014 while there were no comparable revenues in 2013, as the acquisitions occurred subsequent to June 30, 2013 as previously described. When viewing the five properties sold by CEOC to CGP LLC as a group on a comparable quarter basis, without regard to ownership structure and timing of property sales, these properties had an increase in net revenues totaling $35.4 million, or 13.7%, in the second quarter, driven by growth in casino revenues as well as food and beverage and entertainment offerings at Planet Hollywood and the opening during the quarter of The Cromwell, which had no revenue in the comparable quarter in 2013. Consolidated income from operations was $106.3 million compared with $132.4 million in the 2013 quarter, with the decline driven by the following factors: (1) a $31.9 million charge associated with the increase in fair value of contingent consideration from previous acquisitions included in acquisition and integration costs related to CGP LLC acquisitions, (2) property operating expense increases, and (3) increased write-downs, reserves, and project opening costs, net of recoveries, related largely to the exit liability of approximately $40.0 million recorded for Iowa dog-racing. In addition, year over year income from operations was lower than the comparable period due to the 2013 non-recurring reversal of approximately $18.0 million in previously accrued reserves related to the taxability of complimentary meals provided to Nevada employees. These factors were partially offset by the income effect of slightly higher net revenues and lower non-cash intangible and tangible asset impairment charges, which totaled $32.9 million in the three months ended June 30, 2014, compared with $104.7 million in the three months ended June 30, 2013. CEOC income from operations decreased $0.9 million, or 1.7%. The decrease is a function of the income impact of the decline in net revenues, primarily resulting from the Property Sales, and the Iowa dog-racing charge referenced above. In addition, CEOC recognized an approximately $9.0 million reversal in the second quarter of 2013 related to the treatment of complimentary employee meals in Nevada, which contributed to the higher second quarter 2013 income. Partially offsetting the above were lower intangible and tangible asset impairment charges, which totaled $17.4 million in the three months ended June 30, 2014 compared with $82.9 million in the three months ended June 30, 2013. CERP income from operations decreased $4.3 million, or 5.9%. The decrease is primarily due to the income impact of a 5.6% decrease in casino revenues and higher property expenses resulting from a 2013 non-recurring reversal of approximately $9.0 million in previously accrued reserves related to the taxability of complimentary meals provided to Nevada employees that did not recur in 2014 and increased marketing spend. These factors were partially offset by no intangible and tangible asset impairment charges in the three months ended June 30, 2014 compared with a charge of $24.4 million in the three months ended June 30, 2013. CGP LLC income from operations increased $6.4 million, or 66.7%. The increase is primarily due to the income impact of higher revenues, reflecting the impact of the Property Sales, partially offset by a $31.9 million charge associated with the increase in fair value of contingent consideration from previous acquisitions and an impairment charge in the second quarter 2014 of $15.5 million on intangible assets. Consolidated property, general, administrative and other operating expenses increased in the 2014 quarter when compared with the 2013 quarter due to the previously mentioned 2013 non-recurring reversal of approximately $18.0 million in accrued reserves related to the taxability of complimentary meals provided to Nevada employees that did not recur in 2014, increased spending on marketing programs, and, to a lesser degree, wage increases. Consolidated corporate expenses increased $26.9 million in the 2014 quarter when compared with the 2013 quarter due to certain professional fees associated with the numerous corporate transactions and costs associated with stock-based compensation programs. Net Loss Consolidated net loss attributable to Caesars was $466.4 million during the second quarter compared with $212.2 million in the 2013 quarter. The net loss increased primarily due to the factors discussed in "Income from Operations" above, the reduction in the tax benefits related to current year losses subject to a federal valuation allowance, as well as a pre-tax $113.7 million increase in interest expense. These factors are further described in "Additional Financial Information" that follows herein. Consolidated property EBITDA decreased $20.3 million, or 4.1%, compared with the 2013 quarter. Adjusted EBITDA decreased $15.4 million, or 3.3%. Further details on these non-GAAP financial measures follow later in this release. Additional Financial Information Interest Expense During the three months ended June 30, 2014, interest expense increased by $113.7 million, or 21.1%, to $653.7 million from $540.0 million in the 2013 quarter, primarily due to higher interest rates as a result of CERP's October 2013 8.0% and 11% senior secured notes offerings, the proceeds of which were used to repay a portion of lower interest rate term loans of Caesars Entertainment's commercial mortgage-backed securities ("CMBS"), as well as interest costs resulting from the bridge financing and term loan obtained by CGP LLC associated with the four property sale and the $1,750.0 million in term loans obtained by CEOC. Loss on Early Extinguishment of Debt During the three months ended June 30, 2014, we recognized a $28.0 million loss on early extinguishment of debt as a result of the early extinguishment of CGP LLC's Planet Hollywood senior secured loan which was refinanced in the second quarter of 2014. During the three months ended June 30, 2013, we recognized a $41.3 million gain on early extinguishment of debt primarily related to the early repurchase of CMBS debt. Benefit for Income Taxes The effective tax rate benefits for the three months ended June 30, 2014 and 2013 were 29.3% and 35.7%, respectively. The effective tax rate benefit in the three months ended June 30, 2014 was unfavorably impacted by an increase in the federal valuation allowance against 2014 losses from continuing operations, the state deferred tax impact of combining the CERP properties for tax purposes, and the tax effect of the CEC sale of CEOC common stock. Our projected effective tax rate benefit for 2014 is expected to range from 24% to 27%, which differs from the effective federal tax rate benefit of 35%, due to projected increase in the federal valuation allowance against 2014 losses from continuing operations, which will not be tax benefitted, partially offset by the reversal of uncertain state positions during the first quarter of 2014 due to the expiration of the statute of limitations. This projected effective tax rate range includes the expected tax benefits from the sale of certain properties from CEOC to CGP LLC in May 2014. Deconsolidation In May 2013, CEOC sold 45% of its equity interest in the Conrad, and as a result of this transaction, no longer consolidates the Conrad's results of operations, but instead accounts for it as an equity method investment. For the three months ended June 30, 2013, CEOC's operating results included net revenues of $16.0 million and loss from operations of $6.1 million for the Conrad, and equity method loss from operations of $2.1 million in the three months ended June 30, 2014. Cost-Savings Initiatives The Company has undertaken comprehensive cost-reduction efforts to manage expenses with current business levels. We estimate that our cost-savings programs produced $25.7 million in incremental cost savings for the second quarter 2014, compared with the same period in 2013. Additionally, as of June 30, 2014, the Company expects that these and other identified new cost-savings programs will produce further annual cost-savings of approximately $135.0 million, based on the full implementation of current projects that are in process. As the Company realizes savings or identifies new cost-reduction activities, this amount will change. Caesars Entertainment Operating Company, Inc. Results Due to CEOC's continuing involvement with The LINQ and Octavius Tower of Caesars Palace Las Vegas, CEOC continued to consolidate both of these properties and their related net assets and income statement impacts into CEOC's financial results subsequent to CERP's ownership of this property in October 2013, through May 5, 2014, at which point CEOC no longer consolidated the results of The LINQ. CEOC continues to consolidate the results of the Octavius Tower. This is reflected in the tables below. Management believes the measures presented below are helpful to investors because The LINQ and Octavius Tower are not legally owned by CEOC. A reconciliation of Property EBITDA and Adjusted EBITDA to the most closely related GAAP financial measure is presented later in this release. CEOC is our majority owned operating subsidiary that conducts a significant part of our business operations. The following is being provided as supplementary financial information and CEOC Financial Information below is consistent with CEOC presented on a standalone basis. Full CEOC results will be provided separately in CEOC's Quarterly Report on Form 10-Q ("Form 10-Q") for the quarterly period ended June 30, 2014. About Caesars Caesars Entertainment Corporation (CEC) is the world's most diversified casino-entertainment provider and the most geographically diverse U.S. casino-entertainment company. CEC is mainly comprised of the following three entities: the majority owned operating subsidiary Caesars Entertainment Operating Company, wholly owned Caesars Entertainment Resort Properties and Caesars Growth Properties, in which we hold a variable economic interest.
Caesars Entertainment reports financial results for Q2 2014
is republished from Online.CasinoCity.com.
|