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8-K/A - 8-K - CAESARS HOLDINGS, INC. | a2016q3cecform8-kxdisposit.htm |
Exhibit 99.1
CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA FINANCIAL STATEMENTS
The following unaudited consolidated condensed pro forma financial statements of Caesars Entertainment Corporation and its consolidated entities (collectively, “Caesars Entertainment,” “CEC,” “we,” or “our”) are included herein:
• | Unaudited consolidated condensed pro forma balance sheet as of June 30, 2016; |
• | Unaudited consolidated condensed pro forma statement of operations for the six months ended June 30, 2016; |
• | Unaudited consolidated condensed pro forma statement of operations for the years ended December 31, 2015, 2014, and 2013; and |
• | Notes to unaudited consolidated condensed pro forma financial statements. |
The following unaudited consolidated condensed pro forma financial statements (“pro forma financial statements”) are based upon the historical consolidated financial statements of Caesars Entertainment, adjusted to reflect the sale of the Caesars Interactive Entertainment, LLC (“CIE”) social and mobile games business (the “SMG Business”).
The pro forma financial statements of Caesars Entertainment should be read in conjunction with the historical consolidated financial statements of Caesars Entertainment and the related notes included in our 2015 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016 as filed with the Securities and Exchange Commission.
CEC prepared the unaudited consolidated condensed interim financial statements included herein on the same basis as the annual audited CEC consolidated financial statements and included all adjustments, consisting of normal and recurring adjustments, that are considered necessary to present fairly the financial position and results of operations for the unaudited periods. The summary financial information as of and for the six months ended June 30, 2016, is not necessarily indicative of the results that may be obtained for a full year for CEC subsequent to the sale of the SMG Business.
The unaudited consolidated condensed pro forma balance sheet (“pro forma balance sheet”) reflects the sale of the SMG Business assuming the sale had occurred on June 30, 2016, while the unaudited consolidated condensed pro forma statements of operations (“pro forma statements of operations”) give effect to the sale assuming it had occurred on January 1, 2013. The pro forma adjustments are based on the best available information, including certain assumptions that Caesars Entertainment management believes are reasonable. Management believes that such adjustments are appropriate and directly attributable to the sale of the SMG Business. Actual results could differ materially from the pro forma presentation included herein.
The pro forma financial statements are provided for illustrative purposes only and are not indicative of the operating results or financial position that would have occurred had the sale of the SMG Business occurred on June 30, 2016 for the pro forma balance sheet, or on January 1, 2013 for the pro forma statements of operations. Readers should not rely on the pro forma financial statements as being indicative of the historical operating results that Caesars Entertainment would have achieved if the sale of the SMG Business had occurred on such dates or any future operating results or financial position that it will experience after the sale of the SMG Business.
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CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA BALANCE SHEET
June 30, 2016
(in millions) | Historical CEC Consolidated | Pro Forma Adjustments (1) | Pro Forma CEC Consolidated | ||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 1,525 | $ | 125 | $ | 1,650 | |||||
Restricted cash | 56 | 3,048 | 3,104 | ||||||||
Receivables, net | 200 | (70 | ) | 130 | |||||||
Due from affiliates | 25 | — | 25 | ||||||||
Prepayments and other current assets | 126 | (6 | ) | 120 | |||||||
Inventories | 16 | — | 16 | ||||||||
Total current assets | 1,948 | 3,097 | 5,045 | ||||||||
Property and equipment, net | 7,511 | (18 | ) | 7,493 | |||||||
Goodwill | 1,696 | (88 | ) | 1,608 | |||||||
Intangible assets other than goodwill | 500 | (35 | ) | 465 | |||||||
Restricted cash | 5 | — | 5 | ||||||||
Deferred income taxes | 20 | (20 | ) | — | |||||||
Deferred charges and other assets | 437 | 25 | 462 | ||||||||
Total assets | $ | 12,117 | $ | 2,961 | $ | 15,078 | |||||
Liabilities and Stockholders’ Equity/(Deficit) | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 165 | $ | (13 | ) | $ | 152 | ||||
Due to affiliates | 17 | (6 | ) | 11 | |||||||
Accrued expenses and other current liabilities | 631 | 244 | 875 | ||||||||
Accrued restructuring and support expenses | 3,170 | — | 3,170 | ||||||||
Interest payable | 127 | — | 127 | ||||||||
Current portion of long-term debt | 71 | — | 71 | ||||||||
Total current liabilities | 4,181 | 225 | 4,406 | ||||||||
Long-term debt | 6,763 | — | 6,763 | ||||||||
Deferred income taxes | 1,004 | (2 | ) | 1,002 | |||||||
Deferred credits and other liabilities | 265 | (125 | ) | 140 | |||||||
Total liabilities | 12,213 | 98 | 12,311 | ||||||||
Stockholders’ equity/(deficit) | |||||||||||
Caesars stockholders’ equity/(deficit) | (1,394 | ) | 2,897 | 1,503 | |||||||
Noncontrolling interests | 1,298 | (34 | ) | 1,264 | |||||||
Total stockholders’ equity/(deficit) | (96 | ) | 2,863 | 2,767 | |||||||
Total liabilities and stockholders’ equity/(deficit) | $ | 12,117 | $ | 2,961 | $ | 15,078 |
____________________
(1) | See Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements for a description of the pro forma adjustments included in this column. |
See accompanying Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements.
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CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2016
(in millions, except per share data) | Historical CEC Consolidated | Pro Forma Adjustments (1) | Pro Forma CEC Consolidated | ||||||||
Revenues | |||||||||||
Casino | $ | 1,075 | $ | — | $ | 1,075 | |||||
Food and beverage | 410 | — | 410 | ||||||||
Rooms | 464 | — | 464 | ||||||||
Interactive entertainment | 476 | (456 | ) | 20 | |||||||
Other revenue | 245 | — | 245 | ||||||||
Less: casino promotional allowances | (272 | ) | — | (272 | ) | ||||||
Net revenues | 2,398 | (456 | ) | 1,942 | |||||||
Operating expenses | |||||||||||
Direct | |||||||||||
Casino | 564 | — | 564 | ||||||||
Food and beverage | 193 | — | 193 | ||||||||
Rooms | 122 | — | 122 | ||||||||
Platform fees | 132 | (132 | ) | — | |||||||
Property, general, administrative, and other | 716 | (209 | ) | 507 | |||||||
Depreciation and amortization | 228 | (14 | ) | 214 | |||||||
Corporate expense | 82 | — | 82 | ||||||||
Other operating costs | 43 | (1 | ) | 42 | |||||||
Total operating expenses | 2,080 | (356 | ) | 1,724 | |||||||
Income from operations | 318 | (100 | ) | 218 | |||||||
Interest expense | (301 | ) | — | (301 | ) | ||||||
Deconsolidation and restructuring of CEOC and other | (2,263 | ) | — | (2,263 | ) | ||||||
Loss from continuing operations, before income taxes | (2,246 | ) | (100 | ) | (2,346 | ) | |||||
Income tax provision | (71 | ) | 61 | (10 | ) | ||||||
Net loss | (2,317 | ) | (39 | ) | (2,356 | ) | |||||
Net income attributable to noncontrolling interests | (68 | ) | 5 | (63 | ) | ||||||
Net loss attributable to Caesars | $ | (2,385 | ) | $ | (34 | ) | $ | (2,419 | ) | ||
Loss per share | |||||||||||
Net loss per share | $ | (16.39 | ) | $ | (16.62 | ) | |||||
Weighted-average common shares outstanding | 146 | 146 |
____________________
(1) | See Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements for a description of the pro forma adjustments included in this column. |
See accompanying Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements.
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CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
Year Ended December 31, 2015
(in millions, except per share data) | Historical CEC Consolidated | Pro Forma Adjustments (1) | Pro Forma CEC Consolidated | ||||||||
Revenues | |||||||||||
Casino | $ | 2,257 | $ | — | $ | 2,257 | |||||
Food and beverage | 840 | — | 840 | ||||||||
Rooms | 878 | — | 878 | ||||||||
Interactive entertainment | 764 | (726 | ) | 38 | |||||||
Other revenue | 468 | — | 468 | ||||||||
Reimbursed management costs | 10 | — | 10 | ||||||||
Less: casino promotional allowances | (563 | ) | — | (563 | ) | ||||||
Net revenues | 4,654 | (726 | ) | 3,928 | |||||||
Operating expenses | |||||||||||
Direct | |||||||||||
Casino | 1,194 | — | 1,194 | ||||||||
Food and beverage | 399 | — | 399 | ||||||||
Rooms | 227 | — | 227 | ||||||||
Platform fees | 212 | (212 | ) | — | |||||||
Property, general, administrative, and other | 1,309 | (271 | ) | 1,038 | |||||||
Reimbursable management costs | 10 | — | 10 | ||||||||
Depreciation and amortization | 401 | (29 | ) | 372 | |||||||
Impairment of tangible and other intangible assets | 1 | — | 1 | ||||||||
Corporate expense | 176 | — | 176 | ||||||||
Other operating costs | 152 | — | 152 | ||||||||
Total operating expenses | 4,081 | (512 | ) | 3,569 | |||||||
Income from operations | 573 | (214 | ) | 359 | |||||||
Interest expense | (684 | ) | 1 | (683 | ) | ||||||
Deconsolidation and restructuring of CEOC and other | 6,115 | — | 6,115 | ||||||||
Income from continuing operations, before income taxes | 6,004 | (213 | ) | 5,791 | |||||||
Income tax benefit | 55 | 67 | 122 | ||||||||
Income from continuing operations, net of income taxes | 6,059 | (146 | ) | 5,913 | |||||||
Loss from discontinued operations, net of income taxes | (7 | ) | — | (7 | ) | ||||||
Net income | 6,052 | (146 | ) | 5,906 | |||||||
Net income attributable to noncontrolling interests | (132 | ) | 20 | (112 | ) | ||||||
Net income attributable to Caesars | $ | 5,920 | $ | (126 | ) | $ | 5,794 | ||||
Earnings/(loss) per share - basic and diluted | |||||||||||
Basic earnings per share from continuing operations | $ | 40.92 | $ | 40.05 | |||||||
Diluted earnings per share from continuing operations | $ | 40.30 | $ | 39.45 | |||||||
Weighted-average common shares outstanding - basic | 145 | 145 | |||||||||
Weighted-average common shares outstanding - diluted | 147 | 147 |
____________________
(1) | See Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements for a description of the pro forma adjustments included in this column. |
See accompanying Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements.
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CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
Year Ended December 31, 2014
(in millions, except per share data) | Historical CEC Consolidated | Pro Forma Adjustments (1) | Pro Forma CEC Consolidated | ||||||||
Revenues | |||||||||||
Casino | $ | 5,394 | $ | — | $ | 5,394 | |||||
Food and beverage | 1,522 | — | 1,522 | ||||||||
Rooms | 1,207 | — | 1,207 | ||||||||
Interactive entertainment | 585 | (549 | ) | 36 | |||||||
Other revenue | 703 | — | 703 | ||||||||
Reimbursed management costs | 243 | — | 243 | ||||||||
Less: casino promotional allowances | (1,138 | ) | — | (1,138 | ) | ||||||
Net revenues | 8,516 | (549 | ) | 7,967 | |||||||
Operating expenses | |||||||||||
Direct | |||||||||||
Casino | 3,253 | — | 3,253 | ||||||||
Food and beverage | 694 | — | 694 | ||||||||
Rooms | 315 | — | 315 | ||||||||
Platform fees | 166 | (166 | ) | — | |||||||
Property, general, administrative, and other | 2,149 | (241 | ) | 1,908 | |||||||
Reimbursable management costs | 243 | — | 243 | ||||||||
Depreciation and amortization | 636 | (28 | ) | 608 | |||||||
Impairment of goodwill | 695 | — | 695 | ||||||||
Impairment of tangible and other intangible assets | 299 | — | 299 | ||||||||
Corporate expense | 282 | — | 282 | ||||||||
Other operating costs | 236 | (33 | ) | 203 | |||||||
Total operating expenses | 8,968 | (468 | ) | 8,500 | |||||||
Loss from operations | (452 | ) | (81 | ) | (533 | ) | |||||
Interest expense | (2,670 | ) | 1 | (2,669 | ) | ||||||
Deconsolidation and restructuring of CEOC and other | (95 | ) | — | (95 | ) | ||||||
Loss from continuing operations, before income taxes | (3,217 | ) | (80 | ) | (3,297 | ) | |||||
Income tax benefit | 543 | 52 | 595 | ||||||||
Loss from continuing operations, net of income taxes | (2,674 | ) | (28 | ) | (2,702 | ) | |||||
Loss from discontinued operations, net of income taxes | (192 | ) | — | (192 | ) | ||||||
Net loss | (2,866 | ) | (28 | ) | (2,894 | ) | |||||
Net loss attributable to noncontrolling interests | 83 | (4 | ) | 79 | |||||||
Net loss attributable to Caesars | $ | (2,783 | ) | $ | (32 | ) | $ | (2,815 | ) | ||
Loss per share | |||||||||||
Loss per share from continuing operations | $ | (18.18 | ) | $ | (18.41 | ) | |||||
Weighted-average common shares outstanding | 142 | 142 |
____________________
(1) | See Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements for a description of the pro forma adjustments included in this column. |
See accompanying Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements.
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CAESARS ENTERTAINMENT CORPORATION
UNAUDITED CONSOLIDATED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
Year Ended December 31, 2013
(in millions, except per share data) | Historical CEC Consolidated | Pro Forma Adjustments (1) | Pro Forma CEC Consolidated | ||||||||
Revenues | |||||||||||
Casino | $ | 5,527 | $ | — | $ | 5,527 | |||||
Food and beverage | 1,451 | — | 1,451 | ||||||||
Rooms | 1,167 | — | 1,167 | ||||||||
Interactive entertainment | 315 | (303 | ) | 12 | |||||||
Other revenue | 601 | — | 601 | ||||||||
Reimbursed management costs | 266 | — | 266 | ||||||||
Less: casino promotional allowances | (1,107 | ) | — | (1,107 | ) | ||||||
Net revenues | 8,220 | (303 | ) | 7,917 | |||||||
Operating expenses | |||||||||||
Direct | |||||||||||
Casino | 3,112 | — | 3,112 | ||||||||
Food and beverage | 639 | — | 639 | ||||||||
Rooms | 296 | — | 296 | ||||||||
Platform fees | 94 | (94 | ) | — | |||||||
Property, general, administrative, and other | 1,943 | (122 | ) | 1,821 | |||||||
Reimbursable management costs | 266 | — | 266 | ||||||||
Depreciation and amortization | 701 | (17 | ) | 684 | |||||||
Impairment of goodwill | 104 | — | 104 | ||||||||
Impairment of tangible and other intangible assets | 2,727 | — | 2,727 | ||||||||
Corporate expense | 161 | — | 161 | ||||||||
Other operating costs | 203 | (53 | ) | 150 | |||||||
Total operating expenses | 10,246 | (286 | ) | 9,960 | |||||||
Loss from operations | (2,026 | ) | (17 | ) | (2,043 | ) | |||||
Interest expense | (2,252 | ) | — | (2,252 | ) | ||||||
Deconsolidation and restructuring of CEOC and other | 28 | — | 28 | ||||||||
Loss from continuing operations, before income taxes | (4,250 | ) | (17 | ) | (4,267 | ) | |||||
Income tax benefit | 1,517 | 6 | 1,523 | ||||||||
Loss from continuing operations, net of income taxes | (2,733 | ) | (11 | ) | (2,744 | ) | |||||
Loss from discontinued operations, net of income taxes | (207 | ) | — | (207 | ) | ||||||
Net loss | (2,940 | ) | (11 | ) | (2,951 | ) | |||||
Net income attributable to noncontrolling interests | (8 | ) | (1 | ) | (9 | ) | |||||
Net loss attributable to Caesars | $ | (2,948 | ) | $ | (12 | ) | $ | (2,960 | ) | ||
Loss per share | |||||||||||
Loss per share from continuing operations | $ | (21.32 | ) | $ | (21.41 | ) | |||||
Weighted-average common shares outstanding | 129 | 129 |
____________________
(1) | See Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements for a description of the pro forma adjustments included in this column. |
See accompanying Notes to Unaudited Consolidated Condensed Pro Forma Financial Statements.
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CAESARS ENTERTAINMENT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED PRO FORMA FINANCIAL STATEMENTS
Pro Forma Adjustments
The pro forma adjustments included in the pro forma financial statements are as follows:
(a) | The disposal of the SMG Business assets and liabilities at their carrying amounts included in CEC’s balance sheet as of June 30, 2016. |
(b) | The removal of the SMG Business statement of operations included in CEC’s statements of operations for the six months ended June 30, 2016 and for the years ended December 31, 2015, 2014, and 2013. |
(c) | Proceeds of $4.4 billion received from the sale of the SMG Business have been reflected as restricted cash, after deducting appropriate amounts representing the following disbursements from those cash proceeds: (i) transaction expenses that were paid within three business days following the sale of the SMG Business, (ii) amounts paid to CIE’s minority shareholders, including CIE management and Rock Gaming Interactive LLC, that are then payable and (iii) appropriate taxes, as discussed below. |
(d) | Taxes represent the net income tax liability of (i) Caesars Acquisition Company (“CAC”) with respect to the sale of the SMG Business (including the pre-closing restructuring), after taking into account any available tax attributes of CAC, (ii) each equity holder of CIE that continues to be an equity holder of CIE following the sale of the SMG Business (other than CIE Growth, LLC) and does not otherwise receive cash proceeds in an amount sufficient to cover its tax liability in connection with the sale of the SMG Business (including the pre-closing restructuring), and (iii) CIE with respect to the sale (including the pre-closing restructuring). The aggregate tax liability is currently estimated to be $266 million, and has been included as a pro forma adjustment within accrued expenses and other current liabilities in the June 30, 2016 balance sheet. This presents a liability recorded by Caesars Growth Partners, LLC (“CGP”), which is a consolidated variable interest entity of CEC. Pursuant to the operating agreement of CGP, CGP pays certain expenses on behalf of CAC. |
(e) | Transaction expenses of $58 million represent third party transaction costs, including investment banking and legal fees, incurred by CIE in connection with the sale of the SMG Business. These expenses were paid upon the closing of the sale using proceeds from the sale. See Note (c). |
(f) | The tax impacts in the pro forma adjustments include a $25 million increase in deferred charges and other assets, the reversal of deferred tax assets of $2 million, and the reversal of deferred tax liabilities of $2 million, with an offset of these adjustments to stockholders’ equity/(deficit). These adjustments are the result of the remaining businesses of CIE converting to a limited liability company as of the effective date of the sale. |
(g) | Payables due to CIE’s shareholders in excess of amounts described in Note (c), which are scheduled to be paid in a future period, are reflected as an adjustment of $14 million to accrued expenses and other current liabilities, $64 million reflected as deferred credits and other liabilities, with an offset of $78 million to stockholders’ equity/(deficit). |
(h) | Gain of $4.1 billion, net of taxes, recognized on the sale of the SMG Business reflected as an adjustment to stockholders’ equity/(deficit). |
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