Caesars releases fourth quarter and full-year 2016 results

In an official statement released February 14, Caesars reported fourth quarter and full-year 2016 results highlighting certain GAAP and non-GAAP financial measures on a consolidated basis. 

Following is a summary of the results: 

Net revenues for Continuing CEC increased 2.8% to $3.9 billion driven by strength in Las Vegas due to favorable hold and improved hotel performance.

Net loss for Continuing CEC, before including the effect of noncontrolling interest, was $2.7 billion due to $5.7 billion of accruals related to the restructuring of Caesars Entertainment Operating Company, Inc. ("CEOC"), partially offset by a gain of $4.2 billion on the sale of Caesars Interactive Entertainment's ("CIE") social and mobiles games business.

Adjusted EBITDA for Continuing CEC increased 8.6% to $1.1 billion driven by net revenue increases and efficiency initiatives.
In January 2017, the U.S. Bankruptcy Court for the Northern District of Illinois approved CEOC's Plan of Reorganization, paving the way for a successful conclusion to CEOC's bankruptcy in 2017.

Fourth Quarter

Net revenues for Continuing CEC increased 3.0% year-over-year to $949 million.

Net loss for Continuing CEC, before including the effect of noncontrolling interest, was $435 million compared to a net loss of $39 million in the fourth quarter of 2015 mainly due to a $426 million accrual related to the restructuring of CEOC.
Adjusted EBITDA for Continuing CEC grew 10.6% year-over-year to $250 million.

Continuing CEC Cash ADR in Las Vegas was up 5.8% due to increased resort fees, effective hotel yield management and improved pricing power.

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Caesars Entertainment delivered a second consecutive year of solid operational improvement and margin expansion driven by strong performance in Las Vegas, our largest market, and continued productivity improvements, said Mark Frissora, President and Chief Executive Officer of Caesars Entertainment

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"We also generated record full year cash hotel revenues as we renovated over 8,000 rooms domestically since 2014. This year, we intend to deliver additional cash flow and margin improvements while completing CEOC's restructuring. These actions will allow us to continue to generate more value for our stakeholders as we execute against our long-term plan." 

Summary Financial Data

The results of CEOC and its subsidiaries are no longer consolidated with Caesars subsequent to CEOC and certain of its United States subsidiaries (the "Debtors") voluntarily filing for reorganization under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") on January 15, 2015. In January 2017, the U.S. Bankruptcy Court for the Northern District of Illinois approved CEOC's Plan of Reorganization. This is a key milestone that paves the way toward a successful conclusion of CEOC's bankruptcy in 2017.

Financial Results

The company viewed each casino property as an operating segment and currently aggregate all such casino properties into two reportable segments based on management's view, which aligns with their own ownership and underlying credit structures: CERP and CGP.

Through June 30, 2016, we aggregated the operating segments within CGP into two separate reportable segments: Caesars Growth Partners Casino Properties and Developments ("CGP Casinos") and CIE. On September 23, 2016, CIE sold its social and mobile games business ("SMG Business") for cash consideration of $4.4 billion, subject to customary purchase price adjustments, and retained only its World Series of Poker ("WSOP") and regulated online real money gaming businesses. The SMG Business represented the majority of CIE's operations and is being classified as a discontinued operation for all periods presented. After excluding the SMG Business from CIE's continuing operations, we no longer consider CIE to be a separate reportable segment from CGP Casinos. Therefore, CGP Casinos and CIE have been combined for all periods presented to form the CGP segment. CEOC was a reportable segment until its deconsolidation effective January 15, 2015.

Segment results in this release are presented consistent with the way Caesars management assesses these results and allocates resources, which is a consolidated view that adjusts for the impact of certain transactions between reportable segments within Caesars. Accordingly, the results of certain reportable segments presented in this filing differ from the financial statement information presented in their stand-alone filings. "Other" includes parent, consolidating, and other adjustments to reconcile to consolidated Caesars results. All comparisons are to the same period of the previous year.

Continuing CEC

Net revenues for Continuing CEC increased 3.0% year-over-year to $949 million primarily due to strong growth in the Las Vegas region resulting from favorable year over year hold and improved hotel performance. Income from operations increased $61 million to $102 million, property EBITDA increased 15.2% to $273 million and adjusted EBITDA increased 10.6% to $250 million. These increases were mainly due to increases in net revenues and efficiency initiatives. Net loss, before including the effect of non-controlling interest, was $435 million compared to a net loss of $39 million in the fourth quarter of 2015 mainly due to a $426 million accrual related to CEC's estimate of the additional amount it will pay to support the restructuring of CEOC.

CERP

CERP owns six casinos in the United States and The LINQ promenade, along with leasing Octavius Tower at Caesars Palace Las Vegas to CEOC and gaming space at The LINQ promenade to CGP.

Net revenues for the fourth quarter of 2016 were $536 million, up 3.7% primarily due to increased gaming revenues and higher hotel revenues in Las Vegas. Room renovations at Paris negatively impacted CERP's hospitality revenues in the quarter as there were over 23,000 room nights out of service. Casino revenues were $278 million, up 4.1% from the prior year mainly due to higher gaming volumes in Las Vegas and Atlantic City as well as favorable year over year hold, primarily at Paris. Room revenues rose 2.3% in the quarter to $135 million driven by a 6.3% increase in cash ADR mainly due to improved hotel performance in Las Vegas as a result of room renovations at Harrah's and Paris. Food and beverage revenues were $128 million, down 0.8%, partially driven by rooms out of service at Paris.

Income from operations increased 20.0% to $96 million, net income increased $12 million to a net loss of $1 million and adjusted EBITDA increased 12.4% to $163 million. These increases were mainly due to higher revenues and efficiency initiatives. Hold was estimated to have a minimal effect on operating income in the quarter relative to the expected hold and a favorable effect of between $5 million and $10 million when compared to the prior year period.

CGP

CGP owns six casinos in the United States, primarily in Las Vegas, as well as CIE. CIE owns and operates regulated online real money gaming and the WSOP tournaments and brand.

Net revenues for the fourth quarter of 2016 were $414 million, a 3.0% increase primarily attributable to higher gaming and hotel revenues in Las Vegas and increases in entertainment revenue mainly due to the Axis Theater at Planet Hollywood. Casino revenues were $265 million, up 1.9% from the prior year mainly driven by favorable year over year hold, partially offset by weaker gaming volumes in Baltimore and New Orleans. Gaming volumes at Horseshoe Baltimore were impacted by the entry of a new competitor in the market while Harrah's New Orleans continued to experience pressure from the smoking ban. Room revenues increased 2.4% to $87 million mainly due to higher hotel rates, resort fees and improved hotel yield. Planet Hollywood had 33,000 room nights off the market in the quarter due to room renovations, which also affected hotel revenues at the property. Food and beverage revenues were $62 million, down 4.6%, partially due to rooms out of service at Planet Hollywood.

Net income decreased $14 million to $11 million primarily attributable to the sale of CIE's SMG Business. Income from operations increased 55.6% to $42 million and adjusted EBITDA increased 19.2% to $93 million mainly due to higher revenues and efficiency initiatives. Hold was estimated to have a favorable effect on operating income of between $0 million and $5 million in the quarter relative to the expected hold and between $0 million and $5 million when compared to the prior year period.

CEOC and CES

CEOC owns and operates 19 casinos in the United States and nine internationally, most of which are located in England, and manages 8 casinos, which include one CGP casino and seven casinos for unrelated third parties. Caesars Enterprise Services ("CES") is a joint venture among CERP, CEOC, and a subsidiary of CGP. CES provides certain corporate and administrative services to their casino properties. In addition, effective October 2014 most of the properties owned by CERP and CGP are managed by CES.

Cash and Available Revolver Capacity

CEC is primarily a holding company with no independent operations, employees, or material debt issuances of its own. CEC's primary assets as of December 31, 2016, consist of $188 million in cash and cash equivalents and its ownership interests in CEOC, CERP and CGP. CEC's cash includes $109 million held by insurance captives. Each of the subsidiary entities comprising Caesars Entertainment's consolidated financial statements have separate debt agreements with restrictions on usage of the respective entity's capital resources. CGP is a variable interest entity that is consolidated by Caesars Entertainment, but is controlled by its sole voting member, Caesars Acquisition Company ("CAC"). CAC is a managing member of CGP and therefore controls all decisions regarding liquidity and capital resources of CGP. CEOC was deconsolidated effective January 15, 2015, and therefore, has not been included in the table below. In the table below, "Other" reflects CEC and its other direct subsidiaries.

CEC has limited unrestricted cash available to meet its financial commitments, primarily resulting from significant expenditures made to defend against litigation related to the CEOC restructuring and to support a plan of reorganization for CEOC. The completion of the merger with CAC is expected to allow CEC to fulfill its financial commitments in support of the restructuring; under the terms of the restructuring, all related litigation is expected to be resolved; and CEC is permitted to use a portion of the proceeds from the sale of CIE's SMG Business to fund certain expenses incurred related to the restructuring. If CEC is unable to obtain additional sources of cash when needed, in the event of a material adverse ruling on one or all of the ongoing litigation matters, or if CEOC does not emerge from bankruptcy on a timely basis on terms and under circumstances satisfactory to CEC, it is likely that CEC would seek reorganization under Chapter 11 of the Bankruptcy Code.

For further details on Caesars' quarterly results, you can check investors.caesars.com.