Caesars Entertainment Reports Fourth Quarter and Full-Year 2015 Results

Quarterly net revenues for Continuing CEC increased 8.7% year-over-year to $1.1 billion and full-year net revenues increased 14.7% year-over-year to $4.5 billion driven by strength in hospitality offerings as well as positive performance in CIE's social and mobile games business.

Caesars Entertainment Corporation (NASDAQ:  CZR) yesterday reported fourth quarter and full-year 2015 results as summarized in the discussion below, which highlights certain GAAP and non-GAAP financial measures on a consolidated basis.

Fourth Quarter and Full-Year Highlights

• Quarterly net revenues for Continuing CEC increased 8.7% year-over-year to $1.1 billion and full-year net revenues increased 14.7% year-over-year to $4.5 billion driven by strength in hospitality offerings as well as positive performance in CIE's social and mobile games business. 
• Quarterly adjusted EBITDA for Continuing CEC grew 51.7% year-over-year to $305 million and full-year adjusted EBITDA grew 46.1% year-over-year to $1.3 billion primarily driven by net revenue increases, marketing and operational efficiencies, and improved hotel customer mix. 
• Cash ADR in Las Vegas improved significantly year-over-year, up 13.6% in the quarter and 12.0% for the full-year, driven by improved pricing power as a result of the recapitalization of room product, increased resort fees, and higher group room revenues. 
• Quarterly net revenues for CIE increased 33.3% year-over-year to $208 million and full-year net revenues increased 30.5% year-over-year to $766 million, while adjusted EBITDA grew 67.4% and 62.6% year-over-year for the quarter and the full-year, respectively. CIE has continued to experience strong organic growth in social and mobile games due to the focus on increasing monthly unique paying users and the monetization of those users.  

"Caesars achieved solid operating momentum throughout 2015. Including CEOC's results, the enterprise experienced its best full-year of operating results since 2007," said Mark Frissora, President and CEO of Caesars Entertainment. "These results largely reflect higher hotel revenues, with cash ADR up double-digits, and increased marketing and operational efficiencies, which delivered approximately $350 million in incremental EBITDA enterprise-wide year-over-year." 

"The ability to generate this level of sustained growth is a testament to the success of our low-cost, high-quality operating model. We remain focused on executing a balanced agenda of enhancing revenue growth while driving productivity gains to improve margins and cash flow, while increasing long-term value for our stakeholders," Frissora concluded. 

Summary Financial Data 

Effective January 15, 2015, CEC deconsolidated CEOC subsequent to its voluntarily filing for reorganization under Chapter 11 of the United States Bankruptcy Code. As such, all amounts presented in this earnings release exclude the operating results of CEOC subsequent to January 15, 2015. Prior period results have not been recast to reflect the deconsolidation of CEOC. 

Because CEOC operating results for 2015 are not comparable with 2014 as a result of CEOC's deconsolidation, the analysis of our operating results in this release will include discussion of the components that remain in the consolidated CEC entity subsequent to the deconsolidation of CEOC. In the table below, "Continuing CEC" represents CERP, CGP Casinos, CIE, other non-operating subsidiaries and associated parent company and elimination adjustments that represent the Caesars structure as of December 31, 2015, and for periods subsequent to the deconsolidation of CEOC. 

In August 2015, the Company announced that it had secured the support of CEOC's largest and most senior creditor constituencies, representing holders of more than 80% of CEOC's First Lien Bank Debt and First Lien Notes. The following results include Caesars Entertainment's accrual of $52 million and $1 billion of commitments to the First-Lien RSAs related to the restructuring of CEOC for the fourth quarter and year ended December 31, 2015, respectively.

Financial Results 

We view each casino property and CIE as operating segments and currently aggregate all such casino properties and CIE into three reportable segments based on management's view of these properties which aligns with their own ownership and underlying credit structures: CERP, Caesars Growth Partners Casino Properties and Developments ("CGP Casinos"), and CIE. CGP Casinos is comprised of all subsidiaries of CGP excluding CIE. CIE is comprised of the subsidiaries that operate CGP's social and mobile games operations, regulated online real money gaming, and the World Series of Poker ("WSOP"). CEOC remained 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, as described below. 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 from the previous year. 

CERP 

CERP owns and operates 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 2015 were $517 million, a 3.4% increase. Casino revenues were $267 million in the fourth quarter 2015, flat from the prior year. Room revenues rose 11.9% in the quarter to $132 million mainly due to an increase in resort fees, which drove a 16.9% increase in cash ADR. Food and beverage revenues were $132 million, up 1.5%.  

Income from operations was $80 million. Adjusted EBITDA increased 40.8% to $145 million primarily due to marketing and operational efficiencies as well as a year-over-year decrease in bad debt expense. For the quarter, the adjusted EBITDA impact from hold was $0 to $5 million. 

CGP Casinos 

CGP Casinos owns and operates six casinos in the United States, primarily in Las Vegas. 

Net revenues for the fourth quarter of 2015 were $392 million, a 5.7% increase primarily due to strong hotel revenues from The LINQ Hotel & Casino due to the renovations completed earlier this year. Casino revenues were $252 million in the fourth quarter of 2015, a 1.2% increase. We remain focused on mitigating the negative impact on revenues at Harrah's New Orleans to the extent possible by developing outdoor smoking patios, subject to approvals. Room revenues increased 30.8% in the quarter to $85 million as a result of an increase in total rooms available at The LINQ Hotel & Casino and resort fees. Food and beverage revenues were $67 million, down 1.5%.   

Income from operations was $39 million. Adjusted EBITDA increased 40.4% to $80 million primarily due to net revenue increases and marketing and operational efficiencies. For the quarter, the adjusted EBITDA impact from hold was $0 to $5 million. 

CIE 

CIE, a subsidiary of CGP, owns and operates (1) an online games business providing social and mobile games (2) regulated online real money gaming and (3) the WSOP tournaments and brand. 

Net revenues for the fourth quarter of 2015 were $208 million, a 33.3% increase. Income from operations was $51 million and adjusted EBITDA increased 67.4% to $77 million. The increase in revenue and adjusted EBITDA was driven primarily by the continued focus on conversion and monetization of users to increase revenue per user. 

CEOC and CES 

CEOC owns and operates 19 casinos in the United States and nine internationally, most of which are located in England, and managed 16 casinos, which included the six CGP casinos and ten casinos for unrelated third parties. Effective October 2014, substantially all our properties are managed by CES (and the remaining properties will be transitioned upon regulatory approval). 

CES is a joint venture among CERP, CEOC, and a subsidiary of CGP that provides certain corporate and administrative services for their casino properties, including substantially all of the 28 casinos owned by CEOC and ten casinos owned by unrelated third parties (including four Indian tribal properties). CES also manages certain enterprise assets and the other assets it owns, licenses or controls, and employs certain of the corresponding employees. 

Balance Sheet and Other Items 

Cash and Available Revolver Capacity 

Each of the 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. Parent reflects CEC and its various non-operating subsidiaries and excludes CERP, CES, and CGP.

About Caesars 

Caesars Entertainment 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: wholly owned Caesars Entertainment Resort Properties ("CERP"), Caesars Growth Partners, LLC ("CGP"), in which we hold a variable economic interest, and the majority owned operating subsidiary Caesars Entertainment Operating Company ("CEOC") (which was deconsolidated effective January 15, 2015 due to its bankruptcy filing). Since its beginning in Reno, Nevada, in 1937, CEC has grown through development of new resorts, expansions and acquisitions. The Caesars system of properties now operates 50 casinos in 14 U.S. states and five countries. CERP and CGP operate a total of 12 casinos. CEC's resorts operate primarily under the Caesars®, Harrah's®, and Horseshoe® brand names. CEOC's portfolio also includes the Caesars Entertainment UK (formerly London Clubs International) family of casinos.

CAESARS ENTERTAINMENT CORPORATION

SUPPLEMENTAL INFORMATION

RECONCILIATION OF PROPERTY EBITDA AND ADJUSTED EBITDA

Property earnings before interest, taxes, depreciation and amortization ("EBITDA") is presented as a supplemental measure of the Company's performance.  Property EBITDA is defined as revenues less property 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 management does not consider indicative of the Company's ongoing operating performance at an operating property level.  In evaluating Property EBITDA, you should be aware that, in the future, the Company may incur expenses that are the same or similar to some of the adjustments in this presentation.  The presentation of Property EBITDA should not be construed as an inference that future results will be unaffected by unusual or unexpected items.

Property 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 GAAP).  Property EBITDA may not be comparable to similarly titled measures reported by other companies within the industry.  Property EBITDA is included because management uses Property EBITDA to measure performance and allocate resources and believes that Property EBITDA provides investors with additional information consistent with that used by management.

Adjusted EBITDA is defined as Property EBITDA further adjusted to exclude certain non-cash and other items required or permitted in calculating covenant compliance under the agreements governing CERP and CGP's secured credit facilities.

Adjusted EBITDA is presented as a supplemental measure of the Company's performance and management believes that Adjusted EBITDA provides investors with additional information and allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the Company.

Because not all companies use identical calculations, the presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The following tables reconcile net income/(loss) attributable to the companies presented to Property EBITDA and Adjusted EBITDA for the periods indicated. Amounts are presented on a legal entity basis consistent with agreements governing applicable secured credit facilities.