UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

2020

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                 

Commission File No.

001-3662936629

ELDORADO RESORTS,

CAESARS ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

Nevada

46-3657681

Delaware

46-3657681
(State or other jurisdiction of


incorporation or organization)

(I.R.S. Employer


Identification No.)

100 West Liberty Street, Suite 1150,12th Floor, Reno, Nevada 89501

(Address and zip code of principal executive offices)

(775) 328‑0100

328-0100

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.00001 par value

ERI

CZR

NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑acceleratednon-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑212b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non‑acceleratedNon-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑212b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares of the Registrant’s Common Stock, $0.00001 par value per share, outstanding as of November 4, 2019October 30, 2020 was 77,769,501.

208,277,138.

ELDORADO RESORTS,
CAESARS ENTERTAINMENT, INC.

QUARTERLY REPORT FOR THE THREE MONTHS ENDED

SEPTEMBER 30, 2019

2020

TABLE OF CONTENTS

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Consolidated Condensed Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2020 and 2019 and 2018 (unaudited)

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1




PART I-FINANCIAL INFORMATION

Item 1.  Financial Statements.

ELDORADO RESORTS,Statements

2

CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(dollars in thousands)

 

September 30,

 

 

December 31,

 

 

2019

 

 

2018

 

September 30,
2020		December 31,
2019

 

 

(unaudited)

 

 

 

 

 

 

(Dollars in millions)(Dollars in millions)(unaudited)

ASSETS

 

 

 

 

 

 

 

 

 

 

ASSETS

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

Cash and cash equivalents

 

$

 

208,831

 

 

$

 

230,752

 

Cash and cash equivalents ($8 and $0 attributable to our VIEs)Cash and cash equivalents ($8 and $0 attributable to our VIEs)$1,037 $206 

Restricted cash and investments

 

 

 

22,242

 

 

 

 

24,892

 

Restricted cash and investments2,259 4 

Marketable securities

 

 

 

20,433

 

 

 

 

16,957

 

Accounts receivable, net

 

 

 

48,150

 

 

 

 

60,169

 

Accounts receivable, net385 54 

Due from affiliates

 

 

 

2,823

 

 

 

 

327

 

Due from affiliates37 4 

Inventories

 

 

 

17,684

 

 

 

 

20,595

 

Inventories49 18 

Income taxes receivable

 

 

 

—

 

 

 

 

15,731

 

Prepaid expenses

 

 

 

37,429

 

 

 

 

48,002

 

Prepayments and other current assets ($5 and $0 attributable to our VIEs)Prepayments and other current assets ($5 and $0 attributable to our VIEs)265 66 

Assets held for sale

 

 

 

605,947

 

 

 

 

155,771

 

Assets held for sale2,266 253 

Total current assets

 

 

 

963,539

 

 

 

 

573,196

 

Total current assets6,298 605 

Investment in and advances to unconsolidated affiliates

 

 

 

129,796

 

 

 

 

1,892

 

Investment in and advances to unconsolidated affiliates170 136 

Property and equipment, net

 

 

 

2,635,111

 

 

 

 

2,882,606

 

Property and equipment, net ($84 and $0 attributable to our VIEs)Property and equipment, net ($84 and $0 attributable to our VIEs)14,630 2,615 

Gaming licenses and other intangibles, net

 

 

 

1,118,855

 

 

 

 

1,362,006

 

Gaming licenses and other intangibles, net4,466 1,111 

Goodwill

 

 

 

909,717

 

 

 

 

1,008,316

 

Goodwill9,450 910 

Right-of-use assets

 

 

 

245,344

 

 

 

 

—

 

Other assets, net

 

 

 

78,879

 

 

 

 

83,446

 

Other assets, net ($25 and $0 attributable to our VIEs)Other assets, net ($25 and $0 attributable to our VIEs)1,224 264 
Deferred income taxesDeferred income taxes1 0 

Total assets

 

$

 

6,081,241

 

 

$

 

5,911,462

 

Total assets$36,239 $5,641 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

Current portion of long-term debt

 

$

 

238

 

 

$

 

462

 

Current portion of long-term debt$67 $246 

Accounts payable

 

 

 

50,024

 

 

 

 

58,524

 

Accrued property, gaming and other taxes

 

 

 

54,628

 

 

 

 

51,931

 

Accrued payroll and related

 

 

 

72,999

 

 

 

 

87,332

 

Accounts payable ($98 and $0 attributable to our VIEs)Accounts payable ($98 and $0 attributable to our VIEs)274 62 

Accrued interest

 

 

 

34,637

 

 

 

 

42,780

 

Accrued interest241 36 

Income taxes payable

 

 

 

15,425

 

 

 

 

47,475

 

Short-term lease obligation

 

 

 

21,963

 

 

 

 

—

 

Accrued other liabilities

 

 

 

108,999

 

 

 

 

102,982

 

Accrued other liabilities ($2 and $0 attributable to our VIEs)Accrued other liabilities ($2 and $0 attributable to our VIEs)1,371 307 

Liabilities related to assets held for sale

 

 

 

56,058

 

 

 

 

10,691

 

Liabilities related to assets held for sale517 37 

Total current liabilities

 

 

 

414,971

 

 

 

 

402,177

 

Total current liabilities2,470 688 

Long-term financing obligation to GLPI

 

 

 

967,982

 

 

 

 

959,835

 

Long-term financing obligationLong-term financing obligation12,547 971 

Long-term debt, less current portion

 

 

 

2,950,955

 

 

 

 

3,261,273

 

Long-term debt, less current portion15,203 2,325 

Deferred income taxes

 

 

 

224,877

 

 

 

 

200,010

 

Deferred income taxes1,081 197 

Long-term lease obligation

 

 

 

229,297

 

 

 

 

—

 

Other long-term liabilities

 

 

 

166,381

 

 

 

 

59,014

 

Other long-term liabilities ($19 and $0 attributable to our VIEs)Other long-term liabilities ($19 and $0 attributable to our VIEs)1,549 343 

Total liabilities

 

 

 

4,954,463

 

 

 

 

4,882,309

 

Total liabilities32,850 4,524 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 13)Commitments and contingencies (Note 13)


STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

Common stock, 200,000,000 shares authorized, 77,545,678

and 77,215,066 issued and outstanding, net of treasury shares, par value

$0.00001 as of September 30, 2019 and December 31, 2018, respectively

 

 

 

1

 

 

 

 

1

 

Paid-in capital

 

 

 

756,225

 

 

 

 

748,076

 

Retained earnings

 

 

 

379,682

 

 

 

 

290,206

 

Treasury stock at cost, 223,823 shares held at September 30, 2019 and

December 31, 2018

 

 

 

(9,131

)

 

 

 

(9,131

)

Accumulated other comprehensive income

 

 

 

1

 

 

 

 

1

 

Caesars stockholders’ equityCaesars stockholders’ equity3,370 1,117 
Noncontrolling interestsNoncontrolling interests19 0 

Total stockholders’ equity

 

 

 

1,126,778

 

 

 

 

1,029,153

 

Total stockholders’ equity3,389 1,117 

Total liabilities and stockholders’ equity

 

$

 

6,081,241

 

 

$

 

5,911,462

 

Total liabilities and stockholders’ equity$36,239 $5,641 

The accompanying condensed notes are an integral part of these consolidated condensed financial statements.


3

ELDORADO RESORTS,


CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

OPERATIONS

(unaudited)

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

Three Months Ended
September 30,		Nine Months Ended
September 30,

 

2019

 

 

2018

 

 

2019

 

 

2018

 

(In millions, except per share data)(In millions, except per share data)2020201920202019

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES:

Casino and pari-mutuel commissions

 

$

 

458,000

 

 

$

 

368,169

 

 

$

 

1,385,848

 

 

$

 

1,060,417

 

Casino and pari-mutuel commissions$919 $458 $1,360 $1,386 

Food and beverage

 

 

 

78,435

 

 

 

 

58,153

 

 

 

 

229,072

 

 

 

 

164,644

 

Food and beverage125 78 188 229 

Hotel

 

 

 

94,318

 

 

 

 

44,780

 

 

 

 

237,493

 

 

 

 

114,447

 

Hotel200 94 257 237 

Other

 

 

 

32,428

 

 

 

 

16,151

 

 

 

 

83,712

 

 

 

 

44,739

 

Other133 33 172 84 

Net revenues

 

 

 

663,181

 

 

 

 

487,253

 

 

 

 

1,936,125

 

 

 

 

1,384,247

 

Net revenues1,377 663 1,977 1,936 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES:

Casino and pari-mutuel commissions

 

 

 

202,555

 

 

 

 

180,062

 

 

 

 

616,101

 

 

 

 

519,558

 

Casino and pari-mutuel commissions461 229 685 693 

Food and beverage

 

 

 

60,406

 

 

 

 

45,381

 

 

 

 

180,288

 

 

 

 

134,927

 

Food and beverage91 60 153 180 

Hotel

 

 

 

27,315

 

 

 

 

13,977

 

 

 

 

76,101

 

 

 

 

40,178

 

Hotel63 27 91 76 

Other

 

 

 

12,092

 

 

 

 

9,315

 

 

 

 

34,064

 

 

 

 

25,030

 

Other52 12 62 34 

Marketing and promotions

 

 

 

33,292

 

 

 

 

23,122

 

 

 

 

97,673

 

 

 

 

66,255

 

General and administrative

 

 

 

122,767

 

 

 

 

75,599

 

 

 

 

360,086

 

 

 

 

223,546

 

General and administrative330 130 495 381 

Corporate

 

 

 

13,014

 

 

 

 

9,217

 

 

 

 

50,819

 

 

 

 

33,018

 

Corporate90 13 120 51 

Impairment charges

 

 

 

—

 

 

 

 

3,787

 

 

 

 

958

 

 

 

 

13,602

 

Impairment charges0 0 161 1 

Depreciation and amortization

 

 

 

52,592

 

 

 

 

35,760

 

 

 

 

166,882

 

 

 

 

99,204

 

Depreciation and amortization223 53 322 167 
Transaction costs and other operating costsTransaction costs and other operating costs219 14 242 2 

Total operating expenses

 

 

 

524,033

 

 

 

 

396,220

 

 

 

 

1,582,972

 

 

 

 

1,155,318

 

Total operating expenses1,529 538 2,331 1,585 

(Loss) gain on sale or disposal of property and equipment

 

 

 

(284

)

 

 

 

(110

)

 

 

 

21,668

 

 

 

 

(393

)

Proceeds from terminated sales

 

 

 

—

 

 

 

 

5,000

 

 

 

 

—

 

 

 

 

5,000

 

Transaction expenses

 

 

 

(12,442

)

 

 

 

(4,091

)

 

 

 

(21,628

)

 

 

 

(10,043

)

Loss from unconsolidated affiliates

 

 

 

(1,515

)

 

 

 

(63

)

 

 

 

(2,132

)

 

 

 

(116

)

Operating income

 

 

 

124,907

 

 

 

 

91,769

 

 

 

 

351,061

 

 

 

 

223,377

 

Operating (loss) incomeOperating (loss) income(152)125 (354)351 

OTHER EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER EXPENSE:

Interest expense, net

 

 

 

(71,897

)

 

 

 

(34,085

)

 

 

 

(217,205

)

 

 

 

(96,579

)

Interest expense, net(473)(72)(608)(217)

Loss on early retirement of debt, net

 

 

 

(1,204

)

 

 

 

—

 

 

 

 

(1,204

)

 

 

 

(162

)

Unrealized gain on restricted investments

 

 

 

3,318

 

 

 

 

—

 

 

 

 

460

 

 

 

 

—

 

Loss on extinguishment of debtLoss on extinguishment of debt(173)(1)(173)(1)
Other (loss) incomeOther (loss) income9 3 (1)0 

Total other expense

 

 

 

(69,783

)

 

 

 

(34,085

)

 

 

 

(217,949

)

 

 

 

(96,741

)

Total other expense(637)(70)(782)(218)

Income before income taxes

 

 

 

55,124

 

 

 

 

57,684

 

 

 

 

133,112

 

 

 

 

126,636

 

(Loss) income from continuing operations before income taxes(Loss) income from continuing operations before income taxes(789)55 (1,136)133 

Provision for income taxes

 

 

 

(18,069

)

 

 

 

(19,980

)

 

 

 

(38,892

)

 

 

 

(31,281

)

Provision for income taxes(135)(18)(64)(39)

Net income

 

$

 

37,055

 

 

$

 

37,704

 

 

$

 

94,220

 

 

$

 

95,355

 

Net income per share of common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 

0.48

 

 

$

 

0.49

 

 

$

 

1.21

 

 

$

 

1.23

 

Diluted

 

$

 

0.47

 

 

$

 

0.48

 

 

$

 

1.20

 

 

$

 

1.22

 

Net (loss) income from continuing operations, net of income taxesNet (loss) income from continuing operations, net of income taxes(924)37 (1,200)94 
Discontinued operations, net of income taxesDiscontinued operations, net of income taxes(1)0 (1)0 
Net (loss) incomeNet (loss) income(925)37 (1,201)94 
Net income attributable to noncontrolling interestsNet income attributable to noncontrolling interests(1)0 (1)0 
Net (loss) income attributable to CaesarsNet (loss) income attributable to Caesars$(926)$37 $(1,202)$94 
Net (loss) income per share - basic and diluted:Net (loss) income per share - basic and diluted:
Basic (loss) income per share from continuing operationsBasic (loss) income per share from continuing operations$(6.09)$0.48 $(11.55)$1.21 
Basic loss per share from discontinued operationsBasic loss per share from discontinued operations0 0 (0.01)0 
Basic (loss) income per shareBasic (loss) income per share$(6.09)$0.48 $(11.56)$1.21 
Diluted (loss) income per share from continuing operationsDiluted (loss) income per share from continuing operations$(6.09)$0.47 $(11.55)$1.20 
Diluted loss per share from discontinued operationsDiluted loss per share from discontinued operations0 0 (0.01)0 
Diluted (loss) income per shareDiluted (loss) income per share$(6.09)$0.47 $(11.56)$1.20 

Weighted average basic shares outstanding

 

 

 

77,721,353

 

 

 

 

77,522,664

 

 

 

 

77,657,553

 

 

 

 

77,445,611

 

Weighted average basic shares outstanding152 78 104 78 

Weighted average diluted shares outstanding

 

 

 

78,449,747

 

 

 

 

78,283,588

 

 

 

 

78,588,517

 

 

 

 

78,208,040

 

Weighted average diluted shares outstanding152 79 104 79 

The accompanying condensed notes are an integral part of these consolidated condensed financial statements.


4

ELDORADO RESORTS,


CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(dollars in thousands)

(unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

 

37,055

 

 

$

 

37,704

 

 

$

 

94,220

 

 

$

 

95,355

 

Other comprehensive income, net of tax

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Comprehensive income, net of tax

 

$

 

37,055

 

 

$

 

37,704

 

 

$

 

94,220

 

 

$

 

95,355

 

Three Months Ended
September 30,		Nine Months Ended
September 30,
(In millions)2020201920202019
Net (loss) income$(925)$37 $(1,201)$94 
Foreign currency translation adjustments1 0 1 0 
Change in fair market value of interest rate swaps, net of tax14 0 14 0 
Other comprehensive income, net of tax15 0 15 0 
Comprehensive (loss) income(910)37 (1,186)94 
Comprehensive income attributable to noncontrolling interests(1)0 (1)0 
Comprehensive (loss) income attributable to Caesars$(911)$37 $(1,187)$94 

The accompanying condensed notes are an integral part of these consolidated condensed financial statements.


5

ELDORADO RESORTS,


CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in thousands)

(unaudited)

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Paid-in

Capital

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income

 

 

Shares

 

 

Amount

 

 

Total

 

Balance, December 31, 2018

 

 

77,438,889

 

 

$

 

1

 

 

$

 

748,076

 

 

$

 

290,206

 

 

$

 

1

 

 

 

 

223,823

 

 

$

 

(9,131

)

 

$

 

1,029,153

 

Cumulative change in accounting principle, net of tax

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(4,744

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(4,744

)

Issuance of restricted stock units

 

 

330,641

 

 

 

 

—

 

 

 

 

4,948

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

4,948

 

Net income

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

38,229

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

38,229

 

Shares withheld related to net share settlement

   of stock awards

 

 

(106,542

)

 

 

 

—

 

 

 

 

(4,322

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(4,322

)

Balance, March 31, 2019

 

 

77,662,988

 

 

$

 

1

 

 

$

 

748,702

 

 

$

 

323,691

 

 

$

 

1

 

 

 

 

223,823

 

 

$

 

(9,131

)

 

$

 

1,063,264

 

Issuance of restricted stock units

 

 

169,248

 

 

 

 

—

 

 

 

 

6,509

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

6,509

 

Net income

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

18,936

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

18,936

 

Shares withheld related to net share settlement

   of stock awards

 

 

(65,312

)

 

 

 

—

 

 

 

 

(3,190

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(3,190

)

Balance, June 30, 2019

 

 

77,766,924

 

 

$

 

1

 

 

$

 

752,021

 

 

$

 

342,627

 

 

$

 

1

 

 

 

 

223,823

 

 

$

 

(9,131

)

 

$

 

1,085,519

 

Issuance of restricted stock units

 

 

3,377

 

 

 

 

—

 

 

 

 

4,266

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

4,266

 

Net income

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

37,055

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

37,055

 

Shares withheld related to net share settlement

   of stock awards

 

 

(800

)

 

 

 

—

 

 

 

 

(62

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(62

)

Balance, September 30, 2019

 

 

77,769,501

 

 

$

 

1

 

 

$

 

756,225

 

 

$

 

379,682

 

 

$

 

1

 

 

 

 

223,823

 

 

$

 

(9,131

)

 

$

 

1,126,778

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

 

76,825,966

 

 

$

 

—

 

 

$

 

746,547

 

 

$

 

194,971

 

 

$

 

79

 

 

 

 

—

 

 

$

 

—

 

 

$

 

941,597

 

Issuance of restricted stock units

 

 

645,047

 

 

 

 

—

 

 

 

 

3,679

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

3,679

 

Net income

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

20,855

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

20,855

 

Shares withheld related to net share settlement

   of stock awards

 

 

(229,898

)

 

 

 

—

 

 

 

 

(7,502

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(7,502

)

Balance, March 31, 2018

 

 

77,241,115

 

 

$

 

—

 

 

$

 

742,724

 

 

$

 

215,826

 

 

$

 

79

 

 

 

 

—

 

 

$

 

—

 

 

$

 

958,629

 

Issuance of restricted stock units

 

 

64,833

 

 

 

 

1

 

 

 

 

3,471

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

3,472

 

Net income

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

36,796

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

36,796

 

Exercise of stock options

 

 

50,336

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Shares withheld related to net share settlement

   of stock awards

 

 

(19,674

)

 

 

 

—

 

 

 

 

(2,175

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(2,175

)

Balance, June 30, 2018

 

 

77,336,610

 

 

$

 

1

 

 

$

 

744,020

 

 

$

 

252,622

 

 

$

 

79

 

 

 

 

—

 

 

$

 

—

 

 

$

 

996,722

 

Issuance of restricted stock units

 

 

61,535

 

 

 

 

—

 

 

 

 

2,495

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

2,495

 

Net income

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

37,704

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

37,704

 

Exercise of stock options

 

 

17,000

 

 

 

 

—

 

 

 

 

154

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

154

 

Shares withheld related to net share settlement

   of stock awards

 

 

(23,901

)

 

 

 

—

 

 

 

 

(924

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(924

)

Balance, September 30, 2018

 

 

77,391,244

 

 

$

 

1

 

 

$

 

745,745

 

 

$

 

290,326

 

 

$

 

79

 

 

 

 

—

 

 

$

 

—

 

 

$

 

1,036,151

 

Caesars Stockholders’ Equity
Common StockTreasury Stock
(In millions)SharesAmountPaid-in
Capital		Retained
Earnings (Accumulated Deficit)		Accumulated
Other
Comprehensive
Income		AmountNon controlling InterestsTotal Stockholders’ Equity
Balance, December 31, 201978 $0 $760 $366 $0 $(9)$0 $1,117 
Issuance of restricted stock units0 — 6 — — — — 6 
Net loss— — — (176)— — — (176)
Shares withheld related to net share settlement of stock awards0 — (7)— — — — (7)
Balance, March 31, 202078 0 759 190 0 (9)0 940 
Issuance of restricted stock units0 — 4 — — — — 4 
Issuance of common stock, net21 — 772 — — — — 772 
Net loss— — — (100)— — — (100)
Balance, June 30, 202099 0 1,535 90 0 (9)0 1,616 
Issuance of restricted stock units1 — 37 — — — — 37 
Issuance of common stock, net7 — 235 — — — — 235 
Net (loss) income— — — (926)— — 1 (925)
Shares issued to Former Caesars shareholders62 — 2,381 — — — — 2,381 
Former Caesars replacement awards— — 24 — — — — 24 
Other comprehensive income, net of tax— — — — 15 — — 15 
Shares withheld related to net share settlement of stock awards0 — 1 — — — — 1 
Acquired noncontrolling interests— — (18)— — — 18 0 
Other— — 5 — — — — 5 
Balance, September 30, 2020169 $0 $4,200 $(836)$15 $(9)$19 $3,389 

6

Caesars Stockholders’ Equity
Common StockTreasury Stock
(In millions)SharesAmountPaid-in
Capital		Retained
Earnings (Accumulated Deficit)		Accumulated
Other
Comprehensive
Income		AmountNon controlling InterestsTotal Stockholders’ Equity
Balance, December 31, 201877 $0 $748 $290 $0 $(9)$0 $1,029 
Cumulative change in accounting principle, net of tax— — — (5)— — — (5)
Issuance of restricted stock units0 — 5 — — — — 5 
Net income— — — 38 — — — 38 
Shares withheld related to net share settlement of stock awards0 — (4)— — — — (4)
Balance, March 31, 201977 0 749 323 0 (9)0 1,063 
Issuance of restricted stock units0 — 6 — — — — 6 
Net income— — — 19 — — — 19 
Shares withheld related to net share settlement of stock awards0 — (3)— — — — (3)
Balance, June 30, 201977 0 752 342 0 (9)0 1,085 
Issuance of restricted stock units0 — 4 — — — — 4 
Net income— — — 37 — — — 37 
Balance, September 30, 201977 $0 $756 $379 $0 $(9)$0 $1,126 
The accompanying condensed notes are an integral part of these consolidated condensed financial statements.


7

ELDORADO RESORTS,


CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net income

 

$

 

94,220

 

 

$

 

95,355

 

Adjustments to reconcile net income to net cash provided by operating

   activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

166,882

 

 

 

 

99,204

 

Amortization of deferred financing costs, discount and debt premium

 

 

 

13,861

 

 

 

 

3,753

 

Deferred revenue

 

 

 

(4,966

)

 

 

 

—

 

Unrealized gain on restricted investment

 

 

 

(460

)

 

 

 

—

 

Loss on early retirement of debt

 

 

 

1,204

 

 

 

 

162

 

Lease amortization

 

 

 

2,367

 

 

 

 

1,285

 

Stock compensation expense

 

 

 

15,723

 

 

 

 

9,645

 

(Gain) loss on sale or disposal of property and equipment

 

 

 

(21,668

)

 

 

 

393

 

Impairment charges

 

 

 

958

 

 

 

 

13,602

 

Provision for deferred income taxes

 

 

 

26,080

 

 

 

 

28,345

 

Loss from unconsolidated affiliates

 

 

 

2,132

 

 

 

 

116

 

Other

 

 

 

1,204

 

 

 

 

1,119

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

10,147

 

 

 

 

(441

)

Prepaid expenses and other assets

 

 

 

5,489

 

 

 

 

1,602

 

Income taxes payable

 

 

 

(30,318

)

 

 

 

4,398

 

Accounts payable and accrued other liabilities

 

 

 

(22,772

)

 

 

 

4,910

 

Net cash provided by operating activities

 

 

 

260,083

 

 

 

 

263,448

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

(135,016

)

 

 

 

(89,082

)

Sale of restricted investments

 

 

 

4,962

 

 

 

 

—

 

Proceeds from sale of businesses, property and equipment, net of cash sold

 

 

 

169,361

 

 

 

 

920

 

Net cash used in business combinations

 

 

 

—

 

 

 

 

(306,274

)

Investment in and loans to unconsolidated affiliates

 

 

 

(815

)

 

 

 

(698

)

Net cash provided by (used in) investing activities

 

 

 

38,492

 

 

 

 

(395,134

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of 6% Senior Notes due 2026

 

 

 

—

 

 

 

 

600,000

 

Payments on Term Loan

 

 

 

(70,000

)

 

 

 

—

 

Net (payments) borrowings under Revolving Credit Facility

 

 

 

(245,000

)

 

 

 

180,000

 

Debt issuance costs

 

 

 

(458

)

 

 

 

(5,401

)

Taxes paid related to net share settlement of equity awards

 

 

 

(7,574

)

 

 

 

(10,601

)

Proceeds from exercise of stock options

 

 

 

—

 

 

 

 

154

 

Payments on other long-term payables

 

 

 

(372

)

 

 

 

(501

)

Net cash (used in) provided by financing activities

 

 

 

(323,404

)

 

 

 

763,651

 

 

 

 

 

 

 

 

 

 

 

 

(Decrease) Increase in cash, cash equivalents and restricted cash

 

 

 

(24,829

)

 

 

 

631,965

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

 

246,691

 

 

 

 

147,749

 

Cash, cash equivalents and restricted cash, end of period

 

$

 

221,862

 

 

$

 

779,714

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO

   AMOUNTS REPORTED WITHIN THE CONDENSED CONSOLIDATED BALANCE SHEETS:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

208,831

 

 

$

 

164,086

 

Restricted cash

 

 

 

6,437

 

 

 

 

1,622

 

Restricted and escrow cash included in other noncurrent assets

 

 

 

6,594

 

 

 

 

614,006

 

Total cash, cash equivalents and restricted cash

 

$

 

221,862

 

 

$

 

779,714

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

 

213,719

 

 

$

 

86,964

 

Income taxes paid, net

 

 

 

43,053

 

 

 

 

3,953

 

NON-CASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Payables for capital expenditures

 

 

 

11,292

 

 

 

 

11,190

 

Nine Months Ended
September 30,
(In millions)20202019
Net cash (used in) provided by operating activities$(220)$260 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net(94)(135)
Former Caesars acquisition, net of cash acquired(6,374)0 
Acquisition of gaming rights(20)0 
Sale of restricted investments0 5 
Proceeds from sale of businesses, property and equipment, net of cash sold231 169 
Investment in unconsolidated affiliates(1)(1)
Net cash (used in) provided by investing activities(6,258)38 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt and revolving credit facilities9,765 0 
Repayments of long-term debt and revolving credit facilities(2,826)(315)
Proceeds from sale-leaseback financing arrangement3,219 0 
Financing obligation payments(49)0 
Debt issuance and extinguishment costs(356)(1)
Proceeds from issuance of common stock772 0 
Cash paid to settle convertible notes(574)0 
Taxes paid related to net share settlement of equity awards(8)(7)
Net cash (used in) provided by financing activities9,943 (323)
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Cash flows from operating activities23 0 
Cash flows from investing activities(4)0 
Net cash from discontinued operations19 0 
Increase (decrease) in cash, cash equivalents and restricted cash3,484 (25)
Cash, cash equivalents and restricted cash, beginning of period217 247 
Cash, cash equivalents and restricted cash, end of period$3,701 $222 
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO AMOUNTS REPORTED WITHIN THE CONSOLIDATED CONDENSED BALANCE SHEETS:
Cash and cash equivalents$1,037 $209 
Restricted cash2,251 6 
Restricted and escrow cash included in other assets, net413 7 
Total cash, cash equivalents and restricted cash$3,701 $222 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid$373 $214 
Income taxes paid, net19 43 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Payables for capital expenditures(44)11 
Exchange for sale-leaseback financing obligation246 0 
Shares issued to settle convertible notes235 0 
Shares issued to Former Caesars shareholders2,381 0 

The accompanying condensed notes are an integral part of these consolidated condensed financial statements.


8

ELDORADO RESORTS,
CAESARS ENTERTAINMENT, INC.

CONDENSED

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(unaudited)

Note 1. Organization and Basis of Presentation

Organization

The accompanying unaudited consolidated financial statements include the accounts of Caesars Entertainment, Inc., a Delaware corporation formerly known as Eldorado Resorts, Inc. (“ERI” or the “Company”“Eldorado”), a Nevada corporation formed in September 2013, and its consolidated subsidiaries. subsidiaries which may be referred to as the “Company,” “CEI,” “Caesars,” “we,” “our,” or “us” within these financial statements.
The Company acquired Mountaineer, Presque Isle Downsis a geographically diversified gaming and Scioto Downshospitality company thatwas founded in September 2014 pursuant1973 by the Carano family with the opening of the Eldorado Hotel Casino in Reno, Nevada. The Company partnered with MGM Resorts International to build Silver Legacy Resort Casino in Reno, Nevada in 1993 and, beginning in 2005, grew through a merger withseries of acquisitions, including the acquisition of Eldorado Shreveport in 2005, MTR Gaming Group, Inc. (“MTR Gaming”) and in November 2015 it acquired2014, Circus Circus Reno and the interests50% membership interest in the Silver Legacy that it did not own prior to such date.

On May 1, 2017, the Company completed its acquisition ofwas owned by MGM Resorts International in 2015, Isle of Capri Casinos, Inc. (“Isle” or “Isle of Capri”) in 2017 and Grand Victoria Casino (“Elgin”) and Tropicana Entertainment, Inc. (“Tropicana”) in 2018.

On July 20, 2020, the Company completed the merger with Caesars Entertainment Corporation (“Former Caesars”) pursuant to which Former Caesars became a wholly-owned subsidiary of the Agreement and Plan of Merger dated as of September 19, 2016 (“Isle Merger”Company (the “Merger”) with Isle.. As a result of the Isle Merger, Isle became a wholly-owned subsidiary of ERI.

On August 7, 2018, the Company completed its acquisitioncurrently owns, leases or manages an aggregate of 56 domestic properties in 16 states with approximately 67,200 slot machines, video lottery terminals (“VLTs”) and e-tables, approximately 3,500 table games and approximately 48,800 hotel rooms as of September 30, 2020. We also have international operations in 5 countries outside of the outstanding partnership interestsU.S. In addition, we have other domestic and international properties that are authorized to use the brands and marks of Elgin Riverboat Resort – Riverboat Casino d/b/a Grand Victoria Casino, an Illinois partnership (“Elgin”)Caesars Entertainment, Inc., the owneras well as other non-gaming properties. Upon completion of Grand Victoria Casino, located in Elgin, Illinois (the “Elgin Acquisition”). On October 1, 2018,our previously announced sales, or expected sales, of certain gaming properties, we expect to continue to own, lease or manage 51 properties. See Note 15. The Company’s primary source of revenue is generated by gaming operations, and the Company completedutilizes its acquisition of Tropicana Entertainment, Inc. (“Tropicana”),hotels, restaurants, bars, entertainment, racing, sportsbook offerings, retail shops and added 7 propertiesother services to attract customers to its portfolioproperties.

In connection with the Merger, Caesars Entertainment Corporation changed its name to “Caesars Holdings, Inc.” and Eldorado Resorts, Inc. converted into a Delaware corporation and changed its name to “Caesars Entertainment, Inc.” In addition, effective as of July 21, 2020 the Company’s ticker symbol on the NASDAQ Stock Market changed from “ERI” to “CZR”. In connection with the Merger, the Company also entered into a Master Transaction Agreement (the “Tropicana Acquisition”“MTA”).

with VICI Properties L.P., a Delaware limited partnership (“VICI”), pursuant to which, among other things, the Company agreed to consummate certain sale and leaseback transactions and amend certain lease agreements with VICI and/or its affiliates, with respect to certain property described in the MTA. See Note 2 for further discussion of the Merger and related transactions.

On January 11, 2019 and March 8, 2019, respectively, the Company closed oncompleted its sales of Presque Isle Downs & Casino (“Presque Isle Downs”Presque”) and Lady Luck Casino Nemacolin (“Nemacolin”), which are both located in Pennsylvania.

On December 6, 2019, the Company completed its sales of Mountaineer Casino, Racetrack and Resort (“Mountaineer”), Isle Casino Cape Girardeau (“Cape Girardeau”) and Lady Luck Casino Caruthersville (“Caruthersville”). Mountaineer is located in West Virginia and Cape Girardeau and Caruthersville are located in Missouri. On July 1, 2020, the Company completed the sales of Isle of Capri Casino Kansas City (“Kansas City”) and Lady Luck Casino Vicksburg (“Vicksburg”). Kansas City is located in Missouri and Vicksburg is located in Mississippi. On September 30, 2020, the Company completed the sale of Harrah’s Reno which is located in Nevada. See Note 4.

On April 24, 2020, the Company entered into a definitive purchase agreement with Twin River Worldwide Holdings, Inc. (“Twin River”) and certain of its affiliates for the sale of the equity interests of Eldorado Resort Casino Shreveport Joint Venture and Columbia Properties Tahoe, LLC, the entities that hold Eldorado Resort Casino Shreveport (“Eldorado Shreveport”) and MontBleu Casino Resort & Spa (“MontBleu”), for aggregate consideration of $155 million, subject to a working capital adjustment. The following table sets forthdefinitive agreement provides that the consummation of the sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals. Eldorado Shreveport and MontBleu are expected to close in the first quarter of 2021.

In connection with its review of the Merger, the Indiana Gaming Commission determined on July 16, 2020 that the Company is required to divest three properties within the state of Indiana in order to avoid undue economic concentrations as conditions to the Indiana Gaming Commission’s approval of the Merger.
9

On October 27, 2020, the Company entered into an agreement to sell Tropicana Evansville (“Evansville”) to GLP Capital, L.P., the operating partnership of Gaming and Leisure Properties, Inc. (“GLPI”) and Twin River for $480 million in cash, subject to a customary working capital adjustment. The sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals and is expected to close in mid-2021. In addition, the Company plans to enter into agreements to divest of Caesars Southern Indiana and Horseshoe Hammond prior to December 31, 2020.
Also on October 27, 2020, the Company’s subsidiaries, Isle of Capri Bettendorf, L.C. and IOC Black Hawk County, Inc (collectively, the “Exchanging Subsidiaries”) entered into an Exchange Agreement with GLPI pursuant to which the Exchanging Subsidiaries agreed to transfer the real estate relating to the Isle Casino & Hotels located in Bettendorf, Iowa and Waterloo, Iowa to GLPI in exchange for the real estate relating to Evansville. Following such exchange, the real estate relating to the Isle Casino & Hotels located in Bettendorf, Iowa and Waterloo, Iowa will be subject to the master lease with GLPI that we entered into in connection with the acquisition of Tropicana (the “GLPI Master Lease”).
On September 3, 2020, the Company and VICI entered into an agreement to sell Harrah’s Louisiana Downs Casino, Racing & Entertainment (“Harrah’s Louisiana Downs”) with Rubico Acquisition Corp. for $22 million, subject to a customary working capital adjustment, where the proceeds will be split between the Company and VICI. The sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals and is expected to close in the first half of 2021.
Former Caesars properties, including Harrah’s Louisiana Downs, Caesars Southern Indiana, Horseshoe Hammond, Harrah’s Reno, Caesars UK group, including Emerald Resort & Casino, and Bally’s Atlantic City, have met, or are expected to meet within a short period of time, held for sale criteria as of the date of the closing of the Merger. The sales of these properties have or are expected to close within one year from the date of the closing of the Merger and the properties are classified as discontinued operations.
Proposed Acquisition of William Hill
The Company has entered into agreements, which became effective January 29, 2019, with William Hill plc and William Hill U.S. Holdco, Inc. (“William Hill US”), its U.S. subsidiary (together, “William Hill”) which granted to William Hill the right to conduct betting activities, including operating certain information regardingof our sportsbooks, in retail channels under certain skins for online channels with respect to the Company’s current and future properties, (listedand conduct certain real money online gaming activities. The Company received a 20% ownership interest in William Hill US as well as 13.4 million ordinary shares of William Hill plc, which carry certain time restrictions on when they can be sold. See Note 6 related to the investments in William Hill. Additionally, the Company receives a profit share from the operations of sports betting and other gaming activities associated with the Company’s properties.
On September 30, 2020, the Company announced that it had reached an agreement with William Hill plc on the terms of a recommended cash acquisition pursuant to which the Company would acquire the entire issued and to be issued share capital (other than shares owned by segmentthe Company or held in treasury) of William Hill plc, in an all-cash transaction of approximately £2.9 billion, or $3.7 billion. The transaction is conditioned on, among other things, the approval of William Hill plc shareholders and receipt of required regulatory approvals. To provide liquidity to fund the cash purchase price for the proposed acquisition, the Company entered into various financing transactions. On September 25, 2020, the Company borrowed $900 million under the CEI Revolving Credit Facility (defined below), which each property is reported)was repaid subsequent to September 30, 2020. See Note 10. On September 28, 2020, the Company deposited $2.1 billion, which included the borrowings under the CEI Revolving Credit Facility, into an escrow account related to the William Hill offer. As of September 30, 2020, these funds in escrow were classified as restricted cash until certain regulatory approvals were received. In addition, on October 1, 2020, the Company raised an additional $1.9 billion through a public offering of Company Common Stock. See Note 5.
In order to manage the risk of appreciation of the GBP denominated purchase price the Company has entered into foreign exchange forward contracts. See Note 11.
In connection with the proposed acquisition of William Hill plc, on September 29, 2020, the Company entered into a debt financing commitment letter pursuant to which the lenders party thereto have committed to arrange and provide a newly formed subsidiary of the Company with (a) a £1.0 billion senior secured 540-day bridge loan facility, (b) a £116 million senior secured 540-day revolving credit facility and (c) a £503 million senior secured 60-day bridge loan facility (collectively, the “Debt Financing”). The proceeds of the Debt Financing will be used (i) to pay a portion of the cash consideration for the proposed acquisition, (ii) to refinance certain of William Hill plc's and its subsidiaries' existing debt, (iii) to pay fees and expenses related to the acquisition and related transactions and (iv) for working capital and general corporate purposes.
Pending negotiation of the loan agreement for the Debt Financing, on October 6, 2020, a newly formed subsidiary of the Company entered into a £1.5 billion Interim Facilities Agreement with Deutsche Bank AG, London Branch and JPMorgan Chase Bank, N.A. to provide: (a) a 90-day £1.0 billion interim asset sale bridge facility and (b) a 90-day £503 million interim
10

cash confirmation bridge facility, which Interim Facilities Agreement will be terminated upon the execution of the loan agreement for the Debt Financing. Upon receipt of regulatory approvals, the restriction on the $2.1 billion funded as of September 30, 2019:

Segment

Property

Date Acquired

State

West

Eldorado Resort Casino Reno ("Eldorado Reno")

(a)

Nevada

Silver Legacy Resort Casino ("Silver Legacy")

(a)

Nevada

Circus Circus Reno ("Circus Reno")

(a)

Nevada

MontBleu Casino Resort & Spa ("MontBleu")

October 1, 2018

Nevada

Tropicana Laughlin Hotel & Casino ("Laughlin")

October 1, 2018

Nevada

Isle Casino Hotel - Blackhawk ("Isle Black Hawk")

May 1, 2017

Colorado

Lady Luck Casino - Black Hawk ("Lady Luck Black Hawk")

May 1, 2017

Colorado

Midwest

Isle Casino Waterloo ("Waterloo")

May 1, 2017

Iowa

Isle Casino Bettendorf ("Bettendorf")

May 1, 2017

Iowa

Isle of Capri Casino Boonville ("Boonville")

May 1, 2017

Missouri

Isle Casino Cape Girardeau ("Cape Girardeau")

May 1, 2017 (c)

Missouri

Lady Luck Casino Caruthersville ("Caruthersville")

May 1, 2017 (c)

Missouri

Isle of Capri Casino Kansas City ("Kansas City")

May 1, 2017 (c)

Missouri

South

Isle Casino Racing Pompano Park ("Pompano")

May 1, 2017

Florida

Eldorado Resort Casino Shreveport ("Eldorado Shreveport")

(a)

Louisiana

Isle of Capri Casino Hotel Lake Charles ("Lake Charles")

May 1, 2017

Louisiana

Belle of Baton Rouge Casino & Hotel ("Baton Rouge")

October 1, 2018

Louisiana

Isle of Capri Casino Lula ("Lula")

May 1, 2017

Mississippi

Lady Luck Casino Vicksburg ("Vicksburg")

May 1, 2017 (c)

Mississippi

Trop Casino Greenville ("Greenville")

October 1, 2018

Mississippi

East (b)

Eldorado Gaming Scioto Downs ("Scioto Downs")

(a)

Ohio

Mountaineer Casino, Racetrack & Resort ("Mountaineer")

(a) (c)

West Virginia

Tropicana Casino and Resort, Atlantic City ("Trop AC")

October 1, 2018

New Jersey

Central

Grand Victoria Casino ("Elgin")

August 7, 2018

Illinois

Lumière Place Casino ("Lumière")

October 1, 2018

Missouri

Tropicana Evansville ("Evansville")

October 1, 2018

Indiana

(a)

Property was aggregated into segment prior to January 1, 2016.

2020, was released and the Company transferred $1.4 billion of cash into the Company’s operating accounts and the outstanding balance of the CEI Revolving Credit Facility was repaid in full. Approximately $598 million of cash remains in an unrestricted account.

(b)

Presque Isle Downs was sold on January 11, 2019 and Nemacolin was sold on March 8, 2019. Both properties were previously reported in the East segment.

Reclassifications

(c)

Property currently pending sale (see Note 5).


Reclassifications

Certain reclassifications of prior year presentations have been made to conform to the current period presentation.

Marketing and promotions expense previously disclosed for the three and nine months ended September 30, 2019 has been reclassified to Casino and pari-mutuel commissions expense and General and administrative expense based on the nature of the expense.

Basis of Presentation

The accompanying unaudited consolidated condensed financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by USU.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments, all of which are normal and recurring, considered necessary for a fair presentation. The results of operations for these interim periods are not necessarily indicative of the operating results for other quarters, for the full year or any future period.

The executive decision maker of ourthe Company reviews operating results, assesses performance and makes decisions on a “significant market” basis. Management views each of ourthe Company’s casinos as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, and their management and reporting structure. Prior to the ElginMerger, our principal operating activities occurred in five geographic regions and Tropicana acquisitions,reportable segments: West, Midwest, South, East and Central. Following the Merger, the Company’s principal operating activities occurredoccur in 4 geographic regions and3 regionally-focused reportable segments. Following the Elgin and Tropicana acquisitions, a fifth segment, Central, was added. The reportable segments are based on the similar characteristics of the operating segments with the way management assesses these results and allocates resources, which is a consolidated view that adjusts for the effect of certain transactions between these reportable segments within the regionsCaesars: (1) Las Vegas, (2) Regional, and (3) Managed, International, CIE, in which they operate: West, Midwest, South, East,addition to Corporate and Central. (See the table aboveOther. See Note 15 for a listing of properties included in each segment).

segment.

The presentation of financial information herein for the period after the Company’s acquisition of Former Caesars on July 20, 2020 is not fully comparable to the periods prior to our acquisitionsthe acquisition. In addition, the presentation of Elgin and Tropicana andfinancial information herein for the periods after our dispositionsthe Company’s sales of Presque Isle Downs and Nemacolin on January 11, 2019 and March 8, 2019, respectively, the Company’s sales of Mountaineer, Cape Girardeau and Caruthersville on December 6, 2019, and the Company’s sales of Kansas City and Vicksburg on July 1, 2020 are not fully comparable becauseto the results of operations for Elgin and Tropicana are not included for periods prior to August 7, 2018 and October 1, 2018, respectively. Additionally, the results of operations for Presque Isle Downs and Nemacolin are not included for periods after the sales date. The Company closed on its sales of Presque Isle Downs and Nemacolin in January 2019 and March 2019, respectively. (Seetheir respective sale dates. See Note 5).

4.

These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

2019.

Consolidation of Subsidiaries and Variable Interest Entities
Our consolidated condensed financial statements include the accounts of Caesars and its subsidiaries after elimination of all intercompany accounts and transactions.
We consolidate all subsidiaries in which we have a controlling financial interest and 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 as investments in equity securities.
We consider ourselves the primary beneficiary of a VIE when we have both the power to direct the activities that most significantly affect the results of the VIE and the right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE. We review our investments for VIE consideration if a reconsideration event occurs to determine if the investment continues to qualify as a VIE. If we determine an investment no longer qualifies as a VIE, there may be a material effect to our financial statements.
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Consolidation of Korea Joint Venture
The Company has a joint venture to acquire, develop, own, and operate a casino resort project in Incheon, South Korea (the “Korea JV”). We determined that the Korea JV is a VIE and the Company is the primary beneficiary, and therefore, we consolidate the Korea JV into our financial statements.
Recent Developments Related to COVID-19
In January 2020, an outbreak of a new strain of coronavirus (“COVID-19”) was identified and has since spread throughout much of the world, including the United States. All of the Company’s casino properties were temporarily closed for the period from mid-March 2020 through mid-May 2020 due to orders issued by various government agencies and tribal bodies as part of certain precautionary measures intended to help slow the spread of the COVID-19 public health emergency. On May 15, 2020, the Company began reopening properties and has resumed certain operations at all properties as of September 30, 2020, with the exception of The Cromwell, Planet Hollywood Resort and Casino (“Planet Hollywood”), Rio All-Suite Hotel & Casino, and Caesars Windsor. Planet Hollywood and Caesars Windsor reopened on October 8, 2020, and The Cromwell reopened on October 29, 2020. The COVID-19 public health emergency has had a material adverse effect on the Company’s business, financial condition and results of operations for the three and nine months ended September 30, 2020. The Company continued to pay its full-time employees through April 10, 2020, including tips and tokens. Effective April 11, 2020, the Company furloughed approximately 90% of its employees, implemented salary reductions and committed to continue to provide benefits to its employees through September 30, 2020. Subsequently, the benefit coverage for furloughed employees was extended indefinitely. A portion of the Company’s workforce has returned to service as the properties have resumed with limited capacities and in compliance with operating restrictions imposed by governmental or tribal orders, directives, and guidelines. Due to a triggering event resulting from the COVID-19 public health emergency, the Company recognized impairment charges related to goodwill and trade names during the nine months ended September 30, 2020. See Note 7 for details.
Due to the impact of the ongoing COVID-19 public health emergency on the Company’s results of operations, in June 2020 the Company obtained waivers on the financial covenants in its former credit facility agreement and the GLPI Master Lease. In addition, Former Caesars obtained a waiver of the financial covenant in the credit agreement by and among Caesars Resort Collection, LLC and the lenders thereunder (the “CRC Credit Agreement”). Furthermore, the Company obtained waivers from VICI in relation to annual capital expenditure requirements during the period from June 1, 2020 until December 31, 2020. See Note 10 for details.
The extent of the ongoing and future effects of the COVID-19 public health emergency on the Company’s business and the casino resort industry generally is uncertain, but the Company expects that it will continue to have a significant impact on its business, results of operations and financial condition. The extent and duration of the impact of COVID-19 will ultimately depend on future developments, including but not limited to, the duration and severity of the outbreak, restrictions on operations imposed by governmental authorities, the potential for authorities reimposing stay at home orders or additional restrictions in response to continued developments with the COVID-19 public health emergency, the Company’s ability to adapt to evolving operating procedures, the impact on consumer demand and discretionary spending, the length of time it takes for demand to return and the Company’s ability to adjust its cost structures for the duration of the outbreak’s effect on its operations.
Recently Issued Accounting Pronouncements

Pronouncements Implemented in 2019

2020

In FebruaryJune 2016 (as amended through December(modified in November 2018), the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02 codified as Accounting Standards Codification (“ASC”) 842, Leases, (“ASC 842”) which addresses the recognition and measurement of leases. Under the new guidance, for all leases, at the commencement date, lessees were required to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease. The liability is measured on a discounted basis.  Lessees also recognized a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to control the use of a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. The effective date was for annual and interim periods beginning after December 15, 2018. ASC 842 required a transition adoption election using either 1) a modified retrospective approach with periods prior to the adoption date being recast or 2) a prospective approach with a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods continuing to be reported under prior lease accounting guidance. 

The Company adopted ASC 842 on January 1, 2019 using the prospective approach, and therefore, comparative periods will continue to be reported under prior lease accounting guidance consistent with previously issued financial statements. The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which among other things, allowed us to carry forward the historical lease identification, lease classification and treatment of initial direct costs for leases entered into prior to January 1, 2019. The Company also made an accounting policy election to not record short-term leases with an initial term of 12 months or less on the balance sheet for all classes of underlying assets. The Company has also elected to not adopt the hindsight practical expedient for determining lease terms.

The Company’s operating leases, in which the Company is the lessee, are recorded on the balance sheet as a ROU asset with a corresponding lease liability. The lease liability will be remeasured each reporting period with a corresponding change to the ROU asset.  The adoption of this guidance did not have an impact on net income; however, upon adoption the Company recorded a cumulative adjustment to our retained earnings of $4.7 million, net of tax, primarily related to the Company’s lease and management agreements at its Bettendorf location. (See Note 2).  Adoption of this guidance did not have a material impact on the Company’s other financing leases.


Pronouncements to Be Implemented in Future Periods

In June 2016 (modified in November 2018), the FASB issued ASU No 2016-13, Financial Instruments – Credit Losses related to the timing of recognizing impairment losses on financial assets. The new guidance lowers the threshold on when losses are incurred, from a determination that a loss is probable to a determination that a loss is expected. The change in guidance will be applicable to our evaluation of the CRDA investments (see Note 8).  The guidance is effective for interim and annual periods beginning after December 15, 2019. Adoption of the guidance requiresrequired a modified-retrospective approach and a cumulative adjustment to retained earnings to the first reporting period that the update is effective. The Company will adoptadopted the new guidance on January 1, 2020. The Company is evaluatingAdoption of this guidance did not have a material impact on the qualitative and quantitative effects of the new guidance and currently does not expect a cumulative effect on itsCompany’s Consolidated Condensed Financial Statements.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement Thatthat is a Service Contract. This amendment 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 (and hosting arrangements that include an internal use software license). This generally means that an intangible asset is recognized for the software license and, to the extent that the payments attributable to the software license are made over time, a liability also is recognized. If a cloud computing arrangement does not include a software license, the entity should account for the arrangement as a service contract. This generally means that the
12

fees associated with the hosting element (service) of the arrangement are expensed as incurred. The amendment iswas effective for annual and interim periods beginning after December 15, 2019, with early adoption allowed.2019. The Company will adoptadopted the new guidance on January 1, 2020. Adoption of this guidance did not have a material impact on the Company’s Consolidated Condensed Financial Statements.
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. This amendment modifies the disclosure requirements for fair value measurements and was effective for annual and interim periods beginning after December 15, 2019. The Company is evaluating the qualitative and quantitative effects ofadopted the new guidance and currently doeson January 1, 2020. Adoption of this guidance did not believe it will have a significantmaterial impact on itsthe Company’s Consolidated Condensed Financial Statements.

Pronouncements To Be Implemented In Future Periods
In August 2018, the FASB issued ASU No 2018-14, Compensation –Retirement– Retirement Benefits – Defined Benefit Plans – General. This amendment improves disclosures over defined benefit plans and is effective for interim and annual periods ending after December 15, 2020 with early adoption allowed. The Company anticipates adopting this amendment during the first quarter of 2021, and currently does not expect it to have a significant impact on its Consolidated Condensed Financial Statements.

In August 2018,December 2019, the FASB issued ASU 2018-13, Disclosure Framework-Changes to2019-12, Simplifying the Disclosure RequirementsAccounting for Fair Value Measurement.Income Taxes. This amendment modifies the disclosure requirementsaccounting guidelines for fair value measurementsincome taxes and is effective for annual and interim periods beginning after December 15, 20192020 with early adoption allowed. The Company will adopt the new guidance on January 1, 2020.2021. The Company is evaluating the qualitative and quantitative effect the new guidance will have on its Consolidated Condensed Financial Statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. The amendments in this update are intended to provide relief to the companies that have contracts, hedging relationships or other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate which is expected to be discontinued because of reference rate reform. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions if certain criteria are met. The amendments in this update are effective as of March 12, 2020 and companies may elect to apply the amendments prospectively through December 31, 2022. The Company is evaluating the qualitative and quantitative effect the new guidance will have on its Consolidated Condensed Financial Statements.
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging. This update amends guidance on convertible instruments and the guidance on derivative scope exception for contracts in an entity’s own equity. The amendments for convertible instruments reduce the number of accounting models for convertible debt instruments and convertible preferred stock. In addition, the amendments provide guidance on instruments that will continue to be subject to separation models and improves disclosure for convertible instruments and guidance for earnings per share. Furthermore, the update amends guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The amendments in this update are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. These amendments should be applied on either a modified retrospective basis or a fully retrospective basis. The Company is currently assessing the effect the adoption of this standard will have on our prospective financial statements.
Note 2. Leases

Acquisition of Former Caesars

Merger with Caesars Entertainment Corporation
On July 20, 2020, the Merger was consummated and Former Caesars became a wholly-owned subsidiary of the Company. The strategic rationale for the Merger includes, but is not limited to, the following:
•Creation of the largest owner, operator and manager of domestic gaming assets
•Diversification of the Company’s management determines ifdomestic footprint
•Access to iconic brands, rewards programs and new gaming opportunities expected to enhance customer experience
•Realization of significant identified synergies
The total purchase consideration for Former Caesars was $10.9 billion. The estimated purchase consideration in the acquisition was determined with reference to its acquisition date fair value.
13

(In millions)Consideration
Cash consideration paid$6,090 
Shares issued to Former Caesars shareholders2,381 
Cash paid to retire Former Caesars debt2,356 
Other consideration paid48 
Total purchase consideration$10,875 
Based on the closing price of $38.24 per share of the Company’s common stock, par value $0.00001 per share (“Company Common Stock”), reported on NASDAQ on July 20, 2020, the aggregate implied value of the aggregate merger consideration paid to former holders of Former Caesars common stock in connection with the Merger was approximately $8.5 billion, including approximately $2.4 billion in the Company Common Stock and approximately $6.1 billion in cash. The aggregate merger consideration transferred also included approximately $2.4 billion related to the repayment of certain outstanding debt balances of Former Caesars and approximately $48 million of other consideration paid which includes $19 million related to a contract is or contains a lease at inception or modificationtransaction success fee, for the benefit of a contract. A contract is or contains a lease ifFormer Caesars, and $29 million for the contract conveysreplacement of equity awards of certain employees attributable to services provided prior to the Merger.
Pursuant to the Merger, each share of Former Caesars common stock was converted into the right to controlreceive, at the election of the holder thereof and subject to proration, approximately $12.41 of cash consideration or approximately 0.3085 shares of Company Common Stock, with a value equal to approximately $12.41 in cash (based on the volume weighted average price per share of Company Common Stock for the 10 trading days ending on July 16, 2020). Following the consummation of the Merger, stockholders of the Company and stockholders of Former Caesars held approximately 61% and 39%, respectively, of the outstanding shares of Company Common Stock.
Preliminary Purchase Price Allocation
The fair values are based on management’s analysis including preliminary work performed by third party valuation specialists, which are subject to finalization over the one-year measurement period. The purchase price accounting for Former Caesars is preliminary as it relates to determining the fair value of certain assets and liabilities, including goodwill, and is subject to change. The following table summarizes the preliminary allocation of the purchase consideration to the identifiable assets acquired and liabilities assumed of Former Caesars, with the excess recorded as goodwill as of September 30, 2020:
(In millions)Fair Value
Current and other assets$4,264 
Property and equipment12,730 
Goodwill8,649 
Intangible assets (a)
3,549 
Other noncurrent assets684 
Total assets$29,876 
Current liabilities$1,896 
Financing obligation8,134 
Long-term debt6,591 
Noncurrent liabilities2,362 
Total liabilities18,983 
Noncontrolling interests18 
Net assets acquired$10,875 
____________________
(a)Intangible assets consist of gaming licenses valued at $537 million, trade names valued at $2.1 billion and Caesars Rewards programs valued at $540 million and customer relationships of $404 million.
The fair values of the assets acquired and liabilities assumed were determined using the market, income, and cost approaches, or a combination. Valuation methodologies under both a market and income approach used for the identifiable net assets acquired in the Former Caesars acquisition make use of Level 3 inputs, such as expected cash flows and projected financial results. The market approach indicates value for a subject asset based on available market pricing for comparable assets.
14

Trade receivables and payables and other current and liabilities were valued at the existing carrying values as they represented the estimated fair value of those items at the Former Caesars acquisition date. Assets and liabilities held for sale are recorded at fair value, less costs to sell, based on the agreements reached as of the acquisition date, or an income approach.
Certain financial assets acquired were determined to have experienced more than insignificant deterioration of credit quality since origination. A reconciliation of the difference between the purchase price of financial assets, including acquired markers, and the face value of the assets is as follows:
(In millions)
Purchase price of financial assets$95 
Allowance for credit losses at the acquisition date based on the acquirer’s assessment89 
Discount / (premium) attributable to other factors2 
Face value of financial assets$186 
The fair value of land was determined using the sales comparable approach. The market data is then adjusted for any significant differences, to the extent known, between the identified comparable sites and the site being valued. The value of building and site improvements was estimated via the income approach. Other personal property assets such as furniture, gaming and computer equipment, fixtures, computer software, and restaurant equipment were valued using the cost approach which is based on replacement or reproduction costs of the asset. The cost approach is an estimation of fair value developed by computing the current cost of replacing a property and subtracting any depreciation resulting from one or more of the following factors: physical deterioration, functional obsolescence, and/or economic obsolescence.
Non-amortizing intangible assets acquired primarily include trademarks, Caesars Rewards and gaming rights. The fair value for these intangible assets was determined using either the relief from royalty method and excess earnings method under the income approach or a replacement cost market approach.
Trademarks and Caesars Rewards were valued using the relief from royalty method, which presumes that without ownership of such trademarks or loyalty program, the Company would have to make a stream of payments to a brand or franchise owner in return for the right to use their name or program. By virtue of this asset, the Company avoids any such payments and records the related intangible value of the Company’s ownership of the brand name or program. The acquired Trademarks, including Caesars Rewards are indefinite lived intangible assets.
Customer relationships are valued using an income approach, comparing the prospective cash flows with and without the customer relationships in place to estimate the fair value of the customer relationships, with the fair value assumed to be equal to the discounted cash flows of the business that would be lost if the customer relationships were not in place and needed to be replaced. We estimate the useful life of these customer relationships to be approximately 7 years.
Gaming rights include our gaming licenses in various jurisdictions and may have indefinite lives or an estimated useful life. The fair value of the gaming rights was determined using the excess earnings or replacement cost methodology, based on whether the license resides in gaming jurisdictions where competition is limited to a specified number of licensed gaming operators. The excess earnings methodology is an income approach methodology that estimates the projected cash flows of the business attributable to the gaming license intangible asset, which is net of charges for the use of an identified asset for a period of time in exchange for consideration. Control over the useother identifiable assets of the identified asset means the lessee has both (a) the right to obtain substantially allbusiness including working capital, fixed assets and other intangible assets. The replacement cost of the economic benefitsgaming license was used as an indicator of fair value. The acquired gaming rights have indefinite lives, with the exception of one jurisdiction in which we estimate the useful life of the license to be approximately 34 years.
Goodwill is the result of expected synergies from the useoperations of the assetcombined company and (b) the rightassembled workforce of Former Caesars. The goodwill acquired will not generate amortization deductions for income tax purposes. Pushdown accounting, including the allocation of goodwill to direct the useour reportable segments, is not complete.
The fair value of long-term debt has been calculated based on market quotes. The fair value of the asset.

Finance and operating lease ROU assets and liabilities are recognized based onfinancing obligations were calculated as the net present value of future minimum leaseboth the fixed base rent payments overand the forecasted variable payments plus the expected lease termresidual value of the land and building returned at commencement date. As the implicit rateend of the expected usage period.

The Company recognized acquisition-related transaction costs of $107 million and $129 million for the three and nine months ended September 30, 2020, respectively, and $13 million and $17 million for the three and nine months ended September 30, 2019, respectively. These costs were associated with legal, IT costs, internal labor and professional services and were recognized as Transaction costs and other operating costs in our Consolidated Statements of Comprehensive (Loss) Income.
15

For the period of July 20, 2020 through September 30, 2020, Former Caesars generated net revenues of $924 million and net loss of $564 million.
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information is presented to illustrate the estimated effects of the acquisition of Former Caesars as if it had occurred on January 1, 2019. The pro forma amounts include the historical operating results of the Company and Former Caesars prior to the acquisition, with adjustments directly attributable to the acquisition. The pro forma results include adjustments and consequential tax effects to reflect incremental depreciation and amortization expense to be incurred based on preliminary fair values of the identifiable property and equipment and intangible assets acquired, the incremental interest expense associated with the issuance of debt to finance the acquisition and the adjustments to exclude acquisition related costs incurred during the three and nine months ended September 30, 2020 and to recognize these costs during the nine months ended September 30, 2019 as if incurred in the first quarter of 2019. The unaudited pro forma financial information is not determinable in mostnecessarily indicative of what the consolidated results of operations of the Company’s leases, management uses the Company’s incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. The expected lease terms include options to extend or terminate the lease whencombined company were, nor does it is reasonably certain the Company will exercise such options. Lease expense for operating leases with minimum lease payments is recognized on a straight-line basis overreflect the expected lease term.

The Company’s lease arrangements have lease and non-lease components. For leases in which the Company is the lessee, the Company accounts for the lease components and non-lease components as a single lease component for all classesrealization of underlying assets. Leases, in which the Company is the lessor, are substantially all accounted for as operating leases and the lease components and non-lease components are accounted for separately, which is consistentany synergies or cost savings associated with the Company’s historical accounting. Leases with an expected or initial term of 12 months or less are not accounted for on the balance sheet and the related lease expense is recognized on a straight-line basis over the expected lease term.

acquisition.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2020201920202019
Net revenues$1,639 $2,607 $4,145 $7,652 
Net loss(989)(363)(2,266)(894)
Net loss attributable to Caesars(927)(362)(2,200)(892)

The Company has operating and finance leases for various real estate and equipment. Certain of the Company’s lease agreements include rental payments based on a percentage of sales over specified contractual amounts, rental payments adjusted periodically for inflation and rental payments based on usage. The Company’s leases include options to extend the lease term one month to 60 years. Except for the GLPI Master Lease (see Note 10), the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Leases recorded on the balance sheet consist of the following (in thousands):

Leases

Classification on the Balance Sheet

September 30, 2019

ASSETS

Operating lease ROU assets

$

245,344

Finance lease ROU assets

Property and equipment, net(1)

$

646,353

LIABILITIES

Current:

Operating

$

21,963

Finance

Current portion of long-term debt

$

133

Noncurrent:

Operating

$

229,297

Finance

Long-term financing obligation and debt

$

968,138

(1)

Finance lease ROU assets are recorded net of accumulated depreciation of $12.4 million as of September 30, 2019.

Other information related to lease terms and discount rates are as follows:

September 30, 2019

Weighted Average Remaining Lease Term

Operating leases

34.1 years

Finance leases

34.0 years

Weighted Average Discount Rate

Operating leases(1)

7.2%

Finance leases

10.2%

(1)

Upon adoption of the new lease standard, discount rates used for existing operating leases were established on January 1, 2019.

The components of lease expense are as follows (in thousands):

Three Months Ended

 

Nine Months Ended

 

 

September 30, 2019

 

September 30, 2019

 

Operating lease cost:

 

 

 

 

 

 

 

 

 

 

Operating lease cost

$

 

 

7,674

 

$

 

 

22,729

 

Short-term and variable lease cost

 

 

 

1,573

 

 

 

 

5,211

 

Finance lease cost:

 

 

 

 

 

 

 

 

 

 

Interest expense on lease liabilities

 

 

 

24,696

 

 

 

 

73,931

 

Amortization of ROU assets

 

 

 

2,628

 

 

 

 

7,766

 

Total lease cost

$

 

 

36,571

 

$

 

 

109,637

 

Supplemental cash flow information related to leases is as follows (in thousands):

Nine Months Ended

September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

$

19,382

Operating cash flows for finance leases

$

65,785


Maturities of lease liabilities are summarized as follows (in thousands):

 

Operating Leases

 

 

Finance Leases

 

Year ending December 31,

 

 

 

 

 

 

 

 

 

 

2019 (excluding the nine months ended September 30, 2019)

 

$

 

8,462

 

 

$

 

22,314

 

2020

 

 

 

19,666

 

 

 

 

89,246

 

2021

 

 

 

20,786

 

 

 

 

90,463

 

2022

 

 

 

19,784

 

 

 

 

91,756

 

2023

 

 

 

19,823

 

 

 

 

92,990

 

Thereafter

 

 

 

821,046

 

 

 

 

3,506,672

 

Total future minimum lease payments

 

 

 

909,567

 

 

 

 

3,893,441

 

Less: amount representing interest

 

 

 

(658,307

)

 

 

 

(3,345,270

)

Present value of future minimum lease payments

 

 

 

251,260

 

 

 

 

548,171

 

Less: current lease obligations

 

 

 

(21,963

)

 

 

 

(133

)

Plus: residual values - GLPI

 

 

 

—

 

 

 

 

420,100

 

Long-term lease obligations

 

$

 

229,297

 

 

$

 

968,138

 

Note 3. Revenue Recognition

The Company recognizes as casino revenue the net win from gaming activities, which is the difference between gaming wins and losses, not the total amount wagered. Progressive jackpots are accrued and charged to revenue at the time the obligation to pay the jackpot is established. Gaming revenues are recognized net of certain cash and free play incentives. Pari-mutuel commissions consist of commissions earned from thoroughbred and harness racing and importing of simulcast signals from other race tracks and are recognized at the time wagers are made. Such commissions are a designated portion of the wagering handle as determined by state racing commissions and are shown net of the taxes assessed by state and local agencies, as well as purses and other contractual amounts paid to horsemen associations. The Company recognizes revenues from fees earned through the exporting of simulcast signals to other race tracks at the time wagers are made, andwhich are recorded on a gross basis. Such fees are based upon a predetermined percentage of handle as contracted with the other race tracks.

Hotel, food and beverage services have been determined to be separate, stand-alone performance obligations and are recorded as revenue as the good or service is transferred to the customer over the customer’s stay at the hotel or when the delivery is made for the food and beverage. Advance deposits for future hotel occupancy, convention space or food and beverage services contracts are recorded as deferred income until the revenue recognition criteria has been met. The Company also provides goods and services that may include multiple performance obligations, such as for packages, for which revenues are allocated on a pro rata basis based on each service's stand-alone selling price.

The Company offers programs at its properties whereby participating customers can accumulate points for wagering that can be redeemed for credits for free play on slot machines, lodging, food and beverage, merchandise and, in limited situations, cash. The incentives earned by customers under these programs are based on previous revenue transactions and represent separate performance obligations. Points earned, less estimated breakage, are recorded as a reduction of casino revenues at the standalone selling price of the points when earned based upon the retail value of the benefits, historical redemption rates and estimated breakage and recognized as departmental revenue based on where such points are redeemed upon fulfillment of the performance obligation. The player loyalty program liability represents a deferral of revenue until redemption occurs, which is typically less than one year.

The Company offers discretionary coupons and other discretionary complimentaries to customers outside of the player loyalty program. The retail value of complimentary food, beverage, hotel rooms and other services provided to customers is recognized as a reduction to the revenues for the department which issued the complimentary and a credit to the revenue for the department redeemed. Complimentaries provided by third parties at the discretion and under the control of the Company is recorded as an expense when incurred.


The Company’s consolidated condensed statement of operations presents net revenue disaggregated by type or nature of the good or service (i.e., casino, pari-mutuel, food and beverage, hotel and other, including revenues associated with the Company’s interests in William Hill and The Stars Group Inc. (“TSG”)).service. A summary of net revenues disaggregated by type of revenue and reportable segment is presented below (amounts in thousands).below. We recast previously reported segment amounts to conform to the way management assesses results and allocates resources for the current year. Refer to NotesNote 1 and 16Note 15 for additional information on the Company’s reportable segments.

 

Three Months Ended September 30, 2019

 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Central

 

 

Corporate

and Other

 

 

Total

 

Three Months Ended September 30, 2020

Casino

 

$

 

62,081

 

 

$

 

84,249

 

 

$

 

87,331

 

 

$

 

129,244

 

 

$

 

95,095

 

 

$

 

—

 

 

$

 

458,000

 

(In millions)(In millions)Las VegasRegionalManaged, International & CIECorporate
and Other		Total
Casino and pari-mutuel commissionsCasino and pari-mutuel commissions$122 $774 $23 $0 $919 

Food and beverage

 

 

32,897

 

 

 

5,570

 

 

 

12,049

 

 

 

 

16,280

 

 

 

 

11,639

 

 

 

 

—

 

 

 

 

78,435

 

Food and beverage52 72 1 0 125 

Hotel

 

 

41,352

 

 

 

4,240

 

 

 

6,647

 

 

 

 

33,039

 

 

 

 

9,040

 

 

 

 

—

 

 

 

 

94,318

 

Hotel79 121 0 0 200 

Other

 

 

 

15,088

 

 

 

 

1,807

 

 

 

 

1,990

 

 

 

 

7,999

 

 

 

 

3,636

 

 

 

 

1,908

 

 

 

 

32,428

 

Other51 33 45 4 133 

Net revenues

 

$

 

151,418

 

 

$

 

95,866

 

 

$

 

108,017

 

 

$

 

186,562

 

 

$

 

119,410

 

 

$

 

1,908

 

 

$

 

663,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2018

 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Central

 

 

Corporate

and Other

 

 

Total

 

Casino

 

$

 

60,912

 

 

$

 

86,331

 

 

$

 

86,153

 

 

$

 

113,075

 

 

$

 

21,698

 

 

$

 

—

 

 

$

 

368,169

 

Food and beverage

 

 

27,502

 

 

 

6,867

 

 

 

12,492

 

 

 

 

9,359

 

 

 

 

1,933

 

 

 

 

—

 

 

 

 

58,153

 

Hotel

 

 

31,583

 

 

 

4,720

 

 

 

6,169

 

 

 

 

2,308

 

 

 

 

—

 

 

 

 

—

 

 

 

 

44,780

 

Other

 

 

 

9,095

 

 

 

 

1,916

 

 

 

 

1,755

 

 

 

 

2,980

 

 

 

 

266

 

 

 

 

139

 

 

 

 

16,151

 

Net revenues

 

$

 

129,092

 

 

$

 

99,834

 

 

$

 

106,569

 

 

$

 

127,722

 

 

$

 

23,897

 

 

$

 

139

 

 

$

 

487,253

 

Net revenues$304 $1,000 $69 $4 $1,377 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2019

 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Central

 

 

Corporate

and Other

 

 

Total

 

Casino

 

$

 

170,980

 

 

$

 

254,641

 

 

$

 

291,552

 

 

$

 

378,246

 

 

$

 

290,429

 

 

$

 

—

 

 

$

 

1,385,848

 

Food and beverage

 

 

90,084

 

 

 

17,553

 

 

 

39,815

 

 

 

 

45,960

 

 

 

 

35,660

 

 

 

 

—

 

 

 

 

229,072

 

Hotel

 

 

102,804

 

 

 

11,962

 

 

 

19,822

 

 

 

 

77,372

 

 

 

 

25,533

 

 

 

 

—

 

 

 

 

237,493

 

Other

 

 

 

33,373

 

 

 

 

5,734

 

 

 

 

6,480

 

 

 

 

21,671

 

 

 

 

11,053

 

 

 

 

5,401

 

 

 

 

83,712

 

Net revenues

 

$

 

397,241

 

 

$

 

289,890

 

 

$

 

357,669

 

 

$

 

523,249

 

 

$

 

362,675

 

 

$

 

5,401

 

 

$

 

1,936,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2018

 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Central

 

 

Corporate

and Other

 

 

Total

 

Casino

 

$

 

168,342

 

 

$

 

262,138

 

 

$

 

278,655

 

 

$

 

329,584

 

 

$

 

21,698

 

 

$

 

—

 

 

$

 

1,060,417

 

Food and beverage

 

 

76,524

 

 

 

20,527

 

 

 

38,936

 

 

 

 

26,724

 

 

 

 

1,933

 

 

 

 

—

 

 

 

 

164,644

 

Hotel

 

 

77,234

 

 

 

12,775

 

 

 

18,462

 

 

 

 

5,976

 

 

 

 

—

 

 

 

 

—

 

 

 

 

114,447

 

Other

 

 

 

24,450

 

 

 

 

5,795

 

 

 

 

5,559

 

 

 

 

8,292

 

 

 

 

266

 

 

 

 

377

 

 

 

 

44,739

 

Net revenues

 

$

 

346,550

 

 

$

 

301,235

 

 

$

 

341,612

 

 

$

 

370,576

 

 

$

 

23,897

 

 

$

 

377

 

 

$

 

1,384,247

 

Three Months Ended September 30, 2019
(In millions)Las VegasRegionalManaged, International & CIECorporate
and Other		Total
Casino and pari-mutuel commissions$0 $458 $0 $0 $458 
Food and beverage0 78 0 0 78 
Hotel0 94 0 0 94 
Other0 31 0 2 33 
Net revenues$0 $661 $0 $2 $663 
16

Nine Months Ended September 30, 2020
(In millions)Las VegasRegionalManaged, International & CIECorporate
and Other		Total
Casino and pari-mutuel commissions$122 $1,215 $23 $0 $1,360 
Food and beverage52 135 1 0 188 
Hotel79 178 0 0 257 
Other51 68 45 8 172 
Net revenues$304 $1,596 $69 $8 $1,977 
Nine Months Ended September 30, 2019
(In millions)Las VegasRegionalManaged, International & CIECorporate
and Other		Total
Casino and pari-mutuel commissions$0 $1,386 $0 $0 $1,386 
Food and beverage0 229 0 0 229 
Hotel0 237 0 0 237 
Other0 78 0 6 84 
Net revenues$0 $1,930 $0 $6 $1,936 

Accounts receivable, net include the following amounts:
Balance Sheet as of
(In millions)September 30, 2020December 31, 2019
Casino and pari-mutuel commissions$121 $16 
Food and beverage and hotel27 17 
Other237 21 
Accounts receivable, net$385 $54 
Contract and Contract Related Liabilities

The Company records contract or contract-related liabilities related to differences between the timing of cash receipts from the customer and the recognition of revenue. The Company generally has three types of liabilities related to contracts with customers: (1) outstanding chip liability, which represents the amounts owed in exchange for gaming chips held by a customer,(2) player loyalty program obligations, subsequently combined as Caesars Rewards, which represents the deferred allocation of revenue relating to reward credits granted to Caesars Rewards members based on on-property spending, including gaming, hotel, dining, retail shopping, and player loyalty program incentives earned, as discussed above, and (3) customer deposits and other deferred revenue, which is primarily funds deposited by customers related to gaming play, advance payments onreceived for goods and services yet to be provided (such as advance ticket sales, and deposits on rooms and convention space or for unpaid wagers), and deferred revenues associated with the Company’s existing interests in William Hill and TSG (see Note 7 and Note 8)6). Except for deferred revenues related to William Hill, and TSG, these liabilities are generally expected to be recognized as revenue within one year of being purchased, earned, or deposited and are recorded within “Accruedaccrued other liabilities”liabilities on the Company’s Consolidated Condensed Balance Sheets.


The following table summarizes the activity related to contract and contract-related liabilities (in thousands):

liabilities:

 

Outstanding Chip Liability

 

 

Player Loyalty Liability

 

 

Customer Deposits and Other

Deferred Revenue

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Outstanding Chip LiabilityCaesars RewardsCustomer Deposits and Other
Deferred Revenue
(In millions)(In millions)202020192020201920202019

Balance at January 1

 

$

 

8,930

 

 

$

 

4,743

 

 

$

 

17,639

 

 

$

 

11,752

 

 

$

 

27,588

 

 

$

 

5,487

 

Balance at January 1$10 $9 $13 $18 $172 $28 

Balance at September 30

 

 

 

8,494

 

 

 

 

5,481

 

 

 

 

14,122

 

 

 

 

11,189

 

 

 

 

172,631

 

 

 

 

4,764

 

Balance at September 3028 8 106 14 270 173 

Increase / (decrease)

 

$

 

(436

)

 

$

 

738

 

 

$

 

(3,517

)

 

$

 

(563

)

 

$

 

145,043

 

 

$

 

(723

)

Increase / (decrease)$18 $(1)$93 $(4)$98 $145 

The September 30, 20192020 balances exclude liabilities related to assets held for sale recorded in 2020 and 2019 (see Note 5)4). The significant change in contract and contract-related liabilities during the nine months ended September 30, 2020 was primarily due to the liabilities assumed subsequent to the Merger with Former Caesars. The significant change in customer deposits and
17

other deferred revenue during the nine months ended September 30, 2019 iswas primarily attributed to the initial recognition of the Company’s interests in William Hill, which is recorded in other long-term liabilities on the Consolidated Condensed Balance Sheets (see Note 7)6).

Note 4. Purchase Price Accounting and Pro Forma Information

Tropicana

Acquisition Summary

On April 15, 2018, the Company announced that it had entered into a definitive agreement to acquire Tropicana in a cash transaction valued at $1.9 billion. At the closing of the transaction on October 1, 2018, a subsidiary of the Company merged into Tropicana and Tropicana became a wholly-owned subsidiary of the Company. Immediately prior to the merger, Tropicana sold Tropicana Aruba Resort and Casino and Gaming and Leisure Properties, Inc. (“GLPI”) acquired substantially all of Tropicana’s real estate, other than the real estate underlying MontBleu and Lumière, for approximately $964 million. The Company acquired Tropicana’s operations and certain real estate for $927.3 million. Substantially concurrently with the acquisition of the real estate portfolio by GLPI, the Company also entered into a triple net master lease with GLPI (the “Master Lease”) (see Note 10). The Company funded the purchase of the real estate underlying Lumière with the proceeds of a $246 million loan (see Note 11) and funded the remaining consideration payable with cash on hand at the Company and Tropicana, borrowings under the Company’s revolving credit facility and proceeds from the Company’s offering of $600 million in aggregate principal amount of 6% senior notes due 2026.

Transaction expenses related to the Tropicana Acquisition totaled $0.8 million and $2.0 million for the three months ended September 30, 2019 and 2018, respectively, and $3.3 million and $5.5 million for the nine months ended September 30, 2019 and 2018, respectively.

Final Purchase Price Accounting - Tropicana

The total purchase consideration for the Tropicana Acquisition was $927.3 million. The purchase consideration in the acquisition was determined with reference to its acquisition date fair value.

Purchase consideration calculation (dollars in thousands)

Cash consideration paid

$

640,000

Lumière Loan

246,000

Cash paid to retire Tropicana's long-term debt

35,000

ERI portion of taxes due

6,333

Purchase consideration

$

927,333


The fair values are based on management’s analysis including work performed by third party valuation specialists. The following table summarizes the final allocation of the purchase consideration to the identifiable assets acquired and liabilities assumed of Tropicana, with the excess recorded as goodwill as of September 30, 2019 (dollars in thousands):  

Current and other assets

$

178,581

Property and equipment

436,416

Property subject to the financing obligation

957,300

Goodwill

211,232

Intangible assets (i)

247,976

Other noncurrent assets

54,570

Total assets

2,086,075

Current liabilities

(174,847

)

Financing obligation to GLPI

(957,300

)

Noncurrent liabilities

(26,595

)

Total liabilities

(1,158,742

)

Net assets acquired

$

927,333

(i)

Intangible assets consist of gaming licenses valued at $124.9 million, trade names valued at $67.1 million and player loyalty programs valued at $55.9 million.

During the three months ended September 30, 2019, the Company finalized its valuation procedures and adjusted the Tropicana preliminary purchase price accounting, as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2018, to their final values. The net impact of these changes was a $9.3 million decrease to goodwill. Changes included a $16.3 million increase to other noncurrent assets primarily related to certain long-term receivables offset by $7.0 million of other immaterial changes to liabilities.

Valuation methodologies under both a market and income approach used for the identifiable net assets acquired in the Tropicana Acquisition make use of Level 3 inputs including discounted cash flows.

Trade receivables and payables, inventories and other current and noncurrent assets and liabilities were valued at the existing carrying values as they represented the estimated fair value of those items at the Tropicana Acquisition date.

The fair value of land (excluding the real property acquired by GLPI) was determined using the market approach, which arrives at an indication of value by comparing the site being valued to sites that have been recently acquired in arm’s-length transactions. The market data is then adjusted for any significant differences, to the extent known, between the identified comparable sites and the site being valued. Building and site improvements were valued under the cost approach using a direct cost model built on estimates of replacement cost. Personal property assets with an active and identifiable secondary market such as riverboats, gaming equipment, computer equipment and vehicles were valued using the market approach. Other personal property assets such as furniture, fixtures, computer software, and restaurant equipment were valued using the cost approach which is based on replacement or reproduction costs of the asset. The cost approach is an estimation of fair value developed by computing the current cost of replacing a property and subtracting any depreciation resulting from one or more of the following factors: physical deterioration, functional obsolescence, and/or economic obsolescence. The income approach incorporates all tangible and intangible property and served as a ceiling for the fair values of the acquired assets of the ongoing business enterprise, while still taking into account the premise of highest and best use. In the instance where the business enterprise value developed via the income approach was exceeded by the initial fair values of the underlying assets, an adjustment to reflect economic obsolescence was made to the tangible assets on a pro rata basis to reflect the contributory value of each individual asset to the enterprise as a whole.

The real estate assets that were sold to GLPI and leased back by the Company were adjusted to fair value concurrently with the acquisition of Tropicana. The fair value of the properties was determined utilizing the direct capitalization method of the income approach. In allocating the fair value to the underlying acquired assets, a fair value for the buildings and improvements was determined using the above mentioned cost approach method. To determine the underlying land value, the extraction method was applied wherein the fair value of the building and improvements was deducted from the fair value of the property as derived from the direct capitalization approach to determine the fair value of the land. The fair value of GLPI’s real estate assets was determined to be $957.3 million.


The fair value of the gaming licenses was determined using the multi period excess earnings or replacement cost methodology, based on whether the license resides in gaming jurisdictions where competition is limited to a specified number of licensed gaming operators. The excess earnings methodology is an income approach methodology that estimates the projected cash flows of the business attributable to the gaming license intangible asset, which is net of charges for the use of other identifiable assets of the business including working capital, fixed assets and other intangible assets. Under the respective state’s gaming legislation, the property specific licenses can only be acquired if a theoretical buyer were to acquire each existing facility. The existing licenses could not be acquired and used for a different facility. The properties’ estimated future cash flows were the primary assumption in the respective valuations. Cash flow estimates included net gaming revenue, gaming operating expenses, general and administrative expenses, and tax expense. The replacement cost methodology is a cost approach methodology based on replacement or reproduction cost of the gaming license as an indicator of fair value.

The Company has assigned an indefinite useful life to the gaming licenses, in accordance with its review of the applicable guidance of ASC 350. The Company considered, among other things, the expected use of the asset, the expected useful life of other related assets or asset groups, any legal, regulatory, or contractual provisions that may limit the useful life, the Company’s own historical experience in renewing similar arrangements, the effects of obsolescence, demand and other economic factors, and the maintenance expenditures required to obtain the expected cash flows. The Company determined that no legal, regulatory, contractual, competitive, economic or other factors limit the useful lives of these intangible assets. Tropicana had licenses in New Jersey, Missouri, Mississippi, Nevada, Indiana, and Louisiana. The renewal of each state’s gaming license depends on a number of factors, including payment of certain fees and taxes, providing certain information to the state’s gaming regulator, and meeting certain inspection requirements. However, the Company’s historical experience has not indicated, nor does the Company expect, any limitations regarding its ability to continue to renew each license. No other competitive, contractual, or economic factor limits the useful lives of these assets. Accordingly, the Company has concluded that the useful lives of these licenses are indefinite.

Trade names were valued using the relief from royalty method, which presumes that without ownership of such trademarks, the Company would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, the Company avoids any such payments and records the related intangible value of the Company’s ownership of the brand name. The primary assumptions in the valuation included revenue, pre-tax royalty rate, and tax expense. The Company has assigned an indefinite useful life to the trade names after considering, among other things, the expected use of the asset, the expected useful life of other related assets or asset groups, any legal, regulatory, or contractual provisions that may limit the useful life, the Company’s own historical experience in renewing similar arrangements, the effects of obsolescence, demand and other economic factors, and the maintenance expenditures required to obtain the expected cash flows. In that analysis, the Company determined that no legal, regulatory, contractual, competitive, economic or other factors limit the useful lives of these intangible assets.

Player loyalty programs were valued using the cost approach and the incremental cash flow method under the income approach. The incremental cash flow method is used to estimate the fair value of an intangible asset based on a residual cash flow notion. This method measures the benefits (e.g., cash flows) derived from ownership of an acquired intangible asset as if it were in place, as compared to the acquirer’s expected cash flows as if the intangible asset were not in place (i.e., with-and-without). The residual or net cash flows of the two models is ascribable to the intangible asset. The Company has estimated a 3-year useful life on the player loyalty programs.

Goodwill is the result of expected synergies from combining operations of the acquired and acquirer. The goodwill acquired is fully amortizable for tax purposes.

For the period from January 1, 2019 through September 30, 2019, Tropicana generated net revenues of $643.8 million and net income of $14.7 million.

Elgin

Acquisition Summary

On August 7, 2018, the Company completed its acquisition of one hundred percent of the partnership interests in Elgin. As a result of the Elgin Acquisition, Elgin became an indirect wholly-owned subsidiary of the Company. The Company purchased Elgin for $327.5 million plus a $1.3 million working capital adjustment. The Elgin Acquisition was financed using cash on hand and borrowings under the Company’s revolving credit facility.


Transaction expenses related to the Elgin Acquisition totaled $0.1 million and $2.1 million for the three months ended September 30, 2019 and 2018, respectively and $0.1 million and $3.4 million for the nine months ended September 30, 2019 and 2018, respectively.

Final Purchase Price Accounting – Elgin

The total purchase consideration for the Elgin Acquisition was $328.8 million. The purchase consideration in the acquisition was determined with reference to its acquisition date fair value.

Purchase consideration calculation (dollars in thousands)

Cash consideration paid

$

327,500

Working capital and other adjustments

1,304

Purchase consideration

$

328,804

The fair values are based on management’s analysis including work performed by third party valuation specialists. No changes were recorded during the nine months ended September 30, 2019.  The following table summarizes the allocation of the purchase consideration to the identifiable assets acquired and liabilities assumed of Elgin, with the excess recorded as goodwill as of September 30, 2019 (dollars in thousands):

Cash and cash equivalents

$

25,349

Property and equipment

60,792

Goodwill

59,774

Intangible assets (i)

205,296

Other noncurrent assets

915

Total assets

352,126

Current liabilities

(21,572

)

Noncurrent liabilities

(1,750

)

Total liabilities

(23,322

)

Net assets acquired

$

328,804

(i)

Intangible assets consist of gaming license valued at $163.9 million, trade names valued at $12.6 million and player relationships valued at $28.8 million.

Valuation methodologies under both a market and income approach used for the identifiable net assets acquired in the Elgin Acquisition made use of Level 3 inputs including discounted cash flows.

Trade receivables and payables, inventories and other current and noncurrent assets and liabilities were valued at the existing carrying values as they represented the estimated fair value of those items at the Elgin Acquisition date.

The fair value of land was determined using the market approach, which arrives at an indication of value by comparing the site being valued to sites that have been recently acquired in arm’s-length transactions. The market data is then adjusted for any significant differences, to the extent known, between the identified comparable sites and the site being valued. Building and site improvements were valued under the cost approach using a direct cost model built on estimates of replacement cost. Personal property assets with an active and identifiable secondary market such as riverboats, gaming equipment, computer equipment and vehicles were valued using the market approach. Other personal property assets such as furniture, fixtures, computer software, and restaurant equipment were valued using the cost approach which is based on replacement or reproduction costs of the asset.

The cost approach is an estimation of fair value developed by computing the current cost of replacing a property and subtracting any depreciation resulting from one or more of the following factors: physical deterioration, functional obsolescence, and/or economic obsolescence. The income approach incorporates all tangible and intangible property and served as a ceiling for the fair values of the acquired assets of the ongoing business enterprise, while still taking into account the premise of highest and best use.


The Company has assigned an indefinite useful life to the gaming licenses, in accordance with its review of the applicable guidance of ASC 350. The fair value of the gaming license was determined using the multi period excess earnings method. The excess earnings methodology, which is an income approach methodology that allocates the projected cash flows of the business to the gaming license intangible assets less charges for the use of other identifiable assets of Elgin including working capital, fixed assets and other intangible assets. This methodology was considered appropriate as the gaming license is the primary asset of Elgin. The property’s estimated future cash flows were the primary assumption in the respective valuations. Cash flow estimates included net gaming revenue, gaming operating expenses, general and administrative expenses, and tax expense. The renewal of the gaming license depends on a number of factors, including payment of certain fees and taxes, providing certain information to the state’s gaming regulator, and meeting certain inspection requirements. However, the Company’s historical experience has not indicated, nor does the Company expect, any limitations regarding its ability to continue to renew the license. No other competitive, contractual, or economic factor limits the useful lives of this asset. Accordingly, the Company has concluded that the useful life of this license is indefinite.

The player loyalty program was valued using the cost approach and the incremental cash flow method under the income approach. The incremental cash flow method is used to estimate the fair value of an intangible asset based on a residual cash flow notion. This method measures the benefits (e.g., cash flows) derived from ownership of an acquired intangible asset as if it were in place, as compared to the acquirer’s expected cash flows as if the intangible asset were not in place (i.e., with-and-without). The residual or net cash flows of the two models is ascribable to the intangible asset. The Company has estimated a 4-year useful life on the player loyalty programs.

The trade name was valued using the relief‑from‑royalty method. The primary assumptions in the valuation included revenue, pre-tax royalty rate, and tax expense. The Company has assigned the trade name an indefinite useful life after considering, among other things, the expected use of the asset, the expected useful life of other related assets or asset groups, any legal, regulatory, or contractual provisions that may limit the useful life, the Company’s own historical experience in renewing similar arrangements, the effects of obsolescence, demand and other economic factors, and the maintenance expenditures required to obtain the expected cash flows. In that analysis, the Company determined that no legal, regulatory, contractual, competitive, economic or other factors limit the useful lives of these intangible assets.

Goodwill is the result of expected synergies from combining operations of the acquired and acquirer. The goodwill acquired is fully amortizable for tax purposes.

For the period from January 1, 2019 through September 30, 2019, Elgin generated net revenues of $115.7 million and net income of $17.4 million.

Unaudited Pro Forma Information

Tropicana

The following unaudited pro forma information presents the results of operations of the Company for the nine months ended September 30, 2018, as if only the Tropicana Acquisition had occurred on January 1, 2017 (in thousands).

Nine Months Ended

September 30, 2018

Net operating revenues

$

2,063,604

Net income

78,730

These pro forma results do not necessarily represent the results of operations that would have been achieved if the acquisition had taken place on January 1, 2017, nor are they indicative of the results of operations for future periods. The pro forma amounts include the historical operating results of the Company and Tropicana prior to the Tropicana Acquisition with adjustments directly attributable to the Tropicana Acquisition.

Elgin

The following unaudited pro forma information presents the results of operations of the Company for the nine months ended September 30, 2018, as if only the Elgin Acquisition had occurred on January 1, 2017 (in thousands).

Nine Months Ended

September 30, 2018

Net operating revenues

$

1,481,188

Net income

108,461


These pro forma results do not necessarily represent the results of operations that would have been achieved if the acquisition had taken place on January 1, 2017, nor are they indicative of the results of operations for future periods. The pro forma amounts include the historical operating results of the Company and Elgin prior to the Elgin Acquisition with adjustments directly attributable to the Elgin Acquisition.

Note 5.4. Assets Held for Sale

Twin River Worldwide Holdings, Inc.


Held for sale - Continuing operations

Eldorado Shreveport, MontBleu and Evansville
In connection with its review of the Merger, the Indiana Gaming Commission determined on July 16, 2020 that the Company is required to divest three properties within the state of Indiana in order to avoid undue economic concentrations as conditions to the Indiana Gaming Commission’s approval of the Merger. On July 10, 2019,October 27, 2020, the Company entered into a definitivean agreement to sell the equity interests of Rainbow Casino Vicksburg Partnership, L.P.Evansville to GLPI and IOC-Kansas City, L.L.C., the entities that hold Lady Luck Casino Vicksburg and Isle of Capri Casino Kansas City, to Twin River Worldwide Holdings, Inc. for approximately $230$480 million subject to a working capital adjustment.

Century Casinos, Inc.

On June 17, 2019, the Company entered into definitive agreements to sell the real property relating to Mountaineer, Cape Girardeau, and Caruthersville to VICI Properties, Inc. (“VICI”) for approximately $278 million and, immediately following the consummation of the sale such real property, sell all of the outstanding equity interests of Mountaineer Park, Inc., IOC-Caruthersville, LLC and IOC-Cape Girardeau, LLC to Century Casinos, Inc. for approximately $107 million, in cash, subject to a customary working capital adjustment.

adjustment. The salessale is subject to satisfaction ofMountaineer, Cape Girardeau, Caruthersville, Kansas City customary conditions, including receipt of required regulatory approvals and Vicksburgis expected to close in mid-2021. In addition, the Company plans to enter into agreements to divest of Caesars Southern Indiana and Horseshoe Hammond prior to December 31, 2020. Evansville met the requirements for presentation as assets held for sale under generally accepted accounting principles as of September 30, 2019.2020, while Caesars Southern Indiana and Horseshoe Hammond met the requirements for presentation as held for sale and discontinued operations.

On April 24, 2020, the Company entered into a definitive purchase agreement with Twin River and certain of its affiliates for the sale of the equity interests of Eldorado Resort Casino Shreveport Joint Venture and Columbia Properties Tahoe, LLC, the entities that hold Eldorado Shreveport and MontBleu, respectively, for aggregate consideration of $155 million, subject to a working capital adjustment. The definitive agreement provides that the consummation of the sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals. Eldorado Shreveport and MontBleu are expected to close in the first quarter of 2021.
Eldorado Shreveport and MontBleu met the requirements for presentation as assets held for sale as of September 30, 2020. However, theythe pending divestitures of Eldorado Shreveport and MontBleu did not meet the requirements for presentation as discontinued operations and are included in income from continuing operations.

operations in the periods presented.

As a result of the agreement to sell MontBleu, an impairment charge totaling $45 million was recorded during the nine months ended September 30, 2020 due to the carrying value exceeding the estimated net sales proceeds. The divestitures are subjectimpairment charges resulted in a reduction to receiptthe carrying amounts of required regulatory approvalsthe right-of-use assets, property and equipment, goodwill and other customary closing conditions. The divestitures are expected to close in early 2020 subject to satisfaction of closing conditions.

intangibles totaling $18 million, $23 million and $4 million, respectively. See Note 7.

The assets and liabilities held for sale, accounted for at carrying value as it was lower than fair value, were as follows as of September 30, 2019 (in thousands):

2020:

 

 

September 30, 2019

 

 

 

Mountaineer

 

 

Cape Girardeau

 

 

Caruthersville

 

 

Kansas City

 

 

Vicksburg

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

 

3,122

 

 

$

 

327

 

 

$

 

159

 

 

$

 

240

 

 

$

 

72

 

 

$

 

3,920

 

Due from affiliates

 

 

 

106

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

106

 

Inventories

 

 

 

1,058

 

 

 

 

716

 

 

 

 

233

 

 

 

 

46

 

 

 

 

131

 

 

 

 

2,184

 

Right-of-use assets

 

 

 

341

 

 

 

 

148

 

 

 

 

7

 

 

 

 

41,389

 

 

 

 

—

 

 

 

 

41,885

 

Prepaid expenses and other

 

 

 

14,583

 

 

 

 

294

 

 

 

 

148

 

 

 

 

273

 

 

 

 

4,210

 

 

 

 

19,508

 

Property and equipment, net

 

 

 

66,284

 

 

 

 

77,007

 

 

 

 

15,323

 

 

 

 

38,724

 

 

 

 

31,287

 

 

 

 

228,625

 

Goodwill

 

 

 

3,854

 

 

 

 

18,790

 

 

 

 

18,276

 

 

 

 

39,623

 

 

 

 

8,806

 

 

 

 

89,349

 

Other intangibles, net

 

 

 

44,400

 

 

 

 

27,788

 

 

 

 

55,145

 

 

 

 

90,329

 

 

 

 

2,708

 

 

 

 

220,370

 

Assets held for sale

 

$

 

133,748

 

 

$

 

125,070

 

 

$

 

89,291

 

 

$

 

210,624

 

 

$

 

47,214

 

 

$

 

605,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

 

409

 

 

$

 

495

 

 

$

 

252

 

 

$

 

206

 

 

$

 

169

 

 

$

 

1,531

 

Accrued payroll and related

 

 

 

1,131

 

 

 

 

531

 

 

 

 

250

 

 

 

 

435

 

 

 

 

234

 

 

 

 

2,581

 

Accrued property and other taxes

 

 

 

1,137

 

 

 

 

952

 

 

 

 

299

 

 

 

 

484

 

 

 

 

753

 

 

 

 

3,625

 

Short-term lease obligation

 

 

 

171

 

 

 

 

54

 

 

 

 

6

 

 

 

 

3,057

 

 

 

 

—

 

 

 

 

3,288

 

Long-term lease obligation

 

 

 

170

 

 

 

 

94

 

 

 

 

1

 

 

 

 

38,332

 

 

 

 

—

 

 

 

 

38,597

 

Accrued other liabilities

 

 

 

2,917

 

 

 

 

1,269

 

 

 

 

567

 

 

 

 

1,392

 

 

 

 

291

 

 

 

 

6,436

 

Liabilities related to assets held for sale

 

$

 

5,935

 

 

$

 

3,395

 

 

$

 

1,375

 

 

$

 

43,906

 

 

$

 

1,447

 

 

$

 

56,058

 

September 30, 2020
(In millions)ShreveportMontBleuEvansville
Assets:
Property and equipment, net$85 $37 $302 
Goodwill0 0 9 
Gaming licenses and other intangibles, net21 0 138 
Other assets, net15 32 48 
Assets held for sale$121 $69 $497 
Current liabilities$21 $72 $36 
Liabilities related to assets held for sale$21 $72 $36 


The following information presents the net operating revenues and net (loss) income for the Company’s properties that are held for sale:

Three Months Ended September 30, 2020
(In millions)ShreveportMontBleuEvansville
Net revenues$21 $11 $31 
Net (loss) income7 (3)1 
18

Nine Months Ended September 30, 2020
(In millions)ShreveportMontBleuEvansville
Net revenues$51 $23 $71 
Net (loss) income8 (43)(7)
Held for sale (in thousands):

- Sold

 

 

Three Months ended September 30, 2019

 

 

 

Mountaineer

 

 

Cape Girardeau

 

 

Caruthersville

 

 

Kansas City

 

 

Vicksburg

 

Net operating revenues

 

$

 

32,658

 

 

$

 

14,097

 

 

$

 

8,821

 

 

$

 

15,278

 

 

$

 

5,006

 

Net income (loss)

 

 

 

3,205

 

 

 

 

2,165

 

 

 

 

1,317

 

 

 

 

2,672

 

 

 

 

(401

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months ended September 30, 2019

 

 

 

Mountaineer

 

 

Cape Girardeau

 

 

Caruthersville

 

 

Kansas City

 

 

Vicksburg

 

Net operating revenues

 

$

 

95,530

 

 

$

 

43,839

 

 

$

 

26,399

 

 

$

 

47,677

 

 

$

 

15,573

 

Net income (loss)

 

 

 

7,242

 

 

 

 

5,857

 

 

 

 

5,004

 

 

 

 

7,701

 

 

 

 

(1,195

)

Kansas City, Vicksburg, Mountaineer, Caruthersville, Cape Girardeau, Presque and Nemacolin Divestitures

Churchill Downs Incorporated

On February 28, 2018,July 1, 2020, the Company entered into definitive agreements to sell substantially all of the assets and liabilities of Presque Isle Downs and Vicksburg to Churchill Downs Incorporated (“CDI”). Under the terms of the agreements, CDI agreed to purchase Presque Isle Downs for approximately $178.9 million and Vicksburg for approximately $50.6 million, in each case subject to a customary working capital adjustment. In conjunction with the classification of Vicksburg’s operations as assets held for sale at June 30, 2018 as a result of the announced sale to CDI, an impairment charge totaling $9.8 million was recorded due to the carrying value exceeding the estimated net sales proceeds.

The definitive agreements provided that the divestitures were subject to receipt of required regulatory approvals, termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and other customary closing conditions, including, in the case of Presque Isle Downs, the prior closing ofconsummated the sale of Vicksburg or the entry into an agreement to acquire another assetequity interests of the Company. On May 7, 2018, the Company and CDI each received a Request for Additional Information and Documentary Materials, often referred to as a “Second Request,” from the Federal Trade Commission in connection with its review of the Vicksburg acquisition.

On July 6, 2018, in consideration of the time and expense needed to reply to the Second Request, the Company and CDI entered into a termination agreement and release pursuant to which the parties agreed to terminate the asset purchase agreement with respect toentities that hold Vicksburg and Kansas City to enter into an asset purchase agreement pursuant to which CDI would acquire and assume the rights and obligations to operate Nemacolin (the “Vicksburg Termination Agreement”). The Vicksburg Termination Agreement also provided that CDI would pay the Company a $5.0Twin River for $230 million termination fee upon execution of a definitive agreement with respect to the Nemacolin transaction, which was recorded as proceeds from terminated sale on the Consolidated Statements of Income.  On August 10, 2018, the Company entered into a definitive agreement to sell substantially all of the assets and liabilities of Nemacolin to CDI.  Under the terms of the agreement, CDI agreed to purchase Nemacolin for cash consideration of approximately $0.1 million, subject to a customary working capital adjustment. As a result of the agreement to sell Nemacolin, an impairment charge of $3.8 million was recorded in the third quarter of 2018 due to the carrying value of the net property and equipment being sold exceeding the estimated net sales proceeds.

The sale of Presque Isle Downs closed on January 11, 2019 resulting in a gain of $8 million. The sales of Mountaineer, Caruthersville and Cape Girardeau were consummated on sale of $22.1 million, net of final working capital adjustments, for the nine months ended September 30,December 6, 2019. The sale of Nemacolin closed on March 8, 2019 resulting in a gain on sale of $0.1 million, net of final working capital adjustments, for the nine months ended September 30, 2019.

The sale of Presque closed on January 11, 2019 resulting in a gain on sale of $22 million, net of final working capital adjustments, for the nine months ended September 30, 2019. Prior to thetheir respective closing dates, the divestitures ofVicksburg, Kansas City, Mountaineer, Caruthersville, Cape Girardeau, Nemacolin and Presque Isle Downs, both of which were reported in the East segment, met the requirements for presentation as assets held for sale under generally accepted accounting principles. However, they did not meet the requirements for presentation as discontinued operations. Due toAll properties were previously reported in the terminationRegional segment.

The following information presents the net revenues and net (loss) income of Kansas City and Vicksburg properties for the Vicksburg sale, Vicksburg was no longer presented as an assetthree and nine months ended September 30, 2020:
Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
(In millions)Kansas CityVicksburgKansas CityVicksburg
Net revenues$0 $0 $18 $7 
Net (loss) income1 0 3 (1)
The following information presents the net revenues and net (loss) income of held for sale as of December 31, 2018.properties for the three and nine months ended September 30, 2019:
Three Months Ended September 30, 2019
(In millions)MountaineerCape  GirardeauCaruthersvilleKansas CityVicksburgPresqueNemacolin
Net revenues$33 $14 $9 $15 $6 $0 $0 
Net income3 2 1 1 0 0 0 
Nine Months Ended September 30, 2019
(In millions)MountaineerCape  GirardeauCaruthersvilleKansas CityVicksburgPresqueNemacolin
Net revenues$96 $44 $26 $48 $16 $3 $5 
Net (loss) income7 6 5 8 (1)0 (1)


19


The assets and liabilities held for sale, accounted for at carrying value as it was lower than fair value, were as follows as of December 31, 2018 (in thousands):

2019:

 

 

December 31, 2018

 

 

 

Nemacolin

 

 

Presque Isle

Downs

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

 

272

 

 

$

 

2,208

 

 

$

 

2,480

 

Inventories

 

 

 

79

 

 

 

 

1,607

 

 

 

 

1,686

 

Prepaid expenses and other

 

 

 

370

 

 

 

 

773

 

 

 

 

1,143

 

Property and equipment, net

 

 

 

1,784

 

 

 

 

70,134

 

 

 

 

71,918

 

Goodwill

 

 

 

—

 

 

 

 

3,122

 

 

 

 

3,122

 

Other intangibles, net

 

 

 

—

 

 

 

 

75,422

 

 

 

 

75,422

 

Assets held for sale

 

$

 

2,505

 

 

$

 

153,266

 

 

$

 

155,771

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

 

147

 

 

$

 

683

 

 

$

 

830

 

Accrued payroll and related

 

 

 

838

 

 

 

 

596

 

 

 

 

1,434

 

Accrued property and other taxes

 

 

 

552

 

 

 

 

71

 

 

 

 

623

 

Accrued other liabilities

 

 

 

1,628

 

 

 

 

3,659

 

 

 

 

5,287

 

Other long-term liabilities

 

 

 

105

 

 

 

 

—

 

 

 

 

105

 

Long-term obligation

 

 

 

2,412

 

 

 

 

—

 

 

 

 

2,412

 

Liabilities related to assets held for sale

 

$

 

5,682

 

 

$

 

5,009

 

 

$

 

10,691

 

December 31, 2019
(In millions)Kansas CityVicksburgTotal
Assets:
Property and equipment, net$39 $31 $70 
Goodwill40 9 49 
Gaming licenses and other intangibles, net91 3 94 
Other assets, net36 4 40 
Assets held for sale$206 $47 $253 
Current liabilities$3 $2 $5 
Other long-term liabilities33 0 33 
Liabilities related to assets held for sale$36 $2 $38 

The following information presents the net operating revenues and net income (loss) of Presque Isle Downs and Nemacolin prior to the respective divestitures (in thousands):

 

 

Three Months ended September 30, 2018

 

 

 

Nine Months ended September 30, 2018

 

 

 

Presque Isle Downs

 

 

Nemacolin

 

 

Presque Isle Downs

 

 

Nemacolin

 

Net operating revenues

 

$

 

37,685

 

 

$

 

8,866

 

 

$

 

107,738

 

 

$

 

25,799

 

Net income (loss)

 

 

 

5,713

 

 

 

 

(2,745

)

 

 

 

11,909

 

 

 

 

(3,213

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Presque Isle Downs

 

 

Nemacolin

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

 

3,235

 

 

$

 

4,836

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

(42

)

 

 

 

(754

)

 

 

 

 

 

 

 

 

 

 

These amounts include historical operating results, adjusted to eliminate the internal allocation of interest expense that was not be assumed by the buyer.

Held for sale - Discontinued operations
As result of the Merger, certain Former Caesars properties, including Harrah’s Louisiana Downs, Caesars Southern Indiana, Horseshoe Hammond, Harrah’s Reno, Caesars UK group, including Emerald Resorts & Casino, and Bally’s Atlantic City (“Bally’s AC”) have met, or are expected to meet within a short period of time, held for sale criteria as of the date of the closing of the Merger. The sales of these properties have or are expected to close within one year from the date of the closing of the Merger and the properties are classified as discontinued operations.
On September 30, 2020, the Company and VICI completed the sale of Harrah’s Reno for $42 million. The proceeds from the sale were split between the Company and VICI, and the Company received $8 million of net proceeds.
The following information presents the net revenues and net (loss) income for the Company’s properties that are part of discontinued operations for the three months ended September 30, 2020:
Three Months Ended September 30, 2020
(In millions)Harrah’s Louisiana DownsHarrah’s RenoHorseshoe HammondCaesars UKBally’s ACCaesars Southern Indiana
Net revenues$9 $0 $66 $11 $31 $39 
Net (loss) income2 (4)9 (11)5 1 
20

The assets and liabilities held for sale as a discontinued operation, accounted for at carrying value as it was lower than fair value, were as follows as of September 30, 2020:
September 30, 2020
(In millions)Harrah’s Louisiana DownsHorseshoe HammondCaesars UKBally’s ACCaesars Southern Indiana
Assets:
Cash$9 $14 $36 $10 $7 
Property and equipment, net11 404 69 25 413 
Goodwill3 138 35 0 136 
Gaming licenses and other intangibles, net5 30 50 0 23 
Other assets, net1 43 107 6 4 
Assets held for sale$29 $629 $297 $41 $583 
Current liabilities$6 $34 $89 $14 $20 
Other long-term liabilities (a)
6 73 125 20 1 
Liabilities related to assets held for sale$12 $107 $214 $34 $21 
____________________
(a)We have included $25 million of deferred finance obligation as held for sale liabilities for Bally’s Atlantic City and Louisiana Downs, which represent our preliminary purchase price allocation of the liability which will be derecognized upon completion of those divestitures. We have not included any portion of the deferred finance obligation associated with Horseshoe Hammond or Caesars Southern Indiana as held for sale as we do not yet have any sale agreements in place or know the effect of any possible master lease modification on our deferred finance lease liability.

Note 6.5. Stock-Based Compensation and Stockholders’ Equity

Common Stock Offering
On June 19, 2020, the Company completed the public offering of 20,700,000 shares (including the shares sold pursuant to the underwriters’ overallotment option) of Company Common Stock, at an offering price of $39.00 per share, which provided $772 million of proceeds, net of fees and estimated expenses of $35 million.
On October 1, 2020, the Company completed the public offering of 35,650,000 shares (including the shares sold pursuant to the underwriters’ overallotment option) of Company Common Stock, at an offering price of $56.00 per share, which provided $1.9 billion of proceeds, net of fees and estimated expenses of $50 million.
Share Repurchase Program

In November 2018, the Company’s Board of Directors authorized a $150 million common stock repurchase program (the “Share Repurchase Program”) pursuant to which the Company may, from time to time, repurchase shares of common stock on the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions. The Share Repurchase Program has no time limit and may be suspended or discontinued at any time without notice. There is no minimum number of shares of common stock that the Company is required to repurchase under the Share Repurchase Program.

The

As of September 30, 2020, the Company acquired 223,823 shares of common stock under the Share Repurchase Program at an aggregate value of $9.1$9 million and an average of $40.80 per share during the year ended December 31, 2018.share. NaN shares were repurchased during the nine months ended September 30, 2020 and 2019.


Stock-Based Compensation

The Company accountsmaintains long-term incentive plans for management, other personnel, and key service providers. The plans allow for granting stock-based compensation awards, based on Company Common Stock, including time-based and performance-based stock options, restricted stock units (“RSUs”), performance stock units, market-based stock units (“MSUs”), restricted stock awards, stock grants, or a combination of awards. Forfeitures are recognized in accordance with ASC 718, Compensation—Stock Compensation. the period in which they occur.
Total stock-based compensation expense in the accompanying Consolidated Condensed Statements of IncomeOperations totaled $4.3$45 million and $2.5$4 million during the three months ended September 30, 20192020 and 2018,2019, respectively, and $15.7$55 million and $9.6$16 million during the nine months ended September 30, 20192020 and 2018,2019, respectively. These amounts are included in corporate expenses and, in the case of certain property positions, general and administrative expenses in the Company’s Consolidated Condensed Statements of Income. We recognizedOperations.
21

In connection with the Merger, Former Caesars’ outstanding performance-based stock options ceased to represent an increaseoption or right to acquire shares of Former Caesars common stock and were converted into an option or right to purchase shares of Company Common Stock on the same terms and conditions as were applicable to such option immediately prior to the consummation of the Merger. Former Caesars’ unvested RSUs and MSUs were converted into a number of RSUs or MSUs, as applicable, in income tax expenserespect of $21 thousand forshares of Company Common Stock and remained subject to the same terms and conditions as were applicable to such RSUs and MSUs immediately prior to the consummation of the Merger.
In addition, during the three months ended September 30, 2019,2020, the Company granted both RSUs and MSUs to members of management. Vesting of the awards varies, and includes awards that cliff vest after a two or three year service period, as well as awards that vest ratably on each anniversary during the three year service period. In addition, awards were granted to certain key individuals related to stock-based compensation. We recognizedtheir efforts and the related shareholder return from potential transactions. Vesting of the awards is subject to various service and performance conditions and will accelerate and vest immediately upon the closing of a reduction in income tax expensequalifying transaction as defined by the agreements. Certain awards contained a market-based performance condition with which the fair value of $0.4 millionthe awards was determined based on a Monte Carlo simulation. The grant date fair value for these awards with a market-based performance condition was approximately $7 million.
Restricted Stock Unit Activity
During the three and nine months ended September 30, 2018, for excess tax benefits related2020, as part of the annual incentive program, the Company granted RSUs to stock-based compensation. We recognized a reduction in income tax expenseemployees of $1.3the Company with an aggregate fair value of $42 million and $4.9$59 million, respectively. Each RSU represents the right to receive payment in respect of one share of the Company’s Common Stock.
In connection with the Merger, on July 20, 2020, each Former Caesars’ RSU that was eligible to vest based solely on the passage of time that was outstanding as of immediately prior to the consummation of the Merger was converted into a RSU in respect of Company Common Stock and remained subject to the same terms and conditions as were applicable as of immediately prior to the consummation of the Merger.
A summary of the RSUs activity, including performance awards, for the nine months ended September 30, 2020 is presented in the following table:
Units
Weighted-
Average Grant
Date
Fair Value (a)
Unvested outstanding as of December 31, 20191,246,641 $35.56 
Granted (b)
1,222,736 48.17 
Acquired (c)
1,876,969 38.24 
Vested(1,068,509)33.22 
Forfeited(22,912)41.89 
Unvested outstanding as of September 30, 20203,254,925 42.56 
___________________
(a)Represents the weighted-average grant date fair value of RSUs, which is the share price of our common stock on the grant date.
(b)Included are 20,615 RSUs granted to non-employee members of the Board of Directors during the nine months ended September 30, 2019 and 2018, respectively, for excess tax benefits related to stock-based compensation.

A summary2020.

(c)Assumed RSU shares of Former Caesars as of the restrictedMerger date.
Market-Based Stock Unit Activity
During the quarter ended September 30, 2020, the Company granted approximately 185,639 MSUs that are scheduled to cliff vest in three years. On the vesting date, recipients will receive between 0% and 200% of the granted MSUs in the form of Company Common Stock based on the achievement of specified market and service conditions. Based on the terms and conditions of the awards, the grant date fair value of the MSUs was determined using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model are the risk-free interest rate, expected volatility, expected dividends and correlation coefficient. The effect of market conditions is considered in determining the grant date fair value, which is not subsequently revised based on actual performance. The aggregate value of MSUs granted during the nine months ended September 30, 2020 was $13 million.
In connection with the Merger, on July 20, 2020, each MSU of Former Caesars was converted into a MSU in respect of shares of Company Common Stock and remained subject to the same terms and conditions as were applicable as of immediately prior to the consummation of the Merger.
22

Units
Weighted- Average Fair Value (a)
Unvested outstanding as of December 31, 20190 $0 
Granted185,639 70.26 
Acquired (b)
124,984 63.36 
Vested(61,322)63.36 
Forfeited0 0 
Unvested outstanding as of September 30, 2020249,301 68.50 
____________________
(a)Represents the fair value determined using a Monte-Carlo simulation model.
(b)Assumed MSU shares of Former Caesars as of the Merger date.
Stock Option Activity
There were 26,900 stock unit (RSU) activityoptions exercised for the nine months ended September 30, 2019 is presented in the following table:

2020. Outstanding options as of September 30, 2020 totaled 220,432, of which 104,257 options were exercisable.

 

 

 

Restricted Stock Units

 

 

 

 

 

Units

 

 

 

Weighted-

Average Grant

Date

Fair Value

 

 

 

 

 

 

 

 

 

 

(in millions)

 

 

Unvested outstanding as of December 31, 2018

 

 

 

1,283,372

 

 

$

 

23.93

 

 

Granted (1)

 

 

 

457,941

 

 

 

 

45.23

 

 

Vested

 

 

 

(520,183

)

 

 

 

18.69

 

 

Forfeited

 

 

 

(19,453

)

 

 

 

23.79

 

 

Unvested outstanding as of September 30, 2019

 

 

 

1,201,677

 

 

$

 

34.26

 

 

Unrecognized Compensation Cost

(1)

Included are 30,135 RSUs granted to non-employee members of the Board of Directors during the nine months ended September 30, 2019.

As of September 30, 2019 and 2018,2020, the Company had $22.6$103 million and $11.8 million, respectively, of unrecognized compensation expense. The RSUs areexpense, which is expected to be recognized over a weighted-average period of 1.48 years and 1.15 years, respectively.

There was no ERI stock option activity for the nine months ended September 30, 2019. Outstanding options as of September 30, 2019 totaled 135,956, of which 125,331 options were exercisable.

1.7 years.

Note 7.6. Investments in and Advances to Unconsolidated Affiliates

Pompano Joint Venture

In April 2018, the Company entered into a joint venture with Cordish Companies (“Cordish”) to master plan and develop a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the casino and racetrack at the Company’s Pompano property. As the managing member, Cordish will operate the business and manage the development, construction, financing, marketing, leasing, maintenance and day-to-day operation of the various phases of the project. Additionally, Cordish will be responsible for the development of the master plan for the project with the Company’s input and will submit it for the Company’s review and approval. The Company and Cordish have made cash contributions of $500,000 each and could be required to make additional contributions to a maximum of $2.0 million ($1.0 million per member) at the request of the managing member. The Company has agreed to contribute approximately 130 to 200 acres of land to the joint venture for the project. While the Company holds a 50% variable interest in the joint venture, it is not the primary beneficiary; as such the investment in the joint venture is accounted for using the equity method. The Company participates evenly with Cordish in the profits and losses of the joint venture, which is included in income (loss) from unconsolidated affiliates on the Consolidated Statements of Income. At September 30, 2019 and December 31, 2018, the Company’s investment in the joint venture including contributions and capitalized professional costs totaled $1.1 million and $0.6 million, respectively, recorded in investment in and advances to unconsolidated affiliates on the Consolidated Balance Sheets.


William Hill

In September 2018, the

The Company entered into a 25-year agreement, which became effective January 29, 2019, with William Hill PLC and William Hill US, its U.S. subsidiary (together, “William Hill”) pursuant to which the Company (i) granted to William Hill the right to conduct betting activities, including operating our sportsbooks, in retail channels and under the Company’s first skin and third skincertain skins for online channels with respect to the Company’s current and future properties, located in the United States and the territories and possessions of the United States, including Puerto Rico and the U.S. Virgin Islands and (ii) agreed that William Hill will have the right to conduct certain real money online gaming activities utilizing the Company’s second skin available with respect to properties in such territories.  Pursuant to the terms of the agreement, in January 2019 theactivities. The Company received a 20% ownership interest in William Hill US as well as 13.413 million ordinary shares of William Hill PLC,plc, which carry certain time restrictions on when they can be sold. Additionally, the Company receives a profit share from the operations of sports betting and other gaming activities associated with the Company’s properties. “Skin” in the context of this agreement refers to Eldorado’sthe Company’s ability to grant to William Hill an online channel that allows William Hill to operate online casino and sports gaming activities in reliance on, and utilizing the benefit of, any licenses granted to Eldoradothe Company or its subsidiaries.
On September 30, 2020, the Company announced its intention to acquire William Hill plc in an all-cash transaction. See Note 1.
As of September 30, 2020 and December 31, 2019, based on the Company’s existing sportsbook operations with William Hill, the Company’s receivable from William Hill totaled $2.7$1 million including $0.1and $4 million, in assets held for sale, the remaining balancerespectively, and is reflected in dueDue from affiliates on the Consolidated Condensed Balance Sheets.

The Company is accounting for its investment in William Hill US under the equity method. The fair value of the Company’s initial investment in William Hill US of $128.9$129 million at January 29, 2019 was determined using Level 3 inputs. As of September 30, 2020 and December 31, 2019, the carrying value of the Company’s interest in William Hill US was $127.5totaled $126 million and $127 million, respectively, and is recorded in investmentInvestment in and advances to unconsolidated affiliates on the Consolidated Condensed Balance Sheets.

As of September 30, 2020 and December 31, 2019, the fair value of the William Hill PLCplc shares totaled $27.1$43 million and $29 million, respectively, net of cumulative unrealized gains of $15 million and $2 million, respectively, and is included in Investment in and advances to unconsolidated affiliates on the Consolidated Condensed Balance Sheets. The Company recorded an unrealized gain of $26 million and an unrealized loss of $0.2$4 million during the three months ended September 30, 2020 and included in other assets, net on the Consolidated Balance Sheets.2019, respectively. The Company also recorded deferred revenue associated withan unrealized gain of $13 million during the nine months ended September 30, 2020. The Company recorded a loss of less than $1 million for the nine months ended September 30, 2019
As described above, the Company granted William Hill the right to the use of certain skins in exchange for an equity method investment. The fair value of the William Hill US and William Hill PLCplc shares received has been deferred and is recognizingrecognized as revenue on a straight-line basis over the 25-year agreement term. The Company recognized revenue of $1.5$2 million for both of the three months ended September 30, 2020 and 2019, and $7 million and $3.9$4 million during the three and nine months ended September 30, 2020 and 2019, respectively.respectively and is recorded in Other revenue in the Consolidated Condensed Statement of
23

Operations. As of September 30, 2020 and December 31, 2019, the balance of the William Hill deferred revenue totaled $143.6$135 million and $142 million, respectively, and is recorded in other long-term liabilities on the Consolidated Condensed Balance Sheets.

Note 8.7. Goodwill and Intangible Assets, net
The purchase price of an acquisition is allocated to the underlying assets acquired and Other Long-Term Assets

Otherliabilities assumed based upon their estimated fair values at the date of acquisition. The Company determines the estimated fair values after review and consideration of relevant information including discounted cash flows, quoted market prices, and estimates made by management. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets net, include the following amounts (in thousands):

acquired and liabilities assumed, such excess is recorded as goodwill.

 

 

September 30,

 

 

December 31,

 

 

 

 

 

 

2019

 

 

2018

 

 

 

Useful Life

Goodwill

 

$

 

909,717

 

 

$

 

1,008,316

 

 

 

Indefinite

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming licenses

 

$

 

893,271

 

 

$

 

1,090,682

 

 

 

Indefinite

Trade names

 

 

 

165,479

 

 

 

 

187,929

 

 

 

Indefinite

Player loyalty programs

 

 

 

97,035

 

 

 

 

105,005

 

 

 

3 - 4 years

Subtotal

 

 

 

1,155,785

 

 

 

 

1,383,616

 

 

 

 

Accumulated amortization player loyalty programs

 

 

 

(36,930

)

 

 

 

(21,610

)

 

 

 

Total gaming licenses and other intangible assets, net

 

$

 

1,118,855

 

 

$

 

1,362,006

 

 

 

 

Changes in Carrying Value of Goodwill and Other Intangible Assets

Non-Amortizing Intangible Assets
(In millions)Amortizing Intangible AssetsGoodwillOther
December 31, 2019$53 $910 $1,058 
Amortization(35)— — 
Impairments0 (100)(20)
Acquired (a)
488 8,649 3,081 
Assets held for sale (see Note 4)(5)(9)(154)
September 30, 2020$501 $9,450 $3,965 
____________________
(a)Includes intangible assets and goodwill acquired upon Merger and $20 million of acquisition of gaming rights. See Note 2 and Note 13 for further detail.
Gross Carrying Value and Accumulated Amortization of Intangible Assets Other Than Goodwill
September 30, 2020December 31, 2019
(Dollars in millions)Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortizing intangible assets
Customer relationships3 - 7 years$488 $(71)$417 $101 $(48)$53 
Gaming rights and others34.2 years84 0 84 0 0 0 
$572 $(71)501 $101 $(48)53 
Non-amortizing intangible assets
Trademarks2,202 165 
Gaming rights1,223 893 
Caesars Rewards540 0 
3,965 1,058 
Total amortizing and non-amortizing intangible assets, net$4,466 $1,111 
Gaming licensesrights represent intangible assets acquired from the purchase of a gaming entity located in a gaming jurisdiction where competition is limited, such as when only a limited number of gaming operators are allowed to operate in the jurisdiction. These gaming license rights are not subject to amortization as the Company has determined that they have indefinite useful lives.

For gaming jurisdictions with high barriers of renewal of the gaming rights, such as material costs of renewal, the gaming rights are deemed to have a finite useful life and are amortized over the expected useful life.

During the nine months ended September 30, 2020, the Company recognized impairment charges in our Regional segment related to goodwill and trade names totaling $100 million and $16 million, respectively, due to declines in recent performance and the expected impact on future cash flows as a result of COVID-19.
Additionally, in conjunction with the classification of MontBleu’s operations as assets held for sale as of September 30, 2020 (see Note 4) as a result of the announced sale, an impairment charge totaling $45 million was recorded due to the carrying value exceeding the estimate sales proceeds. Trade names, property, plant and equipment and other assets were impaired by $4 million, $23 million and $18 million, respectively, recorded in the Regional segment.
24

Amortization expense with respect to player loyalty programsintangible assets for the three months ended September 30, 2020 and 2019 and 2018 totaled $7.6$21 million and $2.4$8 million, respectively, and $22.8$35 million and $5.1$23 million for the nine months ended September 30, 20192020 and 2018,2019, respectively, which is included in depreciation and amortization in the Consolidated Condensed Statements of Income. Such amortization expenseOperations.
Estimated Five-Year Amortization
Years Ended December 31,
(In millions)Remaining 202020212022202320242025
Estimated annual amortization expense$20 $78 $64 $60 $60 $60 
Note 8. Income Taxes
Income Tax Allocation
Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2020201920202019
(Loss) income from continuing operations before income taxes$(789)$55 $(1,136)$133 
Provision for income taxes(135)(18)(64)(39)
Effective tax rate(17.1)%32.7 %(5.6)%29.3 %
We classify accruals for uncertain tax positions within Other long-term liabilities on the Balance Sheets separate from any related income tax payable which is expectedreported within Accrued other liabilities. The accrual amounts relate to any potential income tax liabilities resulting from uncertain tax positions as well as potential interest or penalties associated with those liabilities.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be $7.7 million forgenerated to use the remainderexisting deferred tax assets. We have provided a valuation allowance on certain federal, state and foreign deferred tax assets that were not deemed realizable based upon estimates of 2019 and $27.4 million, $21.2 million and $4.2 million for the years ended December 31, 2020, 2021 and 2022, respectively.

future taxable income.

Goodwill represents the excess of the purchase prices of acquiring MTR Gaming, Isle, Elgin and Tropicana over the fair market value of the net assets acquired. In conjunction with the classification of Vicksburg’s operations as assets held for sale at June 30, 2018 (see Note 5) asAs a result of the announced sale to CDI, an impairment charge totaling $9.8Merger, the Company acquired $779 million was recorded due to the carrying value exceeding the estimatedof additional net sales proceeds.deferred tax liabilities net of necessary valuation allowances, plus $24 million in additional accruals for uncertain tax positions. The impairment reduced the value of goodwill in the South segment in 2018.

The September 30, 2019 balances exclude assets held for sale recorded in 2019 (see Note 5), as well as the assets associated with the Presque Isle Downs and Nemacolin divestitures, which accountsincome tax expense for the changes in goodwillthree and indefinite-lived intangible assets.

Other Assets, Net 

Other assets, net, include the following amounts (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

CRDA bonds and deposits, net

 

$

 

4,974

 

 

$

 

6,694

 

Unamortized debt issuance costs - Revolving

   Credit Facility

 

 

 

7,903

 

 

 

 

9,533

 

Non-operating real property

 

 

 

1,957

 

 

 

 

17,880

 

Long-term prepaid rent

 

 

 

—

 

 

 

 

20,198

 

Restricted cash and investments

 

 

 

36,761

 

 

 

 

15,064

 

Other

 

 

 

27,284

 

 

 

 

14,077

 

Total other assets, net

 

$

 

78,879

 

 

$

 

83,446

 

The Casino Reinvestment Development Authority (“CRDA”) bonds have various contractual maturities that range up to 40 years. Actual maturities may differ from contractual maturities because of prepayment rights. The Company treats CRDA bonds as held-to-maturity since the Company has the ability and the intent to hold these bonds to maturity and under the CRDA, the Company is not permitted to do otherwise. The Company analyzes the CRDA bonds for recoverability on a quarterly basis based on management's historical collection experience and other information received from the CRDA. If indications exist that the CRDA bond is impaired, additional valuation allowances are recorded.

Non-operating real property consists principally of land and undeveloped properties for which the Company has designated as non-operating and has declared its intent to sell such assets. As a result of a pending sale offer for certain non-operating real property located in Pennsylvania, the Company recognized an impairment charge of $1.0 million for the nine months ended September 30, 2019. Non-operating land totaling $9.8 million associated with Mountaineer is included in assets held for sale as of September 30, 2019.

Approximately ten acres of2020 differed from the approximately 20 acres on which Tropicana Evansville is situated is subject to a lease with the City of Evansville, Indiana. Under the terms of the agreement, a pre-payment of lease rent of $25 million was due at the commencement of the construction project. The prepayments will be applied against future rent in equal monthly amounts over a period of 120 months which commenced upon the opening of the property in January 2018.  The current term of the lease expires November 30, 2027. As of December 31, 2018, this prepaid rent was included in long-term prepaid rent. However, upon adoption of the new lease accounting guidance the prepaid rent is now included with the Company’s ROU assets.

In September 2018, we entered into a 25-year agreement, which became effective January 2019, with William Hill pursuant to which we received 13.4 million ordinary shares of William Hill PLC which carry certain time restrictions on when they can be sold. As of September 30, 2019, the fair value of the William Hill PLC shares totaled $27.1 million, net of an unrealized loss of $0.2 million, and is included in other assets, netexpected income tax benefit based on the Consolidated Balance Sheets.


Note 9. Income Taxes

The Company estimatesfederal tax rate of 21% primarily due to an annual effectiveincrease in the valuation allowance against the deferred tax assets due to the series of transactions with VICI during the quarter. The income tax rate based on projected resultsexpense for the year and applies this rate to income before taxes to calculate income tax expense. Any refinements made due to subsequent information that affects the estimated annual effective income tax rate are reflected as adjustments in the current period.

For the three and nine months ended September 30, 2019 differed from the Company’sexpected income tax expense was $18.1 million and $38.9 million, respectively, and forbased on the three and nine months ended September 30, 2018, the Company’sfederal tax expense was $20.0 million and $31.3 million, respectively. For the three and nine months ended September 30, 2019, the difference between the effective rate and the statutory rate is attributedof 21% primarily due to excess tax benefits associated with stock compensation, state and local income taxes and changes in the valuation allowance. Forallowance against deferred tax assets.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020. The CARES Act includes, among other things, refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical amendments regarding the income tax depreciation of qualified improvement property placed in service after December 31, 2017. These amendments allow for retroactive accelerated income tax depreciation on certain of the Company’s leasehold improvement assets. The financial impact of these technical amendments on the business was recorded in the three and nine monthsmonth period ended September 30, 2018,2020 but had no impact on the difference between the effective rate and the statutory rate is attributed primarily to non-deductible expenses andincome tax provision.
The Company, including its subsidiaries, files tax returns with federal, state, and local income taxes.

As of September 30, 2019, there were 0 unrecognized tax benefits and the Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits within the next twelve months. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

The Company and its subsidiaries file US federal income tax returns and various state and local income tax returns.foreign jurisdictions. The Company does not have tax sharing agreements with the other members within theits consolidated ERI group. The Company is subject to exam by various state and foreign tax authorities. With few exceptions, the Company is no longer subject to US federal or state and local tax examinations by tax authorities for years before 2012.

2016, and it is possible that the amount of the liability for unrecognized tax benefits could change during the next 12 months.

Note 10. Long-Term 9. Leases
The Company has operating and finance leases for various real estate and equipment. Certain of the Company’s lease agreements include rental payments based on a percentage of sales over specified contractual amounts, rental payments adjusted periodically for inflation and rental payments based on usage. The Company’s leases include options to extend the lease term one month to 60 years. The Company’s lease agreements do not contain any material restrictive covenants, other than those described below.
25

Financing Obligation

AsObligations

VICI Leases & Golf Course Use Agreement
Upon consummation of the Merger, CEI assumed obligations of certain real property assets leased from VICI by Former Caesars under the following agreements: (i) for a portfolio of properties at various locations throughout the United States (the “Non-CPLV lease”), (ii) for Caesars Palace Las Vegas (the “CPLV lease”), (iii) for Harrah’s Joliet Hotel & Casino (the “Joliet Lease”) and (iv) for Harrah’s Las Vegas (the “HLV Lease”). These lease agreements provided for annual fixed rent (subject to escalation) of $773 million during an initial period, then rent consisting of both base rent and variable rent elements. The lease agreements had a 15-year initial term and 4 five-year renewal options. The lease agreements included escalation provisions beginning in year two of the initial term and continuing through the renewal terms. The lease agreements also included provisions for variable rent 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.
In connection with the closing of the Merger on July 20, 2020, the Company and certain of its affiliates consummated a series of transactions with VICI in accordance with the MTA and the purchase and sales agreements entered on September 26, 2019. The Company and certain of its affiliates consummated sale leaseback transactions related to Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Resort Atlantic City, including the Harrah’s Atlantic City Waterfront Conference Center, for approximately $1.8 billion of net proceeds. The Non-CPLV lease was amended to include these properties (as amended, the “Regional Lease”), and was further amended to increase the annual rent thereunder by $154 million in the aggregate related to such added properties and extend the term of such lease so that following the amendment of such lease there will be 15 years remaining until the expiration of the initial term. The Joliet Lease term was also amended such that 15 years remain until the expiration of the initial term.
Former Caesars entered into a Golf Course Use Agreement with VICI, which has a 35-year term (inclusive of all renewal periods), pursuant to which such affiliates of the Company agreed to pay (i) an annual payment of $10 million, subject to escalation, (ii) an annual use fee of $3 million, subject to escalation beginning in the second year, and (iii) certain per-round fees, all as more particularly set forth in the Golf Course Use Agreement. Furthermore, the term of the Golf Course Use Agreement was extended such that there will be 15 years remaining until the expiration of the initial term.
The amendment to the Regional Lease also contains a put-call agreement related to the Centaur properties, which are Hoosier Park and Indiana Grand, pursuant to which the Company may require VICI to purchase and lease back (as lessor) the real estate components of the gaming and racetrack facilities of Hoosier Park and Indiana Grand and VICI may require the Company to sell to VICI and lease back (as lessee) the real estate components of such gaming and racetrack facilities. Election by either party to put or call the Centaur properties must be made during the election period beginning January 1, 2022 and ending December 31, 2018, under2024. Upon either party exercising their option, the priorCentaur properties would be sold at the price in accordance with the agreement and subsequently leased back to CEI by adding the leaseback to the pre-existing Regional lease agreement. As such, the Centaur properties would be leased back over the remaining term of the Regional lease agreement and the Regional lease agreement annual rental payments would be increased by the amount of rent required to achieve a rent coverage ratio of 1.3 as of the exercise date. A liability of $6 million associated with this agreement has been recorded within Other long-term liabilities.
Additionally, in connection with the Merger, the Company received a one-time payment from VICI of approximately $1.4 billion for amendments to the CPLV Lease (as amended, the “Las Vegas Lease”) to, among other things, (i) add the land and improvements of HLV to the lease and terminate the HLV Lease (ii) add the rent payable with respect to the HLV Lease and further increase the annual rent payable with respect to HLV by approximately $15 million, (iii) increase the annual rent with respect to CPLV by approximately $84 million and (iv) extend the term of such lease so that following the amendment of such lease there will be 15 years remaining until the expiration of the initial term.
In connection with the Merger, the land and building components subject to the lease amendments described above did not qualify for sale-leaseback accounting standard the Company’s Master Lease with GLPI wasand are accounted for as a failed sale-leaseback financing obligation equal to the fair value of the leased real estate assets and liabilities acquired in purchase accounting. Upon adoption of ASC 842 (see Note 2), the Company re-evaluated the Master Lease and determined this existing failed sale-leaseback transaction will continue to be accounted for as a financing obligation.

post-combination debt modifications.

GLPI Leases
The fair value of the real estate assets and the related failed sale-leaseback financing obligations were estimated based on the present value of the estimated future lease payments over the lease term of 35 years, including renewal options, using an imputed discount rate of approximately 10.2%. The value of the failed sale-leaseback financing obligations is dependent upon assumptions regarding the amount of the lease payments and the estimated discount rate of the lease payments required by a market participant.

26

The GLPI Master Lease provides for the lease of land, buildings, structures and other improvements on the land (including barges and riverboats), easements and similar appurtenances to the land and improvements relating to the operation of the leased properties. The GLPI Master Lease provides for an initial term of fifteen years20 (as amended below) with no purchase option. At the Company’s option, the GLPI Master Lease may be extended for up to four4 five-year renewal terms beyond the initial 15-year term.20 years-year term (as amended below).
On June 15, 2020, the Company entered into an Amended and Restated Master Lease with GLPI, which, among other things, (i) extended the initial term from 15 to 20 years (through September 2038), with 4 five-year renewals at the Company’s option, (ii) commencing October 1, 2020, removed the percentage rent payable in exchange for an increase to the non-escalating portion of land base rent to $24 million, (iii) amended the dates on which, and the amounts by which, the escalating portion of base rent escalates, and (iv) provided certain relief under the operating, capital expenditure and financial covenants in the event of facility closures due to public health emergencies, governmental restrictions and certain other instances of unavoidable delay. The amendment to the GLPI Master Lease became effective on July 17, 2020 following receipt of required regulatory approvals. If we electthe Company elects to renew the term of the GLPI Master Lease, the renewal will be effective as to all, but not less than all, of the leased property then subject to the GLPI Master Lease. The GLPI Master Lease does not provide the Company with the option to purchase the leased property and the Company does not have the ability to terminate its obligations under the GLPI Master Lease prior to its expiration without GLPI’s consent.

The rent payable under

On September 29, 2020, Company entered into a sale-leaseback transaction with GLPI for the Master Lease is comprised of “Base Rent” and “Percentage Rent.”  Base rent isLumière property. On October 1, 2018, the sum of:

•

Building Base Rent: a fixed component equal to $60.9 million during the first year of the Master Lease, and thereafter escalated annually by 2%, subject to a cap that would cause the preceding year’s adjusted revenue to rent ratio for the properties in the aggregate not to fall below 1.20:1.00 for the first five years of the Master Lease and 1.80:1.00 thereafter; plus

•

Land Base Rent: an additional fixed component equal to $13.4 million, subject to adjustment in the event of the termination of the Master Lease with respect to any of the leased properties.

The percentage rent payable underCompany borrowed $246 million from GLPI to fund the Master Lease is adjusted every two years based on the actual net revenuespurchase price of the leased properties duringreal estate underlying Lumière. As part of the two-year period then ended. The initial variable rent, which is fixedconsideration for the first two years, is $13.4purchase of the property, GLPI cancelled the $246 million per year.loan. The actual percentage increase is basedlease (the “Lumiere Lease”) has an initial term that ends on actual performanceOctober 31, 2033 and is4 five-year renewal options.

Following the amendments and transactions above, the land and building components subject to change.

The initial annual rent under the terms of the lease is approximately $87.6 million.


Under the Master Lease, the Company is required to pay the following, among other things: lease payments to the underlying ground lessoramendments described above did not qualify for properties thatsale-leaseback accounting and are subject to ground leases, facility maintenance costs, all insurance premiumsaccounted for insurance with respect to the leased properties and the business conducted on the leased properties, taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor and all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties).

The estimated future lease payments include the minimum lease payments and were adjusted to reflect estimated lease payments as described in the agreements, including an annual escalator of up to 2%.

post-combination debt modifications.

The future minimum payments related to the MasterGLPI leases, including the Lumière Lease, and VICI leases financing obligation, with GLPIas amended, at September 30, 20192020 were as follows (in thousands):

follows:

2019 (excluding the nine months ended September 30, 2019)

 

$

 

22,214

 

2020

 

 

89,168

 

(In millions)(In millions)GLPI LeasesVICI Leases
2020 (excluding the nine months ended September 30, 2020)2020 (excluding the nine months ended September 30, 2020)$27 $268 

2021

 

 

90,417

 

2021109 1,079 

2022

 

 

91,691

 

2022109 1,097 

2023

 

 

92,990

 

2023111 1,119 
20242024112 1,139 

Thereafter

 

 

 

3,506,672

 

Thereafter4,880 46,737 

Total future payments

 

 

 

3,893,152

 

Total future payments5,348 51,439 

Less: amounts representing interest at 10.2%

 

 

(3,345,270

)

Plus: residual values

 

 

 

420,100

 

Financing obligation to GLPI

 

$

 

967,982

 

Less: Amounts representing interestLess: Amounts representing interest(4,522)(41,020)
Plus: Residual valuesPlus: Residual values399 906 
Financing obligationFinancing obligation$1,225 $11,325 

Total

Cash payments and interest expense relatedmade relating to the Master Lease were $21.9 million and $24.6 million, respectively, forour long-term financing obligations during the three months ended September 30, 2019, and $65.7 million and $73.8 million, respectively, for the nine months ended September 30, 2019. 2020 and 2019 are as follows:
GLPI Leases (a)
VICI Leases
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
(In millions)20202019202020192020201920202019
Cash paid for principal$22 $22 $66 $66 $49 $0 $49 $0 
Cash paid for interest24 25 74 74 128 0 128 0 
____________________
(a)For the initial periods of the Master Lease,GLPI Leases, cash payments are less than the interest expense recognized, which causes the failed sale-leasebackfailed-sale leaseback obligation to increase during the initial years of the lease term.

27

Lease Covenants
The GLPI Leases and VICI leases contains certain operating, capital expenditure and financial covenants thereunder, and the Company’s ability to maintain compliance with these covenants was also negatively impacted. On June 15, 2020, the Company entered into an amendment to the GLPI Master Lease containswhich provides certain relief under these covenants including minimumin the event of facility closures due to public health emergencies, governmental restrictions and certain other instances of unavoidable delay. Furthermore, the Company obtained waivers from VICI with relation to annual capital improvement expenditures. Asexpenditure requirements the leases with VICI starting with the annual period ending December 31, 2020.
Lessor Arrangements
Lodging Arrangements
Lodging arrangements are considered short-term and generally consist of September 30, 2019, we were in compliance with alllease and nonlease components. The lease component is the predominant component of the covenants under the Master Lease.

Note 11. Long-Term Debt

Long‑term debt consistedarrangement and consists of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Term Loan

 

$

 

886,750

 

 

$

 

956,750

 

Less: Unamortized discount and debt issuance costs

 

 

 

(14,968

)

 

 

 

(18,426

)

Net

 

 

 

871,782

 

 

 

 

938,324

 

6% Senior Notes due 2026

 

 

 

600,000

 

 

 

 

600,000

 

Less: Unamortized debt issuance costs

 

 

 

(18,487

)

 

 

 

(19,630

)

Net

 

 

 

581,513

 

 

 

 

580,370

 

6% Senior Notes due 2025

 

 

 

875,000

 

 

 

 

875,000

 

Plus: Unamortized debt premium

 

 

 

21,049

 

 

 

 

23,491

 

Less: Unamortized debt issuance costs

 

 

 

(16,570

)

 

 

 

(18,405

)

Net

 

 

 

879,479

 

 

 

 

880,086

 

7% Senior Notes due 2023

 

 

 

375,000

 

 

 

 

375,000

 

Less: Unamortized discount and debt issuance costs

 

 

 

(5,239

)

 

 

 

(6,075

)

Net

 

 

 

369,761

 

 

 

 

368,925

 

Revolving Credit Facility

 

 

 

—

 

 

 

 

245,000

 

Lumière Loan

 

 

 

246,000

 

 

 

 

246,000

 

Long-term notes and other payables

 

 

 

2,658

 

 

 

 

3,030

 

Less: Current portion

 

 

 

(238

)

 

 

 

(462

)

Total long-term debt

 

$

 

2,950,955

 

 

$

 

3,261,273

 


Amortizationfees 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 debt issuance costslease term, we have elected to combine the revenue generated from lease and nonlease components into a single lease component based on the discount and/or premium associated with our indebtedness totaled $1.9 million and $1.2 million forpredominant component in the arrangement. During the three months ended September 30, 2019 and 2018, respectively, and $5.7 million and $3.8 million for the nine months ended September 30, 20192020, we recognized approximately $200 million and 2018, respectively. Amortization$257 million, respectively, 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 Other revenue in the Statement of Operations, and during the three and nine months ended September 30, 2020, we recognized approximately $2 million in lease revenue related to conventions.
28

Note 10. Long-Term Debt
Long-term debt consisted of the following:
September 30, 2020December 31,
2019
(Dollars in millions)Final
Maturity		RatesFace ValueBook ValueBook Value
Secured Debt
CEI Senior Secured Notes20256.25%$3,400 $3,330 $0 
CEI Revolving Credit Facility2025
variable (a)
900 880 0 
ERI Term LoanN/AN/A0 0 491 
CRC Term Loan B2024
variable (b)
4,571 4,120 0 
CRC Term Loan B-12025
variable (c)
1,800 1,709 0 
CRC Revolving Credit Facility2022
variable (d)
0 0 0 
CRC Senior Secured Notes20255.75%1,000 978 0 
Convention Center Mortgage Loan20257.70%400 397 0 
Lumière LoanN/AN/A0 0 246 
Unsecured Debt
CEI Senior Notes20278.13%1,800 1,767 0 
CRC Notes20255.25%1,700 1,490 0 
5% Convertible Notes20245.00%597 546 0 
6% Senior Notes2026N/A0 0 582 
6% Senior Notes2025N/A0 0 879 
7% Senior Notes2023N/A0 0 370 
Special Improvement District Bonds20374.30%51 51 0 
Long-term notes and other payables2 2 3 
Total debt16,221 15,270 2,571 
Current portion of long-term debt(67)(67)(246)
Long-term debt$16,154 $15,203 $2,325 
Unamortized premiums, discounts and deferred finance charges (e)
$951 $34 
Fair value$16,135 
____________________
(a)Prime rate plus 2.25%.
(b)LIBOR plus 2.75%.
(c)$1.2 billion at 1 month LIBOR plus 4.50% and $600 million at 3 month LIBOR plus 4.50%.
(d)LIBOR plus 2.00%.
(e)Approximately $7 million of deferred financing costs related to our revolving credit facilities are included within Other assets, net as of December 31, 2019.
Current Portion of Long-Term Debt
The current portion of long-term debt as of September 30, 2020 includes the principal payments on the term loans, other unsecured borrowings, and special improvement district bonds that are contractually due within 12 months.
Debt Discounts or Premiums and Deferred Finance Charges
Debt discounts or premiums and deferred finance charges incurred in connection with the issuance of debt issuance costs is computedare amortized to interest expense based on the related debt agreements primarily using the effective interest methodmethod. Unamortized discounts are written off and is included in interest expense.

Scheduled maturitiesour gain or loss calculations to the extent we extinguish debt prior to its original maturity date.

Fair Value
The fair value of long‑term debt are $0.1 million forhas been calculated primarily based on the remainderborrowing rates available as of 2019, $246.2 millionSeptember 30, 2020 based on market quotes of our publicly traded debt. We classify the fair value of debt within Level 1 and Level 2 in 2020, $0.2 million in 2021, $0.2 million in 2022, $375.1 million in 2023, and $2.4 billion thereafter.

Term Loan and Revolving Credit Facility

the fair value hierarchy.

29

New Debt Transactions
The Company iswas party to a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto dated as of April 17, 2017 (as amended the “Credit“ERI Credit Facility”), consisting of a $1.45$1.5 billion term loan facility (the “Term Loan Facility” or “Term“ERI Term Loan”) and a $500.0$500 million revolving credit facility (the “Revolving“ERI Revolving Credit Facility”). The Company’s obligations
In an effort to maintain liquidity and provide financial flexibility as the effects of COVID-19 continued to evolve and impact global financial markets, the Company borrowed $465 million under the revolving credit facility on March 16, 2020, which we repaid in July 2020 utilizing, in part, proceeds from the sale of the Company’s interests in Kansas City and Vicksburg.
On July 6, 2020, Colt Merger Sub, Inc., a wholly-owned subsidiary of the Company (the “Escrow Issuer”), issued $3.4 billion aggregate principal amount of 6.25% Senior Secured Notes due 2025 (the “CEI Senior Secured Notes”), $1.8 billion aggregate principal amount of 8.125% Senior Notes due 2027 (the “CEI Senior Notes”) and $1.0 billion aggregate principal amount of 5.75% Senior Secured Notes due 2025 (the “CRC Senior Secured Notes”).
On July 20, 2020, in connection with the closing of the Merger, the Company entered into a new credit agreement (“CEI Credit Agreement”), which provide a five-year senior secured revolving credit facility in an aggregate principal amount of $1.2 billion (the “CEI Revolving Credit Facility will mature on October 1, 2023. The Company’s obligationsFacility”). In addition, Caesars Resort Collection, LLC (“CRC”) entered into incremental amendments to the CRC Credit Agreement (described below), which provided a $1.8 billion incremental term loan.
A portion of the proceeds from these arrangements was used to prepay in full the loans outstanding and terminate all commitments under the Term LoanERI Credit Facility, will mature on April 17, 2024. The Company was requiredand to make quarterly principal payments of $3.6 million onsatisfy and discharge the Term Loan Facility on the last day of each fiscal quarter beginning on June 30, 2017 but satisfied this requirement as a result of the principal prepayment of $444.5 million on September 13, 2017 in conjunction with the issuance of the additionalCompany’s 6% Senior Notes due 2025.2025, 6% Senior Notes due 2026, and the 7% Senior Notes due 2023.
The 6% Senior Notes due 2025 were redeemed at a redemption price of 104.5%, the 7% Senior Notes due 2023 were redeemed at a redemption price of 103.5%, and $210 million aggregate principal amount of the 6% Senior Notes due 2026 was redeemed at a redemption price of 106% with the remaining balance redeemed at a redemption price of 100% of the aggregate principal amount thereof plus the Applicable Premium, as defined in the indenture for the 6% Senior Notes due 2026. The redemption of the senior notes resulted in a loss on extinguishment of debt of $132 million during the three and nine months ended September 30, 2020, which is recorded within Other (loss) income on the Statement of Operations.
CEI Senior Secured Notes due 2025
On July 6, 2020, the Escrow Issuer issued $3.4 billion in aggregate principal amount of 6.25% Senior Secured Notes due 2025 pursuant to an indenture dated July 6, 2020 (the “CEI Senior Secured Notes Indenture”), by and among the Escrow Issuer, U.S. Bank National Association, as trustee, and U.S. Bank National Association, as collateral agent. The Company assumed the rights and obligations under the CEI Senior Secured Notes and the Senior Secured Notes Indenture on July 20, 2020. The CEI Senior Secured Notes will mature on July 1, 2025 with interest payable semi-annually in cash in arrears on January 1 and July 1 of each year, commencing January 1, 2021.
CEI Senior Notes due 2027
On July 6, 2020, the Escrow Issuer issued $1.8 billion in aggregate principal amount of 8.125% Senior Notes due 2027 pursuant to an indenture, dated July 6, 2020 (the “CEI Senior Notes Indenture”), by and between the Escrow Issuer and U.S. Bank National Association, as trustee. The Company assumed the rights and obligations under the CEI Senior Notes and the CEI Senior Notes Indenture on July 20, 2020. The CEI Secured Notes will mature on July 1, 2027 with interest payable semi-annually in cash in arrears on January 1 and July 1 of each year, commencing January 1, 2021.
CRC Senior Secured Notes due 2025
On July 6, 2020, the Company issued $1.0 billion in aggregate principal amount of 5.75% Senior Notes due 2025 pursuant to an indenture, dated July 6, 2020 (the “CRC Senior Secured Notes Indenture”), by and among the Escrow Issuer, U.S. Bank National Association, as trustee and Credit Suisse AG, Cayman Islands Branch, as collateral agent. In addition,connection with the consummation of the Merger, CRC assumed the rights and obligations under the CRC Senior Secured Notes and the CRC Senior Secured Notes Indenture. The CRC Senior Secured Notes will mature on July 1, 2025 with interest payable semi-annually in cash in arrears on January 1 and July 1 of each year, commencing January 1, 2021.
30

CEI Revolving Credit Facility
On July 20, 2020, the Escrow Issuer entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, U.S. Bank National Association, as collateral agent, and certain banks and other financial institutions and lenders party thereto, which provide for a five-year CEI Revolving Credit Facility in an aggregate principal amount of $1.2 billion. The CEI Revolving Credit Facility matures in 2025 and includes a letter of credit sub-facility of $250 million.
The interest rate per annum applicable under the CEI Revolving Credit Facility, at the Company’s option is either (a) LIBOR adjusted for certain additional costs, subject to a floor of 0% or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by JPMorgan Chase Bank, N.A. and (iii) the one-month adjusted LIBOR rate plus 1.00%, in each case plus an applicable margin. Such applicable margin shall be 3.25% per annum in the case of any LIBOR loan and 2.25% per annum in the case of any base rate loan, subject to three 0.25% step-downs based on the Company’s total leverage ratio.
Additionally, the Company is required to make mandatory paymentspay a commitment fee in respect of amounts outstandingany unused commitments under theCEI Revolving Credit Facility within the proceedsamount of certain casualty events, debt issuances, and asset sales and, depending on its consolidated0.50% of principal amount of the commitments of all lenders, subject to a step-down to 0.375% based upon the Company’s total leverage ratio, theratio. The Company may beis also required to applypay customary agency fees as well as letter of credit participation fees computed at a portion of its excess cash flowrate per annum equal to repay amounts outstanding under the Credit Facility.

As of September 30, 2019, the Company had $886.8 million outstandingapplicable margin for LIBOR borrowings on the Term Loandollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer’s customary documentary and 0 outstanding balance underprocessing fees and charges and a fronting fee in an amount equal to 0.125% of the Revolving Credit Facility. daily stated amount of such letter of credit.

The Company had $483.7$266 million of available borrowing capacity, after consideration of $16.3$19 million in outstanding letters of credit under itsCEI Revolving Credit Facility, as of September 30, 2019.2020. The Company applied approximately $150.0paid down $900 million subsequent to September 30, 2020.
Convention Center Mortgage Loan
On September 18, 2020, the Company entered into a loan agreement with VICI to borrow a 5-year, $400 million Forum Convention Center mortgage loan (the “Mortgage Loan”). The Mortgage Loan bears interest at a rate of, proceeds frominitially, 7.7% per annum, which escalates annually to a maximum interest rate of 8.3% per annum.
Assumed Debt Activity
Former Caesars and its subsidiaries incurred the salefollowing indebtedness that remained outstanding following the consummation of Presque Isle Downs to repay amounts outstanding under the Merger.
CRC Term Loans and CRC Revolving Credit Facility.  PursuantFacility
CRC is party to the termsCredit Agreement, dated as of December 22, 2017 (as amended, the indentures governing the Company’s senior notes, the Company will be required“CRC Credit Agreement”), which included a $1.0 billion five-year revolving credit facility (the “CRC Revolving Credit Facility”) and an initial $4.7 billion seven-year first lien term loan, which was increased by $1.8 billion pursuant to make an offer to purchase a portion of its outstanding senior notesincremental agreement executed in connection with the excess proceeds from such sale unless it applies the net proceeds of such sale to either permanently repay outstanding indebtedness or make specified acquisitions or capital expenditures within 365 days of the sale of Presque Isle Downs. Merger (the “CRC Term Loan”).
The Company anticipates applying the proceeds of the Presque Isle Downs sale to permanently repay indebtedness and make qualifying capital expenditures prior to the anniversary of the sale.

CRC Term Loan matures in 2024. The interest rate per annum applicable to loans under theCRC Revolving Credit Facility are, at our option, either LIBOR plusmatures in 2022 and includes a margin ranging from 1.75% to 2.50% or a base rate plus a margin from 0.75% to 1.50%, the margin is based on our total leverage ratio.letter of credit sub-facility. The interest rate per annum applicable to the loans under theCRC Term Loan Facility is, at our option, either LIBOR plus 2.25%, or a base rate plus 1.25%; provided, however, thatrequires scheduled quarterly principal payments in no event will LIBOR be less than zero or the base rate be less than 1.00%. Additionally, the Company pays a commitment fee on the unused portionamounts equal to 0.25% of the Revolvingoriginal aggregate principal amount, with the balance due at maturity. The CRC Credit Facility of 0.50% per annum.Agreement also includes customary voluntary and mandatory prepayment provisions, subject to certain exceptions. As of September 30, 2019, the weighted average interest rate on the Term Loan2020, approximately $64 million was 4.31%.  

Senior Notes

6% Senior Notes due 2026

On September 20, 2018, Delta Merger Sub, Inc. (“Escrow Issuer”), a Delaware corporation and a wholly-owned subsidiarycommitted to outstanding letters of the Company, issued $600 million aggregate principal amount of 6.0% senior notes due 2026 (the “6% Senior Notes due 2026”) pursuant to an indenture, dated ascredit. As of September 20, 2018 (the “2026 Indenture”), between Escrow Issuer and U.S. Bank, National Association, as Trustee. Interest on30, 2020, there were no borrowings outstanding under the 6% Senior Notes due 2026 will be paid every semi-annually in arrears on March 15 and September 15.

CRC Revolving Credit Facility.

The 6% Senior Notes due 2026 were general unsecured obligationsBorrowings under the CRC Credit Agreement bear interest at a rate equal to either (a) LIBOR adjusted for certain additional costs, subject to a floor of Escrow Issuer’s upon issuance and, upon the assumption of such obligations0% or (b) a base rate determined by the Company and the subsidiary guarantors (the “Guarantors”) upon consummation of the Tropicana Acquisition, became general unsecured obligations of the Company and the Guarantors, ranking senior in right of payment to all of the Company’s existing and future debt that is expressly subordinated in right of paymentreference to the 6% Senior Notes due 2026 andhighest of (i) the guarantees, ranking equally in right of payment with all offederal funds rate plus 0.50%, (ii) the applicable obligor’s existing and future senior liabilities, including the obligationsprime rate as determined by Credit Suisse AG, Cayman Islands Branch, as administrative agent under the Company’s existing 7% Senior Notes due 2023CRC Credit Agreement and 6% Senior Notes due 2025, and are effectively subordinated to all of(iii) the applicable obligor’s existing and future secured debt, including indebtedness under the Company’s Term Loan and Revolving Credit Facility and the Lumière Note (as defined in the 2026 Indenture)one-month adjusted LIBOR rate plus 1.00%, in each case plus an applicable margin. Such applicable margin shall be (a) with respect to the extentCRC Term Loan, 2.75% per annum in the case of any LIBOR loan or 1.75% per annum in the case of any base rate loan, (b) with respect to the CRC Incremental Term Loan, 4.50% per annum in the case of any LIBOR loan or 3.50% in the case of any base rate loan and (c) in the case of the valueCRC Revolving Credit Facility, 2.25% per annum in the case of any LIBOR loan and 1.25% per annum in the case of any base rate loan, subject in the case of the collateral securing such debt. CRC Revolving Credit Facility to two 0.125% step-downs based on CRC’s senior secured leverage ratio (“SSLR”), the ratio of first lien senior secured net debt to adjusted earnings before interest, taxes, depreciation and amortization. The CRC Revolving Credit Facility is subject to a financial covenant discussed below.

31

In addition, CRC is required to pay a commitment fee in respect of any commitments under the 6% Senior Notes due 2026 andCRC Revolving Credit Facility in the related guarantees are structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries and other entities in which the Company has an equity interest that do not guarantee the 6% Senior Notes due 2026 (other than indebtedness and liabilities owed to the Company or the Guarantors).

6% Senior Notes due 2025

On March 29, 2017, the Company issued at par $375.0 million aggregate principal amount of 6.0% senior notes due 2025 (the “6% Senior Notes due 2025”) pursuant to an indenture, dated as of March 29, 2017 (the “2025 Indenture”), between Eagle II and U.S. Bank, National Association, as Trustee. The 6% Senior Notes due 2025 will mature on April 1, 2025, with interest payable semi-annually in arrears on April 1 and October 1. In connection with the consummation of the Isle Acquisition on May 1, 2017, the Company assumed Eagle II’s obligations under the 6% Senior Notes due 2025 and the 2025 Indenture and certain of the Company’s subsidiaries (including Isle and certain of its subsidiaries) executed guarantees of the Company’s obligations under the 6% Senior Notes due 2025.

On September 13, 2017, the Company issued an additional $500.0 million principal amount of its 6% Senior Notes due 2025 at an issue price equal to 105.5%0.50% of the principal amount of the 6% Senior Notes due 2025. The additional notes were issued pursuantcommitments, subject to step-downs to 0.375% and 0.25% based upon CRC’s SSLR. CRC is also required to pay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the 2025 Indenture that governsapplicable margin for LIBOR borrowings on the 6% Senior Notes due 2025. The Company used the proceedsdollar equivalent of the offering to repay $78.0 milliondaily stated amount of outstanding borrowings underletters of credit, plus such letter of credit issuer’s customary documentary and processing fees and charges and a fronting fee in an amount equal to 0.125% of the previous revolving credit facilitydaily stated amount of such letter of credit.

CRC Notes
On October 16, 2017, CRC issued $1.7 billion aggregate principal amount of 5.25% senior notes due 2025 (the “CRC Notes”).
Former Caesars 5% Convertible Notes
On October 6, 2017, Former Caesars issued $1.1 billion aggregate principal amount of 5.00% convertible senior notes maturing in 2024 (the “5% Convertible Notes”).
The 5% Convertible Notes are convertible into the weighted average of the number of shares of Company Common Stock and usedamount of cash actually received per share by holders of common stock of Former Caesars that made elections for consideration in the remainder to repay $444.5Merger. As of September 30, 2020, we have paid approximately $574 million outstanding borrowings under the previous term loan facility and related accrued interest.

7% Senior Notes due 2023

On July 23, 2015, the Company issued at par $375.0approximately 6.8 million shares upon conversion of $487 million in aggregate principal amount of 7.0% senior notes due 2023 (“7% Seniorthe 5% Convertible Notes due 2023”) pursuant toduring 2020. Through November 2, 2020, we paid an indenture, dated asadditional $328 million and issued 3.9 million shares upon conversion of July 23, 2015 (the “2023 Indenture”),an additional $281 million of the 5% Convertible Notes.

The Company has determined that the 5% Convertible Notes contain derivative features that require bifurcation. The Company separately accounts for the liability component and equity conversion option of the 5% Convertible Notes. The difference between the Companyoverall instrument value and U.S. Bank, National Association, as Trustee.the value of the liability component was assumed to be the value of the equity conversion option component. The 7% Senior Notes due 2023 will maturevalue of the liability is determined based on August 1, 2023,a discounted cash flow of the debt instrument. See Note 11 for more information on the 5% Convertible Notes’ fair value measurements.
Net amortization of the debt issuance costs and the discount and/or premium associated with the Company’s indebtedness totaled $34 million and $2 million for the three months ended September 30, 2020 and 2019, respectively, and $37 million and $6 million for the nine months ended September 30, 2020 and 2019 respectively. Amortization of debt issuance costs is computed using the effective interest payable semi-annuallymethod and is included in arrearsinterest expense.
Annual Estimated Debt Service Requirements as of September 30, 2020
RemainingYears Ended December 31,
(In millions)20202021202220232024ThereafterTotal
Annual maturities of long-term debt$16 $67 $67 $67 $5,036 $10,968 $16,221 
Estimated interest payments200 850 820 790 790 690 4,140 
Total debt service obligation (a)
$216 $917 $887 $857 $5,826 $11,658 $20,361 
____________________
(a)Debt principal payments are estimated amounts based on February 1maturity dates and August 1potential borrowings under our revolving credit facilities. Interest payments are estimated based on the forward-looking LIBOR curve and include the estimated impact of each year.

the ten interest rate swap agreements related to our CRC Credit Facility (see Note 11). Actual payments may differ from these estimates.

Lumière Loan

We

The Company borrowed $246 million from GLPI to fund the purchase price of the real estate underlying Lumière. The Lumière, Loan bears interest at a rate equalwhich was scheduled to (i) 9.09% until October 1, 2019 and (ii) 9.27% until October 1, 2020, and maturesmature on October 1, 2020. TheOn June 24, 2020, the Company received approval from Missouri Gaming Commission to sell Lumière Loan was secured byto GLPI and leaseback the property under a first priority mortgage onlong-term financing obligation. As of September 30, 2020, the Lumière real property that was released pursuant to its terms on October 1, 2019. In connection withestate has been refinanced under a financing obligation. See Note 9.
Debt Covenant Compliance
The CRC Credit Agreement, the issuance of the Lumière Loan, we agreed to use our commercially reasonable efforts to transfer one or more of the Grand Victoria Casino, Isle Casino Bettendorf, Isle Casino Hotel Waterloo, Isle of Capri Lula, Lady Luck Casino Vicksburg and Mountaineer Casino, Racetrack and Resort or such other property or properties mutually acceptable to us and GLPI, provided that the aggregate value of such property, individually or collectively, is at least $246 million (the “Replacement Property”), to GLPI with a simultaneous leaseback to us of such Replacement Property. In connection with such Replacement Property sale, (i) we and GLPI will enter into an amendment to the Master Lease to revise the economic terms to include the Replacement Property, (ii) GLPI, or one of its affiliates, will assume the Lumière Loan and Tropicana St. Louis RE’s obligations under the Lumière Loan in consideration of the acquisition of the Replacement Property and our obligations under the Lumière Loan will be deemed to have been satisfied, and (iii) in the event the value of the Replacement Property is greater than the our outstanding obligations under the Lumière Loan, GLPI will pay us the difference between the value of the Replacement PropertyCEI Revolving Credit Facility and the amountindentures governing the CEI Senior Secured Notes, the CEI Senior Notes, the CRC Senior Secured Notes and the CRC's 5.25% senior notes due 2025 (the “CRC Notes”) contain covenants which are standard and customary for these types of outstanding obligations underagreements. These include negative covenants, which, subject to certain exceptions and baskets, limit the Lumière Loan. If such Replacement Property transaction is not consummated priorCompany’s and its subsidiaries’ ability to (among other items) incur additional indebtedness, make investments, make restricted payments, including dividends, grant liens, sell assets and make acquisitions.
32

The indenture for the maturity date of the Lumière Loan, other than5% Convertible Notes contained limited covenants as a result of amendments that became effective in connection with the consummation of the Merger. The CRC Revolving Credit Facility and CEI Revolving Credit Facility include a maximum first-priority net senior secured leverage ratio financial covenant of 6.35:1, which is applicable solely to the extent that certain failurestesting conditions are satisfied. Failure to performcomply with such covenants could result in an acceleration of the maturity of indebtedness outstanding under the relevant debt document.
The Company’s results of operations have been materially adversely affected by GLPI, then the amounts outstanding will be paid in fullimpacts of the COVID-19 public health emergency. As a result, the current terms of the CEI Credit Agreement and the rentCRC Credit Agreement provide that the financial covenant measurement period is not effective through September 30, 2021 so long as the Company and CRC, respectively, comply with a minimum liquidity requirement, which includes any such availability under the Master Lease will automatically increase, subject to certain escalations.

Debt Covenant Compliance

applicable revolving credit facilities.

As of September 30, 2019, we were2020, the Company was in compliance with all of the applicable financial covenants under the 7%CEI Credit Agreement, the CRC Credit Agreement, CEI Senior Secured Notes, CEI Senior Notes, due 2023, 6%and CRC Senior Secured Notes, due 2025, 6% Senior5% Convertible Notes due 2026, theand CRC Notes.
Guarantees
The CEI Revolving Credit Facility and the Lumière Loan.

CEI Senior Secured Notes are guaranteed on a senior secured basis by each existing and future material wholly-owned domestic subsidiary of CEI (subject to certain exceptions) and are secured by substantially all of the existing and future property and assets of CEI and its subsidiary guarantors (subject to certain exceptions). The CEI Senior Notes are guaranteed on a senior unsecured basis by such subsidiaries.

The CRC Credit Agreement and the CRC Senior Secured Notes are guarantees on a senior secured basis by each existing and future material wholly-owned domestic subsidiary of CRC (subject to certain exceptions) and are secured by substantially all of the existing and future property and assets of CEI and its subsidiary guarantors (subject to certain exceptions). The CRC Notes are guaranteed on a senior unsecured basis by such subsidiaries.

Note 12.11. Fair Value Measurements

Items Measured at Fair value is an exit price, representingValue on a Recurring Basis: The following table sets forth the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly,assets and liabilities measured at fair value ison a market based measurement thatrecurring basis, by input level, in the Consolidated Condensed Balance Sheets at September 30, 2020 and December 31, 2019:
(In millions)September 30, 2020
Assets:Level 1Level 2Level 3Total
Restricted cash and investments$8 $3 $50 $61 
Marketable securities31 12 0 43 
Total assets at fair value$39 $15 $50 $104 
Liabilities:
Other liabilities related to restricted investments$0 $0 $4 $4 
Derivative instruments - 5% Convertible Notes0 575 0 575 
Derivative instruments - interest rate swaps and FX forward0 114 0 114 
Total liabilities at fair value$0 $689 $4 $693 
December 31, 2019
Assets:Level 1Level 2Level 3Total
Restricted cash and investments$11 $2 $29 $42 
Marketable securities27 8 0 35 
Total assets at fair value$38 $10 $29 $77 
The change in restricted cash and investments and liabilities valued using Level 3 inputs for the nine months ended September 30, 2020 is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there is a three‑tier fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows:

•

Level 1 Inputs: Quoted market prices in active markets for identical assets or liabilities.

•

Level 2 Inputs: Observable market‑based inputs or unobservable inputs that are corroborated by market data.

33

•

Level 3 Inputs: Unobservable inputs that are not corroborated by market data.

(In millions)Level 3 InvestmentsLevel 3
Other Liabilities
Fair value of investment and liabilities at December 31, 2019$29 $0 
Value of additional investment received5 2 
Unrealized gain16 2 
Fair value at September 30, 2020$50 $4 

The following methods and assumptions are used to estimate

There were 0 transfers in or out of Level 3 investments during the fair value of each class of financial instruments for which it is practical to estimate fair value:

Cash and Cash Equivalents: Cash equivalents include cash held in money market funds and investments that can be redeemed immediately at the current net asset value per share. A money market fund is a mutual fund whose investments are primarily in short‑term debt securities designed to maximize current income with liquidity and capital preservation, usually maintaining per share net asset value at a constant amount, such as one dollar. Cash and cash equivalents also include cash maintained for gaming operations. The carrying amounts approximate the fair value because of the short maturity of those instruments (Level 1).

Restricted Cash and Investments and Other Liabilities related to nine months ended September 30, 2020.

Restricted Investments:
The estimated fair values of ourthe Company’s restricted cash and investments are based upon quoted prices available in active markets (Level 1), or quoted prices for similar assets in active and inactive markets (Level 2), or quoted prices available in active markets adjusted for time restrictions related to the sale of the investment (Level 3) and represent the amounts wethe Company would expect to receive if wethe Company sold ourthe restricted cash and investments.

Restricted investments include shares acquired in conjunction with the Company’s sports betting agreements that contain restrictions related to the ability to liquidate shares within a specified timeframe.

In November 2018, the Company entered into a 20-year agreement with The Stars Group Inc. (“TSG”) to provide TSG with options to obtain access to a second skin for online sports wagering and third skin for real money online gaming and poker with respect to the Company’s properties in the United States. Under the terms of the agreement, the Company received 1 million TSG common shares as a revenue share from the operation of the applicable verticals by TSG under the Company’s licenses. The fair value of the shares received has been deferred and is recognized as revenue on a straight-line basis over the 20-year agreement term. All shares are subject to a one year restriction on transfer from the date they are received. On May 5, 2020, Flutter Entertainment PLC (“Flutter”) completed the acquisition of all of the issued and outstanding common shares of TSG in exchange for 0.2253 Flutter shares per common share of TSG.
As of September 30, 2020 and December 31, 2019, the fair value of unrestricted shares totaled $19 million and $14 million, respectively, net of cumulative unrealized gains of $9 million and $4 million, respectively, and is included in Prepayments and other current assets on the Consolidated Condensed Balance Sheet. In addition, as of September 30, 2020, the fair value of restricted shares in Flutter totaled $8 million, net of cumulative unrealized gains of $3 million, and is included in restricted cash and investments on the Consolidated Condensed Balance Sheet. The Company recorded unrealized gains of $5 million and $8 million during the three and nine months ended September 30, 2020, respectively, and unrealized loss of $2 million during the three months ended September 30, 2019. For the nine months ended September 30, 2019, the Company recorded an unrealized loss of less than a million.
Marketable Securities:  Securities 
Marketable securities consist primarily of trading securities held by the Company’s captive insurance subsidiary.subsidiary and unrestricted shares acquired in conjunction with the Company’s sports betting agreements. These investments also include collateral for several escrow and trust agreements with third-party beneficiaries. The estimated fair values of the Company’s marketable securities are determined on an individual asset basis based upon quoted prices of identical assets available in active markets (Level 1), quoted prices of identical assets in inactive markets, or quoted prices for similar assets in active and inactive markets (Level 2), and represent the amounts wethe Company would expect to receive if wethe Company sold these marketable securities.

Long‑term Debt:

Derivative Instruments
The fair valueCompany does not purchase or hold any derivative financial instruments for trading purposes.
5% Convertible Notes - Derivative Liability
On October 6, 2017, Former Caesars issued $1.1 billion aggregate principal amount of our long-term debt5% Convertible Notes.
34

The 5% Convertible Notes are convertible into the weighted average of the number of shares of Company Common Stock and amount of cash actually received per share by holders of common stock of Former Caesars that made elections for consideration in the Merger. As a result, the 5% Convertible Notes are convertible into a number of shares of Company Common Stock that is equal to approximately 0.014 shares of Company Common Stock and $1.17 of cash per $1.00 principal amount of 5% Convertible Notes. The 5% Convertible Notes are convertible at any time at the option of the holders thereof and, beginning in October 2020, are convertible at the option of the Company if the last reported sale price of Company Common Stock equals or exceeds 140% of the conversion price for the 5% Convertible Notes in effect on each of at least 20 trading days during any 30 consecutive trading day period. As of September 30, 2020, approximately $487 million of the 5% Convertible Notes have been converted into cash and shares resulting in a net gain of approximately $34 million which is recorded within other long-term obligations is estimated based(loss) income on the quoted market priceStatement of the underlying debt issue (Level 1) or, when a quoted market price is not available, the discounted cash flowOperations.
The outstanding balance of future payments utilizing current rates available to us for the debt$607 million of similar remaining maturities (Level 2). Debt obligations with a short remaining maturity have a carrying amount that approximates fair value.

Acquisition‑Related Contingent Considerations: Contingent consideration related to the July 2003 acquisition of Scioto Downs represents the estimate of amounts to be paid to former stockholders of Scioto Downs under certain earn-out provisions. Acquisition related contingent consideration of $0.4which $10 million and $0.5 million is includedwas held in accrued other liabilities on the Consolidated Balance Sheetstrust as of September 30, 20192020, would result in the issuance of an aggregate of 8.4 million shares of Company Common Stock and December 31, 2018, respectivelypayment of $708 million upon conversion of the remaining outstanding 5% Convertible Notes. As of September 30, 2020, the remaining life of the 5% Convertible Notes is approximately 4 years.

Management analyzed the conversion features for derivative accounting consideration under ASC Topic 815, .


Items Measured at Fair ValueDerivatives and Hedging, (“ASC 815”) and determined that the 5% Convertible Notes contain bifurcated derivative features and qualify for derivative accounting. In accordance with ASC 815, the Company has bifurcated the conversion features of the 5% Convertible Notes and recorded a derivative liability. The 5% Convertible Notes derivative features are not designated as hedging instruments. The derivative features of the 5% Convertible Notes are carried on a Recurring Basis: The following table sets forth the assets measuredCompany’s Balance Sheet at fair value onin Other long-term liabilities. The derivative liability is marked-to-market each measurement period and the changes in fair value as a recurring basis, by input level,result of fluctuations in the Consolidated Balance Sheets at September 30, 2019 and December 31, 2018 (amountsshare price of our common stock resulted in thousands):

 

 

September 30, 2019

 

Assets:

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Restricted cash and investments

 

$

 

13,857

 

 

$

 

2,221

 

 

$

 

42,925

 

 

$

 

59,003

 

Marketable securities

 

 

 

12,665

 

 

 

 

7,768

 

 

 

 

—

 

 

 

 

20,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities related to restricted investments

 

 

 

—

 

 

 

 

—

 

 

 

 

7,903

 

 

 

 

7,903

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

Assets:

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Restricted cash and investments

 

$

 

19,481

 

 

$

 

4,467

 

 

$

 

16,008

 

 

$

 

39,956

 

Marketable securities

 

 

 

9,515

 

 

 

 

7,442

 

 

 

 

—

 

 

 

 

16,957

 

The change in restricted cash and investments valued using Level 3 inputsa loss of $87 million for the nine monthsthree month ended September 30, 20192020, which was recorded as a component of Other (loss) income in the Statement of Operations. The derivative liability associated with the 5% Convertible Notes will remain in effect until such time as the underlying convertible notes are exercised or terminated and the resulting derivative liability will be transitioned from a liability to equity as of such date.

Valuation Methodology
The 5% Convertible Notes had an initial face value of $1.1 billion, an initial term of 7 years, and a coupon rate of 5%.
As of September 30, 2020 we estimated the fair value of the 5% Convertible Notes using a market-based approach that incorporated the value of both the straight debt and conversion features of the 5% Convertible Notes. The valuation model incorporated actively traded prices of the 5% Convertible Notes as of the reporting date, and assumptions regarding the incremental cost of borrowing for CEI. The key assumption used in the valuation model is the actively traded price of 5% Convertible Notes and the incremental cost of borrowing is an indirectly observable input. The fair value for the conversion features of the 5% Convertible Notes is classified as follows:

Level 2 measurement.

 

 

Level 3 Investments

 

 

Level 3 Other Liabilities

 

Fair value of investment and liabilities at December 31, 2018

 

$

 

16,008

 

 

$

 

—

 

Value of additional investment received

 

 

 

27,329

 

 

 

 

8,774

 

Unrealized loss

 

 

 

(412

)

 

 

 

(871

)

Fair value at September 30, 2019

 

$

 

42,925

 

 

$

 

7,903

 

Key Assumptions as of September 30, 2020:

•Actively traded price of 5% Convertible Notes - $193.00
•Incremental cost of borrowing - 6.0%
Forward contracts
In November 2018, werelation to the proposed acquisition of William Hill plc, on September 28, 2020, the Company entered into a 20-yearforeign exchange forward contract to hedge the risk of appreciation of the GBP denominated purchase price. Under the agreement, with TSG pursuantthe Company will purchase £1.3 billion at a contracted exchange rate. An unrealized loss of $5 million related to which we agreed to provide TSG with options to obtain access to our second skin for online sports wageringthe change in fair value during the period from September 28, 2020 and third skin for real money online gaming and poker, in each case with respect to our propertiesSeptember 30, 2020 was recorded in the United States.consolidated condensed statement of operations. As of September 30, 2020, the forward derivative liability of $5 million was recorded in Other long-term liabilities. On October 1, 2020 the contract was cancelled.
On October 9, 2020, the Company entered into a foreign exchange forward contract to hedge the risk of appreciation of the GBP denominated purchase price. Under the agreement, the Company will purchase £536 million at a contracted exchange rate. The forward term of the contract ends on March 31, 2021.
Interest Rate Swap Derivatives
We use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. As of September 30, 2020, Former Caesars has entered into 10 interest rate swap agreements to fix the interest rate on $3.0 billion of variable rate debt related to the CRC Credit Agreement. The interest rate swaps are designated as cash flow hedging instruments. The
35

difference to be paid or received under the terms of the agreement, we will receive a revenue share frominterest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense at settlement. Changes in the operation of the applicable verticals by TSG under our licenses. Pursuantvariable interest rates to be received pursuant to the terms of the TSG agreement, we received 1.1 million TSG common shares, and an additional $5.0 million in TSG common shares became payable to us upon TSG’s exercise of its first option, which shares we expect to receive in the fourth quarter of 2019. We may also receive additional TSG common shares in theinterest rate swap agreements will have a corresponding effect on future based on TSG net gaming revenue generated in our markets. cash flows.
The initial 1.1 million TSG common shares are subject to a restriction on transfer and may not be sold until November 2019, and the TSG common shares that are payable to us in connection with TSG’s exercise of its first option may not be sold for a period of one year from the date such shares are issued.

At September 30, 2019, the fair valuemajor terms of the Company’s shares of TSG totaled $15.8 million and is included in restricted cash and investments on the Consolidated Balance Sheets. Upon entry into the TSG agreement, the Company also recorded deferred revenue associated with the shares received and recognized revenue of $0.3 million and $1.0 million during the three and nine months ended September 30, 2019, respectively. Asinterest rate swap agreements as of September 30, 2019, the balance of the TSG deferred revenue totaled $17.7 million and is recorded in other long-term liabilities on the Consolidated Balance Sheets. As part of the agreement with William Hill (see Note 7), the Company is obligated to pay William Hill US 50% of the proceeds received from selling the TSG shares. At September 30, 2019, the estimated obligation was $7.9 million and is included in accrued other liabilities on the Consolidated Balance Sheets.

There were 0 transfers between Level 1 and Level 2 investments.

2020 are as follows:

Effective Date
Notional Amount
(In millions)
Fixed Rate PaidVariable Rate Received as of
September 30, 2020		Maturity Date
12/31/20182502.274%0.156%12/31/2022
12/31/20182002.828%0.156%12/31/2022
12/31/20186002.739%0.156%12/31/2022
1/1/20192502.153%0.156%12/31/2020
1/1/20192502.196%0.156%12/31/2021
1/1/20194002.788%0.156%12/31/2021
1/1/20192002.828%0.156%12/31/2022
1/2/20192502.172%0.156%12/31/2020
1/2/20192002.731%0.156%12/31/2020
1/2/20194002.707%0.156%12/31/2021

Valuation Methodology
The estimated fair values of the Company’s financialour 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 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 follows (amountsLevel 2.
Financial Statement Effect
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 gain of $18 million during the threemonths ended September 30, 2020. AOCI reclassified to Interest expense on the Statements of Operations was $12 million for the three months ended September 30, 2020. The estimated amount of existing losses that are reported in thousands):

AOCI at the reporting date that are expected to be reclassified into earnings within the next 12 months is approximately $62 million. As of September 30, 2020, the interest rate swaps derivative liability of $109 million was recorded in Other long-term liabilities.

 

 

September 30, 2019

 

 

December 31, 2018

 

 

 

Carrying

 

 

Fair

 

 

Carrying

 

 

Fair

 

 

 

Amount

 

 

Value

 

 

Amount

 

 

Value

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7% Senior Notes due 2023

 

$

 

369,761

 

 

$

 

392,813

 

 

$

 

368,925

 

 

$

 

385,312

 

6% Senior Notes due 2025

 

 

 

879,479

 

 

 

 

923,125

 

 

 

 

880,086

 

 

 

 

840,000

 

6% Senior Notes due 2026

 

 

 

581,513

 

 

 

 

660,000

 

 

 

 

580,370

 

 

 

 

567,000

 

Term Loan

 

 

 

871,783

 

 

 

 

884,533

 

 

 

 

938,324

 

 

 

 

916,088

 

Revolving Credit Facility

 

 

 

—

 

 

 

 

—

 

 

 

 

245,000

 

 

 

 

245,000

 

Lumière Loan

 

 

 

246,000

 

 

 

 

246,000

 

 

 

 

246,000

 

 

 

 

246,000

 

Other long-term debt

 

 

 

2,657

 

 

 

 

2,657

 

 

 

 

3,030

 

 

 

 

3,030

 

Accumulated Other Comprehensive Income
The changes in AOCI by component, net of tax, for the period through September 30, 2020 are shown below.
(In millions)Unrealized Net Gains on Derivative InstrumentsForeign Currency Translation AdjustmentsTotal
Balances as of December 31, 2019$0 $0 $0 
Other comprehensive income before reclassifications2 1 3 
Amounts reclassified from accumulated other comprehensive income12 0 12 
Total other comprehensive income, net of tax14 1 15 
Balances as of September 30, 2020$14 $1 $15 

Note 13.12. Earnings per Share

The following table illustrates the reconciliation of the numerators and denominators of the basic and diluted net (loss) income per share computations for the three and nine months ended September 30, 20192020 and 2018 (dollars2019:
36

Three Months Ended
September 30,		Nine Months Ended
September 30,
(In millions, except per share data)2020201920202019
Net (loss) income attributable to Caesars$(926)$37 $(1,202)$94 
Shares outstanding:
Weighted average shares outstanding – basic152 78 104 78 
Effect of dilutive securities:
Stock-based compensation awards— 1 — 1 
Weighted average shares outstanding – diluted152 79 104 79 
Basic (loss) income per share from continuing operations$(6.09)$0.48 $(11.55)$1.21 
Basic loss per share from discontinued operations0 0 (0.01)0 
Net (loss) income per common share attributable to common stockholders – basic:$(6.09)$0.48 $(11.56)$1.21 
Diluted (loss) income per share from continuing operations$(6.09)$0.47 $(11.55)$1.20 
Diluted loss income per share from discontinued operations0 0 (0.01)0 
Net (loss) income per common share attributable to common stockholders – diluted:$(6.09)$0.47 $(11.56)$1.20 
For a period in thousands, exceptwhich the Company generated a net loss, the weighted average shares outstanding - basic was used in calculating diluted loss per share amounts):

because using diluted shares would have been anti-dilutive to loss per share.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income available to common stockholders

 

$

 

37,055

 

 

$

 

37,704

 

 

$

 

94,220

 

 

$

 

95,355

 

Shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

 

77,721,353

 

 

 

 

77,522,664

 

 

 

 

77,657,553

 

 

 

 

77,445,611

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

103,337

 

 

 

 

93,530

 

 

 

 

105,036

 

 

 

 

125,861

 

RSUs

 

 

 

625,057

 

 

 

 

667,394

 

 

 

 

825,928

 

 

 

 

636,568

 

Weighted average shares outstanding – diluted

 

 

 

78,449,747

 

 

 

 

78,283,588

 

 

 

 

78,588,517

 

 

 

 

78,208,040

 

Net income per common share attributable to

     common stockholders – basic:

 

$

 

0.48

 

 

$

 

0.49

 

 

$

 

1.21

 

 

$

 

1.23

 

Net income per common share attributable to

     common stockholders – diluted:

 

$

 

0.47

 

 

$

 

0.48

 

 

$

 

1.20

 

 

$

 

1.22

 

Weighted-Average Number of Anti-Dilutive Shares Excluded from Calculation of EPS

Three Months Ended
September 30,		Nine Months Ended
September 30,
(In millions)2020201920202019
Stock-based compensation awards3 0 7 0 
5% Convertible notes8 0 8 0 
Total anti-dilutive common stock11 0 15 0 
Note 14.13. Litigation, Commitments and Contingencies

Litigation.

Litigation
The Company is a party to various legal proceedings. Such proceedings can be costly, time consuming and unpredictable and, therefore, no assurance can be given that the final outcome of such proceedings will not materially impact the Company’s consolidated financial condition or results of operations. While the Company maintains insurance coverage that the Company believes is adequate to mitigate the risks of such proceedings, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters.
On July 14, 2020, the Company filed a lawsuit for damages and declaratory relief in state court in New York relating to a transfer fee of $50 million that was assessed by the Indiana Gaming Commission upon the Company’s purchase of Hoosier Park Racino and Casino in 2017 from Centaur Holdings, LLC. Contemporaneous with the filing of the lawsuit, the Company notified Centaur that it was withholding payment of $50 million from Centaur Holdings that was otherwise due as a portion of a deferred payment for the purchase from Centaur. In the lawsuit, the Company seeks a declaration from the Court that the Sellers are required to indemnify Caesars for its losses arising out of or relating to payment of the transfer fee and that the Company is entitled to offset the $50 million transfer fee against payments otherwise due to Centaur.
General
In addition, the Company is a party to various legal and administrative proceedings, which have arisen in the normal course of its business. Estimated losses are accrued for these proceedings when the loss is probable and can be estimated. The current liability for the estimated losses associated with these proceedings is not material to the Company’s consolidated financial condition and those estimated losses are not expected to have a material impact on itsthe Company’s results of operations. In addition,
Contractual Commitments
The following contractual commitments were assumed by the Company maintains what it believes is adequate insurance coverageassociated with Former Caesars as result of the consummation of the Merger.
37

Extension of Casino Operating Contract and Ground Lease for Harrah’s New Orleans
On April 1, 2020, the Company and the State of Louisiana, by and through the Louisiana Gaming Control Board (the “LGCB”), entered into an Amended and Restated Casino Operating Contract (as amended by a First Amendment to further mitigate the risksAmended and Restated Casino Operating Contract dated April 9, 2020, the “Casino Operating Contract”) to amend and restate the casino operating contract between the Company and the LGCB with respect to Harrah’s New Orleans to, among other things: (a) extend the term of such proceedings. However, such proceedings can be costly, time consuming and unpredictable and, therefore, no assurance can be given that the final outcome of such proceedings may not materially impact the Company’s consolidated financial conditionauthority to conduct gaming operations at Harrah’s New Orleans for thirty (30) years to 2054; (b) require the Company to make (i) a capital investment of $325 million on or results of operations. Further, no assurance can be given thataround Harrah’s New Orleans by July 15, 2024 (subject to extensions for force majeure events) (the “Capital Investment”), (ii) certain one-time payments totaling $65 million to the Company’s existing insurance coverage will be sufficient to cover losses, if any, arising from such proceedings.

As of November 6, 2019, 8 putative class action lawsuits have been filed in connection with the Merger.  The Company has been named as a party in three of such actions: Stein v. Caesars Entertainment Corp., et al, Civil Action No. 1:19-cv-01656, United States District Court for the District of Delaware (9/5/2019), Romaniuk v. Caesars Entertainment Corp., et al, Civil Action No 1:19-cv-17871, United States District Court for the DistrictCity of New Jersey (9/11/2019),Orleans (the “City”) and Biasi v. Caesars Entertainment Corp., et al, Civil Action No. 1:19-cv-08547, United States District Court for the Southern DistrictState of New York (9/13/2019).  In general,Louisiana, (iii) annual payments totaling $9 million to the complaints assert claims under sections 14(a), 20(a)City and Rule 14a-9the State of Louisiana and (iv) an annual license payment of $3 million to the Securities Exchange Act of 1934 challengingLGCB starting April 1, 2022; and (c) delay the adequacy of certain disclosures in the joint proxy statement/prospectus filed in connection with the Merger.  In addition, one of the complaints, indate by which the Company has not been namedmust deliver certain payments to the State of Louisiana and the City primarily driven by the reopening date of the casino.

On April 3, 2020, the Company, New Orleans Building Corporation (“NOBC”) and the City (collectively, the “Ground Lease Parties”) entered into a party, alleges state law breachSecond Amended and Restated Lease Agreement (as amended by a letter agreement of fiduciary duty claims against the Caesars directors.  The complaints seek,same date, the “Ground Lease”) to amend and restate the ground lease among the Ground Lease Parties with respect to Harrah’s New Orleans to, among other relief, an injunction preventingthings: (a) require the Company to make (i) the Capital Investment, (ii) certain payments to the City as also required by the Casino Operating Contract and (iii) certain one-time payments totaling $29 million to NOBC; (b) increase the minimum amount of certain annual payments to be made by the Company to NOBC; (c) provide that NOBC approves (subject to the satisfaction of certain conditions) of (i) the consummation of the Merger damages in the event that the Merger is consummated and attorneys’ fees.   The Company intends to vigorously defend itself against these claims.


On September 23, 2019,(ii) a sale-leaseback transaction between the Company and an affiliate of VICI; and (d) delay the date by which the Company must deliver certain of its officers were named as defendants in a putative class action complaint filed inpayments to the United States District Court forCity and NOBC primarily driven by the District of New Jersey and captioned as Elberts v. Eldorado Resorts, Inc., Case No. 2:19-cv-18230-SRC-CLW.  The complaint asserts violations of Sections 10(b) and 20(a)reopening date of the Securities Exchange Actcasino.

As certain operations have resumed at Harrah’s New Orleans, under Former Caesars, approximately $61 million was paid of 1934which $47 million reflected additional gaming rights, and SEC Rule 10b-5 promulgated under$14 million was operating costs, related to the Securities Exchange Act of 1934.  The complaint alleges thatpayments described above. Subsequent to the Merger, the Company made material misstatements and/additional payments totaling approximately $20 million of additional gaming rights as of, or omissions duringfor the period from March 1, 2019 throughended, September 2, 2019.  The allegations relate30, 2020, related to the subpoenas thatpayments described above.
Sports Sponsorship/Partnership Obligations
We have agreements with certain professional sports leagues and teams, sporting event facilities and sports television networks for tickets, suites, and advertising, marketing, promotional and sponsorship opportunities. As of September 30, 2020, obligations related to these agreements were $318 million with contracts extending through 2035. We recognize expenses in the period services are rendered in accordance with the various agreements. In addition, assets or liabilities may be recorded related to the timing of payments as required by the respective agreement. On September 1, 2020, we amended our agreement with Turner Sports, Inc. for advertising and televised specials. On September 10, 2020, the Company entered into a multi-year agreement with ESPN including link integrations from ESPN’s website and app to sportsbooks with our sports betting partner, William Hill.
Self-Insurance
We are self-insured for workers compensation and other risk insurance, as well as health insurance. Our total estimated self-insurance liability was $235 million as of September 30, 2020.
Due to the novel nature of the Company’s directors and officers receiveddisruption resulting from the SEC, whichCOVID-19 public health emergency, actuarial data is limited for determining its effect. The assumptions utilized by our actuaries are subject to significant uncertainty and if outcomes differ from these assumptions or events develop or progress in a negative manner, the Company could experience a material adverse effect and additional liabilities may be recorded in the future. Alternatively, as a result of the current work stoppages, a reduction of claims in future periods could be beneficial to our financial condition and results of operations.
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 previously disclosedor 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. On July 2, 2019, the proxy statement/prospectusjudge denied Harrah’s New Orleans’ motion for partial summary judgment and granted the Department of Revenue’s (the “Department”) partial motion for summary judgment, finding that Harrah’s New Orleans owes state sales taxes, as well as district and New Orleans occupancy taxes to the Department on all discounted or complimentary
38

rooms furnished by Harrah’s New Orleans to patrons or guests at Harrah’s New Orleans hotel and certain third party hotels. On September 3, 2019, Harrah’s New Orleans filed a Motion for Suspensive Appeal, which was granted. Harrah’s filed its reply on February 3, 2020. Oral argument was on February 20, 2020. Under Former Caesars, $9 million has been paid under protest and is being held in escrow by the Department. Harrah’s New Orleans had accrued contingent liabilities of $42 million on September 30, 2020.
Weather disruption - Lake Charles
On August 27, 2020 Hurricane Laura made landfall on Lake Charles as a Category 4 storm. The hurricane severely damaged the Isle of Capri Casino Lake Charles and the Company relatinghas recorded an insurance receivable of $31 million, of which $15 million related to fixed asset impairments and $16 million related to remediation costs and repairs that have been incurred in the pending transaction with Caesars. The complaint seeks unspecified damages on behalf of all persons and entities who purchased the Company’s securities during the period from March 1, 2019 throughthree months ended September 2, 2019. The Company intends to vigorously defend itself against these claims.30, 2020

Agreements with Horsemen and Pari-mutuel Clerks. The Federal Interstate Horse Racing Act and the state racing laws in West Virginia and Ohio require that, in order to simulcast races, we have written agreements with the horse owners and trainers at those racetracks. In addition, in order to operate slot machines in West Virginia, we are required to enter into written agreements regarding the proceeds of the slot machines (a “proceeds agreement”) with a representative of a majority of the horse owners and trainers and with a representative of a majority of the pari‑mutuel clerks. We are required to have a proceeds agreement in effect on July 1 of each year with the horsemen and the pari‑mutuel clerks as a condition to renewal of our video lottery license for such year. If the requisite proceeds agreement is not in place as of July 1 of a particular year, Mountaineer’s application for renewal of its video lottery license could be denied, in which case Mountaineer would not be permitted to operate either its slot machines or table games. In Ohio, we must have an agreement with the representative of the horse owners. We currently have all the requisite agreements in place referenced in this sub section at Mountaineer and Scioto Downs. Certain agreements referenced above may be terminated upon written notice by either party.property has remained closed.

Note 15.14. Related Affiliates

REI

As of September 30, 2019,2020, Recreational Enterprises, Inc. (“REI”) owned approximately 14.4%5.1% of outstanding common stock of the Company. The directors of REI are the Company’s Executive Chairman of the Board, Gary L. Carano, its Chief Executive Officer and Board member, Thomas R. Reeg, and its former Senior Vice President of Regional Operations, Gene Carano. In addition, Gary L. Carano also serves as the Vice President of REI and Gene Carano also serves as the Secretary and Treasurer of REI. Members of the Carano family, including Gary L. Carano and Gene Carano, own the equity interests in REI. As such, the Carano family has the ability to significantly influence the affairs of the Company. During the three and nine months ended September 30, 20192020 and 2018,2019, there were 0 related party transactions between the Company and the Carano family other than compensation, including salary and equity incentives, and the CSY Lease listed below.

C. S. & Y. Associates

The Company owns the entire parcel on which Eldorado Reno is located, except for approximately 30,000 square feet which is leased from C. S. & Y. Associates (“CSY”) which is an entity partially owned by REI (the “CSY Lease”). The CSY Lease expires on June 30, 2057. Rent pursuant to the CSY Lease is $0.6 million annually and paid quarterly during the year. As of September 30, 20192020 and December 31, 2018,2019, there were 0 amounts due to or from C.S. & Y. Associates.

CSY.

Transactions with Horseshoe Baltimore
The Company holds an interest in Horseshoe Baltimore of approximately 44.3% which is accounted for as an equity method investment and is considered to be a related party. These related party transactions include items such as casino management fees, reimbursement of various costs incurred by CEOC, LLC on behalf of Horseshoe Baltimore, and the allocation of other general corporate expenses. A summary of the transactions with Horseshoe Baltimore is provided in the table below.
(In millions)Three Months Ended
September 30, 2020
Transactions with Horseshoe Baltimore
Management fees$2 
Allocated expenses1 
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 settled on a net basis by each counterparty in accordance with the legal and contractual restrictions governing transactions by and among the Company’s consolidated entities.
As of September 30, 2020 and December 31, 2019, Due from affiliates, net was $37 million and $4 million, respectively, and represented transactions with Horseshoe Baltimore and William Hill.

Note 16.15. Segment Information

The executive decision maker of ourthe Company reviews operating results, assesses performance and makes decisions on a “significant market” basis. Management views each of ourthe Company’s casinos as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, and their management and reporting structure. Prior to the ElginMerger, our principal operating activities occurred in 5 geographic regions and Tropicana acquisitions,reportable segments: West, Midwest, South, East and Central. Following the Merger, the Company’s principal operating activities occurredoccur in 4 geographic regions3 regionally-focused and reportable segments. As referenced in Note 1, following the Elgin and Tropicana acquisitions a fifth segment, Central, was added in the third quarter of 2018. The reportable segments are based on the similar
39

characteristics of the operating segments within the regions in which they operate.operate: (1) Las Vegas, (2) Regional, and (3) Managed, International, CIE, in addition to Corporate and Other. See Note 1table below for a summary of these segments.

Also, see Note 4 and Note 7 for a discussion of the impairment of intangibles and long-lived assets related to certain segments.

The following table sets forth certain information regarding our properties (listed by segment in which each property is reported) as of September 30, 2020:
Las VegasRegionalManaged, International, CIE
(a)Bally’s Las VegasEldorado Resort Casino Reno(a)Harrah’s Atlantic CityInternational
(a)The CromwellSilver Legacy Resort Casino(a)Harrah’s Laughlin(a)Caesars Cairo
(a)Flamingo Las VegasCircus Circus Reno(a)Harrah’s New Orleans(a)Ramses Casino
(a)The LINQ Hotel & Casino
MontBleu Casino Resort & Spa (c)
(a)
Hoosier Park (f)
(a)
Emerald Casino Resort (b)
(a)Paris Las VegasTropicana Laughlin Hotel & Casino(a)
Indiana Grand (g)
(a)
Alea Glasgow (b)
(a)Planet Hollywood Resort & CasinoIsle Casino Hotel - Blackhawk(a)
Bally’s Atlantic City (b)
(a)
Alea Nottingham (b)
(a)Caesars Palace Las VegasLady Luck Casino - Black Hawk(a)Caesars Atlantic City(a)
The Empire Casino (b)
(a)Harrah’s Las VegasIsle Casino Waterloo(a)
Caesars Southern Indiana (e)(b)
(a)
Manchester235 (b)
(a)Rio All-Suite Hotel & CasinoIsle Casino Bettendorf(a)Harrah’s Council Bluffs(a)
Playboy Club London (b)
Isle of Capri Casino Boonville(a)Harrah’s Gulf Coast(a)
Rendezvous Brighton (b)
Isle of Capri Casino Kansas City (d)
(a)Harrah’s Joliet(a)
Rendezvous Southend-on-Sea (j)(b)
Isle Casino Racing Pompano Park(a)Harrah’s Lake Tahoe(a)
The Sportsman (b)
Eldorado Resort Casino Shreveport (c)
(a)
Harrah’s Louisiana Downs (h)(b)
Managed
Isle of Capri Casino Hotel Lake Charles(a)Harrah’s Metropolis(a)Harrah’s Ak-Chin
Belle of Baton Rouge Casino & Hotel(a)Harrah’s North Kansas City(a)Harrah’s Cherokee
Isle of Capri Casino Lula(a)Harrah’s Philadelphia(a)Harrah’s Cherokee Valley River
Lady Luck Casino Vicksburg (d)
(a)
Harrah’s Reno (i)(b)
(a)Harrah’s Resort Southern California
Trop Casino Greenville(a)Harveys Lake Tahoe(a)
Horseshoe Baltimore (k)
Eldorado Gaming Scioto Downs(a)Horseshoe Bossier City(a)Caesars Windsor
Tropicana Casino and Resort, Atlantic City(a)Horseshoe Council Bluffs(a)Kings & Queens Casino
Grand Victoria Casino(a)
Horseshoe Hammond (e)(b)
(a)Caesars Dubai
Lumière Place Casino(a)Horseshoe TunicaCIE
Tropicana Evansville (e)
(a)Caesars Interactive Entertainment
___________________
(a)These properties were acquired from the Merger with Former Caesars on July 20, 2020.
(b)As a result of the Merger, the sales of these properties met the requirements for presentation as discontinued operations as of September 30, 2020.
(c)In April 2020, the Company entered into an agreement to sell Eldorado Shreveport and MontBleu, which are expected to close in the first quarter of 2021. As of September 30, 2020, the properties’ assets and liabilities were classified as held for sale.
(d)Kansas City and Vicksburg were sold on July 1, 2020.
(e)On October 27, 2020, the Company entered into an agreement to sell Evansville, which is expected to close mid-2021. In addition, the Company plans to enter into an agreement to divest of Caesars Southern Indiana and Horseshoe Hammond prior to December 31, 2020. As of September 30, 2020, Evansville’s assets and liabilities were classified as held for sale.
(f)Hoosier Park includes operations of our off-track betting locations, Winner’s Circle Indianapolis and Winner’s Circle New Haven.
(g)Indiana Grand includes operations of our off-track betting location, Winner’s Circle Clarksville.
(h)On September 3, 2020, the Company entered into an agreement to sell Harrah’s Louisiana Downs, which is expected to close in the first half of 2021.
(i)Harrah’s Reno was sold on September 30, 2020.
(j)Rendezvous Southend-on-Sea permanently closed in June 2020 following the recent closure due to the COVID-19 public health emergency.
(k)As of September 30, 2020, Horseshoe Baltimore was 44.3% owned and held as an equity-method investment.
In addition to our properties listed above, other domestic and international properties, including Harrah’s Northern California, are authorized to use the brands and marks of Caesars Entertainment, Inc. We also own the CAESARS FORUM conference
40

center, which is a 550,000 sq. ft. conference center with 300,000 sq. ft. of flexible meeting space and 2 of the largest pillarless ballrooms.
“Corporate and Other” includes parent other adjustments and eliminations to reconcile to consolidated Caesars results.
The following table sets forth, for the periods indicated, certain operating data for our 5the Company’s 3 reportable segments.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(in thousands)

 

Revenues and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Net operating revenues

 

$

 

151,418

 

 

$

 

129,092

 

 

$

 

397,241

 

 

$

 

346,550

 

Depreciation and amortization

 

 

 

13,935

 

 

 

 

9,476

 

 

 

 

40,585

 

 

 

 

27,045

 

      Operating income

 

 

 

35,358

 

 

 

 

31,894

 

 

 

 

66,772

 

 

 

 

63,898

 

Midwest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Net operating revenues

 

 

 

95,866

 

 

 

 

99,834

 

 

 

 

289,890

 

 

 

 

301,235

 

Depreciation and amortization

 

 

 

4,515

 

 

 

 

8,605

 

 

 

 

20,650

 

 

 

 

24,654

 

      Operating income

 

 

 

30,221

 

 

 

 

26,637

 

 

 

 

87,066

 

 

 

 

80,725

 

South:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Net operating revenues

 

 

 

108,017

 

 

 

 

106,569

 

 

 

 

357,669

 

 

 

 

341,612

 

Depreciation and amortization

 

 

 

9,000

 

 

 

 

9,703

 

 

 

 

29,865

 

 

 

 

26,343

 

      Operating income

 

 

 

15,185

 

 

 

 

16,176

 

 

 

 

61,723

 

 

 

 

50,099

 

East:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Net operating revenues

 

 

 

186,562

 

 

 

 

127,722

 

 

 

 

523,249

 

 

 

 

370,576

 

Depreciation and amortization

 

 

 

11,630

 

 

 

 

4,486

 

 

 

 

36,019

 

 

 

 

15,253

 

      Operating income

 

 

 

45,341

 

 

 

 

23,637

 

 

 

 

107,715

 

 

 

 

67,164

 

Central:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Net operating revenues

 

 

 

119,410

 

 

 

 

23,897

 

 

 

 

362,675

 

 

 

 

23,897

 

Depreciation and amortization

 

 

 

11,626

 

 

 

 

2,215

 

 

 

 

34,317

 

 

 

 

2,215

 

      Operating income

 

 

 

25,793

 

 

 

 

2,868

 

 

 

 

80,896

 

 

 

 

2,868

 

Corporate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Net operating revenues

 

 

 

1,908

 

 

 

 

139

 

 

 

 

5,401

 

 

 

 

377

 

Depreciation and amortization

 

 

 

1,886

 

 

 

 

1,275

 

 

 

 

5,446

 

 

 

 

3,694

 

      Operating expense

 

 

 

(26,991

)

 

 

 

(9,443

)

 

 

 

(53,111

)

 

 

 

(41,377

)

Total Reportable Segments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Net operating revenues

 

$

 

663,181

 

 

$

 

487,253

 

 

$

 

1,936,125

 

 

$

 

1,384,247

 

Depreciation and amortization

 

$

 

52,592

 

 

$

 

35,760

 

 

$

 

166,882

 

 

$

 

99,204

 

      Operating income

 

$

 

124,907

 

 

$

 

91,769

 

 

$

 

351,061

 

 

$

 

223,377

 

Reconciliations to consolidated net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

 

124,907

 

 

$

 

91,769

 

 

$

 

351,061

 

 

$

 

223,377

 

Unallocated income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Interest expense, net

 

 

 

(71,897

)

 

 

 

(34,085

)

 

 

 

(217,205

)

 

 

 

(96,579

)

Loss on early retirement of debt, net

 

 

 

(1,204

)

 

 

 

—

 

 

 

 

(1,204

)

 

 

 

(162

)

      Unrealized gain on restricted

      investments

 

 

 

3,318

 

 

 

 

—

 

 

 

 

460

 

 

 

 

—

 

Provision for income taxes

 

 

 

(18,069

)

 

 

 

(19,980

)

 

 

 

(38,892

)

 

 

 

(31,281

)

Net income

 

$

 

37,055

 

 

$

 

37,704

 

 

$

 

94,220

 

 

$

 

95,355

 

 We recast previously reported segment amounts to conform to the way management assesses results and allocates resources for the current year.

Three Months Ended
September 30,		Nine Months Ended
September 30,
(In millions)2020201920202019
Revenues and expenses
Las Vegas:
Net revenues$304 $0 $304 $0 
Net loss attributable to Caesars(162)0 (162)0 
Adjusted EBITDA43 0 43 0 
Regional:
Net revenues1,000 661 1,596 1,930 
Net (loss) income attributable to Caesars47 117 (175)300 
Adjusted EBITDA331 205 439 569 
Managed, International, CIE:
Net revenues69 0 69 0 
Net income attributable to Caesars3 0 3 0 
Adjusted EBITDA18 0 18 0 
Corporate and Other:
Net revenues4 2 8 6 
Net loss attributable to Caesars(814)(80)(868)(206)
Adjusted EBITDA(41)(8)(59)(27)
Total
Net revenues$1,377 $663 $1,977 $1,936 
Net (loss) income attributable to Caesars$(926)$37 $(1,202)$94 
Adjusted EBITDA$351 $197 $441 $542 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

 

(in thousands)

 

Capital Expenditures, Net

 

 

 

 

 

 

 

 

 

 

West

 

$

 

67,787

 

 

$

 

49,060

 

Midwest

 

 

 

11,175

 

 

 

 

14,516

 

South

 

 

 

15,035

 

 

 

 

12,307

 

East

 

 

 

28,280

 

 

 

 

8,953

 

Central

 

 

 

8,521

 

 

 

 

237

 

Corporate

 

 

 

4,218

 

 

 

 

4,009

 

Total

 

$

 

135,016

 

 

$

 

89,082

 

Adjusted EBITDA - By Segment

 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Central

 

 

Corporate,

Other &

Eliminations

 

 

Total

 

Balance sheet as of September 30, 2019

(in thousands)

 

Total assets

 

$

 

1,862,752

 

 

$

 

1,327,369

 

 

$

 

1,161,263

 

 

$

 

2,006,147

 

 

$

 

1,540,086

 

 

$

 

(1,816,376

)

 

$

 

6,081,241

 

Goodwill

 

 

 

220,934

 

 

 

 

246,056

 

 

 

 

204,791

 

 

 

 

162,816

 

 

 

 

75,120

 

 

 

 

—

 

 

 

 

909,717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance sheet as of December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

 

1,710,375

 

 

$

 

1,245,521

 

 

$

 

1,068,258

 

 

$

 

2,166,730

 

 

$

 

1,457,961

 

 

$

 

(1,737,383

)

 

$

 

5,911,462

 

Goodwill

 

 

 

220,861

 

 

 

 

322,745

 

 

 

 

213,150

 

 

 

 

177,486

 

 

 

 

74,074

 

 

 

 

—

 

 

 

 

1,008,316

 

Note 17. Consolidating Condensed Financial Information

Certain of our wholly-owned subsidiaries have fully and unconditionally guaranteed onAdjusted EBITDA is presented as a joint and several basis, the payment of all obligations under our 7% Senior Notes due 2023, 6% Senior Notes due 2025, 6% Senior Notes due 2026 and Credit Facility.

As of September 30, 2019, following wholly-owned subsidiariesmeasure of the CompanyCompany’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, and (iv) 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 guarantors, on a joint and several basis, under the 7% Senior Notes due 2023, 6% Senior Notes due 2025, 6% Senior Notes due 2026 and Credit Facility: Isle of Capri Casinos LLC; Eldorado Holdco LLC; Eldorado Resorts LLC; Eldorado Shreveport #1, LLC; Eldorado Shreveport #2, LLC; Eldorado Casino Shreveport Joint Venture; MTR Gaming Group, Inc.; Mountaineer Park, Inc.; Old PID, Inc. (f/k/a Presque Isle Downs, Inc.); Scioto Downs, Inc.; Eldorado Limited Liability Company; Circus and Eldorado Joint Venture, LLC; CC-Reno, LLC; CCR Newco, LLC; Black Hawk Holdings, L.L.C.; IC Holdings Colorado, Inc.; CCSC/Blackhawk, Inc.; Isle of Capri Black Hawk, L.L.C.; IOC-Black Hawk Distribution Company, LLC; IOC-Black Hawk County, Inc.; Isle of Capri Bettendorf, L.C.; PPI, Inc.; Pompano Park Holdings, L.L.C.; IOC-Lula, Inc.; IOC-Kansas City, Inc.; IOC-Boonville, Inc.; IOC-Caruthersville, LLC; IOC Cape Girardeau, LLC; IOC-Vicksburg, Inc.; IOC-Vicksburg, L.L.C.; Rainbow Casino-Vicksburg Partnership, L.P.; IOC Holdings L.L.C.; St. Charles Gaming Company, L.L.C; Elgin Riverboat Resort–Riverboat Casino; Elgin Holdings I LLC; Elgin Holdings II LLC, PPI Development Holdings LLC; PPI Development LLC; Tropicana Entertainment, Inc.; New Tropicana Holdings, Inc.; New Tropicana OpCo, Inc.; TLH LLC; TropWorld Games LLC; TEI R7 Investment LLC; TEI Management Services LLC; Tropicana St. Louis LLC; TEI (ST. LOUIS RE), LLC; TEI (STLH), LLC; TEI (ES), LLC; Aztar Riverboat Holding Company, LLC; Aztar Indiana Gaming Company, LLC ; New Jazz Enterprises, LLC; Catfish Queen Partnership in Commendam; Centroplex Centre Convention Hotel, L.L.C.; Columbia Properties Tahoe, LLC; MB Development, LLC; Lighthouse Point, LLC; Tropicana Atlantic City Corp.; Tropicana St. Louis RE LLC, Tropicana Laughlin, LLC, ELDO FIT, LLC and CRS ANNEX, LLC. Eachsame or similar to some of the subsidiaries’ guaranteesadjustments 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 jointa non-GAAP financial measure commonly used in our industry and severalshould 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). Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies within the guarantees ofindustry. 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.
41

Three Months Ended September 30, 2020
(In millions)Las VegasRegionalManaged, International, CIECorporate and OtherTotal
Net (loss) income attributable to Caesars$(162)$47 $3 $(814)$(926)
Net income attributable to noncontrolling interests0 1 0 0 1 
Net (income) loss from discontinued operations0 (9)10 0 1 
Interest expense, net92 157 0 224 473 
Provision for income taxes (a)
0 0 0 135 135 
Other loss (b)
0 0 0 164 164 
Depreciation and amortization91 117 0 15 223 
Stock-based compensation3 4 0 38 45 
Transaction costs and other operating costs (c)
19 7 5 188 219 
Other items (d)
0 7 0 9 16 
Adjusted EBITDA$43 $331 $18 $(41)$351 
Three Months Ended September 30, 2019
(In millions)Las VegasRegionalManaged, International, CIECorporate and OtherTotal
Net (loss) income attributable to Caesars$0 $117 $0 $(80)$37 
Provision for income taxes (a)
0 0 0 18 18 
Other income0 0 0 (2)(2)
Interest expense, net0 35 0 37 72 
Depreciation and amortization0 51 0 2 53 
Transaction costs and other operating costs0 0 0 14 14 
Stock-based compensation expense0 0 0 4 4 
Other items (d)
0 2 0 (1)1 
Adjusted EBITDA$0 $205 $0 $(8)$197 
Nine Months Ended September 30, 2020
(In millions)Las VegasRegionalManaged, International, CIECorporate and OtherTotal
Net (loss) income attributable to Caesars$(162)$(175)$3 $(868)$(1,202)
Net income attributable to noncontrolling interests0 1 0 0 1 
Net (income) loss from discontinued operations0 (9)10 0 1 
Provision for income taxes (a)
0 0 0 64 64 
Other loss (b)
0 0 0 174 174 
Interest expense, net92 229 0 287 608 
Depreciation and amortization91 213 0 18 322 
Impairment charges0 161 0 0 161 
Transaction costs and other operating costs (c)
19 8 5 210 242 
Stock-based compensation expense3 4 0 48 55 
Other items (d)
0 7 0 8 15 
Adjusted EBITDA$43 $439 $18 $(59)$441 
42

Nine Months Ended September 30, 2019
(In millions)Las VegasRegionalManaged, International, CIECorporate and OtherTotal
Net (loss) income attributable to Caesars$0 $300 $0 $(206)$94 
Provision for income taxes (a)
0 0 0 39 39 
Other loss0 0 0 1 1 
Interest expense, net0 103 0 114 217 
Depreciation and amortization0 162 0 5 167 
Impairment charges0 0 0 1 1 
Transaction costs and other operating costs0 1 0 1 2 
Stock-based compensation expense0 0 0 16 16 
Other items (d)
0 3 0 2 5 
Adjusted EBITDA$0 $569 $0 $(27)$542 
____________________
(a)Taxes are recorded at the other subsidiaries.   

consolidated level and not estimated or recorded to our Las Vegas, Regional, and Managed, International, CIE segments.

The consolidating condensed balance sheet as of September 30, 2019 is as follows:

Balance Sheet

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

 

(in thousands)

 

Current assets

 

$

 

78,612

 

 

$

 

864,016

 

 

$

 

20,911

 

 

$

 

—

 

 

$

 

963,539

 

Intercompany receivables

 

 

 

—

 

 

 

 

438,466

 

 

 

 

32,402

 

 

 

 

(470,868

)

 

 

 

—

 

Investment in and advances to

   unconsolidated affiliates

 

 

 

127,480

 

 

 

 

2,316

 

 

 

 

—

 

 

 

 

—

 

 

 

 

129,796

 

Investments in subsidiaries

 

 

 

3,847,795

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(3,847,795

)

 

 

 

—

 

Property and equipment, net

 

 

 

17,544

 

 

 

 

2,616,883

 

 

 

 

684

 

 

 

 

—

 

 

 

 

2,635,111

 

Other assets

 

 

 

72,945

 

 

 

 

2,299,720

 

 

 

 

15,868

 

 

 

 

(35,738

)

 

 

 

2,352,795

 

Total assets

 

$

 

4,144,376

 

 

$

 

6,221,401

 

 

$

 

69,865

 

 

$

 

(4,354,401

)

 

$

 

6,081,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

 

75,851

 

 

$

 

321,286

 

 

$

 

17,834

 

 

$

 

—

 

 

$

 

414,971

 

Intercompany payables

 

 

 

445,868

 

 

 

 

—

 

 

 

 

25,000

 

 

 

 

(470,868

)

 

 

 

—

 

Long-term financing obligation to GLPI

 

 

 

—

 

 

 

 

967,982

 

 

 

 

—

 

 

 

 

—

 

 

 

 

967,982

 

Long-term debt, less current maturities

 

 

 

2,329,800

 

 

 

 

621,155

 

 

 

 

—

 

 

 

 

—

 

 

 

 

2,950,955

 

Deferred income tax liabilities

 

 

 

—

 

 

 

 

260,449

 

 

 

 

166

 

 

 

 

(35,738

)

 

 

 

224,877

 

Other liabilities

 

 

 

166,080

 

 

 

 

229,598

 

 

 

 

—

 

 

 

 

—

 

 

 

 

395,678

 

Stockholders’ equity

 

 

 

1,126,777

 

 

 

 

3,820,931

 

 

 

 

26,865

 

 

 

 

(3,847,795

)

 

 

 

1,126,778

 

Total liabilities and stockholders’

   equity

 

$

 

4,144,376

 

 

$

 

6,221,401

 

 

$

 

69,865

 

 

$

 

(4,354,401

)

 

$

 

6,081,241

 

The consolidating condensed balance sheet as of December 31, 2018 is as follows:

Balance Sheet

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

 

(in thousands)

 

Current assets

 

$

 

48,268

 

 

$

 

497,309

 

 

$

 

27,619

 

 

$

 

—

 

 

$

 

573,196

 

Intercompany receivables

 

 

 

—

 

 

 

 

7,831

 

 

 

 

28,042

 

 

 

 

(35,873

)

 

 

 

—

 

Investment in and advances to

   unconsolidated affiliates

 

 

 

—

 

 

 

 

1,892

 

 

 

 

—

 

 

 

 

—

 

 

 

 

1,892

 

Investments in subsidiaries

 

 

 

3,648,961

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(3,648,961

)

 

 

 

—

 

Property and equipment, net

 

 

 

18,555

 

 

 

 

2,863,311

 

 

 

 

740

 

 

 

 

—

 

 

 

 

2,882,606

 

Other assets

 

 

 

35,072

 

 

 

 

2,423,807

 

 

 

 

26,674

 

 

 

 

(31,785

)

 

 

 

2,453,768

 

Total assets

 

$

 

3,750,856

 

 

$

 

5,794,150

 

 

$

 

83,075

 

 

$

 

(3,716,619

)

 

$

 

5,911,462

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

 

48,579

 

 

$

 

328,319

 

 

$

 

25,279

 

 

$

 

—

 

 

$

 

402,177

 

Intercompany payables

 

 

 

10,873

 

 

 

 

—

 

 

 

 

25,000

 

 

 

 

(35,873

)

 

 

 

—

 

Long-term financing obligation to GLPI

 

 

 

—

 

 

 

 

959,835

 

 

 

 

—

 

 

 

 

—

 

 

 

 

959,835

 

Long-term debt, less current maturities

 

 

 

2,640,046

 

 

 

 

621,193

 

 

 

 

34

 

 

 

 

—

 

 

 

 

3,261,273

 

Deferred income tax liabilities

 

 

 

—

 

 

 

 

231,795

 

 

 

 

—

 

 

 

 

(31,785

)

 

 

 

200,010

 

Other liabilities

 

 

 

22,206

 

 

 

 

36,808

 

 

 

 

—

 

 

 

 

—

 

 

 

 

59,014

 

Stockholders’ equity

 

 

 

1,029,152

 

 

 

 

3,616,200

 

 

 

 

32,762

 

 

 

 

(3,648,961

)

 

 

 

1,029,153

 

Total liabilities and stockholders’

   equity

 

$

 

3,750,856

 

 

$

 

5,794,150

 

 

$

 

83,075

 

 

$

 

(3,716,619

)

 

$

 

5,911,462

 


The consolidating condensed statement of operations(b)Other loss for the three months ended September 30, 2019 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

 

(in thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

$

 

—

 

 

 

 

457,852

 

 

$

 

148

 

 

$

 

—

 

 

$

 

458,000

 

Non-gaming

 

 

 

1,785

 

 

 

 

202,018

 

 

 

 

1,378

 

 

 

 

—

 

 

 

 

205,181

 

Net revenues

 

 

 

1,785

 

 

 

 

659,870

 

 

 

 

1,526

 

 

 

 

—

 

 

 

 

663,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

 

 

—

 

 

 

 

202,555

 

 

 

 

—

 

 

 

 

—

 

 

 

 

202,555

 

Non-gaming

 

 

 

—

 

 

 

 

99,813

 

 

 

 

—

 

 

 

 

—

 

 

 

 

99,813

 

Marketing and promotions

 

 

 

—

 

 

 

 

33,291

 

 

 

 

1

 

 

 

 

—

 

 

 

 

33,292

 

General and administrative

 

 

 

—

 

 

 

 

122,802

 

 

 

 

(35

)

 

 

 

—

 

 

 

 

122,767

 

Corporate

 

 

 

13,490

 

 

 

 

(541

)

 

 

 

65

 

 

 

 

—

 

 

 

 

13,014

 

Management fee

 

 

 

(6,401

)

 

 

 

6,401

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Depreciation and amortization

 

 

 

1,311

 

 

 

 

51,225

 

 

 

 

56

 

 

 

 

—

 

 

 

 

52,592

 

Total operating expenses

 

 

 

8,400

 

 

 

 

515,546

 

 

 

 

87

 

 

 

 

—

 

 

 

 

524,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on sale or disposal of

   property and equipment

 

 

 

—

 

 

 

 

(284

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(284

)

Transaction expenses

 

 

 

(12,442

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(12,442

)

(Loss) income from unconsolidated

   affiliates

 

 

 

(1,552

)

 

 

 

37

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(1,515

)

Operating (loss) income

 

 

 

(20,609

)

 

 

 

144,077

 

 

 

 

1,439

 

 

 

 

—

 

 

 

 

124,907

 

Other Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(35,600

)

 

 

 

(35,948

)

 

 

 

(349

)

 

 

 

—

 

 

 

 

(71,897

)

Loss on early retirement of debt, net

 

 

 

(1,204

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(1,204

)

Unrealized gain on restricted investments

 

 

 

3,318

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

3,318

 

Subsidiary income (loss)

 

 

 

71,256

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(71,256

)

 

 

 

—

 

Income (loss) before income

   taxes

 

 

 

17,161

 

 

 

 

108,129

 

 

 

 

1,090

 

 

 

 

(71,256

)

 

 

 

55,124

 

Income tax benefit (provision)

 

 

 

19,894

 

 

 

 

(37,633

)

 

 

 

(330

)

 

 

 

—

 

 

 

 

(18,069

)

Net income (loss)

 

$

 

37,055

 

 

$

 

70,496

 

 

$

 

760

 

 

$

 

(71,256

)

 

$

 

37,055

 


The consolidating condensed statement of operations for the three months ended September 30, 2018 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

 

(in thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

$

 

—

 

 

$

 

359,897

 

 

$

 

8,272

 

 

$

 

—

 

 

$

 

368,169

 

Non-gaming

 

 

 

10

 

 

 

 

116,639

 

 

 

 

2,435

 

 

 

 

—

 

 

 

 

119,084

 

Net revenues

 

 

 

10

 

 

 

 

476,536

 

 

 

 

10,707

 

 

 

 

—

 

 

 

 

487,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

 

 

—

 

 

 

 

174,602

 

 

 

 

5,460

 

 

 

 

—

 

 

 

 

180,062

 

Non-gaming

 

 

 

—

 

 

 

 

68,046

 

 

 

 

627

 

 

 

 

—

 

 

 

 

68,673

 

Marketing and promotions

 

 

 

—

 

 

 

 

22,687

 

 

 

 

435

 

 

 

 

—

 

 

 

 

23,122

 

General and administrative

 

 

 

—

 

 

 

 

73,755

 

 

 

 

1,844

 

 

 

 

—

 

 

 

 

75,599

 

Corporate

 

 

 

8,596

 

 

 

 

94

 

 

 

 

527

 

 

 

 

—

 

 

 

 

9,217

 

Impairment charges

 

 

 

—

 

 

 

 

—

 

 

 

 

3,787

 

 

 

 

—

 

 

 

 

3,787

 

Management fee

 

 

 

(7,067

)

 

 

 

7,067

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Depreciation and amortization

 

 

 

923

 

 

 

 

34,782

 

 

 

 

55

 

 

 

 

—

 

 

 

 

35,760

 

Total operating expenses

 

 

 

2,452

 

 

 

 

381,033

 

 

 

 

12,735

 

 

 

 

—

 

 

 

 

396,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on sale of asset or disposal of

   property and equipment

 

 

 

—

 

 

 

 

(101

)

 

 

 

(9

)

 

 

 

—

 

 

 

 

(110

)

Proceeds from terminated sale

 

 

 

5,000

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

5,000

 

Transaction expenses

 

 

 

(4,090

)

 

 

 

(1

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(4,091

)

Equity in loss of unconsolidated

   affiliate

 

 

 

—

 

 

 

 

(63

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(63

)

Operating (loss) income

 

 

 

(1,532

)

 

 

 

95,338

 

 

 

 

(2,037

)

 

 

 

—

 

 

 

 

91,769

 

Other Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(27,582

)

 

 

 

(6,088

)

 

 

 

(415

)

 

 

 

—

 

 

 

 

(34,085

)

Subsidiary income (loss)

 

 

 

61,964

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(61,964

)

 

 

 

—

 

Income (loss) before income

   taxes

 

 

 

32,850

 

 

 

 

89,250

 

 

 

 

(2,452

)

 

 

 

(61,964

)

 

 

 

57,684

 

Income tax benefit (provision)

 

 

 

4,854

 

 

 

 

(25,778

)

 

 

 

944

 

 

 

 

—

 

 

 

 

(19,980

)

Net income (loss)

 

$

 

37,704

 

 

$

 

63,472

 

 

$

 

(1,508

)

 

$

 

(61,964

)

 

$

 

37,704

 


The consolidating condensed statement of operations for theand nine months ended September 30, 2019 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

 

(in thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

$

 

—

 

 

$

 

1,381,231

 

 

$

 

4,617

 

 

$

 

—

 

 

$

 

1,385,848

 

Non-gaming

 

 

 

4,966

 

 

 

 

540,394

 

 

 

 

4,917

 

 

 

 

—

 

 

 

 

550,277

 

Net revenues

 

 

 

4,966

 

 

 

 

1,921,625

 

 

 

 

9,534

 

 

 

 

—

 

 

 

 

1,936,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

 

 

—

 

 

 

 

612,937

 

 

 

 

3,164

 

 

 

 

—

 

 

 

 

616,101

 

Non-gaming

 

 

 

—

 

 

 

 

290,053

 

 

 

 

400

 

 

 

 

—

 

 

 

 

290,453

 

Marketing and promotions

 

 

 

—

 

 

 

 

97,422

 

 

 

 

251

 

 

 

 

—

 

 

 

 

97,673

 

General and administrative

 

 

 

—

 

 

 

 

358,884

 

 

 

 

1,202

 

 

 

 

—

 

 

 

 

360,086

 

Corporate

 

 

 

50,352

 

 

 

 

166

 

 

 

 

301

 

 

 

 

—

 

 

 

 

50,819

 

Impairment charges

 

 

 

—

 

 

 

 

958

 

 

 

 

—

 

 

 

 

—

 

 

 

 

958

 

Management fee

 

 

 

(16,956

)

 

 

 

16,956

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Depreciation and amortization

 

 

 

3,701

 

 

 

 

163,125

 

 

 

 

56

 

 

 

 

—

 

 

 

 

166,882

 

Total operating expenses

 

 

 

37,097

 

 

 

 

1,540,501

 

 

 

 

5,374

 

 

 

 

—

 

 

 

 

1,582,972

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale or disposal of

   property and equipment

 

 

 

409

 

 

 

 

21,193

 

 

 

 

66

 

 

 

 

—

 

 

 

 

21,668

 

Transaction expenses

 

 

 

(20,470

)

 

 

 

(913

)

 

 

 

(245

)

 

 

 

—

 

 

 

 

(21,628

)

(Loss) income from unconsolidated

   affiliates

 

 

 

(2,281

)

 

 

 

149

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(2,132

)

Operating (loss) income

 

 

 

(54,473

)

 

 

 

401,553

 

 

 

 

3,981

 

 

 

 

—

 

 

 

 

351,061

 

Other Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

��

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(108,617

)

 

 

 

(107,507

)

 

 

 

(1,081

)

 

 

 

—

 

 

 

 

(217,205

)

Loss on early retirement of debt, net

 

 

 

(1,204

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(1,204

)

Unrealized gain on restricted investments

 

 

 

460

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

460

 

Subsidiary income (loss)

 

 

 

203,531

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(203,531

)

 

 

 

—

 

Income (loss) before income

   taxes

 

 

 

39,697

 

 

 

 

294,046

 

 

 

 

2,900

 

 

 

 

(203,531

)

 

 

 

133,112

 

Income tax benefit (provision)

 

 

 

54,523

 

 

 

 

(92,515

)

 

 

 

(900

)

 

 

 

—

 

 

 

 

(38,892

)

Net income (loss)

 

$

 

94,220

 

 

$

 

201,531

 

 

$

 

2,000

 

 

$

 

(203,531

)

 

$

 

94,220

 


The consolidating condensed statement2020 primarily represents loss on early repayment of operations for the nine months ended September 30, 2018 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

 

(in thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

$

 

—

 

 

$

 

1,036,650

 

 

$

 

23,767

 

 

$

 

—

 

 

$

 

1,060,417

 

Non-gaming

 

 

 

10

 

 

 

 

316,216

 

 

 

 

7,604

 

 

 

 

—

 

 

 

 

323,830

 

Net revenues

 

 

 

10

 

 

 

 

1,352,866

 

 

 

 

31,371

 

 

 

 

—

 

 

 

 

1,384,247

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

 

 

—

 

 

 

 

503,741

 

 

 

 

15,817

 

 

 

 

—

 

 

 

 

519,558

 

Non-gaming

 

 

 

—

 

 

 

 

198,113

 

 

 

 

2,022

 

 

 

 

—

 

 

 

 

200,135

 

Marketing and promotions

 

 

 

—

 

 

 

 

64,943

 

 

 

 

1,312

 

 

 

 

—

 

 

 

 

66,255

 

General and administrative

 

 

 

—

 

 

 

 

218,054

 

 

 

 

5,492

 

 

 

 

—

 

 

 

 

223,546

 

Corporate

 

 

 

30,148

 

 

 

 

751

 

 

 

 

2,119

 

 

 

 

—

 

 

 

 

33,018

 

Impairment charges

 

 

 

—

 

 

 

 

9,815

 

 

 

 

3,787

 

 

 

 

—

 

 

 

 

13,602

 

Management fee

 

 

 

(19,234

)

 

 

 

19,234

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Depreciation and amortization

 

 

 

2,646

 

 

 

 

96,180

 

 

 

 

378

 

 

 

 

—

 

 

 

 

99,204

 

Total operating expenses

 

 

 

13,560

 

 

 

 

1,110,831

 

 

 

 

30,927

 

 

 

 

—

 

 

 

 

1,155,318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on sale of asset or disposal of

   property and equipment

 

 

 

—

 

 

 

 

(386

)

 

 

 

(7

)

 

 

 

—

 

 

 

 

(393

)

Proceeds from terminated sale

 

 

 

5,000

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

5,000

 

Transaction expenses

 

 

 

(9,543

)

 

 

 

(500

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(10,043

)

Equity in loss of unconsolidated

   affiliate

 

 

 

—

 

 

 

 

(116

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(116

)

Operating (loss) income

 

 

 

(18,093

)

 

 

 

241,033

 

 

 

 

437

 

 

 

 

—

 

 

 

 

223,377

 

Other Expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(76,927

)

 

 

 

(18,293

)

 

 

 

(1,359

)

 

 

 

—

 

 

 

 

(96,579

)

Loss on early retirement of debt, net

 

 

 

(162

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(162

)

Subsidiary income (loss)

 

 

 

166,040

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(166,040

)

 

 

 

—

 

Income (loss) before income

   taxes

 

 

 

70,858

 

 

 

 

222,740

 

 

 

 

(922

)

 

 

 

(166,040

)

 

 

 

126,636

 

Income tax benefit (provision)

 

 

 

24,497

 

 

 

 

(56,519

)

 

 

 

741

 

 

 

 

—

 

 

 

 

(31,281

)

Net income (loss)

 

$

 

95,355

 

 

$

 

166,221

 

 

$

 

(181

)

 

$

 

(166,040

)

 

$

 

95,355

 


The consolidating condensed statement of cash flows for the nine months ended September 30, 2019 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

 

(in thousands)

 

Net cash (used in) provided by

   operating activities

 

$

 

(83,572

)

 

$

 

342,979

 

 

$

 

676

 

 

$

 

—

 

 

$

 

260,083

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

(3,510

)

 

 

 

(131,506

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(135,016

)

Sale of restricted investments

 

 

 

—

 

 

 

 

—

 

 

 

 

4,962

 

 

 

 

—

 

 

 

 

4,962

 

Proceeds from sale of property and

   equipment, net of cash sold

 

 

 

33

 

 

 

 

171,398

 

 

 

 

(2,070

)

 

 

 

—

 

 

 

 

169,361

 

Investments in and loans to unconsolidated

   affiliates

 

 

 

(815

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(815

)

Net cash (used in) provided by

   investing activities

 

 

 

(4,292

)

 

 

 

39,892

 

 

 

 

2,892

 

 

 

 

—

 

 

 

 

38,492

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net proceeds from (payments to) related

   parties

 

 

 

434,993

 

 

 

 

(430,633

)

 

 

 

(4,360

)

 

 

 

—

 

 

 

 

—

 

Payments on Term Loan

 

 

 

(70,000

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(70,000

)

Net payments under Revolving Credit Facility

 

 

 

(245,000

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(245,000

)

Debt issuance costs

 

 

 

(458

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(458

)

Taxes paid related to net share settlement

   of equity awards

 

 

 

(7,574

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(7,574

)

Dividends received (paid)

 

 

 

—

 

 

 

 

7,900

 

 

 

 

(7,900

)

 

 

 

—

 

 

 

 

—

 

Payments on other long-term payables

 

 

 

(72

)

 

 

 

(36

)

 

 

 

(264

)

 

 

 

 

 

 

 

 

(372

)

Net cash provided by (used in)

   financing activities

 

 

 

111,889

 

 

 

 

(422,769

)

 

 

 

(12,524

)

 

 

 

—

 

 

 

 

(323,404

)

Increase (decrease) in cash, cash equivalents

   and restricted cash

 

 

 

24,025

 

 

 

 

(39,898

)

 

 

 

(8,956

)

 

 

 

—

 

 

 

 

(24,829

)

Cash, cash equivalents and restricted

   cash, beginning of period

 

 

 

12,844

 

 

 

 

222,672

 

 

 

 

11,175

 

 

 

 

—

 

 

 

 

246,691

 

Cash, cash equivalents and restricted

   cash, end of period

 

$

 

36,869

 

 

$

 

182,774

 

 

$

 

2,219

 

 

$

 

—

 

 

$

 

221,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO AMOUNTS REPORTED WITHIN THE CONDENSED

   CONSOLIDATED BALANCE SHEETS:

 

Cash and cash equivalents

 

$

 

36,869

 

 

 

 

169,819

 

 

 

 

2,143

 

 

$

 

—

 

 

$

 

208,831

 

Restricted cash

 

 

 

—

 

 

 

 

6,361

 

 

 

 

76

 

 

 

 

—

 

 

 

 

6,437

 

Restricted and escrow cash included in other

   noncurrent assets

 

 

 

—

 

 

 

 

6,594

 

 

 

 

—

 

 

 

 

—

 

 

 

 

6,594

 

Total cash, cash equivalents and restricted

   cash

 

$

 

36,869

 

 

$

 

182,774

 

 

$

 

2,219

 

 

$

 

—

 

 

$

 

221,862

 


The consolidating condensed statement of cash flows for the nine months ended September 30, 2018 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

 

(in thousands)

 

Net cash (used in) provided by

   operating activities

 

$

 

(22,743

)

 

$

 

283,410

 

 

$

 

2,781

 

 

$

 

—

 

 

$

 

263,448

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

(2,620

)

 

 

 

(86,405

)

 

 

 

(57

)

 

 

 

—

 

 

 

 

(89,082

)

Proceeds from sale of property and

   equipment

 

 

 

—

 

 

 

 

920

 

 

 

 

—

 

 

 

 

—

 

 

 

 

920

 

Net cash (used in) provided by business

   combinations

 

 

 

(328,925

)

 

 

 

22,651

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(306,274

)

Investment in and loans to unconsolidated

   affiliates

 

 

 

—

 

 

 

 

(698

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(698

)

Net cash used in investing activities

 

 

 

(331,545

)

 

 

 

(63,532

)

 

 

 

(57

)

 

 

 

—

 

 

 

 

(395,134

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net proceeds from (payments to) related

   parties

 

 

 

208,772

 

 

 

 

(214,023

)

 

 

 

5,251

 

 

 

 

—

 

 

 

 

—

 

Proceeds from issuance of New Term Loan

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Proceeds from issuance of 6% Senior Notes

   due 2026

 

 

 

—

 

 

 

 

—

 

 

 

 

600,000

 

 

 

 

—

 

 

 

 

600,000

 

Net borrowings under Revolving Credit

   Facility

 

 

 

180,000

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

180,000

 

Debt issuance costs

 

 

 

(5,401

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(5,401

)

Taxes paid related to net share settlement

   of equity awards

 

 

 

(10,601

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(10,601

)

Proceeds from exercise of stock options

 

 

 

154

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

154

 

Payments on other long-term payables

 

 

 

(67

)

 

 

 

(217

)

 

 

 

(217

)

 

 

 

—

 

 

 

 

(501

)

Net cash provided by (used in)

   financing activities

 

 

 

372,857

 

 

 

 

(214,240

)

 

 

 

605,034

 

 

 

 

—

 

 

 

 

763,651

 

Increase in cash, cash equivalents and

   restricted cash

 

 

 

18,569

 

 

 

 

5,638

 

 

 

 

607,758

 

 

 

 

—

 

 

 

 

631,965

 

Cash, cash equivalents and restricted

   cash, beginning of period

 

 

 

13,837

 

 

 

 

118,483

 

 

 

 

15,429

 

 

 

 

—

 

 

 

 

147,749

 

Cash, cash equivalents and restricted

   cash, end of period

 

$

 

32,406

 

 

$

 

124,121

 

 

$

 

623,187

 

 

$

 

—

 

 

$

 

779,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO AMOUNTS REPORTED WITHIN THE CONDENSED

  CONSOLIDATED BALANCE SHEETS:

 

Cash and cash equivalents

 

$

 

31,688

 

 

$

 

122,451

 

 

$

 

9,947

 

 

$

 

—

 

 

$

 

164,086

 

Restricted cash

 

 

 

718

 

 

 

 

670

 

 

 

 

234

 

 

 

 

—

 

 

 

 

1,622

 

Restricted and escrow cash included in other

   noncurrent assets

 

 

 

—

 

 

 

 

1,000

 

 

 

 

613,006

 

 

 

 

—

 

 

 

 

614,006

 

Total cash, cash equivalents and restricted

   cash

 

$

 

32,406

 

 

$

 

124,121

 

 

$

 

623,187

 

 

$

 

—

 

 

$

 

779,714

 

Note 18. Pending Acquisitions

Caesars Entertainment Corporation

On June 24, 2019, the Company entered into an Agreement and Plan of Merger (as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 15, 2019, and as it may be further amended from time to time, the “Merger Agreement”) with Caesars Entertainment Corporation (“Caesars”) pursuant to which a wholly-owned subsidiary of the Company will merge with and into Caesars, with Caesars surviving as a wholly-owned subsidiary of the Company (the “Merger”). Based on the terms and subject to the conditions set forthdebt in the Merger Agreement, the aggregate consideration payable by the Company in respect of outstanding shares of common stock of Caesars will be (a) an amount of cash equal to (i) the sum of (A) $8.40 plus (B) if applicable closing conditions set forth in the Merger Agreement are not satisfied by March 25, 2020, an amount equal to $0.003333 for each day (provided that such amount will not be payable if the waiting period under the HSR Act has expired or been terminated but (to the extent required) the consents of the holders of Caesars’ 5.00% convertible senior notes due 2024 have not been obtained) from March 25, 2020 until the closing date of the Merger, multiplied by (ii) a number of shares of Caesars common stock equal to (A) 682,161,838 (which includes 8,271,660 shares being held in escrow trust to satisfy unsecured claims pursuant to the Third Amended Joint Plan of Reorganization, filed with the U.S. Bankruptcy Court for the Northern District of Illinois in Chicago on January 13, 2017, at Docket No. 6318, which


shares are not entitled to vote) plus (B) the number of shares of Caesars common stock (the “Aggregate Caesars Share Amount”) issued after June 24, 2019 and prior to the effective time of the Merger pursuant to the exercise of certain equity awards issued under Caesars stock plans or conversion of Caesars’ outstanding convertible notes and (b) a number of shares of common stock of Eldorado equal to 0.0899 multiplied by the Aggregate Caesars Share Amount (such amount per share of Caesars common stock, the “Merger Consideration”).  Following the consummation of the Merger (assuming that all Caesars convertible notes are converted immediately following consummation of the Merger into $8.40 in cash and 0.0899 shares of common stock of Eldorado for each share of Caesars common stock into which such Caesars convertible notes were convertible immediately prior to the Merger), Eldorado and former Caesars stockholders will hold approximately 51% and 49%, respectively, of the combined company's outstanding shares of common stock.

The Merger Agreement contains customary representations and warranties by each of Caesars and Eldorado, and each party has agreed to customary covenants.

The Merger Agreement also contains termination rights for each of Caesars and Eldorado under certain circumstances. If the Merger Agreement is terminated in certain circumstances relating to changes in the recommendation of the board of directors of Caesars in favor of the Merger, entry by Caesars into an alternative transaction or in certain circumstances following the failure of Caesars stockholders to approve the Merger, Caesars will be required to pay Eldorado a termination fee of approximately $418.4 million. If the Merger Agreement is terminated in certain circumstances relating to changes in the recommendation of the board of directors of Eldorado in favor of the issuance of shares of Eldorado common stock in the Merger or in certain circumstances following the failure of Eldorado stockholders to approve such issuance, then Eldorado will be required to pay Caesars a termination fee of approximately $154.9 million. In addition, each party will be obligated to reimburse the other party’s expenses for an amount not to exceed $50.0 million if the Merger Agreement is terminated because of the failure to obtain the required approval of such party’s stockholders (creditable against any termination fee that may subsequently be paid by such party). The Merger Agreement also provides that Eldorado will be obligated to pay a termination fee of approximately $836.8 million to Caesars if the Merger Agreement is terminated (i) due to a law or order relating to gaming or antitrust laws that prohibits or permanently enjoins the consummation of the transactions, (ii) because the required regulatory approvals were not obtained prior to June 24, 2020 (subject to extension to a date no later than December 24, 2020 pursuant to the Merger Agreement) or (iii) due to Eldorado willfully and materially breaching certain obligations with respect to the actions required to be taken by Eldorado to obtain required antitrust approvals.

Consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including, among others, (1) the expiration or termination of any applicable waiting period under the HSR Act, and receipt of required gaming approvals, (2) the absence of any governmental order or law prohibiting the consummation of the Merger, (3) adoption of the Merger Agreement by holders of a majority of the outstanding shares of Caesars common stock, (4) the approval of the issuance of shares of Eldorado common stock in the Merger, (5) the effectiveness of the registration statement for Eldorado common stock to be issued in the Merger and the authorization for listing of those shares on the Nasdaq Stock Market, (6) absence of a material adverse effect on the other party, (7) the accuracy of the other party’s representations and warranties, subject to customary materiality standards, (8) compliance of the other party with its respective covenants under the Merger Agreement in all material respects and (9) conversion or certain amendments of, or another mutually agreed arrangement with respect to, Caesars’ 5.00% convertible senior notes due 2024.

In connection with the execution of the Merger Agreement, on June 24, 2019, the Company entered into a debt financing commitment letter and related fee letters with JPMorgan Chase Bank, N.A., Credit Suisse AG, Cayman Islands Branch, Credit Suisse Loan Funding LLC, Macquarie Capital (USA) Inc. and Macquarie Capital Funding LLC (the “Initial Commitment Parties”). On July 19, 2019, the Company entered into an amended and restated commitment letter (the “A&R Commitment Letter”) and related fee letters, which amended and restated the Commitment Letter in its entirety to, among other things, add additional arrangers and lenders, including Bank of America, N.A., BofA Securities, Inc., Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch, Goldman Sachs Bank USA, SunTrust Bank, SunTrust Robinson Humphrey, Inc., U.S. Bank National Association, KeyBank National Association, KeyBanc Capital Markets Inc., Fifth Third Bank, and Citizens Bank, National Association (together with the Initial Commitment Parties, collectively, the “Commitment Parties”). Pursuant to the A&R Commitment Letter, the Commitment Parties committed to arrange and provide (i) the Company with: (w) a $1,000.0 million senior secured revolving credit facility, (x) a $3,000.0 million senior secured term loan B facility, (y) a $3,600.0 million senior secured 364-day bridge facility and (z) a $1,800.0 million senior unsecured bridge loan facility and (ii) a subsidiary of Caesars with a $2,400.0 million senior secured incremental term loan B facility (collectively, the “Debt Financing”). The proceeds of the Debt Financing will be used (a) to pay all or a portion of the cash consideration payable in the Merger, (b) to refinance all of the Company’s existing syndicated bank credit facilities and outstanding senior notes, (c) to refinance certain of Caesars’ and its subsidiaries’ existing debt, (d) to pay transaction fees and expenses related to the Merger and related transactions and (e) for working capital and general corporate purposes. The availability of the borrowings under the Debt Financing is subject to the satisfaction of certain customary conditions including the substantially concurrent closing of the Merger.


On July 19, 2019, the Company entered into a commitment and engagement letter (as amended, the “Increase Commitment Letter”) and related fee letters to, if elected by the Company, increase the total size of the Debt Financing, including an increase to the senior secured term loan B facility to be arranged on a commercially reasonable efforts basis by the Commitment Parties in an amount to be agreed upon by the parties and an increase to the revolving credit facility by $830.0 million, the proceeds of which, if the Company elects to incur such financing, may be used to refinance certain existing indebtedness of Caesars Resort Collection, LLC and its subsidiaries and for working capital and general corporate purposes upon consummation of the Merger. The Increase Commitment Letter and a related engagement letter also contemplate the possibility of new senior secured and/or senior unsecured notes to be issued by the Company.

In connection with the execution of the Merger Agreement, on June 24, 2019, the Company entered into a Master Transaction Agreement (the “MTA”) with VICI Properties L.P., a Delaware limited partnership (“VICI”), pursuant to which, among other things, the Company has agreed, subject to the consummation of the Merger and unrealized loss on the other applicable conditions set forth therein andchange in any related documents, (i) through one or more of its subsidiaries (after giving effect to the Merger) to consummate one or more sale and leaseback transactions with VICI and/or its affiliates with respect to certain property described in the MTA, including Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City (or, under certain circumstances, if necessary, certain replacement properties specified in the MTA), (ii) through one or more of its subsidiaries (after giving effect to the Merger) to amend the CPLV Lease, the Non-CPLV Lease and the Joliet Lease (each as defined in the MTA) in accordance with the termsfair value of the MTA and receive certain consideration from VICI or its affiliates in respect thereof, (iii) to provide a guaranty in respect of each of the CPLV Lease, the Non-CPLV Lease and the Joliet Lease in accordance with the terms of the MTA, (iv) to enter into (or cause its applicable subsidiaries (after giving effect to the Merger) to enter into) certain right of first refusal agreements and a put-call right agreement in accordance with the terms of the MTA and (v) to undertake certain related transactions in connection with orderivative liability related to the foregoing.  The Company expects to apply the proceeds5% Convertible Notes, slightly offset by a gain on William Hill UK and Flutter stock and a realized gain on conversion of the VICI transactions5% Convertible Notes.

(c)Transaction costs and other operating costs for the three and nine months ended September 30, 2020 primarily represent costs related to pay a portion of the cash consideration payable in the Merger, various contract or license termination exit costs, professional services, other acquisition costs and transactionseverance costs.
(d)Other items represent internal labor charges related to certain departed executives, retention bonuses, business optimization expenses associated with the Merger and contract labor.

Nine Months Ended September 30,
(In millions)20202019
Capital Expenditures, Net
Las Vegas$16 $0 
Regional (a)
62 131 
Managed, International, CIE (a)
1 0 
Corporate and Other19 4 
Total$98 $135 
___________________
(a)Includes $4 million of capital expenditures related transactions.

On September 26, 2019, the Company and VICI entered into definitive Purchase and Sale Agreements to effect the purchase and sale of Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City in connection with the transactions described in clause (i) of the preceding paragraph.

The Company expects that the Merger and related transactions will be consummated in the first half of 2020.


properties classified as discontinued operations.
Balance Sheet as of
(In millions)September 30, 2020December 31, 2019
Total Assets
Las Vegas$21,552 $0 
Regional14,096 6,787 
Managed, International, CIE604 0 
Corporate and Other(13)(1,146)
Total$36,239 $5,641 
43

ITEM 2.

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion together with the financial statements, including the related notes and the other financial information, contained in this Quarterly Report on Form 10-Q.

Caesars Entertainment, Inc., a Delaware corporation formerly known as Eldorado Resorts, Inc. (“ERI” or “Eldorado”), a Nevada corporation, is referred to as the “Company,” “ERI,“CEI,” “Caesars,” or the “Registrant,” and together with its subsidiaries may also be referred to as “we,” “us” or “our.”

Overview

We are a geographically diversified gaming and hospitality company that was founded in 1973 by the Carano family with 26 gaming facilitiesthe opening of the Eldorado Hotel Casino in 12Reno, Nevada. We partnered with MGM Resorts International to build Silver Legacy Resort Casino in Reno, Nevada in 1993 and, beginning in 2005, we grew through a series of acquisitions, including the acquisition of Eldorado Shreveport in 2005, MTR Gaming Group, Inc. in 2014, Circus Circus Reno (“Circus Reno”) and the 50% membership interest in the Silver Legacy that was owned by MGM Resorts International in 2015, Isle of Capri Casinos, Inc. (“Isle” or “Isle of Capri”) in 2017 and Grand Victoria Casino (“Elgin”) and Tropicana Entertainment, Inc. (“Tropicana”) in 2018.
On July 20, 2020, we completed the merger with Caesars Entertainment Corporation (“Former Caesars”) pursuant to which Former Caesars became our wholly-owned subsidiary (the “Merger”). As a result of the Merger, we currently own, lease or manage an aggregate of 56 domestic properties in 16 states as of September 30, 2019. Our properties, which are located in Ohio, Louisiana, Nevada, New Jersey, West Virginia, Colorado, Florida, Iowa, Mississippi, Illinois, Indiana and Missouri, featurewith approximately 26,60067,200 slot machines, video lottery terminals (“VLTs”) and e-tables, approximately 7503,500 table games and approximately 11,80048,800 hotel rooms.rooms as of September 30, 2020. We also have international operations in five countries outside of the U.S. In addition, we have other domestic and international properties that are authorized to use the brands and marks of Caesars Entertainment, Inc., as well as other non-gaming properties. Upon completion of our previously announced sales, or expected sales, of certain gaming properties, we expect that we will continue to own, lease or manage 51 properties. Our primary source of revenue is generated by gaming operations, and we utilize our hotels, restaurants, bars, entertainment, racing, sportsbook offerings, retail shops and other services to attract customers to our properties.

We were founded in 1973 by the Carano family with the opening of the Eldorado Hotel Casino in Reno, Nevada. In 1993, we partnered with MGM Resorts International to build Silver Legacy Resort Casino, the first mega-themed resort in Reno. In 2005, we acquired our first property outside of Reno when we purchased a casino in Shreveport, Louisiana, now known as Eldorado Shreveport. In September 2014, we merged with MTR Gaming Group, Inc. and acquired its three gaming and racing facilities in Ohio, Pennsylvania and West Virginia. The following year, in November 2015, we acquired Circus Reno and the 50% membership interest in the Silver Legacy that was owned by MGM Resorts International. On May 1, 2017, we completed our acquisition of Isle of Capri Casinos, Inc. (“Isle” or “Isle of Capri”), adding 13 gaming properties to our portfolio. On August 7, 2018, we acquired the Elgin Riverboat Resort – Riverboat Casino d/b/a Grand Victoria Casino (“Elgin”) (the “Elgin Acquisition”). On October 1, 2018, we completed our acquisition of Tropicana Entertainment, Inc. (“Tropicana”), and added seven properties to our portfolio (the “Tropicana Acquisition”). On January 11, 2019 and March 8, 2019, respectively, we closed on our sales of Presque Isle Downs & Casino and Lady Luck Casino Nemacolin, which are both located in Pennsylvania.


The following table sets forth certain information regarding our properties (listed by segment in which each property is reported) as of September 30, 2019:

Segment

Property

Date Acquired

State

West

Eldorado Resort Casino Reno ("Eldorado Reno")

(a)

Nevada

Silver Legacy Resort Casino ("Silver Legacy")

(a)

Nevada

Circus Circus Reno ("Circus Reno")

(a)

Nevada

MontBleu Casino Resort & Spa ("MontBleu")

October 1, 2018

Nevada

Tropicana Laughlin Hotel & Casino ("Laughlin")

October 1, 2018

Nevada

Isle Casino Hotel - Blackhawk ("Isle Black Hawk")

May 1, 2017

Colorado

Lady Luck Casino - Black Hawk ("Lady Luck Black Hawk")

May 1, 2017

Colorado

Midwest

Isle Casino Waterloo ("Waterloo")

May 1, 2017

Iowa

Isle Casino Bettendorf ("Bettendorf")

May 1, 2017

Iowa

Isle of Capri Casino Boonville ("Boonville")

May 1, 2017

Missouri

Isle Casino Cape Girardeau ("Cape Girardeau")

May 1, 2017 (c)

Missouri

Lady Luck Casino Caruthersville ("Caruthersville")

May 1, 2017 (c)

Missouri

Isle of Capri Casino Kansas City ("Kansas City")

May 1, 2017 (c)

Missouri

South

Isle Casino Racing Pompano Park ("Pompano")

May 1, 2017

Florida

Eldorado Resort Casino Shreveport ("Eldorado Shreveport")

(a)

Louisiana

Isle of Capri Casino Hotel Lake Charles ("Lake Charles")

May 1, 2017

Louisiana

Belle of Baton Rouge Casino & Hotel ("Baton Rouge")

October 1, 2018

Louisiana

Isle of Capri Casino Lula ("Lula")

May 1, 2017

Mississippi

Lady Luck Casino Vicksburg ("Vicksburg")

May 1, 2017 (c)

Mississippi

Trop Casino Greenville ("Greenville")

October 1, 2018

Mississippi

East (b)

Eldorado Gaming Scioto Downs ("Scioto Downs")

(a)

Ohio

Mountaineer Casino, Racetrack & Resort ("Mountaineer")

(a) (c)

West Virginia

Tropicana Casino and Resort, Atlantic City ("Trop AC")

October 1, 2018

New Jersey

Central

Grand Victoria Casino ("Elgin")

August 7, 2018

Illinois

Lumière Place Casino ("Lumière")

October 1, 2018

Missouri

Tropicana Evansville ("Evansville")

October 1, 2018

Indiana

(a)

Property was aggregated into segment prior to January 1, 2016.

(b)

Presque Isle Downs was sold on January 11, 2019 and Nemacolin was sold on March 8, 2019. Both properties were previously reported in the East segment.

(c)

Property currently pending sale (see Note 5).


Acquisitions and Development Opportunities

Caesars Entertainment

On June 24, 2019, we entered into an Agreement and Plan of Merger (as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 15, 2019, and as it may be further amended from time to time, the “Merger Agreement”) with Caesars Entertainment Corporation (“Caesars”) pursuant to which a wholly-owned subsidiary of the Company will merge with and into Caesars, with Caesars surviving as a wholly-owned subsidiary of the Company (the “Merger”). On the terms and subject to the conditions set forth in the Merger Agreement, the aggregate consideration paid by the Company in respect of outstanding shares of common stock of Caesars will be (a) an amount of cash equal to (i) the sum of (A) $8.40 plus (B) if the applicable closing conditions set forth in the Merger Agreement are not satisfied by March 25, 2020, an amount equal to $0.003333 for each day (provided that such amount will not be payable if the waiting period under the HSR Act has expired or been terminated but (to the extent required) the consents of the holders of Caesars’ 5.00% convertible senior notes due 2024 have not been obtained) from March 25, 2020 until the closing date of the Merger, multiplied by (ii) a number of shares of Caesars common stock equal to (A) 682,161,838 (which includes 8,271,660 shares being held in escrow trust to satisfy unsecured claims pursuant to the Third Amended Joint Plan of Reorganization, filed with the U.S. Bankruptcy Court for the Northern District of Illinois in Chicago on January 13, 2017, at Docket No. 6318, which shares are not entitled to vote) plus (B) the number of shares of Caesars common stock (the “Aggregate Caesars Share Amount”) issued after June 24, 2019 and prior to the effective time of the Merger pursuant to the exercise of certain equity awards issued under Caesars stock plans or conversion of Caesars’ outstanding convertible notes and (b) a number of shares of ERI common stock equal to 0.0899 multiplied by the Aggregate Caesars Share Amount (such amount per share of Caesars common stock, the “Merger Consideration”). Following the consummation of the Merger (assuming that all Caesars convertible notes are converted immediately following consummation of the Merger into $8.40 in cash and 0.0899 shares of common stock of Eldorado for each share of Caesars common stock into which such Caesars convertible notes were convertible immediately prior to the Merger), Eldorado stockholders and former Caesars stockholders will hold approximately 51% and 49%, respectively, of the combined company's outstanding shares of common stock.

The Merger Agreement contains customary representations and warranties by each of Caesars and Eldorado, and each party has agreed to customary covenants.

The Merger Agreement also contains termination rights for each of Caesars and Eldorado under certain circumstances. If the Merger Agreement is terminated in certain circumstances relating to changes in the recommendation of the board of directors of Caesars in favor of the Merger, entry by Caesars into an alternative transaction or in certain circumstances following the failure of Caesars stockholders to approve the Merger, Caesars will be required to pay Eldorado a termination fee of approximately $418.4 million. If the Merger Agreement is terminated in certain circumstances relating to changes in the recommendation of the board of directors of Eldorado in favor of the issuance of shares of Eldorado common stock in the Merger or in certain circumstances following the failure of Eldorado stockholders to approve such issuance, then Eldorado will be required to pay Caesars a termination fee of approximately $154.9 million. In addition, each party will be obligated to reimburse the other party’s expenses for an amount not to exceed $50.0 million if the Merger Agreement is terminated because of the failure to obtain the required approval of such party’s stockholders (creditable against any termination fee that may subsequently be paid by such party). The Merger Agreement also provides that Eldorado will be obligated to pay a termination fee of approximately $836.8 million to Caesars if the Merger Agreement is terminated (i) due to a law or order relating to gaming or antitrust laws that prohibits or permanently enjoins the consummation of the transactions, (ii) because the required regulatory approvals were not obtained prior to June 24, 2020 (subject to extension to a date no later than December 24, 2020 pursuant to the Merger Agreement) or (iii) due to Eldorado willfully and materially breaching certain obligations with respect to the actions required to be taken by Eldorado to obtain required antitrust approvals.

Consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including, among others, (1) the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and receipt of required gaming approvals, (2) the absence of any governmental order or law prohibiting the consummation of the Merger, (3) adoption of the Merger Agreement by holders of a majority of the outstanding shares of Caesars common stock, (4) the approval of the issuance of shares of Eldorado common stock in the Merger, (5) the effectiveness of the registration statement for Eldorado common stock to be issued in the Merger and the authorization for listing of those shares on the Nasdaq Stock Market, (6) absence of a material adverse effect on the other party, (7) the accuracy of the other party’s representations and warranties, subject to customary materiality standards, (8) compliance of the other party with its respective covenants under the Merger Agreement in all material respects and (9) conversion or certain amendments of, or another mutually agreed arrangement with respect to, Caesars’ 5.00% convertible senior notes due 2024.

In connection with execution of the Merger Agreement, on June 24, 2019, we entered into a debt financing commitment letter and related fee letters with JPMorgan Chase Bank, N.A., Credit Suisse AG, Cayman Islands Branch, Credit Suisse Loan Funding LLC, Macquarie Capital (USA) Inc. and Macquarie Capital Funding LLC (the “Initial Commitment Parties”). On July 19, 2019, the Company entered into an amended and restated commitment letter (the “A&R Commitment Letter”) and related fee letters, which amended and restated the Commitment Letter in its entirety to, among other things, add additional arrangers and lenders, including Bank of America, N.A., BofA Securities, Inc., Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch, Goldman Sachs Bank


USA, SunTrust Bank, SunTrust Robinson Humphrey, Inc., U.S. Bank National Association, KeyBank National Association, KeyBanc Capital Markets Inc., Fifth Third Bank, and Citizens Bank, National Association (together with the Initial Commitment Parties, collectively, the “Commitment Parties”). Pursuant to the A&R Commitment Letter, the Commitment Parties committed to arrange and provide (i) the Company with: (w) a $1,000.0 million senior secured revolving credit facility, (x) a $3,000.0 million senior secured term loan B facility, (y) a $3,600.0 million senior secured 364-day bridge facility and (z) a $1,800.0 million senior unsecured bridge loan facility and (ii) a subsidiary of Caesars with a $2,400.0 million senior secured incremental term loan B facility (collectively, the “Debt Financing”). The proceeds of the Debt Financing will be used (a) to pay all or a portion of the cash consideration payable in the Merger, (b) to refinance all of our existing syndicated bank credit facilities and outstanding senior notes, (c) to refinance certain of Caesars’ and its subsidiaries’ existing debt, (d) to pay transaction fees and expenses related to the Merger and related transactions and (e) for working capital and general corporate purposes. The availability of the borrowings under the Debt Financing is subject to the satisfaction of certain customary conditions including the substantially concurrent closing of the Merger.

On July 19, 2019, the Company entered into a commitment and engagement letter (as amended, the “Increase Commitment Letter”) and related fee letters to, if elected by the Company, increase the total size of the Debt Financing, including an increase to the senior secured term loan B facility to be arranged on a commercially reasonable efforts basis by the Commitment Parties in an amount to be agreed upon by the parties and an increase to the revolving credit facility by $830.0 million, the proceeds of which, if the Company elects to incur such financing, may be used to refinance certain existing indebtedness of Caesars Resort Collection, LLC and its subsidiaries and for working capital and general corporate purposes upon consummation of the Merger. The Increase Commitment Letter and a related engagement letter also contemplate the possibility of new senior secured and/or senior unsecured notes to be issued by the Company.

In connection with the executionMerger, Caesars Entertainment Corporation changed its name to “Caesars Holdings, Inc.” and Eldorado Resorts, Inc. converted into a Delaware corporation and changed its name to “Caesars Entertainment, Inc.” In addition, effective as of July 21, 2020 our ticker symbol on the NASDAQ Stock Market changed from “ERI” to “CZR”. In connection with the Merger, Agreement, on June 24, 2019, we also entered into a Master Transaction Agreement (the “MTA”) with VICI Properties L.P., a Delaware limited partnership (“VICI”), pursuant to which, among other things, we have agreed subject to the consummation of the Merger and the other applicable conditions set forth therein and in any related documents, (i) through one or more of its subsidiaries (after giving effect to the Merger) to consummate one or morecertain sale and leaseback transactions and amend certain lease agreements with VICI and/or its affiliates, with respect to certain property described in the MTA,MTA.

As of September 30, 2020, we owned 23 of our casinos and leased 28 casinos in the U.S. We have leases with GLP Capital, L.P., the operating partnership of Gaming and Leisure Properties, Inc. (“GLPI”), including Harrah’s New Orleans, Harrah’s Laughlinour Master Lease that we entered into in connection with the Tropicana Acquisition on October 1, 2018 (as amended, the “GLPI Master Lease”) and our Lumiere lease. Six of the leased casinos are subject to leases with GLPI, and we lease an additional 22 casinos from other third parties, including VICI. See descriptions under the “GLPI Master Lease” and “VICI Leases”.
We periodically divest of assets in order to raise capital or as a result of a determination that the assets are not core to our business. We also divested certain assets, and are required to divest additional assets, in connection with regulatory approvals related to closing of the Merger. A summary of recently completed and planned divestitures of our properties as of September 30, 2020 is as follows:
44

SegmentPropertyDate SoldLocation
RegionalPresque Isle Downs & Casino (“Presque”)January 11, 2019Pennsylvania
RegionalLady Luck Casino Nemacolin (“Nemacolin”)March 8, 2019Pennsylvania
RegionalMountaineer Casino, Racetrack and Resort (“Mountaineer”)December 6, 2019West Virginia
RegionalIsle Casino Cape Girardeau (“Cape Girardeau”)December 6, 2019Missouri
RegionalLady Luck Casino Caruthersville (“Caruthersville”)December 6, 2019Missouri
RegionalIsle of Capri Casino Kansas City (“Kansas City”)July 1, 2020 (a)Missouri
RegionalLady Luck Casino Vicksburg (“Vicksburg”)July 1, 2020 (a)Mississippi
RegionalEldorado Resort Casino Shreveport (“Eldorado Shreveport”)N/A (b)Louisiana
RegionalMontBleu Casino Resort & Spa (“MontBleu”)N/A (b)Nevada
RegionalTropicana Evansville (“Evansville”)N/A (c)Indiana
Discontinued operations (d):
RegionalHarrah’s RenoSeptember 30, 2020 (e)Nevada
RegionalBally’s Atlantic CityN/A (f)New Jersey
RegionalHarrah’s Louisiana Downs Casino, Racing & Entertainment (“Harrah’s Louisiana Downs”)N/A (g)Louisiana
RegionalCaesars Southern IndianaN/A (c)Indiana
RegionalHorseshoe HammondN/A (c)Indiana
Managed, International, CIEEmerald Resort & CasinoN/ASouth Africa
Managed, International, CIECaesars Entertainment UKN/AUnited Kingdom
(a)We closed the sales of Kansas City (ii) through one or moreand Vicksburg on July 1, 2020 and recorded a gain of approximately $8 million during the quarter ended September 30, 2020.
(b)On April 24, 2020, we entered into a definitive purchase agreement with Twin River Worldwide Holdings, Inc. (“Twin River”) and certain of its subsidiaries (after giving effectaffiliates for the sale of the equity interests of Eldorado Resort Casino Shreveport Joint Venture and Columbia Properties Tahoe, LLC, the entities that hold Eldorado Shreveport and MontBleu for aggregate consideration of $155 million, subject to a working capital adjustment. The definitive agreement provides that the consummation of the sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals and Eldorado Shreveport and MontBleu are expected to close in the first quarter of 2021. Eldorado Shreveport and MontBleu met the requirements for presentation as assets held for sale under generally accepted accounting principles as of September 30, 2020. In conjunction with the classification of MontBleu’s operations as assets held for sale as a result of the announced sale, an impairment charge totaling $45 million was recorded during the nine months ended September 30, 2020 due to the Merger) to amendcarrying value exceeding the CPLV Lease, the Non-CPLV Lease and the Joliet Lease (each as defined in the MTA) in accordanceestimated net sales proceeds.
(c)In connection with the termsits review of the MTA and receive certain consideration from VICI or its affiliatesMerger, the Indiana Gaming Commission determined on July 16, 2020 that we are required to divest three properties within the state of Indiana in respect thereof, (iii)order to provide a guaranty in respect of eachavoid undue economic concentrations as conditions to the Indiana Gaming Commission’s approval of the CPLV Lease,Merger. On October 27, 2020, the Non-CPLV LeaseCompany entered into an agreement to sell Evansville to GLPI and the Joliet LeaseTwin River for $480 million in accordance with the termscash, subject to a customary working capital adjustment. The sale is subject to satisfaction of the MTA, (iv)customary conditions, including receipt of required regulatory approvals and is expected to close in mid-2021. In addition, we plan to enter into (or cause our subsidiaries (after giving effectagreements to divest of Caesars Southern Indiana, and Horseshoe Hammond prior to December 31, 2020. Evansville met the Merger)requirements for presentation as assets held for sale under generally accepted accounting principles as of September 30, 2020. See (d) below for Caesars Southern Indiana, and Horseshoe Hammond.
(d)These Former Caesars properties met, or are expected to enter into) certain rightmeet within a short period of first refusal agreements and a put-call right agreement in accordance with the termstime, held for sale criteria as of the MTA and (v)acquisition date. The sales of these properties have or are expected to undertake certain related transactions in connection with or related toclose within one year from the foregoing.  We expect to apply the proceedsdate of the VICI transactions to pay a portionclosing of the cash consideration payable in the Merger and transaction expenses associated with the Merger and related transactions.

properties are classified as discontinued operations.

(e)On September 26, 2019,30, 2020, we and VICI completed the Companysale of Harrah’s Reno to an affiliate of CAI Investments for $42 million, which proceeds were split between us and VICI. We received approximately $8 million of net proceeds.
(f)On April 24, 2020, Former Caesars reached an agreement with VICI to sell Bally’s Atlantic City Hotel & Casino to Twin River for approximately $25 million. Caesars will receive approximately $6 million from the sale. In addition, on October 9, 2020, we reached an agreement to sell the Bally’s brand to Twin River for $20 million, while retaining the right to use the brand within Bally’s Las Vegas into perpetuity.
45

(g)On September 3, 2020, we and VICI entered into definitive Purchase and Sale Agreementsagreement to effectsell Harrah’s Louisiana Downs with Rubico Acquisition Corp. for $22 million, subject to a customary working capital adjustment, where the purchase and sale of Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City in connection with the transactions described in clause (i) of the preceding paragraph.

We expect that the Merger and related transactionsproceeds will be consummatedsplit between us and VICI. The sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals and is expected to close in the first half of 2020.

2021.

Merger Related Activities
Merger with Caesars Entertainment Corporation
On July 20, 2020, the Merger was consummated and Former Caesars became a wholly-owned subsidiary of ours. The strategic rationale for the Merger includes, but is not limited to, the following:
•Creation of the largest owner, operator and manager of domestic gaming assets
•Diversification of the Company’s domestic footprint
•Access to iconic brands, rewards programs and new gaming opportunities expected to enhance customer experience
•Realization of significant identified synergies
Based on the closing price of $38.24 per share of the Company’s common stock, par value $0.00001 per share (“Company Common Stock”), reported on NASDAQ on July 20, 2020, the aggregate implied value of the aggregate merger consideration paid to former holders of Former Caesars common stock in connection with the Merger was approximately $8.5 billion, including approximately $2.4 billion in the Company Common Stock and approximately $6.1 billion in cash. The aggregate merger consideration transferred also included approximately $2.4 billion related to the repayment of certain outstanding debt balances of Former Caesars and approximately $48 million of other consideration paid, which includes $19 million related to a transaction success fee, for the benefit of Former Caesars, and $29 million for the replacement of equity awards of certain employees attributable to services provided prior to the Merger.
Pursuant to the Merger, each share of Former Caesars common stock was converted into the right to receive, at the election of the holder thereof and subject to proration, approximately $12.41 of cash consideration or approximately 0.3085 shares of Company Common Stock, with a value equal to approximately $12.41 in cash (based on the volume weighted average price per share of Company Common Stock for the 10 trading days ending on July 16, 2020). Following the consummation of the Merger, stockholders of the Company and stockholders of Former Caesars held approximately 61% and 39%, respectively, of the outstanding shares of Company Common Stock.
We recognized acquisition-related transaction costs of $107 million and $129 million for the three and nine months ended September 30, 2020, respectively, and $13 million and $17 million for the three and nine months ended September 30, 2019, respectively.
Partnerships and Acquisition Opportunities
William Hill

In September 2018, we entered into a 25-year agreement, which became effective January 2019, with William Hill PLCplc and William Hill US,U.S. Holdco, Inc. (“William Hill US”), its U.S. subsidiary (together, “William Hill”) pursuant to which we (i) granted to William Hill the right to conduct betting activities, including operating sportsbooks, in retail channels and under our first skin and third skin for online channels with respect to our current and future properties located in the United States and the territories and possessions of the United States, including Puerto Rico and the U.S. Virgin Islands and (ii) agreed that William Hill will have the right to conduct real money online gaming activities utilizing our second skin available with respect to properties in such territoryterritories. Pursuant to the terms of the agreement, we received a 20% ownership interest in William Hill US valued at approximately $128.9$129 million as well as 13.413 million ordinary shares of William Hill PLC valued atplc with an initial value of approximately $27.3$27 million upon closing of the transaction in January 2019. The Company’s initial equity and theOur profit and losses attributable to William Hill US are in included in income (loss) from unconsolidated affiliatesTransaction costs and other operating costs on the Consolidated Condensed Statements of Income.Operations. We granted William Hill the right to the use of certain skins in exchange for an equity method investment. The fair value of the William Hill US and William Hill plc shares received has been deferred and is recognized as revenue on a straight-line basis over the 25-year agreement term. The amortization of deferred revenues associated with the Company’sour equity interests totaled $1.3 million and $3.9 million for the three and nine months ended September 30, 2019, respectively, and is included in corporateother revenue within our Corporate and other revenues and operating income.Other segment. Additionally, we receive a profit share from the operations of betting and other gaming activities associated with our properties.
On September 30, 2020, we announced that we had reached an agreement with William Hill plc on the Company’s properties,terms of a recommended cash acquisition pursuant to which we would acquire the entire issued and to be issued share capital (other than shares owned by us or held in treasury) of William Hill plc, in an all-cash transaction of approximately £2.9 billion, or $3.7 billion. The transaction is conditioned on, among other things, the approval of William Hill plc shareholders and receipt of required regulatory approvals. To provide liquidity to fund the cash purchase price for the proposed acquisition, we entered into various
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financing transactions. On September 25, 2020, we borrowed $900 million under the CEI Revolving Credit Facility (defined below), which was repaid subsequent to September 30, 2020. On September 28, 2020, we deposited $2.1 billion, which included borrowings under the CEI Revolving Credit Facility, into an escrow account related to the William Hill offer. As of September 30, 2020, these funds in other property revenuesescrow were classified as restricted cash until certain regulatory approvals were received. In addition, on October 1, 2020, we raised an additional $1.9 billion through a public offering of Company Common Stock.
In connection with the proposed acquisition of William Hill plc, on September 29, 2020, the Company entered into a debt financing commitment letter pursuant to which the lenders party thereto have committed to arrange and provide a newly formed subsidiary of the Company with (a) a £1.0 billion senior secured 540-day bridge loan facility, (b) a £116 million senior secured 540-day revolving credit facility and (c) a £503 million senior secured 60-day bridge loan facility (collectively, the "Debt Financing"). The proceeds of the Debt Financing will be used (i) to pay a portion of the cash consideration for the proposed acquisition, (ii) to refinance certain of William Hill plc's and its subsidiaries' existing debt, (iii) to pay fees and expenses related to the acquisition and related transactions and (iv) for working capital and general corporate purposes.
In order to manage the risk of appreciation of the GBP denominated purchase price the Company has entered into foreign exchange forward contracts.
In connection with the Debt Financing on October 6, 2020, our newly formed subsidiary entered into a £1.5 billion Interim Facilities Agreement with Deutsche Bank AG, London Branch and JPMorgan Chase Bank, N.A. to provide: (a) a 540-day £1.0 billion asset sale bridge facility and (b) a 60-day £503 million cash confirmation bridge facility. Upon receipt of regulatory approvals, the restriction on the $2.1 billion funded as of September 30, 2020 was released and we transferred $1.4 billion of cash into our operating income.

accounts and the outstanding balance of the CEI Revolving Credit Facility was repaid in full. Approximately $598 million of cash remains in an unrestricted account.

The Stars Group

Group/Flutter Entertainment

In November 2018, we entered into a 20-year agreement with The Stars Group Inc. (“TSG”) pursuant to which we agreed to provide TSG with options to obtain access to our second skin for online sports wagering and third skin for real money online gaming and poker, in each case with respect to our properties in the United States. Under the terms of the agreement, we received 1 million TSG common shares. The fair value of the shares received has been deferred and is recognized as revenue on a straight-line basis over the 20-year agreement term. All shares are subject to a one year restriction on transfer from the date they are received. On May 5, 2020, Flutter Entertainment PLC (“Flutter”) completed the acquisition of all of the issued and outstanding common shares of TSG in exchange for 0.2253 Flutter shares per common share of TSG. In addition, we will receive a revenue share from the operation of the applicable verticals by TSG under our licenses. Pursuant to the terms of the TSG agreement, we received 1.1 million TSG common shares valued at approximately $18.6 million and an additional $5.0 million
Reportable Segments
The following table sets forth certain information regarding our properties (listed by segment in TSG common shares became payable to us upon TSG’s exercise of its first option, which shares we expect to receive in the fourth quarter of 2019. We may also receive additional TSG common shares in the future based on TSG net gaming revenue generated in our markets. Upon the entry into the TSG agreement, the Company also recorded deferred revenue associated with the shares received and recognized revenue of $0.3 million and $0.9 million during the three and nine months ended September 30, 2019, respectively, whicheach property is included in corporate and other revenues and operating income.

Tropicana Entertainment Inc.

On October 1, 2018, we acquired Tropicana in a cash transaction valued at $1.9 billion. At the closing of the transaction Tropicana became a wholly-owned subsidiary of ours. Immediately prior to our acquisition, Tropicana sold Tropicana Aruba Resort and GLP Capital, L.P., a wholly-owned subsidiary of Gaming and Leisure Properties, Inc. (“GLPI”), acquired substantially all of Tropicana’s real estate, other than the real estate underlying MontBleu and Lumière, for approximately $964 million. We acquired the real estate underlying Lumière for $246 million with the proceeds of a $246 million loan from GLPI. We funded the remaining consideration payable with our cash on hand and cash on hand at Tropicana, borrowings under our revolving credit facility and proceeds from our offering of $600 million of 6.0% senior notes due 2026. In addition, our borrowing capacity on our revolving credit facility increased from $300 million to $500 million effective October 1, 2018, and the maturity of the revolving credit facility was extended to October 1, 2023.

Substantially concurrently with the acquisition of the real estate portfolio by GLPI, we entered into a triple net master lease for the Tropicana properties acquired by GLPI with an initial term of 15 years, with renewals of up to 20 years at our option (“Master Lease”). Under the Master Lease, we are required to pay the following, among other things: lease payments to the underlying ground lessor for properties that are subject to ground leases, facility maintenance costs, all insurance premiums for insurance with respect to the leased properties and the business conducted on the leased properties, taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor and all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties). The initial annual rent under the terms of the lease was approximately $87.6 million and is subject to annual escalation. We do not have the ability to terminate the obligations under the Master Lease prior to its expiration without GLPI’s consent.

In connection with the purchase of the real estate related to Lumière, GLPI, Tropicana St. Louis RE LLC, a wholly-owned subsidiary of ours (“Tropicana St. Louis RE”), and GLPI entered into a loan agreement, dated as of October 1, 2018 (the “Lumière Loan”), relating to a loan of $246 million by GLPI to Tropicana St. Louis RE to fund the purchase price of the real estate underlying Lumière. The Lumière Loan is guaranteed by us, bears interest at a rate equal to (i) 9.09% until October 1, 2019 and (ii) 9.27% thereafter and matures on October 1, 2020. The Lumière Loan was secured by a first priority mortgage on the Lumière real estate that was released pursuant to its terms on October 1, 2019. In connection with the issuance of the Lumière Loan, we agreed to use our commercially reasonable efforts to transfer one or more of Elgin, Bettendorf, Waterloo, Lula, Vicksburg and Mountaineer or such other property or properties mutually acceptable to Tropicana St. Louis RE and GLPI, provided that the aggregate value of such property, individually or collectively, is at least $246 million (the “Replacement Property”), to GLPI with a simultaneous leaseback to us of such Replacement Property.  In connection with such Replacement Property sale, (i) we and GLPI will enter into an amendment to the Master Lease to revise the economic terms to include the Replacement Property, (ii) GLPI, or one of its affiliates, will assume the Lumière Loan and Tropicana St. Louis RE’s obligations under the Lumière Loan in consideration of the acquisition of the Replacement Property and our Tropicana St. Louis RE’s obligations under the Lumière Loan will be deemed to have been satisfied and (iii) in the event the value of the Replacement Property is greater than the outstanding obligations of Tropicana St. Louis RE under the Lumière Loan, GLPI will pay Tropicana St. Louis RE the difference between the value of the Replacement Property and the amount of outstanding obligations under the Lumière Loan. If such Replacement Property transaction is not consummated prior to the maturity date of the Lumière Loan, other than as a result of certain failures to perform by GLPI, then the amounts outstanding will be paid in full and the rent under the Master Lease will automatically increase, subject to certain escalations.


Grand Victoria Casino

On August 7, 2018, we completed the acquisition of the Grand Victoria Casino in Elgin, Illinois. We purchased Elgin for $328.8 million, including a working capital adjustment totaling $1.3 million. The Elgin Acquisition was financed using cash on hand and borrowings under the Company’s revolving credit facility.

Pompano Joint Venture

In April 2018, we entered into a joint venture with Cordish Companies (“Cordish”) to master plan and develop a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the casino and racetrack at our Pompano property.  As the managing member, Cordish will operate the business and manage the development, construction, financing, marketing, leasing, maintenance and day-to-day operation of the various phases of the project. Additionally, Cordish will be responsible for the development of the master plan for the project with our input and will submit it for our review and approval. We and Cordish have made cash contributions of $500,000 each and could be required to make additional contributions to a maximum of $2.0 million ($1.0 million per member) at the request of the managing member. We have agreed to contribute approximately 130 to 200 acres of land to the joint venture for the project. While we hold a 50% variable interest in the joint venture, we are not the primary beneficiary; as such the investment in the joint venture is accounted for using the equity method. We participate evenly with Cordish in the profits and losses of the joint venture, which is included in income (loss) from unconsolidated affiliates on the Consolidated Statements of Income.

Divestitures

Twin River Worldwide Holdings, Inc.

On July 10, 2019, we entered into a definitive agreement to sell the equity interests of Rainbow Casino Vicksburg Partnership, L.P. and IOC-Kansas City, L.L.C., the entities that hold Lady Luck Casino Vicksburg and Isle of Capri Casino Kansas City, to Twin River Worldwide Holdings, Inc. for cash consideration of approximately $230 million, subject to a working capital adjustment.

The definitive agreement provides that the consummation of the sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals. The transaction is expected to close in early 2020.

Century Casinos, Inc.

On June 17, 2019, we entered into definitive agreements to sell the real property relating to Mountaineer, Cape Girardeau, and Caruthersville to VICI Properties Inc. (“VICI) for approximately $278 million and, immediately following the consummation of the sale such real property, sell all of the outstanding equity interests of Mountaineer Park, Inc., IOC-Caruthersville, LLC and IOC- Cape Girardeau, LLC to Century Casinos, Inc. for approximately $107 million, subject to a customary working capital adjustment.

The definitive agreements provide that the consummation of the sales is subject to satisfaction of customary conditions, including receipt of required regulatory approvals.  The transaction is expected to close in early 2020.

The sales ofMountaineer, Cape Girardeau, Caruthersville, Kansas City and Vicksburg met the requirements for presentation as assets held for sale under generally accepted accounting principlesreported) as of September 30, 2019. However, they did not meet2020:

Las VegasRegionalManaged, International, CIE
(a)Bally’s Las VegasEldorado Resort Casino Reno(a)Harrah’s Atlantic CityInternational
(a)The CromwellSilver Legacy Resort Casino(a)Harrah’s Laughlin(a)Caesars Cairo
(a)Flamingo Las VegasCircus Circus Reno(a)Harrah’s New Orleans(a)Ramses Casino
(a)The LINQ Hotel & Casino
MontBleu Casino Resort & Spa (c)
(a)
Hoosier Park (f)
(a)
Emerald Casino Resort (b)
(a)Paris Las VegasTropicana Laughlin Hotel & Casino(a)
Indiana Grand (g)
(a)
Alea Glasgow (b)
(a)Planet Hollywood Resort & CasinoIsle Casino Hotel - Blackhawk(a)
Bally’s Atlantic City (b)
(a)
Alea Nottingham (b)
(a)Caesars Palace Las VegasLady Luck Casino - Black Hawk(a)Caesars Atlantic City(a)
The Empire Casino (b)
(a)Harrah’s Las VegasIsle Casino Waterloo(a)
Caesars Southern Indiana (e)(b)
(a)
Manchester235 (b)
(a)Rio All-Suite Hotel & CasinoIsle Casino Bettendorf(a)Harrah’s Council Bluffs(a)
Playboy Club London (b)
Isle of Capri Casino Boonville(a)Harrah’s Gulf Coast(a)
Rendezvous Brighton (b)
Isle of Capri Casino Kansas City (d)
(a)Harrah’s Joliet(a)
Rendezvous Southend-on-Sea (j)(b)
Isle Casino Racing Pompano Park(a)Harrah’s Lake Tahoe(a)
The Sportsman (b)
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Eldorado Resort Casino Shreveport (c)
(a)
Harrah’s Louisiana Downs (h)(b)
Managed
Isle of Capri Casino Hotel Lake Charles(a)Harrah’s Metropolis(a)Harrah’s Ak-Chin
Belle of Baton Rouge Casino & Hotel(a)Harrah’s North Kansas City(a)Harrah’s Cherokee
Isle of Capri Casino Lula(a)Harrah’s Philadelphia(a)Harrah’s Cherokee Valley River
Lady Luck Casino Vicksburg (d)
(a)
Harrah’s Reno (i)(b)
(a)Harrah’s Resort Southern California
Trop Casino Greenville(a)Harveys Lake Tahoe(a)
Horseshoe Baltimore (k)
Eldorado Gaming Scioto Downs(a)Horseshoe Bossier City(a)Caesars Windsor
Tropicana Casino and Resort, Atlantic City(a)Horseshoe Council Bluffs(a)Kings & Queens Casino
Grand Victoria Casino(a)
Horseshoe Hammond (e)(b)
(a)Caesars Dubai
Lumière Place Casino(a)Horseshoe TunicaCIE
Tropicana Evansville (e)
(a)Caesars Interactive Entertainment
___________________
(a)These properties were acquired from the Merger with Former Caesars on July 20, 2020.
(b)As a result of the Merger, the sales of these properties met the requirements for presentation as discontinued operations and are included in income from continuing operations.

Churchill Downs Incorporated

On February 28, 2018, we entered into definitive agreements to sell substantially allas of September 30, 2020.

(c)In April 2020, the assets and liabilities of Presque Isle Downs and Vicksburg to Churchill Downs Incorporated (“CDI”). Under the terms of the agreements, CDI agreed to purchase Presque Isle Downs for cash consideration of approximately $178.9 million and Vicksburg for cash consideration of approximately $50.6 million, in each case subject to a customary working capital adjustment. In conjunction with the classification of Vicksburg’s operations as assets held for sale at June 30, 2018 as a result of the announced sale to CDI, an impairment charge totaling $9.8 million was recorded due to the carrying value exceeding the estimated net sales proceeds.


The definitive agreements provided that the divestitures were subject to receipt of required regulatory approvals, termination of the waiting period under the HSR Act and other customary closing conditions, including, in the case of Presque Isle Downs, the prior closing of the sale of Vicksburg or the entryCompany entered into an agreement to acquire another assetsell Eldorado Shreveport and MontBleu, which are expected to close in the first quarter of ours. 2021. As of September 30, 2020, the properties’ assets and liabilities were classified as held for sale.

(d)Kansas City and Vicksburg were sold on July 1, 2020.
(e)On May 7, 2018, we and CDI each received a Request for Additional Information and Documentary Materials, often referred to as a “Second Request,” from the Federal Trade Commission in connection with its review of the Vicksburg acquisition.

On July 6, 2018, in consideration of the time and expense needed to reply to the Second Request,October 27, 2020, the Company and CDI entered into a terminationan agreement and release pursuant to sell Evansville, which is expected to close mid-2021. In addition, the parties agreed to terminate the asset purchase agreement with respect to Vicksburg andCompany plans to enter into an asset purchase agreement pursuant to which CDI would acquiredivest of Caesars Southern Indiana, and assumeHorseshoe Hammond prior to December 31, 2020. As of September 30, 2020, Evansville’s assets and liabilities were classified as held for sale.

(f)Hoosier Park includes operations of our off-track betting locations, Winner’s Circle Indianapolis and Winner’s Circle New Haven.
(g)Indiana Grand includes operations of our off-track betting location, Winner’s Circle Clarksville.
(h)On September 3, 2020, the rights and obligations to operate Nemacolin (the “Vicksburg Termination Agreement”). The Vicksburg Termination Agreement also provided that CDI would pay us a $5.0 million termination fee upon execution of a definitive agreement with respect to the Nemacolin transaction.  On August 10, 2018, weCompany entered into a definitivean agreement to sell substantially all of the assets and liabilities of NemacolinHarrah’s Louisiana Downs, which is expected to CDI.  Under the terms of the agreement, CDI agreed to purchase Nemacolin for cash consideration of approximately $0.1 million, subject to a customary working capital adjustment.

As a result of the agreement to sell Nemacolin, an impairment charge of $3.8 million was recordedclose in the third quarterin the first half of 20182021.

(i)Harrah’s Reno was sold on September 30, 2020.
(j)Rendezvous Southend-on-Sea permanently closed in June 2020 following the recent closure due to the carrying valueCOVID-19 public health emergency.
(k)As of the net propertySeptember 30, 2020, Horseshoe Baltimore was 44.3% owned and equipment being sold exceeding the estimated net sales proceeds.

We closed on the sale of Presque Isle Downs on January 11, 2019 and the sale of Nemacolin on March 8, 2019.

Reportable Segments

held as an equity-method investment.

The executive decision maker of our companythe Company reviews operating results, assesses performance and makes decisions on a “significant market” basis. Our managementManagement views each of our propertiescasinos as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate, and their management and reporting structure. Prior to our acquisition of Isle,the Merger, our principal operating activities occurred in three geographic regions: Nevada, Louisiana and parts of the eastern United States. Following the Isle Acquisition, the Company’s principal operating activities occurred in fourfive geographic regions and reportable segments: West, Midwest, South, East and East.Central. Following the Tropicana Acquisition and Elgin Acquisition, an additional segment, Central, was added increasingMerger, our principal operating activities occur in three regionally-focused reportable segments. The reportable segments continue to five. See Notes 1be based on the similar characteristics of the operating segments within the regions in which they operate and 16 for a summary ofalign with the way management assesses these segments.

results and allocates resources. The Company’s reportable segments are: (1) Las Vegas, (2) Regional, and (3) Managed, International, CIE, in addition to Corporate and Other.

Presentation of Financial Information

The financial information included in this Item 2 for the period after our acquisition of Former Caesars on July 20, 2020 is not fully comparable to the periods prior to the acquisition. In addition, the presentation of financial information herein for the periods prior to our acquisitions of Elgin and Tropicana and after our acquisitions of Elgin and Tropicana are not fully comparable because the results of operations for Elgin and Tropicana are not included for periods prior to August 7, 2018 and October 1, 2018, respectively. Additionally, the Company closed on its sales of Presque Isle Downs and Nemacolin on January 11, 2019 and March 8, 2019, respectively.

Summary financial resultsrespectively, our sales of Tropicana forMountaineer, Cape Girardeau and Caruthersville on December 6, 2019, and our sales of Kansas City and Vicksburg on July 1, 2020 are not fully comparable to the three and nine months ended September 30, 2018 is included in Tropicana’s Quarterly Report on Form 10-Q as filed with the SEC. In conjunction with our acquisition of Tropicana, Tropicana was no longer requiredperiods prior to file quarterly and annual reports with the SEC and terminated its registration on October 1, 2018.

their respective sale dates.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist in better understanding and evaluating our financial condition and results of operations. Our historical operating results may not be indicative of our future results of operations because of these factors and the changing competitive landscape in each of our markets, as well as by factors discussed elsewhere herein. We recommend that you read this MD&A in conjunction with our unaudited consolidated condensed financial statements and the notes to those statements included in this Quarterly Report on Form 10-Q.


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Key Performance Metrics

Our primary source of revenue is generated by our gaming operations, but we use our hotels, restaurants, bars, entertainment, retail shops, racing, sportsbook offerings and other services to attract customers to our properties. Our operating results are highly dependent on the volume and quality of customers visiting and staying at our properties. Key performance metrics include volume indicators such as table games drop and slot handle, which refer to amounts wagered by our customers. The amount of volume we retain, which is not fully controllable by us, is recognized as casino revenues and is referred to as our win or hold. In addition, hotel occupancy
Other Recent Developments and price per room designated by average daily rate (“ADR”) are key indicators for our hotel business. Our calculation of ADR consists of the average price of occupied rooms per day including the impact of resort fees and complimentary rooms. Complimentary room rates are determined based on an analysis of retail or cash rates for each customer segment and each type of room product to estimate complimentary rates which are consistent with retail rates. Complimentary rates are reviewed at least annually and on an interim basis if there are significant changes in market conditions. Complimentary rooms are treated as occupied rooms in our calculation of hotel occupancy.

Significant Factors Impacting Financial Results

The following summary highlights therecent developments and significant factors impacting our financial results for the three and nine months ended September 30, 2020 and 2019.
•COVID-19 Public Health Emergency – In January 2020, an outbreak of a new strain of coronavirus (“COVID-19”) was identified and has since spread throughout much of the world, including the United States. All of our casino properties were temporarily closed for the period from mid-March 2020 through mid-May 2020 due to orders issued by various government agencies and tribal bodies as part of certain precautionary measures intended to help slow the spread of the COVID-19 public health emergency. On May 15, 2020, we began reopening our properties and have resumed certain operations at all of our properties as of September 30, 2020, with the exception of The Cromwell, Planet Hollywood Resort and Casino (“Planet Hollywood”), Rio All-Suite Hotel & Casino (“Rio”), and Caesars Windsor. Planet Hollywood and Caesars Windsor reopened on October 8, 2020 and The Cromwell reopened on October 29, 2020. The COVID-19 public health emergency has had a material adverse effect on our business, financial condition and results of operations for the three and nine months ended September 30, 2020. We continued to pay our full-time employees through April 10, 2020, including tips and tokens. Effective April 11, 2020, we furloughed approximately 90% of our employees, implemented salary reductions and committed to continue to provide benefits to our employees through September 30, 2020. Subsequently, the benefit coverage for furloughed employees was extended indefinitely. A portion of our workforce has returned to service as the properties have resumed with limited capacities and in compliance with operating restrictions imposed by governmental or tribal orders, directives, and guidelines. Due to the impact of the ongoing COVID-19 public health emergency on our results of operations, we obtained waivers on the financial covenants in our former credit facility agreement and the GLPI Master Lease. Furthermore, we obtained waivers from VICI in relation to annual capital expenditure requirements under the leases with VICI.
The extent of the ongoing and future effects of the COVID-19 public health emergency on our business and the casino resort industry generally is uncertain, but we expect that it will continue to have a significant impact on our business, results of operations and financial condition. The extent and duration of the impact of COVID-19 will ultimately depend on future developments, including but not limited to, the duration and severity of the outbreak, restrictions on operations imposed by governmental authorities, the potential for authorities reimposing stay at home orders or additional restrictions in response to continued developments with the COVID-19 public health emergency, our ability to adapt to evolving operating procedures, the impact on consumer demand and discretionary spending, the length of time it takes for demand to return and our ability to adjust our cost structures for the duration of the outbreak’s effect on our operations.
•Caesars Acquisition – The Merger closed on July 20, 2020. Transaction costs related to our acquisition of Former Caesars totaled $107 million and $129 million for the three and nine months ended September 30, 2020, respectively, and $13 million and $17 million for the three and nine months ended September 30, 2019, respectively.
•Discontinued Operations – As result of the Merger, Former Caesars properties including Harrah’s Louisiana Downs, Caesars Southern Indiana, Horseshoe Hammond, Harrah’s Reno, Caesars UK group including Emerald Resort & Casino, and Bally’s Atlantic City have met, or are expected to meet within a short period of time, held for sale criteria as of the date of the closing of the Merger. The sales of these properties have or are expected to close within one year from the date of the closing of the Merger and the properties are classified as discontinued operations. Additionally, we closed the sale of Harrah’s Reno on September 30, 2020.
•Proposed William Hill Acquisition – On September 30, 2020, we announced that we had reached an agreement with William Hill plc on the terms of a recommended cash acquisition pursuant to which we would acquire the entire issued and to be issued share capital (other than shares owned by us or held in treasury) of William Hill plc, in an all-cash transaction of approximately £2.9 billion, or $3.7 billion. The transaction is conditioned on, among other things, the approval of William Hill plc shareholders and receipt of required regulatory approvals.
49

•ESPN Agreement– On September 10, 2020, we entered into a multi-year agreement with ESPN including link integrations from ESPN’s website and app to sportsbooks with our sports betting partner, William Hill.
•Divestitures – We closed the sales of Kansas City and Vicksburg on July 1, 2020 and recorded a gain of approximately $8 million during the quarter ended September 30, 2020. We closed the sales of Presque and Nemacolin on January 11, 2019 and 2018.

•

Elgin Acquisition – Our results of operations for the three and nine months ended September 30, 2019 include incremental revenues and expenses attributable to Elgin. Transaction expenses related to our acquisition of Elgin totaled $89 thousand and $2.1 million, respectively, for the three months ended September 30, 2019 and 2018, and $134 thousand and $3.4 million, respectively, for the nine months ended September 30, 2019 and 2018.

•

Tropicana Acquisition – Our results of operations for the three and nine months ended September 30, 2019 include incremental revenues and expenses attributable to the seven properties we acquired in our acquisition of Tropicana on October 1, 2018. Transaction expenses related to the Tropicana Acquisition totaled $0.8 million and $2.0 million, respectively, for the three months ended September 30, 2019 and 2018, and $3.3 million and $5.5 million, respectively, for the nine months ended September 30, 2019 and 2018.

•

Isle Acquisition – Transaction expenses related to the Isle Acquisition totaled $1.2 million for the nine months ended September 30, 2018.

•

Master Lease – We account for the Master Lease entered into effective October 1, 2018 with GLPI as a direct financing obligation. As a result, we recorded minimum lease payments and amortization of the direct financing obligation totaling $24.7 million and $73.8 million as interest expense for the three and nine months ended September 30, 2019, respectively.

•

Tropicana Financing – On September 20, 2018 we issued $600 million aggregate principal amount of 6.0% senior notes due 2026. The proceeds from the notes were used to fund the Tropicana Acquisition which closed on October 1, 2018. We incurred $9.0 million and $27.0 million of incremental interest expense associated with the new senior notes for the three and nine months ended September 30, 2019, respectively.

•

William Hill and TSG – The amortization of deferred revenues associated with the William Hill and TSG agreements totaled $1.8 million and $5.0 million for the three and nine months ended September 30, 2019, respectively, and is included in corporate and other revenues and operating income.

•

Divestitures – The sales ofPresque Isle Downs and Nemacolin met the requirements for presentation as assets held for sale under generally accepted accounting principles. However, they did not meet the requirements for presentation as discontinued operations and are included in income from continuing operations for the nine months ended September 30, 2019 and 2018 prior to their respective sale closing dates. We closed on the sale of Presque Isle Downs on January 11, 2019 and recorded a gain on sale of approximately $22.1 million for the nine months ended September 30, 2019. We closed on the sale of Nemacolin on March 8, 2019 and recorded a gain on sale of $0.1 million for the nine months ended September 30, 2019.

March 8, 2019, respectively, and recorded a net gain of $22 million. We closed the sales of Mountaineer, Cape Girardeau and Caruthersville on December 6, 2019 and recorded a net gain of $29 million during the fourth quarter of 2019. The properties that have been sold are collectively referred to as the “Divestitures.” In conjunction with the classification of Vicksburg’sMontBleu’s operations as assets held for sale at June 30, 2018 as a result of the announced sale, to CDI, an impairment charge totaling $9.8$45 million was recorded during the nine months ended September 30, 2020 due to the carrying value exceeding the estimated net sales proceeds. Effective July 6, 2018,None of the sale of Vicksburg was terminated, and Vicksburg was no longer presented as an asset held for sale as of July 31, 2018. In connection with this termination, CDI paid us a $5.0 million termination fee.


The sales ofMountaineer, Cape Girardeau, Caruthersville, Kansas City and Vicksburglisted met the requirements for presentation as assets held for sale under generally accepted accounting principles as of September 30, 2019. However, they did not meet the requirements for presentation as discontinued operations and are included in income from continuing operations.operations for the periods prior to their respective closing dates.

•

Execution of Synergies and Cost Savings Programs – We continue to identify areas to improve property level and consolidated margins across our existing and acquired properties through operating and cost efficiencies, including reductions in revenues associated with unprofitable customer play, and exercising financial discipline throughout the company. In addition to cost savings relating to duplicative executive compensation, legal and accounting fees and other corporate expenses that have been eliminated as a result of our acquisitions, we have achieved savings in marketing, food and beverage costs, selling, general and administrative expenses, and other operating departments as a result of operating efficiencies, changes in marketing strategies and purchasing power of the combined Eldorado organization.

•

Property Enhancement Capital Expenditures – Property enhancement initiatives and targeted investments that improve our guests’ experiences and elevate our properties’ overall competitiveness in their markets continued throughout 2018•Impairment Charges – As a result of declines in recent performance and the expected impact on future cash flows as a result of COVID-19, we recognized impairment charges in our Regional segment related to goodwill and trade names totaling $100 million and $16 million, respectively, during the nine months ended September 30, 2020.

•Weather and Construction Disruption– Our Regional segment was negatively impacted by severe weather, including flooding, during the three and nine months ended September 30, 2019.

As part of the continuing evolution of the Reno tri-properties, we built a new 21,000 square foot spa at Silver Legacy which opened in early October 2018. We have substantially renovated every room at Circus Reno and completed the first phase of room renovations at Silver Legacy and Eldorado. We began the second phase of renovations of approximately 1,200 rooms at Silver Legacy and Eldorado in the third quarter of 2019. In2019 compared to the same current year period. Additionally, our Regional segment was negatively impacted by disruption to our casino floor and hotel availability associated with renovation projects at our Black Hawk we completed our renovation of all 402 hotel rooms and refresh ofproperties during the casino floor inconstruction period from January to June 2019. In addition,late August 2020, our joint venture with Cordish continuesRegional segment was negatively impacted by Hurricane Laura, causing severe damage to make progress on development plansIsle of a new, mixed-use entertainmentCapri Casino Hotel Lake Charles (“Lake Charles”), which remains temporarily closed. We recorded an insurance receivable of $31 million, of which $15 million related to fixed asset impairments and hospitality destination anchored by our Isle Casino Racing Pompano Park. At Tropicana Atlantic City, we opened an expansive, new sportsbook$16 million related to remediation costs and repairs that have been incurred in the fourth quarter of 2018.

three months ended September 30, 2020.

•

Weather and Construction Disruption – All of our segments were negatively impacted by severe weather, including flooding, during the first half of 2019 compared to the same prior year period. Additionally, our South segment was negatively impacted during the third quarter of 2019 due to hurricane and tropical storm activity. Our West segment was also negatively impacted by disruption to our casino floor and hotel availability associated with renovation projects at our Black Hawk property during the construction period from January to June 2019.

Results of Operations

The following table highlights the results of our operations (dollarsoperations:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Dollars in millions)2020201920202019
Net revenues:
Las Vegas$304 $— $304 $— 
Regional1,000 661 1,596 1,930 
Managed, International, CIE69 — 69 — 
Corporate and Other (a)
4 2 8 6 
Total$1,377 $663 $1,977 $1,936 
Net (loss) income$(925)$37 $(1,201)$94 
Adjusted EBITDA (b):
Las Vegas$43 $— $43 $— 
Regional331 205 439 569 
Managed, International, CIE18 — 18 — 
Corporate and Other (a)
(41)(8)(59)(27)
Total$351 $197 $441 $542 
Net (loss) income margin (c)
(67.2)%5.6 %(60.7)%4.9 %
Adjusted EBITDA margin25.5 %29.7 %22.3 %28.0 %
___________________
(a)Corporate and Other includes revenues related to certain licensing revenue and various revenue sharing agreements. Expenses incurred for corporate activities that are directly attributable to a property or are otherwise incurred to support a property are allocated to each property. The Other category also includes corporate overhead costs, which consist of certain expenses, such as: payroll, professional fees, travel expenses and other general and administrative expenses that do not directly relate to or have not otherwise been allocated to a property.
(b)See the “Supplemental Unaudited Presentation of Consolidated Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”)” discussion later in thousands):

 

 

Three Months Ended

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

 

 

2019

 

 

2018

 

 

Change

 

 

 

 

2019

 

 

2018

 

 

Change

 

 

 

Net revenues

 

$

 

663,181

 

 

$

 

487,253

 

 

 

36.1

 

%

 

 

$

 

1,936,125

 

 

$

 

1,384,247

 

 

 

39.9

 

%

 

Operating income

 

 

 

124,907

 

 

 

 

91,769

 

 

 

36.1

 

%

 

 

 

 

351,061

 

 

 

 

223,377

 

 

 

57.2

 

%

 

Net income

 

 

 

37,055

 

 

 

 

37,704

 

 

 

(1.7

)

%

 

 

 

 

94,220

 

 

 

 

95,355

 

 

 

(1.2

)

%

 

Operating Results.  Including incrementalthis MD&A for a definition of Adjusted EBITDA and a reconciliation of net revenues totaling $264.7 million generated(loss) income to Adjusted EBITDA related margins.

50

(c)Net (loss) income margin is calculated as net (loss) income divided by Elgin and the Tropicana properties, net revenues rose 36.1% forrevenues.
Consolidated comparison of the three months ended September 30, 2019 compared to the same prior year period. For theand nine months ended September 30, 2019 compared to the same prior year period, Elgin2020 and Tropicana contributed incremental net2019
Net Revenues
Net revenues totaling $759.5 million resulting in a 39.9% increase in netwere as follows:
Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Net Revenues:
Casino and pari-mutuel commissions$919 $458 $461 100.7 %$1,360 $1,386 $(26)(1.9)%
Food and beverage125 78 47 60.3 %188 229 (41)(17.9)%
Hotel200 94 106 112.8 %257 237 20 8.4 %
Other133 33 100 *172 84 88 104.8 %
Net Revenues$1,377 $663 $714 107.7 %$1,977 $1,936 $41 2.1 %
___________________
*    Not meaningful.
Consolidated revenues for the nine months ended September 30, 2019 compared to the same prior year period. Excluding the impact of our acquisitions and the divestitures of Presque Isle Downs and Nemacolin, net revenues decreased 9.6% and 6.6%, respectively,increased for the three and nine months ended September 30, 20192020 as a result of our acquisition of Former Caesars on July 20, 2020. This was offset by a decline in revenues associated with the COVID-19 public health emergency and, to a lesser extent, divestitures of certain properties discussed earlier. Both we and Former Caesars began temporarily closing our properties from mid-March 2020. We began reopening our properties on May 15, 2020. Former Caesars began opening properties on May 18, 2020. As of September 30, 2020, all but The Cromwell, Planet Hollywood, Rio and Caesars Windsor were reopened. Due to the impact of the COVID-19 public health emergency, including local and state regulations and the implementation of social distancing and health and safety protocols, our properties are subject to reduced gaming capacity and hotel occupancy, limited operation of food and beverage outlets, live entertainment events and group business. As a result, gaming revenue represents a larger portion of our total revenues following the reopening of our properties as compared to earlier periods, which we expect to continue until at least such time that social distancing and safety and health protocols, along with governmental capacity or other restrictions, are relaxed or no longer necessary.
Our diversified portfolio has yielded mixed results as the properties have reopened under the conditions noted above. Net revenues for properties which have historically relied on a local customer base, not dependent on air travel or convention business, showed a smaller decrease as compared to the samethree months ended September 30, 2019 results. These properties’ gaming and hotel revenues have historically been the largest portion of their total revenue. Properties in destination markets such as Las Vegas, Atlantic City, Northern Nevada and New Orleans, which have historically relied on a broader regional and national customer base or convention business have declined significantly from the prior year periods mainly dueperiod. These properties have historically relied on a broader mix of revenue sources including convention, entertainment, and food and beverage offerings. As a result of reduced visitation, state and local restrictions on capacity, and social distancing and safety and health protocols, these sources of revenue have been materially reduced as compared to the significant factors described above. These decreasesprior periods.
Operating Expenses
Operating expenses were offset by incremental net revenues recognized in conjunctionas follows:
51

Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Operating Expenses:
Casino and pari-mutuel commissions$461 $229 $232 101.3 %685 693 $(8)(1.2)%
Food and beverage91 60 31 51.7 %153 180 (27)(15.0)%
Hotel63 27 36 133.3 %91 76 15 19.7 %
Other52 12 40 *62 34 28 82.4 %
General and administrative330 130 200 153.8 %495 381 114 29.9 %
Corporate90 13 77 *120 51 69 135.3 %
Impairment charges— — — *161 1 160 *
Depreciation and amortization223 53 170 *322 167 155 92.8 %
Transaction costs and other operating costs219 14 205 *242 2 240 *
Total operating expenses$1,529 $538 $991 184.2 %$2,331 $1,585 $754 47.6 %
___________________
*    Not meaningful.
Casino and pari-mutuel expenses consist primarily of salaries and wages associated with our William Hillgaming operations, marketing and TSG sports betting partnershipspromotions and gaming taxes. Hotel expenses consist principally of salaries, wages and supplies associated with our hotel operations. Food and beverage expenses consist principally of salaries and wages and costs of goods sold associated with our food and beverage operations. Other expenses consist principally of salaries and wages and costs of goods sold associated with our retail, entertainment and other operations.
Casino and pari-mutuel, hotel, food and beverage, and other expenses for the three and nine months ended September 30, 2019 compared2020 increased year over year as a result of our acquisition of Former Caesars. This was offset as a result of the temporary closures of all of our properties due to the same prior year periods.


Operating income increased $33.1 millionCOVID-19 public health emergency, which reduced our salaries and $127.7 million, or 36.1%wages, gaming taxes, costs of goods sold, and 57.2%,other expenses. As discussed above, our reopened properties are operating with reduced gaming and hotel capacity and limited food and beverage options. As such, our properties are operating with a reduced workforce, which resulted in decreased salaries and wages. In addition, our properties have reduced marketing and promotional spend, resulting in further declines in gaming expenses.

General and administrative expenses include items such as compliance, facility maintenance, utilities, property and liability insurance, expenses for administrative departments such as accounting, purchasing, human resources, legal and internal audit, and property taxes. Property, general and administrative expenses also include stock-based compensation expense for certain property executives, sports sponsorships and other marketing expenses not directly related to our gaming operations.
General and administrative expenses for the three and nine months ended September 30, 2019, respectively, compared2020 increased year over year as the result of our acquisition of Former Caesars. This was offset by actions taken to reduce our cost structure while our properties were temporarily closed and during the same prior year periods mainlyperiod of reduced operations due to incremental operating income contributed by the acquired Elgin and Tropicana properties. Excluding the impact of our acquisitionsthe COVID-19 public health emergency, which are discussed above and the divestitures of Presque Isle Downs and Nemacolin, operating income decreased 18.4% for the three months ended September 30, 2019 due to higher depreciation expense associated with asset additions and transaction costs associated with the acquisitions of Tropicana and Caesars. implemented.
For the nine months ended September 30, 2019, we recorded a $22.2 million net gain on the sale of assets associated with the sales of Presque Isle Downs and Nemacolin resulting in an increase in operating income of 1.3% excluding the impact of our acquisitions and divestitures.

Net income decreased $0.6 million and $1.1 million, respectively, for the three and nine months ended September 30, 2019, compared to the same prior year periods principally due to the same factors impacting operating income. Additionally, higher interest expense for the three and nine months ended September 30, 2019 compared to the same prior year periods resulting from increased debt associated with the Tropicana Acquisition and amortization of the direct financing obligation associated with the Master Lease also contributed to the declines. Net income for the three months ended September 30, 2019 compared to the same prior year period was also impacted by a $1.2 million loss on the early retirement of debt due to repayments on our Term Loan offset by a $3.3 million gain associated with our investments.  Net income for the three months ended September 30, 2018 was favorably impacted by a $5.0 million fee related to the termination of the agreement to purchase our Vicksburg property. Net income for the nine months ended September 30, 2019 compared to the same prior year period was also impacted by a higher income tax provision due to an increase in our effective tax rate from an increase in disallowed officers’ compensation and changes in valuation allowance.

Net Revenues and Operating Income (Loss)

The following tables highlight our net revenues and operating income (loss) by reportable segment (dollars in thousands):

 

 

Net Revenues for the

Three Months Ended September 30,

 

 

Operating Income (Loss) for the

Three Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

West

 

$

 

151,418

 

 

$

 

129,092

 

 

$

 

35,358

 

 

$

 

31,894

 

Midwest

 

 

 

95,866

 

 

 

 

99,834

 

 

 

 

30,221

 

 

 

 

26,637

 

South

 

 

 

108,017

 

 

 

 

106,569

 

 

 

 

15,185

 

 

 

 

16,176

 

East

 

 

 

186,562

 

 

 

 

127,722

 

 

 

 

45,341

 

 

 

 

23,637

 

Central

 

 

 

119,410

 

 

 

 

23,897

 

 

 

 

25,793

 

 

 

 

2,868

 

Corporate

 

 

 

1,908

 

 

 

 

139

 

 

 

 

(26,991

)

 

 

 

(9,443

)

Total

 

$

 

663,181

 

 

$

 

487,253

 

 

$

 

124,907

 

 

$

 

91,769

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenues for the

Nine Months Ended September 30,

 

 

Operating Income (Loss) for the

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

West

 

$

 

397,241

 

 

$

 

346,550

 

 

$

 

66,772

 

 

$

 

63,898

 

Midwest

 

 

 

289,890

 

 

 

 

301,235

 

 

 

 

87,066

 

 

 

 

80,725

 

South

 

 

 

357,669

 

 

 

 

341,612

 

 

 

 

61,723

 

 

 

 

50,099

 

East

 

 

 

523,249

 

 

 

 

370,576

 

 

 

 

107,715

 

 

 

 

67,164

 

Central

 

 

 

362,675

 

 

 

 

23,897

 

 

 

 

80,896

 

 

 

 

2,868

 

Corporate

 

 

 

5,401

 

 

 

 

377

 

 

 

 

(53,111

)

 

 

 

(41,377

)

Total

 

$

 

1,936,125

 

 

$

 

1,384,247

 

 

$

 

351,061

 

 

$

 

223,377

 


Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018

Net revenues and operating expenses were as follows (dollars in thousands):

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

Percent

 

 

 

 

2019

 

 

2018

 

 

Variance

 

 

Change

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

62,081

 

 

$

 

60,912

 

 

$

 

1,169

 

 

 

1.9

 

%

Midwest

 

 

 

84,249

 

 

 

 

86,331

 

 

 

 

(2,082

)

 

 

(2.4

)

%

South

 

 

 

87,331

 

 

 

 

86,153

 

 

 

 

1,178

 

 

 

1.4

 

%

East

 

 

 

129,244

 

 

 

 

113,075

 

 

 

 

16,169

 

 

 

14.3

 

%

Central

 

 

 

95,095

 

 

 

 

21,698

 

 

 

 

73,397

 

 

 

338.3

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

458,000

 

 

 

 

368,169

 

 

 

 

89,831

 

 

 

24.4

��

%

Non-gaming:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

89,337

 

 

 

 

68,180

 

 

 

 

21,157

 

 

 

31.0

 

%

Midwest

 

 

 

11,617

 

 

 

 

13,503

 

 

 

 

(1,886

)

 

 

(14.0

)

%

South

 

 

 

20,686

 

 

 

 

20,416

 

 

 

 

270

 

 

 

1.3

 

%

East

 

 

 

57,318

 

 

 

 

14,647

 

 

 

 

42,671

 

 

 

291.3

 

%

Central

 

 

 

24,315

 

 

 

 

2,199

 

 

 

 

22,116

 

 

 

1,005.7

 

%

Corporate

 

 

 

1,908

 

 

 

 

139

 

 

 

 

1,769

 

 

 

1,273.0

 

%

Total Non-gaming

 

 

 

205,181

 

 

 

 

119,084

 

 

 

 

86,097

 

 

 

72.3

 

%

Total Net Revenues

 

 

 

663,181

 

 

 

 

487,253

 

 

 

 

175,928

 

 

 

36.1

 

%

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

22,326

 

 

 

 

21,605

 

 

 

 

721

 

 

 

3.3

 

%

Midwest

 

 

 

33,881

 

 

 

 

35,687

 

 

 

 

(1,806

)

 

 

(5.1

)

%

South

 

 

 

42,361

 

 

 

 

41,513

 

 

 

 

848

 

 

 

2.0

 

%

East

 

 

 

60,972

 

 

 

 

70,645

 

 

 

 

(9,673

)

 

 

(13.7

)

%

Central

 

 

 

43,015

 

 

 

 

10,612

 

 

 

 

32,403

 

 

 

305.3

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

202,555

 

 

 

 

180,062

 

 

 

 

22,493

 

 

 

12.5

 

%

Non-gaming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

42,838

 

 

 

 

37,111

 

 

 

 

5,727

 

 

 

15.4

 

%

Midwest

 

 

 

6,021

 

 

 

 

7,572

 

 

 

 

(1,551

)

 

 

(20.5

)

%

South

 

 

 

12,757

 

 

 

 

13,217

 

 

 

 

(460

)

 

 

(3.5

)

%

East

 

 

 

25,655

 

 

 

 

8,744

 

 

 

 

16,911

 

 

 

193.4

 

%

Central

 

 

 

12,542

 

 

 

 

2,029

 

 

 

 

10,513

 

 

 

518.1

 

%

Total Non-gaming

 

 

 

99,813

 

 

 

 

68,673

 

 

 

 

31,140

 

 

 

45.3

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing and promotions

 

 

 

33,292

 

 

 

 

23,122

 

 

 

 

10,170

 

 

 

44.0

 

%

General and administrative

 

 

 

122,767

 

 

 

 

75,599

 

 

 

 

47,168

 

 

 

62.4

 

%

Corporate

 

 

 

13,014

 

 

 

 

9,217

 

 

 

 

3,797

 

 

 

41.2

 

%

Impairment charges

 

 

 

—

 

 

 

 

3,787

 

 

 

 

(3,787

)

 

 

(100.0

)

%

Depreciation and amortization

 

 

 

52,592

 

 

 

 

35,760

 

 

 

 

16,832

 

 

 

47.1

 

%

Total Operating Expenses

 

$

 

524,033

 

 

$

 

396,220

 

 

$

 

127,813

 

 

 

32.3

 

%

Gaming Revenues and Pari-Mutuel Commissions.  Elgin and Tropicana contributed $171.2 million of incremental gaming revenues and pari-mutuel commissions for the three months ended September 30, 2019 compared to the same prior year period. This increase was partially offset by the decline in revenues associated with the divestitures of Presque Isle Downs and Nemacolin for the three months ended September 30, 2019 compared to the same prior year period, resulting in a 24.4% increase in gaming revenues and pari-mutuel commissions.


Excluding incremental Elgin and Tropicana gaming revenues and pari-mutuel commissions and the impact of the Presque Isle Downs and Nemacolin divestitures, gaming revenues and pari-mutuel commissions decreased 11.9% for the three months ended September 30, 2019 compared to the same prior year period due to reductions in casino volume associated with declines in promotional offers across all segments and severe weather in our South segment.

Non-gaming Revenues.  Elgin and Tropicana contributed $93.5 million of incremental non-gaming revenues for the three months ended September 30, 2019, which was partially offset by declines in non-gaming revenues attributable to the Presque Isle Downs and Nemacolin divestitures, resulting in an increase of 72.3% over the same prior year period.

Excluding incremental Elgin and Tropicana non-gaming revenues and the impact of the Presque Isle Downs and Nemacolin divestitures, non-gaming revenues decreased 3.0% for the three months ended September 30, 2019 compared to the same prior year period. This decline was primarily driven by changes in promotional activity along with decreased food and beverage revenues associated with reductions in restaurant offerings in our West, Midwest and South segments in an effort to drive more profitable non-gaming departmental margins.

Gaming Expenses and Pari-Mutuel Commissions. Elgin and Tropicana contributed $70.6 million of incremental gaming expenses and pari-mutuel commissions for the three months ended September 30, 2019, which was partially offset by the Presque Isle Downs and Nemacolin divestitures, resulting in an increase of 12.5% in gaming expenses and pari-mutuel commissions over the same prior year period.

Excluding incremental Elgin and Tropicana gaming expenses and pari-mutuel commissions, and the impact of the Presque Isle Downs and Nemacolin divestitures, gaming expenses and pari-mutuel commissions decreased 12.4% for the three months ended September 30, 2019 compared to the same prior year period. Gaming expenses declined in comparison to the same prior year period due to lower casino volume combined with savings initiatives targeted at reducing variable expenses.

Non-gaming Expenses.  Elgin and Tropicana contributed $41.8 million of incremental non-gaming expenses for the three months ended September 30, 2019, which was partially offset by the Presque Isle Downs and Nemacolin divestitures, resulting in an increase of 45.3% over the same prior year period.

Excluding incremental Elgin and Tropicana non-gaming expenses, and the impact of the Presque Isle Downs and Nemacolin divestitures, non-gaming expenses decreased 11.8% for the three months ended September 30, 2019 compared to the same prior year period. Decreased non-gaming expenses across all segments were associated with lower non-gaming revenues along with continued efforts to reduce variable expenses including labor and cost of sales.

Marketing and Promotions Expenses.  Elgin and Tropicana contributed $17.3 million of incremental marketing and promotions expense for the three months ended September 30, 2019, which was partially offset by the Presque Isle Downs and Nemacolin divestitures, resulting in an increase of 44.0% over the same prior year period.

Excluding incremental Elgin and Tropicana marketing and promotions expenses and the impact of the Presque Isle Downs and Nemacolin divestitures, consolidated marketing and promotions expense decreased 25.7% for the three months ended September 30, 2019 compared to the same prior year period. This decline was primarily due to savings achieved via the termination of certain marketing contracts, reductions in direct mail costs and continued company-wide changes in marketing and promotional activity.  

General and Administrative Expenses.  Elgin and Tropicana contributed $54.4 million of general and administrative expense for the three months ended September 30, 2019, which was partially offset by the Presque Isle Downs and Nemacolin dispositions, resulting in an increase of 62.4% over the same prior year period.    

Excluding incremental Elgin and Tropicana general and administrative expenses, and the impact of the Presque Isle Downs and Nemacolin divestitures, consolidated general and administrative expenses decreased 3.9% for the three months ended September 30, 2019 compared to the same prior year period mainly due to the centralization of certain services provided to our properties and realized savings achieved through consolidated purchasing programs.

Corporate Expenses.  For the three months ended September 30, 20192020 compared to the same prior year period, corporate expenses increased primarily due to payroll and other expenses associated with additional corporate costs, including stock compensation expense, driven by growth related to the Company’s acquisitions. This increase was partiallyacquisition of Former Caesars offset by reductions in salaries and wages due to reductions in workforce implemented as a decline in corporate bonus expense and captive insurance costs forresult of the impact of the COVID-19 public health emergency.

For the three and nine months ended September 30, 2019 compared to the same prior year period.


Depreciation and Amortization Expense.  Elgin and Tropicana contributed $26.5 million of depreciation and amortization expense for the three months ended September 30, 2019, which was partially offset by the Presque Isle Downs and Nemacolin divestitures, resulting in an increase of 47.1% over the same prior year period.  

Excluding incremental Elgin and Tropicana depreciation and amortization expense, and the impact of the Presque Isle Downs and Nemacolin divestitures, depreciation and amortization expense decreased 27.0% for the three months ended September 30, 20192020 compared to the same prior year period, depreciation and amortization expense increased mainly due to the acquisition of Former Caesars offset by ceasing depreciation and amortization expense on assets held for sale.

Nine Months Ended September 30, 2019 Compared tosale and the Nine Months Ended September 30, 2018

Net revenuesDivestitures.

For the three and operating expenses were as follows (dollars in thousands):

 

 

Nine Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

Percent

 

 

 

 

2019

 

 

2018

 

 

Variance

 

 

Change

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

170,980

 

 

$

 

168,342

 

 

$

 

2,638

 

 

 

1.6

 

%

Midwest

 

 

 

254,641

 

 

 

 

262,138

 

 

 

 

(7,497

)

 

 

(2.9

)

%

South

 

 

 

291,552

 

 

 

 

278,655

 

 

 

 

12,897

 

 

 

4.6

 

%

East

 

 

 

378,246

 

 

 

 

329,584

 

 

 

 

48,662

 

 

 

14.8

 

%

Central

 

 

 

290,429

 

 

 

 

21,698

 

 

 

 

268,731

 

 

 

1,238.5

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

1,385,848

 

 

 

 

1,060,417

 

 

 

 

325,431

 

 

 

30.7

 

%

Non-gaming:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

226,261

 

 

 

 

178,208

 

 

 

 

48,053

 

 

 

27.0

 

%

Midwest

 

 

 

35,249

 

 

 

 

39,097

 

 

 

 

(3,848

)

 

 

(9.8

)

%

South

 

 

 

66,117

 

 

 

 

62,957

 

 

 

 

3,160

 

 

 

5.0

 

%

East

 

 

 

145,003

 

 

 

 

40,992

 

 

 

 

104,011

 

 

 

253.7

 

%

Central

 

 

 

72,246

 

 

 

 

2,199

 

 

 

 

70,047

 

 

 

3,185.4

 

%

Corporate

 

 

 

5,401

 

 

 

 

377

 

 

 

 

5,024

 

 

 

1,332.6

 

%

Total Non-gaming

 

 

 

550,277

 

 

 

 

323,830

 

 

 

 

226,447

 

 

 

69.9

 

%

Total Net Revenues

 

 

 

1,936,125

 

 

 

 

1,384,247

 

 

 

 

551,878

 

 

 

39.9

 

%

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

64,235

 

 

 

 

63,331

 

 

 

 

904

 

 

 

1.4

 

%

Midwest

 

 

 

102,537

 

 

 

 

107,162

 

 

 

 

(4,625

)

 

 

(4.3

)

%

South

 

 

 

137,679

 

 

 

 

133,500

 

 

 

 

4,179

 

 

 

3.1

 

%

East

 

 

 

181,316

 

 

 

 

204,953

 

 

 

 

(23,637

)

 

 

(11.5

)

%

Central

 

 

 

130,334

 

 

 

 

10,612

 

 

 

 

119,722

 

 

 

1,128.2

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

616,101

 

 

 

 

519,558

 

 

 

 

96,543

 

 

 

18.6

 

%

Non-gaming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

120,634

 

 

 

 

107,544

 

 

 

 

13,090

 

 

 

12.2

 

%

Midwest

 

 

 

18,849

 

 

 

 

23,527

 

 

 

 

(4,678

)

 

 

(19.9

)

%

South

 

 

 

40,858

 

 

 

 

41,260

 

 

 

 

(402

)

 

 

(1.0

)

%

East

 

 

 

72,012

 

 

 

 

25,775

 

 

 

 

46,237

 

 

 

179.4

 

%

Central

 

 

 

38,100

 

 

 

 

2,029

 

 

 

 

36,071

 

 

 

1,777.8

 

%

Total Non-gaming

 

 

 

290,453

 

 

 

 

200,135

 

 

 

 

90,318

 

 

 

45.1

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing and promotions

 

 

 

97,673

 

 

 

 

66,255

 

 

 

 

31,418

 

 

 

47.4

 

%

General and administrative

 

 

 

360,086

 

 

 

 

223,546

 

 

 

 

136,540

 

 

 

61.1

 

%

Corporate

 

 

 

50,819

 

 

 

 

33,018

 

 

 

 

17,801

 

 

 

53.9

 

%

Impairment charges

 

 

 

958

 

 

 

 

13,602

 

 

 

 

(12,644

)

 

 

(93.0

)

%

Depreciation and amortization

 

 

 

166,882

 

 

 

 

99,204

 

 

 

 

67,678

 

 

 

68.2

 

%

Total Operating Expenses

 

$

 

1,582,972

 

 

$

 

1,155,318

 

 

$

 

427,654

 

 

 

37.0

 

%


Gaming Revenues and Pari-Mutuel Commissions.  Elgin and Tropicana contributed $512.4 million of incremental gaming revenues and pari-mutuel commissions for the nine months ended September 30, 2019 compared to the same prior year period. This increase was partially offset by the decline in revenues associated with the divestitures of Presque Isle Downs and Nemacolin for the nine months ended September 30, 20192020 compared to the same prior year period, resulting in a 30.7% increase in gaming revenuestransaction costs and pari-mutuel commissions.

Excluding incremental Elginother operating costs increased primarily due to costs or fees incurred related to the Merger, various project exit fees and Tropicana gaming revenuesrelated write offs, and pari-mutuel commissionshigher severance expense related to synergies with the Merger.



52

Other income (expenses)
Other income (expenses) were as follows:
Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Other income (expenses)
Interest expense, net$(473)$(72)$(401)*$(608)$(217)$(391)(180.2)%
Loss on extinguishment of debt(173)(1)(172)*(173)(1)(172)*
Other (loss) income9 3 6 200.0 %(1)— (1)*
Provision for income taxes(135)(18)(117)*(64)(39)(25)(64.1)%
___________________
*    Not meaningful.
For the three and the impact of the Presque Isle Downs and Nemacolin divestitures, gaming revenues and pari-mutuel commissions decreased 7.7% for the nine months ended September 30, 2020, interest expense, net increased year over year as a result of our acquisition of Former Caesars. Outstanding debt assumed, additional debt raised, and assumed financing obligations resulted in the increase in interest expense.
For thethree and nine months ended September 30, 2020, the loss on extinguishment of debt increased year over year due to the payment of outstanding debt as a result of our acquisition of Former Caesars.
Segment comparison of the three and nine months ended September 30, 2020 and 2019
Las Vegas Segment
Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Revenues:
Casino and pari-mutuel commissions$122 $— $122 *$122 $— $122 *
Food and beverage52 — 52 *52 — 52 *
Hotel79 — 79 *79 — 79 *
Other51 — 51 *51 — 51 *
Net Revenues$304 $— $304 *$304 $— $304 *
Adjusted EBITDA$43 $— $43 *$43 $— $43 *
Adjusted EBITDA margin14.1 %— %14.1 pts14.1 %— %14.1 pts
Net loss attributable to Caesars$(162)$— $(162)*$(162)$— $(162)*
___________________
*    Not meaningful.
Las Vegas segment’s net revenues and Adjusted EBITDA increased as a result of the acquisition of Former Caesars. As of September 30, 2020, all of our Las Vegas properties other than The Cromwell, Planet Hollywood and Rio were reopened. Planet Hollywood opened on October 8, 2020 and The Cromwell reopened on October 29, 2020. All of our properties within the Las Vegas segment reopened with reduced gaming and hotel capacity and with limited food and beverage offerings. As of September 30, 2020, entertainment and convention venues have not reopened due to capacity limitations.
During the third quarter of 2020 or in the period between properties reopening and September 30, 2020, all of our reopened properties in the Las Vegas segment experienced a significant decline in net revenues and Adjusted EBITDA compared to Former Caesars’ prior year results for the same properties due to the general weakness in the economic environment resulting from reduced visitation and travel to Las Vegas resulting from the COVID-19 public health emergency. Adjusted EBITDA margins for our Las Vegas properties were negatively impacted by greater declines in revenue than our Regional segment as well as rent expense associated with our Rio lease in our Las Vegas segment.
53

Regional Segment
Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Revenues:
Casino and pari-mutuel commissions$774 $458 $316 69.0 %$1,215 $1,386 $(171)(12.3)%
Food and beverage72 78 (6)(7.7)%135 229 (94)(41.0)%
Hotel121 94 27 28.7 %178 237 (59)(24.9)%
Other33 31 2 6.5 %68 78 (10)(12.8)%
Net Revenues$1,000 $661 $339 51.3 %$1,596 $1,930 $(334)(17.3)%
Adjusted EBITDA$331 $205 $126 61.5 %$439 $569 $(130)(22.8)%
Adjusted EBITDA margin33.1 %31.0 %2.1 pts27.5 %29.5 %(2) pts
Net (loss) income attributable to Caesars$47 $117 $(70)(59.8)%$(175)300 $(475)(158.3)%
Regional segment’s net revenues, Adjusted EBITDA and margin increased for the three months ended September 30, 2020 compared to the same prior year period as a result of the acquisition of Former Caesars. All of our properties in our Regional segment have reopened as of September 30, 2020. All of our properties within the Regional segment reopened with reduced gaming and hotel capacity and with limited food and beverage offerings.
During the third quarter of 2020 or in the period between properties reopening and September 30, 2020, our Regional properties experienced a decline in net revenues as compared to the prior year. However, in the period between reopening and September 30, 2020 for all of our Regional properties other than Atlantic City, Northern Nevada and New Orleans. Adjusted EBITDA grew as compared to prior year, and Former Caesars’ prior year, for the same properties. Adjusted EBITDA margin for these properties were higher as compared to prior year due to reductionsoperating with a reduced workforce, reducing marketing costs, and limiting certain lower margin food and beverage offerings such as buffets.
Properties in casino volume associated with changesAtlantic City, Northern Nevada and New Orleans experienced significant declines in promotional activity. Additionally, construction disruption affected our West segmentnet revenues and severe weatherAdjusted EBITDA as compared to prior year and Former Caesars’ prior year for the same properties as they were all negatively impacted our visitor volume across all segments contributingby reduced visitation and limitations on capacity due to the declines in casinoCOVID-19 public health emergency.
Managed, International & CIE Segment
Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Revenues:
Casino and pari-mutuel commissions$23 $— $23 *$23 $— $23 *
Food and beverage1 — 1 *1 — 1 *
Hotel— — — *— — — *
Other45 — 45 *45 — 45 *
Net Revenues$69 $— $69 *$69 $— $69 *
Adjusted EBITDA$18 $— $18 *$18 $— $18 *
Adjusted EBITDA margin26.1 %— %26.1 pts26.1 %— %26.1 pts
Net income attributable to Caesars$3 $— $3 *$3 $— $3 *
___________________
*    Not meaningful.
Managed, International, CIE segment’s net revenues and Adjusted EBITDA increased as a result of the acquisition of Former Caesars. All of our managed properties have reopened as of September 30, 2020 except for Caesars Windsor, which opened on October 8, 2020. Our CIE business was not closed at any point related to the COVID-19 public health emergency.
54

For the three and nine months ended September 30, 20192020, net revenues for Managed, International and CIE declined as compared to Former Caesars’ prior period related to reimbursed management costs related to Caesars Windsor remaining closed throughout the same prior year period.

Non-gaming Revenues.  Elginquarter. Excluding that, net revenues increased primarily related to increased revenue in our CIE business. Adjusted EBITDA for Managed, International and Tropicana contributed $247.1 million of incremental non-gaming revenues for the nine months ended September 30, 2019, which was partially offset by declines in non-gaming revenues attributable to the Presque Isle Downs and Nemacolin divestitures, resulting in an increase of 69.9% over the same prior year period.

Excluding incremental Elgin and Tropicana non-gaming revenues and the impact of the Presque Isle Downs and Nemacolin divestitures, non-gaming revenues decreased 3.2% for the nine months ended September 30, 2019CIE increased as compared to the sameFormer Caesars’ prior year period. This decline was primarily driven by the West segment resulting from changes in promotional activity, construction disruption and weather that negatively impacted visitor traffic during the nine months ended September 30, 2019.

Gaming Expenses and Pari-Mutuel Commissions. Elgin and Tropicana contributed $210.1 million of incremental gaming expenses and pari-mutuel commissions for the nine months ended September 30, 2019, which was partially offset by the Presque Isle Downs and Nemacolin divestitures, resulting in an increase of 18.6% in gaming expenses and pari-mutuel commissions over the same prior year period.

Excluding incremental Elgin and Tropicana gaming expenses and pari-mutuel commissions, and the impact of the Presque Isle Downs and Nemacolin divestitures, gaming expenses and pari-mutuel commissions decreased 7.9% for the nine months ended September 30, 2019 compared to the same prior year period. Gaming expenses declined in comparison to the same prior year period due to lower volume combined with savings initiatives targeted at reducing variable expenses. Successful efforts to control costs and maximize departmental profit across all segments also drove the improved departmental profit margin for the nine months ended September 30, 2019 compared to the same prior year period.

Non-gaming Expenses.  Elgin and Tropicana contributed $120.7 million of incremental non-gaming expenses for the nine months ended September 30, 2019, which was partially offset by the Presque Isle Downs and Nemacolin divestitures, resulting in an increase of 45.1% over the same prior year period.

Excluding incremental Elgin and Tropicana non-gaming expenses, and the impact of the Presque Isle Downs and Nemacolin divestitures, non-gaming expenses decreased 11.7% for the nine months ended September 30, 2019 compared to the same prior year period. Decreased non-gaming expenses across all segments were associated with lower non-gaming revenues along with continued efforts to reduce variable expenses including labor and cost of sales.

Marketing and Promotions Expenses.  Elgin and Tropicana contributed $51.1 million of incremental marketing and promotions expense for the nine months ended September 30, 2019, which was partially offset by the Presque Isle Downs and Nemacolin divestitures, resulting in an increase of 47.4% over the same prior year period.

Excluding incremental Elgin and Tropicana marketing and promotions expenses, and the impact of the Presque Isle Downs and Nemacolin divestitures, consolidated marketing and promotions expense decreased 24.7% for the nine months ended September 30, 2019 compared to the same prior year period. This decline was primarily due to savings achieved via the termination of certain marketing contracts, reduction in direct mail costs and continued company-wide changes in marketing and promotional activity.  

General and Administrative Expenses.  Elgin and Tropicana contributed $160.5 million of general and administrative expense for the nine months ended September 30, 2019, which was partially offset by the Presque Isle Downs and Nemacolin divestitures, resulting in an increase of 61.1% over the same prior year period.    


Excluding incremental Elgin and Tropicana general and administrative expenses, and the impact of the Presque Isle Downs and Nemacolin divestitures, consolidated general and administrative expenses decreased 4.4% for the nine months ended September 30, 2019 compared to the same prior year period mainly due to the centralization of certain services provided to our properties and realized savings achieved through consolidated purchasing programs.

Corporate Expenses& Other

Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Revenues:
Other$4 $2 $2 100.0 %$8 $6 $2 33.3 %
Net Revenues$4 $2 $2 100.0 %$8 $6 $2 33.3 %
Adjusted EBITDA$(41)$(8)$(33)*$(59)$(27)$(32)(118.5)%
___________________
.  For the nine months ended September 30, 2019 compared to the same prior year period, corporate expenses increased primarily due to payroll and other expenses associated with additional corporate costs driven by growth related to the Company’s acquisitions. Additionally, an increase in severance expense and the associated acceleration of stock compensation expense also drove the increase in corporate expense for the nine months ended September 30, 2019 compared to the same prior year period.

Impairment Charges. We recorded an impairment charge for the nine months ended September 30, 2019 totaling $1.0 million related to our non-operating real property located in Pennsylvania.*    We recorded impairment charges of $9.8 million related to the classifications of Vicksburg’s operations as assets held for sale and $3.8 million related to the classifications of Nemacolin’s operations as assets held for sale for the Not meaningful.

nine months ended September 30, 2018
.

Depreciation and Amortization Expense.  Elgin and Tropicana contributed $75.9 million of depreciation and amortization expense for the nine months ended September 30, 2019, which was partially offset by the Presque Isle Downs and Nemacolin divestitures, resulting in an increase of 68.2% over the same prior year period.  

Excluding incremental Elgin and Tropicana depreciation and amortization expense, and the impact of the Presque Isle Downs and Nemacolin divestitures, depreciation and amortization expense decreased 6.8% for the nine months ended September 30, 2019 compared to the same prior year period mainly due to ceasing depreciation and amortization expense on assets held for sale.

Supplemental Unaudited Presentation of Consolidated Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA for the Three and Nine Months Ended September 30, 20192020 and 2018

2019

Adjusted EBITDA (defined below), a non-GAAP financial measure, has been presented as a supplemental disclosure because it is a widely used measure of performance and basis for valuation of companies in our industry and we believe that this non-GAAP supplemental information will be helpful in understanding the Company’sour ongoing operating results. Management has historically used Adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period results. Adjusted EBITDA represents operatingnet income (loss) before interest expense, (benefit) provision for income taxes, unrealized (gain) loss on investments and marketable securities, depreciation and amortization, stock-based compensation, impairment charges, transaction expenses, severance expense, selling costs associated with the dispositiondivestitures of properties, preopening expenses, costs associated with resolving the historical Tropicana bankruptcy, impairment charges, equity in income (loss) of unconsolidated affiliates, (gain) loss on the sale or disposal of property and equipment, (gain) loss related to divestitures, changes in the fair value of certain derivatives and certain non-recurring expenses such as sign-on and retention bonuses, business optimization expenses and transformation expenses, litigation awards and settlements, losses on inventory associated with properties temporarily closed as a result of the sales of Presque Isle DownsCOVID-19 public health emergency, contract exit or termination costs, and Nemacolin and other non-cash regulatory gaming assessments.settlements. Adjusted EBITDA also excludes the expense associated with certain of our Master Lease with GLPIleases as the transaction wasthese transactions were accounted for as a financing obligationobligations and the associated expense is included in interest expense. Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with accounting principles generally accepted in the United States (“US GAAP”),GAAP, is unaudited and should not be considered an alternative to, or more meaningful than, net income (loss) as an indicator of our operating performance. Uses of cash flows that are not reflected in Adjusted EBITDA include capital expenditures, interest payments, income taxes, debt principal repayments, payments under our Master Leaseleases with affiliates of GLPI and VICI Properties Inc. and certain regulatory gaming assessments, which can be significant. As a result, Adjusted EBITDA should not be considered as a measure of our liquidity. Other companies that provide EBITDA information may calculate Adjusted EBITDA differently than we do. The definition of Adjusted EBITDA may not be the same as the definitions used in any of our debt agreements.


The following table summarizes our Adjusted EBITDA for our operating segments for the three and nine months ended September 30, 2020 and 2019, and 2018,respectively, in addition to reconciling net (loss) income to Adjusted EBITDA to operating income (loss) in accordance with US GAAP (unaudited,(unaudited):

55

Three Months Ended September 30, 2020
(In millions)CEI
Add: Disc. Ops (d)
Pre-Acq. CEC (e)
Total (f)
Net (loss) income attributable to Caesars$(926)$— $(173)$(1,099)
Net income (loss) attributable to noncontrolling interests1 — (62)(61)
Net loss from discontinued operations1 2 — 3 
Interest expense, net473 26 72 571 
Provision (benefit) for income taxes135 4 (51)88 
Other loss (a)164 — 67 231 
Impairment charges— — 124 124 
Depreciation and amortization223 2 53 278 
Stock-based compensation45 1 3 49 
Transaction costs and other operating costs (b)219 3 22 244 
Other items (c)16 — 19 35 
Adjusted EBITDA$351 $38 $74 $463 

Three Months Ended September 30, 2019
(In millions)CEI
Less: Divestitures (g)
Pre-Acq. CEC (e)
Total (h)
Net income (loss) attributable to Caesars$37 $14 $(359)$(336)
Net loss attributable to noncontrolling interests— — (1)(1)
Provision (benefit) for income taxes18 5 (22)(9)
Other income (a)(2)— (27)(29)
Interest expense, net72 1 341 412 
Depreciation and amortization53 1 255 307 
Impairment charges— — 380 380 
Transaction costs and other operating costs (b)14 — 33 47 
Stock-based compensation expense4 — 19 23 
Other items (c)1 1 16 16 
Adjusted EBITDA$197 $22 $635 $810 

Nine Months Ended September 30, 2020
(In millions)CEI
Less: Divest. Add: Disc. Ops (d) (g)
Pre-Acq. CEC (e)
Total (i)
Net loss attributable to Caesars$(1,202)$(11)$(1,059)$(2,250)
Net income (loss) attributable to noncontrolling interests1 — (67)(66)
Net loss (income) from discontinued operations1 (2)— 3 
Interest expense, net608 (23)750 1,381 
Provision (benefit) for income taxes64 (4)(224)(156)
Other loss (income) (a)174 — (45)129 
Impairment charges161 — 189 350 
Depreciation and amortization322 — 559 881 
Stock-based compensation55 (1)26 82 
Transaction costs and other operating costs (b)242 (1)71 314 
Other items (c)15 1 54 68 
Adjusted EBITDA$441 $(41)$254 $736 
56

Nine Months Ended September 30, 2019
(In millions)CEI
Less: Divestitures (g)
Pre-Acq. CEC (e)
Total (h)
Net income (loss) attributable to Caesars$94 $33 $(891)$(830)
Net loss attributable to noncontrolling interests— — (2)(2)
Provision (benefit) for income taxes39 11 (111)(83)
Other loss (a)1 — 412 413 
Interest expense, net217 2 1,033 1,248 
Depreciation and amortization167 13 743 897 
Impairment charges1 — 430 431 
Transaction costs and other operating costs (b)2 — 86 88 
Stock-based compensation expense16 — 62 78 
Other items (c)5 1 6670 
Adjusted EBITDA$542 $60 $1,828 $2,310 
____________________
(a)Other loss (income) for the three and nine months ended September 30, 2020 primarily represent loss on early repayment of debt in thousands):connection with the consummation of the Merger and unrealized loss on the change in fair value of the derivative liability related to CEC’s 5% convertible notes, slightly offset by gain on William Hill UK and Flutter stock and realized gain on conversion of CEC’s 5% convertible notes. Other loss (income) for the three and nine months ended September 30, 2019 primarily represent unrealized loss on the change in fair value of the derivative liability related to CEC’s 5% convertible notes.

 

 

Three Months Ended September 30, 2019

 

 

 

Operating

Income (Loss)

 

 

Depreciation and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses (6)

 

 

Other (7)

 

 

Adjusted

EBITDA

 

West

 

$

 

35,358

 

 

$

 

13,934

 

 

$

 

—

 

 

$

 

—

 

 

$

 

191

 

 

$

 

49,483

 

Midwest

 

 

 

30,221

 

 

 

 

4,515

 

 

 

 

4

 

 

 

 

—

 

 

 

 

953

 

 

 

 

35,693

 

South

 

 

 

15,185

 

 

 

 

9,000

 

 

 

 

2

 

 

 

 

—

 

 

 

 

512

 

 

 

 

24,699

 

East

 

 

 

45,341

 

 

 

 

11,630

 

 

 

 

—

 

 

 

 

—

 

 

 

 

220

 

 

 

 

57,191

 

Central

 

 

 

25,793

 

 

 

 

11,627

 

 

 

 

—

 

 

 

 

—

 

 

 

 

21

 

 

 

 

37,441

 

Corporate and Other

 

 

 

(26,991

)

 

 

 

1,886

 

 

 

 

4,260

 

 

 

 

12,442

 

 

 

 

1,684

 

 

 

 

(6,719

)

Total

 

$

 

124,907

 

 

$

 

52,592

 

 

$

 

4,266

 

 

$

 

12,442

 

 

$

 

3,581

 

 

$

 

197,788

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2018

 

 

 

Operating

Income (Loss)

 

 

Depreciation and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses (6)

 

 

Other (8)

 

 

Adjusted

EBITDA

 

Excluding Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

31,894

 

 

$

 

9,475

 

 

$

 

—

 

 

$

 

—

 

 

$

 

65

 

 

$

 

41,434

 

Midwest

 

 

 

26,637

 

 

 

 

8,605

 

 

 

 

15

 

 

 

 

—

 

 

 

 

21

 

 

 

 

35,278

 

South

 

 

 

16,176

 

 

 

 

9,704

 

 

 

 

9

 

 

 

 

—

 

 

 

 

126

 

 

 

 

26,015

 

East

 

 

 

23,637

 

 

 

 

4,486

 

 

 

 

2

 

 

 

 

—

 

 

 

 

3,989

 

 

 

 

32,114

 

Central

 

 

 

2,868

 

 

 

 

2,215

 

 

 

 

—

 

 

 

 

—

 

 

 

 

767

 

 

 

 

5,850

 

Corporate and Other

 

 

 

(9,443

)

 

 

 

1,275

 

 

 

 

2,468

 

 

 

 

4,091

 

 

 

 

(4,992

)

 

 

 

(6,601

)

Total Excluding Pre-Acquisition

 

$

 

91,769

 

 

$

 

35,760

 

 

$

 

2,494

 

 

$

 

4,091

 

 

$

 

(24

)

 

$

 

134,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Divestitures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

��

 

 

 

 

 

 

 

East

 

$

 

4,234

 

 

$

 

55

 

 

$

 

2

 

 

$

 

—

 

 

$

 

4,004

 

 

$

 

8,295

 

Total Divestitures (1)

 

$

 

4,234

 

 

$

 

55

 

 

$

 

2

 

 

$

 

—

 

 

$

 

4,004

 

 

$

 

8,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

4,290

 

 

$

 

3,098

 

 

$

 

—

 

 

$

 

—

 

 

$

 

—

 

 

$

 

7,388

 

Midwest

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

South

 

 

 

(1,435

)

 

 

 

2,022

 

 

 

 

—

 

 

 

 

—

 

 

 

 

4

 

 

 

 

591

 

East

 

 

 

22,378

 

 

 

 

8,072

 

 

 

 

—

 

 

 

 

—

 

 

 

 

31

 

 

 

 

30,481

 

Central

 

 

 

17,506

 

 

 

 

6,884

 

 

 

 

—

 

 

 

 

—

 

 

 

 

380

 

 

 

 

24,770

 

Corporate and Other

 

 

 

(38,788

)

 

 

 

448

 

 

 

 

—

 

 

 

 

1,529

 

 

 

 

31,101

 

 

 

 

(5,710

)

Total Pre-Acquisition (2)

 

$

 

3,951

 

 

$

 

20,524

 

 

$

 

—

 

 

$

 

1,529

 

 

$

 

31,516

 

 

$

 

57,520

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Including Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

36,184

 

 

$

 

12,573

 

 

$

 

—

 

 

$

 

—

 

 

$

 

65

 

 

$

 

48,822

 

Midwest

 

 

 

26,637

 

 

 

 

8,605

 

 

 

 

15

 

 

 

 

—

 

 

 

 

21

 

 

 

 

35,278

 

South

 

 

 

14,741

 

 

 

 

11,726

 

 

 

 

9

 

 

 

 

—

 

 

 

 

130

 

 

 

 

26,606

 

East

 

 

 

41,781

 

 

 

 

12,503

 

 

 

 

—

 

 

 

 

—

 

 

 

 

16

 

 

 

 

54,300

 

Central

 

 

 

20,374

 

 

 

 

9,099

 

 

 

 

—

 

 

 

 

—

 

 

 

 

1,147

 

 

 

 

30,620

 

Corporate and Other

 

 

 

(48,231

)

 

 

 

1,723

 

 

 

 

2,468

 

 

 

 

5,620

 

 

 

 

26,109

 

 

 

 

(12,311

)

Total Including Pre-Acquisition and    Excluding Divestitures (3)

 

$

 

91,486

 

 

$

 

56,229

 

 

$

 

2,492

 

 

$

 

5,620

 

 

$

 

27,488

 

 

$

 

183,315

 


 

 

Nine Months Ended September 30, 2019

 

 

 

Operating

Income (Loss)

 

 

Depreciation and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses (6)

 

 

Other (7)

 

 

Adjusted

EBITDA

 

Includes Divestitures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

66,772

 

 

$

 

40,585

 

 

$

 

—

 

 

$

 

—

 

 

$

 

474

 

 

$

 

107,831

 

Midwest

 

 

 

87,066

 

 

 

 

20,650

 

 

 

 

29

 

 

 

 

—

 

 

 

 

1,025

 

 

 

 

108,770

 

South

 

 

 

61,723

 

 

 

 

29,865

 

 

 

 

11

 

 

 

 

—

 

 

 

 

880

 

 

 

 

92,479

 

East

 

 

 

107,715

 

 

 

 

36,019

 

 

 

 

7

 

 

 

 

—

 

 

 

 

372

 

 

 

 

144,113

 

Central

 

 

 

80,896

 

 

 

 

34,317

 

 

 

 

—

 

 

 

 

—

 

 

 

 

153

 

 

 

 

115,366

 

Corporate and Other

 

 

 

(53,111

)

 

 

 

5,446

 

 

 

 

15,676

 

 

 

 

21,628

 

 

 

 

(15,097

)

 

 

 

(25,458

)

Total

 

$

 

351,061

 

 

$

 

166,882

 

 

$

 

15,723

 

 

$

 

21,628

 

 

$

 

(12,193

)

 

$

 

543,101

 

Divestitures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East

 

$

 

(91

)

 

$

 

—

 

 

$

 

7

 

 

$

 

—

 

 

$

 

46

 

 

$

 

(38

)

Total Divestitures (4)

 

$

 

(91

)

 

$

 

—

 

 

$

 

7

 

 

$

 

—

 

 

$

 

46

 

 

$

 

(38

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excluding Divestitures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

66,772

 

 

$

 

40,585

 

 

$

 

—

 

 

$

 

—

 

 

$

 

474

 

 

$

 

107,831

 

Midwest

 

 

 

87,066

 

 

 

 

20,650

 

 

 

 

29

 

 

 

 

—

 

 

 

 

1,025

 

 

 

 

108,770

 

South

 

 

 

61,723

 

 

 

 

29,865

 

 

 

 

11

 

 

 

 

—

 

 

 

 

880

 

 

 

 

92,479

 

East

 

 

 

107,806

 

 

 

 

36,019

 

 

 

 

—

 

 

 

 

—

 

 

 

 

326

 

 

 

 

144,151

 

Central

 

 

 

80,896

 

 

 

 

34,317

 

 

 

 

—

 

 

 

 

—

 

 

 

 

153

 

 

 

 

115,366

 

Corporate and Other

 

 

 

(53,111

)

 

 

 

5,446

 

 

 

 

15,676

 

 

 

 

21,628

 

 

 

 

(15,097

)

 

 

 

(25,458

)

Total Excluding Divestitures (5)

 

$

 

351,152

 

 

$

 

166,882

 

 

$

 

15,716

 

 

$

 

21,628

 

 

$

 

(12,239

)

 

$

 

543,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2018

 

 

 

Operating

Income (Loss)

 

 

Depreciation and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses (6)

 

 

Other (8)

 

 

Adjusted

EBITDA

 

Excluding Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

63,898

 

 

$

 

27,046

 

 

$

 

(32

)

 

$

 

—

 

 

$

 

704

 

 

$

 

91,616

 

Midwest

 

 

 

80,725

 

 

 

 

24,654

 

 

 

 

90

 

 

 

 

—

 

 

 

 

248

 

 

 

 

105,717

 

South

 

 

 

50,099

 

 

 

 

26,343

 

 

 

 

50

 

 

 

 

—

 

 

 

 

10,142

 

 

 

 

86,634

 

East

 

 

 

67,164

 

 

 

 

15,252

 

 

 

 

11

 

 

 

 

—

 

 

 

 

5,230

 

 

 

 

87,657

 

Central

 

 

 

2,868

 

 

 

 

2,215

 

 

 

 

—

 

 

 

 

—

 

 

 

 

767

 

 

 

 

5,850

 

Corporate and Other

 

 

 

(41,377

)

 

 

 

3,694

 

 

 

 

9,526

 

 

 

 

10,043

 

 

 

 

(3,710

)

 

 

 

(21,824

)

Total Excluding Pre-Acquisition

 

$

 

223,377

 

 

$

 

99,204

 

 

$

 

9,645

 

 

$

 

10,043

 

 

$

 

13,381

 

 

$

 

355,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Divestitures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

East

 

$

 

13,262

 

 

$

 

1,632

 

 

$

 

11

 

 

$

 

—

 

 

$

 

4,564

 

 

$

 

19,469

 

Total Divestitures (1)

 

$

 

13,262

 

 

$

 

1,632

 

 

$

 

11

 

 

$

 

—

 

 

$

 

4,564

 

 

$

 

19,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

13,635

 

 

$

 

9,271

 

 

$

 

—

 

 

$

 

—

 

 

$

 

8

 

 

$

 

22,914

 

Midwest

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

South

 

 

 

355

 

 

 

 

6,076

 

 

 

 

—

 

 

 

 

—

 

 

 

 

20

 

 

 

 

6,451

 

East

 

 

 

46,261

 

 

 

 

24,444

 

 

 

 

—

 

 

 

 

—

 

 

 

 

159

 

 

 

 

70,864

 

Central

 

 

 

70,105

 

 

 

 

22,939

 

 

 

 

—

 

 

 

 

—

 

 

 

 

647

 

 

 

 

93,691

 

Corporate and Other

 

 

 

(52,127

)

 

 

 

1,537

 

 

 

 

—

 

 

 

 

4,259

 

 

 

 

31,101

 

 

 

 

(15,230

)

Total Pre-Acquisition (2)

 

$

 

78,229

 

 

$

 

64,267

 

 

$

 

—

 

 

$

 

4,259

 

 

$

 

31,935

 

 

$

 

178,690

 

Including Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

77,533

 

 

$

 

36,317

 

 

$

 

(32

)

 

$

 

—

 

 

$

 

712

 

 

$

 

114,530

 

Midwest

 

 

 

80,725

 

 

 

 

24,654

 

 

 

 

90

 

 

 

 

—

 

 

 

 

248

 

 

 

 

105,717

 

South

 

 

 

50,454

 

 

 

 

32,419

 

 

 

 

50

 

 

 

 

—

 

 

 

 

10,162

 

 

 

 

93,085

 

East

 

 

 

100,163

 

 

 

 

38,064

 

 

 

 

—

 

 

 

 

—

 

 

 

 

825

 

 

 

 

139,052

 

Central

 

 

 

72,973

 

 

 

 

25,154

 

 

 

 

—

 

 

 

 

—

 

 

 

 

1,414

 

 

 

 

99,541

 

Corporate and Other

 

 

 

(93,504

)

 

 

 

5,231

 

 

 

 

9,526

 

 

 

 

14,302

 

 

 

 

27,391

 

 

 

 

(37,054

)

Total Including Pre-Acquisition and Excluding Divestitures (3)

 

$

 

288,344

 

 

$

 

161,839

 

 

$

 

9,634

 

 

$

 

14,302

 

 

$

 

40,752

 

 

$

 

514,871

 


(1)

Figures are for Presque Isle Downs and Nemacolin for the three and nine months ended September 30, 2018.

(2)(b)Transaction costs and other operating costs for the three and nine months ended September 30, 2020 primarily represent costs related to the Merger with Former Caesars, various contract or license termination exit costs, and severance costs.

Figures are for Elgin and Tropicana for the three and nine months ended September 30, 2018. Such figures are based on unaudited internal financial statements and have not been reviewed by the Company’s auditors and do not conform to GAAP.

(3)(c)Other represents internal labor charges related to certain departed executives and contract labor.

Total figures for the three and nine months ended September 30, 2018 include combined results of operations for Elgin, Tropicana and the Company and exclude results of operations for Presque Isle Downs and Nemacolin. Such presentation does not conform with GAAP or the Securities and Exchange Commission rules for pro forma presentation; however, we believe that the additional financial information will be helpful to investors in comparing current results with results of prior periods. This is non-GAAP data and should not be considered a substitute for data prepared in accordance with GAAP, but should be viewed in addition to the results of operations reported by the Company.

(4)(d)Discontinued operations include Horseshoe Hammond, Caesars Southern Indiana, Harrah’s Louisiana Downs, Caesars UK group including Emerald Resorts & Casino, and Bally’s Atlantic City.

Figures are for Presque Isle Downs for the period beginning January 1, 2019 and ending January 11, 2019 and Nemacolin for the period beginning January 1, 2019 and ending March 8, 2019.

(5)(e)Pre-acquisition CEC represents results of operations for Former Caesars for the period from July 1, 2020 and January 1, 2020 to July 20, 2020, the date on which the Merger was consummated, for the three and nine months ended September 30, 2020, respectively, and for the three and nine months ended September 30, 2019. Additionally, certain corporate overhead costs which were historically charged to properties within the segments have been reclassified to the Corporate and Other. These costs primarily include centralized marketing expenses, redundant executive and management payroll and benefits expenses, centralized contract labor expenses, and corporate rent expenses. Such figures are based on unaudited internal financial statements and have not been reviewed by the Company’s auditors and, for the 2020 periods, do not conform to GAAP.

Total figures for 2019 exclude results of operations for Presque Isle Downs and Nemacolin.

(6)(f)2020 Total for the three months ended September 30, 2020 includes results of operations from discontinued operations and from Former Caesars prior to July 20, 2020, the date on which the Merger was consummated. Such presentation does not conform to GAAP or the Securities and Exchange Commission rules for pro forma presentation; however, we believe that the additional financial information will be helpful to investors in comparing current results with results of prior periods. This is non-GAAP data and should not be considered a substitute for data prepared in accordance with GAAP, but should be viewed in addition to the results of operations reported by the Company.

Transaction expenses represent primarily costs related to the pending acquisition of Caesars for the three and nine months ended September 30, 2019 and costs related to the acquisitions of Elgin, Tropicana and Isle for the three and nine months ended September 30, 2018.

(7)(g)Divestitures for the three and nine months ended September 30, 2019 include results of operations for Mountaineer, Cape Girardeau, Caruthersville, Kansas City, and Vicksburg for the three and nine months ended September 30, 2019. Divestitures for the nine months ended September 30, 2020 include results of operations for Kansas City and Vicksburg for the period beginning January 1, 2020 to July 1, 2020. Such figures are based on unaudited internal financial statements and have not been reviewed by the Company’s auditors and do not conform to GAAP.

Other, for the three and nine months ended September 30, 2019, is comprised of severance expense, (gain) loss on the sale or disposal of property and equipment, equity in income (loss) of unconsolidated affiliate, impairment charges, pre-opening charges for Tropicana, the (gain) loss associated with the sales of Presque Isle Downs and Nemacolin and selling costs associated with the pending divestitures of Mountaineer, Cape Girardeau, Caruthersville, Kansas City and Vicksburg.

(8)(h)2019 Total for the three and nine months ended September 30, 2019 excludes results of operations from divestitures as detailed in (g) and includes results of operations of Former Caesars, including discontinued operations, for the relevant period. Such presentation does not conform to GAAP or the Securities and Exchange Commission rules for pro forma presentation; however, we believe that the additional financial information will be helpful to investors in comparing current results with results of prior periods. This is non-GAAP data and should not be considered a substitute for data prepared in accordance with GAAP, but should be viewed in addition to our reported results of operations.

Other, for the three and nine months ended September 30, 2018 is comprised of severance expense, (gain) loss on the sale or disposal of property and equipment, equity in income (loss) of an unconsolidated affiliate, an impairment charge at Vicksburg, selling costs associated with the divestitures of Presque Isle Downs and Nemacolin, the terminated sale of Vicksburg and the purchase of Elgin.

(i)2020 Total for the nine months ended September 30, 2020 excludes divestitures as detailed in (g) and includes results of operations from discontinued operations and from Former Caesars prior to July 20, 2020, the date on which the Merger was consummated. Such presentation does not conform to GAAP or the Securities and Exchange Commission rules for pro forma presentation; however, we believe that the additional financial information will be helpful to investors in comparing current results with results of prior periods. This is non-GAAP data and should not be considered a substitute for data prepared in accordance with GAAP, but should be viewed in addition to our reported results of operations.

Liquidity and Capital Resources

We are a holding company and our only significant assets are ownership interests in our subsidiaries. Our ability to fund our obligations depends on theexisting cash on hand, contracted asset sales, cash flow offrom our subsidiaries and theour ability of our subsidiaries to distribute or otherwise make funds available to us.

raise capital. Our primary sources of liquidity and capital resources have been existing cash on hand, cash flow from operations, borrowings under our revolving credit facility,facilities, proceeds from the issuance of debt and equity securities and proceeds from our disposition of Presque Isle Downs. As of September 30, 2019, we had no outstanding balancecompleted asset sales and $483.7 million of available borrowing capacity, after consideration of $16.3 million in outstanding letters of credit, under our Revolving Credit Facility.  We applied approximately $150.0 million of proceeds from the sale of Presque Isle Downs to repay amounts outstanding under the Revolving Credit Facility.  Pursuant to the terms of the indentures governing the Company’s senior notes, the Company will be required to make an offer to purchase a portion of its outstanding senior notes with the excess proceeds from such sale unless it applies the net proceeds of such sale to either permanently repay outstanding indebtedness or make specified acquisitions or capital expenditures within 365 days of the sale of Presque Isle Downs. The Company anticipates applying the proceeds of the Presque Isle Downs sale to permanently repay indebtedness and make qualifying capital expenditures prior to the anniversary of the sale.

lease transactions.

Our cash requirements can fluctuate significantly depending on our decisions with respect to business acquisitions or divestitures and strategic capital investments to maintain the quality of our properties. Beginning on May 18, 2020, we began reopening our properties and as of September 30, 2020 we have resumed operations at all of our properties, with the exception of The
57

Cromwell, Planet Hollywood, Rio, and Caesars Windsor. Planet Hollywood and Caesars Windsor reopened on October 8, 2020 and The Cromwell reopened on October 29, 2020. In an effort to mitigate the impacts of COVID-19 public health emergency on our business and maintain liquidity, we furloughed approximately 90% of our employees beginning on April 11, 2020. A portion of the workforce has returned to service as the properties have resumed with limited capacities and in compliance with operating restrictions in accordance with governmental orders, directives and guidelines. As a result of these payroll changes combined with other cost saving measures, our operating expenses were reduced significantly.
In an effort to maintain liquidity and provide financial flexibility as the effects of COVID-19 public health emergency continue to evolve and impact global financial markets, we borrowed $465 million under our revolving credit facility on March 16, 2020, which we repaid utilizing, in part, proceeds from the sale of our interests in Kansas City and Vicksburg.
On June 19, 2020, we completed a public offering of 20,700,000 shares of common stock, at a public offering price of $39.00 per share, with proceeds of $772 million, net of fees and estimated expenses of $35 million. On July 6, 2020, we issued $3.4 billion aggregate principal amount of 6.250% Senior Secured Notes due 2025 (the “CEI Senior Secured Notes”) and $1.8 billion aggregate principal amount of 8.125% Senior Notes due 2027 (the “CEI Senior Notes”). In addition, we issued $1.0 billion aggregate principal amount of 5.75% Senior Secured Notes due 2025 (the “CRC Senior Secured Notes”).
On July 1, 2020, we completed the sale of Kansas City and Vicksburg for $230 million and used a portion of the proceeds to repay the outstanding balance under our revolving credit facility. In addition, we closed the sale of Harrah’s Reno on September 30, 2020 which provided additional proceeds of $8 million, net of certain closing costs.
On July 20, 2020, in connection with the Merger, we consummated the sale leaseback transactions related to Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Resort Atlantic City, including the Harrah’s Atlantic City Waterfront Conference Center, for approximately $1.8 billion of net proceeds. Additionally, we received a one-time payment from VICI of approximately $1.4 billion for amendments to the VICI leases. Furthermore, we entered into an incremental agreement to the existing CRC credit agreement, for an incremental term loan in an aggregate principal amount of $1.8 billion.
In connection with the consummation of the Merger, on July 20, 2020, our current and future liquidity significantly changed. A portion of the proceeds from our newly issued debt and proceeds we received from VICI, as well as cash on hand generated from our sale of common stock, were used (a) to fund a portion of the cash consideration of the Merger, (b) to prepay in full the loans outstanding and terminate all commitments under our existing Credit Agreement, dated as of April 17, 2017, (c) to satisfy and discharge our Senior Notes, (d) to repay $975 million of the outstanding amount under the existing CRC revolving credit facility, (e) to repay in full the loans outstanding and terminate all commitments under the existing CEOC, LLC Credit Agreement, dated as of October 6, 2017, (f) to pay fees and expenses related to the financing arrangements, and (g) for general corporate use. Additionally, we entered into the CEI Revolving Credit Facility which provides for a five-year senior secured revolving credit facility in an aggregate principal amount of $1.2 billion.
On September 18, 2020, we entered into a $400 million Loan Agreement with a subsidiary of VICI for a term of five years, with such loan secured by, among other things, a first priority fee mortgage on the Caesars Forum Convention Center (the “Forum Convention Center Mortgage Loan”). The interest rate on the Forum Convention Center Mortgage Loan is initially 7.7% per annum, which escalates annually to a maximum interest rate of 8.3% per annum. After the second anniversary of the closing of the loan, we have the option of prepaying the loan, which may include a premium.
As of September 30, 2020, our cash on hand and revolving borrowing capacity was as follows:
(In millions)September 30, 2020
Cash and cash equivalents$1,037 
Revolver capacity1,310 
Revolver capacity committed to letters of credit(83)
Total$2,264 
On September 30, 2020, we announced that we had reached an agreement with William Hill on the terms of a recommended cash acquisition pursuant to which the we would acquire the entire issued and to be issued share capital (other than shares owned by us or held in treasury) of William Hill, in an all-cash transaction of approximately £2.9 billion, or $3.7 billion. The transaction is conditional on, among other things, the approval of William Hill shareholders and state and federal regulators.
On September 25, 2020, to provide liquidity to potentially fund a portion of the cash purchase price, as required by UK regulators, we borrowed $900 million on our CEI Revolving Credit Facility. On September 28, 2020, we deposited $2.1 billion, which included the proceeds from the revolver, into an escrow account related to the William Hill offer. As of September 30,
58

2020 these funds in escrow were classified as restricted cash until we received certain regulatory approvals for financing described below.
On September 28, 2020, we entered into a foreign exchange forward contract to hedge the risk of appreciation of the GBP denominated purchase price. Under the agreement, we would purchase £1.3 billion at a contracted exchange rate. An unrealized loss of $5 million related to the change in fair value during the period from September 28, 2020 and September 30, 2020 was recorded in the consolidated condensed statement of operations. On October 1, 2020 the contract was cancelled.
On October 1, 2020, we completed a public offering of 35,650,000 shares of our common stock at a public offering price of $56.00 per share. Net proceeds from the offering, after deducting the underwriting discounts and commissions and estimated expenses, was approximately $1.9 billion. We expect to use $1.7 billion of these proceeds for the acquisition of William Hill and, as such, we deposited that amount into a UK escrow account denominated in British Pounds.
Upon receipt of regulatory approval of our Interim Facilities Agreement (described below), the restriction on the $2.1 billion funded as of September 30, 2020, was released and we transferred $1.4 billion of cash back into our operating accounts and the outstanding balance of our revolving credit facility was repaid in full. Approximately $598 million of cash remains in an unrestricted account.
On October 9, 2020, we entered into a foreign exchange forward contract to hedge the risk of appreciation of the GBP denominated purchase price for the William Hill acquisition. Under the agreement, we would purchase £536 million at a contracted exchange rate. The forward term of the contract ends on March 31, 2021.
On October 6, 2020, we entered into a £1.5 billion interim facilities agreement (the “Interim Facilities Agreement”) with Deutsche Bank AG, London Branch and JPMorgan Chase Bank, N.A. (the “Arrangers”). Pursuant to the Interim Facilities Agreement, the Arrangers have made available to the Company: (a) a 540-day £1.0 billion asset sale bridge facility and (b) a 60-day £503.0 million cash confirmation bridge facility (collectively, the “Facility”). The Facility may be used to finance the acquisition, refinance or otherwise discharge the indebtedness of William Hill and its subsidiaries, pay transaction fees and expenses related to the foregoing and for working capital and general corporate purposes, among other things. The availability of the borrowings under the Facility is subject to the satisfaction of certain customary conditions. If drawn upon, outstanding borrowings under the Facility will bear interest at a rate equal to the London interbank offered rate plus 3.50% per annum. We entered into the Interim Facilities Agreement in connection with requirement under applicable United Kingdom law to demonstrate that we have “funds certain” to pay the entirety of the cash purchase price for the acquisition of William Hill. We do not intend to borrow under the Interim Facilities Agreement. Instead, we intend to negotiate long-form financing documentation pursuant to which a subsidiary will incur the Debt Financing for the acquisition.
In addition to the capital required to complete the proposed acquisition of William Hill, we expect that our primary capital requirements going forward will relate to the operation and maintenance of our properties, taxes, servicing our outstanding indebtedness, and rent payments under our GLPI Master Lease, continued costs associatedthe VICI Leases and other leases. We make capital expenditures and perform continuing refurbishment and maintenance at our properties to maintain our quality standards. Our capital expenditure requirements for 2020 are expected to significantly increase as a result of the additional properties acquired in the Merger. In addition to our future capital expenditures for the normal course of business, we funded $400 million to escrow as of the closing of the Merger and will utilize those funds in accordance with a three year capital expenditure plan in the Elgin and Tropicana acquisitions and funding the Caesars acquisition.state of New Jersey. We expectwill also be required to fund a similar escrow account with $25 million for improvements at our racing properties within the anticipated Caesars acquisition with a combinationstate of proceeds from the Debt Financing, the sale-leaseback transactions with VICI with respect to Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City, the consideration received from VICI received in connection with amendments to the CPLV Lease and Non-CPLV Lease contemplated by the MTA, asset divestitures, existing cash on our balance sheet and cash flow generated by the Company and Caesars prior to the acquisition.Indiana. During the remainder of 2019,2020, we plan to spend approximately $65.0an estimated $50 million to $75 million on capital expenditures. Our capital requirementsWe expect to use cash on hand and cash generated from operations to meet such obligations.
On August 27, 2020, Hurricane Laura made landfall on Lake Charles as a Category 4 storm. The hurricane severely damaged the Isle of Capri Casino Lake Charles and the Company has recorded in insurance receivable of $31 million, of which $15 million related to fixed asset impairments and $16 million related to remediation costs and repairs that have been incurred in the three months ended September 30, 2020. The property has remained closed.
A significant portion of our liquidity needs are for debt service and payments associated with our leases. In addition to our newly issued debt, our debt obligations increased significantlyas a result of outstanding debt of Former Caesars that remained outstanding following the consummation of the acquisitionsMerger. Our estimated debt service (including principal and interest) is approximately $165 million for the remainder of Tropicana2020. We also lease certain real property assets from third parties, including GLPI and Elgin, including asVICI. We estimate our lease payments to be approximately $300 million for the remainder of 2020.
The 5% Convertible Notes (defined below) remain outstanding following the consummation of the Merger. As a result of the obligation to pay annual rent in an


initialMerger, the 5% Convertible Notes are convertible into weighted average of the number of shares of Company Common Stock and amount of approximately $87.6 million under the Master Lease with respect to certaincash actually received per share by holders of the Tropicana properties and the required payments under the Lumière Note.  

We funded the $328.8 millioncommon stock of cash considerationFormer Caesars that made elections for the Elgin Acquisition using cash from ongoing operations and borrowings under our revolving credit facility. We funded the $246 million purchase of the real estate underlying Lumière with the proceeds of the Lumière Note. We funded the $640 million

59

consideration in the Tropicana AcquisitionMerger. The 5% Convertible Notes are convertible at any time at the option of the holders thereof and, beginning in October 2020, are convertible at the repaymentoption of amountsthe Company if the last reported sale price of Company Common Stock equals or exceeds 140% of the conversion price for the 5% Convertible Notes in effect on each of at least 20 trading days during any 30 consecutive trading day period. As of September 30, 2020, we have paid approximately $574 million and issued approximately 6.8 million shares upon conversion of $487 million in aggregate principal amount of the convertible notes during 2020. Through November 2, 2020, we paid an additional $328 million and issued 3.9 million shares upon conversion of an additional $281 million in aggregate principal amount of the 5% Convertible Notes. At such time as the holders of the 5% Convertible Notes elect to cause conversion, we estimate using cash of $380 million and issuing 4.5 million shares to settle the remaining outstanding under5% Convertible Notes.
On April 24, 2020, the Tropicana credit facilityCompany entered into a definitive purchase agreement with our cash on hand Twin River and cash on hand at Tropicana, borrowings under our revolving credit facilitycertain of its affiliates for the sale of the equity interests of Eldorado Resort Casino Shreveport Joint Venture and proceeds from our offeringColumbia Properties Tahoe, LLC, the entities that hold Eldorado Shreveport and MontBleu, respectively, for aggregate consideration of $600$155 million, of 6.0% senior notes due 2026. In addition, our borrowing capacity on our revolving credit facility increased from $300 millionsubject to $500 million effective substantially concurrently witha working capital adjustment. The definitive agreement provides that the consummation of the Tropicanasale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals and the sale of Eldorado Shreveport and MontBleu is expected to close in the first quarter of 2021.
On September 3, 2020, the Company and VICI entered into agreement to sell Harrah’s Louisiana Downs with Rubico Acquisition Corp. for $22 million, subject to a customary working capital adjustment, where the proceeds will be split between the Company and VICI. The sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals and is expected to close in the first half of 2021.
We previously reached an agreement with VICI to sell Bally’s Atlantic City Hotel & Casino to Twin River for approximately $25 million. Caesars will receive approximately $6 million from the sale. In addition, on October 1, 20189, 2020, we reached an agreement to sell the Bally’s brand to Twin River Worldwide Holding, Inc. for $20 million, while retaining the right to use the brand within Bally’s Las Vegas into perpetuity.
In addition to the agreements above, we also expect to enter into additional agreements to divest of Caesars Southern Indiana, Horseshoe Hammond and Evansville prior to December 31, 2020, as required by the Indiana Gaming Commission. Further, we extended the maturity of the revolving credit facilityexpect to October 1, 2023.enter into agreements to sell several other non-core properties including our international properties within our Caesars UK group, which includes Emerald Resorts Casino. We expect these divestitures to close by mid-year 2021.
We expect that our current liquidity, cash generatedflows from operations, borrowings under committed credit facilities and the announced asset sales, net of associated taxes, will be sufficient to fund our operations, and capital requirements and service our outstanding indebtedness for the next twelve months.

Operating Cash Flow.  For However, the nine months ended September 30, 2019, cash flows provided by operating activities totaled $260.1 million comparedCOVID-19 public health emergency has had, and is expected to $263.4 million for the same prior year period. Our operating cash flows generally follow trends in operating income, excluding non-cash charges. Changescontinue to have, an adverse effect on our business, financial condition and results of operations and has caused, and may continue to cause, disruption in the balance sheet accountsfinancial markets. While we have undertaken efforts to mitigate the impacts of COVID-19 on our business and maintain liquidity, the extent of the ongoing and future effects of the COVID-19 public health emergency on our business, results of operations and financial condition is uncertain and may adversely impact our liquidity in the future. Our ability to access additional capital may be adversely affected by the disruption in the financial markets caused by the COVID-19 public health emergency, restrictions on incurring additional indebtedness contained in the agreements governing our indebtedness and the timingimpact of significant payments, including interest, rentthe public health emergency on our business, results of operations and tax payments will impact our operating cash flows. financial condition.

Debt and Master Lease Covenant Compliance
The decrease in operating cash compared toCRC Credit Agreement, the same prior year period was primarily due to cash tax payments related to the Tropicana Acquisition for the nine months ended September 30, 2019 offset by cash flows generated by operations.

Investing Cash Flow and Capital Expenditures.  Net cash flows provided by investing activities totaled $38.5 million for the nine months ended September 30, 2019 compared to $395.1 million used for investing activities in the same prior year period. Our investing cash flows generally fluctuate depending upon the timing of strategic and maintenance capital expenditures in addition to business acquisitions or dispositions. Net cash provided by investing activities for the nine months ended September 30, 2019 was primarily due to $169.4 million in net proceeds from the sales of Presque Isle Downs and Nemacolin. This increase was partially offset by cash used totaling $135.0 million for capital expenditures for various property enhancement and maintenance projects along with equipment purchases. Net cash flows used in investing activities for the nine months ended September 30, 2018 were primarily due to $306.3 million used in the Elgin Acquisition and $89.1 million in capital expenditures for various property enhancement and maintenance projects along with equipment purchases.

Financing Cash Flow.  Net cash used in financing activities for the nine months ended September 30, 2019 totaled $323.4 million compared to $763.7 million provided by financing activities for the same prior year period. The cash used in financing activities for the nine months ended September 30, 2019 was principally due to $245 million of net payments under theCEI Revolving Credit Facility and $70.0 millionthe indenture related to the CRC Notes and CEI 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 our ability to (among other items) incur additional indebtedness, make investments, make restricted payments, underincluding dividends, grant liens, sell assets and make acquisitions. The indenture for the Term Loan. For5% Convertible Notes contained limited covenants as a result of amendments that became effective in connection with the nine months ended September 30, 2018, cash provided by financing activities was principally due to $600.0 million of proceeds from the issuanceconsummation of the 6% Senior Notes due 2026 and $180.0 million of net borrowings under theMerger.

The CRC Revolving Credit Facility and CEI Revolving Credit Facility include 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. Failure to comply with such covenants could result in an acceleration of the maturity of indebtedness outstanding under the relevant debt document.
The Company’s results of operations have been materially adversely affected by the impacts of the COVID-19 public health emergency. As a result, the current terms of the CRC Credit Agreement and the CEI Credit Agreement provide that the financial covenant measurement period is not effective through September 30, 2021 so long as the CRC and the Company,
60

respectively, comply with a minimum liquidity requirement, which includes any such availability under the applicable revolving credit facilities.
The GLPI Master Lease contains certain operating, capital expenditure and financial covenants thereunder, and our ability to comply with these covenants was negatively impacted by the effects of the COVID-19 public health emergency on our results of operations. On June 15, 2020, we entered into an amendment to the GLPI Master Lease which provides certain relief under these covenants in the event of facility closures due to public health emergencies, governmental restrictions and certain other instances of unavoidable delay. On July 17, 2020, the amendment to the GLPI Master Lease became effective as the Company obtained all necessary approvals and the applicable waiting period expired. Furthermore, the Company obtained waivers from VICI with relation to annual capital expenditure requirements related to the Elgin Acquisition.

leases with VICI, starting with the annual period ending December 31, 2020.

As of September 30, 2020, we were in compliance with all of the applicable financial covenants under the CRC Credit Agreement, the CEI Credit Agreement, CEI Senior Secured Notes, CEI Senior Notes, CRC Secured Notes, 5% Convertible Notes, the GLPI Leases and VICI Leases.
Share Repurchase Program

On November 8, 2018, the Companywe issued a press release announcing that its Board of Directors has authorized a $150 million common stock repurchase program (the “Share Repurchase Program”) pursuant to which the Companywe may, from time to time, repurchase shares of common stock on the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions. The Share Repurchase Program has no time limit and may be suspended or discontinued at any time without notice. There is no minimum number of shares of common stock that the Company iswe are required to repurchase under the Share Repurchase Program.

The Company

As of September 30, 2020, we acquired 223,823 shares of common stock under the program at an aggregate value of $9.1$9 million and an average of $40.80 per share during the year ended December 31, 2018.share. No shares were repurchased during the nine months ended September 30, 2019.

2020 and 2019.

Debt Obligations and Master Lease

Term Loan and Revolving Credit Facility

The Company isLeases

New Debt Transactions
We were party to a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto dated as of April 17, 2017 (as amended, the “Credit“ERI Credit Facility”), consisting of a $1.45$1.5 billion term loan facility (the “Term Loan Facility” or “Term Loan”) and a $500.0$500 million revolving credit facility (the “Revolving Credit Facility”). The Company’s obligationsfacility.
In an effort to maintain liquidity and provide financial flexibility as the effects of COVID-19 continued to evolve and impact global financial markets, we borrowed $465 million under the RevolvingERI Credit Facility will mature on October 1, 2023. The Company’s obligations under the Term Loan Facility will mature on April 17, 2024. The Company was required to make quarterly principal payments of $3.6 million on the Term Loan Facility on the last day of each fiscal quarter beginning on June 30, 2017 but satisfied this requirement as a result of the principal prepayment of $444.5 million on September 13, 2017March 16, 2020, which we repaid in conjunction with the issuance of the additional 6% Senior Notes due 2025. In addition, the Company is required to make mandatory payments of amounts outstanding under the Credit Facility with the proceeds of certain casualty events, debt issuances, and


asset sales and, depending on its consolidated total leverage ratio, the Company may be required to apply a portion of its excess cash flow to repay amounts outstanding under the Credit Facility.

As of September 30, 2019, the Company had $886.8 million outstanding on the Term Loan and no outstanding balance under the Revolving Credit Facility. The Company had $483.7 million of available borrowing capacity, after consideration of $16.3 millionJuly 2020 utilizing, in outstanding letters of credit under its Revolving Credit Facility as of September 30, 2019. The Company applied approximately $150.0 million ofpart, proceeds from the sale of Presque Isle Downs to repay amounts outstanding under the Revolving Credit Facility.  Pursuant to the terms of the indentures governing the Company’s senior notes, the Company will be required to make an offer to purchase a portion of its outstanding senior notes with the excess proceeds from such sale unless it applies the net proceeds of such sale to either permanently repay outstanding indebtedness or make specified acquisitions or capital expenditures within 365 days of the sale of Presque Isle Downs. The Company anticipates applying the proceeds of the Presque Isle Downs sale to permanently repay indebtednessour interests in Kansas City and make qualifying capital expenditures prior to the anniversary of the sale.

The interest rate per annum applicable to loans under the Revolving Credit Facility are, at our option, either LIBOR plus a margin ranging from 1.75% to 2.50% or a base rate plus a margin from 0.75% to 1.50%, the margin is based on our total leverage ratio. The interest rate per annum applicable to the loans under the Term Loan Facility is, at our option, either LIBOR plus 2.25% or a base rate plus 1.25%; provided, however, that in no event will LIBOR be less than zero or the base rate be less than 1.00%. Additionally, the Company pays a commitment fee on the unused portion of the Revolving Credit Facility of 0.50% per annum. As of September 30, 2019, the weighted average interest rate on the Term Loan was 4.31%.

Senior Notes

6% Senior Notes due 2026

Vicksburg.

On September 20, 2018, DeltaJuly 6, 2020, Colt Merger Sub, Inc. (“Escrow Issuer”), a Delaware corporation and a wholly-owned subsidiary of the Company (“Escrow Issuer”) issued $600 million$3.4 billion aggregate principal amount of 6.0% senior notes due 2026 (the “6%6.250% Senior Notes due 2026”) pursuant to an indenture, dated as of September 20, 2018 (the “2026 Indenture”), between Escrow Issuer and U.S. Bank, National Association, as Trustee. Interest on the 6% Senior Notes due 2026 will be paid every semi-annually in arrears on March 15 and September 15.

The 6% Senior Notes due 2026 were general unsecured obligations of Escrow Issuer’s upon issuance and, upon the assumption of such obligations by the Company and the subsidiary guarantors (the “Guarantors”) upon consummation of the Tropicana Acquisition, became general unsecured obligations of the Company and the Guarantors, ranking senior in right of payment to all of the Company’s existing and future debt that is expressly subordinated in right of payment to the 6% Senior Notes due 2026 and the guarantees, ranking equally in right of payment with all of the applicable obligor’s existing and future senior liabilities, including the obligations under the Company’s existing 7% Senior Notes due 2023 and 6% SeniorSecured Notes due 2025 and are effectively subordinated to all of the applicable obligor’s existing and future secured debt, including indebtedness under the Company’s Term Loan and Revolving Credit Facility and the Lumière Note (as defined in the 2026 Indenture)(the “CEI Senior Secured Notes”), in each case, to the extent of the value of the collateral securing such debt. In addition, the 6% Senior Notes due 2026 and the related guarantees are structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries and other entities in which the Company has an equity interest that do not guarantee the 6% Senior Notes due 2026 (other than indebtedness and liabilities owed to the Company or the Guarantors).

6% Senior Notes due 2025

On March 29, 2017, Eagle II issued at par $375.0 million$1.8 billion aggregate principal amount of 6.0% senior notes due 2025 (the “6%8.125% Senior Notes due 2025”2027 (the “CEI Senior Notes”) pursuant to an indenture, dated as of March 29, 2017 (the “2025 Indenture”), between Eagle II and U.S. Bank, National Association, as Trustee. The 6% Senior Notes due 2025 will mature on April 1, 2025, with interest payable semi-annually in arrears on April 1 and October 1. In connection with the consummation of the Isle Acquisition on May 1, 2017, the Company assumed Eagle II’s obligations under the 6% Senior Notes due 2025 and the 2025 Indenture and certain of the Company’s subsidiaries (including Isle and certain of its subsidiaries) executed guarantees of the Company’s obligations under the 6% Senior Notes due 2025.

On September 13, 2017, the Company issued an additional $500.0 million principal amount of its 6% Senior Notes due 2025 at an issue price equal to 105.5% of the principal amount of the 6% Senior Notes due 2025. The additional notes were issued pursuant to the 2025 Indenture that governs the 6% Senior Notes due 2025. The Company used the proceeds of the offering to repay $78.0 million of outstanding borrowings under the previous revolving credit facility and used the remainder to repay $444.5 million outstanding borrowings under the previous term loan facility and related accrued interest.


7% Senior Notes due 2023

On July 23, 2015, the Company issued at par $375.0 million in$1.0 billion aggregate principal amount of 7.0% senior notes due 2023 (“7%5.75% Senior Secured Notes due 2023”2025 (the “CRC Senior Secured Notes”) pursuant to an indenture, dated as of.

On July 23, 2015 (the “2023 Indenture”), between the Company and U.S. Bank, National Association, as Trustee. The 7% Senior Notes due 2023 will mature on August 1, 2023, with interest payable semi-annually20, 2020, in arrears on February 1 and August 1 of each year.

Lumière Loan

We borrowed $246 million from GLPI to fund the purchase price of the real estate underlying Lumière. The Lumière Loan bears interest at a rate equal to (i) 9.09% until October 1, 2019 and (ii) 9.27% until October 1, 2020, and matures on October 1, 2020. The Lumière Loan was secured by a first priority mortgage on the Lumière real property that was released pursuant to its terms on October 1, 2019. In connection with the issuanceclosing of the Lumière Loan, we agreed to use our commercially reasonable efforts to transfer one or moreMerger, the Company entered into a new credit agreement (“CEI Credit Agreement”) which provides a five-year senior secured revolving credit facility for an aggregate principal amount of $1.2 billion (the “CEI Revolving Credit Facility”). In addition, Caesars Resort Collection, LLC, which became a wholly-owned subsidiary of the Grand Victoria Casino, Isle Casino Bettendorf, Isle Casino Hotel Waterloo, Isle of Capri Lula, Lady Luck Casino Vicksburg and Mountaineer Casino, Racetrack and Resort or such other property or properties mutually acceptable to us and GLPI, provided that the aggregate value of such property, individually or collectively, is at least $246 million (the “Replacement Property”), to GLPI with a simultaneous leaseback to us of such Replacement Property. In connection with such Replacement Property sale, (i) we and GLPI will enter into an amendment to the Master Lease to revise the economic terms to include the Replacement Property, (ii) GLPI, or one of its affiliates, will assume the Lumière Loan and Tropicana St. Louis RE’s obligations under the Lumière Loan in consideration of the acquisition of the Replacement Property and our obligations under the Lumière Loan will be deemed to have been satisfied and (iii) in the event the value of the Replacement Property is greater than the our outstanding obligations under the Lumière Loan, GLPI will pay us the difference between the value of the Replacement Property and the amount of outstanding obligations under the Lumière Loan. If such Replacement Property transaction is not consummated prior to the maturity date of the Lumière Loan, other thanCompany as a result of certain failuresthe Merger (“CRC”), entered into an incremental agreement to perform by GLPI, then the amounts outstanding will be paidCRC Credit Agreement (described below) for an aggregate principal amount of $1.8 billion.

A portion of the proceeds from these arrangements was used to prepay in full the loans outstanding and the rentterminate all commitments under the Master Lease will automatically increase, subjectERI Credit Facility, and to certain escalations.

Debt Covenant Compliance

As of September 30, 2019, we were in compliance with all ofsatisfy and discharge the covenants under the 7% Senior Notes due 2023,Company’s 6% Senior Notes due 2025, 6% Senior Notes due 2026, and the 7% Senior Notes due 2023.

The 6% Senior Notes due 2025 were redeemed at a redemption price of 105%, the 7% Senior Notes due 2023 were redeemed at a redemption price of 103.5%, and $210 million aggregate principal amount of the 6% Senior Notes due 2026 was redeemed at a redemption price of 106% with the remaining balance redeemed at a redemption price of 100% of the aggregate principal amount thereof plus the Applicable Premium, as defined in the indenture for the 6% Senior Notes due 2026. The redemption of these Notes resulted in a loss on extinguishment of debt of $132 million during the three and nine months ended September 30, 2020, which is recorded within other (loss) income on the Statement of Operations.
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CEI Senior Secured Notes due 2025
On July 6, 2020, Escrow Issuer issued $3.4 billion in aggregate principal amount of 6.250% CEI Senior Secured Notes pursuant to an indenture dated July 6, 2020 (the “Senior Secured Notes Indenture”), by and among the Escrow Issuer, U.S. Bank National Association, as trustee, and U.S. Bank National Association, as collateral agent. In connection with the consummation of the Merger, we assumed the rights and obligations under the CEI Senior Secured Notes and the Senior Secured Notes Indenture on July 20, 2020.The CEI Senior Secured Notes will mature on July 1, 2025 with interest payable semi-annually in cash in arrears on January 1 and July 1 of each year, commencing January 1, 2021.
CEI Senior Notes due 2027
On July 6, 2020, Escrow Issuer issued $1.8 billion in aggregate principal amount of 8.125% Senior Notes due 2027 pursuant to an indenture, dated July 6, 2020 (the “Senior Notes Indenture”), by and between the Escrow Issuer and U.S. Bank National Association, as trustee. We assumed the rights and obligations under the CEI Senior Notes and the Senior Notes Indenture on July 20, 2020. The CEI Secured Notes will mature on July 1, 2027 with interest payable semi-annually in cash in arrears on January 1 and July 1 of each year, commencing January 1, 2021.
CRC Senior Secured Notes due 2025
On July 6, 2020, Escrow Issuer issued $1.0 billion in aggregate principal amount of 5.75% Senior Notes due 2025 pursuant to an indenture, dated July 6, 2020 (the “CRC Senior Secured Notes Indenture”), by and among the Escrow Issuer, U.S. Bank National Association, as trustee and Credit Suisse AG, Cayman Islands Branch, as collateral agent. CRC assumed the rights and obligations, jointly and severally, under the CRC Senior Secured Notes on July 20, 2020. The rights and obligations under the CRC Senior Secured Notes to be assumed jointly and severally by CRC. The CRC Senior Secured Notes will mature on July 1, 2025 with interest payable semi-annually in cash in arrears on January 1 and July 1 of each year, commencing January 1, 2021.
CEI Revolving Credit Facility
On July 20, 2020, we entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, U.S. Bank National Association, as collateral agent, and certain banks and other financial institutions and lenders party thereto, as well as an incremental amendment thereto, which provide for a five-year CEI Revolving Credit Facility for an aggregate principal amount of $1.2 billion. The CEI Revolving Credit Facility matures in 2025 and includes a letter of credit sub-facility of $250 million.
The interest rate per annum applicable under the CEI Revolving Credit Facility, at the Company’s option is either (a) LIBOR adjusted for certain additional costs, subject to a floor of 0% or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by JPMorgan Chase Bank, N.A. and (iii) the one-month adjusted LIBOR rate plus 1.00%, in each case plus an applicable margin. Such applicable margin shall be 3.25% per annum in the case of any LIBOR loan and 2.25% per annum in the case of any base rate loan, subject to three 0.25% step-downs based on the Company’s total leverage ratio.
Additionally, we are required to pay a commitment fee in respect of any unused commitments under CEI Revolving Credit Facility in the amount of 0.50% of principal amount of the commitments of all lenders, subject to a step-down to 0.375% based upon the Company’s total leverage ratio. We are also required to pay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for LIBOR borrowings on the dollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer’s customary documentary and processing fees and charges and a fronting fee in an amount equal to 0.125% of the daily stated amount of such letter of credit.
We had $266 million of available borrowing capacity, after consideration of $19 million in outstanding letters of credit under CEI Revolving Credit Facility, as of September 30, 2020.
Convention Center Mortgage Loan
On September 18, 2020, we entered into a loan agreement with VICI to borrow a 5-year, $400 million Forum Convention Center mortgage loan (the “Mortgage Loan”). The Mortgage Loan bears interest at a rate of, initially, 7.7% per annum, which escalates annually to a maximum interest rate of 8.3% per annum.
Assumed Debt Activity
Former Caesars and its subsidiaries incurred the following indebtedness that remained outstanding following the consummation of the Merger.
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CRC Term Loans and CRC Revolving Credit Facility
In connection with the Merger, we assumed the CRC senior secured credit facility (the “CRC Senior Secured Credit Facilities”), which included a $1.0 billion five-year revolving credit facility (the “CRC Revolving Credit Facility”) and an initial $4.7 billion seven-year first lien term loan (the “CRC Term Loan”). The CRC Senior Secured Credit Facilities were funded pursuant to the Credit Agreement, dated as of December 22, 2017 (the “CRC Credit Agreement”). On July 20, 2020, in connection with the closing of the Merger, CRC entered into an incremental amendments to the CRC Credit Agreement, which provided a $1.8 billion incremental tern loan (“CRC Incremental Term Loan”).
The CRC Term Loan matures in 2024. The CRC Incremental Term Loan matures in 2025. The CRC Revolving Credit Facility matures in 2022 and includes a letter of credit sub-facility. Each of the CRC Term Loan requires scheduled quarterly principal payments in amounts equal to 0.25% of the original aggregate principal amount, with the balance due at maturity. The CRC Credit Agreement also includes customary voluntary and mandatory prepayment provisions, subject to certain exceptions. As of September 30, 2020, approximately $64 million was committed to outstanding letters of credit. As of September 30, 2020, there were no borrowings outstanding under the CRC Revolving Credit Facility.
Borrowings under the CRC Credit Agreement bear interest at a rate equal to either (a) LIBOR adjusted for certain additional costs, subject to a floor of 0% or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by Credit Suisse AG, Cayman Islands Branch, as administrative agent under the CRC Credit Agreement and (iii) the one-month adjusted LIBOR rate plus 1.00%, in each case plus an applicable margin. Such applicable margin shall be (a) with respect to the CRC Term Loan, 2.75% per annum in the case of any LIBOR loan or 1.75% per annum in the case of any base rate loan, (b) with respect to the CRC Incremental Term Loan, 4.50% per annum in the case of any LIBOR loan or 3.50% in the case of any base rate loan and (c) in the case of the CRC Revolving Credit Facility, 2.25% per annum in the case of any LIBOR loan and 1.25% per annum in the case of any base rate loan, subject in the case of the CRC Revolving Credit Facility to two 0.125% step-downs based on CRC’s senior secured leverage ratio (“SSLR”), the ratio of first lien senior secured net debt to adjusted earnings before interest, taxes, depreciation and amortization. The CRC Revolving Credit Facility is subject to a financial covenant discussed below.
In addition, CRC is required to pay a commitment fee in respect of any commitments under the CRC Revolving Credit Facility in the amount of 0.50% of the principal amount of the commitments, subject to step-downs to 0.375% and 0.25% based upon CRC’s SSLR. CRC is also required to pay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for LIBOR borrowings on the dollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer’s customary documentary and processing fees and charges and a fronting fee in an amount equal to 0.125% of the daily stated amount of such letter of credit.
Former Caesars 5% Convertible Notes
On October 6, 2017, Former Caesars issued $1.1 billion aggregate principal amount of 5.00% convertible senior notes maturing in 2024 (the “5% Convertible Notes”).
The 5% Convertible Notes are convertible into weighted average of the number of shares of Company Common Stock and amount of cash actually received per share by holders of common stock of Former Caesars that made elections for consideration in the Merger. As of September 30, 2020, we have paid approximately $574 million and issued approximately 6.8 million shares to settle $487 million of the convertible notes during 2020. In October 2020, we paid an additional $328 million and issued 3.9 million shares to settle an additional $281 million of the convertible notes.
The Company has determined that the 5% Convertible Notes contain derivative features that require bifurcation. The Company separately account for the liability component and equity conversion option of the Convertible Notes. The portion of the overall fair value allocated to the liability was calculated by using a market-based approach without the conversion features included. The difference between the overall instrument value and the Lumière Loan.

Mastervalue of the liability component was assumed to be the value of the equity component. See Note 11 for more information on the Convertible Notes’ fair value measurements.

Net amortization of the debt issuance costs and the discount and/or premium associated with the Company’s indebtedness totaled $34 million and $2 million for the three months ended September 30, 2020 and 2019, respectively, and $37 million and $6 million for the nine months ended September 30, 2020 and 2019 respectively. Amortization of debt issuance costs is computed using the effective interest method and is included in interest expense.
VICI Leases
Upon consummation of the Merger, we assumed obligations of certain real property assets leased from VICI by Former Caesars under the following agreements: (i) for a portfolio of properties at various locations throughout the United States (the “Non-
63

CPLV lease”), (ii) for Caesars Palace Las Vegas (the “CPLV lease”), (iii) for Harrah’s Joliet Hotel & Casino (the “Joliet Lease”) and (iv) for Harrah’s Las Vegas (the “HLV Lease”). These lease agreements provided for annual fixed rent (subject to escalation) of $773 million during an initial period, then rent consisting of both base rent and variable rent elements. The lease agreements had a 15-year initial term and four five-year renewal options. The lease agreements included escalation provisions beginning in year two of the initial term and continuing through the renewal terms. The lease agreements also included provisions for variable rent 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.
Former Caesars entered into a Golf Course Use Agreement with VICI, which has a 35-year term (inclusive of all renewal periods), pursuant to which such affiliates of the Company agreed to pay (i) an annual payment of $10 million, subject to escalation, (ii) an annual use fee of $3 million, subject to escalation beginning in the second year, and (iii) certain per-round fees, all as more particularly set forth in the Golf Course Use Agreement.
In connection with the closing of the Merger on July 20, 2020, we consummated a series of transactions with VICI and certain of its affiliates in accordance with the MTA entered on June 24, 2019 and certain purchase and sales agreement entered on September 26, 2019. We consummated sale leaseback transactions related to Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Resort Atlantic City, including the Harrah’s Atlantic City Waterfront Conference Center, for approximately $1.8 billion of net proceeds. The CPLV Lease

with VICI was amended, among other things, (i) add Harrah’s Las Vegas (“HLV”) to the leased premises thereunder (and in connection therewith HLV Lease was terminated), (ii) add (subject to certain adjustments) the rent payable with respect to HLV under such terminated stand-alone lease to such lease and further increase the annual rent payable with respect to HLV by approximately $15 million, (iii) increase the annual rent with respect to CPLV by approximately $84 million and (iv) extend the term of such lease so that following the amendment of such lease there will be 15 years remaining until the expiration of the initial term. In addition, Harrah’s New Orleans, Harrah’s Laughlin, and Harrah’s Resort Atlantic City, including the Harrah’s Atlantic City Waterfront Conference Center, were added to the Regional Lease and such lease was further amended to increase the annual rent thereunder by $154 million in the aggregate related to such added properties and extend the term of such lease so that following the amendment of such lease there will be 15 years remaining until the expiration of the initial term. Furthermore, the Joliet Lease, as well as the term of the Golf Course Use Agreement, were extended such that there will be 15 years remaining until the expiration of the initial term. Our VICI lease is accounted for as a financing obligation and totaled $11 billion as of September 30, 2020. Furthermore, we obtained waivers from VICI with relation to annual capital expenditure requirements. This waiver is effective as of June 1, 2020 until December 31, 2020. See Note 9 to our Consolidated Condensed Financial Statements for additional information about our VICI Lease and related matters.

GLPI Leases
Our GLPI Master Lease is accounted for as a financing obligation and totaled $968.0 million$1.2 billion as of September 30, 2019. The2020. Additionally, our GLPI Master Lease contains certain operating, capital expenditure and financial covenants including minimum capital improvement expenditures.thereunder, and our ability to maintain compliance with these covenants was also negatively impacted. On June 15, 2020, we entered into an amendment to the GLPI Master Lease which, among other things, provides certain relief under these covenants in the event of facility closures due to pandemics, governmental restrictions and certain other instances of unavoidable delay. As of September 30, 2019,July 17, 2020, the amendment to the GLPI Master Lease became effective as we were in compliance withobtained all ofnecessary approvals and the covenants under the Master Lease.applicable waiting period expired. See Note 109 to our Consolidated Condensed Financial Statements for additional information about our GLPI Master Lease and related matters.

Contractual Obligations

The Company assumed various long-term debt arrangements, financing obligations and leases, previously described, associated with Former Caesars as result of the consummation of the Merger. See Note 2 for a description of the Merger and the related obligations assumed and Note 13 for additional contractual obligations. There have been no material changes forduring the nine months ended September 30, 20192020 to our contractual obligations as disclosed in our Annual Report on Form 10‑K10-K for the year ended December 31, 2018.

2019.

Other Liquidity Matters

We are faced with certain contingencies involving litigation and environmental remediation and compliance. These commitments and contingencies are discussed in “Part II, Item 1. Legal Proceedings” and Note 1113 to our unaudited consolidated condensed financial statements, both of which are included elsewhere in this report. In addition, new competition may have a material adverse effect on our revenues, and could have a similar adverse effect on our liquidity. See “Part I, Item 1A. Risk Factors—Risks Related to Our Business” which is included in our Annual Report on Form 10-K for the year ended December 31, 20182019 and “Part II, Item IA. Risk Factors” which is included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.

2020.

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Critical Accounting Policies

Our critical accounting policies disclosures are included in our Annual Report on Form 10‑K10-K for the year ended December 31, 2018.2019. Except as described in Note 1 and Note 2, as it relates to the Merger with Former Caesars, to the accompanying condensed notes of these consolidated condensed financial statements, we believe there have been no material changes since December 31, 2018.2019. We have not substantively changed the application of our policies and there have been no material changes in assumptions or estimation techniques used as compared to prior periods.

Off‑Balance

Off-Balance Sheet Arrangements

We do not currently have any off‑balanceoff-balance sheet arrangements.

Cautionary Statement Regarding Forward‑Looking Information

This report includes “forward‑looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward‑looking statements include statements regarding our strategies, objectives and plans for future development or acquisitions of properties or operations, as well as expectations, future operating results and other information that is not historical information. When used in this report, the terms or phrases such as “anticipates,” “believes,” “projects,” “plans,” “intends,” “expects,” “might,” “may,” “estimates,” “could,” “should,” “would,” “will likely continue,” and variations of such words or similar expressions are intended to identify forward‑looking statements. Specifically, forward-looking statements may include, among others, statements concerning:

•

projections of future results of operations or financial condition;

•

our ability to consummate the acquisition of Caesars, the related real estate transactions with VICI and the disposition of Mountaineer and our properties located in Cape Girardeau, Caruthersville, Kansas City and Vicksburg;

•

expectations regarding our business and results of operations of our existing casino properties and prospects for future development;

•

expectations regarding trends that will affect our market and the gaming industry generally and the impact of those trends on our business and results of operations;

•

our ability to comply with the covenants in the agreements governing our outstanding indebtedness;

•

our ability to meet our projected debt service obligations, operating expenses, and maintenance capital expenditures;

•

expectations regarding availability of capital resources;

•

our intention to pursue development opportunities, including the development of a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the Pompano casino and racetrack, and additional acquisitions and divestitures;

•

our ability to obtain financing for, and realize the anticipated benefits, of the acquisition of Caesars and future development and acquisition opportunities; and

•

the impact of regulation on our business and our ability to receive and maintain necessary approvals for our existing properties and future projects and operation of online sportsbook, poker and gaming

Any forward‑looking statements are based upon underlying assumptions, including any assumptions mentioned with the specific statements, as of the date such statements were made. Such assumptions are in turn based upon internal estimates and analyses of market conditions and trends, management plans and strategies, economic conditions and other factors. Such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control, and are subject to change. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend upon future circumstances that may not occur. Actual results may differ materially from any future results, performance or achievements expressed or implied by such statements. Forward‑looking statements speak only as of the date they are made, and we assume no duty to update forward-looking statements. Forward-looking statements should not be regarded as a representation by us or any other person that the forward‑looking statements will be achieved. Undue reliance should not be placed on any forward‑looking statements. Some of the contingencies and uncertainties to which any forward‑looking statement contained herein are subject include, but are not limited to, the following:

•

our substantial indebtedness and significant financial commitments, including our obligations under the Master Lease, could adversely affect our results of operations and our ability to service such obligations, react to changes in our markets and pursue development and acquisition opportunities;


•

restrictions and limitations in agreements governing our debt could significantly affect our ability to operate our business and our liquidity;

•

risks relating to payment of a significant portion of our cash flow as debt service and rent under the Master Lease;

•

financial, operational, regulatory or other potential challenges that may arise as a result of leasing of a number of our properties from a single lessor;

•

our facilities operate in very competitive environments and we face increasing competition including through legalization of online betting and gaming;

•

uncertainty regarding legalization of betting and online gaming in the jurisdictions in which we operate and conditions applicable to obtaining the licenses required to enable our betting and online gaming partners to conduct betting and gaming activities;

•

the ability to identify suitable acquisition opportunities and realize growth and cost synergies from any future acquisitions;

•

future maintenance, development or expansion projects will be subject to significant development and construction risks;

•

our operations are particularly sensitive to reductions in discretionary consumer spending and are affected by changes in general economic and market conditions;

•

our gaming operations are highly regulated by governmental authorities and the cost of complying or the impact of failing to comply with such regulations;

•

changes in gaming taxes and fees in jurisdictions in which we operate;

•

risks relating to pending claims or future claims that may be brought against us;

•

changes in interest rates and capital and credit markets;

•

our ability to comply with certain covenants in our debt documents and the Master Lease;

•

the effect of disruptions to our information technology and other systems and infrastructure;

•

our ability to attract and retain customers;

•

weather or road conditions limiting access to our properties;

•

the effect of war, terrorist activity, acts of violence, natural disasters and other catastrophic events;

•

the intense competition to attract and retain management and key employees in the gaming industry; and

•

other factors described in Part II, Item 1A. “Risk Factors” contained herein and our reports on Form 10-K, Form 10-Q and Form 8-K filed with the Securities and Exchange Commission.

In addition, the acquisition of Caesars, the related real estate transactions with VICI and the disposition of Mountaineer and our properties located in Cape Girardeau, Caruthersville, Kansas City and Vicksburg and the provisions of the related acquisition agreements create additional risks, uncertainties and other important factors, including but not limited to:

•

the possibility that the proposed transactions are not consummated when expected or at all because required regulatory, stockholder or other approvals are not received or other conditions to the consummation thereof are not satisfied on a timely basis or at all;

•

the possibility that the one or more of such transactions do not close on the terms described herein or that we are required to modify aspects of one or more of such transactions to obtain, or otherwise take action to satisfy conditions imposed in connection with, required regulatory approvals;

•

the risk that the financing required to fund the Merger and related transactions is not obtained on the terms anticipated or at all;

•

uncertainties in the global economy and credit markets and its potential impact on ERI’s ability to finance the acquisition of Caesars and related transactions;

•

risks associated with increased leverage and increased lease payments as a result of the proposed transactions;


•

the possibility that the anticipated benefits of the proposed transactions, including cost savings and expected synergies, are not realized when expected, or at all, including as a result of the impact of, or issues arising from, the implementation of our operating strategies and integration of our business and Caesars’ business;

•

the incurrence of significant transaction and merger-related costs and the possibility that the transactions may be more expensive to complete than expected, including as a result of unexpected factors or events;

•

competitive responses to the proposed transactions;

•

legislative, regulatory and economic developments;

•

the possibility that our business or Caesars’ business may suffer as a result of the announcement of the acquisition;    

•

the ability to retain certain of our key employees and Caesars’ key employees;

•

the outcome of legal proceedings that may be instituted as a result of the proposed transactions;

•

the impact of the proposed transactions, or the failure to consummate the proposed transactions, on our stock price;

•

diversion of management’s attention from our ongoing operations;

•

the impact of provisions of the Merger Agreement limiting the operation of our business prior to the closing of the Merger;

•

the impact of the announcement or consummation of the proposed transactions on the Company’s relationships with third parties, which may make it more difficult to maintain business relationships; and

•

other risks and uncertainties described in Part II, Item 1A. “Risk Factors” contained herein and our reports on Form 10-K, Form 10-Q and Form 8-K filed with the Securities and Exchange Commission.

In light of these and other risks, uncertainties and assumptions, the forward‑looking events discussed in this report might not occur. These forward‑looking statements speak only as of the date on which this statement is made, even if subsequently made available on our website or otherwise, and we do not intend to update publicly any forward‑looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as may be required by law.

You should also be aware that while we from time to time communicate with securities analysts, we do not disclose to them any material non‑public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility and are not endorsed by us.

ITEM 3.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We are exposed to changes in interest rates primarily from variable rate long‑termlong-term variable-rate debt arrangements. As of September 30, 2019,2020, interest on borrowings under our Credit Facility was subject to fluctuation based on changes in short-term interest rates.

As of September 30, 2019,2020, our long‑term variable‑ratelong-term variable-rate borrowings totaled $886.8 million$6.4 billion under the CRC Term Loan. No amounts wereLoans and $900 million was outstanding under the CEI Revolving Credit Facility. Long‑term variable‑rateLong-term variable-rate borrowings under the CRC Term LoanLoans and the CEI Revolving Credit Facility represented approximately 30%45% of our long‑termlong-term debt as of September 30, 2019.2020. Of our $16.2 billion face value of debt, as of September 30, 2020, we have entered into ten interest rate swap agreements to fix the interest rate on $3.0 billion of variable rate debt, and $4.3 billion of debt remains subject to variable interest rates for the term of the agreement. During the nine months ended September 30, 2019,2020, the weighted average interest rates on our variable and fixed rate debt were 4.3%3.67% and 6.5%6.35%, respectively.

LIBOR is expected to be discontinued after 2021. The interest rate per annum applicable to loans under our Credit Facilitycredit facilities is, at our option, either LIBOR plus a margin or a base rate plus a margin. The Credit Facility permits the administrative agent to select, in its reasonable discretion, an alternative base rate in the event that LIBOR is discontinued, but there can be no assurances as to what alternative base rates may be and whether such base rate will be more or less favorable than LIBOR and any other unforeseen impacts of the potential discontinuation of LIBOR. We intend to continue monitoring the developments with respect to the potential phasing out of LIBOR after 2021 and work with our lenders to ensure any transition away from LIBOR will have minimal impact on our financial condition, but can provide no assurances regarding the impact of the discontinuation of LIBOR.


On September 28, 2020, we entered into a foreign exchange forward contract to hedge the risk of appreciation of the GBP denominated purchase price. Under the agreement, we would purchase £1.3 billion at a contracted exchange rate. An unrealized loss of $5 million related to the change in fair value during the period from September 28, 2020 and September 30, 2020 was recorded in the consolidated condensed statement of operations. On October 1, 2020 the contract was cancelled. We may continue to utilize similar contracts in the future to hedge the risk of appreciation of the GBP denominated purchase of our possible acquisition of William Hill.

The Company evaluates its

We evaluate our exposure to market risk by monitoring interest rates in the marketplace and has,have, on occasion, utilized derivative financial instruments to help manage this risk. The Company doesWe do not utilize derivative financial instruments for trading purposes. There were no material quantitative changes in our market risk exposure, or how such risks are managed, for the threenine months ended September 30, 2019.

2020.

ITEM 4.

ITEM 4.    CONTROLS AND PROCEDURES.

(a)Evaluation of Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports that we file under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, evaluated and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e)13a-15(e) and 15d‑15(e)15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10‑Q.10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10‑Q10-Q are effective to ensure that the information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized, evaluated and reported within the time periods specified in SEC rules and forms and that such
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information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

(b)Changes in Internal Controls

Changes in Internal Controls

There

Except as noted below, there were no changes in our internal control over financial reporting during the three months ended September 30, 2019period covered by this Quarterly Report on Form 10‑Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


On July 20, 2020, we completed the Merger with Former Caesars. See Part I, Item 1, Notes to Unaudited Consolidated Condensed Financial Statements, Note 2: Acquisition of Former Caesars, for a discussion of the acquisition and related financial data. The Company is in the process of integrating Former Caesars and our internal controls over financial reporting. As a result of these integration activities, certain controls will be evaluated and may be changed. Excluding the Merger, there were no changes in our internal control over financial reporting that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1.

ITEM 1.    LEGAL PROCEEDINGS

(a)

Material pending litigation, other than lawsuits arisingWe are a party to various lawsuits, which have arisen in the normal course of our business, to which we became party during the quarter ended September 30, 2019, are summarized below:

Merger Litigation

As of November 6, 2019, eight putative class actionour business. Estimated losses are accrued for these lawsuits and claims when the loss is probable and can be estimated. The current liability for the estimated losses associated with those lawsuits is not material to our consolidated financial condition and those estimated losses are not expected to have beena material impact on our results of operations.

On July 14, 2020, the Company filed a lawsuit for damages and declaratory relief in connectionstate court in New York relating to a transfer fee of $50 million that was assessed by the Indiana Gaming Commission upon the Company’s purchase of Hoosier Park Racino and Casino in 2017 from Centaur Holdings, LLC. Contemporaneous with the Merger.  Thefiling of the lawsuit, the Company has been namednotified Centaur that it was withholding payment of $50 million from Centaur Holdings that was otherwise due as a party in threeportion of such actions: Stein v. Caesars Entertainment Corp., et al, Civil Action No. 1:19-cv-01656, United States District Courta deferred payment for the Districtpurchase from Centaur. In the lawsuit, the Company seeks a declaration from the Court that the Sellers are required to indemnify Caesars for its losses arising out of Delaware (9/5/2019), Romaniuk v. Caesars Entertainment Corp., et al, Civil Action No 1:19-cv-17871, United States District Court for the District of New Jersey (9/11/2019), and Biasi v. Caesars Entertainment Corp., et al, Civil Action No. 1:19-cv-08547, United States District Court for the Southern District of New York (9/13/2019).  In general, the complaints assert claims under sections 14(a), 20(a) and Rule 14a-9or relating to payment of the Securities Exchange Act of 1934 challenging the adequacy of certain disclosures in the joint proxy statement/prospectus filed in connection with the Merger.  In addition, one of the complaints, in which the Company has not been named a party, alleges state law breach of fiduciary duty claims against the Caesars directors.  The complaints seek, among other relief, an injunction preventing consummation of the Merger, damages in the event that the Merger is consummatedtransfer fee and attorneys’ fees.   The Company intends to vigorously defend itself against these claims.

Securities Action

On September 23, 2019, the Company and certain of its officers were named as defendants in a putative class action complaint filed in the United States District Court for the District of New Jersey and captioned as Elberts v. Eldorado Resorts, Inc., Case No. 2:19-cv-18230-SRC-CLW.  The complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated under the Securities Exchange Act of 1934.  The complaint alleges that the Company made material misstatements and/or omissions duringis entitled to offset the period from March 1, 2019 through September 2, 2019.  The allegations relate$50 million transfer fee against payments otherwise due to the subpoenas that certain of the Company’s directors and officers received from the SEC, which have been previously disclosed in the proxy statement/prospectus filed by the Company relating to the pending transaction with Caesars. The complaint seeks unspecified damages on behalf of all persons and entities who purchased the Company’s securities during the period from March 1, 2019 through September 2, 2019.  The Company intends to vigorously defend itself against these claims.

Centaur.

(b)

We are also a party to various lawsuits, which have arisen in the normal course of our business. Estimated losses are accrued for these lawsuits and claims when the loss is probable and can be estimated. The current liability for the estimated losses associated with those lawsuits is not material to our consolidated financial condition and those estimated losses are not expected to have a material impact on our results of operations.

Legal matters are discussed in greater detail in “Part I, Item 3. Legal Proceedings” and Note 1718 to our Consolidated Financial statementsStatements included in our Annual Report on Form 10‑K10-K for the year ended December 31, 2018.

2019.
Cautionary Statement Regarding Forward-Looking Information
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding our strategies, objectives and plans for future development or acquisitions of properties or operations, as well as expectations, future operating results and other information that is not historical information. When used in this report, the terms or phrases such as “anticipates,” “believes,” “projects,” “plans,” “intends,” “expects,” “might,” “may,” “estimates,” “could,” “should,” “would,” “will likely continue,” and variations of such words or similar expressions are intended to identify forward-looking statements. Specifically, forward-looking statements may include, among others, statements concerning:
•the impact of COVID-19 on our business and financial condition;
•projections of future results of operations or financial condition;
•our ability to consummate the acquisition of William Hill and the disposition of MontBleu, Eldorado Shreveport and certain of our other properties, including required divestitures of certain properties located in Indiana;
•expectations regarding our business and results of operations of our existing casino properties and prospects for future development;
•expectations regarding trends that will affect our market and the gaming industry generally and the impact of those trends on our business and results of operations;
•our ability to comply with the covenants in the agreements governing our outstanding indebtedness and leases;
•our ability to meet our projected debt service obligations, operating expenses, and maintenance capital expenditures;
•expectations regarding availability of capital resources;
•our intention to pursue development opportunities, including the development of a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the Pompano casino and racetrack, and additional acquisitions and divestitures;
•our ability to realize the anticipated benefits of the acquisition of Former Caesars, William Hill and future development and acquisition opportunities; and
•the impact of regulation on our business and our ability to receive and maintain necessary approvals for our existing properties and future projects and operation of online sportsbook, poker and gaming
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Any forward-looking statements are based upon underlying assumptions, including any assumptions mentioned with the specific statements, as of the date such statements were made. Such assumptions are in turn based upon internal estimates and analyses of market conditions and trends, management plans and strategies, economic conditions and other factors. Such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control, and are subject to change. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend upon future circumstances that may not occur. Actual results may differ materially from any future results, performance or achievements expressed or implied by such statements. Forward-looking statements speak only as of the date they are made, and we assume no duty to update forward-looking statements. Forward-looking statements should not be regarded as a representation by us or any other person that the forward-looking statements will be achieved. Undue reliance should not be placed on any forward-looking statements. Some of the contingencies and uncertainties to which any forward-looking statement contained herein are subject include, but are not limited to, the following:
•the extent and duration of the impact of the global COVID-19 public health emergency on the Company’s business, financial results and liquidity;
•the impact and cost of new operating procedures expected to be implemented upon re-opening of the Company’s casinos;
•the impact of actions we have undertaken to reduce costs and improve efficiencies to mitigate losses as a result of the COVID-19 public health emergency, which could negatively impact guest loyalty and our ability to attract and retain our employees;
•the impact of the COVID-19 public health emergency and resulting unemployment and changes in general economic conditions on discretionary consumer spending and customer demand;
•our substantial indebtedness and significant financial commitments, including our obligations under our lease arrangements, could adversely affect our results of operations and our ability to service such obligations, react to changes in our markets and pursue development and acquisition opportunities;
•restrictions and limitations in agreements governing our debt and leased properties could significantly affect our ability to operate our business and our liquidity;
•risks relating to payment of a significant portion of our cash flow as debt service and rent under the leases of our casino properties with VICI and GLPI;
•financial, operational, regulatory or other potential challenges that may arise as a result of leasing of a number of our properties;
•our facilities operate in very competitive environments and we face increasing competition including through legalization of online betting and gaming;
•uncertainty regarding legalization of betting and online gaming in the jurisdictions in which we operate and conditions applicable to obtaining the licenses required to enable our betting and online gaming partners to conduct betting and gaming activities;
•the ability to identify suitable acquisition opportunities and realize growth and cost synergies from any future acquisitions;
•future maintenance, development or expansion projects will be subject to significant development and construction risks;
•our gaming operations are highly regulated by governmental authorities and the cost of complying or the impact of failing to comply with such regulations;
•changes in gaming taxes and fees in jurisdictions in which we operate;
•risks relating to pending claims or future claims that may be brought against us;
•changes in interest rates and capital and credit markets;
•our ability to comply with certain covenants in our debt documents and lease arrangements;
•the effect of disruptions to our information technology and other systems and infrastructure;
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•our ability to attract and retain customers;
•weather or road conditions limiting access to our properties;
•the effect of war, terrorist activity, acts of violence, natural disasters, public health emergencies and other catastrophic events;
•the intense competition to attract and retain management and key employees in the gaming industry; and
•other factors described in Part II, Item 1A. “Risk Factors” contained herein and our reports on Form 10-K, Form 10-Q and Form 8-K filed with the Securities and Exchange Commission.
In addition, the acquisition of William Hill and the disposition of Eldorado Shreveport, MontBleu, Harrah’s Louisiana Downs and certain of our other properties, including required divestitures of certain properties located in Indiana, create additional risks, uncertainties and other important factors, including but not limited to:
•the possibility that the proposed transactions are not consummated when expected or at all because required regulatory or other approvals are not received or other conditions to the consummation thereof are not satisfied on a timely basis or at all;
•the possibility that one or more of such transactions do not close on the terms described herein or that we are required to modify aspects of one or more of such transactions to obtain, or otherwise take action to satisfy conditions imposed in connection with, required regulatory approvals;
•the possibility that the Company will be required to pay a break fee under certain circumstances if the proposed William Hill acquisition is not consummated;
•risks associated with increased leverage as a result of the proposed acquisition of William Hill;
•the possibility that the anticipated benefits of the proposed transactions are not realized when expected or at all;
•the incurrence of significant transaction and acquisition-related costs and the possibility that the transactions may be more expensive to complete than expected;
•competitive responses to the proposed transactions;
•legislative, regulatory and economic developments;
•the possibility that our business or William Hill’s business may suffer as a result of the announcement of the acquisition;
•the ability to retain certain of our key employees and William Hills’ key employees;
•the outcome of legal proceedings that may be instituted as a result of the proposed transactions;
•the impact of the proposed transactions, or the failure to consummate the proposed transactions, on our stock price;
•diversion of management’s attention from our ongoing operations; and
•the impact of the announcement or consummation of the proposed transactions on the Company’s relationships with third parties, which may make it more difficult to maintain business relationships.
In light of these and other risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur. These forward-looking statements speak only as of the date on which this statement is made, even if subsequently made available on our website or otherwise, and we do not intend to update publicly any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as may be required by law.
You should also be aware that while we from time to time communicate with securities analysts, we do not disclose to them any material non-public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility and are not endorsed by us.
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ITEM 1A.

ITEM 1A.    RISK FACTORS

A description of our risk factors can be found in “Part I, Item 1A. Risk Factors” included in our Annual Report on Form 10‑K10-K for the year ended December 31, 2018.2019. There have been no material changes to those risk factors during the nine months ended September 30, 2019,2020, except for the following additional risk factors related to the Merger.

impact of COVID-19, the Merger and the recently announced William Hill acquisition.

The Merger Agreement subjectsoutbreak of COVID-19 has impacted our operations and caused an economic downturn, widespread unemployment and an adverse impact on consumer sentiment. Such negative impacts could continue for an extended period of time and may worsen.
On March 13, 2020, in response to the coronavirus public health emergency the U.S. government declared a national state of emergency. In an effort to help control the spread of COVID-19, public health officials imposed or recommended various measures, including social distancing, quarantine and stay-at-home or shelter-in-place directives, limitations on the size of gatherings, closures of work facilities, schools, public buildings and businesses, and cancellation of events, including sporting events, concerts, conferences and meetings. As a result of orders issued by governmental authorities in the states in which our properties are located, all of our properties were closed beginning on March 18, 2020. While our properties have reopened, our operations, financial results and cash flows have been affected by social distancing measures, including reduced gaming operations arising from the reconfiguration of our gaming floor, limitations on the number of customers present in our facilities, implementation of additional health and safety measures, restrictions on hotel, food and beverage outlets and limits on concerts, conventions or special events that would otherwise attract customers to our properties. We expect that our operations will continue to be impacted by such restrictions for the foreseeable future. In addition, our operations, financial results and cash flows would be further adversely affected by the implementation or extension of new or existing restrictions, including reinstatement of shelter-in-place requirements or additional restrictions on travel and business operations. The implementation of stay-at-home or additional social distancing and mitigation measures in response to COVID-19 or other public health emergencies could cause future closures of all or a portion of our properties, which would adversely affect operations, financial results and cash flows.
We may also face unforeseen liability or be subject to additional obligations as a result of the COVID-19 public health emergency, including as a result of claims alleging exposure to COVID-19 in connection with our operations or facilities or to the extent we are subject to a governmental enforcement action as a result of failing to comply with applicable health and safety regulations. COVID-19 has materially adversely affected the economy and financial markets of the United States and the world and has resulted in widespread unemployment in the United States. Consumer demand for casino hotel and racetrack properties such as ours is particularly sensitive to downturns in the economy, unemployment and the associated impact on discretionary spending on leisure activities which bring demand for casino hotel properties such as ours. Reduced customer demand could result in lower occupancy rates, reduced visitation and additional disruptions in our casino business. The extent of changes in customer demand resulting from the economic downturn, widespread unemployment, reduced consumer confidence and consumer fears on our properties cannot reasonably be determined, but the impact of such factors may be significant and protracted.
As a result of the foregoing, we cannot predict the ultimate scope, duration and impact of the COVID-19 public health emergency, but we expect that it will continue to have a material impact on our business, financial condition, liquidity, results of operations (including revenues and profitability) and stock price for an extended period of time. The impact of the COVID-19 public health emergency may also have the effect of exacerbating many of the other risks described in our Annual Report on Form 10-K for the year ended December 31, 2019.
We have undertaken aggressive actions to reduce costs and improve efficiencies to mitigate losses as a result of the COVID-19 public health emergency, which could negatively impact guest loyalty and our ability to attract and retain employees.
As a result of the previous closure of all of our properties and the continued uncertainty regarding the duration and severity of this public health emergency, we have taken steps to reduce operating costs and improve efficiencies, including furloughing approximately 90% our employees while our casinos were closed. Such steps, and further changes we may make in the future to reduce costs, may negatively impact guest loyalty or our ability to attract and retain employees, and our reputation may suffer as a result. While a significant number of our employees returned to work once our casinos reopened, our operations continue to be affected by COVID-19 and our full work force has not returned. If our furloughed employees do not return to work with us when the COVID-19 public health emergency subsides, including because they find new employment during the furlough, we may experience operational challenges that may impact our ability to resume operations in full. We may also face demands or requests from labor unions that represent our employees, whether in the course of our periodic renegotiation of our collective bargaining agreements or otherwise, for additional health and safety measures, compensation, healthcare benefits or other terms
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as a result of COVID-19 that could increase costs, and we could experience labor disputes or disruptions as we continue to implement our COVID-19 mitigation plans.
Our ability to remain in compliance with our covenants contained in the agreements governing our indebtedness and lease obligations, and our liquidity, may be negatively impacted by the COVID-19 public health emergency, measures implemented to curtail its spread, and changes in the economy, discretionary spending and consumer confidence.
Our casino operations are a primary source of income and operating cash flows which we rely upon to remain in compliance with covenants contained in the agreements governing our outstanding indebtedness and lease obligations. On September 25, 2020, we drew $900 million under one of our revolving credit facilities and, as a result, as of September 30, 2020, we had an aggregate of $900 million of borrowings outstanding under our credit facilities and $3.5 billion in outstanding principal amount of senior notes, $4.4 billion in outstanding principal amount of senior secured notes, $6.4 billion principal amount outstanding under our Term Loan B, $597 million principal amount outstanding of 5.00% Senior Convertible Notes due 2024 and $400 million in aggregate principal amount of outstanding mortgage debt. On September 28, 2020, the Company deposited $2.1 billion, which included the proceeds from the revolving credit facilities, into an escrow account. As of September 30, 2020, these funds in escrow were classified as restricted cash until certain regulatory approvals were received. While we were in compliance with the covenants under our lease obligations and the agreements governing our outstanding indebtedness as of September 30, 2020, our ability to restrictionsremain in compliance with the quarterly maintenance covenants contained in such agreements would be negatively impacted by a prolonged period of closure of our properties or if the COVID-19 public health emergency, measures implemented to curtail its spread or changes in the economy, discretionary spending and consumer confidence have a protracted negative effect on its business activitiesour business. Failure to satisfy such quarterly maintenance covenants would require us to seek waivers or amendments of such covenants. If we are unable to obtain such waivers or amendments, our creditors and the lessor under some of our lease obligations would be entitled to exercise remedies under the documents governing such obligations, including acceleration of the outstanding principal amount of such indebtedness or termination of our lease arrangements. In addition, while we believe that our cash on hand will be sufficient to provide liquidity to meet our obligations during the pendencyperiod that our properties remain closed, a protracted period of closure of our casinos could impact our ability to make required payments under our outstanding indebtedness, lease obligations or other obligations. Our ability to raise additional financing may be restricted by the covenants and restrictions contained in the agreements governing our indebtedness and could be adversely affected by disruptions in the financing markets and changes to the economy caused by the COVID-19 public health emergency.
On October 6, 2020, the Company entered into a £1.5 billion interim facilities agreement. Upon receipt of regulatory approval of our interim facilities agreement, the Company transferred $1.4 billion of cash back into the operating accounts and the outstanding balance of our revolving credit facilities was repaid in full. Approximately $598 million of cash remains in an unrestricted account.
The COVID-19 public health emergency may exacerbate the risks associated with the Acquisition and the ongoing integration with Former Caesars.
As a result of the Merger.

COVID-19 public health emergency, all of our properties were temporarily closed, and a significant majority of our employees were furloughed. The COVID-19 public health emergency has had an adverse impact on our businesses and results of operations. We cannot predict the scope, duration and impact of the COVID-19 public health emergency on our and William Hill’s businesses or on our ability to recognize the potential benefits of the Acquisition or integration with Former Caesars. We expect that the COVID-19 public health emergency may have the effect of exacerbating many of the risks related to the Merger Agreement subjectsand integration of Former Caesars’ with the Company as described in its Annual Report on Form 10-K for the year ended December 31, 2019 and the risks related to restrictionsthe Acquisition as described below. See “—We may fail to consummate the Acquisition or may not consummate it on its business activitiesthe terms described herein.” The integration of two independent businesses is a complex, costly and obligatestime-consuming process and we expect that the impact of the COVID-19 public health emergency will make such integrations, both the Acquisition and the integration of Former Caesars with the Company, to generally operate its businesses in the ordinary course in all material respects during the pendency of the Merger absent Caesars’ prior written consent.  These restrictions could preventmore challenging. Further, the Company from pursuing attractive business opportunities or responding effectively to competitive pressures and industry developments that arise prior toits subsidiaries have a significant amount of additional indebtedness outstanding following the consummation of the Merger or terminationand will have a significant amount of additional indebtedness outstanding following the consummation of the Merger AgreementAcquisition. The Company and are outsideits subsidiaries expect to satisfy such obligations with cash flows from operations, which may be adversely impacted by the ordinary course of business.  In particular,COVID-19 public health emergency, cash on hand, borrowings under committed credit facilities, additional financing and proceeds from asset sales.

We may fail to consummate the Merger Agreement restricts the Company from making certain acquisitions and dispositions and taking other specified actions absent Caesars’ prior written consent. If the Company is unable to take actionsAcquisition or may not consummate it believes are beneficial, such restrictions could have an adverse effect on the Company’s business, financial conditionterms described herein.
On September 30, 2020, we agreed to acquire William Hill plc for a cash purchase price of approximately £2.9 billion, or $3.7 billion (the “Acquisition”). We intend to consummate the Acquisition in the second half of 2021. The acquisition must be accepted by a requisite number of William Hill shareholders and resultsthe closing of operations.

such transaction is subject to the receipt of

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Delay
regulatory approvals and other customary closing conditions. As a result, the possible timing and likelihood of the completion of the Acquisition are uncertain, and, accordingly, there can be no assurance that such acquisition will be completed on the expected terms, anticipated schedule or at all.
We may not consummate the Acquisition or realize the expected benefits therefrom if we do. In the event that we fail to consummate the Acquisition, we will have issued a significant number of additional shares of common stock and we will not have acquired the revenue generating assets that will be required to produce the earnings and cash flow we anticipated. As a result, failure to consummate the MergerAcquisition would prevent the Company from realizing the anticipated benefits of the Mergeradversely affect our earnings per share and the Company would also remain liable for significant transaction costs.

Any delay in consummating the Merger may increase the cash portion of the Merger Consideration and adversely impact the combined company’sour ability to realize synergiesmake distributions to stockholders. If the Acquisition is not consummated, we could be subject to a number of risks that may adversely affect our business and other benefits that are anticipated if the Merger is consummated within the expected timeframe.  In particular, if the applicable closing conditions set forth in the Merger Agreement are not satisfiedby March 25, 2020, the amount of cash payable by the Company as Merger Consideration per share of Caesars common stock will increase by $0.003333 for each day (provided that such amount will not be payable if the waiting period under the HSR Act has expired or been terminated but (to the extent required) the consents of the holders of Caesar’s 5.00% convertible senior notes due 2024 have not been obtained) from March 25, 2020 until the closing date of the Merger.  In addition, the market price of the Company’sour common stock, may reflect various market assumptions as to whether and when the Mergerincluding:

•we will be consummated.  Consequently,required to pay costs relating to the failureAcquisition, such as legal, accounting, financial advisory and printing fees, whether or not the Acquisition is consummated;
•time and resources committed by our management to consummate,matters relating to the Acquisition could otherwise have been devoted to pursuing other beneficial opportunities;
•the market price of our common stock could decline to the extent that the current market price reflects a market assumption that the Acquisition will be consummated; and
•we would not realize the benefits we expect to realize from consummating the Acquisition.
We cannot provide any assurance that the Acquisition will be consummated or anythat there will not be a delay in the consummation of the MergerAcquisition. Any increased costs associated with the delay or abandonment of the Acquisition, in addition to the impact of the COVID-19 public health emergency, may adversely impact our ability to remain in compliance with our covenants contained in the agreements governing our indebtedness and lease obligations, and our liquidity. See “—The COVID-19 public health emergency may exacerbate the risks associated with the Acquisition and the ongoing integration with Former Caesars.”
If the Acquisition is not consummated, our reputation in our industry and in the investment community could result in significant changes inbe damaged, and the market price of the Company’s common stock.  In addition, the Company has incurred and will continue to incur significant costs relating to the Merger, such as debt commitment, legal, accounting, financial advisor and printing fees, and, to the extent that the Debt Financing is incurred prior to consummation of the Merger, interest expense, in each case, that may increase in the event that the consummation of the Merger is delayed and will be payable in the event that the Merger is not consummated.  For example, pursuant to the A&R Commitment Letter and the related fee letters, if the Debt Financing does not close prior to January 31, 2020, then subject to certain conditions set forth in the A&R Commitment Letter and the related fee letters, the Commitment Parties have the right to require ERI (or an unrestricted subsidiary of ERI) to issue all or a portion of the Debt Financing (other than the commitments for ERI’s new revolving credit facility or 364-day secured bridge facility) into escrow pending consummation of the Merger and satisfaction of the other closing conditions, or in certain circumstances, to allocate a portion of the Debt Financing to lenders, which would result in ERI incurring additional interest expense prior to consummation of the Merger. Moreover, if the Merger Agreement is terminated in certain circumstances, the Company will be obligated to pay a termination fee to Caesars of approximately $154.9 million, or in certain other circumstances, approximately $836.8 million.  In addition, the Company will be obligated to reimburse Caesars’ expenses for an amount not to exceed $50.0 million if the Merger Agreement is terminated because of the failure to obtain the required approval of the Company’s stockholders. Further, in the event the MTA is terminated because the Merger Agreement is terminated, the Company is required to pay VICI a fee of $75.0 million pursuant to the terms of the MTA.

Whether or not the Merger is consummated, the pendency of the Merger could cause disruptions in the Company’s business, which could have an adverse effect on its business, financial condition and results of operations.

The pendency of the Merger could cause disruptions in the business of the Company, including the following:

•

current and prospective employees of the Company may experience uncertainty about their future roles with the combined company following the Merger or consider other employment alternatives, which might adversely affect the Company’s ability to retain or attract key managers and other employees, and current employees of the Company may lose productivity as a result of such uncertainty;

•

current and prospective customers of the Company may anticipate changes in how they are served or the benefits offered by the Company’s loyalty reward programs and may, as a result, choose to discontinue their patronage;

•

current and prospective suppliers or other business relations of the Company may delay or defer certain business decisions or may seek to terminate, change or renegotiate their relationship or key commercial agreements with the Company, or not to establish a relationship with the Company, as a result of the Merger; and

•

the attention of management and key employees of the Company may be diverted from the operation of the Company’s business toward the consummation of the Merger.

If any of these disruptions were to occur, it could have an adverse effect on the Company’s business, financial condition and result of operation.


Obtaining required approvals and satisfying closing conditions may delay or prevent consummation of the Merger.

Consummation of the Merger is subject to various closing conditions, including, among others, (i) the expiration or termination of any applicable waiting period under the HSR Act and receipt of required gaming approvals, (ii) the absence of any governmental order or law prohibiting the consummation of the Merger, (iii) adoption of the Merger Agreement by holders of a majority of the outstanding shares of Caesarsour common stock entitled to vote, (iv) the approval by the Company’s stockholders of the issuance of shares of Company’s common stock in the Merger (the “Share Issuance”), (v) the effectiveness of the registration statement for the Company’s common stock to be issued in the Merger and the authorization for listing of those shares on the Nasdaq Stock Market, (vi) absence of a material adverse effect on the other party, (vii) the accuracy of the other party’s representations and warranties, subject to customary materiality standards, (viii) compliance of the other party with its respective covenants under the Merger Agreement in all material respects and (ix) conversion or certain amendments of, or another mutually agreed arrangement with respect to, Caesars’ 5.00% convertible senior notes due 2024.  

If such conditions are not satisfied, the Merger will not be consummated unless such conditions are validly waived.  Such conditions may jeopardize or delay consummation of the Merger or may reduce the anticipated benefits of the Merger.  Further, no assurance can be given that the required approvals will be obtained or that the conditions to closing will be satisfied.  Even if all such approvals are obtained, no assurance can be given as to the terms, conditions and timing of such approvals or that they will satisfy the terms of the Merger Agreement.  If the Merger is not consummated by June 24, 2020 (as may be extended to a date no later than December 24, 2020 upon satisfaction of certain conditions to extension set forth in the Merger Agreement), either the Company or Caesars may terminate the Merger Agreement.

could decline.

The MergerAcquisition is subject to the receipt of governmental approvals that may impose conditions that could have an adverse effect on the Companyus or, if not obtained, could prevent consummation of the Merger or, in some circumstances, require the Company to pay Caesars a termination fee of approximately $836.8 million.

Acquisition.

Consummation of the MergerAcquisition is conditioned upon the receipt of certain governmental approvals, including, without limitation, antitrust and gaming regulatory approvals.  Although eachapprovals, including, among others, the Danish Gaming Authority, the Gambling Commissioner of Gibraltar, the CompanyGaming Board For the Bahamas, Colorado Division of Gaming, Washington D.C. Office of Lottery and Caesars has agreed to use its reasonable best efforts to obtainCharitable Games, Delaware Lottery, Florida Division of Pari-mutuel Wagering, Illinois Gaming Board, Indiana Gaming Commission, Iowa Racing and Gaming Commission, Michigan Gaming Control Board, Mississippi Gaming Commission, Nevada Gaming Control Board and Gaming Commission, New Jersey Division of Gaming Enforcement, Mescalero Apache Tribal Gaming Commission, Rhode Island Lottery, West Virginia Lottery and the requisite governmental approvals, thereNational Indian Gaming Commission. There can be no assurance that these approvals will be obtained and that the other conditions to consummating the MergerAcquisition will be satisfied. In addition, the governmental authorities from which the regulatory approvals are required may impose conditions on the consummation of the MergerAcquisition or require changes to the terms of the Merger AgreementAcquisition or other agreements to be entered into in connection with the Merger Agreement.Acquisition. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying or impeding consummation of the MergerAcquisition or of imposing additional costs or limitations on the Companyus following consummation of the Merger,Acquisition, any of which might have an adverse effect on the Company’sour business, financial condition and results of operations.  In addition, if
Governmental gaming regulatory requirements may delay the Merger Agreement is terminated (i) duetiming of the approvals for or completion of the Acquisition.
The gaming and racing industries are highly regulated, and we must maintain our licenses and pay gaming taxes to continue our operations. We are subject to extensive regulation under laws, rules and supervisory procedures primarily in the jurisdictions where our facilities are located or docked. These laws, rules and regulations generally concern the responsibility, financial stability and characters of the owners, managers, and persons with financial interests in the gaming operations. Some jurisdictions require applications for findings of suitability, licensing or other approvals for owners of our stock exceeding certain thresholds. If a lawperson purchases stock in us in an amount that results in such person attaining or order relatingexceeding thresholds of ownership requiring regulatory approvals from one or more gaming jurisdictions, the regulators could take the position that such person must make the requisite filings or obtain the requisite approvals from the regulator prior to gamingreceiving regulatory
72

approval for or antitrust laws that prohibitscompleting the Acquisition. If such a position were taken, this could result in a delay in the timing of the approvals for or permanently enjoins the consummation of the Merger, (ii) because the required regulatory approvals were not obtained prior to June 24, 2020 (as may be extended toAcquisition. We cannot predict whether a date no later than December 24, 2020 upon satisfaction of certain conditions to extension set forth in the Merger Agreement) or (iii) due to the Company willfully and materially breaching certain obligations with respect to the actions required to be taken by the Company to obtain required antitrust approvals, the Company will be required to pay Caesars a termination fee of approximately $836.8 million.

Moreover, the special meetings at which Caesars stockholders will vote on a proposal to adopt the Merger Agreement and the Company’s stockholders will vote on a proposal to approve the Share Issuancegaming regulator may take place before all governmental approvals have been obtained and, in cases where such approvals have not been obtained, before the terms of any conditions to obtain such approvals that may be imposed are known. As a result, if the requisite stockholder approvals are obtained at such meetings, the Company and Caesars may make decisions after the special meetings to waive a condition or approve certain actions required to obtain necessary approvals without seeking further stockholder approval. Such actions could have an adverse effect on the combined company’s business, financial condition and results of operations following the Merger.

position.

Antitrust approvals that arewould be required to consummate the MergerAcquisition may not be received, may take longer than expected or may impose conditions, including the requirement to divest assets, that could have an adverse effect on the combined companyus following the Merger.

Under the provisions of the HSR Act, the Merger may not be consummated until filings are made with the Antitrust Division of the DOJ and the FTC and the expiration of a 30-calendar day waiting period, or the early termination of that waiting period, following the parties’ filings.  ERI and Caesars filed their respective notification and report forms under the HSR Act on July 16, 2019.  On August 15, 2019, ERI withdrew its notification and report form and re-filed the same on August 19, 2019, which began a new 30-day waiting period. On September 18, 2019, each of ERI and Caesars received a Request for Additional Information and Documentary Material (a “Second Request”) from the FTC in connection with the FTC’s review of the Merger, which extends the waiting period until 30 days after both parties have substantially complied with the Second Request, unless the FTC early terminates the additional waiting period or the parties otherwise agree not to consummate the Merger for a period of time after substantial compliance. ERI and Caesars are working with the FTC to complete its investigation as soon as practicable.

Acquisition.

In addition, private parties who may be adversely affected by the Merger and individual states may bring legal actions under the antitrust laws in certain circumstances.  Although the Company and Caesars believe the consummation of the Merger will not likely be prevented by antitrust laws, there can be no assurance that a challenge to the Merger on antitrust grounds will not be made or, if a challenge is made, what the result will be.  Under the Merger Agreement, the Company and Caesars have agreed to use their reasonable best efforts to obtain all regulatory clearances necessary to consummate the Merger at the earliest practicable date.

In addition, in order to consummate the Merger, the CompanyAcquisition, we and CaesarsWilliam Hill may be required to comply with divestitures, including selling properties, conditions, terms, obligations or restrictions imposed by antitrust, gaming and other regulatory entities, including divestitures, and such conditions, terms, obligations or restrictions may have the effect of delaying consummation of the Merger,Acquisition, imposing additional material costs on or materially limiting theour revenue of the combined company after the consummation of the Merger,Acquisition, or otherwise reducing the anticipated benefits to the Companyus of the Merger.Acquisition. Such conditions, terms, obligations or restrictions may result in the delay or abandonment of the Merger.

GamingAcquisition. We may be required to comply with divestitures, including selling properties, conditions, terms, obligations or restrictions imposed by antitrust, gaming and other regulatory approvalsentities, and such conditions, terms, obligations or restrictions may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Consummation of the Merger is conditioned on the receipt of approvals from a number of gaming regulatory authorities, including, among others, the Ak Chin Community Tribal Gaming Commission, the Arizona Department of Gaming, the Cherokee Tribal Gaming Commission, the Colorado Division of Gaming, the Illinois Gaming Board, the Indiana Gaming Commission, the Indiana Horse Racing Commission, the Iowa Racing and Gaming Commission, the Kentucky Horse Racing Commission, the Louisiana Gaming Control Board, the Louisiana State Racing Commission, the Maryland Lottery and Gaming Control Agency, the Mississippi Gaming Commission, the Missouri Gaming Commission, the National Indian Gaming Commission, the Nevada Gaming Commission, the New Jersey Casino Control Commission, the New Jersey Division of Gaming Enforcement, the Pennsylvania Gaming Control Board, the Pennsylvania State Horse Racing Commission, the Ohio Lottery Commission, the Gauteng Gambling Board (South Africa), the Alcohol and Gaming Commission of Ontario, the Ministry of Culture, Sports and Tourism (Korea) and the Gambling Commission (United Kingdom).  In some instances, these approvals include findings of suitability for the Company’s officers and continuing members of the Company’s Board of Directors. These approvals and findings may not be received at all, may not be received in a timely fashion and/or may contain conditions on the consummation of the Merger.  In addition, these regulatory bodies may impose conditions on the granting of such approvals and findings. Such conditions and the process of obtaining such regulatory approvals could have the effect of delaying the consummation of the Merger or ofAcquisition, imposing additional material costs on or limitations onmaterially limiting our revenue after the combined company followingconsummation of the Merger.Acquisition, or otherwise reducing the anticipated benefits to us of the Acquisition. Such conditions, terms, obligations or restrictions may result in the delay or abandonment of the Acquisition. We cannot assure you that we or William Hill will be able to sell these required properties in order to be in compliance with such antitrust, gaming and other regulatory entities, within the time frame required. In addition, to the extent we and/or William Hill are able to sell any officer of the Company is found unsuitable, the Company would need to find a replacement, which may take time and could adversely impact the Company’s financial and operational performance, including the Company’s ability to successfully consummate the Merger and integrate Caesars into the Company. Any such finding of unsuitability by regulatory authorities and resulting resignationproperties, we cannot assure you that we or removal of an officer of the Company could also impact the governance structure of the combined company following the Merger.


There can be no assurance that the Companythey will be able to secure the financing in connection with the Mergersell such properties at a fair market price or upon terms and the transactions contemplated by the Merger Agreement on acceptable terms, in a timely manner, or at all.

The Company intends to finance at least a portion of the cash required in connection with the Merger, including expenses in connection with the Merger, with the Debt Financing in accordance with the A&R Commitment Letter. The A&R Commitment Letter provides for funding to (i) the Company of (a) a $1,000.0 million senior secured revolving credit facility, (b) a $3,000.0 million senior secured term loan B facility, (c) a $3,600.0 million senior secured 364-day bridge facility and (d) a $1,800.0 million senior unsecured bridge loan facility and (ii) a subsidiary of Caesars a $2,400.0 million senior secured incremental term loan B facility. The senior secured 364-day bridge facility will only be funded in accordance with the A&R Commitment Letter to the extent that the net cash proceeds of certain asset sales and certain transactions contemplated with VICI as described in the next succeeding paragraph are not available on the closing date of the Merger to be applied to finance the Merger and expenses in connection therewith.  In addition to the Debt Financing, the Company also recently entered into letter agreements with certain financial institutions which additional letter agreements provide (i) for commitments from such financial institutions to provide an increase to the senior secured term loan B facility being provided to the Company and additional revolving credit facility commitments for the Company and (ii) the engagement of such financial institutions to act as arrangers for additional debt financing, in each case, in the event the Company elects to refinance certain existing indebtedness of Caesars Resort Collection, LLC and its subsidiaries and for working capital and general corporate purposes upon the consummation of the Merger. Additionally, the Company may continue to evaluate alternative financing structures and amounts based on its needs and capital markets conditions. The proceeds of the Debt Financing may be used (A) to pay all or a portion of the cash portion of the Merger Consideration, (B) to refinance all of the Company’s existing syndicated bank credit facilities and outstanding senior notes, (C) to refinance certain of Caesars’ and its subsidiaries’ existing debt, (D) to pay transaction fees and expenses related to the foregoing and/or (E) for working capital and general corporate purposes. The availability of the borrowings under the Debt Financing is subject to the satisfaction of certain customary conditions including the substantially concurrent consummation of the Merger.  In the event some or all of the financing contemplated by the Commitment Letter is not available, the Company is obligated to use its reasonable best efforts to obtain alternative financing from alternative institutions in an amount at least equal to the amount of such unavailable portion of the financing contemplated by the A&R Commitment Letter and in an amount sufficient to enable the Company to consummate the Merger.  

In connection with the execution of the Merger Agreement and the A&R Commitment Letter, the Company entered into the MTA with VICI.  The Company intends to finance at least a portion of the cash required in connection with the Merger with the proceeds of transactions that are subject to the MTA, including approximately $1.8 billion of proceeds from the expected sale leaseback of certain properties expected to be acquired upon consummation of the Merger, including Harrah’s New Orleans, Harrah’s Laughlinbeneficial or considered reasonably satisfactory by us or William Hill, as applicable. As a result, we and Harrah’s Atlantic City (or, under certain circumstances, if necessary, certain replacement properties specified in the MTA), and approximately $1.4 billion of proceeds expected to be received in consideration of the amendment of certain existing leases between subsidiaries of Caesars and VICI. The consummation of the transactions contemplated by the MTA is subject to satisfaction of certain conditions, including execution of agreements, receipt of required regulatory approvals, the accuracy of the representations and warranties, compliance with covenants, delivery of certain closing deliverables and the absence of any governmental order or action seeking to prohibit the consummation of the transactions contemplated by the MTA.  The Company is currently negotiating the sale leaseback documents, lease amendments and other agreements contemplated by the MTA and cannot assure you as to the timing or outcome of those negotiations with VICI.  Although the Company expects the transactions contemplated by the MTA to be consummated substantially concurrently with the Merger, there can be no assurance as to the timing of the closing of such transactions or that the closings will occur on the terms set forth in the MTA or at all.  In the event that the closings of some or all of the transactions contemplated by the MTA are delayed or doWilliam Hill may not occur, the Company may be required to incur the 364-day secured bridge facility under the Debt Financing or other additional indebtedness to pay the cash portion of the Merger Consideration, repay the Company’s and certain of Caesars’ and its subsidiaries’ outstanding debt and/or pay transaction fees and expenses related thereto, which could have an adverse impact on the business, financial condition and results of operations of the combined company following the Merger.

The consummation of the Merger is not conditioned on the Company’s ability to obtain financing or the consummation of the transactions contemplated by the MTA.  If the Company is unable to obtain funding contemplated by the Commitment Letter from its financing sources for the cash required in connection with the Merger, the Company may be compelled to specifically perform its obligations to consummate the Merger or could otherwise be subject to claims under the Merger Agreement, each of which could have a material adverse effect on the Company.


Litigation challenging the Merger could delay or prevent the consummation of the Merger.

One of the conditions to the Merger is that no law, statute, rule, regulation, ordinance, code, ruling, subpoena, order, writ, injunction, decree, judgment, ruling, determination, directive, award or settlement issued by a governmental entity (including any gaming authority) shall have been adopted, promulgated or issued that would prohibit, restrain, enjoin or render unlawful the consummation of the Merger or the Share Issuance.  As of November 6, 2019, eight complaints have been filed challenging the Merger. Seven of the complaints generally assert claims under Sections 14(a) and 20(a) of the Exchange Act challenging the adequacy of certain disclosures made in the version of this joint proxy statement/prospectus filed with the SEC on September 3, 2019. Those complaints seek, among other relief, an injunction preventing consummation of the Merger, damages in the event that the Merger is consummated and attorneys’ fees. The eighth complaint, filed in Nevada state court, asserts claims for breach of fiduciary duty by, among other things, approving the Merger at an unfair price and disseminating materially misleading information in connection with the Merger. There can be no assurance that additional claims will not be filed by stockholders of the Company or Caesars seeking damages relating to, or otherwise challenging, the Merger.  If the plaintiffs in any such action secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting the Company’s and Caesars’ ability to consummate the Merger, then such injunctive or other relief may prevent the Merger from becoming effective within the expected time frame or at all.  If consummation of the Merger is prevented or delayed, it could result in substantial costs to the Company.  In addition, whether or not any plaintiff’s claim is successful, the Company could incur significant costs in connection with any such litigation, including costs associated with the indemnification of the Company’s and Caesars’ directors and officers, and the attention and resources of the respective management of ERI and Caesars could be diverted from the consummation of the Merger and ongoing business activities, which could have an adverse effect on the Company’s business, financial condition and results of operations.

The Merger Agreement contains provisions that limit the Company’s ability to pursue alternatives to the Merger, could discourage a potential competing acquiror of the Company from making a favorable alternative transaction proposal and, in specified circumstances, could require the Company to pay Caesars a termination fee.

The Merger Agreement contains certain provisions that restrict the Company’s ability to solicit, initiate, knowingly facilitate or knowingly encourage any inquiries regarding, or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, a competing proposal, engage, continue or otherwise participate in any substantive discussions or negotiations regarding, or furnish any non-public information to any person in connection with or for the purpose of encouraging or facilitating, a competing proposal, subject to customary exceptions and limitations.  In addition, Caesars generally has an opportunity to offer to modify the terms of the Merger Agreement in response to any third-party alternative transaction proposal before the Company’s board of directors may change, qualify, withhold, withdraw or modify its recommendation that the Company’s stockholders approve the Share Issuance.  Upon termination of the Merger Agreement in certain circumstances relating to changes in the recommendation of the Company’s board of directors in favor of the Share Issuance or entry by the Company into an alternative transaction, the Company will be required to pay a termination fee of approximately $154.9 million to Caesars, as well as reimburse Caesars’ expenses in an amount not to exceed $50.0 million if the Merger Agreement is terminated because of the Company’s failure to obtain the required approval of its stockholders (creditable against any termination fee that may subsequently be paid by the Company).  In such a scenario, the Company may also be required to pay VICI a fee of $75.0 million pursuant to the terms of the MTA.

These provisions could discourage a potential third-party acquiror or merger partner that might have an interest in acquiring all or a significant portion of the Company or pursuing an alternative transaction with the Company from considering or proposing such a transaction or might result in a potential third-party acquiror or merger partner proposing to pay a lower price to the stockholders of the Company than it might otherwise have proposed to pay because of the added expense of the termination fee and expense reimbursement that may become payable in certain circumstances.

If the Merger is not consummated, the price of the Company’s common stock and the Company’s future businesses and operations could be harmed.

If the Merger is not consummated, the Company will not have realized any of the potential benefits of the Merger having been consummated and may be subject to material risks, including:

•

failure to consummate the Merger may result in negative publicity and a negative impression of the Company in the investment community;

•

the diversion of management attention from day-to-day business and the unavoidable disruption to its employees and relationships with customers, vendors, joint venture partners and other third parties as a result of efforts and uncertainties relating to the Merger may detract from the ability of the Company to grow revenue and minimize costs, which, in turn, may lead to a loss of market position that the Company could be unable to regain if the Merger does not occur;


•

under the Merger Agreement, the Company is subject to certain restrictions on the conduct of its business prior to consummating the Merger, which may affect the Company’s ability to execute certain of its business strategies or respond effectively to competitive pressures and industry developments; and

•

in certain circumstances, the Company may be required to pay a termination fee of approximately $154.9 million or approximately $836.8 million to Caesars, and may be required to reimburse Caesars’ expenses in an amount not to exceed $50.0 million;

•

the Company may be required to pay a $75.0 million termination fee to VICI pursuant to the terms of the MTA if the MTA is terminated as a result of the termination of the Merger Agreement;

•

if the Company’s board of directors seeks an alternative transaction to the Merger, a potential third-party acquiror or merger partner may propose to pay a lower price to ERI stockholders as a result of the applicable termination fee and expense reimbursement;

•

the price of the Company’s common stock may decline to the extent that the current market price of the Company common stock reflects a higher price than it otherwise would have based on the assumption that the Merger will be consummated;

•

the Company would have incurred significant expenses relating to the Merger that they may be unable to recover; and

•

the Company may be subject to litigation related to the failure to consummate the Merger or to perform its obligations under the Merger Agreement.

The integration of the Company and Caesars following the Merger may present significant challenges.  We cannot be sure that we will be able to realize the anticipatedany expected benefits of the Merger in the anticipated time frame or at all.

The Company’s ability to realize the anticipated benefits of the Merger will depend, to a large extent, on the Company’s ability to integrate Caesars’ businesses into the Company in the anticipated time frame or at all.  The Company may face significant challenges in combining Caesars’ operations into its operations in a timely and efficient manner.  The combination of two independent businesses is a complex, costly and time-consuming process.  As a result, the Company will be required to devote significant management attention and resources to integrating the business practices and operations of Caesars into those of the Company.  The integration process may disrupt the businesses and, if implemented ineffectively or inefficiently, would preclude realization of the full benefits expected by the Company and Caesars.  The failure to successfully integrate Caesars into the Company and to manage the challenges presented by the integration process successfully may result in an interruption of, or loss of momentum in, the business of the Company, which may have the effect of depressing the market price of the Company’s common stock following the Merger.

The Company may be unable to realize anticipated synergies or may incur additional costs.

The Company expects to realize cost synergies from combining administrative and other overlapping functions of Caesars and the Company, as well as revenue synergies.  However, the Company will be required to incur costs, including severance and related expenses, to realize the anticipated synergies. In addition, the amount of synergies realized after consummation of the Merger may be reduced from anticipated levels as a result of cost reduction programs that have been implemented, or may be implemented, by Caesars prior to consummation of the Merger, including Caesars’ previously announced initiatives expected to result in cost savings of $50.0 million.  While the Company’s management believes the combined company will benefit from synergies, the Company may be unable to realize all of these synergies within the time frame expected or at all.  In addition, the Company may incur additional or unexpected costs in order to realize these synergies.

Unanticipated costs relating to the Merger could reduce the Company’s future earnings per share.

We believe that we have reasonably estimated the likely incremental costs of the combined operations of the Company and Caesars following the Merger.  However, it is possible that unexpected transaction costs such as taxes, fees or professional expenses or unexpected future operating expenses such as unanticipated costs to integrate the two businesses or increased personnel costs, as well as other types of unanticipated adverse developments, could have an adverse effect on the business, financial condition and results of operations of the combined company following the Merger.  In addition, if actual costs are materially different than expected costs, the Merger could have a significant dilutive effect on the Company’s earnings.


The Company will have a substantial amount of debt outstanding following the Mergerasset dispositions, and may incur additional indebtedness in the future, which could restrict the Company’s ability to pay dividends and fund working capital and planned capital expenditures.

The Company expects to enter into the Debt Financing in order to consummate the Merger and refinance the Company’s existing syndicated bank credit facilities and senior notes, and a portion of Caesars’ outstanding indebtedness will remain outstanding following the consummation of the Merger.  As a result, the Company will have a significant amount of additional indebtedness outstanding following the consummation of the Merger.  In addition, the Company expects to have the ability to incur additional debt under its anticipated $1.0 billion revolving credit facility and Caesars Resorts Collection, LLC’s existing $1.0 billion revolving credit facility.  The Company also continually evaluates alternative financing structures and amounts based on its needs and capital markets conditions.  The Company may be required to incur indebtedness under the 364-day secured bridge facility provided under the Debt Financing or other additional indebtedness to finance the Merger Consideration if the transactions contemplated by the MTA or the previously announced sales of certain of the Company’s properties are not consummated prior to orreceive adequate consideration in connection with the consummation of the Merger.  This amount of leverage could have important consequences, including:

•

the Company may be required to use a substantial portion of its cash flow from operations to make interest and principal payments on the Company’s debt, which will reduce funds available for operations, future business opportunities and dividends;

therewith.

•

the Company may have limited flexibility to react to changes in its business and its industry;

•

it may be more difficult for the Company to satisfy its other obligations;

•

the Company may have a limited ability to borrow additional funds or to sell assets to raise funds if needed for working capital, capital expenditures, acquisitions or other purposes;

•

the Company may become more vulnerable to general adverse economic and industry conditions and changes in interest rates, including changes in interest rates resulting from the expected discontinuation of LIBOR; and

•

the Company may be at a disadvantage compared to its competitors that have less debt.

Future interest expense will be significantly higher than historic interest expense as a result of higher levels of indebtedness incurred to consummate the Merger.  The Company’s ability to make payments on its debt and potential to pay dividends on its common stock, which the Company has not historically done, will depend on its ability to generate cash in the future, which will depend on many factors beyond its control.  The Company cannot assure you that:

•

its business will generate sufficient cash flow from operations to service and repay its debt, pay dividends on its common stock and fund working capital and planned capital expenditures;

•

future borrowings will be available under its credit facilities or any future credit facilities in an amount sufficient to enable it to repay its debt, pay dividends on its common stock and fund working capital and planned capital expenditures; or

•

it will be able to refinance any of its debt on commercially reasonable terms or at all.

If the Company cannot generate sufficient cash from its operations to meet its debt service obligations, it may need to reduce or delay capital expenditures, the development of its business generally and any acquisitions.  If the Company becomes unable to meet its debt service and repayment obligations (or those of its subsidiaries following the Merger), it (or its applicable subsidiaries) would be in default under the terms of the applicable credit agreement or indenture, which would allow its lenders or noteholders to declare all outstanding indebtedness thereunder to be due and payable and terminate any commitments to lend thereunder.  If the amounts outstanding under its (or its subsidiaries’) credit facilities or indentures were to be accelerated, the Company cannot assure you that its (or its subsidiaries’) assets would be sufficient to repay in full the money owed.


Following consummation of the Merger and the transactions contemplated by the MTA, the Company and its subsidiaries will be required to pay a significant portion of their cash flow from operations to third parties pursuant to leasing and related arrangements.  

The Company and Caesars currently lease certain parcels of land on which several of their respective properties are located and, pursuant to the terms of MTA, are expected to enter into leases with VICI with respect to parcels of land on which Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City are located and will increase the lease rate on an existing lease agreement between a subsidiary of Caesars and VICI, which will require the Company’s subsidiaries that are parties to such leases to apply a significant amount of their cash flow to required rental payments. These leases also are expected to require certain levels of capital expenditures to be made on the properties leased under these leases on an ongoing basis.  As a result of the obligation to pay rent and make capital expenditures under the new and existing leases, the ability of the combined company to fund its operations or development projects, raise capital, make acquisitions and otherwise respond to competitive and economic changes may be adversely affected.  For example, the obligations under these lease agreements may:

•

make it more difficult for the combined company to satisfy its obligations with respect to its (or its subsidiaries’) indebtedness and to obtain additional indebtedness;

•

increase vulnerability to general or regional adverse economic and industry conditions or a downturn in the combined company’s business;

•

require the combined company to dedicate a substantial portion of its cash flow from operations to making lease payments, thereby reducing the availability of cash flow to fund working capital, capital expenditures and other general corporate purposes and acquisitions;

•

limit flexibility in planning for, or reacting to, changes in the combined company’s business and the industry in which it operates; and

•

restrict the combined company’s ability to raise capital, make acquisitions and divestitures and engage in other significant transactions.

In addition, the annual rent escalations under these lease agreements will continue to apply regardless of the amount of cash flows generated by the properties that are subject to these lease agreements. Accordingly, if the cash flows generated by such properties decrease, or do not increase at the same rate as the rent escalations, the rents payable under these lease agreements could comprise a higher percentage of the cash flows generated by the applicable entity, which could exacerbate, perhaps materially, the issues described above.  Any of the above listed factors could have an adverse effect on the combined company’s business, financial condition and results of operations.

Moreover, if the combined company were to default on any one or more of these lease agreements, the applicable lessors could terminate the affected leases and we could lose possession of the land leased under the affected leases and any improvements on that land, including the hotels and casinos. A termination of these lease agreements could result in a default under the Company’s (or its subsidiaries’) applicable credit agreements, which would allow its lenders to declare all outstanding borrowings to be due and payable and terminate any commitments thereunder, and could have a material adverse effect on the combined company’s business, financial condition and results of operations.

The guaranties to be entered into by the Company in connection with the existing and new leases with VICI will include covenants that may restrict the ability of the Company to pay dividends and repurchase its shares following the Merger.

The Company will guaranty the obligations of its subsidiaries under the existing and new leases with VICI pursuant to which the Company’s subsidiaries will lease certain parcels of land on which several of their respective properties are located.  These guaranties will include covenants, which, among other things, may restrict the ability of the Company to pay dividends or repurchase its shares if its market capitalization is less than $5.5 billion, and may restrict the ability of the Company to make non-cash dividends, in each case, following the Merger.


Delay or failure to consummate the sale of properties previously announced by the Company may require the Company to incur additional debt to pay the cash portion of the Merger Consideration or to repay outstanding indebtedness of the Company or otherwise adversely impact the business, financial condition and results of operations of the combined company following the Merger.

On June 17, 2019, the Company entered into an agreement to sell Lady Luck Caruthersville, Isle Casino Cape Girardeau and Mountaineer Casino, Racetrack & Resort for aggregate consideration of $385.0 million, and on July 10, 2019, the Company entered into an agreement to sell Isle of Capri Casino Kansas City and Lady Luck Casino Vicksburg for aggregate consideration of $230.0 million, in each case subject to certain adjustments.  The consummation of each transaction is subject to satisfaction of customary conditions, including receipt of required regulatory approvals, the accuracy of the parties’ representations and warranties, compliance with covenants, delivery of certain closing deliverables and the absence of any governmental order or action seeking to prohibit the consummation of the transaction.  Although the Company expects such sale transactions to be consummated prior to consummation of the Merger, there can be no assurance as to the timing of the closing of such sales or that the closings will occur on the terms set forth in the purchase agreements relating to the sales, or at all.  In the event that the closing of either sale is delayed or does not occur, the Company may be required to incur the 364-day secured bridge facility under the Debt Financing or other additional indebtedness to pay the cash portion of the Merger Consideration, to repay the Company’s and certain of Caesars’ and its subsidiaries outstanding debt and/or to pay transaction fees and expenses related thereto, which could adversely impact the business, financial condition and results of operations of the combined company following the Merger.

On September 26, 2019, ERI and VICI entered into the Real Estate Purchase Agreements for the sale of Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Atlantic City for aggregate consideration of approximately $1.8 billion, subject to satisfaction of customary conditions, including receipt of required regulatory approvals.  In the event that the closing of any of the sales is delayed or does not occur within a certain timeframe, the Company may be required to incur the 364-day secured bridge facility under the Debt Financing or other additional indebtedness to pay the cash portion of the Merger Consideration, to repay the Company’s and certain of Caesars’ and its subsidiaries outstanding debt and/or to pay transaction fees and expenses related thereto, which could adversely impact the business, financial condition and results of operations of the combined company following the Merger.

ITEM 2.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.


During the quarter ended September 30, 2020, we issued 6,839,299 shares of unregistered Company Common Stock to holders of 5% Convertible Notes due 2024 upon conversion of $487 million in aggregate principal amount of such notes.For further information regarding such transactions, see Note 11, Fair Value Measurements, of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.The shares of common stock were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended.

ITEM 3.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

ITEM 4.    MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5.

ITEM 5.    OTHER INFORMATION.

None.


None.

ITEM 6.

ITEM 6.    EXHIBITS.

Exhibit

Number

Exhibit
Number
Description of Exhibit

Method of Filing

2.1

3.1

PurchasePreviously filed on Form 8-K filed on July 21, 2020.
3.2Previously filed on Form 8-K filed on July 21, 2020.
4.1
Indenture (6.25% CEI Senior Secured Notes due 2025) dated as of July 6, 2020, by and Salebetween Colt Merger Sub, Inc. and U.S. Bank National Association.
Previously filed on Form 8-K filed on July 7, 2020.
4.2Previously filed on Form 8-K filed on July 21, 2020.
73

Exhibit
Number
Description of ExhibitMethod of Filing
4.3
Indenture (8.125% CEI Senior Notes due 2027) dated as of July 6, 2020, by and between Colt Merger Sub, Inc. and U.S. Bank National Association.
Previously filed on Form 8-K filed on July 7, 2020.
4.4Previously filed on Form 8-K filed on July 21, 2020.
4.5
Indenture (5.75% CRC Secured Notes due 2025) dated as of July 6, 2020, by and between Colt Merger Sub, Inc. and U.S. Bank National Association.
Previously filed on Form 8-K filed on July 7, 2020.
4.6Previously filed on Form 8-K filed on July 21, 2020.
4.7Previously filed on Form 8-K filed by Caesars Holdings, Inc. on October 13, 2017.
4.8Previously filed on Form 8-K filed by Caesars Holdings, Inc. on November 29, 2019.
4.9Previously filed on Form 8-K filed on July 21, 2020.
4.10Previously filed on Form 8-K filed by Caesars Holdings, Inc. on October 16, 2017.
4.11Previously filed on Form 8-K filed by Caesars Holdings, Inc. on December 22, 2017.
10.1Previously filed on Form 8-K filed on July 21, 2020.
10.2Filed herewith.
10.3Previously filed on Form 8-K filed on July 21, 2020.
10.4**

Previously filed on Form 8-K filed on July 21, 2020.
10.5**Filed herewith.
10.6Previously filed on Form 8-K filed on July 21, 2020.
10.7**Previously filed on Form 8-K filed on July 21, 2020.
10.8**Filed herewith.
10.9Previously filed on Form 8-K filed on July 21, 2020.
74

Exhibit
Number
Description of ExhibitMethod of Filing
10.10*

Previously filed on Form 8-K filed on September 26, 2019.

July 21, 2020.

2.2

10.11*

Previously filed on Form 8-K filed on July 21, 2020.
10.12Previously filed on Form 8-K filed by Caesars Holdings, Inc. on April 6, 2020.
10.13

Previously filed on Form 8-K filed by Caesars Holdings, Inc. on April 6, 2020.

10.14Previously filed on Form 8-K filed on July 21, 2020.
10.15*Previously filed on Form 8-K filed on July 21, 2020.
10.16*Previously filed on Form 8-K filed on September 26, 2019.

18, 2020.

2.3

10.17*

Previously filed on Form 8-K filed on September 26, 2019.

July 21, 2020.

2.4*

10.18

Previously filed on Form 8-K filed by Caesars Holdings, Inc. on July 21, 2020.
10.19

Previously filed on Form 8-K filed on August 16, 2019.

July 21, 2020.

  31.1

10.20

Previously filed on Form 8-K filed on July 21, 2020.
10.21Previously filed on Form 8-K filed by Caesars Holdings, Inc. on December 22, 2017.
10.22
First Amendment to Credit Agreement, dated as of June 15, 2020, by and among Caesars Resort Collection, LLC, the subsidiary loan parties party thereto, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent. 
Previously filed on Form 8-K filed by Caesars Holdings, Inc. on June 12, 2020.
10.23Previously filed on Form 8-K filed on July 21, 2020.
10.24Previously filed on Form 8-K filed on July 21, 2020.
10.25Previously filed on Form 8-K filed by Caesars Holdings, Inc. on October 13, 2017.
75

Exhibit
Number
Description of ExhibitMethod of Filing
10.26†Previously filed on Form 10-Q filed by Caesars Holdings, Inc. on August 9, 2007.
10.27†Previously filed on Form 10-Q filed by Caesars Holdings, Inc. on August 9, 2007.
10.28†Previously filed on Form 10-Q filed by Caesars Holdings, Inc. on August 9, 2007.
10.29†Previously filed on Form 10-Q filed by Caesars Holdings, Inc. on August 9, 2007.
10.30†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on February 13, 2009.
10.31†Previously filed on Form 10-K filed by Caesars Holdings, Inc. on March 16, 2015.
10.32†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on October 13, 2017.
10.33Previously filed on Form 8-K filed by Caesars Holdings, Inc. on October 13, 2017.
10.34Previously filed on Form 8-K filed by Caesars Holdings, Inc. on April 6, 2020.
10.35Previously filed on Form 8-K/A filed by Caesars Holdings, Inc. on April 14, 2020.
10.36†Previously filed on Form S-1/A filed by Caesars Holdings, Inc. on February 2, 2012.
10.37†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on July 25, 2012.
10.38†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on May 20, 2015.
10.39†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on May 20, 2016.
10.40†Previously filed on Form 10-Q filed by Caesars Holdings, Inc. on August 2, 2016.
76

Exhibit
Number
Description of ExhibitMethod of Filing
10.41†Previously filed on Form S-8 filed by Caesars Holdings, Inc. on October 6, 2017.
10.42†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on April 6, 2018.
10.43†Previously filed on Form S-8 filed by Caesars Holdings, Inc. on December 13, 2018.
10.44†Previously filed on Form S-8 filed by Caesars Holdings, Inc. on December 13, 2018.
10.45†Previously filed on Form 8-K filed by Caesars Acquisition Company on April 16, 2014.
10.46†Filed herewith.
10.47Filed herewith.
31.1

Filed herewith.

31.2

Filed herewith.

32.1

Filed herewith.

32.2

Filed herewith.

101.1

99.1

Filed herewith.
101.1Inline XBRL Instance Document

Filed herewith.

101.2

Inline XBRL Taxonomy Extension Schema Document

Filed herewith.

101.3

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith.

101.4

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith.

101.5

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith.

101.6

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

Filed herewith.

*

†

Denotes a management contract or compensatory plan or arrangement.

*Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. EldoradoThe Company will furnish supplementally copies of omitted schedules and exhibits to the U.S. Securities and Exchange Commission upon its request.

**

Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because such information is (i) not material and (ii) could be competitively harmful if publicly disclosed. The Company will furnish supplementally an unredacted copy of such exhibit to the U.S. Securities and Exchange Commission upon its request.


77


SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ELDORADO RESORTS, INC.

CAESARS ENTERTAINMENT, INC.

Date: November 6, 2019

9, 2020

/s/ Thomas R. Reeg

Thomas R. Reeg

Chief Executive Officer (Principal Executive Officer)

Date: November 6, 2019

9, 2020

/s/ Bret Yunker

Bret Yunker

Chief Financial Officer (Principal Financial Officer)

80

78