CAESARS ENTERTAINMENT, INC. The following discussion and analysis of the financial position and operating results ofCaesars Entertainment, Inc. , aDelaware corporation, and its consolidated subsidiaries, which may be referred to as the "Company," "CEI," "Caesars," "we," "our," or "us," for the three and six months endedJune 30, 2022 and 2021 should be read in conjunction with the unaudited consolidated condensed financial statements and the notes thereto and other financial information included elsewhere in this Form 10-Q as well as our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 ("2021 Annual Report"). Capitalized terms used but not defined in this Form 10-Q have the same meanings as in the 2021 Annual Report. We refer to (i) our Consolidated Condensed Financial Statements as our "Financial Statements," (ii) our Consolidated Condensed Balance Sheets as our "Balance Sheets," (iii) our Consolidated Condensed Statements of Operations and Consolidated Condensed Statements of Comprehensive Income (Loss) as our "Statements of Operations," and (iv) our Consolidated Condensed Statements of Cash Flows as our "Statements of Cash Flows." References to numbered "Notes" refer to Notes to Consolidated Condensed Financial Statements included in Item 1, "Unaudited Financial Statements." The statements in this discussion regarding our expectations of our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. Our actual results may differ materially from those contained in or implied by any forward-looking statements. See "CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION" in this report.
Objective
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is intended to be a narrative explanation of the financial
statements and other statistical data that should be read in conjunction with
the accompanying financial statements to enhance an investor's understanding of
our financial condition, changes in financial condition and results of
operations. Our objectives are: (i) to provide a narrative explanation of our
financial statements that will enable investors to see the Company through the
eyes of management; (ii) to enhance the overall financial disclosure and provide
the context within which financial information should be analyzed; and (iii) to
provide information about the quality of, and potential variability of, our
earnings and cash flows so that investors can ascertain the likelihood of
whether past performance is indicative of future performance.
Overview
We are a geographically diversified gaming and hospitality company that was founded in 1973 by the Carano family with the opening of theEldorado Hotel Casino inReno, Nevada . Beginning in 2005, we grew through a series of acquisitions, including the acquisition ofMTR Gaming Group, Inc. in 2014,Isle of Capri Casinos, Inc. ("Isle" or "Isle of Capri") in 2017 andTropicana Entertainment, Inc. in 2018. OnJuly 20, 2020 , we completed the merger withCaesars Entertainment Corporation ("Former Caesars") pursuant to which Former Caesars became our wholly-owned subsidiary (the "Merger") and our ticker symbol on theNASDAQ Stock Market changed from "ERI" to "CZR". OnApril 22, 2021 , we completed the acquisition ofWilliam Hill PLC for £2.9 billion, or approximately$3.9 billion (the "William Hill Acquisition"). We own, lease or manage an aggregate of 51 domestic properties in 16 states with approximately 53,200 slot machines, video lottery terminals and e-tables, approximately 2,900 table games and approximately 47,500 hotel rooms as ofJune 30, 2022 . In addition, we have other domestic and international properties that are authorized to use the brands and marks ofCaesars Entertainment, Inc. , as well as other non-gaming properties. Our primary source of revenue is generated by our casino properties' gaming operations, our retail and online sports betting, as well as our online gaming, and we utilize our hotels, restaurants, bars, entertainment, racing, retail shops and other services to attract customers to our properties. As ofJune 30, 2022 , we owned 20 of our casinos and leased 25 casinos in theU.S. We lease 18 casinos fromVICI Properties L.P. , aDelaware limited partnership ("VICI") pursuant to a regional lease, aLas Vegas lease and a Joliet lease. In addition, we lease six casinos fromGLP Capital, L.P. , the operating partnership of Gaming and Leisure Properties, Inc. ("GLPI") pursuant to aMaster Lease (as amended, the "GLPI Master Lease") and a Lumière lease (together with the GLPI Master Lease, the "GLPI Leases"). Additionally, we lease theRio All-Suite Hotel & Casino from a separate third party.
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We also operate and conduct sports wagering across 25 jurisdictions in North
America , 18 of which are mobile for sports betting, and operate regulated online
real money gaming in six jurisdictions in North America . Our recently launched
Caesars Sportsbook app operates on the Liberty platform, which we acquired in
the William Hill Acquisition, along with other technology platforms that we
intend to migrate to the Liberty platform in the future, subject to required
approvals. The map below illustrates Caesars Digital's presence as of June 30,
2022 :
[[Image Removed: czr-20220630_g1.jpg]]
In addition to the Caesars Sportsbook app, we partnered with NYRABets LLC , the
official online wagering platform of the New York Racing Association, Inc. , and
launched the Caesars Racebook app within five states as of June 30, 2022 ,
excluding Kentucky which went live in July 2022 . The Caesars Racebook app
provides access for wagers at over 300 race tracks around the world. Wagers
placed can earn credits towards our Caesars Rewards program or points which can
be redeemed for free wagering credits.
We are also in the process of expanding our Caesars Digital footprint into other
states in the near term with our Caesars Sportsbook and Caesars Racebook apps as
jurisdictions legalize or provide necessary approvals.
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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 in connection with obtaining regulatory approvals related to the
closing of the Merger. A summary of recently completed and planned divestitures
of our properties as of June 30, 2022 is as follows:
Segment Property Date Sold Sales Price
MontBleu Casino Resort & Spa
Regional ("MontBleu") April 6, 2021 $15 million
Regional Tropicana Evansville ("Evansville") June 3, 2021 $480 million
Belle of Baton Rouge Casino & Hotel
Regional ("Baton Rouge") May 5, 2022 *
Discontinued operations:
Regional Harrah's Louisiana Downs November 1, 2021 $22 million (a)
Regional Caesars Southern Indiana September 3, 2021 $250 million
N/A Emerald Resort & Casino July 16, 2021 *
N/A Caesars Entertainment UK July 16, 2021 *
N/A William Hill International July 1, 2022 £2.0 billion
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*Not meaningful.
(a)The proceeds of this sale were split between the Company and VICI.
Merger and Acquisitions Related Activities
William Hill Acquisition
OnSeptember 30, 2020 , we announced that we had reached an agreement withWilliam 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) ofWilliam Hill PLC , in an all-cash transaction. OnApril 22, 2021 , we completed the acquisition ofWilliam Hill PLC for £2.9 billion, or approximately$3.9 billion . In connection with the William Hill Acquisition, onApril 22, 2021 , a newly formed subsidiary of the Company (the "Bridge Facility Borrower") entered into a Credit Agreement (the "Bridge Credit Agreement") with certain lenders party thereto and Deutsche Bank AG,London Branch, as administrative agent and collateral agent, pursuant to which the lenders party thereto provided the Debt Financing (as defined below). The Bridge Credit Agreement provides for (a) a 540-day £1.0 billion asset sale bridge facility, (b) a 60-day £503 million cash confirmation bridge facility and (c) a 540-day £116 million revolving credit facility (collectively, the "Debt Financing"). The proceeds of the bridge loan facilities provided under the Bridge Credit Agreement were used (i) to pay a portion of the cash consideration for the acquisition and (ii) to pay fees and expenses related to the acquisition and related transactions. The proceeds of the revolving credit facility under the Bridge Credit Agreement may be used for working capital and general corporate purposes. The £1.5 billion Interim Facilities Agreement (the "Interim Facilities Agreement") entered into onOctober 6, 2020 with Deutsche Bank AG,London Branch andJPMorgan Chase Bank, N.A ., and amended onDecember 11, 2020 , was terminated upon the execution of the Bridge Credit Agreement. OnMay 12, 2021 , we repaid the £503 million cash confirmation bridge facility. OnJune 14, 2021 , we drew down the full £116 million from the revolving credit facility and the proceeds, in addition to excess Company cash, were used to make a partial repayment of the asset sale bridge facility in the amount of £700 million. OnJuly 1, 2022 outstanding borrowings under the Bridge Credit Agreement were repaid immediately following the sale of William Hill's non-U.S. operations, which included theUK and international online divisions and the retail betting shops (collectively, "William Hill International "), all of which were held for sale as of the date of the closing of the William Hill Acquisition with operations reflected within discontinued operations. Certain investments acquired have been excluded from the held for sale asset group. OnSeptember 8, 2021 , we entered into an agreement to sellWilliam Hill International to 888 Holdings Plc for approximately £2.2 billion. In order to manage the risk of changes in the GBP denominated sales price and expected proceeds, we entered into foreign exchange forward contracts. OnApril 7, 2022 , we amended the agreement to sell the non-US assets of William Hill to 888 Holdings Plc for a revised enterprise value of approximately £2.0 billion. The amended agreement reflects a £250 million reduction in consideration payable at closing and up to £100 million as deferred consideration to be paid to us, subject to 888 Holdings Plc meeting certain 2023 financial targets. During the three and six months endedJune 30, 2022 , we recorded impairments to assets held for sale of$174 million and$503 million , respectively, within discontinued operations based on the revised and final sales prices.
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On
We recognized acquisition-related transaction costs of$7 million and$62 million for the three months endedJune 30, 2022 and 2021, respectively, and$8 million and$67 million for the six months endedJune 30, 2022 and 2021, respectively, excluding additional transaction costs associated with the sale ofWilliam Hill International . These costs were associated with legal and professional services and were recorded in Transaction and other operating costs, net in our Statements of Operations.
Consolidation of Horseshoe Baltimore
OnAugust 26, 2021 , we increased our ownership interest inCBAC Borrower, LLC ("Horseshoe Baltimore"), a property which we also manage, to approximately 75.8% for cash consideration of$55 million . We were subsequently determined to have a controlling financial interest in Horseshoe Baltimore and have consolidated the results of operations of the property following our change in ownership.
Investments and Partnerships
NeoGames
The acquired net assets of William Hill included an investment in publicly
traded common stock of NeoGames S.A. ("NeoGames"), a global leader of iLottery
solutions and services to national and state-regulated lotteries, and other
investments. On September 16, 2021 , we sold a portion of our shares of NeoGames
common stock for $136 million which decreased our ownership interest from 24.5%
to 8.4%. Additionally, on March 14, 2022 , we sold our remaining 2 million shares
at fair value for $26 million and recorded a loss on the change in fair value of
$34 million during the six months ended June 30, 2022 , which is included within
Other income (loss) on our Statements of Operations.
Pompano Joint Venture
InApril 2018 , we entered into a joint venture with Cordish Companies ("Cordish") to 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. InJune 2021 , the joint venture issued a capital call and we contributed$3 million , for a total of$4 million in cash since inception of the joint venture. OnFebruary 12, 2021 , we contributed 186 acres to the joint venture with a fair value of$61 million . Total contributions of approximately 206 acres of land have been made with a fair value of approximately$69 million and we have no further obligation to contribute additional real estate or cash as ofJune 30, 2022 . We entered into a short-term lease agreement inFebruary 2021 , which we can cancel at any time, to lease back a portion of the land from the joint venture. 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 are included in Transaction and other operating costs, net on our Statements of Operations. As ofJune 30, 2022 andDecember 31, 2021 , our investment in the joint venture is recorded in Investment in and advances to unconsolidated affiliates on the Balance Sheets.
Reportable Segments
Segment results in this MD&A are presented consistent with the way our management reviews operating results, assesses performance and makes decisions on a "significant market" basis. Management views each of the 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. Our principal operating activities occur in four reportable segments: (1)Las Vegas , (2) Regional, (3) Caesars Digital, and (4) Managed and Branded, in addition to Corporate and Other.
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--------------------------------------------------------------------------------Presentation of Financial Information
The presentation of financial information included in this Item 2 for the periods after our acquisition of William Hill onApril 22, 2021 and the acquisition of an additional interest in Horseshoe Baltimore onAugust 26, 2021 , is not fully comparable to the periods prior to the respective acquisitions. In addition, the presentation of financial information herein for the periods after the sale of various properties is not fully comparable to the periods prior to their respective sale dates. See "Reportable Segments" above for a discussion of changes to the Company's reportable segments. This 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 the factors described in the preceding paragraph and the changing competitive landscape in each of our markets, including changes in market and societal trends, as well as by factors discussed elsewhere herein. We recommend that you read this MD&A in conjunction with our unaudited Financial Statements and the notes to those statements included in this Quarterly Report on Form 10-Q.
Key Performance Metrics
Our primary source of revenue is generated by our gaming operations, our retail and online sports betting, as well as our online gaming. Additionally we utilize our hotels, restaurants, bars, entertainment venues, retail shops, racing 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 and using our sports betting and iGaming applications. Key performance metrics include volume indicators such as drop or 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. Slot win percentage is typically in the range of approximately 9% to 11% of slot handle for both theLas Vegas and Regional segments. Table game hold percentage is typically in the range of approximately 14% to 23% of table game drop in theLas Vegas segment and 18% to 21% of table game drop in the Regional segment. Sports betting hold is typically in the range of 5% to 9% and iGaming hold typically ranges from 3% to 4%. In addition, hotel occupancy, which is the average percentage of available hotel rooms occupied during a period, is a key indicator for our hotel business in theLas Vegas segment. See "Results of Operations" section below. Complimentary rooms are treated as occupied rooms in our calculation of hotel occupancy. The key metrics we utilize to measure our profitability and performance are Adjusted EBITDA and Adjusted EBITDA margin.
Significant Factors Impacting Financial Results
The following summary highlights the significant factors impacting our financial
results for the three and six months ended
Acquisition and Transaction Costs
•William Hill Acquisition - OnApril 22, 2021 , we consummated our previously announced acquisition of the entire issued and to be issued share capital (other than shares owned by us or held in treasury) ofWilliam Hill PLC , in an all-cash transaction of £2.9 billion, or approximately$3.9 billion . We recognized acquisition-related transaction costs of$7 million and$62 million for the three months endedJune 30, 2022 and 2021, respectively, and$8 million and$67 million for the six months endedJune 30, 2022 and 2021, respectively, excluding additional transaction costs associated with the sale ofWilliam Hill International . •Consolidation of Horseshoe Baltimore - OnAugust 26, 2021 , we increased our ownership interest in Horseshoe Baltimore to approximately 75.8%. Prior to the purchase, we held an interest in Horseshoe Baltimore of approximately 44.3% which was accounted for as an equity method investment. Subsequent to the change in ownership, we were determined that we have a controlling financial interest and have consolidated the operations of Horseshoe Baltimore. As discussed in the section above, the operations post consolidation are not fully comparable to the prior periods.
Divestitures and Discontinued Operations
•Divestitures and Discontinued Operations - See "Overview" section above for detail on properties divested or held for sale, including related discontinued operations.
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--------------------------------------------------------------------------------Other Significant Factors
•Economic Factors Impacting Discretionary Spending - Gaming and other leisure activities we offer represent discretionary expenditures which may be sensitive to economic downturns. The resurgence of the Omicron variant of COVID-19 continued to impact the beginning of the year, however, many of our properties experienced positive trends during much of the six months endedJune 30, 2022 including higher hotel occupancy, particularly inLas Vegas , and increased gaming and food and beverage volumes coupled with improved product mix. During 2021, mandates and restrictions on maximum capacities and amenities available were eased, discretionary consumer spending was supplemented via governmental stimulus, and pent-up consumer demand from the prolong impact of COVID-19 resulted in strong results across our properties. As a result, our results of operations remain comparable to pre-pandemic years, however, specifically within our Regional segment, are slightly down to the comparative prior year period. In addition to the effects of the increase in consumer discretionary spend in the prior year primarily attributable to government stimulus programs, we are monitoring the trend in higher inflation in the current year and the possible implications on certain customers most affected by lower discretionary income. Although we have seen some reduced visitation from those customers, those not as affected by inflation remain steady or have slightly improved. •Construction Disruption - In lateAugust 2020 , our Regional segment was negatively impacted by Hurricane Laura, causing severe damage toLake Charles , which will remain closed until the fourth quarter of 2022 when construction of a new land-based casino, HorseshoeLake Charles , is expected to be complete. During the six months endedJune 30, 2022 , we reached a final settlement agreement with the insurance carriers for$128 million , before our insurance deductible of$25 million . We recorded a gain of$38 million and$22 million during the six months endedJune 30, 2022 and 2021, respectively, which are included in Transaction and other operating costs, net in our Statements of Operations, as proceeds received for the cost to replace damaged property were in excess of the respective carrying value of the assets. Construction disruption has also been experienced within our Regional segment as we are currently performing significant renovations, remodeling and rebranding of certain properties. See further discussion below within Liquidity and Capital Resources. •Caesars Sportsbook and Caesars Racebook - In connection with the launch and rebranding of the Caesars Sportsbook app, our Caesars Digital segment initiated a significant marketing campaign with distinguished actors, former athletes and other media personalities. As new states and jurisdictions have legalized sports betting, we have made significant upfront investments which have been executed through marketing campaigns and promotional incentives to acquire new customers and establish ourselves as an industry leader. For example, in connection with the launch of our Caesars Sportsbook app in the state ofNew York onJanuary 8, 2022 andLouisiana onJanuary 28, 2022 , we experienced negative net revenue at the beginning of 2022 resulting from a substantial amount of bonus cash and matched deposits issued to customers as sign-on incentives, which exceeded our gaming win. Our level of investment and types of incentives provided are discretionary and are not expected to continue at elevated levels subsequent to the initial launch period. In addition, as our Caesars Racebook launches in new states and jurisdictions, we may offer deposit matching incentives to new users. A significant portion of our marketing and promotional costs are variable and we continue to monitor and adjust our level of investment based on jurisdiction specific conditions, customer behaviors, and results observed from prior state launches.
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--------------------------------------------------------------------------------Results of Operations
The following table highlights the results of our operations:
Three Months Ended June 30, Six Months Ended June 30,
(Dollars in millions) 2022 2021 2022 2021
Net revenues:
Las Vegas $ 1,142 $ 855 $ 2,056 $ 1,352
Regional 1,455 1,490 2,818 2,681
Caesars Digital 152 86 99 125
Managed and Branded 74 66 140 127
Corporate and Other (a) (2) 5 - 9
Total $ 2,821 $ 2,502 $ 5,113 $ 4,294
Net income (loss) $ (121) $ 72 $ (801) $ (352)
Adjusted EBITDA (b):
Las Vegas $ 547 $ 423 $ 947 $ 585
Regional 513 602 972 995
Caesars Digital (69) (5) (623) (7)
Managed and Branded 22 26 42 47
Corporate and Other (a) (35) (42) (64) (81)
Total $ 978 $ 1,004 $ 1,274 $ 1,539
Net income (loss) margin (4.3) % 2.9 % (15.7) % (8.2) %
Adjusted EBITDA margin 34.7 % 40.1 % 24.9 % 35.8 %
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(a)Corporate and Other includes revenues related to certain licensing arrangements and various revenue sharing agreements. Corporate and Other Adjusted EBITDA includes corporate overhead costs, which consist of certain expenses, such as: payroll, professional fees and other general and administrative expenses.
(b)See the "Supplemental Unaudited Presentation of Consolidated Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")" discussion later in this MD&A for a definition of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA.
Consolidated comparison of the three and six months ended
Net Revenues
Net revenues were as follows:
Three Months Ended June 30, Percent Six Months Ended June 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance
Change
Casino and pari-mutuel commissions$ 1,549 $ 1,571 $ (22) (1.4) %$ 2,841 $ 2,798 $ 43 1.5 % Food and beverage 422 281 141 50.2 % 761 450 311 69.1 % Hotel 519 396 123 31.1 % 902 611 291 47.6 % Other 331 254 77 30.3 % 609 435 174 40.0 % Net Revenues$ 2,821 $ 2,502 $ 319 12.7 %$ 5,113 $ 4,294 $ 819 19.1 % Despite the resurgence of the Omicron variant during the beginning of 2022, consolidated net revenues increased for the three and six months endedJune 30, 2022 as compared to the same prior year periods. The Company's net revenues have benefited from increased gaming volumes, hotel occupancy, and food and beverage offerings, particularly inLas Vegas . The Company continues to remain strategic with new food and beverage offerings with a focus on operating margins. Live entertainment events and conventions continue to increase year over year following the prolonged impacts from COVID-19. Additionally, the consolidation of Horseshoe Baltimore onAugust 26, 2021 contributed to the increase in net revenues for the three and six months endedJune 30, 2022 . These increases were offset slightly by negative gaming revenue in our Caesars Digital segment in the first quarter of 2022 and the impact of our recent divestitures, described above.
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--------------------------------------------------------------------------------Operating Expenses
Operating expenses were as follows:
Three Months Ended June 30, Percent Six Months Ended June 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Casino and pari-mutuel
commissions $ 825 $ 694 $ 131 18.9 % $ 1,889 $ 1,281 $ 608 47.5 %
Food and beverage 242 166 76 45.8 % 444 274 170 62.0 %
Hotel 134 106 28 26.4 % 249 187 62 33.2 %
Other 105 79 26 32.9 % 193 148 45 30.4 %
General and administrative 517 418 99 23.7 % 1,016 798 218 27.3 %
Corporate 76 76 - - % 145 142 3 2.1 %
Depreciation and amortization 306 301 5 1.7 % 606 566 40 7.1 %
Transaction and other
operating costs, net 14 72 (58) (80.6) % (21) 92 (113) *
Total operating expenses
16.1 %$ 4,521 $ 3,488 $ 1,033 29.6 % ___________________ * Not meaningful. Casino and pari-mutuel expenses consist primarily of salaries and wages associated with our gaming operations, gaming taxes and marketing and promotions costs attributable to our Caesars Digital segment. Food and beverage expenses consist principally of salaries and wages and costs of goods sold associated with our food and beverage operations. Hotel expenses consist principally of salaries, wages and supplies associated with our hotel operations. Other expenses consist principally of salaries and wages, costs of goods sold and professional talent fees associated with our retail, entertainment and other operations. Casino, food and beverage, hotel, and other expenses for the three and six months endedJune 30, 2022 increased year over year as a result of the William Hill Acquisition and the consolidation of Horseshoe Baltimore. During the six months endedJune 30, 2022 , advertising costs consisting of television, radio and internet marketing campaigns directly attributable to our Caesars Sportsbook app also contributed to the increase in Casino and pari-mutuel commissions, particularly during the launch of the app inNew York andLouisiana during the first quarter. These increases were partially offset as we scaled back our advertising efforts during the three months endedJune 30, 2022 and continue to identify more efficient methods to manage marketing and promotional spend and reduce gaming expenses within ourLas Vegas and Regional segments. We also continue to focus on labor efficiencies to manage rising labor costs. Moreover, we have managed recent increases in food costs by focusing on efficiencies within food and beverage venues and menu options.
General and administrative expenses include items such as information technology, facility maintenance, utilities, property and liability insurance, expenses for administrative departments such as accounting, compliance, purchasing, human resources, legal and internal audit, and property taxes. General and administrative expenses also include other marketing expenses indirectly related to our gaming and non-gaming operations.
General and administrative expenses and depreciation and amortization expense increased for the three and six months endedJune 30, 2022 as compared to the same prior year period, mainly due to the William Hill Acquisition and the consolidation of Horseshoe Baltimore. Transaction and other operating costs decreased for the three and six months endedJune 30, 2022 as compared to the same prior year period due a gain of approximately$38 million as proceeds received for theLake Charles property damage were in excess of the respective carrying value of the assets. Additionally, no significant acquisition related transaction costs were incurred during the year as compared to the William Hill Acquisition in the prior year.
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--------------------------------------------------------------------------------Other income (expenses)
Other income (expenses) were as follows:
Three Months Ended June 30, Percent Six Months Ended June 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Interest expense, net $ (559) $ (576) $ 17 3.0 % $ (1,111) $ (1,155) $ 44 3.8 %
Loss on extinguishment of
debt - (23) 23 100.0 % - (23) 23 100.0 %
Other income (loss) 45 110 (65) (59.1) % 49 (23) 72 *
Benefit (provision) for
income taxes (52) 1 (53) * 55 77 (22) (28.6) %
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* Not meaningful.
Interest expense, net decreased for the three and six months ended June 30,
2022 , as compared to the same prior year period due to the extinguishment of 5%
Convertible Notes in June 2021 , partial repurchase of the CEI Senior Notes
completed in October 2021 , the repricing of CRC Incremental Term Loan in
September 2021 and partial repurchases of CEI Senior Notes and CRC Senior
Secured Notes during the three months ended June 30, 2022 . Additionally, on
September 24, 2021 , the Company issued $1.2 billion in aggregate principal
amount of 4.625% Senior Notes due 2029. Proceeds from the issuance of the Senior
Notes, as well as cash on hand, was used to repay the $1.7 billion aggregate
principal amount of 5.25% CRC Notes. These decreases were offset slightly by the
consolidation of debt held by Horseshoe Baltimore.
Loss on extinguishment of debt decreased for the three and six months ended
For the three and six months endedJune 30, 2022 , other income (loss) primarily consisted of a gain related to the resolution of a portion of disputed claims liability related to Former Caesars' bankruptcy and a change in the fair value of foreign exchange forward contracts, offset by the change in fair value of investments. For the three and six months endedJune 30, 2021 , other income (loss) primarily consisted of a loss on the change in fair value of a derivative liability, offset by a foreign exchange transaction gain. The income tax benefit (provision) for the three and six months endedJune 30, 2022 differed from the expected income tax benefit (provision) based on the federal tax rate of 21% primarily due to a true-up adjustment related to the tax impact of the settlement of preexisting relationships upon the acquisition of William Hill in 2021. The income tax benefit (provision) for the three and six months endedJune 30, 2021 differed from the expected income tax benefit (provision) based on the federal tax rate of 21% due to the tax impacts of; (i) changes in certainU.S. state tax laws and theUnited Kingdom tax rate, each enacted inJune 2021 , (ii) certain income and deductions that are not tax benefited, and (iii) the reclassification of Horseshoe Hammond from held for sale.
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Segment comparison of the three and six months ended
Las Vegas Segment
Three Months Ended June 30, Percent Six Months Ended June 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Revenues:
Casino and pari-mutuel commissions $ 315$ 315 $ - - %$ 606 $ 541 $ 65 12.0 % Food and beverage 291 171 120 70.2 % 511 255 256 100.4 % Hotel 358 242 116 47.9 % 624 357 267 74.8 % Other 178 127 51 40.2 % 315 199 116 58.3 % Net Revenues$ 1,142 $ 855 $ 287 33.6 %$ 2,056 $ 1,352 $ 704 52.1 % Table game drop $ 903$ 789 $ 114 14.4 %$ 1,704 $ 1,369 $ 335 24.5 % Table game hold % 20.8 % 17.4 % 3.4 pts 21.3 % 18.5 % 2.8 pts Slot handle$ 2,669 $ 2,823 $ (154) (5.5) %$ 5,157 $ 4,585 $ 572 12.5 % Hotel occupancy 96.6 % 89.0 % 7.6 pts 89.8 % 75.4 % 14.4 pts Adjusted EBITDA $ 547$ 423 $ 124 29.3 %$ 947 $ 585 $ 362 61.9 % Adjusted EBITDA margin 47.9 % 49.5 % (1.6) pts 46.1 % 43.3 % 2.8 pts Net income attributable to Caesars $ 313$ 184 $ 129 70.1 %$ 481 $ 117 $ 364 * ___________________ * Not meaningful. For the three and six months endedJune 30, 2022 , theLas Vegas segment's net revenues and Adjusted EBITDA increased year over year. Despite the negative impact of the resurgence of the Omicron variant of COVID-19 on the beginning of 2022, including cancellations and postponements of significant entertainment offerings, events and conventions, theLas Vegas segment experienced strong, positive trends year over year with increases in hotel occupancy and higher gaming and food and beverage volumes. For the three and six months endedJune 30, 2022 , slot win percentage in theLas Vegas segment was within our typical range. Regional Segment Three Months Ended June 30, Percent Six Months Ended June 30, Percent (Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Revenues:
Casino and pari-mutuel commissions$ 1,098 $ 1,178 $ (80) (6.8) %$ 2,168 $ 2,145 $ 23 1.1 % Food and beverage 131 109 22 20.2 % 250 193 57 29.5 % Hotel 161 154 7 4.5 % 278 254 24 9.4 % Other 65 49 16 32.7 % 122 89 33 37.1 % Net Revenues$ 1,455 $ 1,490 $ (35) (2.3) %$ 2,818 $ 2,681 $ 137 5.1 % Table game drop$ 1,059 $ 1,140 $ (81) (7.1) %$ 2,117 $ 2,117 $ - - % Table game hold % 22.9 % 20.9 % 2 pts 22.6 % 20.9 % 1.7 pts Slot handle$ 10,929 $ 12,190 $ (1,261) (10.3) %$ 21,341 $ 22,132 $ (791) (3.6) % Adjusted EBITDA $ 513$ 602 $ (89) (14.8) %$ 972 $ 995 $ (23) (2.3) % Adjusted EBITDA margin 35.3 % 40.4 % (5.1) pts 34.5 % 37.1 % (2.6) pts Net income attributable to Caesars $ 145$ 251 $ (106) (42.2) %$ 269 $ 316 $ (47) (14.9) % Table of Contents 43 -------------------------------------------------------------------------------- Regional segment's Adjusted EBITDA, Adjusted EBITDA margin, and gaming volumes decreased for the three and six months endedJune 30, 2022 compared to the same prior year period. The reduction in mandates and restrictions, combined with pent up consumer demand and supplemental discretionary spend from governmental stimulus resulted in strong results during 2021. Performance among our Regional properties was affected by a resurgence of the Omicron variant of COVID-19 in the beginning of 2022, however, the Regional segment subsequently experienced positive results due to increased food and beverage offerings and an increase in banquets. Although net revenues are up for the six months endedJune 30, 2022 , the second quarter experienced softening as customers' discretionary spending has been impacted when compared to the prior year period, which benefited from government stimulus programs. We are monitoring these trends in the current year and the possible implications on certain customers most affected by lower discretionary income. Although we have seen some reduced visitation from those customers, those not as affected by inflationary pressures remain steady or have slightly improved. In addition, certain of our properties have experienced increased competition with the opening of a new casino resort inGary, Indiana . Further, renovations and capital projects at Harrah'sNew Orleans andAtlantic City properties have led to slight disruptions in operations. Despite these headwinds, and the impact of our recent divestitures described above, our results of operations remain strong as compared to pre-pandemic years. The consolidation of Horseshoe Baltimore has also had a positive impact to our results. Table game hold percentage in the Regional segment for the three and six months endedJune 30, 2022 was slightly higher than our typical range. Slot win percentage in the Regional segment for the three and six months endedJune 30, 2022 was within our typical range. Caesars Digital Segment Three Months Ended June 30, Percent Six Months Ended June 30, Percent (Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Revenues:
Casino and pari-mutuel commissions (a) $ 137$ 78 $ 59 75.6 % $ 68$ 112 $ (44) (39.3) % Other 15 8 7 87.5 % 31 13 18 138.5 % Net Revenues $ 152$ 86 $ 66 76.7 % $ 99$ 125 $ (26) (20.8) % Sports betting handle (b)$ 2,631 $ 900 $ 1,731 192.3 %$ 7,321 $ 913 $ 6,408 * Sports betting hold % 4.6 % 5.6 % (1) pts 4.8 % 5.5 % (0.7) pts iGaming handle$ 2,090 $ 1,218 $ 872 71.6 %$ 4,267 $ 2,287 $ 1,980 86.6 % iGaming hold % 3.3 % 3.3 % (0) pts 3.2 % 3.4 % (0.2) pts Adjusted EBITDA $ (69)$ (5) $ (64) *$ (623) $ (7) $ (616) * Adjusted EBITDA margin (45.4) % (5.8) % (39.6) pts * (5.6) % * Net loss attributable to Caesars$ (116) $ (22) $ (94) *$ (692) $ (30) $ (662) * ___________________ * Not meaningful. (a)Includes total promotional and complimentary incentives related to sports betting, iGaming, and poker of$66 million and$19 million for the three months endedJune 30, 2022 and 2021, respectively, and$439 million and$30 million for the six months endedJune 30, 2022 and 2021, respectively. Promotional and complimentary incentives for poker were$8 million and$3 million for the three months endedJune 30, 2022 and 2021, respectively, and$13 million and$5 million for the six months endedJune 30, 2022 and 2021, respectively. (b)Caesars Digital generated an additional$261 million and$129 million of sports betting handle, for the three months endedJune 30, 2022 and 2021, respectively, and$604 million and$129 million for the six months endedJune 30, 2022 and 2021, respectively, which is not included in this table, for select wholly-owned and third-party operations for which Caesars Digital provides services and we receive all, or a share of, the net profits. Hold related to these operations was 7.7% and 9.1%, for the three months endedJune 30, 2022 and 2021, respectively, and 8.7% and 9.1% for the six months endedJune 30, 2022 and 2021, respectively. Sports betting handle includes$14 million and$12 million for the three months endedJune 30, 2022 and 2021, respectively, and$27 million and$12 million for the six months endedJune 30, 2022 and 2021, respectively, related to horse racing and pari-mutuel wagers.
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Caesars Digital includes Caesars' operations for retail and mobile sports
betting, online casino, and poker, which includes our Caesars Sportsbook app and
our Caesars Racebook app. Caesars Digital's sports betting handle and iGaming
handle increased significantly for the three and six months ended June 30, 2022
compared to the same prior year period due to the William Hill Acquisition, the
launch of our new Caesars Sportsbook app in 2021, and the expansion of sports
betting into additional states subsequent to the acquisition. Net Revenues
increased during the three months ended June 30, 2022 , as we significantly
scaled back promotions such as cash bonuses and matched deposits offered to new
customers as sign-on incentives as compared to those offered in the first
quarter with the launch of the Caesars Sportsbook app in New York and Louisiana .
Outside of these promotional launch periods, we continue to rationalize our
promotional and marketing spend and reduce gaming expenses.
We expect to continue to expand into new states and jurisdictions with our apps,
our Caesars branded sportsbooks, and our iGaming applications, to the extent
such jurisdictions allow. During significant promotional periods, such as
entering these new jurisdictions, we may deploy a significant level of marketing
spend to build brand awareness and acquire and retain customers.
As sports betting and online casinos expand through increased state legalization
and customer adoption, increases in marketing and promotional costs in highly
competitive markets may negatively impact Caesars Digital's net revenues,
Adjusted EBITDA and margin in comparison to prior periods. These periods are not
expected to be long in duration as we use our discretion to determine the level
of investment for a particular jurisdiction.
Managed and Branded Segment
Three Months Ended June 30, Six Months Ended June 30,
(Dollars in millions) 2022 2021 Variance Percent Change 2022 2021 Variance Percent Change
Revenues:
Food and beverage $ - $ 1 $ (1) (100.0) % $ - $ 2 $ (2) (100.0) %
Other 74 65 9 13.8 % 140 125 15 12.0 %
Net Revenues $ 74 $ 66 $ 8 12.1 % $ 140 $ 127 $ 13 10.2 %
Adjusted EBITDA $ 22 $ 26 $ (4) (15.4) % $ 42 $ 47 $ (5) (10.6) %
Adjusted EBITDA margin 29.7 % 39.4 % (9.7) pts 30.0 % 37.0 % (7) pts
Net income (loss)
attributable to Caesars $ (132) $ (13) $ (119) * $ (343) $ 2 $ (345) *
___________________
* Not meaningful.
We manage several properties and license rights to the use of our brands. These
revenue agreements typically include reimbursement of certain costs that we
incur directly. Such costs are primarily related to payroll costs incurred on
behalf of the properties under management. The revenue related to these
reimbursable management costs has a direct impact on our evaluation of Adjusted
EBITDA margin which, when excluded, reflects margins typically realized from
such agreements. The table below presents the amount included in net revenues
and total operating expenses related to these reimbursable costs.
Three Months Ended June 30, Percent Six Months Ended June 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Reimbursable management
revenue $ 52 $ 40 $ 12 30.0 % $ 98 $ 80 $ 18 22.5 %
Reimbursable management
cost 52 40 12 30.0 % 98 80 18 22.5 %
In connection with the closing of the sale of Caesars Southern Indiana on
September 3, 2021 , the Company and the Eastern Band of Cherokee Indians extended
their existing relationship by entering into a 10-year brand license agreement
for the continued use of the Caesars brand and Caesars Rewards loyalty program
at Caesars Southern Indiana. Caesars Southern Indiana was previously reported
within the Regional segment and subsequent to the sale, as a result of the
license agreement, is reported within the Managed and Branded segment. The
increase was slightly offset by the consolidation of Horseshoe Baltimore
beginning in the third quarter of 2021. The operations of the property are
included in the Regional segment and management revenue is eliminated upon
consolidation.
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Corporate & Other
Three Months Ended June 30, Percent Six Months Ended June 30,
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Percent Change
Revenues:
Casino and pari-mutuel
commissions $ (1) $ - $ (1) * $ (1) $ - $ (1) *
Other (1) 5 (6) * 1 9 (8) (88.9) %
Net Revenues $ (2) $ 5 $ (7) * $ - $ 9 $ (9) (100.0) %
Adjusted EBITDA $ (35) $ (42) $ 7 16.7 % $ (64) $ (81) $ 17 21.0 %
___________________
* Not meaningful.
Supplemental Unaudited Presentation of Consolidated Adjusted Earnings Before
Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") for the Three
and Six Months Ended June 30, 2022 and 2021
Adjusted EBITDA (described 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 our
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 net income (loss) before
interest income or interest expense, net of interest capitalized, (benefit)
provision for income taxes, (gain) loss on investments and marketable
securities, depreciation and amortization, stock-based compensation, impairment
charges, transaction expenses, severance expense, selling costs associated with
the divestitures of properties, 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, certain
litigation awards and settlements, contract exit or termination costs, and
certain regulatory settlements. Adjusted EBITDA also excludes the expense
associated with certain of our leases as these transactions were accounted for
as financing obligations 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
("GAAP"). It 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 leases with affiliates of GLPI and VICI 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.
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The following tables summarize our Adjusted EBITDA for the three and six months
ended
Three Months Ended June 30,
(In millions) 2022 2021
Net income (loss) attributable to Caesars $ (123) $ 71
Net income attributable to noncontrolling interests 2 1
Discontinued operations, net of income taxes 157 30
(Benefit) provision for income taxes 52 (1)
Other income (a) (45) (110)
Loss on extinguishment of debt - 23
Interest expense, net 559 576
Depreciation and amortization 306 301
Transaction and other operating costs, net (b) 14 72
Stock-based compensation expense 26 20
Other items (c) 30 21
Adjusted EBITDA 978 1,004
Pre-consolidation, pre-acquisition, and pre-disposition EBITDA,
net (d) - 7
Total Adjusted EBITDA $ 978 $ 1,011
Six Months Ended June 30,
(In millions) 2022 2021
Net loss attributable to Caesars $ (803) $ (352)
Net income attributable to noncontrolling interests 2 -
Discontinued operations, net of income taxes 386 34
Benefit for income taxes (55) (77)
Other (income) loss (a) (49) 23
Loss on extinguishment of debt - 23
Interest expense, net 1,111 1,155
Depreciation and amortization 606 566
Transaction and other operating costs, net (b) (21) 92
Stock-based compensation expense 51 43
Other items (c) 46 32
Adjusted EBITDA 1,274 1,539
Pre-consolidation, pre-acquisition, and pre-disposition EBITDA,
net (d) - (7)
Total Adjusted EBITDA $ 1,274 $ 1,532
____________________
(a)Other income for the three and six months ended
(b)Transaction and other operating costs, net for the three and six months endedJune 30, 2022 primarily represents a gain resulting from insurance proceeds received in excess of the respective carrying value of the assets damaged atLake Charles by Hurricane Laura in Q1 2022 partially offset by various contract or license termination costs. Transaction and other operating costs, net for the three and six months endedJune 30, 2021 primarily represent costs related to the William Hill Acquisition and the Merger, various contract or license termination exit costs, professional services, other acquisition costs and severance costs.
(c)Other items primarily represent certain consulting and legal fees, rent for non-operating assets, relocation expenses, retention bonuses, and business optimization expenses.
(d)Results of operations for Horseshoe Baltimore for periods prior to the consolidation resulting from the Company's increase in its ownership interest onAugust 26, 2021 and William Hill prior to its acquisition onApril 22, 2021 are added to Adjusted EBITDA. The results of operations for MontBleu,Evansville , and Belle ofBaton Rouge prior to divestiture are subtracted from Adjusted EBITDA. Such figures are based on unaudited internal financial statements and have not been reviewed by the Company's auditors for the periods presented. The additional financial information is included to enable the comparison of current results with results of prior periods.
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47
--------------------------------------------------------------------------------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 existing cash on hand, contracted asset sales, cash flows from our subsidiaries and our ability to raise capital. Our primary sources of liquidity and capital resources are existing cash on hand, cash flows from operations, availability of borrowings under our revolving credit facilities, proceeds from the issuance of debt and equity securities and proceeds from completed asset sales. Our cash requirements may fluctuate significantly depending on our decisions with respect to business acquisitions or divestitures and strategic capital and marketing investments. As ofJune 30, 2022 , our cash on hand and revolving borrowing capacity was as follows: (In millions) June 30, 2022 Cash and cash equivalents $ 997 Revolver capacity (a) 2,180 Revolver capacity committed to letters of credit
(77)
Available revolver capacity committed as regulatory requirement (48) Total$ 3,052 ___________________
(a)Revolver capacity includes
During the six months endedJune 30, 2022 , our operating activities generated operating cash inflows of$116 million , as compared to operating cash inflows of$672 million during the six months endedJune 30, 2021 due to the results of operations described above. In addition, as a result of our debt reduction and the reduction in our borrowing rates, our interest rate payments have been reduced. OnSeptember 30, 2020 , the Company announced that it had reached an agreement withWilliam 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 the Company or held in treasury) ofWilliam Hill PLC , in an all-cash transaction. OnApril 22, 2021 , the Company completed the acquisition ofWilliam Hill PLC for £2.9 billion, or approximately$3.9 billion . In connection with the William Hill Acquisition, onApril 22, 2021 , a newly formed subsidiary, the Bridge Facility Borrower, entered into the Bridge Credit Agreement with certain lenders party thereto and Deutsche Bank AG, London Branch, as administrative agent and collateral agent, pursuant to which the lenders party thereto provided the Debt Financing. The Bridge Credit Agreement provides for (a) a 540-day £1.0 billion asset sale bridge facility, (b) a 60-day £503 million cash confirmation bridge facility and (c) a 540-day £116 million revolving credit facility. The proceeds of the bridge loan facilities provided under the Bridge Credit Agreement were used (i) to pay a portion of the cash consideration for the acquisition and (ii) to pay fees and expenses related to the acquisition and related transactions. The proceeds of the revolving credit facility under the Bridge Credit Agreement may be used for working capital and general corporate purposes. The £1.5 billion Interim Facilities Agreement entered into onOctober 6, 2020 with Deutsche Bank AG,London Branch andJPMorgan Chase Bank, N.A ., and amended onDecember 11, 2020 , was terminated upon the execution of the Bridge Credit Agreement. OnMay 12, 2021 , the Company repaid the £503 million cash confirmation bridge facility. OnJune 14, 2021 , the Company drew down the full £116 million from the revolving credit facility and the proceeds, in addition to excess Company cash, were used to make a partial repayment of the asset sale bridge facility in the amount of £700 million. OnJuly 1, 2022 , outstanding borrowings under the Bridge Credit Agreement were repaid immediately following the sale ofWilliam Hill International , all of which were held for sale as of the date of the closing of the William Hill Acquisition and are reflected within discontinued operations. Certain investments acquired have been excluded from the held for sale asset group. OnSeptember 8, 2021 , the Company entered into an agreement to sellWilliam Hill International to 888 Holdings Plc for approximately £2.2 billion. In order to manage the risk of changes in the GBP denominated sales price and expected proceeds, the Company entered into foreign exchange forward contracts. OnApril 7, 2022 , the Company amended the agreement to sell the non-US assets of William Hill to 888 Holdings Plc for a revised enterprise value of approximately £2.0 billion. The amended agreement reflects a £250 million reduction in consideration payable at closing and up to £100 million as deferred consideration to be paid to the Company, subject to 888 Holdings Plc meeting certain 2023 financial targets. During the three and six months endedJune 30, 2022 , the Company recorded impairments to assets held for sale of$174 million and$503 million , respectively, within discontinued operations based on the revised and final sales prices.
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On July 1, 2022 the Company completed the sale of William Hill International to
888 Holdings Plc. After the repayment of the Bridge Credit Agreement, other
permitted leakage, and the settlement of related forward contracts, Caesars
received net proceeds of $730 million . Including open market repurchases during
the second quarter and subsequent repurchases and repayments in July 2022 , the
Company utilized all $730 million to reduce the Company's outstanding debt.
We expect that our primary capital requirements going forward will relate to the
expansion and maintenance of our properties, taxes, servicing our outstanding
indebtedness, and rent payments under our GLPI Master Lease, the 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 the remainder of 2022 are expected to increase
compared to prior periods as a result of increased expansion projects, the
rebranding of certain properties, implementation and migration of our Caesars
Sportsbook and iGaming applications in certain states to our Liberty platform,
and continued investment into new markets with our Caesars Sportsbook and
iGaming applications in our Caesars Digital segment. In addition, we may, from
time to time, seek to repurchase our outstanding indebtedness. Any such
purchases may be funded by existing cash balances or the incurrence of debt. The
amount and timing of any repurchase will be based on business and market
conditions, capital availability, compliance with debt covenants and other
considerations.
We continue to expand into new markets with projects such as Caesars Virginia,
which is expected to be a $500 million premier destination resort casino. The
property plans to include a 500 room hotel and casino including slot machines,
table games, WSOP Room and Caesars Sportsbook. Additionally, Caesars announced
the plans to expand into Nebraska with the development of a Harrah's casino and
racetrack.
In 2020, we funded $400 million to escrow as of the closing of the Merger and
have begun to utilize those funds in accordance with a three year capital
expenditure plan in the state of New Jersey . This amount is currently included
in restricted cash in Other assets, net. As of June 30, 2022 , our restricted
cash balance in the escrow account was $189 million for future capital
expenditures in New Jersey .
As a condition of the extension of the casino operating contract and ground
lease for Harrah's New Orleans , we are also required to make a capital
investment of $325 million in Harrah's New Orleans by July 15, 2024 . The capital
investment will include a renovation and full interior and exterior redesign,
updated casino floor, new culinary experiences and a new 340 room hotel tower as
we are also in the process of rebranding the property as Caesars New Orleans. We
expect to meet our required investment as the project has a current capital plan
of $430 million as of June 30, 2022 . Total capital expenditures have been
$64 million since the project began.
On August 27, 2020 , Hurricane Laura made landfall on Lake Charles as a Category
4 storm severely damaging the Isle of Capri Casino Lake Charles . During the six
months ended June 30, 2022 , the Company reached a final settlement agreement
with the insurance carriers for a total amount of $128 million , before our
insurance deductible of $25 million , of which $100 million has been received by
the Company related to damaged fixed assets and remediation costs and business
interruption. The remaining $3 million is included in Accounts receivable, net
and is expected to be received in the third quarter of 2022. The property will
remain closed until the fourth quarter of 2022 when construction of a new
land-based casino, Horseshoe Lake Charles, is expected to be complete.
Cash spent for capital expenditures totaled $471 million and $177 million for
the six months ended June 30, 2022 and 2021, respectively. The following table
summarizes our capital expenditures for the six months ended June 30, 2022 , and
an estimated range of capital expenditures for the remainder of 2022:
Six Months Ended June
Estimate of
30, 2022 Expenditures for 2022
(In millions) Actual Low High
Atlantic City $ 108 $ 130 $ 150
Indiana racing operations 3 - 5
Total estimated capital expenditures from
restricted cash 111 130 155
Growth and renovation projects 197 405 560
Caesars Digital 58 55 75
Maintenance projects 105 185 235
Total estimated capital expenditures from
unrestricted cash and insurance proceeds 360 645 870
Total $ 471 $ 775 $ 1,025
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49-------------------------------------------------------------------------------- A significant portion of our liquidity needs are for debt service and payments associated with our leases. Our estimated debt service (including principal and interest) is approximately$484 million for the remainder of 2022, excluding the early extinguishment of debt inJuly 2022 , which we estimate would reduce our debt service payments for the remainder of 2022 by approximately$20 million based on projected rates as ofJune 30, 2022 , for our variable rate debt subject to changes in LIBOR. We also lease certain real property assets from third parties, including VICI and GLPI. We estimate our lease payments to VICI and GLPI to be approximately$600 million for the remainder of 2022. The Company periodically divests assets to raise capital or, in some cases, to comply with conditions, terms, obligations or restrictions imposed by antitrust, gaming and other regulatory entities.
On
If the agreed upon selling price for future divestitures does not exceed the carrying value of the assets, we may be required to record additional impairment charges in future periods which may be material. We expect that our current liquidity, cash flows from operations, availability of borrowings under committed credit facilities and proceeds from the announced asset sales will be sufficient to fund our operations, capital requirements and service our outstanding indebtedness for the next twelve months. However, we cannot be certain that the COVID-19 public health emergency will not adversely affect our business, financial condition and results of operations in the future, or cause disruption in the financial markets that could adversely affect ability to access additional capital.
Debt and Master Lease Covenant Compliance
The CRC Credit Agreement, the CEI Revolving Credit Facility, the Baltimore Term Loan, the Baltimore Revolving Credit Facility and the indentures related to the CEI Senior Secured Notes, the CEI Senior Notes, the CRC Senior Secured Notes and the Senior 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, including dividends, grant liens, sell assets and make acquisitions. The CRC Revolving Credit Facility and the 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. The Baltimore Revolving Credit Facility includes a senior secured leverage ratio financial covenant of 5.0:1. Failure to comply with such covenants could result in an acceleration of the maturity of indebtedness outstanding under the relevant debt document.
The GLPI Leases and VICI Leases contain certain covenants requiring minimum capital expenditures based on a percentage of net revenues along with maintaining certain financial ratios.
The Bridge Credit Agreement associated with the completed divestiture ofWilliam Hill International , which was presented within liabilities held for sale as ofJune 30, 2022 , included a financial covenant requiring the Bridge Facility Borrower to comply with a maximum total net leverage ratio of 10.50 to 1.00. The borrowings under the Bridge Credit Agreement were guaranteed by the Bridge Facility Borrower and the Bridge Facility Borrower's material wholly-owned subsidiaries (subject to exceptions), and were secured by a pledge of substantially all of the existing and future property and assets of the Bridge Facility Borrower and the guarantors (subject to exceptions). The outstanding debt under the Bridge Credit Agreement was fully repaid upon closing of the sale ofWilliam Hill International onJuly 1, 2022 . Additionally, no financial covenants were related to the$850 million of debt from the two trust deeds assumed in the William Hill Acquisition, which are also held for sale as ofJune 30, 2022 . The two trust deeds were included within liabilities held for sale, which were disposed of onJuly 1, 2022 with the completion of the sale ofWilliam Hill International .
As of
Share Repurchase Program
InNovember 2018 , our Board of Directors authorized a$150 million common stock repurchase program (the "Share Repurchase Program") pursuant to which we 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 we are required to repurchase under the Share Repurchase Program.
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As of June 30, 2022 , we have acquired 223,823 shares of common stock under the
program at an aggregate value of $9 million and an average of $40.80 per share.
No shares were repurchased during the six months ended June 30, 2022 and 2021.
Contractual Obligations
There have been no other material changes during the six months endedJune 30, 2022 to our contractual obligations as disclosed in Part II, Item 7 of our Annual Report on Form 10-K for the year endedDecember 31, 2021 . See Note 8 to our unaudited Financial Statements, which is included elsewhere in this report, for additional information regarding contractual obligations.
Other Liquidity Matters
We are faced with certain contingencies, from time to time, involving litigation, claims, assessments, environmental remediation or compliance. These commitments and contingencies are discussed in greater detail in "Part II, Item 1. Legal Proceedings" and Note 8 to our unaudited Financial Statements, both of which are included elsewhere in this report. In addition, new competition among retail and online operations 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 elsewhere in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Critical Accounting Policies
Our critical accounting policies disclosures are included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . There have been no material changes sinceDecember 31, 2021 . 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 those described in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Off-Balance Sheet Arrangements
We do not currently have any off-balance sheet arrangements.
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