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 nine months endedSeptember 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 (the "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 a 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." In addition, onApril 22, 2021 , we completed the acquisition ofWilliam Hill PLC (the "William Hill Acquisition"). We own, lease or manage an aggregate of 51 domestic properties in 16 states with approximately 52,800 slot machines, video lottery terminals and e-tables, approximately 2,800 table games and approximately 47,500 hotel rooms as ofSeptember 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 ofSeptember 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") and lease theRio All-Suite Hotel & Casino from a separate third party.
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We also operate and conduct sports wagering across 26 jurisdictions in North
America , 19 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
September 30, 2022 :
[[Image Removed: czr-20220930_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 seven states as of September 30, 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 divestitures of our
properties as of September 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. On the acquisition date, our intent was to divest ofWilliam Hill PLC's non-U.S. operations, which included theUK and international online divisions and the retail betting shops (collectively, "William Hill International ") was held for sale as of the date of the closing of the William Hill Acquisition with operations reflected within discontinued operations. 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 provided 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 £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. 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 sellWilliam Hill International to 888 Holdings Plc for a revised enterprise value of approximately £2.0 billion. The amended agreement reflected 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 nine months endedSeptember 30, 2022 , we recorded impairments to assets held for sale of$503 million within discontinued operations based on the revised and final sales prices. OnJuly 1, 2022 , we completed the sale ofWilliam Hill International to 888 Holdings Plc. and outstanding borrowings under the Bridge Credit Agreement were immediately repaid. After the repayment of the Bridge Credit Agreement, other permitted leakage, and the settlement of related forward contracts, we received net proceeds of$730 million . Including open market repurchases and repayments, we utilized all$730 million to reduce our outstanding debt.
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We recognized acquisition-related transaction costs of $2 million and $5 million
for the three months ended September 30, 2022 and 2021, respectively, and
$10 million and $60 million for the nine months ended September 30, 2022 and
2021, respectively, excluding additional transaction costs associated with the
sale of William Hill International . These costs were associated with legal,
professional services and severance costs 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 . Subsequent to the change in ownership, we were determined to have a controlling financial interest and began to consolidate the operations of Horseshoe Baltimore.
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 nine months ended September 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 ofSeptember 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 ofSeptember 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.
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. 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
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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 staying at, or visiting, 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 nine 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$2 million and$5 million for the three months endedSeptember 30, 2022 and 2021, respectively, and$10 million and$60 million for the nine months endedSeptember 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 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, 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 nine months endedSeptember 30, 2022 including higher hotel occupancy and rates, 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 prolonged impact of COVID-19 resulted in strong results across our properties. 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 to Isle ofCapri Casino Hotel Lake Charles , which has remained closed during the construction of our new land-based casino, Horseshoe Lake Charles, which is expected to open onDecember 12, 2022 . During the nine months endedSeptember 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 nine months endedSeptember 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 September 30, Nine Months Ended September 30,
(Dollars in millions) 2022 2021 2022 2021
Net revenues:
Las Vegas $ 1,077 $ 1,017 $ 3,133 $ 2,369
Regional 1,530 1,492 4,348 4,173
Caesars Digital 212 96 311 221
Managed and Branded 70 79 210 206
Corporate and Other (a) (2) 1 (2) 10
Total $ 2,887 $ 2,685 $ 8,000 $ 6,979
Net income (loss) $ 53 $ (231) $ (748) $ (583)
Adjusted EBITDA (b):
Las Vegas $ 480 $ 500 $ 1,427 $ 1,085
Regional 570 554 1,542 1,549
Caesars Digital (38) (164) (661) (171)
Managed and Branded 22 22 64 69
Corporate and Other (a) (22) (42) (86) (123)
Total $ 1,012 $ 870 $ 2,286 $ 2,409
Net income (loss) margin 1.8 % (8.6) % (9.4) % (8.4) %
Adjusted EBITDA margin 35.1 % 32.4 % 28.6 % 34.5 %
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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 nine months ended
Net Revenues
Net revenues were as follows:
Three Months Ended September Nine Months Ended September
30, Percent 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Casino and pari-mutuel
commissions $ 1,605 $ 1,510 $ 95 6.3 % $ 4,446 $ 4,308 $ 138 3.2 %
Food and beverage 411 347 64 18.4 % 1,172 797 375 47.1 %
Hotel 544 511 33 6.5 % 1,446 1,122 324 28.9 %
Other 327 317 10 3.2 % 936 752 184 24.5 %
Net Revenues $ 2,887 $ 2,685 $ 202 7.5 % $ 8,000 $ 6,979 $ 1,021 14.6 %
Despite the resurgence of the Omicron variant during the beginning of 2022,
consolidated net revenues increased for the three and nine months ended
September 30, 2022 as compared to the same prior year periods. The Company's net
revenues have benefited from steady gaming volumes at our properties, increased
hotel occupancy and room rates, and improved food and beverage offerings. The
Company continues to remain strategic with new food and beverage offerings with
a focus on operating margins and product mix. Live entertainment events and
conventions continue to increase year over year following the prolonged impacts
from COVID-19. Additionally, the consolidation of Horseshoe Baltimore on August
26, 2021 contributed to the increase in net revenues for the three and nine
months ended September 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 September Nine Months Ended September
30, Percent 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Casino and pari-mutuel
commissions $ 838 $ 830 $ 8 1.0 % $ 2,727 $ 2,111 $ 616 29.2 %
Food and beverage 240 210 30 14.3 % 684 484 200 41.3 %
Hotel 142 130 12 9.2 % 391 317 74 23.3 %
Other 105 114 (9) (7.9) % 298 262 36 13.7 %
General and administrative 529 486 43 8.8 % 1,545 1,284 261 20.3 %
Corporate 63 86 (23) (26.7) % 208 228 (20) (8.8) %
Depreciation and amortization 304 276 28 10.1 % 910 842 68 8.1 %
Transaction and other
operating costs, net 7 21 (14) (66.7) % (14) 113 (127) *
Total operating expenses $ 2,228 $ 2,153 $ 75 3.5 % $ 6,749 $ 5,641 $ 1,108 19.6 %
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* 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 nine
months ended September 30, 2022 increased year over year as a result of the
William Hill Acquisition and the consolidation of Horseshoe Baltimore. During
the nine months ended September 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 in New York
and Louisiana during the first quarter. These increases were partially offset as
we scaled back our advertising efforts subsequent to the first quarter of 2022
and continue to identify more efficient methods to manage marketing and
promotional spend and reduce gaming expenses within our Las 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 nine months endedSeptember 30, 2022 as compared to the same prior year period, mainly due to the William Hill Acquisition and the consolidation of Horseshoe Baltimore as well as higher utility costs during the third quarter. Transaction and other operating costs decreased for the three and nine months endedSeptember 30, 2022 as compared to the same prior year period due a gain of approximately$38 million as proceeds received for the Isle ofCapri Casino Hotel Lake 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 Nine Months Ended September
September 30, Percent 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Interest expense, net $ (569) $ (579) $ 10 1.7 % $ (1,680) $ (1,734) $ 54 3.1 %
Loss on extinguishment of
debt (33) (117) 84 71.8 % (33) (140) 107 76.4 %
Other income (loss) 4 (153) 157 * 53 (176) 229 *
Benefit (provision) for
income taxes (8) 90 (98) * 47 167 (120) *
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* Not meaningful.
Interest expense, net decreased for the three and nine months ended
September 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 the Caesars Resort
Collection ("CRC") Incremental Term Loan in September 2021 , the partial
repurchases of the CEI Senior Notes and the CRC Senior Secured Notes, and the
partial prepayments of the CRC Incremental Term Loan and the CRC Term Loan
during the nine months ended September 30, 2022 . Additionally, on September 24,
2021 , the Company issued $1.2 billion in aggregate principal amount of the
Senior Notes. Proceeds from the issuance of the Senior Notes, as well as cash on
hand, were used to repay the $1.7 billion aggregate principal amount of the CRC
Notes. These decreases were offset slightly by the consolidation of debt held by
Horseshoe Baltimore.
For the three and nine months ended September 30, 2022 , loss on extinguishment
of debt was related to the early prepayments of the CRC Incremental Term Loan
and the CRC Term Loan. The loss on extinguishment of debt for the three and nine
months ended September 30, 2021 was primarily due to the early repayment of the
CRC Notes and the 5% Convertible Notes.
For the three and nine months ended September 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 nine months ended September 30, 2021 , other
income (loss) primarily consisted of a loss on the change in fair value of
investments and a derivative liability, slightly offset by a foreign exchange
transaction gain.
The income tax provision for the three months ended September 30, 2022 differed
from the expected income tax provision based on the federal tax rate of 21%
primarily due to a decrease in the state deferred tax liabilities as a result of
a reduction in tax rates in Pennsylvania and Iowa . The income tax benefit for
the nine months ended September 30, 2022 differed from the expected income tax
benefit 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 William Hill Acquisition in 2021 and nondeductible
expenses.
The income tax benefit for the three months ended September 30, 2021 differed
from the expected income tax benefit based on the federal tax rate of 21%
primarily due to the realization of capital losses previously not tax benefited
due to the William Hill Acquisition, offset by nondeductible expenses related to
the 5% Convertible Notes conversion The income tax benefit for the nine months
ended September 30, 2021 differed from the expected income tax benefit based on
the federal tax rate of 21% primarily due to the reclassification of Horseshoe
Hammond from held for sale and state taxes, offset by nondeductible expenses
related to the 5% Convertible Notes conversion.
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Segment comparison of the three and nine months ended September 30, 2022 and
2021
Las Vegas Segment
Three Months Ended September Nine Months Ended September
30, Percent 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Revenues:
Casino and pari-mutuel commissions$ 323 $ 329 $ (6) (1.8) %$ 929 $ 870 $ 59 6.8 % Food and beverage 264 221 43 19.5 % 775 476 299 62.8 % Hotel 335 303 32 10.6 % 959 660 299 45.3 % Other 155 164 (9) (5.5) % 470 363 107 29.5 % Net Revenues$ 1,077 $ 1,017 $ 60 5.9 %$ 3,133 $ 2,369 $ 764 32.2 % Table game drop$ 890 $ 805 $ 85 10.6 %$ 2,594 $ 2,174 $ 420 19.3 % Table game hold % 22.2 % 22.6 % (0.4) pts 21.6 % 20.0 % 1.6 pts Slot handle$ 2,599 $ 2,676 $ (77) (2.9) %$ 7,756 $ 7,261 $ 495 6.8 % Hotel occupancy 93.6 % 89.6 % 4 pts 91.1 % 80.3 % 10.8 pts Adjusted EBITDA$ 480 $ 500 $ (20) (4.0) %$ 1,427 $ 1,085 $ 342 31.5 % Adjusted EBITDA margin 44.6 % 49.2 % (4.6) pts 45.5 % 45.8 %
(0.3) pts
Net income attributable to Caesars$ 245 $ 272 $ (27) (9.9) %$ 726 $ 389 $ 337 86.6 % For the three and nine months endedSeptember 30, 2022 , theLas Vegas segment's net revenues increased primarily due to expanded food and beverage offerings, including Bobby's Burgers, Nobu, and TheBedford byMartha Stewart atParis , and continued growth in hotel occupancy and rates, offset by slower gaming revenue growth during the three months endedSeptember 30, 2022 due to gaming capacity disruption caused by the renovation to the front entrance area atCaesars Palace . For the three months endedSeptember 30, 2022 , Adjusted EBITDA and Adjusted EBITDA margin in theLas Vegas segment were negatively impacted by higher utility costs experienced during the quarter.
For the three and nine months ended
Regional Segment
Three Months Ended September
30, Percent Nine Months Ended September 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Revenues:
Casino and pari-mutuel commissions$ 1,096 $ 1,096 $ - - %$ 3,264 $ 3,241 $ 23 0.7 % Food and beverage 147 125 22 17.6 % 397 318 79 24.8 % Hotel 209 208 1 0.5 % 487 462 25 5.4 % Other 78 63 15 23.8 % 200 152 48 31.6 % Net Revenues$ 1,530 $ 1,492 $ 38 2.5 %$ 4,348 $ 4,173 $ 175 4.2 % Table game drop$ 1,151 $ 1,119 $ 32 2.9 %$ 3,268 $ 3,236 $ 32 1.0 % Table game hold % 21.0 % 20.4 % 0.6 pts 22.0 % 20.7 % 1.3 pts Slot handle$ 11,280 $ 11,228 $ 52 0.5 %$ 32,621 $ 33,360 $ (739) (2.2) % Adjusted EBITDA$ 570 $ 554 $ 16 2.9 %$ 1,542 $ 1,549 $ (7) (0.5) % Adjusted EBITDA margin 37.3 % 37.1 % 0.2 pts 35.5 % 37.1 % (1.6) pts Net income attributable to Caesars$ 211 $ 239 $ (28) (11.7) %$ 480 $ 555 $ (75) (13.5) %
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Regional segment's Net Revenues, Adjusted EBITDA and Adjusted EBITDA margin for
the three and nine months ended September 30, 2022 remained comparable to the
same prior year period. Gaming volumes for the three and nine months ended
September 30, 2022 also remain comparable as 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 improved food and
beverage offerings, increased entertainment revenues and an increase in
banquets. The consolidation of Horseshoe Baltimore has also had a positive
impact on our results. We continue to monitor trends observed during the current
year of reduced visitation from certain customers most affected by the current
inflationary pressures whereas those not as affected by such pressures remain
steady or have improved. We also continue to monitor our competitive environment
resulting from the opening of a new casino resort in Gary, Indiana . Further,
renovations and capital projects at Harrah's New Orleans and Atlantic 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.
Table game hold percentage in the Regional segment for the three and nine months
ended September 30, 2022 was slightly higher than our typical range. Slot win
percentage in the Regional segment for the three and nine months ended
September 30, 2022 was within our typical range.
Caesars Digital Segment
Three Months Ended September Nine Months Ended September
30, Percent 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Revenues:
Casino and pari-mutuel
commissions (a) $ 187 $ 85 $ 102 120.0 % $ 255 $ 197 $ 58 29.4 %
Other 25 11 14 127.3 % 56 24 32 133.3 %
Net Revenues $ 212 $ 96 $ 116 120.8 % $ 311 $ 221 $ 90 40.7 %
Sports betting handle (b) $ 2,029 $ 1,528 $ 501 32.8 % $ 9,350 $ 2,442 $ 6,908 *
Sports betting hold % 7.9 % 5.0 % 2.9 pts 5.4 % 5.2 % 0.2 pts
iGaming handle $ 1,787 $ 1,467 $ 320 21.8 % $ 6,054 $ 3,754 $ 2,300 61.3 %
iGaming hold % 3.5 % 3.2 % 0.3 pts 3.3 % 3.3 % (0) pts
Adjusted EBITDA $ (38) $ (164) $ 126 76.8 % $ (661) $ (171) $ (490) *
Adjusted EBITDA margin (17.9) % (170.8) % 152.9 pts * (77.4) % *
Net loss attributable to
Caesars $ (63) $ (190) $ 127 66.8 % $ (755) $ (220) $ (535) *
___________________
* Not meaningful.
(a)Includes total promotional and complimentary incentives related to sports
betting, iGaming, and poker of $48 million and $49 million for the three months
ended September 30, 2022 and 2021, respectively, and $487 million and $79
million for the nine months ended September 30, 2022 and 2021, respectively.
Promotional and complimentary incentives for poker were $5 million and
$6 million for the three months ended September 30, 2022 and 2021, respectively,
and $18 million and $11 million for the nine months ended September 30, 2022 and
2021, respectively.
(b)Caesars Digital generated an additional $220 million and $196 million of
sports betting handle, for the three months ended September 30, 2022 and 2021,
respectively, and $824 million and $325 million for the nine months ended
September 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 14.0% and 11.5%, for the three months ended
September 30, 2022 and 2021, respectively, and 10.1% and 10.5% for the nine
months ended September 30, 2022 and 2021, respectively. Sports betting handle
includes $12 million and $14 million for the three months ended September 30,
2022 and 2021, respectively, and $39 million and $26 million for the nine months
ended September 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, poker, and horse racing, which includes our Caesars
Sportsbook and Caesars Racebook apps. Caesars Digital's sports betting handle
and iGaming handle increased significantly for the three and nine months ended
September 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 and jurisdictions subsequent
to the acquisition. Net Revenues increased during the three months ended
September 30, 2022 due to higher handle and lower promotional and complimentary
incentives as a percentage of Net Revenues during the period. Adjusted EBITDA
loss during the three months ended September 30, 2022 decreased significantly
due to higher Net Revenues and lower marketing expenses.
Sports betting and iGaming hold percentages in the Caesars Digital segment for
the three and nine months ended
We expect to continue to expand into new jurisdictions with our apps, our
Caesars branded retail 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, variations in hold percentages and 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 ongoing level of investment for a particular
jurisdiction.
Managed and Branded Segment
Three Months Ended September Nine Months Ended September
30, 30,
(Dollars in millions) 2022 2021 Variance Percent Change 2022 2021 Variance Percent Change
Revenues:
Food and beverage $ - $ 1 $ (1) (100.0) % $ - $ 3 $ (3) (100.0) %
Other 70 78 (8) (10.3) % 210 203 7 3.4 %
Net Revenues $ 70 $ 79 $ (9) (11.4) % $ 210 $ 206 $ 4 1.9 %
Adjusted EBITDA $ 22 $ 22 $ - - % $ 64 $ 69 $ (5) (7.2) %
Adjusted EBITDA margin 31.4 % 27.8 % 3.6 pts 30.5 % 33.5 % (3) pts
Net income (loss)
attributable to Caesars $ 22 $ 38 $ (16) (42.1) % $ (321) $ 40 $ (361) *
___________________
* 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 September Nine Months Ended September
30, Percent 30, Percent
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Change
Reimbursable management
revenue $ 48 $ 57 $ (9) (15.8) % $ 146 $ 137 $ 9 6.6 %
Reimbursable management
cost 48 57 (9) (15.8) % 146 137 9 6.6 %
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 September Nine Months Ended September
30, Percent 30,
(Dollars in millions) 2022 2021 Variance Change 2022 2021 Variance Percent Change
Revenues:
Casino and pari-mutuel
commissions $ (1) $ - $ (1) * $ (2) $ - $ (2) *
Other (1) 1 (2) * - 10 (10) (100.0) %
Net Revenues $ (2) $ 1 $ (3) * $ (2) $ 10 $ (12) *
Adjusted EBITDA $ (22) $ (42) $ 20 47.6 % $ (86) $ (123) $ 37 30.1 %
___________________
* Not meaningful.
Supplemental Unaudited Presentation of Consolidated Adjusted Earnings Before
Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") for the Three
and Nine Months Ended September 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, depreciation and amortization, (gain) loss on
investments and marketable securities, 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 nine months
ended September 30, 2022 and 2021, respectively, in addition to reconciling net
income (loss) to Adjusted EBITDA in accordance with GAAP (unaudited):
Three Months Ended September 30,
(In millions) 2022 2021
Net income (loss) attributable to Caesars $ 52 $ (233)
Net income attributable to noncontrolling interests 1 2
Discontinued operations, net of income taxes - 4
(Benefit) provision for income taxes 8 (90)
Other (income) loss (a) (4) 153
Loss on extinguishment of debt 33 117
Interest expense, net 569 579
Depreciation and amortization 304 276
Transaction and other operating costs, net (b) 7 21
Stock-based compensation expense 26 21
Other items (c) 16 20
Adjusted EBITDA 1,012 870
Pre-consolidation, pre-acquisition, and pre-disposition EBITDA,
net (d) - 10
Total Adjusted EBITDA $ 1,012 $ 880
Nine Months Ended September 30,
(In millions) 2022 2021
Net loss attributable to Caesars $ (751) $ (585)
Net income attributable to noncontrolling interests 3 2
Discontinued operations, net of income taxes 386 38
Benefit for income taxes (47) (167)
Other (income) loss (a) (53) 176
Loss on extinguishment of debt 33 140
Interest expense, net 1,680 1,734
Depreciation and amortization 910 842
Transaction and other operating costs, net (b) (14) 113
Stock-based compensation expense 77 64
Other items (c) 62 52
Adjusted EBITDA 2,286 2,409
Pre-consolidation, pre-acquisition, and pre-disposition EBITDA,
net (d) - 3
Total Adjusted EBITDA $ 2,286 $ 2,412
____________________
(a)Other income for the three and nine months ended September 30, 2022 primarily
represents the net changes in fair value of (i) investments held by the Company,
(ii) foreign exchange forward contracts, and (iii) the disputed claims liability
related to Former Caesars' bankruptcy prior to the Merger. Other loss for the
three and nine months ended September 30, 2021 primarily represents a loss on
the change in fair value of investments held by the Company and a loss on the
change in fair value of the derivative liability related to the 5% Convertible
Notes.
(b)Transaction and other operating costs, net for the three and nine months
ended September 30, 2022 primarily represents a gain resulting from insurance
proceeds received in excess of the respective carrying value of the assets
damaged at Lake 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 nine months ended September 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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--------------------------------------------------------------------------------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 ofSeptember 30, 2022 , our cash on hand and revolving borrowing capacity was as follows: (In millions) September 30, 2022 Cash and cash equivalents $ 944 Revolver capacity (a) 2,180 Revolver capacity committed to letters of credit (82) Available revolver capacity committed as regulatory requirement (48) Total $ 2,994 ___________________ (a)Revolver capacity includes$1,145 million under our CEI Revolving Credit Facility, as amended, maturing inJuly 2025 ,$1,025 million under our CRC Revolving Credit Facility, maturing inDecember 2022 , and$10 million under our Baltimore Revolving Credit Facility, as amended, maturing inJuly 2023 . OnOctober 5, 2022 , we amended the CEI Revolving Credit Facility to$2.25 billion maturing inJanuary 2028 and terminated the CRC Revolving Credit Facility, as described below. During the nine months endedSeptember 30, 2022 , our operating activities generated cash inflows of$469 million , as compared to operating cash inflows of$974 million during the nine months endedSeptember 30, 2021 due to the results of operations described above. 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. On the acquisition date, the Company's intent was to divest ofWilliam Hill PLC's non-U.S. operations, which included theUK and international online divisions and the retail betting shops (collectively, "William Hill International ") was held for sale as of the date of the closing of the William Hill Acquisition with operations reflected within discontinued operations. 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 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 provided 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 £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 , 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. 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 sellWilliam Hill International to 888 Holdings Plc for a revised enterprise value of approximately £2.0 billion. The amended agreement reflected 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 nine months endedSeptember 30, 2022 , the Company recorded impairments to assets held for sale of$503 million 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. and outstanding borrowings under the Bridge Credit Agreement
were immediately repaid. 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
and repayments, the Company utilized all $730 million to reduce the Company's
outstanding debt.
On October 5, 2022 , CEI entered into a third amendment to the CEI Credit
Agreement (the "Third Amendment") which provided for an aggregate principal
amount of $750 million senior secured term loan (the "CEI Term Loan A" and
together with the CEI Revolving Credit Facility, as so amended, the "Amended CEI
Revolving Credit Facility," the "Senior Credit Facilities") as a new term loan
under the credit agreement, increased the aggregate principal amount of the CEI
Revolving Credit Facility to $2.25 billion and made certain other amendments to
the credit agreement. Both the Amended CEI Revolving Credit Facility and the CEI
Term Loan A mature on January 31, 2028 , subject to a springing maturity in the
event certain other long-term debt of Caesars is not extended or repaid. The
Amended CEI Revolving Credit Facility includes a letter of credit sub-facility
of $388 million . Concurrently with the closing of the Senior Credit Facilities,
the Company terminated the CRC Revolving Credit Facility and utilized the entire
proceeds of the CEI Term Loan A of $750 million to make a partial prepayment of
the outstanding principal balance of the CRC Term Loan.
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 next year include 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 our partnership
with the Eastern Band of Cherokee Indians to build and develop Caesars Virginia
which is estimated to open in late 2024. The development has a revised budget of
$650 million and will include a premier destination resort casino along with a
500 room hotel and world-class casino floor including 1,300 slot machines, 85
live table games, 24 electronic table games, a WSOP Poker Room , a Caesars
Sportsbook, a live entertainment theater and 40,000 square feet of meeting and
convention space. Additionally, Caesars announced the plans to expand into
Nebraska with the development of a Harrah's casino and racetrack. The
approximately $75 million casino development is expected to feature a new
one-mile horse racing surface, a 40,000-square-foot-casino and sportsbook with
more than 400 slot machines and 20 table games, as well as a restaurant and
retail space.
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 September 30, 2022 , our
restricted cash balance in the escrow account was $141 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 approximately $430 million as of September 30, 2022 . Total capital
expenditures have been $87 million since the project began.
On August 27, 2020 , Hurricane Laura made landfall on Lake Charles. Louisiana as
a Category 4 storm severely damaging the Isle of Capri Casino Hotel Lake
Charles . During the nine months ended September 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 . During the nine
months ended September 30, 2022 , the Company received a total of $103 million
related to damaged fixed assets, remediation costs and business interruption.
Our new land-based casino, Horseshoe Lake Charles, will open on December 12,
2022 .
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Cash spent for capital expenditures totaled $717 million and $313 million for
the nine months ended September 30, 2022 and 2021, respectively. The following
table summarizes our capital expenditures for the nine months ended September
30, 2022 , and an estimated range of capital expenditures for the remainder of
2022:
Nine Months Ended
September 30, Estimate of Remaining Capital
2022 Expenditures for 2022
(In millions) Actual Low High
Atlantic City $ 156 $ 40 $ 60
Indiana racing operations 5 - 5
Total estimated capital expenditures from
restricted cash 161 40 65
Growth and renovation projects 300 120 165
Caesars Digital 86 30 40
Maintenance projects 170 60 80
Total estimated capital expenditures from
unrestricted cash and insurance proceeds 556 210 285
Total $ 717 $ 250 $ 350
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 $158 million for the remainder of 2022. We also lease
certain real property assets from third parties, including VICI and GLPI. Our
leases with VICI are subject to annual escalations based on the Consumer Price
Index ("CPI") which has increased in 2022. These increases take effect in
November 2022 . We estimate our lease payments to VICI and GLPI to be
approximately $313 million for the remainder of 2022.
The Company has periodically divested assets to raise capital or, in previous
cases, to comply with conditions, terms, obligations or restrictions imposed by
antitrust, gaming and other regulatory entities.
In addition to the divestiture of William Hill International , described above,
on May 5, 2022 , the Company consummated the sale of the equity interests of
Baton Rouge to CQ Holding Company, Inc. , subject to a customary working capital
adjustment.
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 will be sufficient to fund our
operations, capital requirements and service our outstanding indebtedness for
the next twelve months.
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. As a result of the termination of the CRC Revolving Credit Facility onOctober 5, 2022 , the associated financial covenant is no longer applicable. 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 outstanding debt under the Bridge Credit Agreement was fully repaid upon closing of the sale ofWilliam Hill International onJuly 1, 2022 . Accordingly, the Company is no longer subject to the financial covenant and guarantees associated with the Bridge Credit Agreement.
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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. As ofSeptember 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 nine months endedSeptember 30, 2022 and 2021. Contractual Obligations There have been no other material changes during the nine months endedSeptember 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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