UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

10-Q

(Mark One)

☒

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

For the quarterly period ended September 30, 2017

2020

OR

☐

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

For the transition period from                to                 

Commission File No. 001‑001-36629

ELDORADO RESORTS,

CAESARS ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

Nevada

46‑3657681

Delaware

46-3657681
(State or other jurisdiction of


incorporation or organization)

(I.R.S. Employer


Identification No.)

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

(Address and zip code of principal executive offices)

(775) 328‑0100

328-0100

(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.00001 par valueCZRNASDAQ Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑TS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒    No  ☐

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

Large accelerated filer

☐

☒

Accelerated filer

☒

☐

Non‑acceleratedNon-accelerated filer

☐

(Do not check if a smaller reporting company)

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

The number of shares of the Registrant’s Common Stock, $0.00001 par value per share, outstanding as of November 2, 2017October 30, 2020 was 76,824,595.

208,277,138.

ELDORADO RESORTS,


CAESARS ENTERTAINMENT, INC.

QUARTERLY REPORT FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2017

2020

TABLE OF CONTENTS

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1




PART I-FINANCIALI-FINANCIAL INFORMATION

Item 1.  Financial Statements.

ELDORADO RESORTS,Statements

2

CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(dollars in thousands)

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

(unaudited)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

134,903

 

 

$

 

61,029

 

Restricted cash

 

 

 

21,307

 

 

 

 

2,414

 

Marketable securities

 

 

 

17,461

 

 

 

 

—

 

Accounts receivable, net

 

 

 

33,129

 

 

 

 

14,694

 

Due from affiliates

 

 

 

71

 

 

 

 

—

 

Inventories

 

 

 

16,505

 

 

 

 

11,055

 

Prepaid income taxes

 

 

 

5,353

 

 

 

 

69

 

Prepaid expenses and other

 

 

 

28,749

 

 

 

 

12,492

 

Assets held for sale

 

 

 

143,496

 

 

 

 

—

 

Total current assets

 

 

 

400,974

 

 

 

 

101,753

 

PROPERTY AND EQUIPMENT, NET

 

 

 

1,446,354

 

 

 

 

612,342

 

GAMING LICENSES AND OTHER INTANGIBLES, NET

 

 

 

954,962

 

 

 

 

487,498

 

GOODWILL

 

 

 

746,482

 

 

 

 

66,826

 

NON-OPERATING REAL PROPERTY

 

 

 

18,069

 

 

 

 

14,219

 

OTHER ASSETS, NET

 

 

 

18,416

 

 

 

 

11,406

 

Total assets

 

$

 

3,585,257

 

 

$

 

1,294,044

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

 

1,068

 

 

$

 

4,545

 

Accounts payable

 

 

 

28,328

 

 

 

 

21,576

 

Due to affiliates

 

 

 

30

 

 

 

 

259

 

Accrued property, gaming and other taxes

 

 

 

40,772

 

 

 

 

18,790

 

Accrued payroll and related

 

 

 

57,814

 

 

 

 

14,588

 

Accrued interest

 

 

 

13,193

 

 

 

 

14,634

 

Deferred proceeds for assets held for sale

 

 

 

20,000

 

 

 

 

—

 

Accrued other liabilities

 

 

 

57,080

 

 

 

 

27,648

 

Liabilities related to assets held for sale

 

 

 

6,790

 

 

 

 

—

 

Total current liabilities

 

 

 

225,075

 

 

 

 

102,040

 

LONG-TERM DEBT, LESS CURRENT PORTION

 

 

 

2,224,054

 

 

 

 

795,881

 

DEFERRED INCOME TAXES

 

 

 

251,978

 

 

 

 

90,385

 

OTHER LONG-TERM LIABILITIES

 

 

 

30,215

 

 

 

 

7,287

 

 

 

 

 

2,731,322

 

 

 

 

995,593

 

COMMITMENTS AND CONTINGENCIES (Note 10)

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

 

 

Common stock, 100,000,000 shares authorized, 76,804,618 and 47,105,744 issued and

   outstanding, par value $0.00001 as of September 30, 2017 and December 31, 2016,

   respectively

 

 

 

—

 

 

 

 

—

 

Paid-in capital

 

 

 

745,117

 

 

 

 

173,879

 

Retained earnings

 

 

 

108,806

 

 

 

 

124,560

 

Accumulated other comprehensive income

 

 

 

12

 

 

 

 

12

 

Total stockholders’ equity

 

 

 

853,935

 

 

 

 

298,451

 

Total liabilities and stockholders’ equity

 

$

 

3,585,257

 

 

$

 

1,294,044

 

September 30,
2020		December 31,
2019
(Dollars in millions)(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ($8 and $0 attributable to our VIEs)$1,037 $206 
Restricted cash and investments2,259 4 
Accounts receivable, net385 54 
Due from affiliates37 4 
Inventories49 18 
Prepayments and other current assets ($5 and $0 attributable to our VIEs)265 66 
Assets held for sale2,266 253 
Total current assets6,298 605 
Investment in and advances to unconsolidated affiliates170 136 
Property and equipment, net ($84 and $0 attributable to our VIEs)14,630 2,615 
Gaming licenses and other intangibles, net4,466 1,111 
Goodwill9,450 910 
Other assets, net ($25 and $0 attributable to our VIEs)1,224 264 
Deferred income taxes1 0 
Total assets$36,239 $5,641 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt$67 $246 
Accounts payable ($98 and $0 attributable to our VIEs)274 62 
Accrued interest241 36 
Accrued other liabilities ($2 and $0 attributable to our VIEs)1,371 307 
Liabilities related to assets held for sale517 37 
Total current liabilities2,470 688 
Long-term financing obligation12,547 971 
Long-term debt, less current portion15,203 2,325 
Deferred income taxes1,081 197 
Other long-term liabilities ($19 and $0 attributable to our VIEs)1,549 343 
Total liabilities32,850 4,524 
Commitments and contingencies (Note 13)


STOCKHOLDERS' EQUITY:
Caesars stockholders’ equity3,370 1,117 
Noncontrolling interests19 0 
Total stockholders’ equity3,389 1,117 
Total liabilities and stockholders’ equity$36,239 $5,641 

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


3

ELDORADO RESORTS,


CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Casino

 

$

 

367,930

 

 

$

 

184,604

 

 

$

 

825,833

 

 

$

 

532,141

 

Pari-mutuel commissions

 

 

 

5,162

 

 

 

 

3,527

 

 

 

 

9,945

 

 

 

 

7,104

 

Food and beverage

 

 

 

56,356

 

 

 

 

38,029

 

 

 

 

132,307

 

 

 

 

108,735

 

Hotel

 

 

 

38,536

 

 

 

 

28,001

 

 

 

 

85,473

 

 

 

 

73,843

 

Other

 

 

 

15,052

 

 

 

 

12,095

 

 

 

 

35,196

 

 

 

 

33,994

 

 

 

 

 

483,036

 

 

 

 

266,256

 

 

 

 

1,088,754

 

 

 

 

755,817

 

Less-promotional allowances

 

 

 

(38,162

)

 

 

 

(24,691

)

 

 

 

(87,776

)

 

 

 

(69,371

)

Net operating revenues

 

 

 

444,874

 

 

 

 

241,565

 

 

 

 

1,000,978

 

 

 

 

686,446

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Casino

 

 

 

184,790

 

 

 

 

103,272

 

 

 

 

428,543

 

 

 

 

299,908

 

Pari-mutuel commissions

 

 

 

4,601

 

 

 

 

3,506

 

 

 

 

9,793

 

 

 

 

7,761

 

Food and beverage

 

 

 

26,457

 

 

 

 

21,046

 

 

 

 

66,711

 

 

 

 

61,557

 

Hotel

 

 

 

10,138

 

 

 

 

7,956

 

 

 

 

24,767

 

 

 

 

23,064

 

Other

 

 

 

7,792

 

 

 

 

7,298

 

 

 

 

18,689

 

 

 

 

19,990

 

Marketing and promotions

 

 

 

24,634

 

 

 

 

11,323

 

 

 

 

54,845

 

 

 

 

30,664

 

General and administrative

 

 

 

68,585

 

 

 

 

34,094

 

 

 

 

155,778

 

 

 

 

98,129

 

Corporate

 

 

 

7,718

 

 

 

 

4,426

 

 

 

 

21,734

 

 

 

 

15,684

 

Depreciation and amortization

 

 

 

29,122

 

 

 

 

15,810

 

 

 

 

69,635

 

 

 

 

47,597

 

Total operating expenses

 

 

 

363,837

 

 

 

 

208,731

 

 

 

 

850,495

 

 

 

 

604,354

 

GAIN (LOSS) ON SALE OF ASSET OR DISPOSAL OF PROPERTY

 

 

 

4

 

 

 

 

25

 

 

 

 

(51

)

 

 

 

(740

)

ACQUISITION CHARGES

 

 

 

(2,094

)

 

 

 

(4,750

)

 

 

 

(89,172

)

 

 

 

(5,326

)

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE

 

 

 

(23

)

 

 

 

—

 

 

 

 

(305

)

 

 

 

—

 

OPERATING INCOME

 

 

 

78,924

 

 

 

 

28,109

 

 

 

 

60,955

 

 

 

 

76,026

 

OTHER EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(29,183

)

 

 

 

(12,589

)

 

 

 

(69,380

)

 

 

 

(38,375

)

Loss on early retirement of debt, net

 

 

 

(10,030

)

 

 

 

—

 

 

 

 

(37,347

)

 

 

 

(155

)

Total other expense

 

 

 

(39,213

)

 

 

 

(12,589

)

 

 

 

(106,727

)

 

 

 

(38,530

)

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE

   INCOME TAXES

 

 

 

39,711

 

 

 

 

15,520

 

 

 

 

(45,772

)

 

 

 

37,496

 

(PROVISION) BENEFIT FOR INCOME TAXES

 

 

 

(11,595

)

 

 

 

(5,838

)

 

 

 

27,625

 

 

 

 

(13,654

)

INCOME (LOSS) FROM CONTINUING OPERATIONS

 

 

 

28,116

 

 

 

 

9,682

 

 

 

 

(18,147

)

 

 

 

23,842

 

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXES

 

 

 

1,438

 

 

 

 

—

 

 

 

 

2,393

 

 

 

 

—

 

NET INCOME (LOSS)

 

$

 

29,554

 

 

$

 

9,682

 

 

$

 

(15,754

)

 

$

 

23,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share attributable to common stockholders - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

 

0.36

 

 

$

 

0.21

 

 

$

 

(0.28

)

 

$

 

0.51

 

Income from discontinued operations, net of income taxes

 

 

 

0.02

 

 

 

 

—

 

 

 

 

0.03

 

 

 

 

—

 

Net income (loss) attributable to common stockholders

 

$

 

0.38

 

 

$

 

0.21

 

 

$

 

(0.25

)

 

$

 

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share attributable to common stockholders - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

 

0.36

 

 

$

 

0.20

 

 

$

 

(0.28

)

 

$

 

0.50

 

Income from discontinued operations, net of income taxes

 

 

 

0.02

 

 

 

 

—

 

 

 

 

0.03

 

 

 

 

—

 

Net income (loss) attributable to common stockholders

 

$

 

0.38

 

 

$

 

0.20

 

 

$

 

(0.25

)

 

$

 

0.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Basic Shares Outstanding

 

 

 

76,902,070

 

 

 

 

47,193,120

 

 

 

 

63,821,705

 

 

 

 

47,106,706

 

Weighted Average Diluted Shares Outstanding

 

 

 

77,959,689

 

 

 

 

47,834,644

 

 

 

 

64,768,174

 

 

 

 

47,737,592

 

Three Months Ended
September 30,		Nine Months Ended
September 30,
(In millions, except per share data)2020201920202019
REVENUES:
Casino and pari-mutuel commissions$919 $458 $1,360 $1,386 
Food and beverage125 78 188 229 
Hotel200 94 257 237 
Other133 33 172 84 
Net revenues1,377 663 1,977 1,936 
EXPENSES:
Casino and pari-mutuel commissions461 229 685 693 
Food and beverage91 60 153 180 
Hotel63 27 91 76 
Other52 12 62 34 
General and administrative330 130 495 381 
Corporate90 13 120 51 
Impairment charges0 0 161 1 
Depreciation and amortization223 53 322 167 
Transaction costs and other operating costs219 14 242 2 
Total operating expenses1,529 538 2,331 1,585 
Operating (loss) income(152)125 (354)351 
OTHER EXPENSE:
Interest expense, net(473)(72)(608)(217)
Loss on extinguishment of debt(173)(1)(173)(1)
Other (loss) income9 3 (1)0 
Total other expense(637)(70)(782)(218)
(Loss) income from continuing operations before income taxes(789)55 (1,136)133 
Provision for income taxes(135)(18)(64)(39)
Net (loss) income from continuing operations, net of income taxes(924)37 (1,200)94 
Discontinued operations, net of income taxes(1)0 (1)0 
Net (loss) income(925)37 (1,201)94 
Net income attributable to noncontrolling interests(1)0 (1)0 
Net (loss) income attributable to Caesars$(926)$37 $(1,202)$94 
Net (loss) income per share - basic and diluted:
Basic (loss) income per share from continuing operations$(6.09)$0.48 $(11.55)$1.21 
Basic loss per share from discontinued operations0 0 (0.01)0 
Basic (loss) income per share$(6.09)$0.48 $(11.56)$1.21 
Diluted (loss) income per share from continuing operations$(6.09)$0.47 $(11.55)$1.20 
Diluted loss per share from discontinued operations0 0 (0.01)0 
Diluted (loss) income per share$(6.09)$0.47 $(11.56)$1.20 
Weighted average basic shares outstanding152 78 104 78 
Weighted average diluted shares outstanding152 79 104 79 

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


4

ELDORADO RESORTS,


CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (LOSS)

(dollars in thousands)

(unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

NET INCOME (LOSS)

 

$

 

29,554

 

 

$

 

9,682

 

 

$

 

(15,754

)

 

$

 

23,842

 

Other Comprehensive Income (Loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Comprehensive Income (Loss), net of tax

 

$

 

29,554

 

 

$

 

9,682

 

 

$

 

(15,754

)

 

$

 

23,842

 

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

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


5

ELDORADO RESORTS,


CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(dollars in thousands)

STOCKHOLDERS’ EQUITY

(unaudited)

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2017

 

 

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

 

(15,754

)

 

$

 

23,842

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

69,635

 

 

 

 

47,597

 

Amortization of deferred financing costs, discount and debt premium

 

 

 

5,041

 

 

 

 

2,614

 

Equity in loss of unconsolidated affiliate

 

 

 

305

 

 

 

 

—

 

Loss on early extinguishment of debt

 

 

 

37,347

 

 

 

 

155

 

Change in fair value of acquisition related contingencies

 

 

 

36

 

 

 

 

1

 

Stock compensation expense

 

 

 

4,454

 

 

 

 

2,749

 

Loss on disposal of assets

 

 

 

51

 

 

 

 

740

 

Provision for bad debts

 

 

 

397

 

 

 

 

308

 

(Benefit) provision for deferred income taxes

 

 

 

(25,535

)

 

 

 

12,432

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Restricted cash

 

 

 

200

 

 

 

 

2,876

 

Sale of trading securities

 

 

 

272

 

 

 

 

—

 

Accounts receivable

 

 

 

(6,939

)

 

 

 

(7,388

)

Inventory

 

 

 

17

 

 

 

 

265

 

Prepaid expenses and other assets

 

 

 

2,054

 

 

 

 

(5,489

)

Interest payable

 

 

 

(1,441

)

 

 

 

(7,271

)

Income taxes receivable/payable

 

 

 

(1,268

)

 

 

 

—

 

Accounts payable and accrued liabilities

 

 

 

2,959

 

 

 

 

(1,181

)

Net cash provided by operating activities

 

 

 

71,831

 

 

 

 

72,250

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

(53,181

)

 

 

 

(32,949

)

Reimbursement of capital expenditures from West Virginia regulatory authorities

 

 

 

251

 

 

 

 

4,113

 

Restricted cash

 

 

 

1,617

 

 

 

 

—

 

Proceeds from sale of property and equipment

 

 

 

—

 

 

 

 

1,560

 

Net cash used in business combinations

 

 

 

(1,343,659

)

 

 

 

(491

)

Decrease in other assets, net

 

 

 

—

 

 

 

 

564

 

Net cash used in investing activities

 

 

 

(1,394,972

)

 

 

 

(27,203

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of New Term Loan

 

 

 

1,450,000

 

 

 

 

—

 

Proceeds from issuance of 6% Senior Notes

 

 

 

875,000

 

 

 

 

—

 

Borrowings under New Revolving Credit Facility

 

 

 

166,953

 

 

 

 

—

 

Payments under Term Loan

 

 

 

(1,062

)

 

 

 

(3,188

)

Payments under New Term Loan

 

 

 

(448,125

)

 

 

 

—

 

Payments under New Revolving Credit Facility

 

 

 

(166,953

)

 

 

 

—

 

Borrowings (payments) under Revolving Credit Facility

 

 

 

41,000

 

 

 

 

(74,500

)

Payments under Revolving Credit Facility

 

 

 

(29,000

)

 

 

 

—

 

Retirement of Term Loan

 

 

 

(417,563

)

 

 

 

—

 

Retirement of Revolving Credit Facility

 

 

 

(41,000

)

 

 

 

—

 

Debt premium proceeds

 

 

 

27,500

 

 

 

 

—

 

Payment of other long-term obligation

 

 

 

(23

)

 

 

 

—

 

Payments on capital leases

 

 

 

(347

)

 

 

 

(204

)

Debt issuance costs

 

 

 

(51,338

)

 

 

 

(463

)

Taxes paid related to net share settlement of equity awards

 

 

 

(10,927

)

 

 

 

(1,366

)

Proceeds from exercise of stock options

 

 

 

2,900

 

 

 

 

1,005

 

Net cash provided by (used in) financing activities

 

 

 

1,397,015

 

 

 

 

(78,716

)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

 

73,874

 

 

 

 

(33,669

)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

 

 

 

61,029

 

 

 

 

78,278

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

 

134,903

 

 

$

 

44,609

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

 

67,840

 

 

$

 

43,000

 

Cash paid during period for income taxes

 

 

 

714

 

 

 

 

1,406

 

NON-CASH FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Payables for capital expenditures

 

 

 

2,286

 

 

 

 

1,961

 

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

6

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


7

ELDORADO RESORTS,


CAESARS ENTERTAINMENT, INC.

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

CAESARS ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(unaudited)
Note 1. Organization and Basis of Presentation

Organization

The accompanying unaudited consolidated financial statements include the accounts of Caesars Entertainment, Inc., a Delaware corporation formerly known as Eldorado Resorts, Inc. (“ERI” or the “Company”“Eldorado”), a Nevada corporation formed in September 2013, and its consolidated subsidiaries. subsidiaries which may be referred to as the “Company,” “CEI,” “Caesars,” “we,” “our,” or “us” within these financial statements.
The Company acquired Mountaineer, Presque Isle Downsis a geographically diversified gaming and Scioto Downshospitality company thatwas founded in September 2014 pursuant1973 by the Carano family with the opening of the Eldorado Hotel Casino in Reno, Nevada. The Company partnered with MGM Resorts International to build Silver Legacy Resort Casino in Reno, Nevada in 1993 and, beginning in 2005, grew through a merger (the “MTR Merger”) withseries of acquisitions, including the acquisition of Eldorado Shreveport in 2005, MTR Gaming Group, Inc. (“MTR Gaming”) and in November 2015 it acquired2014, Circus Circus Reno and the interests50% membership interest in the Silver Legacy that it did not own priorwas owned by MGM Resorts International in 2015, Isle of Capri Casinos, Inc. (“Isle” or “Isle of Capri”) in 2017 and Grand Victoria Casino (“Elgin”) and Tropicana Entertainment, Inc. (“Tropicana”) in 2018.
On July 20, 2020, the Company completed the merger with Caesars Entertainment Corporation (“Former Caesars”) pursuant to such datewhich Former Caesars became a wholly-owned subsidiary of the Company (the “Reno Acquisition”“Merger”).

Throughout As a result of the three and nine months ended September 30, 2017, ERI owned and operatedMerger, the following properties:

Eldorado Resort Casino Reno (“Eldorado Reno”)—A 814-room hotel, casino and entertainment facility connected viaCompany currently owns, leases or manages an enclosed skywalk to Silver Legacy and Circus Reno locatedaggregate of 56 domestic properties in downtown Reno, Nevada that includes 1,12516 states with approximately 67,200 slot machines, video lottery terminals (“VLTs”) and 46 table games;

Silver Legacy Resort Casino (“Silver Legacy”)—A 1,711-room themed hotel and casino connected via an enclosed skywalk to Eldorado Reno and Circus Reno that includes 1,187 slot machines, 63e-tables, approximately 3,500 table games and approximately 48,800 hotel rooms as of September 30, 2020. We also have international operations in 5 countries outside of the U.S. In addition, we have other domestic and international properties that are authorized to use the brands and marks of Caesars Entertainment, Inc., as well as other non-gaming properties. Upon completion of our previously announced sales, or expected sales, of certain gaming properties, we expect to continue to own, lease or manage 51 properties. See Note 15. The Company’s primary source of revenue is generated by gaming operations, and the Company utilizes its hotels, restaurants, bars, entertainment, racing, sportsbook offerings, retail shops and other services to attract customers to its properties.

In connection with the Merger, Caesars Entertainment Corporation changed its name to “Caesars Holdings, Inc.” and Eldorado Resorts, Inc. converted into a 13 table poker room;

Circus Circus Reno (“Circus Reno”)—A 1,571-room hotel-casinoDelaware corporation and entertainment complex connected via an enclosed skywalkchanged its name to Eldorado Reno and Silver Legacy that includes 720 slot machines and 26 table games;

Eldorado Resort Casino Shreveport (“Eldorado Shreveport“Caesars Entertainment, Inc.”)—A 403-room, all suite art deco-style hotel and tri-level riverboat dockside casino situated In addition, effective as of July 21, 2020 the Company’s ticker symbol on the Red RiverNASDAQ Stock Market changed from “ERI” to “CZR”. In connection with the Merger, the Company also entered into a Master Transaction Agreement (the “MTA”) with VICI Properties L.P., a Delaware limited partnership (“VICI”), pursuant to which, among other things, the Company agreed to consummate certain sale and leaseback transactions and amend certain lease agreements with VICI and/or its affiliates, with respect to certain property described in Shreveport, Louisiana that includes 1,397 slot machines, 52 table gamesthe MTA. See Note 2 for further discussion of the Merger and an eight table poker room;

related transactions.

Mountaineer Casino, Racetrack & Resort (“Mountaineer”)—A 357-room hotel, casinoOn January 11, 2019 and entertainment facility and live thoroughbred horse racing located onMarch 8, 2019, respectively, the Ohio River at the northern tipCompany completed its sales of West Virginia’s northwestern panhandle that includes 1,505 slot machines, 36 table games and a 10 table poker room;

Presque Isle Downs & Casino (“Presque Isle Downs”(“Presque”)—A casino and live thoroughbred horse racing facility with 1,596 slot machines, 32 table games and a seven table poker room located in Erie, Pennsylvania; and

Eldorado Gaming Scioto Downs (“Scioto Downs”)—A modern “racino” offering 2,245 video lottery terminals (“VLT”), harness racing and a 118-room third party hotel connected to Scioto Downs located 15 minutes from downtown Columbus, Ohio.

In addition, on May 1, 2017, the Company consummated its acquisition of Isle of Capri Casinos, Inc. and acquired the following properties:

Isle Casino Hotel—Black Hawk (“Isle Black Hawk”)—A land-based casino on an approximately 10-acre site in Black Hawk, Colorado that includes 993 slot machines, 27 table games, a nine table poker room and a 238-room hotel;

Lady Luck Casino—Black Hawk (“Lady Luck Black Hawk”)—A land-based casino across the intersection from Isle Casino Hotel in Black Hawk, Colorado, that includes 430 slot machines, 10 table games, five poker tables and a 164-room hotel with a parking structure connecting Isle Casino Hotel-Black Hawk and Lady Luck Casino-Black Hawk;

Isle Casino Racing Pompano ParkNemacolin (“Pompano”Nemacolin”)—A casino, which are both located in Pennsylvania. On December 6, 2019, the Company completed its sales of Mountaineer Casino, Racetrack and harness racing track on an approximately 223-acre owned site in Pompano Beach, Florida, that includes 1,459 slot machines and a 45 table poker room;

Isle Casino BettendorfResort (“Bettendorf”Mountaineer”)—A land-based single-level casino located off of Interstate 74 in Bettendorf, Iowa that includes 978 slot machines and 20 table games with two hotel towers with 509 hotel rooms;

Isle Casino Waterloo (“Waterloo”)—A single-level land-based casino in Waterloo, Iowa that includes 940 slot machines, 25 table games, and a 194-room hotel;

Isle of Capri Casino Hotel Lake Charles (“Lake Charles”)—A gaming vessel on an approximately 19 acre site in Lake Charles, Louisiana, with 1,160 slot machines, 49 table games, including 13 poker tables and two hotels offering 493 rooms;

Isle of Capri Casino Lula (“Lula”)—Two dockside casinos in Lula, Mississippi with 879 slot machines and 20 table games, two on-site hotels with a total of 486 rooms and a 28-space RV Park;


•

Lady Luck Casino Vicksburg (“Vicksburg”)—A dockside casino in Vicksburg, Mississippi that includes 619 slot machines, nine table games and a hotel with a total of 89 rooms;

Isle of Capri Casino Boonville (“Boonville”)—A single-level dockside casino in Boonville, Missouri that includes 893 slot machines, 20 table games and a 140-room hotel;

, Isle Casino Cape Girardeau (“Cape Girardeau”)—A dockside casino and pavilion and entertainment center in Cape Girardeau, Missouri that includes 881 slot machines, 20 table games and four poker tables;

Lady Luck Casino Caruthersville (“Caruthersville”Caruthersville”)—A riverboat casino. Mountaineer is located alongin West Virginia and Cape Girardeau and Caruthersville are located in Missouri. On July 1, 2020, the Mississippi River in Caruthersville, Missouri that includes 513 slot machines and nine table games;

Company completed the sales of Isle of Capri Casino Kansas City (“Kansas City”)—A dockside casino located close to downtown Kansas City, Missouri offering 967 slot machines and 18 table games; and

Lady Luck Casino NemacolinVicksburg (“Nemacolin”Vicksburg”)—A casino property. Kansas City is located in Missouri and Vicksburg is located in Mississippi. On September 30, 2020, the Company completed the sale of Harrah’s Reno which is located in Nevada. See Note 4.

On April 24, 2020, the Company entered into a definitive purchase agreement with Twin River Worldwide Holdings, Inc. (“Twin River”) and certain of its affiliates for the sale of the equity interests of Eldorado Resort Casino Shreveport Joint Venture and Columbia Properties Tahoe, LLC, the entities that hold Eldorado Resort Casino Shreveport (“Eldorado Shreveport”) and MontBleu Casino Resort & Spa (“MontBleu”), for aggregate consideration of $155 million, subject to a working capital adjustment. The definitive agreement provides that the consummation of the sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals. Eldorado Shreveport and MontBleu are expected to close in the first quarter of 2021.
In connection with its review of the Merger, the Indiana Gaming Commission determined on July 16, 2020 that the 2,000-acre Nemacolin Woodlands ResortCompany is required to divest three properties within the state of Indiana in Western Pennsylvania that includes 600 slot machines and 28 table games.

order to avoid undue economic concentrations as conditions to the Indiana Gaming Commission’s approval of the Merger.
9


On August 22, 2016, IsleOctober 27, 2020, the Company entered into an agreement to sell Lake CharlesTropicana Evansville (“Evansville”) to GLP Capital, L.P., the operating partnership of Gaming and Leisure Properties, Inc. (“GLPI”) and Twin River for aggregate consideration$480 million in cash, subject to a customary working capital adjustment. The sale is subject to satisfaction of $134.5customary conditions, including receipt of required regulatory approvals and is expected to close in mid-2021. In addition, the Company plans to enter into agreements to divest of Caesars Southern Indiana and Horseshoe Hammond prior to December 31, 2020.
Also on October 27, 2020, the Company’s subsidiaries, Isle of Capri Bettendorf, L.C. and IOC Black Hawk County, Inc (collectively, the “Exchanging Subsidiaries”) entered into an Exchange Agreement with GLPI pursuant to which the Exchanging Subsidiaries agreed to transfer the real estate relating to the Isle Casino & Hotels located in Bettendorf, Iowa and Waterloo, Iowa to GLPI in exchange for the real estate relating to Evansville. Following such exchange, the real estate relating to the Isle Casino & Hotels located in Bettendorf, Iowa and Waterloo, Iowa will be subject to the master lease with GLPI that we entered into in connection with the acquisition of Tropicana (the “GLPI Master Lease”).
On September 3, 2020, the Company and VICI entered into an agreement to sell Harrah’s Louisiana Downs Casino, Racing & Entertainment (“Harrah’s Louisiana Downs”) with Rubico Acquisition Corp. for $22 million, subject to certain adjustments.a customary working capital adjustment, where the proceeds will be split between the Company and VICI. The transaction (the “Lake Charles Disposition”) remainssale is subject to Louisiana Gaming Control Board approvalsatisfaction of customary conditions, including receipt of required regulatory approvals and other customary closing conditions and, if obtained, the transaction is expected to be completed by December 31, 2017.

close in the first half of 2021.

Former Caesars properties, including Harrah’s Louisiana Downs, Caesars Southern Indiana, Horseshoe Hammond, Harrah’s Reno, Caesars UK group, including Emerald Resort & Casino, and Bally’s Atlantic City, have met, or are expected to meet within a short period of time, held for sale criteria as of the date of the closing of the Merger. The sales of these properties have or are expected to close within one year from the date of the closing of the Merger and the properties are classified as discontinued operations.
Proposed Acquisition of IsleWilliam Hill
The Company has entered into agreements, which became effective January 29, 2019, with William Hill plc and William Hill U.S. Holdco, Inc. (“William Hill US”), its U.S. subsidiary (together, “William Hill”) which granted to William Hill the right to conduct betting activities, including operating certain of Capri Casinos, Inc.

On May 1, 2017 (the “Isle Acquisition Date”),our sportsbooks, in retail channels under certain skins for online channels with respect to the Company’s current and future properties, and conduct certain real money online gaming activities. The Company received a 20% ownership interest in William Hill US as well as 13.4 million ordinary shares of William Hill plc, which carry certain time restrictions on when they can be sold. See Note 6 related to the investments in William Hill. Additionally, the Company completed itsreceives a profit share from the operations of sports betting and other gaming activities associated with the Company’s properties.

On September 30, 2020, the Company announced that it had reached an agreement with William Hill plc on the terms of a recommended cash acquisition pursuant to which the Company would acquire the entire issued and to be issued share capital (other than shares owned by the Company or held in treasury) of William Hill plc, in an all-cash transaction of approximately £2.9 billion, or $3.7 billion. The transaction is conditioned on, among other things, the approval of William Hill plc shareholders and receipt of required regulatory approvals. To provide liquidity to fund the cash purchase price for the proposed acquisition, the Company entered into various financing transactions. On September 25, 2020, the Company borrowed $900 million under the CEI Revolving Credit Facility (defined below), which was repaid subsequent to September 30, 2020. See Note 10. On September 28, 2020, the Company deposited $2.1 billion, which included the borrowings under the CEI Revolving Credit Facility, into an escrow account related to the William Hill offer. As of September 30, 2020, these funds in escrow were classified as restricted cash until certain regulatory approvals were received. In addition, on October 1, 2020, the Company raised an additional $1.9 billion through a public offering of Company Common Stock. See Note 5.
In order to manage the risk of appreciation of the GBP denominated purchase price the Company has entered into foreign exchange forward contracts. See Note 11.
In connection with the proposed acquisition of Isle of Capri Casinos, Inc.William Hill plc, on September 29, 2020, the Company entered into a debt financing commitment letter pursuant to which the Agreementlenders party thereto have committed to arrange and Plan of Merger (the “Merger Agreement”) dated as of September 19, 2016 with Isle of Capri Casinos, Inc.,provide a Delaware corporation (“Isle” or “Isle of Capri”), Eagle I Acquisition Corp., a Delaware corporation and a direct wholly-ownednewly formed subsidiary of the Company and Eagle II Acquisition Company LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of the Company (the “Isle Acquisition” or the “Isle Merger”). As a result of the Isle Merger, Isle became a wholly-owned subsidiary of ERI and, at the effective time of the Isle Merger, each outstanding share of Isle’s stock converted into the right to receive $23.00 in cash or 1.638 shares of ERI common stock (the “Stock Consideration”), at the election of the applicable Isle shareholder and subject to proration such that the outstanding shares of Isle common stock were exchanged for aggregate consideration comprised of 58% cash, or $552.0 million, and 42% ERI common stock, or 28.5 million newly issued shares of ERI common stock. The total purchase consideration was $1.93 billion (See Note 2).

In connection with the Isle Acquisition, the Company completed a debt financing transaction comprised of: (a) a £1.0 billion senior secured credit facility in an aggregate principal amount of $1.75 billion with a (i) term540-day bridge loan facility, of $1.45 billion and (ii)(b) a £116 million senior secured 540-day revolving credit facility of $300.0and (c) a £503 million and (b) $375.0 million of senior unsecured notes.secured 60-day bridge loan facility (collectively, the “Debt Financing”). The proceeds of such borrowings werethe Debt Financing will be used (v)(i) to pay the casha portion of the cash consideration payable infor the Isle Merger, (w)proposed acquisition, (ii) to refinance allcertain of Isle’sWilliam Hill plc's and its subsidiaries' existing credit facilities, (x) redeem or otherwise repurchase all of Isle’s senior and senior subordinated notes, (y) refinance the Company’s existing credit facility and (z)debt, (iii) to pay transaction fees and expenses related to the foregoing (See Note 7acquisition and related transactions and (iv) for further discussionworking capital and general corporate purposes.

Pending negotiation of the refinancing transactionloan agreement for the Debt Financing, on October 6, 2020, a newly formed subsidiary of the Company entered into a £1.5 billion Interim Facilities Agreement with Deutsche Bank AG, London Branch and termsJPMorgan Chase Bank, N.A. to provide: (a) a 90-day £1.0 billion interim asset sale bridge facility and (b) a 90-day £503 million interim
10

cash confirmation bridge facility, which Interim Facilities Agreement will be terminated upon the execution of such indebtedness).

Acquisition charges attributed to the Isle Acquisition are reportedloan agreement for the Debt Financing. Upon receipt of regulatory approvals, the restriction on the accompanying statement of operations related to legal, accounting, financial advisory services, severance, stock awards and other costs totaling $2.1 million and $89.2 million for the three and nine months ended September 30, 2017, respectively, and $4.7 million for the three and nine months ended September 30, 2016. Asbillion funded as of September 30, 2017, $0.22020, was released and the Company transferred $1.4 billion of cash into the Company’s operating accounts and the outstanding balance of the CEI Revolving Credit Facility was repaid in full. Approximately $598 million of accrued costs and expenses related to the Isle Acquisition are includedcash remains in accrued other liabilities. Additionally, we recognized a loss of $27.3 million for the nine months ended September 30, 2017 related to the extinguishment of Isle debt and the payment of interest and call premiums in conjunction with the Isle Acquisition.

The presentation of information herein for periods prior to the Isle Acquisition Date and after the Isle Acquisition Date are not fully comparable because the results of operations for Isle are not included for periods prior to the Isle Acquisition Date. Summary financial results of Isle for the three and nine months ended January 22, 2017 are included in Isle’s Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission (“SEC”). In conjunction with the Isle Acquisition, Isle is no longer required to file quarterly and annual reports with the SEC, and terminated its registration on May 11, 2017.

an unrestricted account.

Reclassifications

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

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

Basis of Presentation

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

The executive decision maker of ourthe Company reviews operating results, assesses performance and makes decisions on a “significant market” basis. The Company’s managementManagement views each of its propertiesthe 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, the regulatory environments in which they operate, and their management and reporting structure. Prior to the Isle Acquisition,Merger, our principal operating activities occurred in five geographic regions and reportable segments: West, Midwest, South, East and Central. Following the Merger, the Company’s principal operating activities occurredoccur in three geographic regions: Nevada, Louisiana and parts of the eastern United States.3 regionally-focused reportable segments. The Company aggregated its operations into three reportable segments are based on the similar characteristics of the operating segments withinwith the regions inway management assesses these results and allocates resources, which they operated. Followingis a consolidated view that adjusts for the Isle Acquisition, the Company’s principal operating activities occur in four geographic regions andeffect of certain transactions between these reportable segments based on the similar characteristics of the operating segments within the regionsCaesars: (1) Las Vegas, (2) Regional, and (3) Managed, International, CIE, in which the Company operates: West, Midwest, South,addition to Corporate and East (SeeOther. See Note 1215 for the lista listing of properties included in each segmentsegment.
The presentation of financial information herein for the threeperiod after the Company’s acquisition of Former Caesars on July 20, 2020 is not fully comparable to the periods prior to the acquisition. In addition, the presentation of financial information herein for the periods after the Company’s sales of Presque and nine months ended September 30, 2017Nemacolin on January 11, 2019 and 2016).

March 8, 2019, respectively, the Company’s sales of Mountaineer, Cape Girardeau and Caruthersville on December 6, 2019, and the Company’s sales of Kansas City and Vicksburg on July 1, 2020 are not fully comparable to the periods prior to their respective sale dates. See Note 4.

These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Summary2019.

Consolidation of Significant Accounting Policies - Updates

Marketable securities consist primarilySubsidiaries and Variable Interest Entities

Our consolidated condensed financial statements include the accounts of trading securities held byCaesars and its subsidiaries after elimination of all intercompany accounts and transactions.
We consolidate all subsidiaries in which we have a controlling financial interest and VIEs for which we or one of our consolidated subsidiaries is the primary beneficiary. Control generally equates to ownership percentage, whereby (i) affiliates that are more than 50% owned are consolidated; (ii) investments in affiliates of 50% or less but greater than 20% are generally accounted for using the equity method where we have determined that we have significant influence over the entities; and (iii) investments in affiliates of 20% or less are generally accounted for as investments in equity securities.
We consider ourselves the primary beneficiary of a VIE when we have both the power to direct the activities that most significantly affect the results of the VIE and the right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE. We review our investments for VIE consideration if a reconsideration event occurs to determine if the investment continues to qualify as a VIE. If we determine an investment no longer qualifies as a VIE, there may be a material effect to our financial statements.
11

Consolidation of Korea Joint Venture
The Company has a joint venture to acquire, develop, own, and operate a casino resort project in Incheon, South Korea (the “Korea JV”). We determined that the Korea JV is a VIE and the Company is the primary beneficiary, and therefore, we consolidate the Korea JV into our financial statements.
Recent Developments Related to COVID-19
In January 2020, an outbreak of a new strain of coronavirus (“COVID-19”) was identified and has since spread throughout much of the world, including the United States. All of the Company’s captive insurance subsidiary. The trading securities are primarily debtcasino properties were temporarily closed for the period from mid-March 2020 through mid-May 2020 due to orders issued by various government agencies and equity securities that are purchasedtribal bodies as part of certain precautionary measures intended to help slow the spread of the COVID-19 public health emergency. On May 15, 2020, the Company began reopening properties and has resumed certain operations at all properties as of September 30, 2020, with the intentionexception of The Cromwell, Planet Hollywood Resort and Casino (“Planet Hollywood”), Rio All-Suite Hotel & Casino, and Caesars Windsor. Planet Hollywood and Caesars Windsor reopened on October 8, 2020, and The Cromwell reopened on October 29, 2020. The COVID-19 public health emergency has had a material adverse effect on the Company’s business, financial condition and results of operations for the three and nine months ended September 30, 2020. The Company continued to resellpay its full-time employees through April 10, 2020, including tips and tokens. Effective April 11, 2020, the Company furloughed approximately 90% of its employees, implemented salary reductions and committed to continue to provide benefits to its employees through September 30, 2020. Subsequently, the benefit coverage for furloughed employees was extended indefinitely. A portion of the Company’s workforce has returned to service as the properties have resumed with limited capacities and in compliance with operating restrictions imposed by governmental or tribal orders, directives, and guidelines. Due to a triggering event resulting from the COVID-19 public health emergency, the Company recognized impairment charges related to goodwill and trade names during the nine months ended September 30, 2020. See Note 7 for details.
Due to the impact of the ongoing COVID-19 public health emergency on the Company’s results of operations, in June 2020 the Company obtained waivers on the financial covenants in its former credit facility agreement and the GLPI Master Lease. In addition, Former Caesars obtained a waiver of the financial covenant in the near term. credit agreement by and among Caesars Resort Collection, LLC and the lenders thereunder (the “CRC Credit Agreement”). Furthermore, the Company obtained waivers from VICI in relation to annual capital expenditure requirements during the period from June 1, 2020 until December 31, 2020. See Note 10 for details.
The trading securities are carried at fair value with changes in fair value recognized in current period income in the accompanying statements of operations. This accounting policy was implemented asextent of the Isle Acquisition Date.

ongoing and future effects of the COVID-19 public health emergency on the Company’s business and the casino resort industry generally is uncertain, but the Company expects that it will continue to have a significant impact on its business, results of operations and financial condition. The extent and duration of the impact of COVID-19 will ultimately depend on future developments, including but not limited to, the duration and severity of the outbreak, restrictions on operations imposed by governmental authorities, the potential for authorities reimposing stay at home orders or additional restrictions in response to continued developments with the COVID-19 public health emergency, the Company’s ability to adapt to evolving operating procedures, the impact on consumer demand and discretionary spending, the length of time it takes for demand to return and the Company’s ability to adjust its cost structures for the duration of the outbreak’s effect on its operations.

Recently Issued Accounting Pronouncements – New Developments

Pronouncements Implemented in 2020
In May 2017,June 2016 (modified in November 2018), the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, which amendsASU No 2016-13, Financial Instruments – Credit Losses related to the scopetiming of modification accounting for share-based payment arrangements. An entity should account for the effects of a modification unless the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The standard is effective for therecognizing impairment losses on financial statements issued for annual periods and interim periods within those annual periods, beginning after December 15, 2017, and early adoption is permitted. We anticipate adopting this accounting standard during the first quarter of 2018, and are evaluating the impact on our consolidated financial statements.

In May 2014 (amended January 2017), FASB issued ASU No. 2014‑09, “Revenue from Contracts with Customers,” which provides guidance for revenue recognition.assets. The new standard outlinesguidance lowers the threshold on when losses are incurred, from a single comprehensive model for entitiesdetermination that a loss is probable to use in accounting for revenue arising from contracts with customers and eliminates existing industry guidance, including revenue recognition guidance specific to the gaming industry. The FASB has also recently issued several amendments to the standard, including narrow-scope improvements and practical expedients (ASU 2016-12) and clarification on accounting for and identifying performance obligations (ASU 2016-10). The core principle of the revenue model indicatesa determination that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standarda loss is designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures.expected. The guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied using the full retrospective method or retrospectively with the cumulative effect initially applying2019. Adoption of the guidance recognized atrequired a modified-retrospective approach and a cumulative adjustment to retained earnings to the date of initial application. While early adoptionfirst reporting period that the update is permitted for interim and annual periods beginning after December 15, 2016, we anticipate adopting this standardeffective. The Company adopted the new guidance on January 1, 2018, on a full retrospective basis. We are currently in the process2020. Adoption of evaluating the full impact adoption of ASU 2014‑09 (as amended) will have on our consolidated financial statements, including any new considerations with respect to the Isle Acquisition. We anticipate this new standard will likelyguidance did not have a material impact on our consolidated financial statements.

We expect the most significant effect upon adoption of ASU 2014-09 (as amended) will likely be related to 1) the accounting for our customer loyalty program (no longer will be recorded at cost, and a deferred revenue model will likely be used to account for the classification and timing of revenue recognized, as well as the classification of related expenses for loyalty point redemptions) and 2) the elimination of promotional allowances (the presentation of goods and services provided to our customers without charge,

Company’s Consolidated Condensed Financial Statements.

included in gross revenue with a corresponding reduction in promotional allowances, will no longer be reported as revenue and will be recognized based on relative standalone selling prices for transactions with more than one performance obligation). As a result, we expect that our liability associated with the customer loyalty program will increase, and our gaming revenues will be significantly reduced as the goods and services provided to customers without charge that currently are included in both gross revenues and promotional allowances will be presented on a net basis, with the majority of the impact resulting in a decrease in casino revenues. The quantitative effects of these changes have not yet been fully determined and are still being analyzed.

In February 2016,August 2018, the FASB issued ASU No. 2016-02 which addresses the recognition and measurement of leases. Under the new guidance,2018-15, Customer’s Accounting for all leases (with the exception of short-term leases), at the commencement date, lessees will be required to recognizeImplementation Costs Incurred in a lease liability, whichCloud Computing Arrangement that is a lessee’s obligationService Contract. This amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use (“ROU”)develop or obtain internal-use software (and hosting arrangements that include an internal use software license). This generally means that an intangible asset which is an asset that represents the lessee’s right to use, or control the use of, a specified assetrecognized for the lease term. Undersoftware license and, to the new guidance, lessor accountingextent that the payments attributable to the software license are made over time, a liability also is largely unchanged. Further,recognized. If a cloud computing arrangement does not include a software license, the new lease guidance simplifiesentity should account for the accountingarrangement as a service contract. This generally means that the

12

fees associated with the hosting element (service) of the arrangement are expensed as incurred. The amendment was effective for sale and leaseback transactions primarily because lessees must recognize lease assets and liabilities, which no longer provides a source for off balance sheet financing. The effective date for this update is for the annual and interim periods beginning after December 15, 2019. The Company adopted the new guidance on January 1, 2020. Adoption of this guidance did not have a material impact on the Company’s Consolidated Condensed Financial Statements.
In August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. This amendment modifies the disclosure requirements for fair value measurements and was effective for annual and interim periods beginning after December 15, 2019. The Company adopted the new guidance on January 1, 2020. Adoption of this guidance did not have a material impact on the Company’s Consolidated Condensed Financial Statements.
Pronouncements To Be Implemented In Future Periods
In August 2018, the FASB issued ASU No 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General. This amendment improves disclosures over defined benefit plans and is effective for interim and annual periods ending after December 15, 2020 with early adoption permitted. Lesseesallowed. The Company anticipates adopting this amendment during the first quarter of 2021, and lessors must applycurrently does not expect it to have a modified retrospective transition approachsignificant impact on its Consolidated Condensed Financial Statements.
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for leases existing at, or entered intoIncome Taxes. This amendment modifies accounting guidelines for income taxes and is effective for annual and interim periods beginning after December 15, 2020 with early adoption allowed. The Company will adopt the beginning ofnew guidance on January 1, 2021. The Company is evaluating the earliest comparative period presented in the consolidated financial statements.

Currently, we do not have any material capital leases nor any material operating leases where we are the lessor. Our operating leases, primarily relating to certain ground leases and slot machines or VLTs, will be recorded on the balance sheet as an ROU asset with a corresponding lease liability, which will be amortized using the effective interest rate method as payments are made. The ROU asset will be depreciated on a straight-line basis and recognized as lease expense. The qualitative and quantitative effects of adoption of ASU 2016-02 are still being analyzed, and we are in the process of evaluating the full effect the new guidance will have on our consolidated financial statements including any new considerations with respectits Consolidated Condensed Financial Statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. The amendments in this update are intended to provide relief to the Isle Acquisition.

companies that have contracts, hedging relationships or other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate which is expected to be discontinued because of reference rate reform. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions if certain criteria are met. The amendments in this update are effective as of March 12, 2020 and companies may elect to apply the amendments prospectively through December 31, 2022. The Company is evaluating the qualitative and quantitative effect the new guidance will have on its Consolidated Condensed Financial Statements.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging. This update amends guidance on convertible instruments and the guidance on derivative scope exception for contracts in an entity’s own equity. The amendments for convertible instruments reduce the number of accounting models for convertible debt instruments and convertible preferred stock. In addition, the amendments provide guidance on instruments that will continue to be subject to separation models and improves disclosure for convertible instruments and guidance for earnings per share. Furthermore, the update amends guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The amendments in this update are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. These amendments should be applied on either a modified retrospective basis or a fully retrospective basis. The Company is currently assessing the effect the adoption of this standard will have on our prospective financial statements.
Note 2. Isle Acquisition of Former Caesars
Merger with Caesars Entertainment Corporation
On July 20, 2020, the Merger was consummated and Preliminary Purchase Price Accounting

On May 1, 2017,Former Caesars became a wholly-owned subsidiary of the Company completed its acquisitionCompany. The strategic rationale for the Merger includes, but is not limited to, the following:

•Creation of Isle. the largest owner, operator and manager of domestic gaming assets
•Diversification of the Company’s domestic footprint
•Access to iconic brands, rewards programs and new gaming opportunities expected to enhance customer experience
•Realization of significant identified synergies
The total purchase consideration for Former Caesars was $10.9 billion. The estimated purchase consideration in the Isle Mergeracquisition was determined with reference to its acquisition date fair value.
13

(In millions)Consideration
Cash consideration paid$6,090 
Shares issued to Former Caesars shareholders2,381 
Cash paid to retire Former Caesars debt2,356 
Other consideration paid48 
Total purchase consideration$10,875 
Based on the closing price of $38.24 per share of the Company’s common stock, par value $0.00001 per share (“Company Common Stock”), reported on NASDAQ on July 20, 2020, the aggregate implied value of the aggregate merger consideration paid to former holders of Former Caesars common stock in connection with the Merger was approximately $8.5 billion, including approximately $2.4 billion in the Company Common Stock and approximately $6.1 billion in cash. The aggregate merger consideration transferred also included approximately $2.4 billion related to the repayment of certain outstanding debt balances of Former Caesars and approximately $48 million of other consideration paid which includes $19 million related to a transaction success fee, for the benefit of Former Caesars, and $29 million for the replacement of equity awards of certain employees attributable to services provided prior to the Merger.
Pursuant to the Merger, each share of Former Caesars common stock was converted into the right to receive, at the election of the holder thereof and subject to proration, approximately $12.41 of cash consideration or approximately 0.3085 shares of Company Common Stock, with a value equal to approximately $12.41 in cash (based on the volume weighted average price per share of Company Common Stock for the 10 trading days ending on July 16, 2020). Following the consummation of the Merger, stockholders of the Company and stockholders of Former Caesars held approximately 61% and 39%, respectively, of the outstanding shares of Company Common Stock.
Preliminary Purchase Price Allocation
The fair values are based on management’s analysis including preliminary work performed by third party valuation specialists, which are subject to finalization over the one-year measurement period. The purchase price accounting for Former Caesars is preliminary as it relates to determining the fair value on the date of the Merger Agreement as follows:

Purchase consideration calculation (dollars in thousands, except shares and stock price)

 

Shares

 

 

Per share

 

 

 

 

Cash paid for outstanding Isle common stock (1)

 

 

 

 

 

 

 

 

 

 

 

$

 

552,050

 

Shares of ERI common stock issued for Isle common stock (2)

 

 

 

28,468,182

 

 

$

 

19.12

 

 

 

 

544,312

 

Cash paid by ERI to retire Isle's long-term debt (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

828,000

 

Shares of ERI common stock for Isle equity awards (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

10,383

 

Purchase consideration

 

 

 

 

 

 

 

 

 

 

 

$

 

1,934,745

 

(1)

The cash component of the consideration represents 58% of the aggregate consideration paid in the Isle Merger. The Merger Agreement provided that Isle stockholders could elect to exchange each share of Isle common stock for either $23.00 in cash or 1.638 shares of ERI common stock, subject to proration such that the outstanding shares of Isle common stock will be exchanged for aggregate consideration comprised of 58% cash and 42% ERI common stock. See discussion of Stock Consideration component in note (2) below.

(2)

The Stock Consideration component of the consideration represents 42% of the aggregate consideration paid in the Isle Merger. The Merger Agreement provided that 58% of the aggregate consideration would be paid by ERI in cash, as described in note (1) above. The remaining 42% of the aggregate consideration was paid in shares of ERI common stock. The total Stock Consideration and per share consideration above were based on the ERI stock price on April 28, 2017 (the last business day prior to Isle Acquisition Date) which was $19.12 per share.

(3)

In addition to the cash paid to retire the principal amounts outstanding of Isle’s long-term debt, ERI paid $26.6 million in premiums and interest.

(4)

This amount represents consideration paid for the replacement of Isle’s outstanding equity awards. As discussed in Note 1, Isle’s outstanding equity awards were replaced by ERI equity awards with similar terms. A portion of the fair value of ERI awards issued represents consideration transferred, while a portion represents compensation expense based on the vesting terms of the equity awards.


Preliminary Purchase Price Accounting

certain assets and liabilities, including goodwill, and is subject to change. The following table summarizes the preliminary accountingallocation of the estimated purchase consideration to the identifiable assets acquired and liabilities assumed in the Isle Acquisition as of the Isle Acquisition Date,Former Caesars, with the excess recorded as goodwill. The fair values were based on management’s analysis, including preliminary work performed by third-party valuation specialists. The following table summarizes the preliminary purchase price accounting of the acquired assets and liabilitiesgoodwill as of September 30, 2017 (dollars in thousands):

2020:

(In millions)Fair Value
Current and other assets net

$

$

4,264 

134,143

Property and equipment

12,730 

853,331

Goodwill

679,656

Goodwill

8,649 
Intangible assets (i)

(a)

3,549 

470,811

Other noncurrent assets

684 

11,025

Assets held for sale

Total assets

$

29,876 

143,592

Total assets

2,292,558

Current liabilities

$

1,896 

(138,475

)

Deferred income taxes (ii)

Financing obligation

8,134 

(187,127

)

Other noncurrent liabilities

Long-term debt

6,591 

(26,762

)

Liabilities related to assets held for sale

Noncurrent liabilities

2,362 

(5,449

)

Total liabilities

18,983 

(357,813

)

Noncontrolling interests

18 
Net assets acquired

$

$

10,875 

1,934,745

(i)

Intangible assets consist of gaming licenses, trade names, and player relationships.

(ii)

Deferred tax liabilities were derived based on fair value adjustments for property and equipment and identified intangibles.

____________________

(a)Intangible assets consist of gaming licenses valued at $537 million, trade names valued at $2.1 billion and Caesars Rewards programs valued at $540 million and customer relationships of $404 million.
The fair values of the assets acquired and liabilities assumed were determined using the market, income, and cost approaches, or a combination. Valuation methodologies under both a market and income approach used for the identifiable net assets acquired in the Isle AcquisitionFormer Caesars acquisition make use of Level 1 and Level 3 inputs, including quoted prices in active markets and discountedsuch as expected cash flows using current interest rates and are provisional pending development ofprojected financial results. The market approach indicates value for a final valuation.

subject asset based on available market pricing for comparable assets.

14

Trade receivables and payables inventory and other current and noncurrent assets and liabilities were valued at the existing carrying values as they represented the estimated fair value of those items at the Isle Acquisition Date,Former Caesars acquisition date. Assets and liabilities held for sale are recorded at fair value, less costs to sell, based on management’s judgementthe agreements reached as of the acquisition date, or an income approach.
Certain financial assets acquired were determined to have experienced more than insignificant deterioration of credit quality since origination. A reconciliation of the difference between the purchase price of financial assets, including acquired markers, and estimates.

the face value of the assets is as follows:

(In millions)
Purchase price of financial assets$95 
Allowance for credit losses at the acquisition date based on the acquirer’s assessment89 
Discount / (premium) attributable to other factors2 
Face value of financial assets$186 
The fair value of land was determined using the market approach, which arrives at an indication of value by comparing the site being valued to sites that have been recently acquired in arm’s-length transactions.sales comparable approach. The market data is then adjusted for any significant differences, to the extent known, between the identified comparable sites and the site being valued. BuildingThe value of building and site improvements were valued usingwas estimated via the cost approach using a direct cost model built on estimates of replacement cost. With respect to personal property components of the assets, personal property assets with an active and identifiable secondary market such as riverboats, gaming equipment, computer equipment and vehicles were valued using the marketincome approach. Other personal property assets such as furniture, gaming and computer equipment, fixtures, computer software, and restaurant equipment were valued using the cost approach which is based on replacement or reproduction costs of the asset.

The cost approach is an estimation of fair value developed by computing the current cost of replacing a property and subtracting any depreciation resulting from one or more of the following factors: physical deterioration, functional obsolescence, and/or economic obsolescence.

Non-amortizing intangible assets acquired primarily include trademarks, Caesars Rewards and gaming rights. The income approach incorporates all tangiblefair value for these intangible assets was determined using either the relief from royalty method and intangible property and served as a ceiling for the fair values of the acquired assets of the ongoing business enterprise, while still taking into account the premise of highest and best use. In the instance where the business enterprise value developed viaexcess earnings method under the income approach was exceeded by the initial fair values of the underlying assets, an adjustment to reflect economic obsolescence was made to the tangible assets onor a pro rata basis to reflect the contributory value of each individual asset to the enterprise as a whole.

The fair value of the gaming licenses was determined using the excess earnings or replacement cost methodology based on the respective states’ legislation. The excess earnings methodology, which is an income approach methodology that allocates the projected cash flows of the business to the gaming license intangible assets less charges for the use of other identifiable assets of Isle including working capital, fixed assetsmarket approach.

Trademarks and other intangible assets. This methodology was considered appropriate as the gaming licenses are the primary asset of Isle and the licenses are linked to each respective facility. Under the respective state’s gaming legislation, the property specific licenses can only be acquired if a theoretical buyerCaesars Rewards were to acquire each existing facility. The existing licenses could not be acquired and used for a different facility. The properties’ estimated future cash flows were the primary assumption in the respective valuations. Cash flow estimates included net gaming revenue, gaming operating expenses, general and administrative expenses, and tax expense. The replacement cost methodology is a cost approach methodology based on replacement or reproduction cost of the gaming license as an indicator of fair value.


Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademarks ERIor loyalty program, the Company would have to make a stream of payments to a brand or franchise owner in return for the right to use their name.name or program. By virtue of this asset, ERIthe Company avoids any such payments and recordrecords the related intangible value of ERI’sthe Company’s ownership of the brand name.name or program. The primary assumptionsacquired Trademarks, including Caesars Rewards are indefinite lived intangible assets.

Customer relationships are valued using an income approach, comparing the prospective cash flows with and without the customer relationships in place to estimate the valuation included revenue, pre-tax royalty rate,fair value of the customer relationships, with the fair value assumed to be equal to the discounted cash flows of the business that would be lost if the customer relationships were not in place and tax expense.

ERI has preliminarily assigned an indefiniteneeded to be replaced. We estimate the useful life of these customer relationships to be approximately 7 years.

Gaming rights include our gaming licenses in various jurisdictions and may have indefinite lives or an estimated useful life. The fair value of the gaming rights was determined using the excess earnings or replacement cost methodology, based on whether the license resides in gaming jurisdictions where competition is limited to a specified number of licensed gaming operators. The excess earnings methodology is an income approach methodology that estimates the projected cash flows of the business attributable to the gaming licenses, in accordance with its reviewlicense intangible asset, which is net of charges for the use of other identifiable assets of the applicable guidance of ASC Topic 350, “Intangibles-Goodwillbusiness including working capital, fixed assets and Other” (“ASC 350”).other intangible assets. The standard required ERI to consider, among other things, the expected usereplacement cost of the asset,gaming license was used as an indicator of fair value. The acquired gaming rights have indefinite lives, with the expectedexception of one jurisdiction in which we estimate the useful life of other related asset or asset group, anythe license to be approximately 34 years.
Goodwill is the result of expected synergies from the operations of the combined company and the assembled workforce of Former Caesars. The goodwill acquired will not generate amortization deductions for income tax purposes. Pushdown accounting, including the allocation of goodwill to our reportable segments, is not complete.
The fair value of long-term debt has been calculated based on market quotes. The fair value of the financing obligations were calculated as the net present value of both the fixed base rent payments and the forecasted variable payments plus the expected residual value of the land and building returned at the end of the expected usage period.
The Company recognized acquisition-related transaction costs of $107 million and $129 million for the three and nine months ended September 30, 2020, respectively, and $13 million and $17 million for the three and nine months ended September 30, 2019, respectively. These costs were associated with legal, regulatory, or contractual provisions that may limit the useful life, ERI’s own historical experience in renewing similar arrangements, the effects of obsolescence, demandIT costs, internal labor and professional services and were recognized as Transaction costs and other economic factors, and the maintenance expenditures required to obtain the expected cash flows. In that analysis, ERI determined that no legal, regulatory, contractual, competitive, economic or other factors limit the useful livesoperating costs in our Consolidated Statements of these intangible assets. The acquired Isle properties currently have licenses in Pennsylvania, Iowa, Missouri, Mississippi, Florida and Colorado. The renewal of each state’s gaming license depends on a number of factors, including payment of certain fees and taxes, providing certain information to the state’s gaming regulator, and meeting certain inspection requirements. However, ERI’s historical experience has not indicated, nor does ERI expect, any limitations regarding its ability to continue to renew each license. No other competitive, contractual, or economic factor limits the useful lives of these assets. Accordingly, ERI has preliminarily concluded that the useful lives of these licenses are indefinite.

Comprehensive (Loss) Income.

15

For the period from the Isle Acquisition Dateof July 20, 2020 through September 30, 2017, Isle2020, Former Caesars generated net revenuerevenues of $335.3$924 million and net incomeloss of $30.7$564 million.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presentsis presented to illustrate the results of operationsestimated effects of the Company for the nine months ended September 30, 2017 and 2016, which give effect to the Isle Acquisition, the Lake Charles Disposition, and Isle’s saleacquisition of the Lady Luck Casino Marquette, which closed on March 13, 2017,Former Caesars as if each of such transactionsit had occurred on January 1, 2016 (in thousands):

 

 

Nine Months Ended

 

 

 

September 30, 2017

 

 

September 30, 2016

 

Net revenues

 

$

 

1,291,998

 

 

$

 

1,317,185

 

Net income from continuing operations

 

 

 

77,918

 

 

 

 

22,097

 

Net income

 

 

 

84,310

 

 

 

 

28,645

 

These pro forma results do not necessarily represent the results of operations that would have been achieved if the Isle Acquisition had taken place on January 1, 2016, nor are they indicative of the results of operations for future periods.2019. The pro forma amounts include the historical operating results of the Company and IsleFormer Caesars prior to the Isle Acquisition,acquisition, with adjustments factually supportable and directly attributable to the Isle Acquisition.

acquisition. The pro forma results include adjustments and consequential tax effects to reflect incremental depreciation and amortization expense to be incurred based on preliminary fair values of the identifiable property and equipment and intangible assets acquired, the incremental interest expense associated with the issuance of debt to finance the acquisition and the adjustments to exclude acquisition related costs incurred during the three and nine months ended September 30, 2020 and to recognize these costs during the nine months ended September 30, 2019 as if incurred in the first quarter of 2019. The unaudited pro forma financial information is not necessarily indicative of what the consolidated results of operations of the combined company were, nor does it reflect the expected realization of any synergies or cost savings associated with the acquisition.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2020201920202019
Net revenues$1,639 $2,607 $4,145 $7,652 
Net loss(989)(363)(2,266)(894)
Net loss attributable to Caesars(927)(362)(2,200)(892)
Note 3. Discontinued Operations

Revenue Recognition

The Company recognizes as casino revenue the net win from gaming activities, which is the difference between gaming wins and losses, not the total amount wagered. Progressive jackpots are accrued and charged to revenue at the time the obligation to pay the jackpot is established. Gaming revenues are recognized net of certain cash and free play incentives. Pari-mutuel commissions consist of commissions earned from thoroughbred and harness racing and importing of simulcast signals from other race tracks and are recognized at the time wagers are made. Such commissions are a designated portion of the wagering handle as determined by state racing commissions and are shown net of the taxes assessed by state and local agencies, as well as purses and other contractual amounts paid to horsemen associations. The Company recognizes revenues from fees earned through the exporting of simulcast signals to other race tracks at the time wagers are made, which are recorded on a gross basis. Such fees are based upon a predetermined percentage of handle as contracted with the other race tracks.
The Company’s consolidated condensed statement of operations presents net revenue disaggregated by type or nature of the good or service. A summary of net revenues disaggregated by type of revenue and reportable segment is presented below. We recast previously reported segment amounts to conform to the way management assesses results and allocates resources for the current year. Refer to Note 1 and Note 15 for additional information on the Company’s reportable segments.
Three Months Ended September 30, 2020
(In millions)Las VegasRegionalManaged, International & CIECorporate
and Other		Total
Casino and pari-mutuel commissions$122 $774 $23 $0 $919 
Food and beverage52 72 1 0 125 
Hotel79 121 0 0 200 
Other51 33 45 4 133 
Net revenues$304 $1,000 $69 $4 $1,377 
Three Months Ended September 30, 2019
(In millions)Las VegasRegionalManaged, International & CIECorporate
and Other		Total
Casino and pari-mutuel commissions$0 $458 $0 $0 $458 
Food and beverage0 78 0 0 78 
Hotel0 94 0 0 94 
Other0 31 0 2 33 
Net revenues$0 $661 $0 $2 $663 
16

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

Accounts receivable, net include the following amounts:
Balance Sheet as of
(In millions)September 30, 2020December 31, 2019
Casino and pari-mutuel commissions$121 $16 
Food and beverage and hotel27 17 
Other237 21 
Accounts receivable, net$385 $54 
Contract and Contract Related Liabilities
The Company records contract or contract-related liabilities related to differences between the timing of cash receipts from the customer and the recognition of revenue. The Company generally has three types of liabilities related to contracts with customers: (1) outstanding chip liability, which represents the amounts owed in exchange for gaming chips held by a customer,(2) player loyalty program obligations, subsequently combined as Caesars Rewards, which represents the deferred allocation of revenue relating to reward credits granted to Caesars Rewards members based on on-property spending, including gaming, hotel, dining, retail shopping, and player loyalty program incentives earned, and (3) customer deposits and other deferred revenue, which is primarily funds deposited by customers related to gaming play, advance payments received for goods and services yet to be provided (such as advance ticket sales, deposits on rooms and convention space or for unpaid wagers), and deferred revenues associated with the Company’s existing interests in William Hill (see Note 6). Except for deferred revenues related to William Hill, these liabilities are generally expected to be recognized as revenue within one year of being purchased, earned, or deposited and are recorded within accrued other liabilities on the Company’s Consolidated Condensed Balance Sheets.
The following table summarizes the activity related to contract and contract-related liabilities:
Outstanding Chip LiabilityCaesars RewardsCustomer Deposits and Other
Deferred Revenue
(In millions)202020192020201920202019
Balance at January 1$10 $9 $13 $18 $172 $28 
Balance at September 3028 8 106 14 270 173 
Increase / (decrease)$18 $(1)$93 $(4)$98 $145 
The September 30, 2020 balances exclude liabilities related to assets held for sale recorded in 2020 and 2019 (see Note 4). The significant change in contract and contract-related liabilities during the nine months ended September 30, 2020 was primarily due to the liabilities assumed subsequent to the Merger with Former Caesars. The significant change in customer deposits and
17

other deferred revenue during the nine months ended September 30, 2019 was primarily attributed to the initial recognition of the Company’s interests in William Hill, which is recorded in other long-term liabilities on the Consolidated Condensed Balance Sheets (see Note 6).
Note 4. Assets Held for Sale

Held for sale - Continuing operations

Eldorado Shreveport, MontBleu and Evansville
In connection with its review of the Merger, the Indiana Gaming Commission determined on July 16, 2020 that the Company is required to divest three properties within the state of Indiana in order to avoid undue economic concentrations as conditions to the Indiana Gaming Commission’s approval of the Merger. On August 22, 2016, Isle October 27, 2020, the Company entered into a definitivean agreement to sell its casinoEvansville to GLPI and hotel propertyTwin River for $480 million in Lake Charles, Louisiana, for $134.5 million,cash, subject to a customary purchase price adjustment, to an affiliate of Laguna Development Corporation, a Pueblo of a Laguna-owned business based in Albuquerque, New Mexico.working capital adjustment. The transaction remainssale is subject to Louisiana Gaming Control Board approvalsatisfaction of customary conditions, including receipt of required regulatory approvals and other customary closing conditions and, if obtained, the transaction is expected to be completed byclose in mid-2021. In addition, the Company plans to enter into agreements to divest of Caesars Southern Indiana and Horseshoe Hammond prior to December 31, 2017. Isle received a $20.0 million deposit related to this transaction, which is reflected in restricted cash within current assets in the consolidated balance sheet as of September 30, 2017.

As of the Isle Acquisition Date, Lake Charles2020. Evansville met the requirements for presentation as assets held for sale as of September 30, 2020, while Caesars Southern Indiana and Horseshoe Hammond met the requirements for presentation as held for sale and discontinued operation under generally accepted accounting principles. Accordingly,operations.

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


The resultsAs a result of discontinued operations are summarized as follows (in thousands):

the agreement to sell MontBleu, an impairment charge totaling $45 million was recorded during the nine months ended September 30, 2020 due to the carrying value exceeding the estimated net sales proceeds. The impairment charges resulted in a reduction to the carrying amounts of the right-of-use assets, property and equipment, goodwill and other intangibles totaling $18 million, $23 million and $4 million, respectively. See Note 7.

 

 

Discontinued Operations

 

 

 

Three Months Ended

 

 

May 1 - September 30,

 

 

 

September 30, 2017

 

 

2017

 

Net revenues

 

$

 

25,871

 

 

$

 

44,306

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income from discontinued operations

 

$

 

2,388

 

 

$

 

3,927

 

Income tax provision from discontinued operations

 

 

 

(950

)

 

 

 

(1,534

)

Income from discontinued operations

 

$

 

1,438

 

 

$

 

2,393

 

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

as of September 30, 2020:

September 30,

2017

Assets:

Accounts receivable, net

$

632

Inventories

452

Prepaid expenses and other

833

Property and equipment, net

59,347

Goodwill

36,353

Gaming licenses and other intangibles, net

45,659

Other assets, net

220

Assets held for sale

$

143,496

Liabilities:

Accounts payable

$

1,960

Accrued payroll and related

1,639

Accrued property, gaming and other taxes

1,181

Accrued other liabilities

2,010

Liabilities related to assets held for sale

$

6,790

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

The following information presents the net revenues and net (loss) income for the Company’s properties that are held for sale:
Three Months Ended September 30, 2020
(In millions)ShreveportMontBleuEvansville
Net revenues$21 $11 $31 
Net (loss) income7 (3)1 
18

Nine Months Ended September 30, 2020
(In millions)ShreveportMontBleuEvansville
Net revenues$51 $23 $71 
Net (loss) income8 (43)(7)
Held for sale - Sold
Kansas City, Vicksburg, Mountaineer, Caruthersville, Cape Girardeau, Presque and Nemacolin Divestitures
On July 1, 2020, the Company consummated the sale of the equity interests of the entities that hold Vicksburg and Kansas City to Twin River for $230 million resulting in a gain of $8 million. The sales of Mountaineer, Caruthersville and Cape Girardeau were consummated on December 6, 2019. The sale of Nemacolin closed on March 8, 2019 resulting in a gain on sale of $0.1 million, net of final working capital adjustments, for the nine months ended September 30, 2019. The sale of Presque closed on January 11, 2019 resulting in a gain on sale of $22 million, net of final working capital adjustments, for the nine months ended September 30, 2019. Prior to their respective closing dates, Vicksburg, Kansas City, Mountaineer, Caruthersville, Cape Girardeau, Nemacolin and Presque met the requirements for presentation as assets held for sale under generally accepted accounting principles. However, they did not meet the requirements for presentation as discontinued operations. All properties were previously reported in the Regional segment.
The following information presents the net revenues and net (loss) income of Kansas City and Vicksburg properties for the three and nine months ended September 30, 2020:
Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
(In millions)Kansas CityVicksburgKansas CityVicksburg
Net revenues$0 $0 $18 $7 
Net (loss) income1 0 3 (1)
The following information presents the net revenues and net (loss) income of held for sale properties for the three and nine months ended September 30, 2019:
Three Months Ended September 30, 2019
(In millions)MountaineerCape  GirardeauCaruthersvilleKansas CityVicksburgPresqueNemacolin
Net revenues$33 $14 $9 $15 $6 $0 $0 
Net income3 2 1 1 0 0 0 
Nine Months Ended September 30, 2019
(In millions)MountaineerCape  GirardeauCaruthersvilleKansas CityVicksburgPresqueNemacolin
Net revenues$96 $44 $26 $48 $16 $3 $5 
Net (loss) income7 6 5 8 (1)0 (1)

19

The assets and liabilities held for sale, accounted for at carrying value as it was lower than fair value, were as follows as of December 31, 2019:
December 31, 2019
(In millions)Kansas CityVicksburgTotal
Assets:
Property and equipment, net$39 $31 $70 
Goodwill40 9 49 
Gaming licenses and other intangibles, net91 3 94 
Other assets, net36 4 40 
Assets held for sale$206 $47 $253 
Current liabilities$3 $2 $5 
Other long-term liabilities33 0 33 
Liabilities related to assets held for sale$36 $2 $38 
These amounts include historical operating results, adjusted to eliminate the internal allocation of interest expense that was not assumed by the buyer.
Held for sale - Discontinued operations
As result of the Merger, certain Former Caesars properties, including Harrah’s Louisiana Downs, Caesars Southern Indiana, Horseshoe Hammond, Harrah’s Reno, Caesars UK group, including Emerald Resorts & Casino, and Bally’s Atlantic City (“Bally’s AC”) have met, or are expected to meet within a short period of time, held for sale criteria as of the date of the closing of the Merger. The sales of these properties have or are expected to close within one year from the date of the closing of the Merger and the properties are classified as discontinued operations.
On September 30, 2020, the Company and VICI completed the sale of Harrah’s Reno for $42 million. The proceeds from the sale were split between the Company and VICI, and the Company received $8 million of net proceeds.
The following information presents the net revenues and net (loss) income for the Company’s properties that are part of discontinued operations for the three months ended September 30, 2020:
Three Months Ended September 30, 2020
(In millions)Harrah’s Louisiana DownsHarrah’s RenoHorseshoe HammondCaesars UKBally’s ACCaesars Southern Indiana
Net revenues$9 $0 $66 $11 $31 $39 
Net (loss) income2 (4)9 (11)5 1 
20

The assets and liabilities held for sale as a discontinued operation, accounted for at carrying value as it was lower than fair value, were as follows as of September 30, 2020:
September 30, 2020
(In millions)Harrah’s Louisiana DownsHorseshoe HammondCaesars UKBally’s ACCaesars Southern Indiana
Assets:
Cash$9 $14 $36 $10 $7 
Property and equipment, net11 404 69 25 413 
Goodwill3 138 35 0 136 
Gaming licenses and other intangibles, net5 30 50 0 23 
Other assets, net1 43 107 6 4 
Assets held for sale$29 $629 $297 $41 $583 
Current liabilities$6 $34 $89 $14 $20 
Other long-term liabilities (a)
6 73 125 20 1 
Liabilities related to assets held for sale$12 $107 $214 $34 $21 
____________________
(a)We have included $25 million of deferred finance obligation as held for sale liabilities for Bally’s Atlantic City and Louisiana Downs, which represent our preliminary purchase price allocation of the liability which will be derecognized upon completion of those divestitures. We have not included any portion of the deferred finance obligation associated with Horseshoe Hammond or Caesars Southern Indiana as held for sale as we do not yet have any sale agreements in place or know the effect of any possible master lease modification on our deferred finance lease liability.
Note 4.5. Stock-Based Compensation

The and Stockholders’ Equity

Common Stock Offering
On June 19, 2020, the Company completed the public offering of 20,700,000 shares (including the shares sold pursuant to the underwriters’ overallotment option) of Company Common Stock, at an offering price of $39.00 per share, which provided $772 million of proceeds, net of fees and estimated expenses of $35 million.
On October 1, 2020, the Company completed the public offering of 35,650,000 shares (including the shares sold pursuant to the underwriters’ overallotment option) of Company Common Stock, at an offering price of $56.00 per share, which provided $1.9 billion of proceeds, net of fees and estimated expenses of $50 million.
Share Repurchase Program
In November 2018, the Company’s Board of Directors (“BOD”authorized a $150 million common stock repurchase program (the “Share Repurchase Program”) adoptedpursuant to which the Eldorado Resorts, Inc. 2015 Equity Incentive Plan (“2015 Plan”)Company may, from time to time, repurchase shares of common stock on January 23, 2015the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions. The Share Repurchase Program has no time limit and our shareholders subsequently approvedmay be suspended or discontinued at any time without notice. There is no minimum number of shares of common stock that the adoptionCompany is required to repurchase under the Share Repurchase Program.
As of September 30, 2020, the 2015 PlanCompany acquired 223,823 shares of common stock under the Share Repurchase Program at an aggregate value of $9 million and an average of $40.80 per share. NaN shares were repurchased during the nine months ended September 30, 2020 and 2019.
Stock-Based Compensation
The Company maintains long-term incentive plans for management, other personnel, and key service providers. The plans allow for granting stock-based compensation awards, based on June 23, 2015. The Plan permits the granting ofCompany Common Stock, including time-based and performance-based stock options, including incentive stock options (“ERI Stock Options”), stock appreciation rights, restricted stock or restricted stock units (“RSUs”), performance stock units, market-based stock units (“MSUs”), restricted stock awards, and other stock-based awards and dividend equivalents. ERI Stock Options primarily vest ratably over three years and RSUs granted to employees and executive officers primarily vest and become non-forfeitable upon the third anniversarystock grants, or a combination of the date of grant. RSUs granted to non-employee directors vest immediately andawards. Forfeitures are delivered upon the date that is the earlier of termination of service on the BOD or the consummation of a change of control of the Company. The performance awards relate to the achievement of defined levels of performance and are generally measured over a one or two-year performance period depending upon the award agreement. If the performance award levels are achieved, the awards earned will vest and become payable at the end of the vesting period, defined as either a one or two calendar year period following the performance period. Payout ranges are from 0% up to 200% of the award target.

Pursuant to the Merger Agreement, the outstanding equity awards of Isle were converted into comparable equity awards of ERI stock as follows:

Isle stock options. Each option or other right to acquire Isle common stock (each an “Isle Stock Option”) that was outstanding immediately prior to the Isle Acquisition Date (whether vested or unvested), as of the Isle Acquisition Date, (i) continued to vest or accelerate (if unvested), as the case may be, in accordance with the applicable Isle stock plan, the award agreement pursuant to which such Isle Stock Option was granted and, if applicable, any other relevant agreements (such as an employment agreement), (ii) ceased to represent an option or right to acquire shares of Isle common stock, and (iii) was converted into an option or right to purchase that number of shares ERI common stock equal to the number of shares of Isle common stock subject to the Isle Stock Option multiplied by the Stock Consideration at an exercise price equal to the exercise price of the Isle Stock Option divided by the Stock Consideration,


subject to the same restrictions and other terms as are set forthrecognized in the Isle equity incentive plan, the award agreement pursuant toperiod in which such Isle Stock Option was granted and, if applicable, any other relevant agreements (such as an employment agreement).

Isle restricted stock awards. Each share of Isle common stock subject to vesting, repurchase or lapse restrictions (each an “Isle Restricted Share”) that was outstanding under any Isle equity plan or otherwise immediately prior to the Isle Acquisition Date, as of the Isle Acquisition Date, continued to vest or accelerate (if unvested), as the case may be, in accordance with the applicable Isle stock plan, the award agreement pursuant to which such Isle Restricted Share was granted, and, if applicable, any other relevant agreements (such as an employment agreement) and was exchanged for shares of ERI common stock (in an amount equal to the Stock Consideration, with aggregated fractional shares rounded to the nearest whole share) and remain subject to the same restrictions and other terms as are set forth in the Isle stock plan, the award agreement pursuant to which such Isle Restricted Share was granted, and, if applicable, any other relevant agreements (such as an employment agreement).

Isle performance stock units. Each performance stock unit (each, an “Isle PSU”) that was outstanding immediately prior to the Isle Acquisition Date, as of the Isle Acquisition Date, (i) continued to vest or accelerate (if unvested), as the case may be, in accordance with the applicable Isle stock plan, the award agreement pursuant to which such Isle PSU was granted, and, if applicable, any other relevant agreements (such as an employment agreement), (ii) was converted into a number of performance stock units in respect of shares of ERI common stock, in an amount equal to the Stock Consideration (with aggregated fractional shares rounded to the nearest whole share) at the target level of performance, and (iii) remain subject to the same restrictions and other terms as are set forth in the Isle stock plan, the award agreement pursuant to which such Isle PSU was granted, and, if applicable, any other relevant agreements (such as an employment agreement).

Isle restricted stock units. Each restricted stock unit, deferred stock unit or phantom unit in respect of a share of Isle common stock granted under the applicable Isle stock plan or otherwise, including any such units held in participant accounts under any employee benefit or compensation plan or arrangement of Isle, other than an Isle PSU (each an “Isle RSU”) that was outstanding immediately prior to the Isle Acquisition Date, as of the Isle Acquisition Date, (i) continued to vest or accelerate (if unvested), as the case may be, in accordance with the applicable Isle stock plan, the award agreement pursuant to which such Isle RSU was granted, and, if applicable, any other relevant agreements (such as an employment agreement or applicable employee benefit plan), (ii) was converted into a number of restricted stock units, deferred stock units or phantom units, as applicable, in respect of shares of ERI common stock, in an amount equal to the Stock Consideration (with aggregated fractional shares rounded to the nearest whole share), and (iii) remain subject to the same restrictions and other terms as are set forth in the Isle stock plan, the award agreement pursuant to which such Isle RSU was granted, and, if applicable, any other relevant agreements (such as an employment agreement or applicable employee benefit plan).

The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation—Stock Compensation” (“ASC 718”). they occur.

Total stock-based compensation expense from continuing operations was $1.4in the accompanying Consolidated Condensed Statements of Operations totaled $45 million and $0.7$4 million forduring the three months ended September 30, 20172020 and 2016,2019, respectively, and $4.5$55 million and $2.7$16 million forduring the nine months ended September 30, 20172020 and 2016,2019, respectively. In the first quarter of 2016, the Company’s chief operating officer terminated employment and the chief financial officer retired. In conjunction with the termination and retirement, unvested RSUs totaling 167,511, which were outstanding as of December 31, 2015, immediately vested representing an additional $0.5 million included in stock compensation expense during the first quarter of 2016. Additionally, severance costs totaling $1.4 million were recognized in the first quarter of 2016.

These amounts are included in corporate expenses and, in the case of certain property positions, general and administrative expenses in the Company’s consolidated statementsConsolidated Condensed Statements of operations. We recognizedOperations.

21

In connection with the Merger, Former Caesars’ outstanding performance-based stock options ceased to represent an option or right to acquire shares of Former Caesars common stock and were converted into an option or right to purchase shares of Company Common Stock on the same terms and conditions as were applicable to such option immediately prior to the consummation of the Merger. Former Caesars’ unvested RSUs and MSUs were converted into a reductionnumber of RSUs or MSUs, as applicable, in income tax expenserespect of $0.2 millionshares of Company Common Stock and $0.1 million forremained subject to the same terms and conditions as were applicable to such RSUs and MSUs immediately prior to the consummation of the Merger.
In addition, during the three months ended September 30, 20172020, the Company granted both RSUs and 2016, respectively,MSUs to members of management. Vesting of the awards varies, and $0.8includes awards that cliff vest after a two or three year service period, as well as awards that vest ratably on each anniversary during the three year service period. In addition, awards were granted to certain key individuals related to their efforts and the related shareholder return from potential transactions. Vesting of the awards is subject to various service and performance conditions and will accelerate and vest immediately upon the closing of a qualifying transaction as defined by the agreements. Certain awards contained a market-based performance condition with which the fair value of the awards was determined based on a Monte Carlo simulation. The grant date fair value for these awards with a market-based performance condition was approximately $7 million.
Restricted Stock Unit Activity
During the three and nine months ended September 30, 2020, as part of the annual incentive program, the Company granted RSUs to employees of the Company with an aggregate fair value of $42 million and $59 million, respectively. Each RSU represents the right to receive payment in respect of one share of the Company’s Common Stock.
In connection with the Merger, on July 20, 2020, each Former Caesars’ RSU that was eligible to vest based solely on the passage of time that was outstanding as of immediately prior to the consummation of the Merger was converted into a RSU in respect of Company Common Stock and remained subject to the same terms and conditions as were applicable as of immediately prior to the consummation of the Merger.
A summary of the RSUs activity, including performance awards, for both the nine months ended September 30, 2017 and 2016, respectively, for excess tax benefits related to stock-based compensation.

On January 27, 2017,2020 is presented in the Companyfollowing table:

Units
Weighted-
Average Grant
Date
Fair Value (a)
Unvested outstanding as of December 31, 20191,246,641 $35.56 
Granted (b)
1,222,736 48.17 
Acquired (c)
1,876,969 38.24 
Vested(1,068,509)33.22 
Forfeited(22,912)41.89 
Unvested outstanding as of September 30, 20203,254,925 42.56 
___________________
(a)Represents the weighted-average grant date fair value of RSUs, which is the share price of our common stock on the grant date.
(b)Included are 20,615 RSUs granted 298,761 RSUs to executive officers and key employees, and 46,282 RSUs to non-employee members of the BOD under the 2015 Plan. The RSUs had a fair valueBoard of $15.50 per unit which was the NASDAQ closing price on that date. An additional 42,161 RSUs were also granted to key employeesDirectors during the nine months ended September 30, 2017.

2020.

A summary(c)Assumed RSU shares of Former Caesars as of the RSU activityMerger date.

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

Units
Weighted- Average Fair Value (a)
Unvested outstanding as of December 31, 20190 $0 
Granted185,639 70.26 
Acquired (b)
124,984 63.36 
Vested(61,322)63.36 
Forfeited0 0 
Unvested outstanding as of September 30, 2020249,301 68.50 
____________________
(a)Represents the fair value determined using a Monte-Carlo simulation model.
(b)Assumed MSU shares of Former Caesars as of the Merger date.
Stock Option Activity
There were 26,900 stock options exercised for the nine months ended September 30, 2017 is2020. Outstanding options as follows:

 

 

 

 

 

 

Weighted-

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

 

 

 

 

 

Equity

 

 

Grant Date

 

 

Remaining

 

 

Aggregate

 

 

 

Awards

 

 

Fair Value

 

 

Contractual Life

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

(in years)

 

 

(in millions)

 

Unvested outstanding as of December 31, 2016

 

 

982,370

 

 

$

6.45

 

 

 

1.41

 

 

$

6.3

 

Granted (1)

 

 

387,204

 

 

 

15.95

 

 

 

 

 

 

 

 

 

Exchanged (2)

 

 

860,557

 

 

 

18.94

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(11,870

)

 

 

15.74

 

 

 

 

 

 

 

 

 

Vested

 

 

(851,764

)

 

 

18.37

 

 

 

 

 

 

 

 

 

Unvested outstanding as of September 30, 2017

 

 

1,366,497

 

 

$

9.49

 

 

 

1.06

 

 

$

13.0

 

��

(1)

Includes 100,829 of performance awards at 100% of target and 286,375 time-based awards at 100% of target.

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

(2)

Represents exchanged Isle RSUs as a result of the Isle Acquisition based on the average of the ERI share price on the grant dates.

Unrecognized Compensation Cost

As of September 30, 2017,2020, the Company had approximately $6.4$103 million of unrecognized compensation expense, related to unvested RSUs thatwhich is expected to be recognized over a weighted-average period of approximately 1.061.7 years.

A summary

Note 6. Investments in and Advances to Unconsolidated Affiliates
William Hill
The Company entered into a 25-year agreement, which became effective January 29, 2019, with William Hill which granted to William Hill the right to conduct betting activities, including operating our sportsbooks, in retail channels under certain skins for online channels with respect to the Company’s current and future properties, and conduct certain real money online gaming activities. The Company received a 20% ownership interest in William Hill US as well as 13 million ordinary shares of William Hill plc, which carry certain time restrictions on when they can be sold. Additionally, the Company receives a profit share from the operations of sports betting and other gaming activities associated with the Company’s properties. “Skin” in the context of this agreement refers to the Company’s ability to grant to William Hill an online channel that allows William Hill to operate online casino and sports gaming activities in reliance on, and utilizing the benefit of, any licenses granted to the Company or its subsidiaries.
On September 30, 2020, the Company announced its intention to acquire William Hill plc in an all-cash transaction. See Note 1.
As of September 30, 2020 and December 31, 2019, the Company’s receivable from William Hill totaled $1 million and $4 million, respectively, and is reflected in Due from affiliates on the Consolidated Condensed Balance Sheets.
The Company is accounting for its investment in William Hill US under the equity method. The fair value of the ERI Stock Option activityCompany’s initial investment in William Hill US of $129 million at January 29, 2019 was determined using Level 3 inputs. As of September 30, 2020 and December 31, 2019, the carrying value of the Company’s interest in William Hill US totaled $126 million and $127 million, respectively, and is recorded in Investment in and advances to unconsolidated affiliates on the Consolidated Condensed Balance Sheets.
As of September 30, 2020 and December 31, 2019, the fair value of the William Hill plc shares totaled $43 million and $29 million, respectively, net of cumulative unrealized gains of $15 million and $2 million, respectively, and is included in Investment in and advances to unconsolidated affiliates on the Consolidated Condensed Balance Sheets. The Company recorded an unrealized gain of $26 million and an unrealized loss of $4 million during the three months ended September 30, 2020 and 2019, respectively. The Company recorded an unrealized gain of $13 million during the nine months ended September 30, 2020. The Company recorded a loss of less than $1 million for the nine months ended September 30, 2017 is as follows:

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

Range of

 

 

Weighted-

Average

 

 

Average

Remaining

 

 

Aggregate

 

 

 

Options

 

 

Exercise Prices

 

 

Exercise Price

 

 

Contractual Life

 

 

Intrinsic Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in years)

 

 

(in millions)

 

Outstanding as of December 31, 2016

 

 

169,300

 

 

$

2.44

 

 

$

16.27

 

 

$

9.94

 

 

 

0.86

 

 

$

1.2

 

Exchanged (1)

 

 

1,351,168

 

 

 

6.87

 

 

 

15.60

 

 

 

10.12

 

 

 

 

 

 

 

 

 

Expired

 

 

(51,700

)

 

 

2.44

 

 

 

3.94

 

 

 

2.97

 

 

 

 

 

 

 

 

 

Exercised

 

 

(1,095,660

)

 

 

6.87

 

 

 

16.27

 

 

 

10.03

 

 

 

 

 

 

 

 

 

Outstanding as of September 30, 2017

 

 

373,108

 

 

$

3.94

 

 

$

15.60

 

 

$

11.15

 

 

 

1.10

 

 

$

5.4

 

(1)

Represents exchanged Isle Stock Options as a result of the Isle Acquisition.

As a resultdescribed above, the Company granted William Hill the right to the use of the Isle Acquisition, we exchanged 1,351,168 non-qualified stock options, which have a maximum term of ten years from the grant date and are exercisablecertain skins in yearly installments of 20% commencing one year after the grant date.exchange for an equity method investment. The options have a weighted average per share Isle Acquisition Date fair value of $9.90 utilizing the Black-Scholes-Merton option pricing model withWilliam Hill US and William Hill plc shares received has been deferred and is recognized as revenue on a straight-line basis over the range25-year agreement term. The Company recognized revenue of assumptions disclosed in the following table:

Weighted average expected volatility

40.0

%

Expected dividend yield

0.0

%

Weighted average expected term (in years)

0.66

Weighted average risk-free interest rate

1.08

%

Weighted average volatility is calculated using the historical volatility of our stock price over a range of dates equal to the expected term$2 million for both of the grant’s options. The weighted average expected term is calculated using historical data that is representative of the option for which the fair value is to be determined. The expected term represents the period of time that options granted are expected to be outstanding. The weighted average risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the approximate period of time equivalent to the grant’s expected term. The Company’s unrecognized compensation cost for unvested options was $0.3 million as ofthree months ended September 30, 2017.


A summary of the ERI Restricted Stock Awards activity for2020 and 2019, and $7 million and $4 million during the nine months ended September 30, 20172020 and 2019, respectively and is as follows:

recorded in Other revenue in the Consolidated Condensed Statement of

 

 

 

 

 

 

Weighted-

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

Grant Date

 

 

Remaining

 

 

Aggregate

 

 

 

Restricted Stock

 

 

Fair Value

 

 

Contractual Life

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

(in years)

 

 

(in millions)

 

Outstanding as of December 31, 2016

 

 

—

 

 

$

—

 

 

 

—

 

 

$

—

 

Exchanged (1)

 

 

180,374

 

 

 

19.23

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(1,602

)

 

 

19.13

 

 

 

 

 

 

 

 

 

Vested

 

 

(167,963

)

 

 

19.24

 

 

 

 

 

 

 

 

 

Outstanding as of September 30, 2017

 

 

10,809

 

 

$

19.13

 

 

 

0.70

 

 

$

0.1

 

23

(1)

Represents exchanged Isle Restricted Stock Awards as a result of the Isle Acquisition.


The Company’s unrecognized compensation cost for unvested restricted stock awards was $0.1 million as

Operations. As of September 30, 2017

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

Note 5. Other7. Goodwill and Intangible Assets, net

Other

The purchase price of an acquisition is allocated to the underlying assets acquired and intangible assets, net, includeliabilities assumed based upon their estimated fair values at the following amounts (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

 

 

2017

 

 

2016

 

 

Useful Life

 

 

(unaudited)

 

 

 

 

 

 

 

 

Goodwill

 

$

 

746,482

 

 

$

 

66,826

 

 

Indefinite

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming licenses

 

$

 

846,374

 

 

$

 

482,074

 

 

Indefinite

Trade names

 

 

 

95,850

 

 

 

 

3,100

 

 

Indefinite

Trade names

 

 

 

6,700

 

 

 

 

6,700

 

 

1 - 3.5 years

Loyalty programs

 

 

 

21,461

 

 

 

 

7,700

 

 

1 - 3 years

Subtotal

 

 

 

970,385

 

 

 

 

499,574

 

 

 

Accumulated amortization trade names

 

 

 

(5,811

)

 

 

 

(4,376

)

 

 

Accumulated amortization loyalty programs

 

 

 

(9,612

)

 

 

 

(7,700

)

 

 

Total gaming licenses and other intangible assets

 

$

 

954,962

 

 

$

 

487,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating real property

 

$

 

18,069

 

 

$

 

14,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land held for development

 

$

 

906

 

 

$

 

906

 

 

 

Other

 

 

 

17,510

 

 

 

 

10,500

 

 

 

Total other assets, net

 

$

 

18,416

 

 

$

 

11,406

 

 

 

Goodwill representsdate of acquisition. The Company determines the excessestimated fair values after review and consideration of relevant information including discounted cash flows, quoted market prices, and estimates made by management. To the extent the purchase prices of acquiring MTR Gaming and Isle overprice exceeds the fair market value of the net identifiable tangible and intangible assets acquired.

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

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

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

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

Amortization expense with respect to trade namesintangible assets for the three months ended September 30, 2020 and 2019 totaled $21 million and $8 million, respectively, and $35 million and $23 million for the loyalty programnine months ended September 30, 2020 and 2019, respectively, which is included in depreciation and amortization in the Consolidated Condensed Statements of Operations.
Estimated Five-Year Amortization
Years Ended December 31,
(In millions)Remaining 202020212022202320242025
Estimated annual amortization expense$20 $78 $64 $60 $60 $60 
Note 8. Income Taxes
Income Tax Allocation
Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2020201920202019
(Loss) income from continuing operations before income taxes$(789)$55 $(1,136)$133 
Provision for income taxes(135)(18)(64)(39)
Effective tax rate(17.1)%32.7 %(5.6)%29.3 %
We classify accruals for uncertain tax positions within Other long-term liabilities on the Balance Sheets separate from any related income tax payable which is reported within Accrued other liabilities. The accrual amounts relate to any potential income tax liabilities resulting from uncertain tax positions as well as potential interest or penalties associated with those liabilities.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. We have provided a valuation allowance on certain federal, state and foreign deferred tax assets that were not deemed realizable based upon estimates of future taxable income.
As a result of the Merger, the Company acquired $779 million of additional net deferred tax liabilities net of necessary valuation allowances, plus $24 million in additional accruals for uncertain tax positions. The income tax expense for the three and nine months ended September 30, 2017 amounted2020 differed from the expected income tax benefit based on the federal tax rate of 21% primarily due to $1.7 million and $3.3 million, respectively, and $1.2 million and $3.6 millionan increase in the valuation allowance against the deferred tax assets due to the series of transactions with VICI during the quarter. The income tax expense for the three and nine months ended September 30, 2016, respectively, which is included in depreciation and amortization expense in2019 differed from the consolidated statements of operations. Such amortization expense is expected to be $1.6 million for the remainder of December 31, 2017 and $5.0 million, $4.6 million and $1.5 million for the years ended December 31, 2018, 2019 and 2020, respectively.


Note 6. Income Taxes

The Company estimates an annual effective income tax rateexpense based on projected results for the year and applies thisfederal tax rate to income before taxes to calculate income tax expense. Any refinements madeof 21% primarily due to subsequent information that affects the estimated annual effective income tax rate are reflected as adjustments in the current period.

For income tax purposes, the Company amortizes or depreciates certain assets that have been assigned an indefinite life for book purposes. The incremental amortization or depreciation deductions for income tax purposes result in an increase in certain deferred tax liabilities that cannot be used as a source of future taxable income for purposes of measuring the Company's need for a valuation allowance against the net deferred tax assets. Therefore, we expect to record non-cash deferred tax expense as we amortize these assets for tax purposes.

For the three months ended September 30, 2017, the Company’s tax expense from continuing operations was $11.6 million and for the nine months ended September 30, 2017, the Company’s tax benefit from continuing operations was $27.6 million. For the three and nine months ended September 30, 2016, the Company’s tax expense from continuing operations was $5.8 million and $13.7 million, respectively. For the three and nine months ended September 30, 2017, the difference between the effective rate and the statutory rate is attributed primarily to non-deductible transaction costs incurred and changes in the effective state tax rate associated with the acquisition of Isle of Capri Casinos, Inc., state and local income taxes and the release of the valuation allowance against certain Pennsylvania deferred tax assets. For the three and nine months ended September 30, 2016, the difference between the effective rate and the statutory rate is attributed primarily to state and local income taxes less excess tax benefits associated with stock compensation, and tax credits. As of September 30, 2017 and 2016, there were no unrecognized tax benefits and the Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits within the next twelve months.

The Company and its subsidiaries file US federal income tax returns and various state and local income taxes and changes in the valuation allowance against deferred tax returns.assets.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020. The CARES Act includes, among other things, refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical amendments regarding the income tax depreciation of qualified improvement property placed in service after December 31, 2017. These amendments allow for retroactive accelerated income tax depreciation on certain of the Company’s leasehold improvement assets. The financial impact of these technical amendments on the business was recorded in the three month period ended September 30, 2020 but had no impact on the income tax provision.
The Company, including its subsidiaries, files tax returns with federal, state, and foreign jurisdictions. The Company does not have tax sharing agreements with the other members within theits consolidated ERI group. The Company is subject to exam by various state and foreign tax authorities. With few exceptions, the Company is no longer subject to US federal or state and local tax examinations by tax authorities for years before 2009.

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

Note 9. Leases
The Company was notified by the Internal Revenue Service in October of 2016 that its federal tax returnhas operating and finance leases for the year ended December 31, 2014 had been selected for examination. In September 2017, the IRS informed the Company that they completed the examinationvarious real estate and equipment. Certain of the tax returnCompany’s lease agreements include rental payments based on a percentage of sales over specified contractual amounts, rental payments adjusted periodically for inflation and made no changes. However,rental payments based on usage. The Company’s leases include options to extend the Company may be subjectlease term one month to audit in the future and the outcome of tax audits cannot be predicted with certainty. If60 years. The Company’s lease agreements do not contain any issues addressed in the Company’s tax audits are resolved in a manner not consistent with the Company’s expectations, we would be required to adjust our provision for income taxes in the period such resolution occurs. While the Company believes its reported results are materially accurate, any significant adjustments could have a material adverse effect on the Company’s results of operations, cash flows and financial position.

restrictive covenants, other than those described below.

25

Note 7. Long-Term Debt

Long‑term debt consisted


Financing Obligations
VICI Leases & Golf Course Use Agreement
Upon consummation of the Merger, CEI assumed obligations of certain real property assets leased from VICI by Former Caesars under the following (in thousands):

agreements: (i) for a portfolio of properties at various locations throughout the United States (the “Non-CPLV lease”), (ii) for Caesars Palace Las Vegas (the “CPLV lease”), (iii) for Harrah’s Joliet Hotel & Casino (the “Joliet Lease”) and (iv) for Harrah’s Las Vegas (the “HLV Lease”). These lease agreements provided for annual fixed rent (subject to escalation) of $773 million during an initial period, then rent consisting of both base rent and variable rent elements. The lease agreements had a 15-year initial term and 4 five-year renewal options. The lease agreements included escalation provisions beginning in year two of the initial term and continuing through the renewal terms. The lease agreements also included provisions for variable rent payments calculated, in part, based on increases or decreases of net revenue of the underlying lease properties, commencing in year eight of the initial term and continuing through the renewal terms.

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

(unaudited)

 

 

 

 

 

 

New Term Loan

 

$

 

1,001,875

 

 

$

 

—

 

Less: Unamortized discount and debt issuance costs

 

 

 

(20,316

)

 

 

 

—

 

Net

 

 

 

981,559

 

 

 

 

—

 

6% Senior Notes

 

 

 

875,000

 

 

 

 

—

 

Plus: Unamortized debt premium

 

 

 

27,359

 

 

 

 

 

 

Less: Unamortized debt issuance costs

 

 

 

(21,268

)

 

 

 

—

 

Net

 

 

 

881,091

 

 

 

 

—

 

7% Senior Notes

 

 

 

375,000

 

 

 

 

375,000

 

Less: Unamortized discount and debt issuance costs

 

 

 

(7,421

)

 

 

 

(8,141

)

Net

 

 

 

367,579

 

 

 

 

366,859

 

New Revolving Credit Facility

 

 

 

—

 

 

 

 

—

 

Less: Unamortized debt issuance costs

 

 

 

(9,118

)

 

 

 

—

 

Net

 

 

 

(9,118

)

 

 

 

—

 

Term Loan

 

 

 

—

 

 

 

 

418,625

 

Less: Unamortized discount and debt issuance costs

 

 

 

—

 

 

 

 

(12,578

)

Net

 

 

 

—

 

 

 

 

406,047

 

Revolving Credit Facility

 

 

 

—

 

 

 

 

29,000

 

Less: Unamortized debt issuance costs

 

 

 

—

 

 

 

 

(2,023

)

Net

 

 

 

—

 

 

 

 

26,977

 

Capital leases

 

 

 

1,061

 

 

 

 

543

 

Long-term notes payable

 

 

 

2,950

 

 

 

 

—

 

Less: Current portion

 

 

 

(1,068

)

 

 

 

(4,545

)

Total long-term debt

 

$

 

2,224,054

 

 

$

 

795,881

 

In connection with the Isle Acquisition,closing of the Merger on July 20, 2020, the Company completedand certain of its affiliates consummated a debt financing transaction comprised of: (a) a senior secured credit facilityseries of transactions with VICI in anaccordance with the MTA and the purchase and sales agreements entered on September 26, 2019. The Company and certain of its affiliates consummated sale leaseback transactions related to Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Resort Atlantic City, including the Harrah’s Atlantic City Waterfront Conference Center, for approximately $1.8 billion of net proceeds. The Non-CPLV lease was amended to include these properties (as amended, the “Regional Lease”), and was further amended to increase the annual rent thereunder by $154 million in the aggregate principal amount of $1.75 billion with a (i)related to such added properties and extend the term loan facility of $1.45 billion and (ii) revolving credit facility of $300.0 million and (b) $375.0 million of 6% senior unsecured notes. The proceeds of such borrowings were used (v)lease so that following the amendment of such lease there will be 15 years remaining until the expiration of the initial term. The Joliet Lease term was also amended such that 15 years remain until the expiration of the initial term.

Former Caesars entered into a Golf Course Use Agreement with VICI, which has a 35-year term (inclusive of all renewal periods), pursuant to which such affiliates of the Company agreed to pay (i) an annual payment of $10 million, subject to escalation, (ii) an annual use fee of $3 million, subject to escalation beginning in the cash portionsecond year, and (iii) certain per-round fees, all as more particularly set forth in the Golf Course Use Agreement. Furthermore, the term of the consideration payable inGolf Course Use Agreement was extended such that there will be 15 years remaining until the Isle Merger, (w) refinance allexpiration of Isle’s existing credit facilities, (x) redeem or otherwise repurchase all of Isle’s and senior and senior subordinated notes, (y) refinance the Company’s existing credit facility and (z) pay transaction fees and expensesinitial term.
The amendment to the Regional Lease also contains a put-call agreement related to the foregoing.

On September 13, 2017, the Company issued an additional $500.0 million in aggregate principal amount of its 6% Senior Notes (as defined below) at an issue price equal to 105.5% of the principal amount. The 6% Senior Notes were issued as additional notes under the New Indenture dated March 29, 2017 (as defined below), as supplemented by the Supplemental Indenture dated as of May 1, 2017 (the “Supplemental Indenture”) between the Company, the guarantors party theretoCentaur properties, which are Hoosier Park and U.S. Bank National Association,Indiana Grand, pursuant to which the Company previously issued $375.0 million aggregate principalmay require VICI to purchase and lease back (as lessor) the real estate components of the gaming and racetrack facilities of Hoosier Park and Indiana Grand and VICI may require the Company to sell to VICI and lease back (as lessee) the real estate components of such gaming and racetrack facilities. Election by either party to put or call the Centaur properties must be made during the election period beginning January 1, 2022 and ending December 31, 2024. Upon either party exercising their option, the Centaur properties would be sold at the price in accordance with the agreement and subsequently leased back to CEI by adding the leaseback to the pre-existing Regional lease agreement. As such, the Centaur properties would be leased back over the remaining term of the Regional lease agreement and the Regional lease agreement annual rental payments would be increased by the amount of 6% Senior Notes. The additional 6% Senior Notes formed partrent required to achieve a rent coverage ratio of a single class1.3 as of securities togetherthe exercise date. A liability of $6 million associated with this agreement has been recorded within Other long-term liabilities.

Additionally, in connection with the Merger, the Company received a one-time payment from VICI of approximately $1.4 billion for amendments to the CPLV Lease (as amended, the “Las Vegas Lease”) to, among other things, (i) add the land and improvements of HLV to the lease and terminate the HLV Lease (ii) add the rent payable with respect to the HLV Lease and further increase the annual rent payable with respect to HLV by approximately $15 million, (iii) increase the annual rent with respect to CPLV by approximately $84 million and (iv) extend the term of such lease so that following the amendment of such lease there will be 15 years remaining until the expiration of the initial 6% Senior Notesterm.
In connection with the Merger, the land and building components subject to the lease amendments described above did not qualify for all purposessale-leaseback accounting and are accounted for as post-combination debt modifications.
GLPI Leases
The fair value of the real estate assets and the related failed sale-leaseback financing obligations were estimated based on the present value of the estimated future lease payments over the lease term of 35 years, including renewal options, using an imputed discount rate of approximately 10.2%. The value of the failed sale-leaseback financing obligations is dependent upon assumptions regarding the amount of the lease payments and the estimated discount rate of the lease payments required by a market participant.
26

The GLPI Master Lease provides for the lease of land, buildings, structures and other improvements on the land (including barges and riverboats), easements and similar appurtenances to the land and improvements relating to the operation of the leased properties. The GLPI Master Lease provides for an initial term of 20 (as amended below) with no purchase option. At the Company’s option, the GLPI Master Lease may be extended for up to 4 five-year renewal terms beyond the initial 20 years-year term (as amended below).
On June 15, 2020, the Company entered into an Amended and Restated Master Lease with GLPI, which, among other things, (i) extended the initial term from 15 to 20 years (through September 2038), with 4 five-year renewals at the Company’s option, (ii) commencing October 1, 2020, removed the percentage rent payable in exchange for an increase to the non-escalating portion of land base rent to $24 million, (iii) amended the dates on which, and the amounts by which, the escalating portion of base rent escalates, and (iv) provided certain relief under the New Indenture, including waivers, amendments, redemptionsoperating, capital expenditure and offersfinancial covenants in the event of facility closures due to purchase.

public health emergencies, governmental restrictions and certain other instances of unavoidable delay. The amendment to the GLPI Master Lease became effective on July 17, 2020 following receipt of required regulatory approvals. If the Company usedelects to renew the proceedsterm of the offeringGLPI Master Lease, the renewal will be effective as to repayall, but not less than all, of the outstanding borrowingsleased property then subject to the GLPI Master Lease. The GLPI Master Lease does not provide the Company with the option to purchase the leased property and the Company does not have the ability to terminate its obligations under the New Revolving Credit Facility (as defined below) totaling $78.0GLPI Master Lease prior to its expiration without GLPI’s consent.

On September 29, 2020, Company entered into a sale-leaseback transaction with GLPI for the Lumière property. On October 1, 2018, the Company borrowed $246 million and usedfrom GLPI to fund the remainder to repay outstanding borrowings totaling $444.5 million under the New Term Loan plus related accrued interest.

Amortizationpurchase price of the real estate underlying Lumière. As part of the consideration for the purchase of the property, GLPI cancelled the $246 million loan. The lease (the “Lumiere Lease”) has an initial term that ends on October 31, 2033 and 4 five-year renewal options.

Following the amendments and transactions above, the land and building components subject to the lease amendments described above did not qualify for sale-leaseback accounting and are accounted for as post-combination debt issuance costsmodifications.
The future minimum payments related to the GLPI leases, including the Lumière Lease, and the discount and premium associated withVICI leases financing obligation, as amended, at September 30, 2020 were as follows:
(In millions)GLPI LeasesVICI Leases
2020 (excluding the nine months ended September 30, 2020)$27 $268 
2021109 1,079 
2022109 1,097 
2023111 1,119 
2024112 1,139 
Thereafter4,880 46,737 
Total future payments5,348 51,439 
Less: Amounts representing interest(4,522)(41,020)
Plus: Residual values399 906 
Financing obligation$1,225 $11,325 
Cash payments made relating to our indebtedness totaled $2.0 million and $5.0 million forlong-term financing obligations during the three and nine months ended September 30, 2017, respectively. Amortization2020 and 2019 are as follows:
GLPI Leases (a)
VICI Leases
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
(In millions)20202019202020192020201920202019
Cash paid for principal$22 $22 $66 $66 $49 $0 $49 $0 
Cash paid for interest24 25 74 74 128 0 128 0 
____________________
(a)For the initial periods of the debt issuance costsGLPI Leases, cash payments are less than the interest expense recognized, which causes the failed-sale leaseback obligation to increase during the initial years of the lease term.
27

Lease Covenants
The GLPI Leases and VICI leases contains certain operating, capital expenditure and financial covenants thereunder, and the discount associatedCompany’s ability to maintain compliance with our indebtedness totaled $0.9 millionthese covenants was also negatively impacted. On June 15, 2020, the Company entered into an amendment to the GLPI Master Lease which provides certain relief under these covenants in the event of facility closures due to public health emergencies, governmental restrictions and $2.6 million, respectively,certain other instances of unavoidable delay. Furthermore, the Company obtained waivers from VICI with relation to annual capital expenditure requirements the leases with VICI starting with the annual period ending December 31, 2020.
Lessor Arrangements
Lodging Arrangements
Lodging arrangements are considered short-term and generally consist of lease and nonlease components. The lease component is the predominant component of the arrangement and consists of the fees charged for lodging. The nonlease components primarily consist of resort fees and other miscellaneous items. As the timing and pattern of transfer of both the lease and nonlease components are over the course of the lease term, we have elected to combine the revenue generated from lease and nonlease components into a single lease component based on the predominant component in the arrangement. During the three and nine months ended September 30, 2016. Amortization of debt issuance costs is computed using the effective interest method2020, we recognized approximately $200 million and $257 million, respectively, in lease revenue related to lodging arrangements, which is included in interest expense.

Rooms revenue in the Statement of Operations.

Conventions

In accordance with ASC Topic 470-50, “Debt Modifications

Convention arrangements are considered short-term and Extinguishments” (“ASC 470-50”),generally consist of lease and nonlease components. The lease component is the Company recognized a loss totaling $27.3 millionpredominant component of the arrangement and consists of fees charged for the use of meeting space. The nonlease components primarily consist of food and beverage and audio/visual services. Revenue from conventions is included in Other revenue in the Statement of Operations, and during the three and nine months ended September 30, 2017 as a result2020, we recognized approximately $2 million in lease revenue related to conventions.
28

Note 10. Long-Term Debt
Long-term debt consisted of the refinancefollowing:
September 30, 2020December 31,
2019
(Dollars in millions)Final
Maturity		RatesFace ValueBook ValueBook Value
Secured Debt
CEI Senior Secured Notes20256.25%$3,400 $3,330 $0 
CEI Revolving Credit Facility2025
variable (a)
900 880 0 
ERI Term LoanN/AN/A0 0 491 
CRC Term Loan B2024
variable (b)
4,571 4,120 0 
CRC Term Loan B-12025
variable (c)
1,800 1,709 0 
CRC Revolving Credit Facility2022
variable (d)
0 0 0 
CRC Senior Secured Notes20255.75%1,000 978 0 
Convention Center Mortgage Loan20257.70%400 397 0 
Lumière LoanN/AN/A0 0 246 
Unsecured Debt
CEI Senior Notes20278.13%1,800 1,767 0 
CRC Notes20255.25%1,700 1,490 0 
5% Convertible Notes20245.00%597 546 0 
6% Senior Notes2026N/A0 0 582 
6% Senior Notes2025N/A0 0 879 
7% Senior Notes2023N/A0 0 370 
Special Improvement District Bonds20374.30%51 51 0 
Long-term notes and other payables2 2 3 
Total debt16,221 15,270 2,571 
Current portion of long-term debt(67)(67)(246)
Long-term debt$16,154 $15,203 $2,325 
Unamortized premiums, discounts and deferred finance charges (e)
$951 $34 
Fair value$16,135 
____________________
(a)Prime rate plus 2.25%.
(b)LIBOR plus 2.75%.
(c)$1.2 billion at 1 month LIBOR plus 4.50% and $600 million at 3 month LIBOR plus 4.50%.
(d)LIBOR plus 2.00%.
(e)Approximately $7 million of the Prior Credit Facility (as defined below) in May 2017. deferred financing costs related to our revolving credit facilities are included within Other assets, net as of December 31, 2019.
Current Portion of Long-Term Debt
The Company also recognized a loss totaling $10.0 million for the three months endedcurrent portion of long-term debt as of September 30, 2017 as a result of2020 includes the principal payments on the term loans, other unsecured borrowings, and special improvement district bonds that are contractually due within 12 months.
Debt Discounts or Premiums and Deferred Finance Charges
Debt discounts or premiums and deferred finance charges incurred in connection with the issuance of additional 6% Senior Notes in September 2017 resulting in a combined total loss of $37.3 million for the nine months ended September 30, 2017.

Scheduled maturities of long‑term debt are $375.0 millionamortized to interest expense based on the related debt agreements primarily using the effective interest method. Unamortized discounts are written off and included in 2023, $1.0 billion in 2024, and $875.0 million in 2025.

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

Fair Value
The Company is a holding company with no independent assets or operations. Our 6% Senior Notes and 7% Senior Notes are fully and unconditionally guaranteed,fair value of debt has been calculated primarily based on a joint and several basis, by the subsidiary guarantors. Asborrowing rates available as of September 30, 2017, there were no significant restrictions2020 based on the abilitymarket quotes of our subsidiaries to distribute cash to us or our guarantor subsidiaries.

Senior Notes

7.0% Senior Notes

On July 23, 2015,publicly traded debt. We classify the Company issued at par $375.0 million in aggregate principal amountfair value of 7.0% senior notes due 2023 (“7% Senior Notes”) pursuant to the Indenture, dated as of July 23, 2015 (the “Indenture”), between the Company and U.S. Bank, National Association, as Trustee. The 7% Senior Notes will mature on August 1, 2023, with interest payable semi-annually in arrears on Februarydebt within Level 1 and August 1 of each year.

On or after August 1, 2018, the Company may redeem all or a portion of the 7% Senior Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest and additional interest, if any, on the 7% Senior Notes redeemed, to the applicable redemption date, if redeemed during the twelve month period beginning on August 1 of the years indicated below:

Year

 

Percentage

 

 

2018

 

 

105.250

 

%

2019

 

 

103.500

 

%

2020

 

 

101.750

 

%

2021 and thereafter

 

 

100.000

 

%

Prior to August 1, 2018, the Company may redeem all or a portion of the 7% Senior Notes at a price equal to 100% of the 7% Senior Notes redeemed plus accrued and unpaid interest to the redemption date, plus a make-whole premium. At any time prior to August 1, 2018, the Company is also entitled to redeem up to 35% of the original aggregate principal amount of the 7% Senior Notes with proceeds of certain equity financings at a redemption price equal to 107% of the principal amount of the 7% Senior Notes redeemed, plus accrued and unpaid interest. If the Company experiences certain change of control events (as definedLevel 2 in the Indenture), it must offer to repurchase the 7% Senior Notes at 101% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date. If thefair value hierarchy.

29

New Debt Transactions
The Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company must offer to repurchase the 7% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date.

The 7% Senior Notes are subject to redemption imposed by gaming laws and regulations of applicable gaming regulatory authorities.

The Indenture contains certain covenants limiting, among other things, the Company’s ability and the ability of its subsidiaries (other than its unrestricted subsidiaries) to:

pay dividends or distributions or make certain other restricted payments or investments;

incur or guarantee additional indebtedness or issue disqualified stock or create subordinated indebtedness that is not subordinated to the 7% Senior Notes or the guarantees of the 7% Senior Notes;

create liens;

transfer and sell assets;

merge, consolidate, or sell, transfer or otherwise dispose of all or substantially all of the Company’s assets;

enter into certain transactions with affiliates;


•

engage in lines of business other than the Company’s core business and related businesses; and

create restrictions on dividends or other payments by restricted subsidiaries.

These covenants are subjectwas party to a number of exceptions and qualifications as set forth in the Indenture. The Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on such 7% Senior Notes to be declared due and payable. As of September 30, 2017, the Company was in compliance with all of the covenants under the Indenture relating to the 7% Senior Notes.

6.0% Senior Notes

On March 29, 2017, Eagle II Acquisition Company LLC (“Eagle II”), a wholly-owned subsidiary of the Company, issued $375.0 million aggregate principal amount of 6% Senior Notes due 2025 (the “6% Senior Notes”) pursuant to an indenture, dated as of March 29, 2017 (the “New Indenture”), between Eagle II and U.S. Bank, National Association, as Trustee. The 6% Senior Notes will mature on April 1, 2025, with interest payable semi-annually in arrears on April 1 and October 1, commencing October 1, 2017. The proceeds of the offering, and additional funds in the amount of $1.9 million in respect of interest expected to be accrued on the 6% Senior Notes, were placed in escrow pending satisfaction of certain conditions, including consummation of the Isle Acquisition. In connection with the consummation of the Isle Acquisition on May 1, 2017, the escrowed funds were released and the Company assumed Eagle II’s obligations under the 6% Senior Notes and the New Indenture and certain of the Company’s subsidiaries (including Isle and certain of its subsidiaries) executed guarantees of the Company’s obligations under the 6% Senior Notes.

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

On or after April 1, 2020, the Company may redeem all or a portion of the 6% Senior Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest and additional interest, if any, on the 6% Senior Notes redeemed, to the applicable redemption date, if redeemed during the 12-month period beginning on April 1 of the years indicated below:

Year

 

Percentage

 

 

2020

 

 

104.500

 

%

2021

 

 

103.000

 

%

2022

 

 

101.500

 

%

2023 and thereafter

 

 

100.000

 

%

Prior to April 1, 2020, the Company may redeem all or a portion of the 6% Senior Notes at a price equal to 100% of the 6% Senior Notes redeemed plus accrued and unpaid interest to the redemption date, plus a make-whole premium. At any time prior to August 1, 2018, the Company is also entitled to redeem up to 35% of the original aggregate principal amount of the 6% Senior Notes with proceeds of certain equity financings at a redemption price equal to 106% of the principal amount of the 6% Senior Notes redeemed, plus accrued and unpaid interest. If the Company experiences certain change of control events (as defined in the New Indenture), it must offer to repurchase the 6% Senior Notes at 101% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company must offer to repurchase the 6% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date.

The 6% Senior Notes are subject to redemption imposed by gaming laws and regulations of applicable gaming regulatory authorities.

The New Indenture contains certain covenants limiting, among other things, the Company’s ability and the ability of its subsidiaries (other than its unrestricted subsidiaries) to:

pay dividends or distributions or make certain other restricted payments or investments;

incur or guarantee additional indebtedness or issue disqualified stock or create subordinated indebtedness that is not subordinated to the 6% Senior Notes or the guarantees of the 6% Senior Notes;

create liens;


•

transfer and sell assets;

merge, consolidate, or sell, transfer or otherwise dispose of all or substantially all of the Company’s assets;

enter into certain transactions with affiliates;

engage in lines of business other than the Company’s core business and related businesses; and

create restrictions on dividends or other payments by restricted subsidiaries.

These covenants are subject to a number of exceptions and qualifications as set forth in the New Indenture. The New Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on such 6% Senior Notes to be declared due and payable. As of September 30, 2017, the Company was in compliance with all of the covenants under the New Indenture relating to the 6% Senior Notes.

Refinancing of the Term Loan and Revolving Credit Facility

Credit Facility

On July 23, 2015, the Company entered into a new $425.0 million seven year term loan (the “Term Loan”) and a $150.0 million five year revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan, the “Prior Credit Facility”).

The Term Loan bore interest at a rate per annum of, at the Company’s option, either (x) LIBOR plus 3.25%, with a LIBOR floor of 1.0%, or (y) a base rate plus 2.25%. Borrowings under the Revolving Credit Facility bore interest at a rate per annum of, at the Company’s option, either (x) LIBOR plus a spread ranging from 2.5% to 3.25% or (y) a base rate plus a spread ranging from 1.5% to 2.25%, in each case with the spread determined based on the Company’s total leverage ratio. Additionally, the Company paid a commitment fee on the unused portion of the Revolving Credit Facility not being utilized in the amount of 0.50% per annum.

On May 1, 2017, all of the outstanding amounts under the Prior Credit Facility were repaid with proceeds of borrowings under the New Credit Facility and the Prior Credit Facility was terminated.

New Credit Facility

On April 17, 2017, Eagle II entered into a new credit agreement by and among Eagle II, as initial borrower,with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto dated as of April 17, 2017 (the “New(as amended the “ERI Credit Facility”), consisting of a $1.45$1.5 billion term loan facility (the “New Term Loan Facility” or “New“ERI Term Loan”) and a $300.0$500 million revolving credit facility (the “New“ERI Revolving Credit Facility”).

In an effort to maintain liquidity and provide financial flexibility as the effects of COVID-19 continued to evolve and impact global financial markets, the Company borrowed $465 million under the revolving credit facility on March 16, 2020, which we repaid in July 2020 utilizing, in part, proceeds from the sale of the Company’s interests in Kansas City and Vicksburg.
On July 6, 2020, Colt Merger Sub, Inc., a wholly-owned subsidiary of the Company (the “Escrow Issuer”), issued $3.4 billion aggregate principal amount of 6.25% Senior Secured Notes due 2025 (the “CEI Senior Secured Notes”), $1.8 billion aggregate principal amount of 8.125% Senior Notes due 2027 (the “CEI Senior Notes”) and $1.0 billion aggregate principal amount of 5.75% Senior Secured Notes due 2025 (the “CRC Senior Secured Notes”).
On July 20, 2020, in connection with the closing of the Merger, the Company entered into a new credit agreement (“CEI Credit Agreement”), which was undrawn at closing. The proceedsprovide a five-year senior secured revolving credit facility in an aggregate principal amount of $1.2 billion (the “CEI Revolving Credit Facility”). In addition, Caesars Resort Collection, LLC (“CRC”) entered into incremental amendments to the CRC Credit Agreement (described below), which provided a $1.8 billion incremental term loan.
A portion of the New Term Loanproceeds from these arrangements was used to prepay in full the loans outstanding and terminate all commitments under the ERI Credit Facility, and additional fundsto satisfy and discharge the Company’s 6% Senior Notes due 2025, 6% Senior Notes due 2026, and the 7% Senior Notes due 2023.
The 6% Senior Notes due 2025 were redeemed at a redemption price of 104.5%, the 7% Senior Notes due 2023 were redeemed at a redemption price of 103.5%, and $210 million aggregate principal amount of the 6% Senior Notes due 2026 was redeemed at a redemption price of 106% with the remaining balance redeemed at a redemption price of 100% of the aggregate principal amount thereof plus the Applicable Premium, as defined in the indenture for the 6% Senior Notes due 2026. The redemption of the senior notes resulted in a loss on extinguishment of debt of $132 million during the three and nine months ended September 30, 2020, which is recorded within Other (loss) income on the Statement of Operations.
CEI Senior Secured Notes due 2025
On July 6, 2020, the Escrow Issuer issued $3.4 billion in aggregate principal amount of $4.5 million6.25% Senior Secured Notes due 2025 pursuant to an indenture dated July 6, 2020 (the “CEI Senior Secured Notes Indenture”), by and among the Escrow Issuer, U.S. Bank National Association, as trustee, and U.S. Bank National Association, as collateral agent. The Company assumed the rights and obligations under the CEI Senior Secured Notes and the Senior Secured Notes Indenture on July 20, 2020. The CEI Senior Secured Notes will mature on July 1, 2025 with interest payable semi-annually in respectcash in arrears on January 1 and July 1 of each year, commencing January 1, 2021.
CEI Senior Notes due 2027
On July 6, 2020, the Escrow Issuer issued $1.8 billion in aggregate principal amount of 8.125% Senior Notes due 2027 pursuant to an indenture, dated July 6, 2020 (the “CEI Senior Notes Indenture”), by and between the Escrow Issuer and U.S. Bank National Association, as trustee. The Company assumed the rights and obligations under the CEI Senior Notes and the CEI Senior Notes Indenture on July 20, 2020. The CEI Secured Notes will mature on July 1, 2027 with interest expectedpayable semi-annually in cash in arrears on January 1 and July 1 of each year, commencing January 1, 2021.
CRC Senior Secured Notes due 2025
On July 6, 2020, the Company issued $1.0 billion in aggregate principal amount of 5.75% Senior Notes due 2025 pursuant to be accrued onan indenture, dated July 6, 2020 (the “CRC Senior Secured Notes Indenture”), by and among the New Term Loan Facility, were placed in escrow pending satisfaction of certain conditions, including consummation of the Isle Acquisition.Escrow Issuer, U.S. Bank National Association, as trustee and Credit Suisse AG, Cayman Islands Branch, as collateral agent. In connection with the consummation of the Isle Acquisition on May 1, 2017,Merger, CRC assumed the escrowed funds were releasedrights and ERI assumed Eagle II’s obligations under the New Credit FacilityCRC Senior Secured Notes and certainthe CRC Senior Secured Notes Indenture. The CRC Senior Secured Notes will mature on July 1, 2025 with interest payable semi-annually in cash in arrears on January 1 and July 1 of ERI’s subsidiaries (including Isle and certain of its subsidiaries) executed guarantees of ERI’s obligations under the New Credit Facility.

As of September each year, commencing January 1, 2021.

30 2017, the Company had $1.0 billion outstanding on the New Term Loan. There were no borrowings outstanding under the New

CEI Revolving Credit Facility
On July 20, 2020, the Escrow Issuer entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, U.S. Bank National Association, as collateral agent, and certain banks and other financial institutions and lenders party thereto, which provide for a five-year CEI Revolving Credit Facility in an aggregate principal amount of September 30, 2017. $1.2 billion. The CEI Revolving Credit Facility matures in 2025 and includes a letter of credit sub-facility of $250 million.
The interest rate per annum applicable under the CEI Revolving Credit Facility, at the Company’s option is either (a) LIBOR adjusted for certain additional costs, subject to a floor of 0% or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by JPMorgan Chase Bank, N.A. and (iii) the one-month adjusted LIBOR rate plus 1.00%, in each case plus an applicable margin. Such applicable margin shall be 3.25% per annum in the case of any LIBOR loan and 2.25% per annum in the case of any base rate loan, subject to three 0.25% step-downs based on the Company’s total leverage ratio.
Additionally, the Company is required to pay a commitment fee in respect of any unused commitments under CEI Revolving Credit Facility in the amount of 0.50% of principal amount of the commitments of all lenders, subject to a step-down to 0.375% based upon the Company’s total leverage ratio. The Company is also required to pay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for LIBOR borrowings on the dollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer’s customary documentary and processing fees and charges and a fronting fee in an amount equal to 0.125% of the daily stated amount of such letter of credit.
The Company had $291.6$266 million of available borrowing capacity, after consideration of $8.4$19 million in outstanding letters of credit under its NewCEI Revolving Credit Facility, as of September 30, 2017. At2020. The Company paid down $900 million subsequent to September 30, 2017,2020.
Convention Center Mortgage Loan
On September 18, 2020, the Company entered into a loan agreement with VICI to borrow a 5-year, $400 million Forum Convention Center mortgage loan (the “Mortgage Loan”). The Mortgage Loan bears interest at a rate of, initially, 7.7% per annum, which escalates annually to a maximum interest rate onof 8.3% per annum.
Assumed Debt Activity
Former Caesars and its subsidiaries incurred the Newfollowing indebtedness that remained outstanding following the consummation of the Merger.
CRC Term Loans and CRC Revolving Credit Facility
CRC is party to the Credit Agreement, dated as of December 22, 2017 (as amended, the “CRC Credit Agreement”), which included a $1.0 billion five-year revolving credit facility (the “CRC Revolving Credit Facility”) and an initial $4.7 billion seven-year first lien term loan, which was increased by $1.8 billion pursuant to an incremental agreement executed in connection with the Merger (the “CRC Term Loan”).
The CRC Term Loan was 3.42%, and the weighted average interest rate on the Newmatures in 2024. The CRC Revolving Credit Facility matures in 2022 and includes a letter of credit sub-facility. The CRC Term Loan requires scheduled quarterly principal payments in amounts equal to 0.25% of the original aggregate principal amount, with the balance due at maturity. The CRC Credit Agreement also includes customary voluntary and mandatory prepayment provisions, subject to certain exceptions. As of September 30, 2020, approximately $64 million was 4.12% based upon the weighted average interest ratecommitted to outstanding letters of credit. As of September 30, 2020, there were no borrowings outstanding on our Newunder the CRC Revolving Credit Facility.
Borrowings under the CRC Credit Agreement bear interest at a rate equal to either (a) LIBOR adjusted for certain additional costs, subject to a floor of 0% or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by Credit Suisse AG, Cayman Islands Branch, as administrative agent under the CRC Credit Agreement and (iii) the one-month adjusted LIBOR rate plus 1.00%, in each case plus an applicable margin. Such applicable margin shall be (a) with respect to the CRC Term Loan, 2.75% per annum in the case of any LIBOR loan or 1.75% per annum in the case of any base rate loan, (b) with respect to the CRC Incremental Term Loan, 4.50% per annum in the case of any LIBOR loan or 3.50% in the case of any base rate loan and (c) in the case of the CRC Revolving Credit Facility, as2.25% per annum in the case of September 30, 2017.

The Company appliedany LIBOR loan and 1.25% per annum in the net proceedscase of any base rate loan, subject in the case of the New Term Loan Facility and borrowings under the NewCRC Revolving Credit Facility together withto two 0.125% step-downs based on CRC’s senior secured leverage ratio (“SSLR”), the proceedsratio of the 6% Senior Notes,first lien senior secured net debt to adjusted earnings before interest, taxes, depreciation and cash on hand, to (i) pay the cash portion of the consideration payable in the Isle Merger, (ii) refinance all of the debt outstanding under Isle’s existing credit facility, (iii) redeem or otherwise repurchase all of Isle’s outstanding senior and senior subordinated notes, (iv) refinance the Company’s Prior Credit Facility and (v) pay fees and costs associated with the foregoing.

amortization. The Company’s obligations under the NewCRC Revolving Credit Facility will mature on April 17, 2022. The Company’s obligationsis subject to a financial covenant discussed below.

31

In addition, CRC is required to pay a commitment fee in respect of any commitments under the New Term LoanCRC Revolving Credit Facility will mature on April 17, 2024. The Company wasin the amount of 0.50% of the principal amount of the commitments, subject to step-downs to 0.375% and 0.25% based upon CRC’s SSLR. CRC is also required to make quarterly principal paymentspay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for LIBOR borrowings on the dollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer’s customary documentary and processing fees and charges and a fronting fee in an amount equal to $3.60.125% of the daily stated amount of such letter of credit.
CRC Notes
On October 16, 2017, CRC issued $1.7 billion aggregate principal amount of 5.25% senior notes due 2025 (the “CRC Notes”).
Former Caesars 5% Convertible Notes
On October 6, 2017, Former Caesars issued $1.1 billion aggregate principal amount of 5.00% convertible senior notes maturing in 2024 (the “5% Convertible Notes”).
The 5% Convertible Notes are convertible into the weighted average of the number of shares of Company Common Stock and amount of cash actually received per share by holders of common stock of Former Caesars that made elections for consideration in the Merger. As of September 30, 2020, we have paid approximately $574 million and issued approximately 6.8 million shares upon conversion of $487 million in aggregate principal amount of the 5% Convertible Notes during 2020. Through November 2, 2020, we paid an additional $328 million and issued 3.9 million shares upon conversion of an additional $281 million of the 5% Convertible Notes.
The Company has determined that the 5% Convertible Notes contain derivative features that require bifurcation. The Company separately accounts for the liability component and equity conversion option of the 5% Convertible Notes. The difference between the overall instrument value and the value of the liability component was assumed to be the value of the equity conversion option component. The value of the liability is determined based on a discounted cash flow of the debt instrument. See Note 11 for more information on the New Term Loan Facility5% Convertible Notes’ fair value measurements.
Net amortization of the debt issuance costs and the discount and/or premium associated with the Company’s indebtedness totaled $34 million and $2 million for the three months ended September 30, 2020 and 2019, respectively, and $37 million and $6 million for the nine months ended September 30, 2020 and 2019 respectively. Amortization of debt issuance costs is computed using the effective interest method and is included in interest expense.
Annual Estimated Debt Service Requirements as of September 30, 2020
RemainingYears Ended December 31,
(In millions)20202021202220232024ThereafterTotal
Annual maturities of long-term debt$16 $67 $67 $67 $5,036 $10,968 $16,221 
Estimated interest payments200 850 820 790 790 690 4,140 
Total debt service obligation (a)
$216 $917 $887 $857 $5,826 $11,658 $20,361 
____________________
(a)Debt principal payments are estimated amounts based on maturity dates and potential borrowings under our revolving credit facilities. Interest payments are estimated based on the last dayforward-looking LIBOR curve and include the estimated impact of each fiscal quarter beginningthe ten interest rate swap agreements related to our CRC Credit Facility (see Note 11). Actual payments may differ from these estimates.
Lumière Loan
The Company borrowed $246 million from GLPI to fund the purchase price of the real estate underlying Lumière, which was scheduled to mature on October 1, 2020. On June 24, 2020, the Company received approval from Missouri Gaming Commission to sell Lumière to GLPI and leaseback the property under a long-term financing obligation. As of September 30, 2017 but satisfied this requirement2020, the Lumière real estate has been refinanced under a financing obligation. See Note 9.
Debt Covenant Compliance
The CRC Credit Agreement, the CEI Revolving Credit Facility and the indentures governing the CEI Senior Secured Notes, the CEI Senior Notes, the CRC Senior Secured Notes and the CRC's 5.25% senior notes due 2025 (the “CRC Notes”) contain covenants which are standard and customary for these types of agreements. These include negative covenants, which, subject to certain exceptions and baskets, limit the Company’s and its subsidiaries’ ability to (among other items) incur additional indebtedness, make investments, make restricted payments, including dividends, grant liens, sell assets and make acquisitions.
32

The indenture for the 5% Convertible Notes contained limited covenants as a result of the principal prepayment of $444.5 million on September 30, 2017amendments that became effective in conjunctionconnection with the issuanceconsummation of the additional 6% Senior Notes. In addition,Merger. The CRC Revolving Credit Facility and CEI Revolving Credit Facility include a maximum first-priority net senior secured leverage ratio financial covenant of 6.35:1, which is applicable solely to the Company is requiredextent that certain testing conditions are satisfied. Failure to make mandatory paymentscomply with such covenants could result in an acceleration of amounts


the maturity of indebtedness outstanding under the Newrelevant debt document.

The Company’s results of operations have been materially adversely affected by the impacts of the COVID-19 public health emergency. As a result, the current terms of the CEI Credit Facility withAgreement and the proceeds of certain casualty events, debt issuances, and asset sales and, depending on its consolidated total leverage ratio,CRC Credit Agreement provide that the financial covenant measurement period is not effective through September 30, 2021 so long as the Company may be required to applyand CRC, respectively, comply with a portion of its excess cash flow to repay amounts outstandingminimum liquidity requirement, which includes any such availability under the New Credit Facility.

The interest rate per annum applicable to loansrevolving credit facilities.

As of September 30, 2020, the Company was in compliance with all of the applicable financial covenants under the NewCEI Credit Agreement, the CRC Credit Agreement, CEI Senior Secured Notes, CEI Senior Notes, and CRC Senior Secured Notes, 5% Convertible Notes and CRC Notes.
Guarantees
The CEI Revolving Credit Facility and the CEI Senior Secured Notes are at our option, either (i) LIBOR plusguaranteed on a margin ranging from 1.75% to 2.50% or (ii) a base rate plus a margin ranging from 0.75% to 1.50%, which margin is based on our total leverage ratio. The interest rate per annum applicable to the loans under the New Term Loan Facility is, at our option, either (i) LIBOR plus 2.25%, or (ii) a base rate plus 1.25%; provided, however, that in no event will LIBOR be less than zero or the base rate be less than 1.00% over the termsenior secured basis by each existing and future material wholly-owned domestic subsidiary of the New Term Loan Facility or the New Revolving Credit Facility. Additionally, the Company pays a commitment fee on the unused portion of the Revolving Credit Facility not being utilized in the amount of 0.50% per annum.

The New Credit Facility contains a number of customary covenants that, among other things, restrict, subjectCEI (subject to certain exceptions, the Company’s abilityexceptions) and the ability of the subsidiary guarantors to incur debt; create liens on collateral; engage in mergers, consolidations or asset dispositions; pay dividends or make distributions; make investments, loans or advances; engage in certain transactions with affiliates or subsidiaries; or modify their lines of business.

The New Credit Facility isare secured by substantially all of the Company’s personalexisting and future property assets and substantially all personal property assets of each subsidiary that guaranties the New Credit Facility (other than certainCEI and its subsidiary guarantors designated as immaterial) (the “New(subject to certain exceptions). The CEI Senior Notes are guaranteed on a senior unsecured basis by such subsidiaries.

The CRC Credit Facility Guarantors”), whether ownedAgreement and the CRC Senior Secured Notes are guarantees on the closing datea senior secured basis by each existing and future material wholly-owned domestic subsidiary of the New Credit Facility or thereafter acquired,CRC (subject to certain exceptions) and mortgages on the real property and improvements owned or leased us or the New Credit Facility Guarantors. The New Credit Facility is alsoare secured by a pledge ofsubstantially all of the equity owned by the Companyexisting and the New Credit Facility Guarantorsfuture property and assets of CEI and its subsidiary guarantors (subject to certain gaming law restrictions)exceptions). The credit agreement governingCRC Notes are guaranteed on a senior unsecured basis by such subsidiaries.
Note 11. Fair Value Measurements
Items Measured at Fair Value on a Recurring Basis: The following table sets forth the New Credit Facility containsassets and liabilities measured at fair value on a number of customary covenants that, among other things, restrict, subject to certain exceptions,recurring basis, by input level, in the Company’s abilityConsolidated Condensed Balance Sheets at September 30, 2020 and the ability of the New Credit Facility Guarantors to incur additional indebtedness, create liens on collateral, engageDecember 31, 2019:
(In millions)September 30, 2020
Assets:Level 1Level 2Level 3Total
Restricted cash and investments$8 $3 $50 $61 
Marketable securities31 12 0 43 
Total assets at fair value$39 $15 $50 $104 
Liabilities:
Other liabilities related to restricted investments$0 $0 $4 $4 
Derivative instruments - 5% Convertible Notes0 575 0 575 
Derivative instruments - interest rate swaps and FX forward0 114 0 114 
Total liabilities at fair value$0 $689 $4 $693 
December 31, 2019
Assets:Level 1Level 2Level 3Total
Restricted cash and investments$11 $2 $29 $42 
Marketable securities27 8 0 35 
Total assets at fair value$38 $10 $29 $77 
The change in mergers, consolidations or asset dispositions, make distributions, makerestricted cash and investments loans or advances, engage in certain transactions with affiliates or subsidiaries or make capital expenditures.

The New Credit Facility also includes certain financial covenants, including the requirements that we maintain throughout the term of the New Credit Facility and measured as of the end of each fiscal quarter, and solely with respect to loans under the New Revolving Credit Facility, a maximum consolidated total leverage ratio of not more than 6.50 to 1.00liabilities valued using Level 3 inputs for the period beginning on the closing date and ending with the fiscal quarter ending December 31, 2018, 6.00 to 1.00 for the period beginning with the fiscal quarter beginning January 1, 2019 and ending with the fiscal quarter ending December 31, 2019, and 5.50 to 1.00 for the period beginning with the fiscal quarter beginning January 1, 2020 and thereafter. The Company will also be required to maintain an interest coverage ratio in an amount not less than 2.00 to 1.00 measured on the last day of each fiscal quarter beginning on the closing date, and ending with the fiscal quarter ending December 31, 2018, 2.50 to 1.00 for the period beginning with the fiscal quarter beginning January 1, 2019 and ending with the fiscal quarter ending December 31, 2019, and 2.75 to 1.00 for the period beginning with the fiscal quarter beginning January 1, 2020 and thereafter.

The New Credit Facility contains a number of customary events of default, including, among others, for the non-payment of principal, interest or other amounts, the inaccuracy of certain representations and warranties, the failure to perform or observe certain covenants, a cross default to our other indebtedness including the Notes, certain events of bankruptcy or insolvency; certain ERISA events, the invalidity of certain loan documents, certain changes of control and the loss of certain classes of licenses to conduct gaming. If any event of default occurs, the lenders under the New Credit Facility would be entitled to take various actions, including accelerating amounts outstanding thereunder and taking all actions permitted to be taken by a secured creditor. As ofnine months ended September 30, 2017, the Company was2020 is as follows:

33

(In millions)Level 3 InvestmentsLevel 3
Other Liabilities
Fair value of investment and liabilities at December 31, 2019$29 $0 
Value of additional investment received5 2 
Unrealized gain16 2 
Fair value at September 30, 2020$50 $4 
There were 0 transfers in compliance with the covenants under the New Credit Facility.


Note 8. Fair Valueor out of Financial Instruments

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly, fair value is a market based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there is a three‑tier fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows:

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

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

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

The following methods and assumptions are used to estimateinvestments during the fair value of each class of financial instruments for which it is practical to estimate fair value:

Cash and Cash Equivalents:  Cash equivalents include investments in money market funds.nine months ended September 30, 2020.

Restricted Investments in this category can be redeemed immediately at the current net asset value per share. A money market fund is a mutual fund whose investments are primarily in short‑term debt securities designed to maximize current income with liquidity and capital preservation, usually maintaining per share net asset value at a constant amount, such as one dollar. The carrying amounts approximate the fair value because of the short maturity of those instruments (Level 1).

Restricted Cash and Investments:  Restricted cash includes unredeemed winning tickets from the Company’s racing operations, funds related to horsemen’s fines and certain simulcasting funds that are restricted to payments for improving horsemen’s facilities and racing purses, cash deposits that serve as collateral for letters of credit, surety bonds and short-term certificates of deposit that serve as collateral for certain bonding requirements.

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

Accounts Receivable and Credit Risk. Financial instruments Restricted investments include shares acquired in conjunction with the Company’s sports betting agreements that potentially subjectcontain restrictions related to the ability to liquidate shares within a specified timeframe.

In November 2018, the Company entered into a 20-year agreement with The Stars Group Inc. (“TSG”) to concentrationsprovide TSG with options to obtain access to a second skin for online sports wagering and third skin for real money online gaming and poker with respect to the Company’s properties in the United States. Under the terms of credit risk consist principallythe agreement, the Company received 1 million TSG common shares as a revenue share from the operation of casino accounts receivable.the applicable verticals by TSG under the Company’s licenses. The fair value of the shares received has been deferred and is recognized as revenue on a straight-line basis over the 20-year agreement term. All shares are subject to a one year restriction on transfer from the date they are received. On May 5, 2020, Flutter Entertainment PLC (“Flutter”) completed the acquisition of all of the issued and outstanding common shares of TSG in exchange for 0.2253 Flutter shares per common share of TSG.
As of September 30, 2020 and December 31, 2019, the fair value of unrestricted shares totaled $19 million and $14 million, respectively, net of cumulative unrealized gains of $9 million and $4 million, respectively, and is included in Prepayments and other current assets on the Consolidated Condensed Balance Sheet. In addition, as of September 30, 2020, the fair value of restricted shares in Flutter totaled $8 million, net of cumulative unrealized gains of $3 million, and is included in restricted cash and investments on the Consolidated Condensed Balance Sheet. The Company issues markers to approved casino customers following background checksrecorded unrealized gains of $5 million and assessments$8 million during the three and nine months ended September 30, 2020, respectively, and unrealized loss of creditworthiness. Trade receivables, including casino and hotel receivables, are typically non‑interest bearing. Accounts are written off when management deems$2 million during the account to be uncollectible. Recoveriesthree months ended September 30, 2019. For the nine months ended September 30, 2019, the Company recorded an unrealized loss of accounts previously written off are recorded when received. An estimated allowance for doubtful accounts is maintained to reduce the Company’s receivables to their carrying amount, which approximates fair value. The allowance is estimated based on specific review of customer accounts as well as historical collection experience and current economic and business conditions. Management believes that no significant concentrations of credit risk related to receivables existed.

There were no transfers between Level 1 and Level 2 investments.

less than a million.

Marketable Securities:  Securities 
Marketable securities consist primarily of trading securities held by the Company’s captive insurance subsidiary.subsidiary and unrestricted shares acquired in conjunction with the Company’s sports betting agreements. These investments also include collateral for several escrow and trust agreements with third-party beneficiaries. The estimated fair values of the Company’s marketable securities are determined on an individual asset basis based upon quoted prices of identical assets available in active markets (Level 1), quoted prices of identical assets in inactive markets, or quoted prices for similar assets in active and inactive markets (Level 2), and represent the amounts wethe Company would expect to receive if wethe Company sold these marketable securities.

Long‑

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

The 5% Convertible Notes are convertible into the weighted average of the number of shares of Company Common Stock and amount of cash actually received per share by holders of common stock of Former Caesars that made elections for consideration in the Merger. As a result, the 5% Convertible Notes are convertible into a number of shares of Company Common Stock that is equal to approximately 0.014 shares of Company Common Stock and $1.17 of cash per $1.00 principal amount of 5% Convertible Notes. The 5% Convertible Notes are convertible at any time at the option of the holders thereof and, beginning in October 2020, are convertible at the option of the Company if the last reported sale price of Company Common Stock equals or exceeds 140% of the conversion price for the 5% Convertible Notes in effect on each of at least 20 trading days during any 30 consecutive trading day period. As of September 30, 2020, approximately $487 million of the 5% Convertible Notes have been converted into cash and shares resulting in a net gain of approximately $34 million which is recorded within other (loss) income on the Statement of Operations.
The outstanding balance of $607 million of which $10 million was held in trust as of September 30, 2020, would result in the issuance of an aggregate of 8.4 million shares of Company Common Stock and payment of $708 million upon conversion of the remaining outstanding 5% Convertible Notes. As of September 30, 2020, the remaining life of the 5% Convertible Notes is approximately 4 years.
Management analyzed the conversion features for derivative accounting consideration under ASC Topic 815, Derivatives and Hedging, (“ASC 815”) and determined that the 5% Convertible Notes contain bifurcated derivative features and qualify for derivative accounting. In accordance with ASC 815, the Company has bifurcated the conversion features of the 5% Convertible Notes and recorded a derivative liability. The 5% Convertible Notes derivative features are not designated as hedging instruments. The derivative features of the 5% Convertible Notes are carried on the Company’s Balance Sheet at fair value in Other long-term liabilities. The derivative liability is marked-to-market each measurement period and the changes in fair value as a result of fluctuations in the share price of our common stock resulted in a loss of $87 million for the three month ended September 30, 2020, which was recorded as a component of Other (loss) income in the Statement of Operations. The derivative liability associated with the 5% Convertible Notes will remain in effect until such time as the underlying convertible notes are exercised or terminated and the resulting derivative liability will be transitioned from a liability to equity as of such date.
Valuation Methodology
The 5% Convertible Notes had an initial face value of $1.1 billion, an initial term Debt:of 7 years, and a coupon rate of 5%.
As of September 30, 2020 we estimated the fair value of the 5% Convertible Notes using a market-based approach that incorporated the value of both the straight debt and conversion features of the 5% Convertible Notes. The valuation model incorporated actively traded prices of the 5% Convertible Notes as of the reporting date, and assumptions regarding the incremental cost of borrowing for CEI. The key assumption used in the valuation model is the actively traded price of 5% Convertible Notes and the incremental cost of borrowing is an indirectly observable input. The fair value for the conversion features of our long-term debt or other long-term obligationsthe 5% Convertible Notes is estimated based on the quoted marketclassified as Level 2 measurement.
Key Assumptions as of September 30, 2020:
•Actively traded price of 5% Convertible Notes - $193.00
•Incremental cost of borrowing - 6.0%
Forward contracts
In relation to the underlying debt issue (Level 1) or, whenproposed acquisition of William Hill plc, on September 28, 2020, the Company entered into a quoted market price is not available,foreign exchange forward contract to hedge the discounted cash flowrisk of future payments utilizing current rates available to us forappreciation of the debtGBP denominated purchase price. Under the agreement, the Company will purchase £1.3 billion at a contracted exchange rate. An unrealized loss of similar remaining maturities (Level 2). Debt obligations with a short remaining maturity have a carrying amount that approximates fair value.

Acquisition-Related Contingent Consideration:  Contingent consideration$5 million related to the July 2003 acquisitionchange in fair value during the period from September 28, 2020 and September 30, 2020 was recorded in the consolidated condensed statement of Scioto Downs representsoperations. As of September 30, 2020, the estimateforward derivative liability of amounts$5 million was recorded in Other long-term liabilities. On October 1, 2020 the contract was cancelled.

On October 9, 2020, the Company entered into a foreign exchange forward contract to hedge the risk of appreciation of the GBP denominated purchase price. Under the agreement, the Company will purchase £536 million at a contracted exchange rate. The forward term of the contract ends on March 31, 2021.
Interest Rate Swap Derivatives
We use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. As of September 30, 2020, Former Caesars has entered into 10 interest rate swap agreements to fix the interest rate on $3.0 billion of variable rate debt related to the CRC Credit Agreement. The interest rate swaps are designated as cash flow hedging instruments. The
35

difference to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to former stockholders of Scioto Downs under certain earn-out provisions. The Company considersinterest expense at settlement. Changes in the acquisition related contingency’s fair value measurement, which includes forecast assumptions,variable interest rates to be Level 3 withinreceived pursuant to the fair value hierarchy.

terms of the interest rate swap agreements will have a corresponding effect on future cash flows.

The major terms of the interest rate swap agreements as of September 30, 2020 are as follows:

Effective Date
Notional Amount
(In millions)
Fixed Rate PaidVariable Rate Received as of
September 30, 2020		Maturity Date
12/31/20182502.274%0.156%12/31/2022
12/31/20182002.828%0.156%12/31/2022
12/31/20186002.739%0.156%12/31/2022
1/1/20192502.153%0.156%12/31/2020
1/1/20192502.196%0.156%12/31/2021
1/1/20194002.788%0.156%12/31/2021
1/1/20192002.828%0.156%12/31/2022
1/2/20192502.172%0.156%12/31/2020
1/2/20192002.731%0.156%12/31/2020
1/2/20194002.707%0.156%12/31/2021
Valuation Methodology
The estimated fair values of the Company’s financialour interest rate swap derivative instruments are derived from market prices obtained from dealer quotes for similar, but not identical, assets or liabilities. Such quotes represent the estimated amounts we would receive or pay to terminate the contracts. The interest rate swap derivative instruments are included in either Deferred charges and other assets or Deferred credits and other liabilities on our Balance Sheets. Our derivatives are recorded at their fair values, adjusted for the credit rating of the counterparty if the derivative is an asset, or adjusted for the credit rating of the Company if the derivative is a liability. None of our derivative instruments are offset and all were classified as follows (amountsLevel 2.
Financial Statement Effect
The effect of derivative instruments designated as hedging instruments on the Balance Sheet for amounts transferred into Accumulated other comprehensive income/(loss) (“AOCI”) before tax was a gain of $18 million during the threemonths ended September 30, 2020. AOCI reclassified to Interest expense on the Statements of Operations was $12 million for the three months ended September 30, 2020. The estimated amount of existing losses that are reported in thousands):

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

 

 

September 30, 2017

 

 

December 31, 2016

 

 

 

Carrying

 

 

Fair

 

 

Carrying

 

 

Fair

 

 

 

Amount

 

 

Value

 

 

Amount

 

 

Value

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

134,903

 

 

$

 

134,903

 

 

$

 

61,029

 

 

$

 

61,029

 

Restricted cash

 

 

 

21,307

 

 

 

 

21,307

 

 

 

 

2,414

 

 

 

 

2,414

 

Marketable securities

 

 

 

17,461

 

 

 

 

17,461

 

 

 

 

—

 

 

 

 

—

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7% Senior Notes

 

$

 

367,579

 

 

$

 

402,187

 

 

$

 

366,859

 

 

$

 

397,500

 

6% Senior Notes

 

 

 

881,091

 

 

 

 

916,563

 

 

 

 

—

 

 

 

 

—

 

New Term Loan

 

 

 

981,559

 

 

 

 

1,003,177

 

 

 

 

—

 

 

 

 

—

 

Other long-term debt

 

 

 

2,950

 

 

 

 

2,950

 

 

 

 

—

 

 

 

 

—

 

Term Loan

 

 

 

—

 

 

 

 

—

 

 

 

 

406,047

 

 

 

 

423,858

 

Revolving Credit Facility

 

 

 

—

 

 

 

 

—

 

 

 

 

26,977

 

 

 

 

29,000

 

Acquisition-related contingent considerations

 

 

 

460

 

 

 

 

460

 

 

 

 

496

 

 

 

 

496

 

Accumulated Other Comprehensive Income

The following table represents the changechanges in acquisition-related contingent consideration liabilitiesAOCI by component, net of tax, for the period December 31, 2016 tothrough September 30, 2017:

Balance as of December 31, 2016

$

496

Amortization of present value discount(1)

50

Fair value adjustment for change in consideration expected to

   be paid(2)

4

Settlements

(90

)

Balance as of September 30, 2017

$

460

(1)

Changes in present value are included as a component of interest expense in the consolidated statements of operations.

2020 are shown below.

(2)

Fair value adjustments for changes in earn-out estimates are included in general and administrative expense in the consolidated statements of operations.

(In millions)Unrealized Net Gains on Derivative InstrumentsForeign Currency Translation AdjustmentsTotal
Balances as of December 31, 2019$0 $0 $0 
Other comprehensive income before reclassifications2 1 3 
Amounts reclassified from accumulated other comprehensive income12 0 12 
Total other comprehensive income, net of tax14 1 15 
Balances as of September 30, 2020$14 $1 $15 

Note 9.12. Earnings per Share

The following table illustrates the reconciliation of the numerators and denominators of the basic and diluted net (loss) income per share computations for the three and nine months ended September 30, 20172020 and 2016 (dollars2019:
36

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

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

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(unaudited)

 

 

(unaudited)

 

Income (loss) from continuing operations

 

$

 

28,116

 

 

$

 

9,682

 

 

$

 

(18,147

)

 

$

 

23,842

 

Income from discontinued operations, net of income taxes

 

 

 

1,438

 

 

 

 

—

 

 

 

 

2,393

 

 

 

 

—

 

Net income available to common stockholders

 

$

 

29,554

 

 

$

 

9,682

 

 

$

 

(15,754

)

 

$

 

23,842

 

Shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

 

76,902,070

 

 

 

 

47,193,120

 

 

 

 

63,821,705

 

 

 

 

47,106,706

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

128,696

 

 

 

 

63,157

 

 

 

 

85,977

 

 

 

 

107,790

 

RSUs

 

 

 

928,923

 

 

 

 

578,367

 

 

 

 

860,492

 

 

 

 

523,096

 

Weighted average shares outstanding - diluted

 

 

 

77,959,689

 

 

 

 

47,834,644

 

 

 

 

64,768,174

 

 

 

 

47,737,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share attributable to common

   stockholders - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

 

0.36

 

 

$

 

0.21

 

 

$

 

(0.28

)

 

$

 

0.51

 

Income from discontinued operations, net of income taxes

 

 

 

0.02

 

 

 

 

—

 

 

 

 

0.03

 

 

 

 

—

 

Net income (loss) attributable to common stockholders

 

$

 

0.38

 

 

$

 

0.21

 

 

$

 

(0.25

)

 

$

 

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share attributable to common

   stockholders - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

 

0.36

 

 

$

 

0.20

 

 

$

 

(0.28

)

 

$

 

0.50

 

Income from discontinued operations, net of income taxes

 

 

 

0.02

 

 

 

 

—

 

 

 

 

0.03

 

 

 

 

—

 

Net income (loss) attributable to common stockholders

 

$

 

0.38

 

 

$

 

0.20

 

 

$

 

(0.25

)

 

$

 

0.50

 

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

Three Months Ended
September 30,		Nine Months Ended
September 30,
(In millions)2020201920202019
Stock-based compensation awards3 0 7 0 
5% Convertible notes8 0 8 0 
Total anti-dilutive common stock11 0 15 0 
Note 10.13. Litigation, Commitments and Contingencies

Litigation.

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

Contractual Commitments
The following contractual commitments were assumed by the Company associated with Former Caesars as result of the consummation of the Merger.
37

Extension of Casino Operating Contract and Ground Lease for Harrah’s New Orleans
On April 1, 2020, the Company and the State of Louisiana, by and through the Louisiana Gaming Control Board (the “LGCB”), entered into an Amended and Restated Casino Operating Contract (as amended by a First Amendment to the Amended and Restated Casino Operating Contract dated April 9, 2020, the “Casino Operating Contract”) to amend and restate the casino operating contract between the Company and the LGCB with respect to Harrah’s New Orleans to, among other things: (a) extend the term of the Company’s authority to conduct gaming operations at Harrah’s New Orleans for thirty (30) years to 2054; (b) require the Company to make (i) a capital investment of $325 million on or around Harrah’s New Orleans by July 15, 2024 (subject to extensions for force majeure events) (the “Capital Investment”), (ii) certain one-time payments totaling $65 million to the City of New Orleans (the “City”) and the State of Louisiana, (iii) annual payments totaling $9 million to the City and the State of Louisiana and (iv) an annual license payment of $3 million to the LGCB starting April 1, 2022; and (c) delay the date by which the Company must deliver certain payments to the State of Louisiana and the City primarily driven by the reopening date of the casino.
On April 3, 2020, the Company, New Orleans Building Corporation (“NOBC”) and the City (collectively, the “Ground Lease Parties”) entered into a Second Amended and Restated Lease Agreement (as amended by a letter agreement of the same date, the “Ground Lease”) to amend and restate the ground lease among the Ground Lease Parties with respect to Harrah’s New Orleans to, among other things: (a) require the Company to make (i) the Capital Investment, (ii) certain payments to the City as also required by the Casino Operating Contract and (iii) certain one-time payments totaling $29 million to NOBC; (b) increase the minimum amount of certain annual payments to be made by the Company to NOBC; (c) provide that NOBC approves (subject to the satisfaction of certain conditions) of (i) the consummation of the Merger and (ii) a sale-leaseback transaction between the Company and an affiliate of VICI; and (d) delay the date by which the Company must deliver certain payments to the City and NOBC primarily driven by the reopening date of the casino.
As certain operations have resumed at Harrah’s New Orleans, under Former Caesars, approximately $61 million was paid of which $47 million reflected additional gaming rights, and $14 million was operating costs, related to the payments described above. Subsequent to the Merger, the Company made additional payments totaling approximately $20 million of additional gaming rights as of, or for the period ended, September 30, 2020, related to the payments described above.
Sports Sponsorship/Partnership Obligations
We have agreements with certain professional sports leagues and teams, sporting event facilities and sports television networks for tickets, suites, and advertising, marketing, promotional and sponsorship opportunities. As of September 30, 2020, obligations related to these agreements were $318 million with contracts extending through 2035. We recognize expenses in the period services are rendered in accordance with the various agreements. In addition, assets or liabilities may be recorded related to the timing of payments as required by the respective agreement. On September 1, 2020, we amended our agreement with Turner Sports, Inc. for advertising and televised specials. On September 10, 2020, the Company entered into a multi-year agreement with ESPN including link integrations from ESPN’s website and app to sportsbooks with our sports betting partner, William Hill.
Self-Insurance
We are self-insured for workers compensation and other risk insurance, as well as health insurance. Our total estimated self-insurance liability was $235 million as of September 30, 2020.
Due to the novel nature of the disruption resulting from the COVID-19 public health emergency, actuarial data is limited for determining its effect. The assumptions utilized by our actuaries are subject to significant uncertainty and if outcomes differ from these assumptions or events develop or progress in a negative manner, the Company could experience a material adverse effect and additional liabilities may be recorded in the future. Alternatively, as a result of the current work stoppages, a reduction of claims in future periods could be beneficial to our financial condition and results of operations.
Contingent Liabilities
Uncertainties
Since 2009, Harrah’s New Orleans has undergone audits by state and local departments of revenue related to sales taxes on hotel rooms, parking and entertainment complimentaries. The periods that have been or are currently being audited are 2004 through 2016. In connection with these audits, certain periods have been paid under protest or are currently in various stages of litigation. On July 2, 2019, the judge denied Harrah’s New Orleans’ motion for partial summary judgment and granted the Department of Revenue’s (the “Department”) partial motion for summary judgment, finding that Harrah’s New Orleans owes state sales taxes, as well as district and New Orleans occupancy taxes to the Department on all discounted or complimentary
38

rooms furnished by Harrah’s New Orleans to patrons or guests at Harrah’s New Orleans hotel and certain third party hotels. On September 3, 2019, Harrah’s New Orleans filed a Motion for Suspensive Appeal, which was granted. Harrah’s filed its reply on February 3, 2020. Oral argument was on February 20, 2020. Under Former Caesars, $9 million has been paid under protest and is being held in escrow by the Department. Harrah’s New Orleans had accrued contingent liabilities of $42 million on September 30, 2020.
Weather disruption - Lake Charles
On August 27, 2020 Hurricane Laura made landfall on Lake Charles as a Category 4 storm. The hurricane severely damaged the Isle Merger, a class action lawsuit was filed by a purported stockholder of Capri Casino Lake Charles and the Company alleging breachhas recorded an insurance receivable of fiduciary duty by $31 million, of which $15 million related to fixed asset impairments and $16 million related to remediation costs and repairs that have been incurred in the Company board of directors in connection with the Isle Merger.three months ended September 30, 2020. The case was filed on November 8, 2016 in the Second Judicial District Court of the State of Nevada and is captioned Assad v. Eldorado Resorts, Inc., et. al, case no. CV 16-02312. The lawsuit, which purported to be a class action on behalf of all of the stockholders of the Company, alleged, among other things, breach of fiduciary duty in failing to disclose all material information to stockholders in seeking approval of the issuance of shares of Company Common Stock in the Isle Merger and requested injunctive relief. In the suit, the Plaintiff sought to enjoin the shareholder meeting to approve the sale. The request to enjoin the shareholder meeting lawsuitproperty has since been withdrawn and, on May 31, 2017, the Court denied plaintiff’s application for an award of attorneys’ fees and expenses. This matter was dismissed by the Court in August 2017.

Agreements with Horsemen and Pari-mutuel Clerks.  The Federal Interstate Horse Racing Act and the state racing laws in West Virginia, Ohio and Pennsylvania require that, in order to simulcast races, we have written agreements with the horse owners and trainers at those racetracks. In addition, in order to operate slot machines in West Virginia, we are required to enter into written agreements regarding the proceeds of the slot machines (a “proceeds agreement”) with a representative of a majority of the horse owners and trainers and with a representative of a majority of the pari‑mutuel clerks. In Pennsylvania and Ohio, we must have an agreement with the representative of the horse owners. We have the requisite agreements in place with the horsemen at Mountaineer until December 31, 2018. With respect to the Mountaineer pari‑mutuel clerks, we have a labor agreement in force until November 30, 2017, which will automatically renew for an additional one-year period, and a proceeds agreement until April 14, 2018. We are required to have a proceeds agreement in effect on July 1 of each year with the horsemen and the pari‑mutuel clerks as a condition to renewal of our video lottery license for such year. If the requisite proceeds agreement is not in place as of July 1 of a particular year, Mountaineer’s application for renewal of its video lottery license could be denied, in which case Mountaineer would not be permitted to operate either its slot machines or table games. Scioto Downs has the requisite agreement in place with the OHHA until December 31, 2023, with automatic two-year renewals unless either party requests re‑negotiation pursuant to its terms. Presque Isle

remained closed.

Downs has the requisite agreement in place with the Pennsylvania Horsemen’s Benevolent and Protective Association until May 1, 2019. With the exception of the respective Mountaineer, Presque Isle Downs and Scioto Downs horsemen’s agreements and the agreement between Mountaineer and the pari‑mutuel clerks’ union described above, each of the agreements referred to in this paragraph may be terminated upon written notice by either party.

Note 11.14. Related Affiliates

The accompanying balance sheets include the Company’s payable to C.S. &Y. Associates (“CS&Y”) which is an entity partially owned by

REI
As of September 30, 2020, Recreational Enterprises, Inc. (“REI”). owned approximately 5.1% of outstanding common stock of the Company. The directors of REI are the Company’s Chief Executive Officer and Chairman of the Board, Gary L. Carano, its Chief Executive Officer and Board member, Thomas R. Reeg, and its former Senior Vice President of Regional Operations, Gene Carano. In addition, Gary L. Carano arealso serves as the directorsVice President of REI and membersGene Carano also serves as the Secretary and Treasurer of REI. Members of the Carano family, including Gary L. Carano and Gene Carano, own the equity interests in REI. During the nine months ended September 30, 2020 and 2019, there were 0 related party transactions between the Company and the Carano family other than compensation, including salary and equity incentives, and the CSY Lease listed below.
C. S. & Y. Associates
The Company owns the entire parcel on which Eldorado Reno is located, except for approximately 30,000 square feet which is leased from CS&Y. No amounts were due to or due from CS&Y as of SeptemberC. S. & Y. Associates (“CSY”) which is an entity partially owned by REI (the “CSY Lease”). The CSY Lease expires on June 30, 2017. As of December 31, 2016, the Company’s payable to CS&Y totaled $0.3 million and is reflected on the accompanying balance sheet under “due to affiliates.”

The Company holds a 42.1% variable interest in a partnership with other investors that developed a new 118-room Hampton Inn & Suites hotel at Scioto Downs that opened in March 2017. Pursuant2057. Rent pursuant to the terms ofCSY Lease is $0.6 million annually and paid quarterly during the partnership agreement, the Company contributed $1.0 million of cash and 2.4 acres of a leasehold immediately adjacent to The Brew Brothers microbrewery and restaurant at Scioto Downs. The partnership constructed the hotel at a cost of $16.0 million and other investor members operate the hotel.year. As of September 30, 2017,2020 and December 31, 2019, there were 0 amounts due to or from CSY.

Transactions with Horseshoe Baltimore
The Company holds an interest in Horseshoe Baltimore of approximately 44.3% which is accounted for as an equity method investment and is considered to be a related party. These related party transactions include items such as casino management fees, reimbursement of various costs incurred by CEOC, LLC on behalf of Horseshoe Baltimore, and the allocation of other general corporate expenses. A summary of the transactions with Horseshoe Baltimore is provided in the table below.
(In millions)Three Months Ended
September 30, 2020
Transactions with Horseshoe Baltimore
Management fees$2 
Allocated expenses1 
Due from/to Affiliates
Amounts due from or to affiliates for each counterparty represent the net receivable or payable as of the end of the reporting period primarily resulting from the transactions described above and settled on a net basis by each counterparty in accordance with the legal and contractual restrictions governing transactions by and among the Company’s receivableconsolidated entities.
As of September 30, 2020 and December 31, 2019, Due from the partnership totaled $71,000affiliates, net was $37 million and payable to the partnership totaled $30,000$4 million, respectively, and are reflected on the accompanying balance sheet under “due from affiliates”represented transactions with Horseshoe Baltimore and “due to affiliates.”

William Hill.

Note 12.15. Segment Information

We view

The executive decision maker of the Company reviews operating results, assesses performance and makes decisions on a “significant market” basis. Management views each of our propertiesthe Company’s casinos as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, and their management and reporting structure. Prior to the Isle Acquisition,Merger, our principal operating activities occurred in 5 geographic regions and reportable segments: West, Midwest, South, East and Central. Following the Merger, the Company’s principal operating activities occurredoccur in three geographic regions: Nevada, Louisiana3 regionally-focused and parts of the eastern United States.reportable segments. The Company aggregated its operations into three reportable segments are based on the similar
39

characteristics of the operating segments within the regions in which they operated as follows:

Segment

Property

State

Nevada

Eldorado Reno

Nevada

Silver Legacy

Nevada

Circus Reno

Nevada

Louisiana

Eldorado Shreveport

Louisiana

Eastern

Presque Isle Downs

Pennsylvania

Scioto Downs

Ohio

Mountaineer

West Virginia


Following the Isle Acquisition, the Company’s principal operating activities expandedoperate: (1) Las Vegas, (2) Regional, and now occur(3) Managed, International, CIE, in four geographic regionsaddition to Corporate and reportable segments based on the similar characteristicsOther. See table below for a summary of these segments. Also, see Note 4 and Note 7 for a discussion of the operating segments within the regions in which they operate. impairment of intangibles and long-lived assets related to certain segments.

The following table summarizessets forth certain information regarding our current segments:

properties (listed by segment in which each property is reported) as of September 30, 2020:

Segment

Property

State

West

Las Vegas

Eldorado Reno

Regional

Nevada

Managed, International, CIE

(a)

Bally’s Las Vegas

Silver Legacy

Eldorado Resort Casino Reno

Nevada

(a)Harrah’s Atlantic CityInternational

(a)

The Cromwell

Circus Reno

Silver Legacy Resort Casino

Nevada

(a)Harrah’s Laughlin(a)Caesars Cairo

(a)

Flamingo Las Vegas

Circus Circus Reno(a)Harrah’s New Orleans(a)Ramses Casino
(a)The LINQ Hotel & Casino
MontBleu Casino Resort & Spa (c)
(a)
Hoosier Park (f)
(a)
Emerald Casino Resort (b)
(a)Paris Las VegasTropicana Laughlin Hotel & Casino(a)
Indiana Grand (g)
(a)
Alea Glasgow (b)
(a)Planet Hollywood Resort & CasinoIsle Casino Hotel - Blackhawk(a)
Bally’s Atlantic City (b)
(a)
Alea Nottingham (b)
(a)Caesars Palace Las VegasLady Luck Casino - Black Hawk

Colorado

(a)		Caesars Atlantic City(a)
The Empire Casino (b)

(a)

Harrah’s Las Vegas

Isle Casino Waterloo(a)
Caesars Southern Indiana (e)(b)
(a)
Manchester235 (b)
(a)Rio All-Suite Hotel & CasinoIsle Casino Bettendorf(a)Harrah’s Council Bluffs(a)
Playboy Club London (b)
Isle of Capri Casino Boonville(a)Harrah’s Gulf Coast(a)
Rendezvous Brighton (b)
Isle of Capri Casino Kansas City (d)
(a)Harrah’s Joliet(a)
Rendezvous Southend-on-Sea (j)(b)
Isle Casino Racing Pompano Park(a)Harrah’s Lake Tahoe(a)
The Sportsman (b)
Eldorado Resort Casino Shreveport (c)
(a)
Harrah’s Louisiana Downs (h)(b)
Managed
Isle of Capri Casino Hotel Lake Charles(a)Harrah’s Metropolis(a)Harrah’s Ak-Chin
Belle of Baton Rouge Casino & Hotel(a)Harrah’s North Kansas City(a)Harrah’s Cherokee
Isle of Capri Casino Lula(a)Harrah’s Philadelphia(a)Harrah’s Cherokee Valley River
Lady Luck Black Hawk

Casino Vicksburg (d)

Colorado

(a)
Harrah’s Reno (i)(b)
(a)Harrah’s Resort Southern California

Trop Casino Greenville

(a)Harveys Lake Tahoe(a)
Horseshoe Baltimore (k)

Midwest

Waterloo

Eldorado Gaming Scioto Downs

Iowa

(a)Horseshoe Bossier City(a)Caesars Windsor

Bettendorf

Tropicana Casino and Resort, Atlantic City

Iowa

(a)Horseshoe Council Bluffs(a)Kings & Queens Casino

Boonville

Grand Victoria Casino

Missouri

(a)
Horseshoe Hammond (e)(b)
(a)Caesars Dubai

Cape Girardeau

Lumière Place Casino

Missouri

(a)Horseshoe TunicaCIE

Caruthersville

Tropicana Evansville (e)

Missouri

Kansas City

Missouri

(a)

South

Pompano

Florida

Eldorado Shreveport

Louisiana

Lula

Mississippi

Vicksburg

Mississippi

East

Presque Isle Downs

Pennsylvania

Nemacolin

Pennsylvania

Scioto Downs

Ohio

Mountaineer

West Virginia

Caesars Interactive Entertainment


___________________

(a)These properties were acquired from the Merger with Former Caesars on July 20, 2020.
(b)As a result of the Merger, the sales of these properties met the requirements for presentation as discontinued operations as of September 30, 2020.
(c)In April 2020, the Company entered into an agreement to sell Eldorado Shreveport and MontBleu, which are expected to close in the first quarter of 2021. As of September 30, 2020, the properties’ assets and liabilities were classified as held for sale.
(d)Kansas City and Vicksburg were sold on July 1, 2020.
(e)On October 27, 2020, the Company entered into an agreement to sell Evansville, which is expected to close mid-2021. In addition, the Company plans to enter into an agreement to divest of Caesars Southern Indiana and Horseshoe Hammond prior to December 31, 2020. As of September 30, 2020, Evansville’s assets and liabilities were classified as held for sale.
(f)Hoosier Park includes operations of our off-track betting locations, Winner’s Circle Indianapolis and Winner’s Circle New Haven.
(g)Indiana Grand includes operations of our off-track betting location, Winner’s Circle Clarksville.
(h)On September 3, 2020, the Company entered into an agreement to sell Harrah’s Louisiana Downs, which is expected to close in the first half of 2021.
(i)Harrah’s Reno was sold on September 30, 2020.
(j)Rendezvous Southend-on-Sea permanently closed in June 2020 following the recent closure due to the COVID-19 public health emergency.
(k)As of September 30, 2020, Horseshoe Baltimore was 44.3% owned and held as an equity-method investment.
In addition to our properties listed above, other domestic and international properties, including Harrah’s Northern California, are authorized to use the brands and marks of Caesars Entertainment, Inc. We also own the CAESARS FORUM conference
40

center, which is a 550,000 sq. ft. conference center with 300,000 sq. ft. of flexible meeting space and 2 of the largest pillarless ballrooms.
“Corporate and Other” includes parent other adjustments and eliminations to reconcile to consolidated Caesars results.
The following table sets forth, for the periods indicated, certain operating data for our fourthe Company’s 3 reportable segments. Amounts relatedWe recast previously reported segment amounts to pre-acquisition periods (prior to May 1, 2017) conform to prior presentationthe way management assesses results and allocates resources for the current year.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(In millions)2020201920202019
Revenues and expenses
Las Vegas:
Net revenues$304 $0 $304 $0 
Net loss attributable to Caesars(162)0 (162)0 
Adjusted EBITDA43 0 43 0 
Regional:
Net revenues1,000 661 1,596 1,930 
Net (loss) income attributable to Caesars47 117 (175)300 
Adjusted EBITDA331 205 439 569 
Managed, International, CIE:
Net revenues69 0 69 0 
Net income attributable to Caesars3 0 3 0 
Adjusted EBITDA18 0 18 0 
Corporate and Other:
Net revenues4 2 8 6 
Net loss attributable to Caesars(814)(80)(868)(206)
Adjusted EBITDA(41)(8)(59)(27)
Total
Net revenues$1,377 $663 $1,977 $1,936 
Net (loss) income attributable to Caesars$(926)$37 $(1,202)$94 
Adjusted EBITDA$351 $197 $441 $542 
Adjusted EBITDA - By Segment
Adjusted EBITDA is presented as the additional operating segments associated with the Isle Acquisition are incremental to the previously disclosed reportable segments.

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(in thousands, unaudited)

 

Revenues and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

 

132,775

 

 

$

 

89,676

 

 

$

 

293,528

 

 

$

 

246,608

 

Operating income

 

 

 

32,556

 

 

 

 

15,606

 

 

 

 

50,507

 

 

 

 

34,825

 

Midwest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

 

103,510

 

 

$

 

—

 

 

$

 

171,015

 

 

$

 

—

 

Operating income

 

 

 

24,261

 

 

 

 

—

 

 

 

 

39,669

 

 

 

 

—

 

South:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

 

81,696

 

 

$

 

33,984

 

 

$

 

183,425

 

 

$

 

100,514

 

Operating income

 

 

 

11,293

 

 

 

 

6,703

 

 

 

 

28,280

 

 

 

 

18,746

 

East:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

 

126,720

 

 

$

 

117,905

 

 

$

 

352,644

 

 

$

 

339,324

 

Operating income

 

 

 

21,140

 

 

 

 

15,102

 

 

 

 

54,333

 

 

 

 

43,767

 

Corporate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

 

173

 

 

$

 

—

 

 

$

 

366

 

 

$

 

—

 

Operating loss

 

 

 

(10,326

)

 

 

 

(9,302

)

 

 

 

(111,834

)

 

 

 

(21,312

)

Total Reportable Segments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

 

444,874

 

 

$

 

241,565

 

 

$

 

1,000,978

 

 

$

 

686,446

 

Operating income—Total Reportable Segments

 

 

 

78,924

 

 

 

 

28,109

 

 

 

 

60,955

 

 

 

 

76,026

 

Reconciliations to Consolidated Net Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income—Total Reportable Segments

 

$

 

78,924

 

 

$

 

28,109

 

 

$

 

60,955

 

 

$

 

76,026

 

Unallocated income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(29,183

)

 

 

 

(12,589

)

 

 

 

(69,380

)

 

 

 

(38,375

)

Loss on early retirement of debt

 

 

 

(10,030

)

 

 

 

—

 

 

 

 

(37,347

)

 

 

 

(155

)

(Provision) benefit for income taxes

 

 

 

(11,595

)

 

 

 

(5,838

)

 

 

 

27,625

 

 

 

 

(13,654

)

Net income (loss) from continuing operations

 

$

 

28,116

 

 

$

 

9,682

 

 

$

 

(18,147

)

 

$

 

23,842

 

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

 

(in thousands, unaudited)

 

Capital Expenditures

 

 

 

 

 

 

 

 

 

 

West

 

$

 

30,498

 

 

$

 

12,270

 

Midwest

 

 

 

6,545

 

 

 

 

—

 

South

 

 

 

4,003

 

 

 

 

4,026

 

East (1)

 

 

 

6,791

 

 

 

 

16,278

 

Corporate

 

 

 

5,344

 

 

 

 

375

 

Total

 

$

 

53,181

 

 

$

 

32,949

 

(1)

Amounts are before any West Virginia capital expenditure reimbursements.

 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Corporate, Other & Eliminations

 

 

Total

 

Balance sheet as of September 30, 2017 (unaudited)

(in thousands)

 

Total assets

 

$

 

1,282,981

 

 

$

 

1,185,266

 

 

$

 

688,035

 

 

$

 

1,176,264

 

 

$

 

(747,289

)

 

$

 

3,585,257

 

Goodwill

 

 

 

154,467

 

 

 

 

334,276

 

 

 

 

190,914

 

 

 

 

66,825

 

 

 

 

—

 

 

 

 

746,482

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance sheet as of December 31, 2016

 

 

 

 

 

 

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

 

377,688

 

 

$

 

—

 

 

$

 

128,427

 

 

$

 

850,904

 

 

$

 

(62,975

)

 

$

 

1,294,044

 

Goodwill

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

66,826

 

 

 

 

—

 

 

 

 

66,826

 


Note 13. Consolidating Condensed Financial Information

Certain of our wholly-owned subsidiaries have fully and unconditionally guaranteed on a joint and several basis, the payment of all obligations under our 7% Senior Notes, 6% Senior Notes and New Credit Facility.

The following wholly-owned subsidiariesmeasure of the CompanyCompany’s performance. Adjusted EBITDA is defined as revenues less operating expenses and is comprised of net income/(loss) before (i) interest expense, net of interest capitalized and interest income, (ii) income tax (benefit)/provision, (iii) depreciation and amortization, and (iv) certain items that we do not consider indicative of its ongoing operating performance at an operating property level.

In evaluating Adjusted EBITDA you should be aware that, in the future, we may incur expenses that are guarantors, on a joint and several basis, under the 7% Senior Notes, 6% Senior Notes and New Credit Facility: Isle of Capri Casinos LLC; Eldorado Holdco LLC; Eldorado Resorts LLC; Eldorado Shreveport 1 LLC; Eldorado Shreveport 2 LLC; Eldorado Casino Shreveport Joint Venture; MTR Gaming Group Inc.; Mountaineer Park Inc.; Presque Isle Downs Inc.; Scioto Downs Inc.; Eldorado Limited Liability Company; Circus and Eldorado Joint Venture, LLC; CC Reno LLC; CCR Newco LLC; Black Hawk Holdings, L.L.C.; IC Holdings Colorado, Inc.; CCSC/Blackhawk, Inc.; IOC-Black Hawk Distribution Company, LLC; IOC-Black Hawk County, Inc.; Isle of Capri Bettendorf, L.C.; PPI, Inc.; Pompano Park Holdings LLC; IOC-Lula, Inc.; IOC-Kansas City, Inc.; IOC-Boonville, Inc.; IOC-Caruthersville, LLC; IOC Cape Girardeau, LLC; IOC-Vicksburg, Inc.; IOC-Vicksburg, L.L.C.; Rainbow Casino-Vicksburg Partnership, L.P.; IOC Holdings L.L.C. and St. Charles Gaming Company, L.L.C. Eachsame or similar to some of the subsidiaries’ guaranteesadjustments in this presentation. The presentation of Adjusted EBITDA should not be construed as an inference that future results will be unaffected by unusual or unexpected items.
Adjusted EBITDA is jointa non-GAAP financial measure commonly used in our industry and severalshould not be construed as an alternative to net income/(loss) as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (as determined in accordance with GAAP). Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies within the guarantees ofindustry. Adjusted EBITDA is included because management uses Adjusted EBITDA to measure performance and allocate resources, and believes that Adjusted EBITDA provides investors with additional information consistent with that used by management.
41

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

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

The consolidating condensed balance sheet as of September 30, 2017 is as follows:

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

Balance Sheet

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

Current assets

 

$

 

31,559

 

 

$

 

348,082

 

 

$

 

21,333

 

 

$

 

—

 

 

$

 

400,974

 

Intercompany receivables

 

 

 

304,637

 

 

 

 

—

 

 

 

 

37,077

 

 

 

 

(341,714

)

 

 

 

—

 

Investments in subsidiaries

 

 

 

2,312,039

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(2,312,039

)

 

 

 

—

 

Property and equipment, net

 

 

 

5,437

 

 

 

 

1,434,717

 

 

 

 

6,200

 

 

 

 

—

 

 

 

 

1,446,354

 

Other assets

 

 

 

68,346

 

 

 

 

1,717,934

 

 

 

 

33,425

 

 

 

 

(81,776

)

 

 

 

1,737,929

 

Total assets

 

$

 

2,722,018

 

 

$

 

3,500,733

 

 

$

 

98,035

 

 

$

 

(2,735,529

)

 

$

 

3,585,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

 

15,439

 

 

$

 

182,755

 

 

$

 

26,881

 

 

$

 

—

 

 

$

 

225,075

 

Intercompany payables

 

 

 

—

 

 

 

 

341,713

 

 

 

 

—

 

 

 

 

(341,713

)

 

 

 

—

 

Long-term debt, less current maturities

 

 

 

1,848,573

 

 

 

 

350,008

 

 

 

 

25,473

 

 

 

 

—

 

 

 

 

2,224,054

 

Deferred income tax liabilities

 

 

 

—

 

 

 

 

333,754

 

 

 

 

—

 

 

 

 

(81,776

)

 

 

 

251,978

 

Other accrued liabilities

 

 

 

4,083

 

 

 

 

20,792

 

 

 

 

5,340

 

 

 

 

—

 

 

 

 

30,215

 

Stockholders’ equity

 

 

 

853,923

 

 

 

 

2,271,711

 

 

 

 

40,341

 

 

 

 

(2,312,040

)

 

 

 

853,935

 

Total liabilities and stockholders’ equity

 

$

 

2,722,018

 

 

$

 

3,500,733

 

 

$

 

98,035

 

 

$

 

(2,735,529

)

 

$

 

3,585,257

 

The consolidating condensed balance sheet as of December 31, 2016 is as follows:

Balance Sheet

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

Current assets

 

$

 

1,800

 

 

$

 

99,554

 

 

$

 

399

 

 

$

 

—

 

 

$

 

101,753

 

Intercompany receivables

 

 

 

388,050

 

 

 

 

—

 

 

 

 

1,186

 

 

 

 

(389,236

)

 

 

 

—

 

Investments in subsidiaries

 

 

 

299,437

 

 

 

 

808,923

 

 

 

 

—

 

 

 

 

(1,108,360

)

 

 

 

—

 

Property and equipment, net

 

 

 

1,965

 

 

 

 

610,377

 

 

 

 

—

 

 

 

 

—

 

 

 

 

612,342

 

Other assets

 

 

 

50,591

 

 

 

 

585,892

 

 

 

 

11

 

 

 

 

(56,545

)

 

 

 

579,949

 

Total assets

 

$

 

741,843

 

 

$

 

2,104,746

 

 

$

 

1,596

 

 

$

 

(1,554,141

)

 

$

 

1,294,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

 

22,759

 

 

$

 

79,265

 

 

$

 

16

 

 

$

 

—

 

 

$

 

102,040

 

Intercompany payables

 

 

 

—

 

 

 

 

389,236

 

 

 

 

—

 

 

 

 

(389,236

)

 

 

 

—

 

Long-term debt, less current maturities

 

 

 

420,633

 

 

 

 

375,248

 

 

 

 

—

 

 

 

 

—

 

 

 

 

795,881

 

Deferred income tax liabilities

 

 

 

—

 

 

 

 

146,930

 

 

 

 

—

 

 

 

 

(56,545

)

 

 

 

90,385

 

Other accrued liabilities

 

 

 

12

 

 

 

 

7,275

 

 

 

 

—

 

 

 

 

—

 

 

 

 

7,287

 

Stockholders’ equity

 

 

 

298,439

 

 

 

 

1,106,792

 

 

 

 

1,580

 

 

 

 

(1,108,360

)

 

 

 

298,451

 

Total liabilities and stockholders’ equity

 

$

 

741,843

 

 

$

 

2,104,746

 

 

$

 

1,596

 

 

$

 

(1,554,141

)

 

$

 

1,294,044

 


The consolidating condensed statement of operations(b)Other loss for thethree and nine months ended September 30, 2017 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

$

 

—

 

 

$

 

820,452

 

 

$

 

15,326

 

 

$

 

—

 

 

$

 

835,778

 

Non-gaming

 

 

 

—

 

 

 

 

248,034

 

 

 

 

4,942

 

 

 

 

—

 

 

 

 

252,976

 

Gross revenues

 

 

 

—

 

 

 

 

1,068,486

 

 

 

 

20,268

 

 

 

 

—

 

 

 

 

1,088,754

 

Less promotional allowances

 

 

 

—

 

 

 

 

(86,858

)

 

 

 

(918

)

 

 

 

—

 

 

 

 

(87,776

)

Net revenues

 

 

 

—

 

 

 

 

981,628

 

 

 

 

19,350

 

 

 

 

—

 

 

 

 

1,000,978

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

 

 

—

 

 

 

 

427,680

 

 

 

 

10,656

 

 

 

 

—

 

 

 

 

438,336

 

Non-gaming

 

 

 

—

 

 

 

 

109,518

 

 

 

 

649

 

 

 

 

—

 

 

 

 

110,167

 

Marketing and promotions

 

 

 

—

 

 

 

 

53,401

 

 

 

 

1,444

 

 

 

 

—

 

 

 

 

54,845

 

General and administrative

 

 

 

—

 

 

 

 

152,717

 

 

 

 

3,061

 

 

 

 

—

 

 

 

 

155,778

 

Corporate

 

 

 

21,413

 

 

 

 

(1,791

)

 

 

 

2,112

 

 

 

 

—

 

 

 

 

21,734

 

Management fee

 

 

 

(20,064

)

 

 

 

19,564

 

 

 

 

500

 

 

 

 

—

 

 

 

 

—

 

Depreciation and amortization

 

 

 

635

 

 

 

 

68,767

 

 

 

 

233

 

 

 

 

—

 

 

 

 

69,635

 

Total operating expenses

 

 

 

1,984

 

 

 

 

829,856

 

 

 

 

18,655

 

 

 

 

—

 

 

 

 

850,495

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on sale of asset or disposal of

   property

 

 

 

(21

)

 

 

 

(30

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(51

)

Acquisition charges

 

 

 

(69,628

)

 

 

 

(19,544

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(89,172

)

Equity in loss of unconsolidated

   affiliate

 

 

 

—

 

 

 

 

(305

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(305

)

Operating (loss) income

 

 

 

(71,633

)

 

 

 

131,893

 

 

 

 

695

 

 

 

 

—

 

 

 

 

60,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(49,576

)

 

 

 

(19,110

)

 

 

 

(694

)

 

 

 

—

 

 

 

 

(69,380

)

Loss on early retirement of debt, net

 

 

 

(37,347

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(37,347

)

Subsidiary income (loss)

 

 

 

77,197

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(77,197

)

 

 

 

—

 

(Loss) income before income

   taxes

 

 

 

(81,359

)

 

 

 

112,783

 

 

 

 

1

 

 

 

 

(77,197

)

 

 

 

(45,772

)

Income tax benefit (provision)

 

 

 

64,455

 

 

 

 

(36,896

)

 

 

 

66

 

 

 

 

—

 

 

 

 

27,625

 

Income (loss) from continuing

  operations

 

 

 

(16,904

)

 

 

 

75,887

 

 

 

 

67

 

 

 

 

(77,197

)

 

 

 

(18,147

)

Income from discontinued operations, net

  of taxes

 

 

 

1,150

 

 

 

 

1,243

 

 

 

 

—

 

 

 

 

—

 

 

 

 

2,393

 

Net income (loss)

 

$

 

(15,754

)

 

$

 

77,130

 

 

$

 

67

 

 

$

 

(77,197

)

 

$

 

(15,754

)


The consolidating condensed statement2020 primarily represents loss on early repayment of operationsdebt in connection with the consummation of the Merger and unrealized loss on the change in fair value of the derivative liability related to the 5% Convertible Notes, slightly offset by a gain on William Hill UK and Flutter stock and a realized gain on conversion of the 5% Convertible Notes.

(c)Transaction costs and other operating costs for the nine months ended September 30, 2016 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

$

 

—

 

 

$

 

539,010

 

 

$

 

235

 

 

$

 

—

 

 

$

 

539,245

 

Non-gaming

 

 

 

—

 

 

 

 

216,473

 

 

 

 

99

 

 

 

 

—

 

 

 

 

216,572

 

Gross revenues

 

 

 

—

 

 

 

 

755,483

 

 

 

 

334

 

 

 

 

—

 

 

 

 

755,817

 

Less promotional allowances

 

 

 

—

 

 

 

 

(69,371

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(69,371

)

Net revenues

 

 

 

—

 

 

 

 

686,112

 

 

 

 

334

 

 

 

 

—

 

 

 

 

686,446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

   commissions

 

 

 

—

 

 

 

 

307,669

 

 

 

 

—

 

 

 

 

—

 

 

 

 

307,669

 

Non-gaming

 

 

 

—

 

 

 

 

104,611

 

 

 

 

—

 

 

 

 

—

 

 

 

 

104,611

 

Marketing and promotions

 

 

 

—

 

 

 

 

30,661

 

 

 

 

3

 

 

 

 

—

 

 

 

 

30,664

 

General and administrative

 

 

 

—

 

 

 

 

98,129

 

 

 

 

—

 

 

 

 

—

 

 

 

 

98,129

 

Corporate

 

 

 

15,414

 

 

 

 

270

 

 

 

 

—

 

 

 

 

—

 

 

 

 

15,684

 

Management fee

 

 

 

(15,496

)

 

 

 

15,496

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Depreciation and amortization

 

 

 

330

 

 

 

 

47,267

 

 

 

 

—

 

 

 

 

—

 

 

 

 

47,597

 

Total operating expenses

 

 

 

248

 

 

 

 

604,103

 

 

 

 

3

 

 

 

 

—

 

 

 

 

604,354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on sale of asset or disposal of

   property

 

 

 

—

 

 

 

 

(740

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(740

)

Acquisition charges

 

 

 

(5,326

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(5,326

)

Equity in income of unconsolidated

   affiliates

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

Operating (loss) income

 

 

 

(5,574

)

 

 

 

81,269

 

 

 

 

331

 

 

 

 

—

 

 

 

 

76,026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(18,607

)

 

 

 

(19,768

)

 

 

 

 

 

 

 

 

—

 

 

 

 

(38,375

)

Loss on early retirement of debt

 

 

 

(155

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(155

)

Subsidiary income (loss)

 

 

 

61,814

 

 

 

 

 

 

 

 

 

—

 

 

 

 

(61,814

)

 

 

 

—

 

Income (loss) before income

   taxes

 

 

 

37,478

 

 

 

 

61,501

 

 

 

 

331

 

 

 

 

(61,814

)

 

 

 

37,496

 

Income tax (provision) benefit

 

 

 

(13,636

)

 

 

 

(18

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(13,654

)

Net income (loss)

 

$

 

23,842

 

 

$

 

61,483

 

 

$

 

331

 

 

$

 

(61,814

)

 

$

 

23,842

 


The consolidating condensed statement of cash flows for the nine months ended September 30, 2017 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

Net cash (used in) provided by

   operating activities

 

$

 

(64,426

)

 

$

 

131,253

 

 

$

 

5,004

 

 

$

 

—

 

 

$

 

71,831

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

(4,128

)

 

 

 

(48,690

)

 

 

 

(363

)

 

 

 

—

 

 

 

 

(53,181

)

Reimbursement of capital expenditures from

   West Virginia regulatory authorities

 

 

 

—

 

 

 

 

251

 

 

 

 

—

 

 

 

 

—

 

 

 

 

251

 

Restricted cash

 

 

 

—

 

 

 

 

1,649

 

 

 

 

(32

)

 

 

 

—

 

 

 

 

1,617

 

Net cash (used in) provided by business

   combinations

 

 

 

(1,385,978

)

 

 

 

37,103

 

 

 

 

5,216

 

 

 

 

—

 

 

 

 

(1,343,659

)

Net cash used in investing activities

 

 

 

(1,390,106

)

 

 

 

(9,687

)

 

 

 

4,821

 

 

 

 

—

 

 

 

 

(1,394,972

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of New Term Loan

 

 

 

1,450,000

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

1,450,000

 

Proceeds from issuance of 6% Senior Notes

 

 

 

875,000

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

875,000

 

Proceeds from issuance of New Revolving

   Credit Facility

 

 

 

166,953

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

166,953

 

Payments on Term Loan

 

 

 

(1,062

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(1,062

)

Payments on New Term Loan

 

 

 

(448,125

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(448,125

)

Payments under New Revolving Credit Facility

 

 

 

(166,953

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(166,953

)

Borrowings under Revolving Credit Facility

 

 

 

41,000

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

41,000

 

Payments under Revolving Credit Facility

 

 

 

(29,000

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(29,000

)

Retirement of Term Loan

 

 

 

(417,563

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(417,563

)

Retirement of Revolving Credit Facility

 

 

 

(41,000

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(41,000

)

Debt premium proceeds

 

 

 

27,500

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

27,500

 

Payment of other long-term obligation

 

 

 

(23

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(23

)

Payments on capital leases

 

 

 

—

 

 

 

 

(242

)

 

 

 

(105

)

 

 

 

—

 

 

 

 

(347

)

Debt issuance costs

 

 

 

(51,338

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(51,338

)

Taxes paid related to net share settlement of

   equity awards

 

 

 

(10,927

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(10,927

)

Net proceeds from (payments to) related parties

 

 

 

72,129

 

 

 

 

(67,904

)

 

 

 

(4,225

)

 

 

 

—

 

 

 

 

—

 

Proceeds from exercise of stock options

 

 

 

2,900

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

2,900

 

Net cash provided by (used in)

   financing activities

 

 

 

1,469,491

 

 

 

 

(68,146

)

 

 

 

(4,330

)

 

 

 

—

 

 

 

 

1,397,015

 

INCREASE IN CASH AND CASH

  EQUIVALENTS

 

 

 

14,959

 

 

 

 

53,420

 

 

 

 

5,495

 

 

 

 

—

 

 

 

 

73,874

 

CASH AND CASH EQUIVALENTS,

   BEGINNING OF YEAR

 

 

 

812

 

 

 

 

59,885

 

 

 

 

332

 

 

 

 

—

 

 

 

 

61,029

 

CASH AND CASH EQUIVALENTS,

   END OF YEAR

 

$

 

15,771

 

 

$

 

113,305

 

 

$

 

5,827

 

 

$

 

—

 

 

$

 

134,903

 


The consolidating condensed statement of cash flows for the nine months ended September 30, 2016 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

Net cash (used in) provided by

   operating activities

 

$

 

(26,531

)

 

$

 

98,763

 

 

$

 

18

 

 

$

 

 

 

 

$

 

72,250

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

6

 

 

 

 

(32,945

)

 

 

 

(10

)

 

 

 

—

 

 

 

 

(32,949

)

Reimbursement of capital expenditures from

   West Virginia regulatory authorities

 

 

 

—

 

 

 

 

4,113

 

 

 

 

—

 

 

 

 

—

 

 

 

 

4,113

 

Proceeds from sale of property and equipment

 

 

 

—

 

 

 

 

1,560

 

 

 

 

—

 

 

 

 

—

 

 

 

 

1,560

 

Net cash used in business combinations

 

 

 

(491

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(491

)

Increase in other assets

 

 

 

—

 

 

 

 

564

 

 

 

 

—

 

 

 

 

—

 

 

 

 

564

 

Net cash used in investing activities

 

 

 

(485

)

 

 

 

(26,708

)

 

 

 

(10

)

 

 

 

—

 

 

 

 

(27,203

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments under Term Loan

 

 

 

(3,188

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(3,188

)

Payments under Revolving

   Credit Facility

 

 

 

(74,500

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(74,500

)

Payments on capital leases

 

 

 

—

 

 

 

 

(204

)

 

 

 

—

 

 

 

 

—

 

 

 

 

(204

)

Debt issuance costs

 

 

 

(463

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(463

)

Taxes paid related to net share settlement of

   equity awards

 

 

 

(1,366

)

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(1,366

)

Proceeds from exercise of stock options

 

 

 

1,005

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

1,005

 

Net payments to related parties

 

 

 

108,181

 

 

 

 

(108,249

)

 

 

 

68

 

 

 

 

—

 

 

 

 

—

 

Net cash provided by (used in)

   financing activities

 

 

 

29,669

 

 

 

 

(108,453

)

 

 

 

68

 

 

 

 

—

 

 

 

 

(78,716

)

INCREASE (DECREASE) IN CASH

   AND CASH EQUIVALENTS

 

 

 

2,653

 

 

 

 

(36,398

)

 

 

 

76

 

 

 

 

—

 

 

 

 

(33,669

)

CASH AND CASH EQUIVALENTS,

   BEGINNING OF YEAR

 

 

 

657

 

 

 

 

77,453

 

 

 

 

168

 

 

 

 

—

 

 

 

 

78,278

 

CASH AND CASH EQUIVALENTS,

   END OF YEAR

 

$

 

3,310

 

 

$

 

41,055

 

 

$

 

244

 

 

$

 

—

 

 

$

 

44,609

 


ITEM 2.

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

General

Eldorado Resorts, Inc. (“ERI” or the “Company”), a Nevada corporation, was formed in September 2013. ERI and its subsidiaries are collectively referred to as “we,” “us,” “our” or the “Company.” The Company acquired Mountaineer, Presque Isle Downs and Scioto Downs in September 2014 pursuant to a merger (the “MTR Merger”) with MTR Gaming Group, Inc. (“MTR Gaming”) and in November 2015 we acquired Circus Reno and the interests in the Silver Legacy that we did not own prior to such date (the “Reno Acquisition”).

Throughout the three and nine months ended September 30, 2017, ERI owned2020 primarily represent costs related to the Merger, various contract or license termination exit costs, professional services, other acquisition costs and operatedseverance costs.

(d)Other items represent internal labor charges related to certain departed executives, retention bonuses, business optimization expenses and contract labor.

Nine Months Ended September 30,
(In millions)20202019
Capital Expenditures, Net
Las Vegas$16 $0 
Regional (a)
62 131 
Managed, International, CIE (a)
1 0 
Corporate and Other19 4 
Total$98 $135 
___________________
(a)Includes $4 million of capital expenditures related to properties classified as discontinued operations.
Balance Sheet as of
(In millions)September 30, 2020December 31, 2019
Total Assets
Las Vegas$21,552 $0 
Regional14,096 6,787 
Managed, International, CIE604 0 
Corporate and Other(13)(1,146)
Total$36,239 $5,641 
43

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following properties:

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

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

Overview
We are a geographically diversified gaming and hospitality company that was founded in 1973 by the Carano family with the opening of the Eldorado Hotel Casino in Reno, (“Eldorado Reno”)—A 814-room hotel, casino and entertainment facility connected via an enclosed skywalkNevada. We partnered with MGM Resorts International to Silver Legacy and Circus Reno located in downtown Reno, Nevada that includes 1,125 slot machines and 46 table games;

build Silver Legacy Resort Casino (“Silver Legacy”)—A 1,711-room themed hotelin Reno, Nevada in 1993 and, casino connected via an enclosed skywalk tobeginning in 2005, we grew through a series of acquisitions, including the acquisition of Eldorado Reno and Circus Reno that includes 1,187 slot machines, 63 table games and a 13 table poker room;

Shreveport in 2005, MTR Gaming Group, Inc. in 2014, Circus Circus Reno (“(“Circus Reno”Reno”)—A 1,571-room hotel-casino and entertainment complex connected via an enclosed skywalk to Eldorado Reno andthe 50% membership interest in the Silver Legacy that includes 720 slot machines and 26 table games;

Eldorado Resort Casino Shreveport (“Eldorado Shreveport”)—A 403-room, all suite art deco-style hotel and tri-level riverboat dockside casino situated on the Red Riverwas owned by MGM Resorts International in Shreveport, Louisiana that includes 1,397 slot machines, 52 table games and an eight table poker room;

Mountaineer Casino, Racetrack & Resort (“Mountaineer”)—A 357-room hotel, casino and entertainment facility and live thoroughbred horse racing located on the Ohio River at the northern tip of West Virginia’s northwestern panhandle that includes 1,505 slot machines, 36 table games and a 10 table poker room;

Presque Isle Downs & Casino (“Presque Isle Downs”)—A casino and live thoroughbred horse racing facility with 1,596 slot machines, 32 table games and a seven table poker room located in Erie, Pennsylvania; and

Eldorado Gaming Scioto Downs (“Scioto Downs”)—A modern “racino” offering 2,245 video lottery terminals (“VLT”), harness racing and a 118-room third party hotel connected to Scioto Downs located 15 minutes from downtown Columbus, Ohio.

In addition, on May 1, 2017, the Company consummated its acquisition of2015, Isle of Capri Casinos, Inc. (“Isle” or “Isle of Capri”) in 2017 and acquiredGrand Victoria Casino (“Elgin”) and Tropicana Entertainment, Inc. (“Tropicana”) in 2018.

On July 20, 2020, we completed the following properties:

Isle Casino Hotel—Black Hawkmerger with Caesars Entertainment Corporation (“Isle Black Hawk”Former Caesars”)—A land-based casino on pursuant to which Former Caesars became our wholly-owned subsidiary (the “Merger”). As a result of the Merger, we currently own, lease or manage an aggregate of 56 domestic properties in 16 states with approximately 10-acre site in Black Hawk, Colorado that includes 99367,200 slot machines, 27 table games, a nine table poker roomvideo lottery terminals (“VLTs”) and a 238-room hotel;

Lady Luck Casino—Black Hawk (“Lady Luck Black Hawk”)—A land-based casino across the intersection from Isle Casino Hotel in Black Hawk, Colorado, that includes 430 slot machines, 10 table games, five poker tables and a 164-room hotel with a parking structure connecting Isle Casino Hotel-Black Hawk and Lady Luck Casino-Black Hawk;

Isle Casino Racing Pompano Park (“Pompano”)—A casino and harness racing track on ane-tables, approximately 223-acre owned site in Pompano Beach, Florida, that includes 1,459 slot machines and a 45 table poker room;

Isle Casino Bettendorf (“Bettendorf”)—A land-based single-level casino located off of Interstate 74 in Bettendorf, Iowa that includes 978 slot machines and 20 table games with two hotel towers with 509 hotel rooms;

Isle Casino Waterloo (“Waterloo”)—A single-level land-based casino in Waterloo, Iowa that includes 940 slot machines, 253,500 table games and approximately 48,800 hotel rooms as of September 30, 2020. We also have international operations in five countries outside of the U.S. In addition, we have other domestic and international properties that are authorized to use the brands and marks of Caesars Entertainment, Inc., as well as other non-gaming properties. Upon completion of our previously announced sales, or expected sales, of certain gaming properties, we expect that we will continue to own, lease or manage 51 properties. Our primary source of revenue is generated by gaming operations, and we utilize our hotels, restaurants, bars, entertainment, racing, sportsbook offerings, retail shops and other services to attract customers to our properties.

In connection with the Merger, Caesars Entertainment Corporation changed its name to “Caesars Holdings, Inc.” and Eldorado Resorts, Inc. converted into a 194-room hotel;

Delaware corporation and changed its name to “Caesars Entertainment, Inc.” In addition, effective as of July 21, 2020 our ticker symbol on the NASDAQ Stock Market changed from “ERI” to “CZR”. In connection with the Merger, we also entered into a Master Transaction Agreement (the “MTA”) with VICI Properties L.P., a Delaware limited partnership (“VICI”), pursuant to which, among other things, we agreed to consummate certain sale and leaseback transactions and amend certain lease agreements with VICI and/or its affiliates, with respect to certain property described in the MTA.

IsleAs of Capri Casino Hotel Lake Charles (“Lake Charles”)—A gaming vessel on an approximately 19 acre site in Lake Charles, Louisiana, with 1,160 slot machines, 49 table games, including 13 poker tablesSeptember 30, 2020, we owned 23 of our casinos and two hotels offering 493 rooms;

Isle of Capri Casino Lula (“Lula”)—Two docksideleased 28 casinos in Lula, Mississippithe U.S. We have leases with 879 slot machinesGLP Capital, L.P., the operating partnership of Gaming and 20 table games, two on-site hotelsLeisure Properties, Inc. (“GLPI”), including our Master Lease that we entered into in connection with the Tropicana Acquisition on October 1, 2018 (as amended, the “GLPI Master Lease”) and our Lumiere lease. Six of the leased casinos are subject to leases with GLPI, and we lease an additional 22 casinos from other third parties, including VICI. See descriptions under the “GLPI Master Lease” and “VICI Leases”.

We periodically divest of assets in order to raise capital or as a totalresult of 486 roomsa determination that the assets are not core to our business. We also divested certain assets, and a 28-space RV Park;

are required to divest additional assets, in connection with regulatory approvals related to closing of the Merger. A summary of recently completed and planned divestitures of our properties as of September 30, 2020 is as follows:

Lady Luck Casino Vicksburg (“Vicksburg”)—A dockside casino in Vicksburg, Mississippi that includes 619 slot machines, nine table games and a hotel with a total of 89 rooms;

44


•

SegmentPropertyDate SoldLocation
RegionalPresque Isle Downs & Casino (“Presque”)January 11, 2019Pennsylvania
RegionalLady Luck Casino Nemacolin (“Nemacolin”)March 8, 2019Pennsylvania
RegionalMountaineer Casino, Racetrack and Resort (“Mountaineer”)December 6, 2019West Virginia
RegionalIsle Casino Cape Girardeau (“Cape Girardeau”)December 6, 2019Missouri
RegionalLady Luck Casino Caruthersville (“Caruthersville”)December 6, 2019Missouri
RegionalIsle of Capri Casino BoonvilleKansas City (“Boonville”Kansas City”)—July 1, 2020 (a)Missouri
RegionalLady Luck Casino Vicksburg (“Vicksburg”)July 1, 2020 (a)Mississippi
RegionalEldorado Resort Casino Shreveport (“Eldorado Shreveport”)N/A single-level dockside casino in Boonville, Missouri that includes 893 slot machines, 20 table games and a 140-room hotel;

(b)		Louisiana
RegionalMontBleu Casino Resort & Spa (“MontBleu”)N/A (b)Nevada
RegionalTropicana Evansville (“Evansville”)N/A (c)Indiana
Discontinued operations (d):
RegionalHarrah’s RenoSeptember 30, 2020 (e)Nevada
RegionalBally’s Atlantic CityN/A (f)New Jersey
RegionalHarrah’s Louisiana Downs Casino, Racing & Entertainment (“Harrah’s Louisiana Downs”)N/A (g)Louisiana
RegionalCaesars Southern IndianaN/A (c)Indiana
RegionalHorseshoe HammondN/A (c)Indiana
Managed, International, CIEEmerald Resort & CasinoN/ASouth Africa
Managed, International, CIECaesars Entertainment UKN/AUnited Kingdom

Isle Casino Cape Girardeau (“Cape Girardeau”)—A dockside casino and pavilion and entertainment center in Cape Girardeau, Missouri that includes 881 slot machines, 20 table games and four poker tables;

Lady Luck Casino Caruthersville (“Caruthersville”)—A riverboat casino located along(a)We closed the Mississippi River in Caruthersville, Missouri that includes 513 slot machines and nine table games;

Islesales of Capri Casino Kansas City and Vicksburg on July 1, 2020 and recorded a gain of approximately $8 million during the quarter ended September 30, 2020.

(b)On April 24, 2020, we entered into a definitive purchase agreement with Twin River Worldwide Holdings, Inc. (“Kansas City”Twin River”)—A dockside casino located and certain of its affiliates for the sale of the equity interests of Eldorado Resort Casino Shreveport Joint Venture and Columbia Properties Tahoe, LLC, the entities that hold Eldorado Shreveport and MontBleu for aggregate consideration of $155 million, subject to a working capital adjustment. The definitive agreement provides that the consummation of the sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals and Eldorado Shreveport and MontBleu are expected to close in the first quarter of 2021. Eldorado Shreveport and MontBleu met the requirements for presentation as assets held for sale under generally accepted accounting principles as of September 30, 2020. In conjunction with the classification of MontBleu’s operations as assets held for sale as a result of the announced sale, an impairment charge totaling $45 million was recorded during the nine months ended September 30, 2020 due to downtown Kansas City, Missouri offering 967 slot machines and 18 table games; and

the carrying value exceeding the estimated net sales proceeds.

Lady Luck Casino Nemacolin (“Nemacolin”)—A casino property located(c)In connection with its review of the Merger, the Indiana Gaming Commission determined on July 16, 2020 that we are required to divest three properties within the 2,000-acre Nemacolin Woodlands Resortstate of Indiana in Western Pennsylvania that includes 600 slot machines and 28 table games.

order to avoid undue economic concentrations as conditions to the Indiana Gaming Commission’s approval of the Merger. On August 22, 2016, IsleOctober 27, 2020, the Company entered into an agreement to sell Lake CharlesEvansville to GLPI and Twin River for aggregate consideration$480 million in cash, subject to a customary working capital adjustment. The sale is subject to satisfaction of $134.5customary conditions, including receipt of required regulatory approvals and is expected to close in mid-2021. In addition, we plan to enter into agreements to divest of Caesars Southern Indiana, and Horseshoe Hammond prior to December 31, 2020. Evansville met the requirements for presentation as assets held for sale under generally accepted accounting principles as of September 30, 2020. See (d) below for Caesars Southern Indiana, and Horseshoe Hammond.

(d)These Former Caesars properties met, or are expected to meet within a short period of time, held for sale criteria as of the acquisition date. The sales of these properties have or are expected to close within one year from the date of the closing of the Merger and the properties are classified as discontinued operations.
(e)On September 30, 2020, we and VICI completed the sale of Harrah’s Reno to an affiliate of CAI Investments for $42 million, which proceeds were split between us and VICI. We received approximately $8 million of net proceeds.
(f)On April 24, 2020, Former Caesars reached an agreement with VICI to sell Bally’s Atlantic City Hotel & Casino to Twin River for approximately $25 million. Caesars will receive approximately $6 million from the sale. In addition, on October 9, 2020, we reached an agreement to sell the Bally’s brand to Twin River for $20 million, while retaining the right to use the brand within Bally’s Las Vegas into perpetuity.
45

(g)On September 3, 2020, we and VICI entered into agreement to sell Harrah’s Louisiana Downs with Rubico Acquisition Corp. for $22 million, subject to certain adjustments.a customary working capital adjustment, where the proceeds will be split between us and VICI. The transaction (the “Lake Charles Disposition”) remainssale is subject to Louisiana Gaming Control Board approvalsatisfaction of customary conditions, including receipt of required regulatory approvals and other customary closing conditions and, if obtained, the transaction is expected to be completed by December 31, 2017.

Acquisitionclose in the first half of Isle of Capri Casinos, Inc.

2021.

Merger Related Activities
Merger with Caesars Entertainment Corporation
On May 1, 2017 (the “Isle Acquisition Date”),July 20, 2020, the Company completed its acquisition of Isle of Capri Casinos, Inc. pursuant to the AgreementMerger was consummated and Plan of Merger (the “Merger Agreement”) dated as of September 19, 2016 with Isle of Capri Casinos, Inc., a Delaware corporation (“Isle” or “Isle of Capri”), Eagle I Acquisition Corp., a Delaware corporation and a direct wholly-owned subsidiary of the Company, and Eagle II Acquisition Company LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of the Company (the “Isle Acquisition” or the “Isle Merger”). As a result of the Isle Merger, IsleFormer Caesars became a wholly-owned subsidiary of ERI and, atours. The strategic rationale for the effective timeMerger includes, but is not limited to, the following:
•Creation of the Islelargest owner, operator and manager of domestic gaming assets
•Diversification of the Company’s domestic footprint
•Access to iconic brands, rewards programs and new gaming opportunities expected to enhance customer experience
•Realization of significant identified synergies
Based on the closing price of $38.24 per share of the Company’s common stock, par value $0.00001 per share (“Company Common Stock”), reported on NASDAQ on July 20, 2020, the aggregate implied value of the aggregate merger consideration paid to former holders of Former Caesars common stock in connection with the Merger was approximately $8.5 billion, including approximately $2.4 billion in the Company Common Stock and approximately $6.1 billion in cash. The aggregate merger consideration transferred also included approximately $2.4 billion related to the repayment of certain outstanding debt balances of Former Caesars and approximately $48 million of other consideration paid, which includes $19 million related to a transaction success fee, for the benefit of Former Caesars, and $29 million for the replacement of equity awards of certain employees attributable to services provided prior to the Merger.
Pursuant to the Merger, each outstanding share of Isle’sFormer Caesars common stock was converted into the right to receive, $23.00 in cash or 1.638 shares of ERI common stock (the “Stock Consideration”), at the election of the applicable Isle shareholderholder thereof and subject to proration, such thatapproximately $12.41 of cash consideration or approximately 0.3085 shares of Company Common Stock, with a value equal to approximately $12.41 in cash (based on the volume weighted average price per share of Company Common Stock for the 10 trading days ending on July 16, 2020). Following the consummation of the Merger, stockholders of the Company and stockholders of Former Caesars held approximately 61% and 39%, respectively, of the outstanding shares of Isle common stock were exchanged for aggregate consideration comprisedCompany Common Stock.
We recognized acquisition-related transaction costs of 58% cash, or $552.0$107 million and 42% ERI common stock, or 28.5$129 million newly issued shares of ERI common stock. The total purchase consideration was $1.93 billion.

In connection with the Isle Acquisition, the Company completed a debt financing transaction comprised of: (a) a senior secured credit facility in an aggregate principal amount of $1.75 billion with a (i) term loan facility of $1.45 billion and (ii) revolving credit facility of $300.0 million and (b) $375.0 million of senior unsecured notes. The proceeds of such borrowings were used (v) to pay the cash portion of the consideration payable in the Isle Merger, (w) refinance all of Isle’s existing credit facilities, (x) redeem or otherwise repurchase all of Isle’s senior and senior subordinated notes, (y) refinance the Company’s existing credit facility and (z) pay transaction fees and expenses related to the foregoing.

The financial information included in this Item 2 for periods prior to the Isle Merger are those of ERI and its subsidiaries. The presentation of information herein for periods prior to the Isle Merger and after the Isle Merger are not fully comparable because the results of operations for Isle are not included for periods prior to the Isle Merger. Summary financial results of Isle for the three and nine months ended September 30, 2020, respectively, and $13 million and $17 million for the three and nine months ended September 30, 2019, respectively.

Partnerships and Acquisition Opportunities
William Hill
In September 2018, we entered into a 25-year agreement, which became effective January 22, 20172019, with William Hill plc and William Hill U.S. Holdco, Inc. (“William Hill US”), its U.S. subsidiary (together, “William Hill”) pursuant to which we (i) granted to William Hill the right to conduct betting activities, including operating sportsbooks, in retail channels and under our first skin and third skin for online channels with respect to our current and future properties located in the United States and the territories and possessions of the United States, including Puerto Rico and the U.S. Virgin Islands and (ii) agreed that William Hill will have the right to conduct real money online gaming activities utilizing our second skin available with respect to properties in such territories. Pursuant to the terms of the agreement, we received a 20% ownership interest in William Hill US valued at approximately $129 million as well as 13 million ordinary shares of William Hill plc with an initial value of approximately $27 million upon closing of the transaction in January 2019. Our profit and losses attributable to William Hill US are included in Isle’s Quarterly ReportTransaction costs and other operating costs on Form 10-Qthe Consolidated Condensed Statements of Operations. We granted William Hill the right to the use of certain skins in exchange for an equity method investment. The fair value of the William Hill US and William Hill plc shares received has been deferred and is recognized as filedrevenue on a straight-line basis over the 25-year agreement term. The amortization of deferred revenues associated with our equity interests is included in other revenue within our Corporate and Other segment. Additionally, we receive a profit share from the operations of betting and other gaming activities associated with our properties.
On September 30, 2020, we announced that we had reached an agreement with William Hill plc on the terms of a recommended cash acquisition pursuant to which we would acquire the entire issued and to be issued share capital (other than shares owned by us or held in treasury) of William Hill plc, in an all-cash transaction of approximately £2.9 billion, or $3.7 billion. The transaction is conditioned on, among other things, the approval of William Hill plc shareholders and receipt of required regulatory approvals. To provide liquidity to fund the cash purchase price for the proposed acquisition, we entered into various
46

financing transactions. On September 25, 2020, we borrowed $900 million under the CEI Revolving Credit Facility (defined below), which was repaid subsequent to September 30, 2020. On September 28, 2020, we deposited $2.1 billion, which included borrowings under the CEI Revolving Credit Facility, into an escrow account related to the William Hill offer. As of September 30, 2020, these funds in escrow were classified as restricted cash until certain regulatory approvals were received. In addition, on October 1, 2020, we raised an additional $1.9 billion through a public offering of Company Common Stock.
In connection with the Securitiesproposed acquisition of William Hill plc, on September 29, 2020, the Company entered into a debt financing commitment letter pursuant to which the lenders party thereto have committed to arrange and Exchange Commission (‘‘SEC’’provide a newly formed subsidiary of the Company with (a) a £1.0 billion senior secured 540-day bridge loan facility, (b) a £116 million senior secured 540-day revolving credit facility and (c) a £503 million senior secured 60-day bridge loan facility (collectively, the "Debt Financing"). The proceeds of the Debt Financing will be used (i) to pay a portion of the cash consideration for the proposed acquisition, (ii) to refinance certain of William Hill plc's and its subsidiaries' existing debt, (iii) to pay fees and expenses related to the acquisition and related transactions and (iv) for working capital and general corporate purposes.
In conjunctionorder to manage the risk of appreciation of the GBP denominated purchase price the Company has entered into foreign exchange forward contracts.
In connection with the Isle Acquisition, IsleDebt Financing on October 6, 2020, our newly formed subsidiary entered into a £1.5 billion Interim Facilities Agreement with Deutsche Bank AG, London Branch and JPMorgan Chase Bank, N.A. to provide: (a) a 540-day £1.0 billion asset sale bridge facility and (b) a 60-day £503 million cash confirmation bridge facility. Upon receipt of regulatory approvals, the restriction on the $2.1 billion funded as of September 30, 2020 was released and we transferred $1.4 billion of cash into our operating accounts and the outstanding balance of the CEI Revolving Credit Facility was repaid in full. Approximately $598 million of cash remains in an unrestricted account.
The Stars Group/Flutter Entertainment
In November 2018, we entered into a 20-year agreement with The Stars Group Inc. (“TSG”) pursuant to which we agreed to provide TSG with options to obtain access to our second skin for online sports wagering and third skin for real money online gaming and poker, in each case with respect to our properties in the United States. Under the terms of the agreement, we received 1 million TSG common shares. The fair value of the shares received has been deferred and is no longer requiredrecognized as revenue on a straight-line basis over the 20-year agreement term. All shares are subject to file quarterlya one year restriction on transfer from the date they are received. On May 5, 2020, Flutter Entertainment PLC (“Flutter”) completed the acquisition of all of the issued and annual reportsoutstanding common shares of TSG in exchange for 0.2253 Flutter shares per common share of TSG. In addition, we will receive a revenue share from the operation of the applicable verticals by TSG under our licenses.
Reportable Segments
The following table sets forth certain information regarding our properties (listed by segment in which each property is reported) as of September 30, 2020:
Las VegasRegionalManaged, International, CIE
(a)Bally’s Las VegasEldorado Resort Casino Reno(a)Harrah’s Atlantic CityInternational
(a)The CromwellSilver Legacy Resort Casino(a)Harrah’s Laughlin(a)Caesars Cairo
(a)Flamingo Las VegasCircus Circus Reno(a)Harrah’s New Orleans(a)Ramses Casino
(a)The LINQ Hotel & Casino
MontBleu Casino Resort & Spa (c)
(a)
Hoosier Park (f)
(a)
Emerald Casino Resort (b)
(a)Paris Las VegasTropicana Laughlin Hotel & Casino(a)
Indiana Grand (g)
(a)
Alea Glasgow (b)
(a)Planet Hollywood Resort & CasinoIsle Casino Hotel - Blackhawk(a)
Bally’s Atlantic City (b)
(a)
Alea Nottingham (b)
(a)Caesars Palace Las VegasLady Luck Casino - Black Hawk(a)Caesars Atlantic City(a)
The Empire Casino (b)
(a)Harrah’s Las VegasIsle Casino Waterloo(a)
Caesars Southern Indiana (e)(b)
(a)
Manchester235 (b)
(a)Rio All-Suite Hotel & CasinoIsle Casino Bettendorf(a)Harrah’s Council Bluffs(a)
Playboy Club London (b)
Isle of Capri Casino Boonville(a)Harrah’s Gulf Coast(a)
Rendezvous Brighton (b)
Isle of Capri Casino Kansas City (d)
(a)Harrah’s Joliet(a)
Rendezvous Southend-on-Sea (j)(b)
Isle Casino Racing Pompano Park(a)Harrah’s Lake Tahoe(a)
The Sportsman (b)
47

Eldorado Resort Casino Shreveport (c)
(a)
Harrah’s Louisiana Downs (h)(b)
Managed
Isle of Capri Casino Hotel Lake Charles(a)Harrah’s Metropolis(a)Harrah’s Ak-Chin
Belle of Baton Rouge Casino & Hotel(a)Harrah’s North Kansas City(a)Harrah’s Cherokee
Isle of Capri Casino Lula(a)Harrah’s Philadelphia(a)Harrah’s Cherokee Valley River
Lady Luck Casino Vicksburg (d)
(a)
Harrah’s Reno (i)(b)
(a)Harrah’s Resort Southern California
Trop Casino Greenville(a)Harveys Lake Tahoe(a)
Horseshoe Baltimore (k)
Eldorado Gaming Scioto Downs(a)Horseshoe Bossier City(a)Caesars Windsor
Tropicana Casino and Resort, Atlantic City(a)Horseshoe Council Bluffs(a)Kings & Queens Casino
Grand Victoria Casino(a)
Horseshoe Hammond (e)(b)
(a)Caesars Dubai
Lumière Place Casino(a)Horseshoe TunicaCIE
Tropicana Evansville (e)
(a)Caesars Interactive Entertainment
___________________
(a)These properties were acquired from the Merger with Former Caesars on July 20, 2020.
(b)As a result of the SEC,Merger, the sales of these properties met the requirements for presentation as discontinued operations as of September 30, 2020.
(c)In April 2020, the Company entered into an agreement to sell Eldorado Shreveport and terminated its registrationMontBleu, which are expected to close in the first quarter of 2021. As of September 30, 2020, the properties’ assets and liabilities were classified as held for sale.
(d)Kansas City and Vicksburg were sold on May 11, 2017.

July 1, 2020.

(e)On October 27, 2020, the Company entered into an agreement to sell Evansville, which is expected to close mid-2021. In addition, the Company plans to enter into an agreement to divest of Caesars Southern Indiana, and Horseshoe Hammond prior to December 31, 2020. As of September 30, 2020, Evansville’s assets and liabilities were classified as held for sale.

Reportable Segments

(f)Hoosier Park includes operations of our off-track betting locations, Winner’s Circle Indianapolis and Winner’s Circle New Haven.
(g)Indiana Grand includes operations of our off-track betting location, Winner’s Circle Clarksville.
(h)On September 3, 2020, the Company entered into an agreement to sell Harrah’s Louisiana Downs, which is expected to close in the in the first half of 2021.
(i)Harrah’s Reno was sold on September 30, 2020.
(j)Rendezvous Southend-on-Sea permanently closed in June 2020 following the recent closure due to the COVID-19 public health emergency.
(k)As of September 30, 2020, Horseshoe Baltimore was 44.3% owned and held as an equity-method investment.
The executive decision maker of ourthe Company reviews operating results, assessassesses performance and makemakes decisions on a “significant market” basis. The Company’s managementManagement views each of its propertiesour casinos as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate, and their management and reporting structure. Prior to the Isle Acquisition, the Company’sMerger, our principal operating activities occurred in five geographic regions and reportable segments: West, Midwest, South, East and Central. Following the Merger, our principal operating activities occur in three geographic regions: Nevada, Louisiana and parts of the eastern United States.regionally-focused reportable segments. The Company aggregated its operations into three reportable segments continue to be based on the similar characteristics of the operating segments within the regions in which they operated as follows:

Segment

Property

State

Nevada

Eldorado Reno

Nevada

Silver Legacy

Nevada

Circus Reno

Nevada

Louisiana

Eldorado Shreveport

Louisiana

Eastern

Presque Isle Downs

Pennsylvania

Scioto Downs

Ohio

Mountaineer

West Virginia

Followingoperate and align with the Isle Acquisition, theway management assesses these results and allocates resources. The Company’s principal operating activities expanded and now occur in four geographic regions and reportable segments basedare: (1) Las Vegas, (2) Regional, and (3) Managed, International, CIE, in addition to Corporate and Other.

Presentation of Financial Information
The financial information included in this Item 2 for the period after our acquisition of Former Caesars on July 20, 2020 is not fully comparable to the similar characteristicsperiods prior to the acquisition. In addition, the presentation of financial information herein for the periods after our sales of Presque and Nemacolin on January 11, 2019 and March 8, 2019, respectively, our sales of Mountaineer, Cape Girardeau and Caruthersville on December 6, 2019, and our sales of Kansas City and Vicksburg on July 1, 2020 are not fully comparable to the periods prior to their respective sale dates.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist in better understanding and evaluating our financial condition and results of operations. Our historical operating segments withinresults may not be indicative of our future results of operations because of these factors and the regionschanging competitive landscape in which they operate. The following table summarizeseach of our current segments:

markets, as well as by factors discussed elsewhere herein. We recommend that you read this MD&A in conjunction with our unaudited consolidated condensed financial statements and the notes to those statements included in this Quarterly Report on Form 10-Q.

Segment

Property

State

West

Eldorado Reno

Nevada

Silver Legacy

Nevada

Circus Reno

Nevada

Isle Black Hawk

Colorado

Lady Luck Black Hawk

Colorado

Midwest

Waterloo

Iowa

Bettendorf

Iowa

Boonville

Missouri

Cape Girardeau

Missouri

Caruthersville

Missouri

Kansas City

Missouri

South

Pompano

Florida

Eldorado Shreveport

Louisiana

Lula

Mississippi

Vicksburg

Mississippi

East

Presque Isle Downs

Pennsylvania

Nemacolin

Pennsylvania

Scioto Downs

Ohio

Mountaineer

West Virginia

48


Key Performance Metrics

Our primary source of revenue is generated by our gaming operations, but we use our hotels, restaurants, bars, entertainment, retail shops, racing, sportsbook offerings and other services to attract customers to our properties. Our operating results are highly dependent on the volume and quality of customers visiting and staying at our properties. Key performance metrics include volume indicators such as table games drop and slot handle, which refer to amounts wagered by our customers. The amount of volume we retain, which is not fully controllable by us, is recognized as casino revenues and is referred to as our win or hold. In addition, hotel occupancy
Other Recent Developments and price per room designated by average daily rate (“ADR”) are key indicators for our hotel business. Our calculation of ADR consists of the average price of occupied


rooms per day including the impact of resort fees and complimentary rooms. Complimentary room rates are determined based on an analysis of retail or cash rates for each customer segment and each type of room product to estimate complimentary rates which are consistent with retail rates. Complimentary rates are reviewed at least annually and on an interim basis if there are significant changes in market conditions. Complimentary rooms are treated as occupied rooms in our calculation of hotel occupancy.

Significant Factors Impacting Financial Results

The following summary highlights therecent developments and significant factors impacting our financial results for the three and nine months ended September 30, 20172020 and 2016.

2019.

Isle Acquisition•COVID-19 Public Health Emergency – Our In January 2020, an outbreak of a new strain of coronavirus (“COVID-19”) was identified and has since spread throughout much of the world, including the United States. All of our casino properties were temporarily closed for the period from mid-March 2020 through mid-May 2020 due to orders issued by various government agencies and tribal bodies as part of certain precautionary measures intended to help slow the spread of the COVID-19 public health emergency. On May 15, 2020, we began reopening our properties and have resumed certain operations at all of our properties as of September 30, 2020, with the exception of The Cromwell, Planet Hollywood Resort and Casino (“Planet Hollywood”), Rio All-Suite Hotel & Casino (“Rio”), and Caesars Windsor. Planet Hollywood and Caesars Windsor reopened on October 8, 2020 and The Cromwell reopened on October 29, 2020. The COVID-19 public health emergency has had a material adverse effect on our business, financial condition and results of continuing operations for the three and nine months ended September 30, 2017 include incremental revenues2020. We continued to pay our full-time employees through April 10, 2020, including tips and expenses for five months (Maytokens. Effective April 11, 2020, we furloughed approximately 90% of our employees, implemented salary reductions and committed to continue to provide benefits to our employees through September 2017) attributable30, 2020. Subsequently, the benefit coverage for furloughed employees was extended indefinitely. A portion of our workforce has returned to service as the properties have resumed with limited capacities and in compliance with operating restrictions imposed by governmental or tribal orders, directives, and guidelines. Due to the twelve propertiesimpact of the ongoing COVID-19 public health emergency on our results of operations, we acquiredobtained waivers on the financial covenants in our former credit facility agreement and the Isle Acquisition.

GLPI Master Lease. Furthermore, we obtained waivers from VICI in relation to annual capital expenditure requirements under the leases with VICI.
The extent of the ongoing and future effects of the COVID-19 public health emergency on our business and the casino resort industry generally is uncertain, but we expect that it will continue to have a significant impact on our business, results of operations and financial condition. The extent and duration of the impact of COVID-19 will ultimately depend on future developments, including but not limited to, the duration and severity of the outbreak, restrictions on operations imposed by governmental authorities, the potential for authorities reimposing stay at home orders or additional restrictions in response to continued developments with the COVID-19 public health emergency, our ability to adapt to evolving operating procedures, the impact on consumer demand and discretionary spending, the length of time it takes for demand to return and our ability to adjust our cost structures for the duration of the outbreak’s effect on our operations.

•Caesars Acquisition charges – The Merger closed on July 20, 2020. Transaction costs related to the Isle Acquisition for legal, accounting, financial advisory services, severance, stock awards and other costsour acquisition of Former Caesars totaled $2.1$107 million and $89.2$129 million for the three and nine months ended September 30, 2017,2020, respectively, and $0.1$13 million and $0.6$17 million for the three and nine months ended September 30, 2016.

2019, respectively.

•

Debt Refinancing – In connection with the Isle Acquisition, we completed a debt financing transaction comprised of: (a) a senior secured credit facility in an aggregate principal amount of $1.75 billion with a (i) term loan facility of $1.45 billion and (ii) revolving credit facility of $300.0 million and (b) $375.0 million of senior unsecured notes. The proceeds of such borrowings were used (v) to pay the cash portion of the consideration payable in the Isle Merger, (w) refinance all of Isle’s existing credit facilities, (x) redeem or otherwise repurchase all of Isle’s senior and senior subordinated notes, (y) refinance our existing credit facility and (z) pay transaction fees and expenses related to the foregoing. We recognized a loss totaling $27.3 million for the nine months ended September 30, 2017 as a result of the debt refinancing transaction (See “Liquidity and Capital Resources” for more information related to the debt refinancing).

•Discontinued Operations – As result of the Merger, Former Caesars properties including Harrah’s Louisiana Downs, Caesars Southern Indiana, Horseshoe Hammond, Harrah’s Reno, Caesars UK group including Emerald Resort & Casino, and Bally’s Atlantic City have met, or are expected to meet within a short period of time, held for sale criteria as of the date of the closing of the Merger. The sales of these properties have or are expected to close within one year from the date of the closing of the Merger and the properties are classified as discontinued operations. Additionally, we closed the sale of Harrah’s Reno on September 30, 2020.

•Proposed William Hill Acquisition – On September 13, 2017,30, 2020, we announced that we had reached an agreement with William Hill plc on the terms of a recommended cash acquisition pursuant to which we would acquire the entire issued and to be issued share capital (other than shares owned by us or held in treasury) of William Hill plc, in an additional $500all-cash transaction of approximately £2.9 billion, or $3.7 billion. The transaction is conditioned on, among other things, the approval of William Hill plc shareholders and receipt of required regulatory approvals.
49

•ESPN Agreement– On September 10, 2020, we entered into a multi-year agreement with ESPN including link integrations from ESPN’s website and app to sportsbooks with our sports betting partner, William Hill.
•Divestitures – We closed the sales of Kansas City and Vicksburg on July 1, 2020 and recorded a gain of approximately $8 million in aggregate principal amountduring the quarter ended September 30, 2020. We closed the sales of 6% Senior Notes at an issue price equalPresque and Nemacolin on January 11, 2019 and March 8, 2019, respectively, and recorded a net gain of $22 million. We closed the sales of Mountaineer, Cape Girardeau and Caruthersville on December 6, 2019 and recorded a net gain of $29 million during the fourth quarter of 2019. The properties that have been sold are collectively referred to 105.5%as the “Divestitures.” In conjunction with the classification of MontBleu’s operations as assets held for sale as a result of the principal amount. We usedannounced sale, an impairment charge totaling $45 million was recorded during the proceedsnine months ended September 30, 2020 due to the carrying value exceeding the estimated net sales proceeds. None of the offeringsales listed met requirements for presentation as discontinued operations and are included in income from continuing operations for the periods prior to repay alltheir respective closing dates.
•Impairment Charges – As a result of declines in recent performance and the outstanding borrowings under the New Revolving Credit Facilityexpected impact on future cash flows as a result of COVID-19, we recognized impairment charges in our Regional segment related to goodwill and trade names totaling $78.0$100 million and used$16 million, respectively, during the remaindernine months ended September 30, 2020.
•Weather and Construction Disruption– Our Regional segment was negatively impacted by severe weather, including flooding, during the first quarter of 2019 compared to repay outstanding borrowings totaling $444.5the same current year period. Additionally, our Regional segment was negatively impacted by disruption to our casino floor and hotel availability associated with renovation projects at our Black Hawk properties during the construction period from January to June 2019. In late August 2020, our Regional segment was negatively impacted by Hurricane Laura, causing severe damage to Isle of Capri Casino Hotel Lake Charles (“Lake Charles”), which remains temporarily closed. We recorded an insurance receivable of $31 million, under the New Term Loan plusof which $15 million related accrued interest. We recognized a loss of $10.0to fixed asset impairments and $16 million for related to remediation costs and repairs that have been incurred in the three months ended September 30, 2017 as a result of the issuance of additional debt and retirement of existing debt.

Severe Weather – During the third quarter of 2017, Hurricanes Harvey and Irma negatively impacted our South region, specifically our Pompano and Eldorado Shreveport properties, and made travel to those properties impossible or difficult. While Pompano did not sustain any major physical damage, we incurred incremental expenses as a result of the storms and were forced to close the casino for four days and experienced disruption to our business for a longer period of time.

Our West segment’s operations are subject to seasonal variation, with our lowest business volume generally occurring during the winter months. The northern Nevada region experienced record snowfall and severe weather conditions, including major snow storms during eleven of the fourteen weekends in the 2017 first quarter, making travel to Reno from northern California, our main feeder market, difficult or impossible due to road closures. As a result, there was a significant adverse effect on business levels, especially hotel occupancy and gaming volume, and our operating performance for the nine months ended September 30, 2017 compared to the same prior year period.

Execution of Cost Savings Program – We continue to identify areas to improve property level and consolidated margins through operating and cost efficiencies and exercising financial discipline throughout the Company without impacting the guest experience. In addition to cost savings relating to duplicative executive compensation, legal and accounting fees and other corporate expenses that have been eliminated as a result of the MTR Merger, Reno Acquisition and Isle Acquisition, we have achieved savings in marketing, food and beverage costs, selling, general and administrative expenses, and other operating departments as a result of operating efficiencies and purchasing power of the combined Eldorado organization.

2020.

Property Enhancement Capital Expenditures – Property enhancement initiatives continued throughout 2016 and into 2017. At Presque Isle Downs, we opened The Brew Brothers in May 2016 and an escalator in July to improve traffic flow to the restaurant. In June 2016, we opened a second smoking patio at Scioto Downs which features a casino bar and 119 new VLTs. In Shreveport, we completed the remodel of the second floor of the casino in December 2016 and added approximately 20 new slot machines. We improved the offerings at Mountaineer with a goal of maintaining a positive customer experience while right sizing the property to maximize free cash flow and operational efficiencies.

In September 2016, the Company announced that it plans to invest more than $50 million in facility enhancements to Eldorado Reno, Silver Legacy and Circus Reno. Eldorado’s master plan for the three connected properties, which span eight city blocks in downtown Reno, will be phased over three years, and commenced in the fourth quarter of 2016. In


addition to the renovation of our guest rooms across the Tri-Properties, each of the three resorts will introduce new restaurant concepts, reinvigorated nightlife and resort amenities. In September 2016, Silver Legacy opened a new $2.0 million 8,500 square foot sports book. Also, in the fourth quarter of 2016, we completed the renovation of the Carnival Midway and opened El Jefe’s Cantina Mexican restaurant and bar at Circus Reno. We also opened Hidden Pizza, a New York style pizza restaurant, at Eldorado Reno.

Throughout 2017, capital improvements continued at the Tri-Properties including the renovation of approximately 600 guest rooms at Circus Reno and 153 rooms at Eldorado Reno. Property enhancements that are either already completed or that are expected to come online prior to the end of 2017 include a new poker room and Canter’s Delicatessen at Silver Legacy, new food court with Habit Burger®, Piezzetta Pizza Kitchen® and Panda Express®, 6,700 square foot video arcade, party rooms and bar, renovation of approximately 648 guest rooms, Kanpai Sushi and a new Madame Butterworks Curious Café at Circus Reno, the addition of Starbucks café and showroom renovation at Eldorado Reno and new public spaces across all three properties.

A 118-room Hampton Inn Hotel at Scioto Downs developed by a third party opened on March 2017 and since opening continues to drive visitation and spend at the property.

With the completion of the Isle Acquisition, we continue to evaluate capital improvement plans across the newly acquired properties.

New Regulation – Effective January 1, 2016, the Ohio Lottery Commission enacted new regulation which resulted in the establishment of a $1.0 million progressive slot liability and a corresponding decrease in net slot win for the nine months ended September 30, 2016. The changes are non-cash and related to jackpots established in prior years. The net non-cash impact to Scioto Down’s operating income was $0.6 million for the nine months ended September 30, 2016.

Results of Operations

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

 

 

Three Months Ended

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

% Change

 

 

 

2017

 

 

2016

 

 

% Change

 

 

Net revenues

 

$

 

444,874

 

 

$

 

241,565

 

 

 

84.2

 

%

 

$

 

1,000,978

 

 

$

 

686,446

 

 

 

45.8

 

%

Operating income

 

 

 

78,924

 

 

 

 

28,109

 

 

 

180.8

 

%

 

 

 

60,955

 

 

 

 

76,026

 

 

 

(19.8

)

%

Net income (loss)

 

 

 

29,554

 

 

 

 

9,682

 

 

 

205.2

 

%

 

 

 

(15,754

)

 

 

 

23,842

 

 

 

(166.1

)

%

Operating Results.  Isle contributed $201.1 millionthis MD&A for a definition of Adjusted EBITDA and $335.3 milliona reconciliation of net revenues for(loss) income to Adjusted EBITDA related margins.

50

(c)Net (loss) income margin is calculated as net (loss) income divided by net revenues.
Consolidated comparison of the three and nine months ended September 30, 20172020 and the period from the Isle Acquisition Date through September 30, 2017, respectively, consisting primarily of gaming revenues. Including the incremental Isle net operating2019
Net Revenues
Net revenues netwere as follows:
Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Net Revenues:
Casino and pari-mutuel commissions$919 $458 $461 100.7 %$1,360 $1,386 $(26)(1.9)%
Food and beverage125 78 47 60.3 %188 229 (41)(17.9)%
Hotel200 94 106 112.8 %257 237 20 8.4 %
Other133 33 100 *172 84 88 104.8 %
Net Revenues$1,377 $663 $714 107.7 %$1,977 $1,936 $41 2.1 %
___________________
*    Not meaningful.
Consolidated revenues increased 84.2% and 45.8%, respectively, for the three and nine months ended September 30, 20172020 as a result of our acquisition of Former Caesars on July 20, 2020. This was offset by a decline in revenues associated with the COVID-19 public health emergency and, to a lesser extent, divestitures of certain properties discussed earlier. Both we and Former Caesars began temporarily closing our properties from mid-March 2020. We began reopening our properties on May 15, 2020. Former Caesars began opening properties on May 18, 2020. As of September 30, 2020, all but The Cromwell, Planet Hollywood, Rio and Caesars Windsor were reopened. Due to the impact of the COVID-19 public health emergency, including local and state regulations and the implementation of social distancing and health and safety protocols, our properties are subject to reduced gaming capacity and hotel occupancy, limited operation of food and beverage outlets, live entertainment events and group business. As a result, gaming revenue represents a larger portion of our total revenues following the reopening of our properties as compared to earlier periods, which we expect to continue until at least such time that social distancing and safety and health protocols, along with governmental capacity or other restrictions, are relaxed or no longer necessary.
Our diversified portfolio has yielded mixed results as the same prior year periods.

Operating income increased 180.8%properties have reopened under the conditions noted above. Net revenues for properties which have historically relied on a local customer base, not dependent on air travel or convention business, showed a smaller decrease as compared to the three months ended September 30, 2017 compared to2019 results. These properties’ gaming and hotel revenues have historically been the samelargest portion of their total revenue. Properties in destination markets such as Las Vegas, Atlantic City, Northern Nevada and New Orleans, which have historically relied on a broader regional and national customer base or convention business have declined significantly from the prior year period. This increase wasThese properties have historically relied on a broader mix of revenue sources including convention, entertainment, and food and beverage offerings. As a result of reduced visitation, state and local restrictions on capacity, and social distancing and safety and health protocols, these sources of revenue have been materially reduced as compared to prior periods.

Operating Expenses
Operating expenses were as follows:
51

Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Operating Expenses:
Casino and pari-mutuel commissions$461 $229 $232 101.3 %685 693 $(8)(1.2)%
Food and beverage91 60 31 51.7 %153 180 (27)(15.0)%
Hotel63 27 36 133.3 %91 76 15 19.7 %
Other52 12 40 *62 34 28 82.4 %
General and administrative330 130 200 153.8 %495 381 114 29.9 %
Corporate90 13 77 *120 51 69 135.3 %
Impairment charges— — — *161 1 160 *
Depreciation and amortization223 53 170 *322 167 155 92.8 %
Transaction costs and other operating costs219 14 205 *242 2 240 *
Total operating expenses$1,529 $538 $991 184.2 %$2,331 $1,585 $754 47.6 %
___________________
*    Not meaningful.
Casino and pari-mutuel expenses consist primarily due to $39.0 million of operating income contributed by Islesalaries and wages associated with our gaming operations, marketing and promotions and gaming taxes. Hotel expenses consist principally of salaries, wages and supplies associated with our hotel operations. Food and beverage expenses consist principally of salaries and wages and costs of goods sold associated with our food and beverage operations. Other expenses consist principally of salaries and wages and costs of goods sold associated with our retail, entertainment and other operations.
Casino and pari-mutuel, hotel, food and beverage, and other expenses for the three months ended September 30, 2017. Operating income decreased 19.8% for theand nine months ended September 30, 2017 compared2020 increased year over year as a result of our acquisition of Former Caesars. This was offset as a result of the temporary closures of all of our properties due to the same prior year period. This decrease was primarily due to acquisition chargesCOVID-19 public health emergency, which reduced our salaries and wages, gaming taxes, costs of goods sold, and other expenses. As discussed above, our reopened properties are operating with reduced gaming and hotel capacity and limited food and beverage options. As such, our properties are operating with a reduced workforce, which resulted in decreased salaries and wages. In addition, our properties have reduced marketing and promotional spend, resulting in further declines in gaming expenses.
General and administrative expenses include items such as compliance, facility maintenance, utilities, property and liability insurance, expenses for administrative departments such as accounting, purchasing, human resources, legal and internal audit, and property taxes. Property, general and administrative expenses also include stock-based compensation expense for certain property executives, sports sponsorships and other marketing expenses not directly related to the Isle Acquisition totaling $89.2 millionour gaming operations.
General and administrative expenses for the three and nine months ended September 30, 2017 and2020 increased year over year as the result of our acquisition of Former Caesars. This was partially offset by $46.3 million of operating income contributed by Isle foractions taken to reduce our cost structure while our properties were temporarily closed and during the period from the Isle Acquisition Date through September 30, 2017.

Net income increased 205.2% for the three months ended September 30, 2017 compared to the same prior year periodof reduced operations due to the same factors impacting operating income. This increase was partially offset by higher interest expense associated with additional debt in conjunction withimpact of the Isle Acquisition,COVID-19 public health emergency, which are discussed above and implemented.

For the loss on the early retirement of debt recorded during the current periodthree and by the recorded income tax provision of $11.6 million. Net income decreased 166.1% for the nine months ended September 30, 2017 compared to the same prior year period primarily due to $89.2 million of acquisition charges associated with the Isle Acquisition combined with higher interest expense and the loss on the early retirement of debt, offsetting incremental operating income and income tax benefit of $27.6 million.


Net Revenues and Operating Income (Loss)

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

 

 

Net Revenues for the Three Months Ended September 30,

 

 

Net Revenues for the Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

West

 

$

 

132,775

 

 

$

 

89,676

 

 

$

 

293,528

 

 

$

 

246,608

 

Midwest

 

 

 

103,510

 

 

 

 

—

 

 

 

 

171,015

 

 

 

 

—

 

South

 

 

 

81,696

 

 

 

 

33,984

 

 

 

 

183,425

 

 

 

 

100,514

 

East

 

 

 

126,720

 

 

 

 

117,905

 

 

 

 

352,644

 

 

 

 

339,324

 

Corporate

 

 

 

173

 

 

 

 

—

 

 

 

 

366

 

 

 

 

—

 

Total

 

$

 

444,874

 

 

$

 

241,565

 

 

$

 

1,000,978

 

 

$

 

686,446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income (Loss) for the Three Months Ended September 30,

 

 

Operating Income (Loss) for the Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

West

 

$

 

32,556

 

 

$

 

15,606

 

 

$

 

50,507

 

 

$

 

34,825

 

Midwest

 

 

 

24,261

 

 

 

 

—

 

 

 

 

39,669

 

 

 

 

—

 

South

 

 

 

11,293

 

 

 

 

6,703

 

 

 

 

28,280

 

 

 

 

18,746

 

East

 

 

 

21,140

 

 

 

 

15,102

 

 

 

 

54,333

 

 

 

 

43,767

 

Corporate

 

 

 

(10,326

)

 

 

 

(9,302

)

 

 

 

(111,834

)

 

 

 

(21,312

)

Total

 

$

 

78,924

 

 

$

 

28,109

 

 

$

 

60,955

 

 

$

 

76,026

 


Three Months Ended September 30, 2017 Compared to the Three Months Ended September 30, 2016

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

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Variance

 

 

Percent

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

83,166

 

 

$

 

48,067

 

 

$

 

35,099

 

 

 

73.0

 

%

Midwest

 

 

 

96,330

 

 

 

 

—

 

 

 

 

96,330

 

 

 

100.0

 

%

South

 

 

 

76,279

 

 

 

 

31,505

 

 

 

 

44,774

 

 

 

142.1

 

%

East

 

 

 

117,317

 

 

 

 

108,559

 

 

 

 

8,758

 

 

 

8.1

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

373,092

 

 

 

 

188,131

 

 

 

 

184,961

 

 

 

98.3

 

%

Non-gaming:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

67,185

 

 

 

 

54,126

 

 

 

 

13,059

 

 

 

24.1

 

%

Midwest

 

 

 

14,161

 

 

 

 

—

 

 

 

 

14,161

 

 

 

100.0

 

%

South

 

 

 

14,261

 

 

 

 

9,810

 

 

 

 

4,451

 

 

 

45.4

 

%

East

 

 

 

14,164

 

 

 

 

14,189

 

 

 

 

(25

)

 

 

(0.2

)

%

Corporate

 

 

 

173

 

 

 

 

—

 

 

 

 

173

 

 

 

100.0

 

%

Total Non-gaming

 

 

 

109,944

 

 

 

 

78,125

 

 

 

 

31,819

 

 

 

40.7

 

%

Total Gross Revenues

 

 

 

483,036

 

 

 

 

266,256

 

 

 

 

216,780

 

 

 

81.4

 

%

Promotional allowances:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

(17,576

)

 

 

 

(12,517

)

 

 

 

5,059

 

 

 

40.4

 

%

Midwest

 

 

 

(6,981

)

 

 

 

—

 

 

 

 

6,981

 

 

 

100.0

 

%

South

 

 

 

(8,844

)

 

 

 

(7,331

)

 

 

 

1,513

 

 

 

20.6

 

%

East

 

 

 

(4,761

)

 

 

 

(4,843

)

 

 

 

(82

)

 

 

(1.7

)

%

Total Promotional Allowances

 

 

 

(38,162

)

 

 

 

(24,691

)

 

 

 

13,471

 

 

 

54.6

 

%

Total Net Revenues

 

 

 

444,874

 

 

 

 

241,565

 

 

 

 

203,309

 

 

 

84.2

 

%

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

33,650

 

 

 

 

21,536

 

 

 

 

12,114

 

 

 

56.3

 

%

Midwest

 

 

 

42,681

 

 

 

 

—

 

 

 

 

42,681

 

 

 

100.0

 

%

South

 

 

 

39,243

 

 

 

 

17,143

 

 

 

 

22,100

 

 

 

128.9

 

%

East

 

 

 

73,817

 

 

 

 

68,099

 

 

 

 

5,718

 

 

 

8.4

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

189,391

 

 

 

 

106,778

 

 

 

 

82,613

 

 

 

77.4

 

%

Non-gaming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

29,317

 

 

 

 

25,862

 

 

 

 

3,455

 

 

 

13.4

 

%

Midwest

 

 

 

4,667

 

 

 

 

—

 

 

 

 

4,667

 

 

 

100.0

 

%

South

 

 

 

4,450

 

 

 

 

1,762

 

 

 

 

2,688

 

 

 

152.6

 

%

East

 

 

 

5,953

 

 

 

 

8,676

 

 

 

 

(2,723

)

 

 

(31.4

)

%

Total Non-gaming

 

 

 

44,387

 

 

 

 

36,300

 

 

 

 

8,087

 

 

 

22.3

 

%

Marketing and promotions

 

 

 

24,634

 

 

 

 

11,323

 

 

 

 

13,311

 

 

 

117.6

 

%

General and administrative

 

 

 

68,585

 

 

 

 

34,094

 

 

 

 

34,491

 

 

 

101.2

 

%

Corporate

 

 

 

7,718

 

 

 

 

4,426

 

 

 

 

3,292

 

 

 

74.4

 

%

Depreciation and amortization

 

 

 

29,122

 

 

 

 

15,810

 

 

 

 

13,312

 

 

 

84.2

 

%

Total Operating Expenses

 

$

 

363,837

 

 

$

 

208,731

 

 

$

 

155,106

 

 

 

74.3

 

%

Gaming Revenues and Pari-Mutuel Commissions.  Isle contributed $187.5 million of gaming revenues and pari-mutuel commissions for the three months ended September 30, 2017 consisting primarily of slot and table games revenues. As a result, gaming revenues and pari-mutuel commissions increased 98.3% for the three months ended September 30, 2017 compared to the same prior year period.

Excluding incremental Isle gaming revenues and pari-mutuel commissions of $187.5 million, gaming revenues and pari-mutuel commissions declined 1.3% for the three months ended September 30, 2017 compared to the same prior year period. Growth in the West segment attributable to a strong Reno market was offset by a decrease in gaming revenues in the South segment while the East segment remained flat. Reductions in gaming volume driven by decreased high-end play and the impact of severe negatively affected


the South segment. Additionally, a historically low table games hold percentage at Shreveport during the current quarter compared to the same prior year period also drove the decline in casino revenues in the South segment. Efforts to eliminate unprofitable gaming play via reductions in marketing promotions and incentives across all segments also contributed to the declines in casino volume and positively impacted operating margins for the three months ended September 30, 2017 compared to the same prior year period.

Non-gaming Revenues.  Isle contributed $29.2 million of non-gaming revenues for the three months ended September 30, 2017 resulting in an increase of 40.7% in non-gaming revenues over the same prior year period.

Excluding incremental Isle non-gaming revenues of $29.2 million, non-gaming revenues increased 3.4% for the three months ended September 30, 2017 compared to the same prior year period. The West segment increased for the three months ended September 30, 2017 compared to the same prior year period principally due to higher hotel, food and beverage revenues as a result of increased visitor traffic and benefitted from the Reno properties’ capital improvements including renovated hotel rooms and new food, beverage and entertainment offerings. The South segment decreased in non-gaming revenues for the three months ended September 30, 2017 compared to the same prior year period primarily due to decreased food and beverage revenues associated with revisions to complimentary food offers. The East segment decreased for the three months ended September 30, 2017 compared to the same prior year period in non-gaming revenues primarily due to decreased food and beverage revenues resulting from reductions in complimentary food offerings and the consolidation of restaurants in an effort to maximize capacity utilization.

Promotional Allowances.  Promotional allowances, expressed as a percentage of gaming revenues and pari-mutuel commissions, decreased to 10.2% for the three months ended September 30, 2017 compared to 13.1% for the same prior year period. This decline was primarily due to strategic revisions to reduce unprofitable promotional offers across all segments combined with the incremental revenues contributed by the Isle properties which historically have lower promotional allowances as a percentage of gaming revenues.

Gaming Expenses and Pari-Mutuel Commissions.  Isle contributed $88.5 million of gaming expenses and pari-mutuel commissions for the three months ended September 30, 2017 resulting in an increase of 77.4% in gaming expenses and pari-mutuel commissions over the same prior year period.

Excluding incremental Isle gaming expenses and pari-mutuel commissions, gaming expenses and pari-mutuel commissions decreased 5.5% for the three months ended September 30, 2017 compared to the same prior year period primarily due to declines in gaming volume in the South and East segments combined with savings initiatives targeted at reducing variable expenses along with continued synergies related to the integration of the Tri-Properties in the West segment. Additionally, successful efforts to control costs and maximize departmental profit across all segments also drove the decline in expenses during the current period.

Non-gaming Expenses.  Isle contributed $9.9 million of non-gaming expenses for the three months ended September 30, 2017 resulting in an increase of 22.3% over the same prior year period.

Excluding incremental Isle non-gaming expenses, non-gaming expenses decreased 5.5% for the three months ended September 30, 2017 compared to the same prior year period. Increased expenses associated with higher non-gaming revenues and hotel occupancy in the West segment were offset by lower non-gaming expenses in the South and East segments. Additionally, the growth in hotel ADR in the West segment contributed to improved non-gaming margins.

Marketing and Promotions Expenses.  Isle contributed $12.1 million of marketing and promotions expense for the three months ended September 30, 2017 resulting in an increase of 117.6% over the same prior year period.  

Excluding incremental Isle marketing and promotions expenses, consolidated marketing and promotions expense increased 10.6% for the three months ended September 30, 2017 compared to the same prior year period. This increase was primarily attributable to increased expenses resulting from higher internet advertising spend, new television media production promoting new product offerings in the Reno market and a shift in marketing spend to targeted direct mail and promotional offers across all segments. Additionally, marketing promotional costs associated with casino initiatives are charged to this category to provide consistency among properties following the Isle Acquisition.

General and Administrative Expenses.  Isle contributed $35.5 million of general and administrative expense for the three months ended September 30, 2017 resulting in an increase of 101.2% over the same prior year period.  

Excluding incremental Isle general and administrative expenses, consolidated general and administrative expenses decreased 3.0% for the three months ended September 30, 2017 compared to the same 2016 period primarily due to savings in property and general liability insurance costs and payroll and related benefit cost savings programs across all segments.


Corporate Expenses.  For the three months ended September 30, 20172020 compared to the same prior year period, corporate expenses increased primarily due to payrollthe acquisition of Former Caesars offset by reductions in salaries and other expenses associated with additional corporate costs driven by growth relatedwages due to the recent Isle Acquisition. Additionally, corporate costs rosereductions in workforce implemented as a result of the impact of the COVID-19 public health emergency.

For the three and nine months ended September 30, 2020 compared to the same prior year period, depreciation and amortization expense increased mainly due to the acquisition of Former Caesars offset by ceasing depreciation and amortization expense on assets held for sale and the Divestitures.
For the three and nine months ended September 30, 2020 compared to the same prior year period, transaction costs and other operating costs increased primarily due to costs or fees incurred related to the Merger, various project exit fees and related write offs, and higher stock compensationseverance expense related to synergies with the Merger.


52

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

Regional Segment
Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Revenues:
Casino and pari-mutuel commissions$774 $458 $316 69.0 %$1,215 $1,386 $(171)(12.3)%
Food and beverage72 78 (6)(7.7)%135 229 (94)(41.0)%
Hotel121 94 27 28.7 %178 237 (59)(24.9)%
Other33 31 2 6.5 %68 78 (10)(12.8)%
Net Revenues$1,000 $661 $339 51.3 %$1,596 $1,930 $(334)(17.3)%
Adjusted EBITDA$331 $205 $126 61.5 %$439 $569 $(130)(22.8)%
Adjusted EBITDA margin33.1 %31.0 %2.1 pts27.5 %29.5 %(2) pts
Net (loss) income attributable to Caesars$47 $117 $(70)(59.8)%$(175)300 $(475)(158.3)%
Regional segment’s net revenues, Adjusted EBITDA and margin increased for the three months ended September 30, 20172020 compared to the same prior year period as a result of the acquisition of Former Caesars. All of our properties in our Regional segment have reopened as of September 30, 2020. All of our properties within the Regional segment reopened with reduced gaming and hotel capacity and with limited food and beverage offerings.
During the third quarter of 2020 or in the period between properties reopening and September 30, 2020, our Regional properties experienced a decline in net revenues as compared to the prior year. However, in the period between reopening and September 30, 2020 for all of our Regional properties other than Atlantic City, Northern Nevada and New Orleans. Adjusted EBITDA grew as compared to prior year, and Former Caesars’ prior year, for the same properties. Adjusted EBITDA margin for these properties were higher as compared to prior year due to operating with a reduced workforce, reducing marketing costs, and limiting certain lower margin food and beverage offerings such as buffets.
Properties in Atlantic City, Northern Nevada and New Orleans experienced significant declines in net revenues and Adjusted EBITDA as compared to prior year and Former Caesars’ prior year for the same properties as they were all negatively impacted by reduced visitation and limitations on capacity due to the three year vesting schedule associated withCOVID-19 public health emergency.
Managed, International & CIE Segment
Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Revenues:
Casino and pari-mutuel commissions$23 $— $23 *$23 $— $23 *
Food and beverage1 — 1 *1 — 1 *
Hotel— — — *— — — *
Other45 — 45 *45 — 45 *
Net Revenues$69 $— $69 *$69 $— $69 *
Adjusted EBITDA$18 $— $18 *$18 $— $18 *
Adjusted EBITDA margin26.1 %— %26.1 pts26.1 %— %26.1 pts
Net income attributable to Caesars$3 $— $3 *$3 $— $3 *
___________________
*    Not meaningful.
Managed, International, CIE segment’s net revenues and Adjusted EBITDA increased as a result of the acquisition of Former Caesars. All of our long-term incentive plan established in 2015 resulting in three yearsmanaged properties have reopened as of grants andSeptember 30, 2020 except for Caesars Windsor, which opened on October 8, 2020. Our CIE business was not closed at any point related expense into the current period versus two years of grants and related expense in the same prior year period.

Depreciation and Amortization Expense.  Isle contributed $14.9 million of depreciation expense forCOVID-19 public health emergency.

54

For the three months ended September 30, 2017 resulting in an increase of 84.2% over the same prior year period.  

Excluding incremental Isle depreciation and amortization expense, depreciation and amortization expense decreased 13.5% for the three months ended September 30, 2017 compared to the same prior year period mainly due to lower depreciation in all segments due to assets becoming fully depreciated.


Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016

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

 

 

Nine Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Variance

 

 

Percent

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

178,390

 

 

$

 

132,480

 

 

$

 

45,910

 

 

 

34.7

 

%

Midwest

 

 

 

159,010

 

 

 

 

—

 

 

 

 

159,010

 

 

 

100.0

 

%

South

 

 

 

170,712

 

 

 

 

92,702

 

 

 

 

78,010

 

 

 

84.2

 

%

East

 

 

 

327,666

 

 

 

 

314,063

 

 

 

 

13,603

 

 

 

4.3

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

835,778

 

 

 

 

539,245

 

 

 

 

296,533

 

 

 

55.0

 

%

Non-gaming:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

155,417

 

 

 

 

148,475

 

 

 

 

6,942

 

 

 

4.7

 

%

Midwest

 

 

 

23,693

 

 

 

 

—

 

 

 

 

23,693

 

 

 

100.0

 

%

South

 

 

 

35,758

 

 

 

 

28,801

 

 

 

 

6,957

 

 

 

24.2

 

%

East

 

 

 

37,742

 

 

 

 

39,296

 

 

 

 

(1,554

)

 

 

(4.0

)

%

Corporate

 

 

 

366

 

 

 

 

—

 

 

 

 

366

 

 

 

100.0

 

%

Total Non-gaming

 

 

 

252,976

 

 

 

 

216,572

 

 

 

 

36,404

 

 

 

16.8

 

%

Total Gross Revenues

 

 

 

1,088,754

 

 

 

 

755,817

 

 

 

 

332,937

 

 

 

44.0

 

%

Promotional allowances:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

(40,279

)

 

 

 

(34,347

)

 

 

 

5,932

 

 

 

17.3

 

%

Midwest

 

 

 

(11,688

)

 

 

 

—

 

 

 

 

11,688

 

 

 

100.0

 

%

South

 

 

 

(23,045

)

 

 

 

(20,989

)

 

 

 

2,056

 

 

 

9.8

 

%

East

 

 

 

(12,764

)

 

 

 

(14,035

)

 

 

 

(1,271

)

 

 

(9.1

)

%

Total Promotional Allowances

 

 

 

(87,776

)

 

 

 

(69,371

)

 

 

 

18,405

 

 

 

26.5

 

%

Total Net Revenues

 

 

 

1,000,978

 

 

 

 

686,446

 

 

 

 

314,532

 

 

 

45.8

 

%

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

75,393

 

 

 

 

61,196

 

 

 

 

14,197

 

 

 

23.2

 

%

Midwest

 

 

 

70,561

 

 

 

 

—

 

 

 

 

70,561

 

 

 

100.0

 

%

South

 

 

 

88,577

 

 

 

 

50,585

 

 

 

 

37,992

 

 

 

75.1

 

%

East

 

 

 

203,805

 

 

 

 

195,888

 

 

 

 

7,917

 

 

 

4.0

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

438,336

 

 

 

 

307,669

 

 

 

 

130,667

 

 

 

42.5

 

%

Non-gaming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

74,815

 

 

 

 

75,760

 

 

 

 

(945

)

 

 

(1.2

)

%

Midwest

 

 

 

7,779

 

 

 

 

—

 

 

 

 

7,779

 

 

 

100.0

 

%

South

 

 

 

10,184

 

 

 

 

5,482

 

 

 

 

4,702

 

 

 

85.8

 

%

East

 

 

 

17,389

 

 

 

 

23,369

 

 

 

 

(5,980

)

 

 

(25.6

)

%

Total Non-gaming

 

 

 

110,167

 

 

 

 

104,611

 

 

 

 

5,556

 

 

 

5.3

 

%

Marketing and promotions

 

 

 

54,845

 

 

 

 

30,664

 

 

 

 

24,181

 

 

 

78.9

 

%

General and administrative

 

 

 

155,778

 

 

 

 

98,129

 

 

 

 

57,649

 

 

 

58.7

 

%

Corporate

 

 

 

21,734

 

 

 

 

15,684

 

 

 

 

6,050

 

 

 

38.6

 

%

Depreciation and amortization

 

 

 

69,635

 

 

 

 

47,597

 

 

 

 

22,038

 

 

 

46.3

 

%

Total Operating Expenses

 

$

 

850,495

 

 

$

 

604,354

 

 

$

 

246,141

 

 

 

40.7

 

%

Gaming Revenues and Pari-Mutuel Commissions.  Isle contributed $312.8 million of gaming revenues and pari-mutuel commissions for the period from the Isle Acquisition Date through September 30, 2017 consisting primarily of slot and table games revenues. As a result, gaming revenues and pari-mutuel commissions increased 55.0% for the nine months ended September 30, 20172020, net revenues for Managed, International and CIE declined as compared to Former Caesars’ prior period related to reimbursed management costs related to Caesars Windsor remaining closed throughout the same prior year period.

quarter. Excluding incremental Isle gamingthat, net revenues increased primarily related to increased revenue in our CIE business. Adjusted EBITDA for Managed, International and pari-mutuel commissions of $312.8 million, gaming revenues declined 3.0% for the nine months ended September 30, 2017CIE increased as compared to the sameFormer Caesars’ prior year period due to a decrease in gaming revenues across all segments. The decline in the West segment was mainly attributable to decreases in visitor traffic due to severe weather the northern Nevada region experienced throughout the first quarter of 2017 that resulted in limited access from our main feeder markets combined

period.

with the absence of a major bowling tournament in the Reno market. Additionally, reductions in gaming volume driven by decreased high-end play, the continued weakness in the energy sector, historically lower table games hold percentage impacted the Shreveport market and severe weather in the third quarter of 2017 negatively impacted the South segment in 2017. Efforts to eliminate unprofitable gaming play via reductions in marketing promotions and incentives across the properties also contributed to the declines in casino volume and positively impacted margins across all segments.

Non-gaming Revenues.  Isle contributed $48.8 million of non-gaming revenues for the period from the Isle Acquisition Date through September 30, 2017 resulting in an increase of 16.8% over the same prior year period.

Excluding incremental Isle non-gaming revenues of $48.8 million, non-gaming revenues decreased 5.9% for the nine months ended September 30, 2017 compared to the same prior year period. The West segment declined for the nine months ended September 30, 2017 compared to the same prior year period principally due to lower hotel, food and beverage revenues resulting from reduced customer traffic due to fewer convention room nights and the absence of a major bowling tournament during the current year. The South segment decreased in non-gaming revenues for the nine months ended September 30, 2017 compared to the same prior year period primarily due to decreased food and beverage revenues associated with revisions to marketing strategies resulting in fewer complimentary food offers and severe weather negatively impacting visitation in 2017. Non-gaming revenues in the East segment decreased for the nine months ended September 30, 2017 compared to the same prior year period primarily due to decreased food and beverage revenues resulting from reductions in complimentary food offers and the consolidation of restaurants in an effort to maximize capacity utilization.

Promotional Allowances.  Promotional allowances, expressed as a percentage of gaming revenues and pari-mutuel commissions, decreased to 10.5% for the nine months ended September 30, 2017 compared to 12.9% for the same prior year period. This decline was primarily due to strategic revisions to promotional offers across all segments combined with the incremental revenues contributed by the Isle properties which historically have lower promotional allowances as a percentage of gaming revenues.

Gaming Expenses and Pari-Mutuel Commissions.  Isle contributed $148.3 million of gaming expenses and pari-mutuel commissions for the period from the Isle Acquisition Date through September 30, 2017 resulting in an increase of 42.5% over the same prior year period.

Excluding incremental Isle gaming expenses and pari-mutuel commissions, gaming expenses and pari-mutuel commissions decreased 5.7% for the nine months ended September 30, 2017 compared to the same prior year period primarily due to decreases in gaming volume combined with savings initiatives targeted at reducing variable expenses along with continued synergies related to the integration of the Reno properties in the West segment. Additionally, successful efforts to control costs and maximize departmental profit across all segments also drove the decline in expenses during the current period.  

Non-gaming Expenses.  Isle contributed $16.5 million of non-gaming expenses for the period from the Isle Acquisition Date through September 30, 2017 resulting in an increase of 5.3% over the same prior year period.

Excluding incremental Isle non-gaming expenses, non-gaming expenses decreased 10.5% for the nine months ended September 30, 2017 compared to the same prior year period across all segments in conjunction with non-gaming revenue declines.

Marketing and Promotions Expenses.  Isle contributed $20.5 million of marketing and promotions expense for the period from the Isle Acquisition Date through September 30, 2017 resulting in an increase of 78.9% over the same prior year period.

Excluding incremental Isle marketing and promotions expenses, consolidated marketing and promotions expense increased 11.8% for the nine months ended September 30, 2017 compared to the same prior year period. This increase was primarily attributable to increased marketing promotional costs associated with casino initiatives that are charged to this category to provide consistency among properties following the Isle Acquisition. Additionally, expenses resulting from higher internet advertising spend, new television media production promoting new product offerings and a shift in marketing spend to targeted direct mail and promotional offers across all segments.

General and Administrative Expenses.  Isle contributed $59.8 million of marketing and promotions expense for the period from the Isle Acquisition Date through September 30, 2017 resulting in an increase of 58.7% over the same prior year period.  

Excluding incremental Isle general and administrative expenses, consolidated general and administrative expenses decreased 2.2% for the nine months ended September 30, 2017 compared to the same 2016 period. Savings associated with lower property and general liability insurance costs were partially offset by higher expenses associated with information systems maintenance contracts and professional services. These incremental costs resulted from information technology infrastructure projects targeted at consolidating systems for future savings and efficiencies.


Corporate Expenses.  For the nine months ended September 30, 2017 compared to the same prior year period, corporate costs increased due to payroll and other expenses associated with additional corporate costs driven by growth related to the Isle acquisition and higher stock compensation expense for the nine months ended September 30, 2017 compared to the same prior year period due to the three year vesting schedule associated with our long-term incentive plan established in 2015 resulting in three years of grants and related expense in the current period versus two years of grants and related expense in the same prior year period.

Depreciation and Amortization Expense.  Isle contributed $24.4 million of depreciation expense for the period from the Isle Acquisition Date through September 30, 2017 resulting in an increase of 46.3% over the same prior year period.  

Excluding incremental Isle depreciation and amortization expense, depreciation and amortization expense decreased 6.9% for the nine months ended September 30, 2017 compared to the same prior year period mainly due to lower depreciation in all segments due to assets becoming fully depreciated.

& Other

Three Months Ended
September 30,		Percent
Change		Nine Months Ended
September 30,		Percent
Change
(Dollars in millions)20202019Variance20202019Variance
Revenues:
Other$4 $2 $2 100.0 %$8 $6 $2 33.3 %
Net Revenues$4 $2 $2 100.0 %$8 $6 $2 33.3 %
Adjusted EBITDA$(41)$(8)$(33)*$(59)$(27)$(32)(118.5)%
___________________
*    Not meaningful.

Supplemental Unaudited Presentation of Consolidated Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA for the Three and Nine Months Ended September 30, 20172020 and 2016

2019

Adjusted EBITDA (defined below), a non GAAPnon-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 GAAPnon-GAAP supplemental information will be helpful in understanding the Company’sour ongoing operating results. Management has historically used Adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period results. Adjusted EBITDA represents operatingnet income (loss) before interest expense, (benefit) provision for income taxes, unrealized (gain) loss on investments and marketable securities, depreciation and amortization, stock basedstock-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 other expenses.equipment, (gain) loss related to divestitures, changes in the fair value of certain derivatives and certain non-recurring expenses such as sign-on and retention bonuses, business optimization expenses and transformation expenses, litigation awards and settlements, losses on inventory associated with properties temporarily closed as a result of the COVID-19 public health emergency, contract exit or termination costs, and 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 US GAAP, is unaudited and should not be considered an alternative to, or more meaningful than, net income (loss) as an indicator of our operating performance. Uses of cash flows that are not reflected in Adjusted EBITDA include capital expenditures, interest payments, income taxes, debt principal repayments, payments under our leases with affiliates of GLPI and VICI Properties Inc. and certain regulatory gaming assessments, which can be significant. As a result, Adjusted EBITDA should not be considered as a measure of our liquidity. Other companies that provide EBITDA information may calculate Adjusted EBITDA differently than we do. The definition of Adjusted EBITDA may not be the same as the definitions used in any of our debt agreements.

The following table summarizes our Adjusted EBITDA for our operating segments for the three and nine months ended September 30, 20172020 and 2016,2019, respectively, in addition to reconciling net (loss) income to Adjusted EBITDA to operating income (loss) in accordance with US GAAP (unaudited,(unaudited):
55

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

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

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

Nine Months Ended September 30, 2019
(In millions)CEI
Less: Divestitures (g)
Pre-Acq. CEC (e)
Total (h)
Net income (loss) attributable to Caesars$94 $33 $(891)$(830)
Net loss attributable to noncontrolling interests— — (2)(2)
Provision (benefit) for income taxes39 11 (111)(83)
Other loss (a)1 — 412 413 
Interest expense, net217 2 1,033 1,248 
Depreciation and amortization167 13 743 897 
Impairment charges1 — 430 431 
Transaction costs and other operating costs (b)2 — 86 88 
Stock-based compensation expense16 — 62 78 
Other items (c)5 1 6670 
Adjusted EBITDA$542 $60 $1,828 $2,310 
____________________
(a)Other loss (income) for the three and nine months ended September 30, 2020 primarily represent loss on early repayment of debt in thousands):

 

 

Three Months Ended September 30, 2017

 

 

 

Operating

Income

(Loss)

 

 

Depreciation

and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses

 

 

Severance

Expense

 

 

Other (6)

 

 

Adjusted

EBITDA

 

West

 

$

 

32,556

 

 

$

 

7,654

 

 

$

 

67

 

 

$

 

—

 

 

$

 

59

 

 

$

 

43

 

 

$

 

40,379

 

Midwest

 

 

 

24,261

 

 

 

 

7,995

 

 

 

 

67

 

 

 

 

—

 

 

 

 

133

 

 

 

 

(9

)

 

 

 

32,447

 

South

 

 

 

11,293

 

 

 

 

6,055

 

 

 

 

29

 

 

 

 

—

 

 

 

 

220

 

 

 

 

5

 

 

 

 

17,602

 

East

 

 

 

21,140

 

 

 

 

6,732

 

 

 

 

5

 

 

 

 

—

 

 

 

 

64

 

 

 

 

(39

)

 

 

 

27,902

 

Corporate

 

 

 

(10,326

)

 

 

 

686

 

 

 

 

1,207

 

 

 

 

2,094

 

 

 

 

—

 

 

 

 

72

 

 

 

 

(6,267

)

Total

 

$

 

78,924

 

 

$

 

29,122

 

 

$

 

1,375

 

 

$

 

2,094

 

 

$

 

476

 

 

$

 

72

 

 

$

 

112,063

 

connection with the consummation of the Merger and unrealized loss on the change in fair value of the derivative liability related to CEC’s 5% convertible notes, slightly offset by gain on William Hill UK and Flutter stock and realized gain on conversion of CEC’s 5% convertible notes. Other loss (income) for the three and nine months ended September 30, 2019 primarily represent unrealized loss on the change in fair value of the derivative liability related to CEC’s 5% convertible notes.

��

 

 

Three Months Ended September 30, 2016

 

 

 

Operating

Income

(Loss)

 

 

Depreciation

and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses

 

 

Severance

Expense

 

 

Other (6)

 

 

Adjusted

EBITDA

 

Excluding Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

15,606

 

 

$

 

4,864

 

 

$

 

—

 

 

$

 

—

 

 

$

 

153

 

 

$

 

(12

)

 

$

 

20,611

 

Midwest

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

South

 

 

 

6,703

 

 

 

 

1,973

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

8,676

 

East

 

 

 

15,102

 

 

 

 

8,847

 

 

 

 

—

 

 

 

 

—

 

 

 

 

263

 

 

 

 

(70

)

 

 

 

24,142

 

Corporate

 

 

 

(9,302

)

 

 

 

126

 

 

 

 

717

 

 

 

 

4,750

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(3,709

)

Total Excluding Pre-Acquisition

 

$

 

28,109

 

 

$

 

15,810

 

 

$

 

717

 

 

$

 

4,750

 

 

$

 

416

 

 

$

 

(82

)

 

$

 

49,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Acquisition (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

7,160

 

 

$

 

2,236

 

 

$

 

6

 

 

$

 

—

 

 

$

 

—

 

 

$

 

—

 

 

$

 

9,402

 

Midwest

 

 

 

22,536

 

 

 

 

10,058

 

 

 

 

41

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(952

)

 

 

 

31,683

 

South

 

 

 

7,378

 

 

 

 

4,269

 

 

 

 

21

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

11,668

 

East

 

 

 

(917

)

 

 

 

694

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(223

)

Corporate

 

 

 

(8,115

)

 

 

 

322

 

 

 

 

1,200

 

 

 

 

805

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(5,788

)

Total Pre-Acquisition

 

$

 

28,042

 

 

$

 

17,579

 

 

$

 

1,268

 

 

$

 

805

 

 

$

 

—

 

 

$

 

(952

)

 

$

 

46,742

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Including Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

22,766

 

 

$

 

7,100

 

 

$

 

6

 

 

$

 

—

 

 

$

 

153

 

 

$

 

(12

)

 

$

 

30,013

 

Midwest

 

 

 

22,536

 

 

 

 

10,058

 

 

 

 

41

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(952

)

 

 

 

31,683

 

South

 

 

 

14,081

 

 

 

 

6,242

 

 

 

 

21

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

20,344

 

East

 

 

 

14,185

 

 

 

 

9,541

 

 

 

 

—

 

 

 

 

—

 

 

 

 

263

 

 

 

 

(70

)

 

 

 

23,919

 

Corporate

 

 

 

(17,417

)

 

 

 

448

 

 

 

 

1,917

 

 

 

 

5,555

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(9,497

)

Total Including Pre-Acquisition (2)

 

$

 

56,151

 

 

$

 

33,389

 

 

$

 

1,985

 

 

$

 

5,555

 

 

$

 

416

 

 

$

 

(1,034

)

 

$

 

96,462

 

 

 

Nine Months Ended September 30, 2017

 

 

 

Operating

Income

(Loss)

 

 

Depreciation

and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses

 

 

Severance

Expense

 

 

Other (6)

 

 

Adjusted

EBITDA

 

Excluding Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

50,507

 

 

$

 

18,868

 

 

$

 

119

 

 

$

 

—

 

 

$

 

255

 

 

$

 

16

 

 

$

 

69,765

 

Midwest

 

 

 

39,669

 

 

 

 

12,961

 

 

 

 

153

 

 

 

 

—

 

 

 

 

135

 

 

 

 

(2

)

 

 

 

52,916

 

South

 

 

 

28,280

 

 

 

 

12,649

 

 

 

 

70

 

 

 

 

—

 

 

 

 

223

 

 

 

 

5

 

 

 

 

41,227

 

East

 

 

 

54,333

 

 

 

 

23,885

 

 

 

 

9

 

 

 

 

—

 

 

 

 

86

 

 

 

 

206

 

 

 

 

78,519

 

Corporate

 

 

 

(111,834

)

 

 

 

1,272

 

 

 

 

4,063

 

 

 

 

89,172

 

 

 

 

289

 

 

 

 

50

 

 

 

 

(16,988

)

Total Excluding Pre-Acquisition

 

$

 

60,955

 

 

$

 

69,635

 

 

$

 

4,414

 

 

$

 

89,172

 

 

$

 

988

 

 

$

 

275

 

 

$

 

225,439

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Acquisition (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

9,525

 

 

$

 

3,694

 

 

$

 

8

 

 

$

 

—

 

 

$

 

—

 

 

$

 

4

 

 

$

 

13,231

 

Midwest

 

 

 

34,819

 

 

 

 

11,952

 

 

 

 

51

 

 

 

 

—

 

 

 

 

5

 

 

 

 

29

 

 

 

 

46,856

 

South

 

 

 

19,165

 

 

 

 

5,694

 

 

 

 

26

 

 

 

 

—

 

 

 

 

—

 

 

 

 

33

 

 

 

 

24,918

 

East

 

 

 

(1,072

)

 

 

 

952

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(120

)

Corporate

 

 

 

(8,811

)

 

 

 

371

 

 

 

 

1,631

 

 

 

 

286

 

 

 

 

549

 

 

 

 

(22

)

 

 

 

(5,996

)

Total Pre-Acquisition

 

$

 

53,626

 

 

$

 

22,663

 

 

$

 

1,716

 

 

$

 

286

 

 

$

 

554

 

 

$

 

44

 

 

$

 

78,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Including Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

60,032

 

 

$

 

22,562

 

 

$

 

127

 

 

$

 

—

 

 

$

 

255

 

 

$

 

20

 

 

$

 

82,996

 

Midwest

 

 

 

74,488

 

 

 

 

24,913

 

 

 

 

204

 

 

 

 

—

 

 

 

 

140

 

 

 

 

27

 

 

 

 

99,772

 

South

 

 

 

47,445

 

 

 

 

18,343

 

 

 

 

96

 

 

 

 

—

 

 

 

 

223

 

 

 

 

38

 

 

 

 

66,145

 

East

 

 

 

53,261

 

 

 

 

24,837

 

 

 

 

9

 

 

 

 

—

 

 

 

 

86

 

 

 

 

206

 

 

 

 

78,399

 

Corporate

 

 

 

(120,645

)

 

 

 

1,643

 

 

 

 

5,694

 

 

 

 

89,458

 

 

 

 

838

 

 

 

 

28

 

 

 

 

(22,984

)

Total Including Pre-Acquisition (2)

 

$

 

114,581

 

 

$

 

92,298

 

 

$

 

6,130

 

 

$

 

89,458

 

 

$

 

1,542

 

 

$

 

319

 

 

$

 

304,328

 

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

 

 

Nine Months Ended September 30, 2016

 

 

 

Operating

Income

(Loss)

 

 

Depreciation

and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses (5)

 

 

Severance

Expense

 

 

Other (4)(6)

 

 

Adjusted

EBITDA

 

Excluding Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

34,825

 

 

$

 

15,373

 

 

$

 

—

 

 

$

 

—

 

 

$

 

153

 

 

$

 

168

 

 

$

 

50,519

 

Midwest

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

South

 

 

 

18,746

 

 

 

 

5,883

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(50

)

 

 

 

24,579

 

East (4)

 

 

 

43,767

 

 

 

 

25,990

 

 

 

 

—

 

 

 

 

—

 

 

 

 

264

 

 

 

 

1,066

 

 

 

 

71,087

 

Corporate

 

 

 

(21,312

)

 

 

 

351

 

 

 

 

2,749

 

 

 

 

5,324

 

 

 

 

1,461

 

 

 

 

(49

)

 

 

 

(11,476

)

Total Excluding Pre-Acquisition

 

$

 

76,026

 

 

$

 

47,597

 

 

$

 

2,749

 

 

$

 

5,324

 

 

$

 

1,878

 

 

$

 

1,135

 

 

$

 

134,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Acquisition (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

20,269

 

 

$

 

6,528

 

 

$

 

32

 

 

$

 

—

 

 

$

 

—

 

 

$

 

—

 

 

$

 

26,829

 

Midwest

 

 

 

65,403

 

 

 

 

29,034

 

 

 

 

129

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(247

)

 

 

 

94,319

 

South

 

 

 

33,557

 

 

 

 

12,525

 

 

 

 

69

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

46,151

 

East

 

 

 

(3,460

)

 

 

 

2,861

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(599

)

Corporate

 

 

 

(23,635

)

 

 

 

1,118

 

 

 

 

3,058

 

 

 

 

805

 

 

 

 

870

 

 

 

 

—

 

 

 

 

(17,784

)

Total Pre-Acquisition

 

$

 

92,134

 

 

$

 

52,066

 

 

$

 

3,288

 

 

$

 

805

 

 

$

 

870

 

 

$

 

(247

)

 

$

 

148,916

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Including Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

55,094

 

 

$

 

21,901

 

 

$

 

32

 

 

$

 

—

 

 

$

 

153

 

 

$

 

168

 

 

$

 

77,348

 

Midwest

 

 

 

65,403

 

 

 

 

29,034

 

 

 

 

129

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(247

)

 

 

 

94,319

 

South

 

 

 

52,303

 

 

 

 

18,408

 

 

 

 

69

 

 

 

 

—

 

 

 

 

—

 

 

 

 

(50

)

 

 

 

70,730

 

East (4)

 

 

 

40,307

 

 

 

 

28,851

 

 

 

 

—

 

 

 

 

—

 

 

 

 

264

 

 

 

 

1,066

 

 

 

 

70,488

 

Corporate

 

 

 

(44,947

)

 

 

 

1,469

 

 

 

 

5,807

 

 

 

 

6,129

 

 

 

 

2,331

 

 

 

 

(49

)

 

 

 

(29,260

)

Total Including Pre-Acquisition (2)

 

$

 

168,160

 

 

$

 

99,663

 

 

$

 

6,037

 

 

$

 

6,129

 

 

$

 

2,748

 

 

$

 

888

 

 

$

 

283,625

 

(1)

Figures for Isle are the four months ended April 30, 2017, the day before the Company acquired Isle on May 1, 2017. The Company reports its financial results on a calendar fiscal year. Prior to the Company’s acquisition of Isle, Isle’s fiscal year typically ended on the last Sunday in April. Isle’s fiscal 2017 and 2016 were 52-week years, which commenced on April 25, 2016 and April 27, 2015, respectively. Such figures were prepared by the Company to reflect Isle’s unaudited consolidated historical net revenues and Adjusted EBITDA for periods corresponding to the Company’s fiscal quarterly calendar. Such figures are based on the unaudited internal financial statements and have not been reviewed by the Company’s auditors and do not conform to GAAP.

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

(2)

Total figures for 2016 and 2017 include combined results of operations for Isle and the Company for periods preceding the date that the Company acquired Isle. Such presentation does not conform with GAAP or the Securities and Exchange Commission rules for proforma presentation; however, we believe that the additional financial information will be helpful to investors in comparing current results with results of prior periods. This is non-GAAP data and should not be considered a substitute for data prepared in accordance with GAAP, but should be viewed in addition to the results of operations reported by the Company.

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

(3)

Figures are for Isle for the three and nine months ended September 30, 2016. Such figures were prepared by the Company to reflect Isle’s unaudited consolidated historical net revenues, operating income and Adjusted EBITDA for periods corresponding to the Company’s fiscal quarterly calendar. Such figures are based on the unaudited internal financial statements and have not been reviewed by the Company’s auditors and do not conform to GAAP.

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

(4)

Effective January 1, 2016, the Ohio Lottery Commission enacted a regulatory change which resulted in the establishment of a $1.0 million progressive slot liability and a corresponding decrease in net slot win during the first quarter of 2016. The changes are non-cash and related primarily to prior years. The net non-cash impact to Adjusted EBITDA was $0.6 million for the nine months ended September 30, 2016.

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

(5)

Transaction expenses for the three and nine months ended September 30, 2017 represent acquisition costs related to the Isle Acquisition. Transaction expenses for the three and nine months ended September 30, 2016 represent acquisition costs related to the Reno Acquisition and includes a credit of $2.0 thousand related to S-1 offering costs.

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

(6)

Other is comprised of (gain) loss on the sale or disposal of property, equity in loss of unconsolidated affiliate and other regulatory gaming assessments, including the item listed in footnote (4) above.

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

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


Liquidity and Capital Resources

We are a holding company and our only significant assets are ownership interests in our subsidiaries. Our ability to fund our obligations depends on existing cash on hand, contracted asset sales, cash flow from our subsidiaries and our ability to raise capital. Our primary sources of liquidity and capital resources have been existing cash on hand, cash flow from operations, borrowings under our revolving credit facility andfacilities, proceeds from the issuance of debt securities. We closedand equity securities and proceeds from completed asset sales and lease transactions.
Our cash requirements fluctuate significantly depending on our decisions with respect to business acquisitions or divestitures and strategic capital investments to maintain the Isle Acquisitionquality of our properties. Beginning on May 18, 2020, we began reopening our properties and as of September 30, 2020 we have resumed operations at all of our properties, with the exception of The
57

Cromwell, Planet Hollywood, Rio, and Caesars Windsor. Planet Hollywood and Caesars Windsor reopened on October 8, 2020 and The Cromwell reopened on October 29, 2020. In an effort to mitigate the impacts of COVID-19 public health emergency on our business and maintain liquidity, we furloughed approximately 90% of our employees beginning on April 11, 2020. A portion of the workforce has returned to service as the properties have resumed with limited capacities and in compliance with operating restrictions in accordance with governmental orders, directives and guidelines. As a result of these payroll changes combined with other cost saving measures, our operating expenses were reduced significantly.
In an effort to maintain liquidity and provide financial flexibility as the effects of COVID-19 public health emergency continue to evolve and impact global financial markets, we borrowed $465 million under our revolving credit facility on March 16, 2020, which we repaid utilizing, in part, proceeds from the sale of our interests in Kansas City and Vicksburg.
On June 19, 2020, we completed a public offering of 20,700,000 shares of common stock, at a public offering price of $39.00 per share, with proceeds of $772 million, net of fees and estimated expenses of $35 million. On July 6, 2020, we issued $3.4 billion aggregate principal amount of 6.250% Senior Secured Notes due 2025 (the “CEI Senior Secured Notes”) and $1.8 billion aggregate principal amount of 8.125% Senior Notes due 2027 (the “CEI Senior Notes”). In addition, we issued $1.0 billion aggregate principal amount of 5.75% Senior Secured Notes due 2025 (the “CRC Senior Secured Notes”).
On July 1, 20172020, we completed the sale of Kansas City and paid $552.0Vicksburg for $230 million and used a portion of the proceeds to repay the outstanding balance under our revolving credit facility. In addition, we closed the sale of Harrah’s Reno on September 30, 2020 which provided additional proceeds of $8 million, net of certain closing costs.
On July 20, 2020, in connection with the Merger, we consummated the sale leaseback transactions related to Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Resort Atlantic City, including the Harrah’s Atlantic City Waterfront Conference Center, for approximately $1.8 billion of net proceeds. Additionally, we received a one-time payment from VICI of approximately $1.4 billion for amendments to the VICI leases. Furthermore, we entered into an incremental agreement to the existing CRC credit agreement, for an incremental term loan in an aggregate principal amount of $1.8 billion.
In connection with the consummation of the Merger, on July 20, 2020, our current and future liquidity significantly changed. A portion of the proceeds from our newly issued debt and proceeds we received from VICI, as well as cash on hand generated from our sale of common stock, were used (a) to fund a portion of the cash consideration of the Merger, (b) to prepay in full the Isle Acquisition, refinancedloans outstanding and terminate all commitments under our existing Credit Agreement, dated as of April 17, 2017, (c) to satisfy and discharge our Senior Notes, (d) to repay $975 million of the outstanding Isle indebtednessamount under the existing CRC revolving credit facility, (e) to repay in full the loans outstanding and paidterminate all commitments under the existing CEOC, LLC Credit Agreement, dated as of October 6, 2017, (f) to pay fees and expenses related to the Isle Acquisitionfinancing arrangements, and (g) for general corporate use. Additionally, we entered into the CEI Revolving Credit Facility which provides for a five-year senior secured revolving credit facility in an aggregate principal amount of $1.2 billion.
On September 18, 2020, we entered into a $400 million Loan Agreement with a subsidiary of VICI for a term of five years, with such loan secured by, among other things, a first priority fee mortgage on the Caesars Forum Convention Center (the “Forum Convention Center Mortgage Loan”). The interest rate on the Forum Convention Center Mortgage Loan is initially 7.7% per annum, which escalates annually to a maximum interest rate of 8.3% per annum. After the second anniversary of the closing of the loan, we have the option of prepaying the loan, which may include a premium.
As of September 30, 2020, our cash on hand and revolving borrowing capacity was as follows:
(In millions)September 30, 2020
Cash and cash equivalents$1,037 
Revolver capacity1,310 
Revolver capacity committed to letters of credit(83)
Total$2,264 
On September 30, 2020, we announced that we had reached an agreement with William Hill on the terms of a recommended cash acquisition pursuant to which the we would acquire the entire issued and to be issued share capital (other than shares owned by us or held in treasury) of William Hill, in an all-cash transaction of approximately £2.9 billion, or $3.7 billion. The transaction is conditional on, among other things, the approval of William Hill shareholders and state and federal regulators.
On September 25, 2020, to provide liquidity to potentially fund a portion of the cash purchase price, as required by UK regulators, we borrowed $900 million on our CEI Revolving Credit Facility. On September 28, 2020, we deposited $2.1 billion, which included the proceeds from the revolver, into an escrow account related to the William Hill offer. As of September 30,
58

2020 these funds in escrow were classified as restricted cash until we received certain regulatory approvals for financing described below.
On September 28, 2020, we entered into a foreign exchange forward contract to hedge the risk of appreciation of the GBP denominated purchase price. Under the agreement, we would purchase £1.3 billion at a contracted exchange rate. An unrealized loss of $5 million related to the change in fair value during the period from September 28, 2020 and September 30, 2020 was recorded in the consolidated condensed statement of operations. On October 1, 2020 the contract was cancelled.
On October 1, 2020, we completed a public offering of 35,650,000 shares of our common stock at a public offering price of $56.00 per share. Net proceeds from the offering, after deducting the underwriting discounts and commissions and estimated expenses, was approximately $1.9 billion. We expect to use $1.7 billion of these proceeds for the acquisition of William Hill and, as such, we deposited that amount into a UK escrow account denominated in British Pounds.
Upon receipt of regulatory approval of our Interim Facilities Agreement (described below), the restriction on the $2.1 billion funded as of September 30, 2020, was released and we transferred $1.4 billion of cash back into our operating accounts and the outstanding balance of our revolving credit facility was repaid in full. Approximately $598 million of cash remains in an unrestricted account.
On October 9, 2020, we entered into a foreign exchange forward contract to hedge the risk of appreciation of the GBP denominated purchase price for the William Hill acquisition. Under the agreement, we would purchase £536 million at a contracted exchange rate. The forward term of the contract ends on March 31, 2021.
On October 6, 2020, we entered into a £1.5 billion interim facilities agreement (the “Interim Facilities Agreement”) with Deutsche Bank AG, London Branch and JPMorgan Chase Bank, N.A. (the “Arrangers”). Pursuant to the Interim Facilities Agreement, the Arrangers have made available to the Company: (a) a 540-day £1.0 billion asset sale bridge facility and (b) a 60-day £503.0 million cash confirmation bridge facility (collectively, the “Facility”). The Facility may be used to finance the acquisition, refinance or otherwise discharge the indebtedness of William Hill and its subsidiaries, pay transaction fees and expenses related to the foregoing and for working capital and general corporate purposes, among other things. The availability of the borrowings under the Facility is subject to the satisfaction of certain customary conditions. If drawn upon, outstanding borrowings under the Facility will bear interest at a rate equal to the London interbank offered rate plus 3.50% per annum. We entered into the Interim Facilities Agreement in connection with requirement under applicable United Kingdom law to demonstrate that we have “funds certain” to pay the entirety of the cash purchase price for the acquisition of William Hill. We do not intend to borrow under the Interim Facilities Agreement. Instead, we intend to negotiate long-form financing described below.

Wedocumentation pursuant to which a subsidiary will incur the Debt Financing for the acquisition.

In addition to the capital required to complete the proposed acquisition of William Hill, we expect that our primary capital requirements going forward will relate to the operation and maintenance of our properties, andtaxes, servicing our outstanding indebtedness.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 2020 are expected to significantly increase as a result of the additional properties acquired in the Merger. In addition to our future capital expenditures for the normal course of business, we funded $400 million to escrow as of the closing of the Merger and will utilize those funds in accordance with a three year capital expenditure plan in the state of New Jersey. We will also be required to fund a similar escrow account with $25 million for improvements at our racing properties within the state of Indiana. During the remainder of 2017,2020, we plan to spend $26.8an estimated $50 million to $75 million on capital expenditures and $8.6 million to pay interest on our outstanding indebtedness. expenditures. We expect thatto use cash on hand and cash generated from operations to meet such obligations.
On August 27, 2020, Hurricane Laura made landfall on Lake Charles as a Category 4 storm. The hurricane severely damaged the Isle of Capri Casino Lake Charles and the Company has recorded in insurance receivable of $31 million, of which $15 million related to fixed asset impairments and $16 million related to remediation costs and repairs that have been incurred in the three months ended September 30, 2020. The property has remained closed.
A significant portion of our liquidity needs are for debt service and payments associated with our leases. In addition to our newly issued debt, our debt obligations increased as a result of outstanding debt of Former Caesars that remained outstanding following the consummation of the Merger. Our estimated debt service (including principal and interest) is approximately $165 million for the remainder of 2020. We also lease certain real property assets from third parties, including GLPI and VICI. We estimate our lease payments to be approximately $300 million for the remainder of 2020.
The 5% Convertible Notes (defined below) remain outstanding following the consummation of the Merger. As a result of the Merger, the 5% Convertible Notes are convertible into weighted average of the number of shares of Company Common Stock and amount of cash actually received per share by holders of common stock of Former Caesars that made elections for
59

consideration in the Merger. The 5% Convertible Notes are convertible at any time at the option of the holders thereof and, beginning in October 2020, are convertible at the option of the Company if the last reported sale price of Company Common Stock equals or exceeds 140% of the conversion price for the 5% Convertible Notes in effect on each of at least 20 trading days during any 30 consecutive trading day period. As of September 30, 2020, we have paid approximately $574 million and issued approximately 6.8 million shares upon conversion of $487 million in aggregate principal amount of the convertible notes during 2020. Through November 2, 2020, we paid an additional $328 million and issued 3.9 million shares upon conversion of an additional $281 million in aggregate principal amount of the 5% Convertible Notes. At such time as the holders of the 5% Convertible Notes elect to cause conversion, we estimate using cash of $380 million and issuing 4.5 million shares to settle the remaining outstanding 5% Convertible Notes.
On April 24, 2020, the Company entered into a definitive purchase agreement with Twin River and certain of its affiliates for the sale of the equity interests of Eldorado Resort Casino Shreveport Joint Venture and Columbia Properties Tahoe, LLC, the entities that hold Eldorado Shreveport and MontBleu, respectively, for aggregate consideration of $155 million, subject to a working capital adjustment. The definitive agreement provides that the consummation of the sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals and the sale of Eldorado Shreveport and MontBleu is expected to close in the first quarter of 2021.
On September 3, 2020, the Company and VICI entered into agreement to sell Harrah’s Louisiana Downs with Rubico Acquisition Corp. for $22 million, subject to a customary working capital adjustment, where the proceeds will be split between the Company and VICI. The sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals and is expected to close in the first half of 2021.
We previously reached an agreement with VICI to sell Bally’s Atlantic City Hotel & Casino to Twin River for approximately $25 million. Caesars will receive approximately $6 million from the sale. In addition, on October 9, 2020, we reached an agreement to sell the Bally’s brand to Twin River Worldwide Holding, Inc. for $20 million, while retaining the right to use the brand within Bally’s Las Vegas into perpetuity.
In addition to the agreements above, we also expect to enter into additional agreements to divest of Caesars Southern Indiana, Horseshoe Hammond and Evansville prior to December 31, 2020, as required by the Indiana Gaming Commission. Further, we expect to enter into agreements to sell several other non-core properties including our international properties within our Caesars UK group, which includes Emerald Resorts Casino. We expect these divestitures to close by mid-year 2021.
We expect that our current liquidity, cash flows from operations, borrowings under committed credit facilities and the announced asset sales, net of associated taxes, will be sufficient to fund our operations, and capital requirements and service our outstanding indebtedness for the next twelve months.

ERI However, the COVID-19 public health emergency has had, and is a holding companyexpected to continue to have, an adverse effect on our business, financial condition and its only significant assets are ownership interestsresults of operations and has caused, and may continue to cause, disruption in its subsidiaries. ERI’sthe financial markets. While we have undertaken efforts to mitigate the impacts of COVID-19 on our business and maintain liquidity, the extent of the ongoing and future effects of the COVID-19 public health emergency on our business, results of operations and financial condition is uncertain and may adversely impact our liquidity in the future. Our ability to fund its obligations dependsaccess additional capital may be adversely affected by the disruption in the financial markets caused by the COVID-19 public health emergency, restrictions on incurring additional indebtedness contained in the cash flow of its subsidiariesagreements governing our indebtedness and the impact of the public health emergency on our business, results of operations and financial condition.

Debt and Master Lease Covenant Compliance
The CRC Credit Agreement, the CEI Revolving Credit Facility and the indenture related to the CRC Notes and CEI Notes contain covenants which are standard and customary for these types of agreements. These include negative covenants, which, subject to certain exceptions and baskets, limit our ability to (among other items) incur additional indebtedness, make investments, make restricted payments, including dividends, grant liens, sell assets and make acquisitions. The indenture for the 5% Convertible Notes contained limited covenants as a result of its subsidiariesamendments that became effective in connection with the consummation of the Merger.
The CRC Revolving Credit Facility and CEI Revolving Credit Facility include a maximum first-priority net senior secured leverage ratio financial covenant of 6.35:1, which is applicable solely to distribute or otherwise make funds availablethe extent that certain testing conditions are satisfied. Failure to ERI.

comply with such covenants could result in an acceleration of the maturity of indebtedness outstanding under the relevant debt document.

The Company’s results of operations have been materially adversely affected by the impacts of the COVID-19 public health emergency. As a result, the current terms of the CRC Credit Agreement and the CEI Credit Agreement provide that the financial covenant measurement period is not effective through September 30, 2021 so long as the CRC and the Company,
60

respectively, comply with a minimum liquidity requirement, which includes any such availability under the applicable revolving credit facilities.
The GLPI Master Lease contains certain operating, capital expenditure and financial covenants thereunder, and our ability to comply with these covenants was negatively impacted by the effects of the COVID-19 public health emergency on our results of operations. On June 15, 2020, we entered into an amendment to the GLPI Master Lease which provides certain relief under these covenants in the event of facility closures due to public health emergencies, governmental restrictions and certain other instances of unavoidable delay. On July 17, 2020, the amendment to the GLPI Master Lease became effective as the Company obtained all necessary approvals and the applicable waiting period expired. Furthermore, the Company obtained waivers from VICI with relation to annual capital expenditure requirements related to the leases with VICI, starting with the annual period ending December 31, 2020.
As of September 30, 2017,2020, we had consolidated cashwere in compliance with all of the applicable financial covenants under the CRC Credit Agreement, the CEI Credit Agreement, CEI Senior Secured Notes, CEI Senior Notes, CRC Secured Notes, 5% Convertible Notes, the GLPI Leases and cash equivalentsVICI Leases.
Share Repurchase Program
On November 8, 2018, we issued a press release announcing that its Board of $156.2Directors has authorized a $150 million including restricted cashcommon stock repurchase program (the “Share Repurchase Program”) pursuant to which we may, from time to time, repurchase shares of $21.3 million.

Operating Cash Flow.  Forcommon 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 of September 30, 2020, we 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 ended September 30, 2017, cash flows provided by operating activities totaled $71.8 million compared to $72.3 million during the same prior year period. The decrease in operating cash was primarily due to transaction costs associated with the Isle Acquisition offset by a benefit in income taxes in the current year combined with changes in the balance sheet accounts in the normal course of business.

Investing Cash Flow2020 and Capital Expenditures.  Net cash flows used in investing activities totaled $1.4 billion for the nine months ended September 30, 2017 compared to $27.2 million for the same prior year period. Net cash flows used in investing activities for the nine months ended September 30, 2017 was primarily due to cash paid to acquire Isle in addition to $53.2 million in capital expenditures for various property enhancement2019.

Debt Obligations and maintenance projects and equipment purchases.

Financing Cash Flow.  Net cash flows provided by financing activities for the nine months ended September 30, 2017 totaled $1.4 billion compared to $78.7 million used in financing activities for the nine months ended September 30, 2016. This increase was primarily related to the issuance of debt associated with the Isle Acquisition, the refinancing of our Term Loan and Revolving Credit Facility in May 2017 and the issuance of additional 6% Senior Notes in September 2107. This increase was partially offset by net payments made on our credit facilities throughout the nine months ended September 30, 2017.

Leases

New Debt Obligations

7% Senior Notes

On July 23, 2015, the Company issued at par $375.0 million in aggregate principal amount of 7.0% senior notes due 2023 (“7% Senior Notes”) pursuant to the indenture, dated as of July 23, 2015 (the “Indenture”), between the Company and U.S. Bank, National Association, as Trustee. The 7% Senior Notes will mature on August 1, 2023, with interest payable semi-annually in arrears on February 1 and August 1 of each year.

On or after August 1, 2018, the Company may redeem all or a portion of the 7% Senior Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest and additional interest, if any, on the 7% Senior Notes redeemed, to the applicable redemption date, if redeemed during the twelve month period beginning on August 1 of the years indicated below:

Year

 

Percentage

 

 

2018

 

 

105.250

 

%

2019

 

 

103.500

 

%

2020

 

 

101.750

 

%

2021 and thereafter

 

 

100.000

 

%

Prior to August 1, 2018, the Company may redeem all or a portion of the 7% Senior Notes at a price equal to 100% of the 7% Senior Notes redeemed plus accrued and unpaid interest to the redemption date, plus a make-whole premium. At any time prior to August 1, 2018, the Company is also entitled to redeem up to 35% of the original aggregate principal amount of the 7% Senior Notes with proceeds of certain equity financings at a redemption price equal to 107% of the principal amount of the 7% Senior Notes


redeemed, plus accrued and unpaid interest. If the Company experiences certain change of control events (as defined in the Indenture), it must offer to repurchase the 7% Senior Notes at 101% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company must offer to repurchase the 7% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date. The 7% Senior Notes are subject to redemption imposed by gaming laws and regulations of applicable gaming regulatory authorities.

The Indenture contains certain covenants limiting, among other things, the Company’s ability and the ability of its subsidiaries (other than its unrestricted subsidiaries) to:

pay dividends or distributions or make certain other restricted payments or investments;

Transactions

incur or guarantee additional indebtedness or issue disqualified stock or create subordinated indebtedness that is not subordinated to the 7% Senior Notes or the guarantees of the 7% Senior Notes;

create liens;

transfer and sell assets;

merge, consolidate, or sell, transfer or otherwise dispose of all or substantially all of the Company’s assets;

enter into certain transactions with affiliates;

engage in lines of business other than the Company’s core business and related businesses; and

create restrictions on dividends or other payments by restricted subsidiaries.

These covenants are subjectWe were party to a number of exceptions and qualifications as set forth in the Indenture. The Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on such 7% Senior Notes to be declared due and payable. As of September 30, 2017, the Company was in compliance with all of the covenants under the Indenture relating to the 7% Senior Notes.

6% Senior Notes

On March 29, 2017, Eagle II Acquisition Company LLC (“Eagle II”), a wholly-owned subsidiary of the Company, issued $375.0 million aggregate principal amount of 6% Senior Notes due 2025 (the “6% Senior Notes”) pursuant to an indenture, dated as of March 29, 2017 (the “New Indenture”), between Eagle II and U.S. Bank, National Association, as Trustee. The 6% Senior Notes will mature on April 1, 2025, with interest payable semi-annually in arrears on April 1 and October 1, commencing October 1, 2017. The proceeds of the offering, and additional funds in the amount of $1.9 million in respect of interest expected to be accrued on the 6% Notes, were placed in escrow pending satisfaction of certain conditions, including consummation of the Isle Acquisition. In connection with the consummation of the Isle Acquisition on May 1, 2017, the escrowed funds were released and ERI assumed Eagle II’s obligations under the 6% Senior Notes and the New Indenture and certain of the Company’s subsidiaries (including Isle and certain of its subsidiaries) executed guarantees of the Company’s obligations under the 6% Senior Notes.

On September 13, 2017, the Company issued an additional $500.0 million principal amount of its 6% Senior Notes at an issue price equal to 105.5% of the principal amount of the 6% Senior Notes. The additional notes were issued pursuant to the New Indenture that governs the 6% Senior Notes. The Company used the proceeds of the offering to repay $78.0 million of outstanding borrowings under the revolving credit facility and used the remainder to repay $444.5 million outstanding borrowings under the term loan facility and related accrued interest. As a result of the offering and retirement of existing debt, the Company recognized a loss of $10.0 million during the three months ended September 30, 2017.

On or after April 1, 2020, the Company may redeem all or a portion of the 6% Senior Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest and additional interest, if any, on the 6% Senior Notes redeemed, to the applicable redemption date, if redeemed during the 12-month period beginning on April 1 of the years indicated below:

Year

 

Percentage

 

 

2020

 

 

104.500

 

%

2021

 

 

103.000

 

%

2022

 

 

101.500

 

%

2023 and thereafter

 

 

100.000

 

%


Prior to April 1, 2020, the Company may redeem all or a portion of the 6% Senior Notes at a price equal to 100% of the 6% Senior Notes redeemed plus accrued and unpaid interest to the redemption date, plus a make-whole premium. At any time prior to August 1, 2018, the Company is also entitled to redeem up to 35% of the original aggregate principal amount of the 6% Senior Notes with proceeds of certain equity financings at a redemption price equal to 106% of the principal amount of the 6% Senior Notes redeemed, plus accrued and unpaid interest. If the Company experiences certain change of control events (as defined in the New Indenture), it must offer to repurchase the 6% Senior Notes at 101% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company must offer to repurchase the 6% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date.

The 6% Senior Notes are subject to redemption imposed by gaming laws and regulations of applicable gaming regulatory authorities.

The New Indenture contains certain covenants limiting, among other things, the Company’s ability and the ability of its subsidiaries (other than its unrestricted subsidiaries) to:

pay dividends or distributions or make certain other restricted payments or investments;

incur or guarantee additional indebtedness or issue disqualified stock or create subordinated indebtedness that is not subordinated to the 6% Senior Notes or the guarantees of the 6% Senior Notes;

create liens;

transfer and sell assets;

merge, consolidate, or sell, transfer or otherwise dispose of all or substantially all of the Company’s assets;

enter into certain transactions with affiliates;

engage in lines of business other than the Company’s core business and related businesses; and

create restrictions on dividends or other payments by restricted subsidiaries.

These covenants are subject to a number of exceptions and qualifications as set forth in the New Indenture. The New Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on such 6% Senior Notes to be declared due and payable. As of September 30, 2017, the Company was in compliance with all of the covenants under the New Indenture relating to the 6% Senior Notes.

Credit Facility

On July 23, 2015, the Company entered into a new $425.0 million seven year term loan (the “Term Loan”) and a $150.0 million five year revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan, the “Prior Credit Facility”).

The Term Loan bore interest at a rate per annum of, at the Company’s option, either (x) LIBOR plus 3.25%, with a LIBOR floor of 1.0%, or (y) a base rate plus 2.25%. Borrowings under the Revolving Credit Facility bore interest at a rate per annum of, at the Company’s option, either (x) LIBOR plus a spread ranging from 2.5% to 3.25% or (y) a base rate plus a spread ranging from 1.5% to 2.25%, in each case with the spread determined based on the Company’s total leverage ratio. Additionally, the Company paid a commitment fee on the unused portion of the Revolving Credit Facility not being utilized in the amount of 0.50% per annum.

On May 1, 2017, all of the outstanding amounts under the Prior Credit Facility were repaid with proceeds of borrowings under the New Credit Facility (as defined below) and the Prior Credit Facility was terminated.

New Credit Facility

On April 17, 2017, Eagle II entered into a new credit agreement by and among Eagle II, as initial borrower,with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto dated as of April 17, 2017 (the “New(as amended, the “ERI Credit Facility”), consisting of a $1.45$1.5 billion term loan facility (the “New Term Loan Facility” or the “New Term Loan”) and a $300.0$500 million revolving credit facility.

In an effort to maintain liquidity and provide financial flexibility as the effects of COVID-19 continued to evolve and impact global financial markets, we borrowed $465 million under the ERI Credit Facility on March 16, 2020, which we repaid in July 2020 utilizing, in part, proceeds from the sale of our interests in Kansas City and Vicksburg.
On July 6, 2020, Colt Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Escrow Issuer”) issued $3.4 billion aggregate principal amount of 6.250% Senior Secured Notes due 2025 (the “CEI Senior Secured Notes”), $1.8 billion aggregate principal amount of 8.125% Senior Notes due 2027 (the “CEI Senior Notes”) and $1.0 billion aggregate principal amount of 5.75% Senior Secured Notes due 2025 (the “CRC Senior Secured Notes”).
On July 20, 2020, in connection with the closing of the Merger, the Company entered into a new credit agreement (“CEI Credit Agreement”) which provides a five-year senior secured revolving credit facility for an aggregate principal amount of $1.2 billion (the “New“CEI Revolving Credit Facility”),. In addition, Caesars Resort Collection, LLC, which was undrawn at closing. The proceedsbecame a wholly-owned subsidiary of the New Term LoanCompany as a result of the Merger (“CRC”), entered into an incremental agreement to the CRC Credit Agreement (described below) for an aggregate principal amount of $1.8 billion.
A portion of the proceeds from these arrangements was used to prepay in full the loans outstanding and terminate all commitments under the ERI Credit Facility, and additional fundsto satisfy and discharge the Company’s 6% Senior Notes due 2025, 6% Senior Notes due 2026, and the 7% Senior Notes due 2023.
The 6% Senior Notes due 2025 were redeemed at a redemption price of 105%, the 7% Senior Notes due 2023 were redeemed at a redemption price of 103.5%, and $210 million aggregate principal amount of the 6% Senior Notes due 2026 was redeemed at a redemption price of 106% with the remaining balance redeemed at a redemption price of 100% of the aggregate principal amount thereof plus the Applicable Premium, as defined in the indenture for the 6% Senior Notes due 2026. The redemption of these Notes resulted in a loss on extinguishment of debt of $132 million during the three and nine months ended September 30, 2020, which is recorded within other (loss) income on the Statement of Operations.
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CEI Senior Secured Notes due 2025
On July 6, 2020, Escrow Issuer issued $3.4 billion in aggregate principal amount of $4.5 million in respect of interest expected6.250% CEI Senior Secured Notes pursuant to be accrued onan indenture dated July 6, 2020 (the “Senior Secured Notes Indenture”), by and among the New Term Loan Facility, were placed in escrow pending satisfaction of certain conditions, including consummation of the Isle Acquisition.Escrow Issuer, U.S. Bank National Association, as trustee, and U.S. Bank National Association, as collateral agent. In connection with the consummation of the Isle Acquisition on May 1, 2017,Merger, we assumed the escrowed funds were releasedrights and ERI assumed Eagle II’s obligations under the New Credit FacilityCEI Senior Secured Notes and certainthe Senior Secured Notes Indenture on July 20, 2020.The CEI Senior Secured Notes will mature on July 1, 2025 with interest payable semi-annually in cash in arrears on January 1 and July 1 of ERI’s subsidiaries (including Isleeach year, commencing January 1, 2021.
CEI Senior Notes due 2027
On July 6, 2020, Escrow Issuer issued $1.8 billion in aggregate principal amount of 8.125% Senior Notes due 2027 pursuant to an indenture, dated July 6, 2020 (the “Senior Notes Indenture”), by and certain of its subsidiaries) executed guarantees of ERI’sbetween the Escrow Issuer and U.S. Bank National Association, as trustee. We assumed the rights and obligations under the New Credit Facility.


AsCEI Senior Notes and the Senior Notes Indenture on July 20, 2020. The CEI Secured Notes will mature on July 1, 2027 with interest payable semi-annually in cash in arrears on January 1 and July 1 of September 30, 2017, the Company hadeach year, commencing January 1, 2021.

CRC Senior Secured Notes due 2025
On July 6, 2020, Escrow Issuer issued $1.0 billion outstanding onin aggregate principal amount of 5.75% Senior Notes due 2025 pursuant to an indenture, dated July 6, 2020 (the “CRC Senior Secured Notes Indenture”), by and among the New Term Loan. There were no borrowings outstandingEscrow Issuer, U.S. Bank National Association, as trustee and Credit Suisse AG, Cayman Islands Branch, as collateral agent. CRC assumed the rights and obligations, jointly and severally, under the NewCRC Senior Secured Notes on July 20, 2020. The rights and obligations under the CRC Senior Secured Notes to be assumed jointly and severally by CRC. The CRC Senior Secured Notes will mature on July 1, 2025 with interest payable semi-annually in cash in arrears on January 1 and July 1 of each year, commencing January 1, 2021.
CEI Revolving Credit Facility
On July 20, 2020, we entered into a new credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, U.S. Bank National Association, as collateral agent, and certain banks and other financial institutions and lenders party thereto, as well as an incremental amendment thereto, which provide for a five-year CEI Revolving Credit Facility for an aggregate principal amount of $1.2 billion. The CEI Revolving Credit Facility matures in 2025 and includes a letter of credit sub-facility of $250 million.
The interest rate per annum applicable under the CEI Revolving Credit Facility, at the Company’s option is either (a) LIBOR adjusted for certain additional costs, subject to a floor of 0% or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by JPMorgan Chase Bank, N.A. and (iii) the one-month adjusted LIBOR rate plus 1.00%, in each case plus an applicable margin. Such applicable margin shall be 3.25% per annum in the case of September 30, 2017. The Companyany LIBOR loan and 2.25% per annum in the case of any base rate loan, subject to three 0.25% step-downs based on the Company’s total leverage ratio.
Additionally, we are required to pay a commitment fee in respect of any unused commitments under CEI Revolving Credit Facility in the amount of 0.50% of principal amount of the commitments of all lenders, subject to a step-down to 0.375% based upon the Company’s total leverage ratio. We are also required to pay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for LIBOR borrowings on the dollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer’s customary documentary and processing fees and charges and a fronting fee in an amount equal to 0.125% of the daily stated amount of such letter of credit.
We had $291.6$266 million of available borrowing capacity, after consideration of $8.4$19 million in outstanding letters of credit under its NewCEI Revolving Credit Facility, as of September 30, 2017. At2020.
Convention Center Mortgage Loan
On September 30, 2017, the18, 2020, we entered into a loan agreement with VICI to borrow a 5-year, $400 million Forum Convention Center mortgage loan (the “Mortgage Loan”). The Mortgage Loan bears interest at a rate of, initially, 7.7% per annum, which escalates annually to a maximum interest rate onof 8.3% per annum.
Assumed Debt Activity
Former Caesars and its subsidiaries incurred the Newfollowing indebtedness that remained outstanding following the consummation of the Merger.
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CRC Term Loans and CRC Revolving Credit Facility
In connection with the Merger, we assumed the CRC senior secured credit facility (the “CRC Senior Secured Credit Facilities”), which included a $1.0 billion five-year revolving credit facility (the “CRC Revolving Credit Facility”) and an initial $4.7 billion seven-year first lien term loan (the “CRC Term Loan”). The CRC Senior Secured Credit Facilities were funded pursuant to the Credit Agreement, dated as of December 22, 2017 (the “CRC Credit Agreement”). On July 20, 2020, in connection with the closing of the Merger, CRC entered into an incremental amendments to the CRC Credit Agreement, which provided a $1.8 billion incremental tern loan (“CRC Incremental Term Loan”).
The CRC Term Loan was 3.42%, and the weighted average interest rate on the Newmatures in 2024. The CRC Incremental Term Loan matures in 2025. The CRC Revolving Credit Facility matures in 2022 and includes a letter of credit sub-facility. Each of the CRC Term Loan requires scheduled quarterly principal payments in amounts equal to 0.25% of the original aggregate principal amount, with the balance due at maturity. The CRC Credit Agreement also includes customary voluntary and mandatory prepayment provisions, subject to certain exceptions. As of September 30, 2020, approximately $64 million was 4.12% based upon the weighted average interest ratecommitted to outstanding letters of credit. As of September 30, 2020, there were no borrowings outstanding on our Newunder the CRC Revolving Credit Facility.
Borrowings under the CRC Credit Agreement bear interest at a rate equal to either (a) LIBOR adjusted for certain additional costs, subject to a floor of 0% or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by Credit Suisse AG, Cayman Islands Branch, as administrative agent under the CRC Credit Agreement and (iii) the one-month adjusted LIBOR rate plus 1.00%, in each case plus an applicable margin. Such applicable margin shall be (a) with respect to the CRC Term Loan, 2.75% per annum in the case of any LIBOR loan or 1.75% per annum in the case of any base rate loan, (b) with respect to the CRC Incremental Term Loan, 4.50% per annum in the case of any LIBOR loan or 3.50% in the case of any base rate loan and (c) in the case of the CRC Revolving Credit Facility, as2.25% per annum in the case of September 30, 2017.

The Company appliedany LIBOR loan and 1.25% per annum in the net proceedscase of any base rate loan, subject in the case of the New Term Loan Facility and borrowings under the NewCRC Revolving Credit Facility totaling $135 million, together withto two 0.125% step-downs based on CRC’s senior secured leverage ratio (“SSLR”), the proceedsratio of the 6% Senior Notes,first lien senior secured net debt to adjusted earnings before interest, taxes, depreciation and cash on hand, to (i) pay the cash portion of the consideration payable in the Isle Acquisition, (ii) refinance all of the debt outstanding under Isle’s existing credit facility, (iii) redeem or otherwise repurchase all of Isle’s outstanding 5.875% Senior Notes due 2021 and 8.875% Senior Subordinated Notes due 2020, (iv) repay all amounts outstanding under the Company’s Prior Credit Facility and (v) pay fees and costs associated with the Isle Acquisition and such financing transactions.

amortization. The Company’s obligations under the NewCRC Revolving Credit Facility will mature on April 17, 2022. The Company’s obligationsis subject to a financial covenant discussed below.

In addition, CRC is required to pay a commitment fee in respect of any commitments under the New Term LoanCRC Revolving Credit Facility will mature on April 17, 2024. The Company wasin the amount of 0.50% of the principal amount of the commitments, subject to step-downs to 0.375% and 0.25% based upon CRC’s SSLR. CRC is also required to make quarterly principal paymentspay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for LIBOR borrowings on the dollar equivalent of the daily stated amount of outstanding letters of credit, plus such letter of credit issuer’s customary documentary and processing fees and charges and a fronting fee in an amount equal to $3.60.125% of the daily stated amount of such letter of credit.
Former Caesars 5% Convertible Notes
On October 6, 2017, Former Caesars issued $1.1 billion aggregate principal amount of 5.00% convertible senior notes maturing in 2024 (the “5% Convertible Notes”).
The 5% Convertible Notes are convertible into weighted average of the number of shares of Company Common Stock and amount of cash actually received per share by holders of common stock of Former Caesars that made elections for consideration in the Merger. As of September 30, 2020, we have paid approximately $574 million and issued approximately 6.8 million shares to settle $487 million of the convertible notes during 2020. In October 2020, we paid an additional $328 million and issued 3.9 million shares to settle an additional $281 million of the convertible notes.
The Company has determined that the 5% Convertible Notes contain derivative features that require bifurcation. The Company separately account for the liability component and equity conversion option of the Convertible Notes. The portion of the overall fair value allocated to the liability was calculated by using a market-based approach without the conversion features included. The difference between the overall instrument value and the value of the liability component was assumed to be the value of the equity component. See Note 11 for more information on the New Term Loan FacilityConvertible Notes’ fair value measurements.
Net amortization of the debt issuance costs and the discount and/or premium associated with the Company’s indebtedness totaled $34 million and $2 million for the three months ended September 30, 2020 and 2019, respectively, and $37 million and $6 million for the nine months ended September 30, 2020 and 2019 respectively. Amortization of debt issuance costs is computed using the effective interest method and is included in interest expense.
VICI Leases
Upon consummation of the Merger, we assumed obligations of certain real property assets leased from VICI by Former Caesars under the following agreements: (i) for a portfolio of properties at various locations throughout the United States (the “Non-
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CPLV lease”), (ii) for Caesars Palace Las Vegas (the “CPLV lease”), (iii) for Harrah’s Joliet Hotel & Casino (the “Joliet Lease”) and (iv) for Harrah’s Las Vegas (the “HLV Lease”). These lease agreements provided for annual fixed rent (subject to escalation) of $773 million during an initial period, then rent consisting of both base rent and variable rent elements. The lease agreements had a 15-year initial term and four five-year renewal options. The lease agreements included escalation provisions beginning in year two of the initial term and continuing through the renewal terms. The lease agreements also included provisions for variable rent payments calculated, in part, based on increases or decreases of net revenue of the last dayunderlying lease properties, commencing in year eight of each fiscal quarterthe initial term and continuing through the renewal terms.
Former Caesars entered into a Golf Course Use Agreement with VICI, which has a 35-year term (inclusive of all renewal periods), pursuant to which such affiliates of the Company agreed to pay (i) an annual payment of $10 million, subject to escalation, (ii) an annual use fee of $3 million, subject to escalation beginning in the second year, and (iii) certain per-round fees, all as more particularly set forth in the Golf Course Use Agreement.
In connection with the closing of the Merger on July 20, 2020, we consummated a series of transactions with VICI and certain of its affiliates in accordance with the MTA entered on June 30, 2017.24, 2019 and certain purchase and sales agreement entered on September 26, 2019. We consummated sale leaseback transactions related to Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Resort Atlantic City, including the Harrah’s Atlantic City Waterfront Conference Center, for approximately $1.8 billion of net proceeds. The Company satisfied this requirement as a resultCPLV Lease with VICI was amended, among other things, (i) add Harrah’s Las Vegas (“HLV”) to the leased premises thereunder (and in connection therewith HLV Lease was terminated), (ii) add (subject to certain adjustments) the rent payable with respect to HLV under such terminated stand-alone lease to such lease and further increase the annual rent payable with respect to HLV by approximately $15 million, (iii) increase the annual rent with respect to CPLV by approximately $84 million and (iv) extend the term of such lease so that following the amendment of such lease there will be 15 years remaining until the expiration of the principal prepaymentinitial term. In addition, Harrah’s New Orleans, Harrah’s Laughlin, and Harrah’s Resort Atlantic City, including the Harrah’s Atlantic City Waterfront Conference Center, were added to the Regional Lease and such lease was further amended to increase the annual rent thereunder by $154 million in the aggregate related to such added properties and extend the term of $444.5 million on September 13, 2017 in conjunction withsuch lease so that following the issuanceamendment of such lease there will be 15 years remaining until the expiration of the additional 6% Senior Notes. In addition,initial term. Furthermore, the Company is required to make mandatory payments of amounts outstanding under the New Credit Facility with the proceeds of certain casualty events, debt issuances, and asset sales and, depending on its consolidated total leverage ratio, the Company is required to apply a portion of its excess cash flow to repay amounts outstanding under the New Credit Facility.

The interest rate per annum applicable to loans under the New Revolving Credit Facility are, at our option, either (i) LIBOR plus a margin ranging from 1.75% to 2.50% or (ii) a base rate plus a margin ranging from 0.75% to 1.50%, which margin is based on our total leverage ratio. The interest rate per annum applicable to the loans under the New Term Loan Facility is, at our option, either (i) LIBOR plus 2.25%, or (ii) a base rate plus 1.25%; provided, however, that in no event will LIBOR be less than zero or the base rate be less than 1.00% overJoliet Lease, as well as the term of the New Term Loan Facility orGolf Course Use Agreement, were extended such that there will be 15 years remaining until the New Revolving Credit Facility. Additionally, the Company pays a commitment fee on the unused portionexpiration of the Revolving Credit Facility not being utilized ininitial term. Our VICI lease is accounted for as a financing obligation and totaled $11 billion as of September 30, 2020. Furthermore, we obtained waivers from VICI with relation to annual capital expenditure requirements. This waiver is effective as of June 1, 2020 until December 31, 2020. See Note 9 to our Consolidated Condensed Financial Statements for additional information about our VICI Lease and related matters.

GLPI Leases
Our GLPI Master Lease is accounted for as a financing obligation and totaled $1.2 billion as of September 30, 2020. Additionally, our GLPI Master Lease contains certain operating, capital expenditure and financial covenants thereunder, and our ability to maintain compliance with these covenants was also negatively impacted. On June 15, 2020, we entered into an amendment to the amount of 0.50% per annum.

The New Credit Facility is secured by substantially all of the Company’s personal property assets and substantially all personal property assets of each subsidiary that guaranties the New Credit Facility (other than certain subsidiary guarantors designated as immaterial) (the “New Credit Facility Guarantors”), whether owned on the closing date of the New Credit Facility or thereafter acquired, and mortgages on the real property and improvements owned or leased us or the New Credit Facility Guarantors. The New Credit Facility is also secured by a pledge of all of the equity owned by us and the New Credit Facility Guarantors (subject to certain gaming law restrictions). The credit agreement governing the New Credit Facility contains a number of customary covenants that,GLPI Master Lease which, among other things, restrict, subjectprovides certain relief under these covenants in the event of facility closures due to pandemics, governmental restrictions and certain exceptions,other instances of unavoidable delay. As of July 17, 2020, the Company’s abilityamendment to the GLPI Master Lease became effective as we obtained all necessary approvals and the abilityapplicable waiting period expired. See Note 9 to our Consolidated Condensed Financial Statements for additional information about our GLPI Master Lease and related matters.

Contractual Obligations
The Company assumed various long-term debt arrangements, financing obligations and leases, previously described, associated with Former Caesars as result of the New Credit Facility Guarantors to incur additional indebtedness, create liens on collateral, engage in mergers, consolidations or asset dispositions, make distributions, make investments, loans or advances, engage in certain transactions with affiliates or subsidiaries or make capital expenditures.

The New Credit Facility containsconsummation of the Merger. See Note 2 for a numberdescription of customary covenants that, among other things, restrict, subject to certain exceptions, the Company’s abilityMerger and the ability of the subsidiary guarantors to incur debt; create liens on collateral; engage in mergers, consolidations or asset dispositions; pay dividends or make distributions; make investments, loans or advances; engage in certain transactions with affiliates or subsidiaries; or modify their lines of business.

The New Credit Facility also includes certain financial covenants, including the requirements that we maintain throughout the term of the New Credit Facilityrelated obligations assumed and measured as of the end of each fiscal quarter, and solely with respect to loans under the New Revolving Credit Facility, a maximum consolidated total leverage ratio of not more than 6.50 to 1.00Note 13 for the period beginning on the closing date and ending with the fiscal quarter ending December 31, 2018, 6.00 to 1.00 for the period beginning with the fiscal quarter beginning January 1, 2019 and ending with the fiscal quarter ending December 31, 2019, and 5.50 to 1.00 for the period beginning with the fiscal quarter beginning January 1, 2020 and thereafter. The Company will also be required to maintain an interest coverage ratio in an amount not less than 2.00 to 1.00 measured on the last day of each fiscal quarter beginning on the closing date, and ending with the fiscal quarter ending December 31, 2018, 2.50 to 1.00 for the period beginning with the fiscal quarter beginning January 1, 2019 and ending with the fiscal quarter ending December 31, 2019, and 2.75 to 1.00 for the period beginning with the fiscal quarter beginning January 1, 2020 and thereafter.

The New Credit Facility contains a number of customary events of default, including, among others, for the non-payment of principal, interest or other amounts, the inaccuracy of certain representations and warranties, the failure to perform or observe certain covenants, a cross default to our other indebtedness including the Notes, certain events of bankruptcy or insolvency; certain ERISA


events, the invalidity of certain loan documents, certain changes of control and the loss of certain classes of licenses to conduct gaming. If any event of default occurs, the lenders under the New Credit Facility would be entitled to take various actions, including accelerating amounts outstanding thereunder and taking all actions permitted to be taken by a secured creditor. As of September 30, 2017, the Company was in compliance with the covenants under the New Credit Facility.

Contractual Obligations

Other than the previously discussed 6% Senior Notes, New Credit Facility and Isle leases for real estate and various equipment, thereadditional contractual obligations. There have been no material changes forduring the three and nine months ended September 30, 20172020 to our contractual obligations as disclosed in our Annual Report on Form 10‑K10-K for the year ended December 31, 2016.

2019.

Other Liquidity Matters

We are faced with certain contingencies involving litigation and environmental remediation and compliance. These commitments and contingencies are discussed in “Part II, Item 1. Legal Proceedings” and Note 1013 to our unaudited consolidated condensed financial statements, both of which are included elsewhere in this report. In addition, new competition may have a material adverse effect on our revenues, and could have a similar adverse effect on our liquidity. See “Part I, Item 1A. Risk Factors—Risks Related to Our Business” which is included in our Annual Report on Form 10-K for the year ended December 31, 20162019 and “Part II, Item IA. Risk Factors” which is included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.

2020.

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Critical Accounting Policies

Our critical accounting policies disclosures are included in our Annual Report on Form 10‑K10-K for the year ended December 31, 2016.2019. Except as described in footnotesNote 1 and 3Note 2, as it relates to the Merger with Former Caesars, to the accompanying condensed notes of these consolidated condensed financial statements, we believe there have been no material changes since December 31, 2016.2019. We have not substantively changed the application of our policies and there have been no material changes in assumptions or estimation techniques used as compared to prior periods.

Off‑Balance

Off-Balance Sheet Arrangements

We are not party to any off‑balance sheet arrangements.

Cautionary Statement Regarding Forward‑Looking Information

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

projections of future results of operations or financial condition;

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

expenses and our ability to operate efficiently and our ability to achieve benefits and synergies associated with the Isle Acquisition;

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

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

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

expectations regarding availability of capital resources;


•

our intention to pursue development opportunities and acquisitions and obtain financing for such development and acquisitions; and

the impact of regulation on our business and our ability to receive and maintain necessary approvals for our existing properties and future projects.

Any forward‑looking statement is based upon a number of estimates and assumptions that, while considered reasonable by us, is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control, and are subject to change. Actual results of operations may vary materially from any forward‑looking statement made herein. Forward‑looking statements should not be regarded as a representation by us or any other person that the forward‑looking statements will be achieved. Undue reliance should not be placed on any forward‑looking statements. Some of the contingencies and uncertainties to which any forward‑looking statement contained herein is subject include, but are not limited to, the following:

our substantial indebtedness, including indebtedness incurred in connection with the Isle Acquisition, and significant financial commitments could adversely affect our results of operations and our ability to service such obligations;

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

our facilities operate in very competitive environments and we face increasing competition;

the ability to successfully integrate ERI’s and Isle’s operations, technologies and employees;

the ability to realize growth opportunities and cost synergies from the Isle Merger, and any future acquisitions, in a timely manner or at all;

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

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

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

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

changes in interest rates and capital and credit markets;

our ability to comply with certain covenants in our debt documents;

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

construction factors relating to maintenance and expansion of operations;

our ability to attract and retain customers;

weather or road conditions limiting access to our properties;

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

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

the other factors set forth in Part I, Item 1A. “Risk Factors” included in our Annual Report on Form 10‑K for the year ended December 31, 2016.

In light of these and other risks, uncertainties and assumptions, the forward‑looking events discussed in this report might not occur. Any forward‑looking statement speaks only as of the date on which that statement is made. We do not intend to update publiclycurrently have any forward‑looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as may be required by law.


off-balance sheet arrangements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We do not hold any market risk sensitive instruments for trading purposes. Our primary exposureare exposed to market risk ischanges in interest rate risk, specifically long‑term U.S. treasury rates and the applicable spreads in the high‑yield investment risk, short‑term and long‑term LIBOR rates, and short‑term Eurodollar rates, and their potential impact on our long‑term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long‑term fixed‑rate borrowings and short‑term borrowings under the Credit Facility. We do not currently utilize derivative financial instruments for trading or speculative purposes. (See also “Liquidity and Capital Resources” above for additional information related to the refinancing of our long‑term debt.)

primarily from long-term variable-rate debt arrangements. As of September 30, 2017,2020, interest on borrowings under our long‑term variable‑rateCredit Facility was subject to fluctuation based on changes in short-term interest rates.

As of September 30, 2020, our long-term variable-rate borrowings totaled $1.0$6.4 billion under the NewCRC Term LoanLoans and $900 million was outstanding under the CEI Revolving Credit Facility. Long-term variable-rate borrowings under the CRC Term Loans and the CEI Revolving Credit Facility represented approximately 44%45% of our long‑term debt. In conjunction withlong-term debt as of September 30, 2020. Of our $16.2 billion face value of debt, as of September 30, 2020, we have entered into ten interest rate swap agreements to fix the issuance of $500 million of additional 6% Senior Notes and the retirementinterest rate on $3.0 billion of variable rate debt, this percentage declined from 54% asand $4.3 billion of December 31, 2016. Based on these changes, asdebt remains subject to variable interest rates for the term of the agreement. During the nine months ended September 30, 20172020, the weighted average interest raterates on our variable and fixed rate debt was 3.63%were 3.67% and 6.3%6.35%, respectively.

LIBOR is expected to be discontinued after 2021. The interest rate per annum applicable to loans under our credit facilities is, at our option, either LIBOR plus a margin or a base rate plus a margin. We intend to continue monitoring the developments with respect to the potential phasing out of LIBOR after 2021 and work with our lenders to ensure any transition away from LIBOR will have minimal impact on our financial condition, but can provide no assurances regarding the impact of the discontinuation of LIBOR.
On September 28, 2020, we entered into a foreign exchange forward contract to hedge the risk of appreciation of the GBP denominated purchase price. Under the agreement, we would purchase £1.3 billion at a contracted exchange rate. An unrealized loss of $5 million related to the change in fair value during the period from September 28, 2020 and September 30, 2020 was recorded in the consolidated condensed statement of operations. On October 1, 2020 the contract was cancelled. We may continue to utilize similar contracts in the future to hedge the risk of appreciation of the GBP denominated purchase of our possible acquisition of William Hill.
We evaluate our exposure to market risk by monitoring interest rates in the marketplace and have, on occasion, utilized derivative financial instruments to help manage this risk. We do not utilize derivative financial instruments for trading purposes. There waswere no material changequantitative changes in interest rateour market risk exposure, or how such risks are managed, for the nine months ended September 30, 2017 other than as previously discussed in Liquidity2020.
ITEM 4.    CONTROLS AND PROCEDURES.
(a)Evaluation of Disclosure Controls and Capital Resources section in Item 2.

ITEM 4.

CONTROLS AND PROCEDURES.

Procedures

(a)

Evaluation of Disclosure Controls and Procedures

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

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

(b)

Changes in Internal Controls

(b)Changes in Internal Controls

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

On May 1, 2017,July 20, 2020, we completed the acquisition of Isle.Merger with Former Caesars. See Part I, Item 1, Condensed Notes to Unaudited Consolidated Condensed Financial Statements, Note 2: Isle Acquisition and Preliminary Purchase Price Accounting,of Former Caesars, for a discussion of the acquisition and related financial data. The Company is in the process of integrating IsleFormer Caesars and our internal controls over financial reporting. As a result of these integration activities, certain controls will be evaluated and may be changed. Excluding the Isle Acquisition,Merger, there were no changes in our internal control over financial reporting that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.


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PART II

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

ITEM 1.    LEGAL PROCEEDINGS
We are a party to various lawsuits, which have arisen in the normal course of our business. Estimated losses are accrued for these lawsuits and claims when the loss is probable and can be estimated. The current liability for the estimated losses associated with those lawsuits is not material to our consolidated financial condition and those estimated losses are not expected to have a material impact on our results of operations.

On July 14, 2020, the Company filed a lawsuit for damages and declaratory relief in state court in New York relating to a transfer fee of $50 million that was assessed by the Indiana Gaming Commission upon the Company’s purchase of Hoosier Park Racino and Casino in 2017 from Centaur Holdings, LLC. Contemporaneous with the filing of the lawsuit, the Company notified Centaur that it was withholding payment of $50 million from Centaur Holdings that was otherwise due as a portion of a deferred payment for the purchase from Centaur. In the lawsuit, the Company seeks a declaration from the Court that the Sellers are required to indemnify Caesars for its losses arising out of or relating to payment of the transfer fee and that the Company is entitled to offset the $50 million transfer fee against payments otherwise due to Centaur.
Legal matters are discussed in greater detail in “Part I, Item 3. Legal Proceedings” and Note 1618 to our Consolidated Financial statementsStatements included in our Annual Report on Form 10‑K10-K for the year ended December 31, 2016.

2019.

ITEM 1A.

RISK FACTORS

Cautionary Statement Regarding Forward-Looking Information
This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding our strategies, objectives and plans for future development or acquisitions of properties or operations, as well as expectations, future operating results and other information that is not historical information. When used in this report, the terms or phrases such as “anticipates,” “believes,” “projects,” “plans,” “intends,” “expects,” “might,” “may,” “estimates,” “could,” “should,” “would,” “will likely continue,” and variations of such words or similar expressions are intended to identify forward-looking statements. Specifically, forward-looking statements may include, among others, statements concerning:
•the impact of COVID-19 on our business and financial condition;
•projections of future results of operations or financial condition;
•our ability to consummate the acquisition of William Hill and the disposition of MontBleu, Eldorado Shreveport and certain of our other properties, including required divestitures of certain properties located in Indiana;
•expectations regarding our business and results of operations of our existing casino properties and prospects for future development;
•expectations regarding trends that will affect our market and the gaming industry generally and the impact of those trends on our business and results of operations;
•our ability to comply with the covenants in the agreements governing our outstanding indebtedness and leases;
•our ability to meet our projected debt service obligations, operating expenses, and maintenance capital expenditures;
•expectations regarding availability of capital resources;
•our intention to pursue development opportunities, including the development of a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the Pompano casino and racetrack, and additional acquisitions and divestitures;
•our ability to realize the anticipated benefits of the acquisition of Former Caesars, William Hill and future development and acquisition opportunities; and
•the impact of regulation on our business and our ability to receive and maintain necessary approvals for our existing properties and future projects and operation of online sportsbook, poker and gaming
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Any forward-looking statements are based upon underlying assumptions, including any assumptions mentioned with the specific statements, as of the date such statements were made. Such assumptions are in turn based upon internal estimates and analyses of market conditions and trends, management plans and strategies, economic conditions and other factors. Such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control, and are subject to change. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend upon future circumstances that may not occur. Actual results may differ materially from any future results, performance or achievements expressed or implied by such statements. Forward-looking statements speak only as of the date they are made, and we assume no duty to update forward-looking statements. Forward-looking statements should not be regarded as a representation by us or any other person that the forward-looking statements will be achieved. Undue reliance should not be placed on any forward-looking statements. Some of the contingencies and uncertainties to which any forward-looking statement contained herein are subject include, but are not limited to, the following:
•the extent and duration of the impact of the global COVID-19 public health emergency on the Company’s business, financial results and liquidity;
•the impact and cost of new operating procedures expected to be implemented upon re-opening of the Company’s casinos;
•the impact of actions we have undertaken to reduce costs and improve efficiencies to mitigate losses as a result of the COVID-19 public health emergency, which could negatively impact guest loyalty and our ability to attract and retain our employees;
•the impact of the COVID-19 public health emergency and resulting unemployment and changes in general economic conditions on discretionary consumer spending and customer demand;
•our substantial indebtedness and significant financial commitments, including our obligations under our lease arrangements, could adversely affect our results of operations and our ability to service such obligations, react to changes in our markets and pursue development and acquisition opportunities;
•restrictions and limitations in agreements governing our debt and leased properties could significantly affect our ability to operate our business and our liquidity;
•risks relating to payment of a significant portion of our cash flow as debt service and rent under the leases of our casino properties with VICI and GLPI;
•financial, operational, regulatory or other potential challenges that may arise as a result of leasing of a number of our properties;
•our facilities operate in very competitive environments and we face increasing competition including through legalization of online betting and gaming;
•uncertainty regarding legalization of betting and online gaming in the jurisdictions in which we operate and conditions applicable to obtaining the licenses required to enable our betting and online gaming partners to conduct betting and gaming activities;
•the ability to identify suitable acquisition opportunities and realize growth and cost synergies from any future acquisitions;
•future maintenance, development or expansion projects will be subject to significant development and construction risks;
•our gaming operations are highly regulated by governmental authorities and the cost of complying or the impact of failing to comply with such regulations;
•changes in gaming taxes and fees in jurisdictions in which we operate;
•risks relating to pending claims or future claims that may be brought against us;
•changes in interest rates and capital and credit markets;
•our ability to comply with certain covenants in our debt documents and lease arrangements;
•the effect of disruptions to our information technology and other systems and infrastructure;
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•our ability to attract and retain customers;
•weather or road conditions limiting access to our properties;
•the effect of war, terrorist activity, acts of violence, natural disasters, public health emergencies and other catastrophic events;
•the intense competition to attract and retain management and key employees in the gaming industry; and
•other factors described in Part II, Item 1A. “Risk Factors” contained herein and our reports on Form 10-K, Form 10-Q and Form 8-K filed with the Securities and Exchange Commission.
In addition, the acquisition of William Hill and the disposition of Eldorado Shreveport, MontBleu, Harrah’s Louisiana Downs and certain of our other properties, including required divestitures of certain properties located in Indiana, create additional risks, uncertainties and other important factors, including but not limited to:
•the possibility that the proposed transactions are not consummated when expected or at all because required regulatory or other approvals are not received or other conditions to the consummation thereof are not satisfied on a timely basis or at all;
•the possibility that one or more of such transactions do not close on the terms described herein or that we are required to modify aspects of one or more of such transactions to obtain, or otherwise take action to satisfy conditions imposed in connection with, required regulatory approvals;
•the possibility that the Company will be required to pay a break fee under certain circumstances if the proposed William Hill acquisition is not consummated;
•risks associated with increased leverage as a result of the proposed acquisition of William Hill;
•the possibility that the anticipated benefits of the proposed transactions are not realized when expected or at all;
•the incurrence of significant transaction and acquisition-related costs and the possibility that the transactions may be more expensive to complete than expected;
•competitive responses to the proposed transactions;
•legislative, regulatory and economic developments;
•the possibility that our business or William Hill’s business may suffer as a result of the announcement of the acquisition;
•the ability to retain certain of our key employees and William Hills’ key employees;
•the outcome of legal proceedings that may be instituted as a result of the proposed transactions;
•the impact of the proposed transactions, or the failure to consummate the proposed transactions, on our stock price;
•diversion of management’s attention from our ongoing operations; and
•the impact of the announcement or consummation of the proposed transactions on the Company’s relationships with third parties, which may make it more difficult to maintain business relationships.
In light of these and other risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur. These forward-looking statements speak only as of the date on which this statement is made, even if subsequently made available on our website or otherwise, and we do not intend to update publicly any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as may be required by law.
You should also be aware that while we from time to time communicate with securities analysts, we do not disclose to them any material non-public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility and are not endorsed by us.
69

ITEM 1A.    RISK FACTORS
A description of our risk factors can be found in “Part I, Item 1A. Risk Factors” included in our Annual Report on Form 10‑K10-K for the year ended December 31, 2016.2019. There have been no material changes to those risk factors during the nine months ended September 30, 2017,2020, except for the following additional risk factors related to the Isle Acquisition.

We face substantial competitionimpact of COVID-19, the Merger and the recently announced William Hill acquisition.

The outbreak of COVID-19 has impacted our operations and caused an economic downturn, widespread unemployment and an adverse impact on consumer sentiment. Such negative impacts could continue for an extended period of time and may worsen.
On March 13, 2020, in response to the hotelcoronavirus public health emergency the U.S. government declared a national state of emergency. In an effort to help control the spread of COVID-19, public health officials imposed or recommended various measures, including social distancing, quarantine and casino industrystay-at-home or shelter-in-place directives, limitations on the size of gatherings, closures of work facilities, schools, public buildings and expect that such competition will continue

The gaming industry is characterizedbusinesses, and cancellation of events, including sporting events, concerts, conferences and meetings. As a result of orders issued by an increasingly high degree of competition among a large number of participants, including land‑based casinos, dockside casinos, riverboat casinos, casinos located on racing tracks and casinos located on Native American reservations and other forms of legalized gaming. We also compete, to a lesser extent, with other forms of legalized gaming and entertainment such as online computer gambling, bingo, pull tab games, card parlors, sports books, fantasy sports websites, “cruise-to-nowhere” operations, pari-mutuel or telephonic betting on horse racing and dog racing, state-sponsored lotteries, jai-alai, and,governmental authorities in the future, may compete with gaming at other venues. In addition, we compete more generally with other forms of entertainment for the discretionary spending of our customers.

Gaming competition is intense in most of the markets in which we operate. States that already have legalized casino gaming may further expand gaming, and other states that have not yet legalized gaming may do so in the future. Legalized casino gaming in these states and on Native American reservations near our markets or changes to gaming laws in states in which weour properties are located, all of our properties were closed beginning on March 18, 2020. While our properties have operations and in states surroundingreopened, our operations, financial results and cash flows have been affected by social distancing measures, including reduced gaming operations arising from the reconfiguration of our gaming floor, limitations on the number of customers present in our facilities, implementation of additional health and safety measures, restrictions on hotel, food and beverage outlets and limits on concerts, conventions or special events that would otherwise attract customers to our properties. We expect that our operations will continue to be impacted by such restrictions for the foreseeable future. In addition, our operations, financial results and cash flows would be further adversely affected by the implementation or extension of new or existing restrictions, including reinstatement of shelter-in-place requirements or additional restrictions on travel and business operations. The implementation of stay-at-home or additional social distancing and mitigation measures in response to COVID-19 or other public health emergencies could increase competition and couldcause future closures of all or a portion of our properties, which would adversely affect our operations. There has been significant competition in our marketsoperations, financial results and cash flows.

We may also face unforeseen liability or be subject to additional obligations as a result of the expansionCOVID-19 public health emergency, including as a result of claims alleging exposure to COVID-19 in connection with our operations or facilities by existing market participants,or to the entranceextent we are subject to a governmental enforcement action as a result of new gaming participants into a market or legislativefailing to comply with applicable health and safety regulations. COVID-19 has materially adversely affected the economy and financial markets of the United States and the world and has resulted in widespread unemployment in the United States. Consumer demand for casino hotel and racetrack properties such as ours is particularly sensitive to downturns in the economy, unemployment and the associated impact on discretionary spending on leisure activities which bring demand for casino hotel properties such as ours. Reduced customer demand could result in lower occupancy rates, reduced visitation and additional disruptions in our casino business. The extent of changes in prior years. For example, in Pennsylvania –customer demand resulting from the economic downturn, widespread unemployment, reduced consumer confidence and consumer fears on our properties cannot reasonably be determined, but the impact of such factors may be significant and protracted.
As a jurisdiction in whichresult of the foregoing, we currently operate two casinos –cannot predict the Governor signed legislation in October 2017 expanding gamingultimate scope, duration and impact of the COVID-19 public health emergency, but we expect that it will continue to allow for up to ten (10) additional casino locations, video gaming terminals (VGTs) at truck stops, interactive gaming (iGaming), gaming at airports and potentially sports wagering. This expansion could have a material adverseimpact on our business, financial condition, liquidity, results of operations (including revenues and profitability) and stock price for an extended period of time. The impact of the COVID-19 public health emergency may also have the effect of exacerbating many of the other risks described in our Annual Report on Form 10-K for the year ended December 31, 2019.
We have undertaken aggressive actions to reduce costs and improve efficiencies to mitigate losses as a result of the COVID-19 public health emergency, which could negatively impact guest loyalty and our ability to attract and retain employees.
As a result of the previous closure of all of our properties and the continued uncertainty regarding the duration and severity of this public health emergency, we have taken steps to reduce operating costs and improve efficiencies, including furloughing approximately 90% our employees while our casinos were closed. Such steps, and further changes we may make in the future to reduce costs, may negatively impact guest loyalty or our ability to attract and retain employees, and our reputation may suffer as a result. While a significant number of our employees returned to work once our casinos reopened, our operations continue to be affected by COVID-19 and our full work force has not returned. If our furloughed employees do not return to work with us when the COVID-19 public health emergency subsides, including because they find new employment during the furlough, we may experience operational challenges that may impact our ability to resume operations in full. We may also face demands or requests from labor unions that represent our employees, whether in the course of our periodic renegotiation of our collective bargaining agreements or otherwise, for additional health and safety measures, compensation, healthcare benefits or other terms
70

as a result of COVID-19 that could increase costs, and we could experience labor disputes or disruptions as we continue to implement our COVID-19 mitigation plans.
Our ability to remain in compliance with our covenants contained in the agreements governing our indebtedness and lease obligations, and our liquidity, may be negatively impacted by the COVID-19 public health emergency, measures implemented to curtail its spread, and changes in the economy, discretionary spending and consumer confidence.
Our casino operations are a primary source of income and operating cash flows which we rely upon to remain in compliance with covenants contained in the agreements governing our outstanding indebtedness and lease obligations. On September 25, 2020, we drew $900 million under one of our revolving credit facilities and, as a result, as of September 30, 2020, we had an aggregate of $900 million of borrowings outstanding under our credit facilities and $3.5 billion in outstanding principal amount of senior notes, $4.4 billion in outstanding principal amount of senior secured notes, $6.4 billion principal amount outstanding under our Term Loan B, $597 million principal amount outstanding of 5.00% Senior Convertible Notes due 2024 and $400 million in aggregate principal amount of outstanding mortgage debt. On September 28, 2020, the Company deposited $2.1 billion, which included the proceeds from the revolving credit facilities, into an escrow account. As of September 30, 2020, these funds in escrow were classified as restricted cash until certain regulatory approvals were received. While we were in compliance with the covenants under our lease obligations and the agreements governing our outstanding indebtedness as of September 30, 2020, our ability to remain in compliance with the quarterly maintenance covenants contained in such agreements would be negatively impacted by a prolonged period of closure of our properties or if the COVID-19 public health emergency, measures implemented to curtail its spread or changes in the economy, discretionary spending and consumer confidence have a protracted negative effect on Lady Luck Casino at Nemacolin Woodlands Resortour business. Failure to satisfy such quarterly maintenance covenants would require us to seek waivers or amendments of such covenants. If we are unable to obtain such waivers or amendments, our creditors and the lessor under some of our lease obligations would be entitled to exercise remedies under the documents governing such obligations, including acceleration of the outstanding principal amount of such indebtedness or termination of our lease arrangements. In addition, while we believe that our cash on hand will be sufficient to provide liquidity to meet our obligations during the period that our properties remain closed, a protracted period of closure of our casinos could impact our ability to make required payments under our outstanding indebtedness, lease obligations or other obligations. Our ability to raise additional financing may be restricted by the covenants and restrictions contained in Farmingtonthe agreements governing our indebtedness and Presque Isle Downscould be adversely affected by disruptions in Eriethe financing markets and changes to the economy caused by the COVID-19 public health emergency.
On October 6, 2020, the Company entered into a £1.5 billion interim facilities agreement. Upon receipt of regulatory approval of our gaminginterim facilities agreement, the Company transferred $1.4 billion of cash back into the operating accounts and the outstanding balance of our revolving credit facilities was repaid in full. Approximately $598 million of cash remains in an unrestricted account.
The COVID-19 public health emergency may exacerbate the risks associated with the Acquisition and the ongoing integration with Former Caesars.
As a result of the COVID-19 public health emergency, all of our properties were temporarily closed, and a significant majority of our employees were furloughed. The COVID-19 public health emergency has had an adverse impact on our businesses and results of operations. We cannot predict the scope, duration and impact of the COVID-19 public health emergency on our and William Hill’s businesses or on our ability to recognize the potential benefits of the Acquisition or integration with Former Caesars. We expect that the COVID-19 public health emergency may have the effect of exacerbating many of the risks related to the Merger and integration of Former Caesars’ with the Company as described in its Annual Report on Form 10-K for the year ended December 31, 2019 and the risks related to the Acquisition as described below. See “—We may fail to consummate the Acquisition or may not consummate it on the terms described herein.” The integration of two independent businesses is a complex, costly and time-consuming process and we expect that the impact of the COVID-19 public health emergency will make such integrations, both the Acquisition and the integration of Former Caesars with the Company, more challenging. Further, the Company and its subsidiaries have a significant amount of additional indebtedness outstanding following the consummation of the Merger and will have a significant amount of additional indebtedness outstanding following the consummation of the Acquisition. The Company and its subsidiaries expect to satisfy such obligations with cash flows from operations, at Mountaineerwhich may be adversely impacted by the COVID-19 public health emergency, cash on hand, borrowings under committed credit facilities, additional financing and Scioto Downs. Additionally, gaming facilitiesproceeds from asset sales.
We may fail to consummate the Acquisition or may not consummate it on the terms described herein.
On September 30, 2020, we agreed to acquire William Hill plc for a cash purchase price of approximately £2.9 billion, or $3.7 billion (the “Acquisition”). We intend to consummate the Acquisition in Ohio that commenced operations in recent years present significant competition for Mountaineer, Presque Isle Downsthe second half of 2021. The acquisition must be accepted by a requisite number of William Hill shareholders and Scioto Downs.

Casino gamingthe closing of such transaction is currently prohibited in several jurisdictions from whichsubject to the Shreveport/Bossier City market draws customers, primarily Texas. The Texas legislature has from time to time considered proposals to legalize gaming,receipt of

71

regulatory approvals and other customary closing conditions. As a result, the possible timing and likelihood of the completion of the Acquisition are uncertain, and, accordingly, there can be no assurance that casino gamingsuch acquisition will be completed on the expected terms, anticipated schedule or at all.
We may not consummate the Acquisition or realize the expected benefits therefrom if we do. In the event that we fail to consummate the Acquisition, we will have issued a significant number of additional shares of common stock and we will not have acquired the revenue generating assets that will be required to produce the earnings and cash flow we anticipated. As a result, failure to consummate the Acquisition would adversely affect our earnings per share and our ability to make distributions to stockholders. If the Acquisition is not consummated, we could be subject to a number of risks that may adversely affect our business and the market price of our common stock, including:
•we will be required to pay costs relating to the Acquisition, such as legal, accounting, financial advisory and printing fees, whether or not the Acquisition is consummated;
•time and resources committed by our management to matters relating to the Acquisition could otherwise have been devoted to pursuing other beneficial opportunities;
•the market price of our common stock could decline to the extent that the current market price reflects a market assumption that the Acquisition will be consummated; and
•we would not realize the benefits we expect to realize from consummating the Acquisition.
We cannot provide any assurance that the Acquisition will be consummated or that there will not be approved in Texasa delay in the future, whichconsummation of the Acquisition. Any increased costs associated with the delay or abandonment of the Acquisition, in addition to the impact of the COVID-19 public health emergency, may adversely impact our ability to remain in compliance with our covenants contained in the agreements governing our indebtedness and lease obligations, and our liquidity. See “—The COVID-19 public health emergency may exacerbate the risks associated with the Acquisition and the ongoing integration with Former Caesars.”
If the Acquisition is not consummated, our reputation in our industry and in the investment community could be damaged, and the market price of our common stock could decline.
The Acquisition is subject to the receipt of governmental approvals that may impose conditions that could have a materialan adverse effect on Eldorado Shreveport. Additionally, since visitors from California comprise a significant portionus or, if not obtained, could prevent consummation of our customer base in Reno, we also compete with Native Americanthe Acquisition.
Consummation of the Acquisition is conditioned upon the receipt of governmental approvals, including, without limitation, antitrust and gaming operations in California. Native American tribes are allowed to operate slot machines, lottery gamesregulatory approvals, including, among others, the Danish Gaming Authority, the Gambling Commissioner of Gibraltar, the Gaming Board For the Bahamas, Colorado Division of Gaming, Washington D.C. Office of Lottery and bankingCharitable Games, Delaware Lottery, Florida Division of Pari-mutuel Wagering, Illinois Gaming Board, Indiana Gaming Commission, Iowa Racing and percentage games on Native American lands. Although many existing Native American gaming facilities in northern California are modest compared to theGaming Commission, Michigan Gaming Control Board, Mississippi Gaming Commission, Nevada properties, a number of Native American tribes have established large‑scale gaming facilities in California. In addition, various forms of internet gaming have been approved in Nevada,Gaming Control Board and Gaming Commission, New Jersey Division of Gaming Enforcement, Mescalero Apache Tribal Gaming Commission, Rhode Island Lottery, West Virginia Lottery and Delaware, and legislation permitting internet gaming has been proposed by the federal government and other states.  The expansion of internet gaming in Nevada and other jurisdictions could result in significant additional competition.

Increased competition may require us to make substantial capital expenditures to maintain and enhance the competitive positions of our properties to increase the attractiveness and add to the appeal of our facilities. Because we are highly leveraged, after satisfying our obligations under our outstanding indebtedness, thereNational Indian Gaming Commission. There can be no assurance that we will have sufficient funds to undertake these expenditures or that weapprovals will be ableobtained and that the other conditions to obtain sufficient financing to fund such expenditures. If weconsummating the Acquisition will be satisfied. In addition, the governmental authorities from which the regulatory approvals are unable to make such expenditures, our competitive position could be negatively affected.


Our operations in certain jurisdictions dependrequired may impose conditions on agreements with third parties.

Our operations in several jurisdictions depend on agreements with third parties. If we are unable to renew these agreements on satisfactory terms as they expire, our business may be disrupted and, in the event of disruptions in multiple jurisdictions, could have a material adverse effect on our financial condition and results of operations. For example, Iowa law requires that each gambling venue in Iowa must have a licensed “Qualified Sponsoring Organization,” or QSO, which is a tax-exempt non-profit organization. The QSO must donate the profits it receives from casino operations to educational, civic, public, charitable, patriotic or religious uses. Each of our three Iowa properties has an agreement with a local QSO. We have the right to renew our agreements for Bettendorf and Waterloo when they expire in 2025 and 2018, respectively.

We have a management agreement with Nemacolin Woodlands Resort, the ownerconsummation of the gaming license issued by the Pennsylvania Gaming Control Board allowing operation of a casino at the resort. UnderAcquisition or require changes to the terms of this agreement, we constructedthe Acquisition or agreements to be entered into in connection with the Acquisition. Such conditions or changes and currently operate a casino at the resort. Our management agreement is subject to a buy-out provision onprocess of obtaining regulatory approvals could have the effect of delaying or after December 31, 2021, as well as other terms and conditions which could result in terminationimpeding consummation of the management agreement. The base termAcquisition or of imposing additional costs or limitations on us following consummation of the agreement is ten years, with four, five-year renewal options. Additionally, each party to the management agreement has certain termination rights. If the management agreement is terminated, we will no longerAcquisition, any of which might have the right to manage our casino at Nemacolin Woodlands Resort.

Our information technology and other systems are subject to cyber security risk including misappropriation of customer information or other breaches of information security.

We collect information relating to our guests and employees for various business purposes, including marketing and promotional purposes. The collection and use of personal data are governed by privacy laws and regulations enacted in the United States. We rely on information technology and other systems to maintain and transmit this personal and financial information, credit card settlements, credit card funds transmissions, mailing lists and reservations information. Our information and processes are subject to the ever-changing threat of compromised security, in the form of a risk of potential breach, system failure, computer virus, or unauthorized or fraudulent use by customers, company employees, or employees of third party vendors. The steps we take to deter and mitigate these risks may not be successful, and any resulting compromise or loss of data or systems could adversely impact, operations or regulatory compliance and could result in remedial expenses, fines, litigation, and loss of reputation, potentially impacting our financial results.

In addition, third party service providers and other business partners process and maintain proprietary business information and data related to our guests, suppliers and other business partners. Our information technology and other systems that maintain and transmit this information, or those of service providers or business partners, may also be compromised by a malicious third party penetration of our network security or that of a third party service provider or business partner, or impacted by intentional or unintentional actions or inactions by our employees or those of a third party service provider or business partner. As a result, our business information, guest, supplier, and other business partner data may be lost, disclosed, accessed or taken without their consent.

Any such loss, disclosure or misappropriation of, or access to, guests’ or business partners’ information or other breach of our information security can result in legal claims or legal proceedings, including regulatory investigations and actions, may have a serious impact on our reputation and may adversely affect our businesses, operating results and financial condition. Furthermore, the loss, disclosure or misappropriation of our business information may adversely affect our reputation, businesses, operating results and financial condition.

Some of our casinos are located on leased property. If we default on one or more leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected casino.  

We lease certain parcels of land on which several of our properties are located. As a ground lessee, we have the right to use the leased land; however, we do not hold fee ownership in the underlying land. Accordingly, with respect to the leased land, we will have no interest in the land or improvements thereon at the expiration of the ground leases. Moreover, since we do not completely control the land underlying the property, a landowner could take certain actions to disrupt our rights in the land leased under the long-term leases which are beyond our control. If the entity owning any leased land chose to disrupt our use either permanently or for a significant period of time, then the value of our assets could be impaired and our business and operations could be adversely affected. If we were to default on any one or more of these leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected land and any improvements on the land, including the hotels and casinos. This would have a significantan adverse effect on our business, financial condition and results of operations as we would then be unable to operate all or portionsoperations.

Governmental gaming regulatory requirements may delay the timing of the affectedapprovals for or completion of the Acquisition.
The gaming and racing industries are highly regulated, and we must maintain our licenses and pay gaming taxes to continue our operations. We are subject to extensive regulation under laws, rules and supervisory procedures primarily in the jurisdictions where our facilities are located or docked. These laws, rules and regulations generally concern the responsibility, financial stability and characters of the owners, managers, and persons with financial interests in the gaming operations. Some jurisdictions require applications for findings of suitability, licensing or other approvals for owners of our stock exceeding certain thresholds. If a person purchases stock in us in an amount that results in such person attaining or exceeding thresholds of ownership requiring regulatory approvals from one or more gaming jurisdictions, the regulators could take the position that such person must make the requisite filings or obtain the requisite approvals from the regulator prior to receiving regulatory
72

approval for or completing the Acquisition. If such a position were taken, this could result in a delay in the timing of the approvals for or the consummation of the Acquisition. We cannot predict whether a gaming regulator may take such a position.
Antitrust approvals that would be required to consummate the Acquisition may not be received, may take longer than expected or may impose conditions, including the requirement to divest assets, that could have an adverse effect on us following the Acquisition.
In order to consummate the Acquisition, we and William Hill may be required to comply with divestitures, including selling properties, conditions, terms, obligations or restrictions imposed by antitrust, gaming and other regulatory entities, and such conditions, terms, obligations or restrictions may have the effect of delaying consummation of the Acquisition, imposing additional material costs on or materially limiting our revenue after the consummation of the Acquisition, or otherwise reducing the anticipated benefits to us of the Acquisition. Such conditions, terms, obligations or restrictions may result in the default underdelay or abandonment of the Acquisition. We may be required to comply with divestitures, including selling properties, conditions, terms, obligations or restrictions imposed by antitrust, gaming and other regulatory entities, and such conditions, terms, obligations or restrictions may have the effect of delaying the consummation of the Acquisition, imposing additional material costs on or materially limiting our New Credit Facility.

revenue after the consummation of the Acquisition, or otherwise reducing the anticipated benefits to us of the Acquisition. Such conditions, terms, obligations or restrictions may result in the delay or abandonment of the Acquisition. We cannot assure you that we or William Hill will be able to sell these required properties in order to be in compliance with such antitrust, gaming and other regulatory entities, within the time frame required. In addition, to the extent we and/or William Hill are able to sell any such properties, we cannot assure you that we or they will be able to sell such properties at a fair market price or upon terms and conditions that are beneficial or considered reasonably satisfactory by us or William Hill, as applicable. As a result, we and William Hill may not be able to realize any expected benefits from such asset dispositions, and may not receive adequate consideration in connection therewith.

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

During the quarter ended September 30, 2020, we issued 6,839,299 shares of unregistered Company Common Stock to holders of 5% Convertible Notes due 2024 upon conversion of $487 million in aggregate principal amount of such notes.For further information regarding such transactions, see Note 11, Fair Value Measurements, of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.The shares of common stock were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended.
ITEM 3.    DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.    MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5.    OTHER INFORMATION.
None.
ITEM 6.    EXHIBITS.

ITEM 2.

Exhibit
Number
Description of ExhibitMethod of Filing
3.1Previously filed on Form 8-K filed on July 21, 2020.
3.2
Bylaws of Caesars Entertainment, Inc.UNREGISTERED SALES OF EQU
Previously filed on Form 8-K filed on July 21, 2020.
4.1
Indenture (6.25% CEI Senior Secured Notes due 2025) dated as of July 6, 2020, by and between Colt Merger Sub, Inc. and U.S. Bank National Association.ITY SECURITIES AND USE OF PROCEEDS

Previously filed on Form 8-K filed on July 7, 2020.
4.2Previously filed on Form 8-K filed on July 21, 2020.

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

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None.

ITEM 4.

MINE SAFETY DISCLOSURES.


Not applicable.

ITEM 5.

OTHER INFORMATION.

None.



ITEM 6.

EXHIBITS.

Exhibit

Number

Description of Exhibit

Method of Filing

4.3

Indenture (8.125% CEI Senior Notes due 2027) dated as of July 6, 2020, by and between Colt Merger Sub, Inc. and U.S. Bank National Association.

Previously filed on Form 8-K filed on July 7, 2020.

  10.1

4.4

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

Previously filed on Form 8-K filed on July 21, 2020.
10.5**Filed herewith.
10.6Previously filed on Form 8-K filed on July 21, 2020.
10.7**Previously filed on Form 8-K filed on July 21, 2020.
10.8**Filed herewith.
10.9Previously filed on Form 8-K filed on July 21, 2020.
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Exhibit
Number
Description of ExhibitMethod of Filing
10.10*Previously filed on Form 8-K filed on July 21, 2020.
10.11*Previously filed on Form 8-K filed on July 21, 2020.
10.12Previously filed on Form 8-K filed by Caesars Holdings, Inc. on April 6, 2020.
10.13Previously filed on Form 8-K filed by Caesars Holdings, Inc. on April 6, 2020.
10.14Previously filed on Form 8-K filed on July 21, 2020.
10.15*Previously filed on Form 8-K filed on July 21, 2020.
10.16*Previously filed on Form 8-K filed on September 18, 2020.
10.17*Previously filed on Form 8-K filed on July 21, 2020.
10.18Previously filed on Form 8-K filed by Caesars Holdings, Inc. on July 21, 2020.
10.19

Filed herewith.

Previously filed on Form 8-K filed on July 21, 2020.

  31.1

10.20

Filed herewith.

Previously filed on Form 8-K filed on July 21, 2020.

  31.2

10.21

Previously filed on Form 8-K filed by Caesars Holdings, Inc. on December 22, 2017.
10.22
First Amendment to Credit Agreement, dated as of June 15, 2020, by and among Caesars Resort Collection, LLC, the subsidiary loan parties party thereto, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent. 
Previously filed on Form 8-K filed by Caesars Holdings, Inc. on June 12, 2020.
10.23Previously filed on Form 8-K filed on July 21, 2020.
10.24Previously filed on Form 8-K filed on July 21, 2020.
10.25Previously filed on Form 8-K filed by Caesars Holdings, Inc. on October 13, 2017.
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Exhibit
Number
Description of ExhibitMethod of Filing
10.26†Previously filed on Form 10-Q filed by Caesars Holdings, Inc. on August 9, 2007.
10.27†Previously filed on Form 10-Q filed by Caesars Holdings, Inc. on August 9, 2007.
10.28†Previously filed on Form 10-Q filed by Caesars Holdings, Inc. on August 9, 2007.
10.29†Previously filed on Form 10-Q filed by Caesars Holdings, Inc. on August 9, 2007.
10.30†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on February 13, 2009.
10.31†Previously filed on Form 10-K filed by Caesars Holdings, Inc. on March 16, 2015.
10.32†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on October 13, 2017.
10.33Previously filed on Form 8-K filed by Caesars Holdings, Inc. on October 13, 2017.
10.34Previously filed on Form 8-K filed by Caesars Holdings, Inc. on April 6, 2020.
10.35Previously filed on Form 8-K/A filed by Caesars Holdings, Inc. on April 14, 2020.
10.36†Previously filed on Form S-1/A filed by Caesars Holdings, Inc. on February 2, 2012.
10.37†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on July 25, 2012.
10.38†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on May 20, 2015.
10.39†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on May 20, 2016.
10.40†Previously filed on Form 10-Q filed by Caesars Holdings, Inc. on August 2, 2016.
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Exhibit
Number
Description of ExhibitMethod of Filing
10.41†Previously filed on Form S-8 filed by Caesars Holdings, Inc. on October 6, 2017.
10.42†Previously filed on Form 8-K filed by Caesars Holdings, Inc. on April 6, 2018.
10.43†Previously filed on Form S-8 filed by Caesars Holdings, Inc. on December 13, 2018.
10.44†Previously filed on Form S-8 filed by Caesars Holdings, Inc. on December 13, 2018.
10.45†Previously filed on Form 8-K filed by Caesars Acquisition Company on April 16, 2014.
10.46†Filed herewith.
10.47Filed herewith.
31.1

Filed herewith.

  32.1

31.2

Filed herewith.

  32.2

32.1

Filed herewith.

101.1

32.2

Filed herewith.
99.1Filed herewith.
101.1Inline XBRL Instance Document

Filed herewith.

101.2

Inline XBRL Taxonomy Extension Schema Document

Filed herewith.

101.3

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith.

101.4

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith.

101.5

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith.

101.6

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith.

104Cover Page Interactive Data File (embedded within the Inline XBRL document)Filed herewith.


†Denotes a management contract or compensatory plan or arrangement.
*Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish supplementally copies of omitted schedules and exhibits to the U.S. Securities and Exchange Commission upon its request.
**Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because such information is (i) not material and (ii) could be competitively harmful if publicly disclosed. The Company will furnish supplementally an unredacted copy of such exhibit to the U.S. Securities and Exchange Commission upon its request.

SIGNATURES

77

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

ELDORADO RESORTS, INC.

CAESARS ENTERTAINMENT, INC.

Date: November 7, 2017

9, 2020

/s/ Gary L. Carano

Thomas R. Reeg

Gary L. Carano

Thomas R. Reeg
Chief Executive Officer and Chairman of the Board

(Principal Executive Officer)

Date: November 7, 2017

9, 2020

/s/ Thomas R. Reeg

Bret Yunker

Thomas R. Reeg

President and

Bret Yunker
Chief Financial Officer

(Principal (Principal Financial Officer)

58

78