Related Party Transactions - Growth Partners | 6 Months Ended |
Jun. 30, 2014 |
Related Party Transaction [Line Items] | ' |
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Related Party Transactions |
Management Services Agreement with CEOC |
In October 2013, CAC entered into the CGP Management Services Agreement with CEOC and CGP LLC pursuant to which CEOC and its subsidiaries provide certain services. The agreement, among other things: |
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• | provides that CEOC and its subsidiaries provide (a) certain corporate services and back office support, including payroll, accounting, risk management, tax, finance, recordkeeping, financial statement preparation and audit support, legal, treasury functions, regulatory compliance, insurance, information systems, office space and corporate, and other centralized services and (b) certain advisory and business management services, including developing business strategies, executing financing transactions and structuring acquisitions and joint ventures; |
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• | allows the parties to modify the terms and conditions of CEOC’s performance of any of the services and to request additional services from time to time; and |
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• | provides for payment of a service fee to CEOC in exchange for the provision of services, plus a margin of 10%. |
We recognized expenses of $1.0 million and $1.5 million during the three and six months ended June 30, 2014, respectively, related to the services provided in connection with CGP Management Services Agreement. |
Share-based Payments to non-employees of CAC or CGP LLC |
On April 9, 2014, the Board approved the CAC Equity-Based Compensation Plan for officers, employees, directors, individual consultants and advisers of the Company and its subsidiaries (the "Equity Plan"). CEC will administer the Equity Plan. Under the Equity Plan, CEC is authorized to grant stock options, stock appreciation rights, stock bonuses, restricted stock, performance stock, stock units, phantom stock, dividend equivalents, cash awards, rights to purchase or acquire shares or similar securities in the form of or with a value related to our Common Stock to officers, employees, directors, individual consultants and advisers of CEC and its subsidiaries. The Equity Plan will terminate ten years after approval by the Board. Subject to adjustments in connection with certain changes in capitalization, the maximum value of the shares of our Common Stock that may be delivered pursuant to awards under the Equity Plan is $25.0 million. |
On May 8, 2014, CEC granted awards to officers, employees, directors, individual consultants and advisers of the CEC and its subsidiaries in accordance with the Equity Plan to reward and provide incentive for services provided in their capacity, promote the success of CGP LLC, and more closely align the interests of such individuals with those of the stockholders of the Company. Awards under this plan vest one-third on each of October 21, 2014, 2015 and 2016. Expense associated with the vesting of such awards is recorded as management fee expense by CGP LLC, totaling $2.7 million for the three months ended June 30, 2014. Upon issuance of shares pursuant to this plan, such shares will be contributed to CGP LLC by CAC as additional investment into that entity, at which time CGP LLC will settle its management fee obligation with CEC and its subsidiaries through a distribution of such shares to CEC. Also upon issuance of shares pursuant to this plan, CGP LLC will issue an equivalent number of voting units in CGP LLC and distribute those units to CAC. As CAC will receive voting units in CGP LLC in exchange for the shares of CAC issued pursuant to this plan, there is no expected dilutive impact to CAC's EPS (see Note 4 — Stockholders’ Equity and Earnings per Share). |
Predecessor Growth Partners [Member] | ' |
Related Party Transaction [Line Items] | ' |
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Related Party Transactions |
WSOP Trade Name |
In 2009, Caesars Interactive acquired the WSOP trademarks and associated rights from CEOC for $15.0 million. At the same time, Caesars Interactive entered into a Trademark License Agreement with CEOC, pursuant to which CEOC acquired an exclusive, perpetual, royalty-free license to use the WSOP trademarks in connection with hosting the WSOP tournaments, operating WSOP branded poker rooms and selling certain WSOP branded retail items. This agreement remains in effect indefinitely, unless earlier terminated pursuant to the agreement's terms. |
In 2011, Caesars Interactive entered into a series of transactions pursuant to which Caesars Interactive effectively repurchased the exclusive rights to host the WSOP tournaments from CEOC for $20.5 million. The 2009 Trademark License Agreement remains in effect with respect to WSOP branded poker rooms and retail items, but the rights to host WSOP tournaments are owned by Caesars Interactive. As part of the 2011 transactions, Caesars Interactive entered into a Trademark License Agreement with CEC pursuant to which Caesars Interactive granted CEC the right to host the WSOP tournaments at the Rio Hotel in Las Vegas or at such other property agreed to by the parties, in exchange for a $2.0 million per year fee. Simultaneously, Caesars Interactive entered into a Circuit Event Agreement with CEC pursuant to which Caesars Interactive granted CEC the right to host a certain number of WSOP circuit events at various properties of CEC for a price of $75,000 per event. Both agreements are in effect until September 1, 2016, unless earlier terminated pursuant to the agreements' respective terms. Revenues under this agreement associated with the WSOP circuit events amounted to $0.8 million and $1.0 million, respectively, for the three and six months ended June 30, 2013. |
Cross Marketing and Trademark License Agreement |
In 2011, Caesars Interactive entered into a Cross Marketing and Trademark License Agreement with Caesars World, Inc., Caesars License Company, LLC, Caesars Entertainment and CEOC. In addition to granting Caesars Interactive the exclusive rights to use various brands of Caesars Entertainment in connection with social and mobile games and online real money gaming in exchange for a 3% royalty, this agreement also provides that CEOC will provide certain marketing and promotional activities for Caesars Interactive, including participation in Caesars Entertainment's Total Rewards loyalty program, and Caesars Interactive will provide certain marketing and promotional activities for Caesars Entertainment and CEOC. The agreement also provides for certain revenue share arrangements where Caesars Interactive pays CEOC for customer referrals. This agreement is in effect until December 31, 2026, unless earlier terminated pursuant to the agreement’s terms. For the three and six months ended June 30, 2013, Caesars Interactive paid $0.2 million and $0.4 million, respectively, pursuant to the terms of the Cross Marketing and Trademark License Agreement. |
Use of Bally's and Harrah's Trademarks |
Bally's Las Vegas and Harrah’s New Orleans have historically used the Bally’s and Harrah’s trademarks, which are owned by CEOC. CEOC has not historically charged a royalty fee for the use of these trademarks, and will not charge a royalty fee subsequent to the closing of the transactions surrounding the Acquired Properties as described in Note 1 — Description of Business and Summary of Significant Accounting Policies. Accordingly, no such charges are recorded in the combined condensed financial statements. As discussed below, management agreements were entered into with CEOC in connection with the Acquired Properties Transaction and Harrah's Transaction, which among other services, includes the use of CEOC-owned trademarks. |
Cash Activity with Affiliates |
Prior to the May 2014 purchase of these properties by CGPH, Harrah’s New Orleans, Bally’s Las Vegas and The Quad transferred cash in excess of operating loan requirements and regulatory needs to CEOC on a daily basis. Cash transfers from CEOC to Harrah’s New Orleans, Bally’s Las Vegas and The Quad were also made based upon needs to fund daily operations, including accounts payable, payroll and capital expenditures. The net of these transfers are reflected in Net transfers to parent in the Cash flows from operating actives section of the Combined Condensed Statement of Cash Flows and Transactions with parent and affiliates, net in the Combined Condensed Statement of Stockholders' Equity. Subsequent to the May 2014 purchase of these properties by CGPH, the transfers of cash in excess of operating loan requirements and regulatory needs to CEOC and cash transfers from CEOC to fund daily operations no longer occur. |
As of June 30, 2013, the assets of Harrah’s New Orleans, Bally’s Las Vegas and The Quad were pledged as collateral for certain of CEOC’s outstanding debt securities. |
Allocation of Centralized Services |
Prior to the May 2014 transactions described Note 1 — Description of Business and Summary of Significant Accounting Policies, Harrah’s New Orleans, Bally’s Las Vegas, The Quad and Cromwell functioned as part of the larger group of companies controlled by CEOC. Prior to the formation transaction on October 21, 2013 described in Item 1 — Business of the CAC Annual Report on Form 10-K for the year ended December 31, 2013, Planet Hollywood functioned as part of the larger group of companies controlled by CEOC. CEOC performed certain corporate overhead functions for these properties. These functions included, but were not limited to, payroll, accounting, risk management, tax, finance, recordkeeping, financial statements preparation and audit support, legal, treasury functions, regulatory compliance, insurance, information systems, office space and corporate and other centralized services. Costs associated with centralized services have been allocated based on a percentage of revenue, or on another basis (such as headcount), depending upon the nature of the general corporate expense being allocated. |
Management believes such allocations are reasonable; however, they may not be indicative of the actual expense that would have been incurred had these properties been operating as a separate entity apart from CEOC. Management believes that participating in these consolidated programs is beneficial in comparison to the cost and terms for similar programs that it could negotiate on a stand-alone basis. The cost allocated for these functions is included in the Property, general, administrative and other line in the Combined Condensed Statements of Operations for the historical periods presented. For the three and six months ended June 30, 2013, allocated general corporate expenses and directly billed expenses totaling $22.3 million and $45.2 million, respectively, were recorded. |
Planet Hollywood Self-Insurance |
Planet Hollywood was self-insured up to certain limits for costs associated with general liability, workers’ compensation, and employee health coverage through June 2013. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of actuarial estimates of incurred but not reported claims. In estimating these reserves, historical loss experience and judgments about the expected levels of costs per claim are considered. These claims are accounted for based on actuarial estimates of the un-discounted claims, including those claims incurred but not reported. Planet Hollywood believes the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly judgmental accruals. Predecessor Growth Partners regularly monitored the potential for changes in estimates, evaluated its insurance accruals, and adjusted its recorded provisions. |
Management Fees |
PHW Manager, LLC ("PHW Manager"), a wholly-owned subsidiary of CEOC, manages the operations of Planet Hollywood. Fees paid to PHW Manager for such services include a base management fee calculated at 3.0% of adjusted gross operating revenue plus net casino wins, and an incentive fee calculated at 4.5% of EBITDA less the base management fee. For the three and six months ended June 30, 2013, the fees were $4.4 million and $8.9 million, respectively. These fees are included in Property, general, administrative and other expenses in the Combined Condensed Statements of Operations. |
During the periods presented, no management fees were charged to Bally’s Las Vegas, Cromwell, The Quad, and Harrah’s New Orleans. |
Long-term debt to related party |
Caesars Interactive has entered into an unsecured credit facility with Caesars Entertainment (the "Credit Facility") whereby Caesars Entertainment provided to Caesars Interactive unsecured intercompany loans as approved by Caesars Entertainment on an individual transaction basis. No principal payments are required under the Credit Facility until its maturity date of November 29, 2016. The unsecured intercompany loans bear interest on the unpaid principal amounts at a rate per annum equal to London Inter-Bank Offered Rate ("LIBOR") plus 5%. For the three and six months ended June 30, 2013, CIE recorded $0.5 million and $1.1 million, respectively, of interest expense associated with this debt. The Credit Facility does not have any restrictive or affirmative covenants. |
During the six months ended June 30, 2013 Predecessor Growth Partners made principal payments on the Credit Facility aggregating $7.0 million. |
Investments in notes and interest receivable from related party |
Predecessor Growth Partners' investments in notes from related party consist solely of senior notes previously issued by CEOC and acquired by Caesars Entertainment. All investments in notes from related party are classified as available for sale and are recorded as non-current assets. |
For the three and six months ended June 30, 2013, interest income from related parties includes $17.0 million and $33.7 million of income based on the stated interest rate, $25.4 million and $49.2 million of accretion of discount, and $0.1 million and $0.2 million of interest income related to the paid-in-kind notes, each respectively. |
Harrah's New Orleans Promissory Note |
In December 2002, Harrah's New Orleans entered into a $123.7 million unsecured promissory note, payable on demand to CEOC bearing interest at 8% with no scheduled repayment terms. There were no financial covenants required under the note. Any amount of principal and interest not paid when due bore additional interest at 2%. Accrued interest was settled on a monthly basis with charges to Transactions with parents and affiliates, net. |
Employee Benefit Plans |
Caesars Entertainment maintains a defined contribution savings and retirement plan in which employees of Predecessor Growth Partners' properties may participate. The plan, among other things, provides for pre-tax and after-tax contributions by employees. Under the plan, participating employees may elect to contribute up to 50% of their eligible earnings, provided that participants who are designated as highly compensated will have their contributions limited to ensure the plan does not discriminate in their favor. In April 2012, Caesars Entertainment reinstated a limited employer match. Predecessor Growth Partners’ reimbursement for Caesars Entertainment’s contribution expense was $0.5 million and $1.3 million for the three and six months ended June 30, 2013, respectively. |
Caesars Entertainment also maintains deferred compensation plans, stock-option plans and an executive supplemental savings plan under which certain employees of Predecessor Growth Partners may defer a portion of their compensation. The expenses charged by Caesars Entertainment to Predecessor Growth Partners for employees’ participation in these programs are included in the Allocation of Centralized Services charge discussed above and are reflected in Property, general, administrative and other in the Combined Condensed Statements of Operations. |
Multiemployer Benefit Plans |
Certain employees of Caesars Entertainment are covered by union sponsored, collectively bargained, health and welfare multiemployer benefit plans. Predecessor Growth Partner’s reimbursement for Caesars Entertainment’s contributions and charges for these plans was $2.3 million and $4.6 million for the three and six months ended June 30, 2013, respectively. These expenses are included in Property, general, administrative and other in the Combined Condensed Statements of Operations. |
Equity Incentive Awards |
Caesars Entertainment grants stock-based compensation awards in Caesars Entertainment common stock to certain employees that work for the management companies of Predecessor Growth Partners' casino properties under the Caesars 2012 Performance Incentive Plan. Allocations from Caesars Entertainment were not considered material to the combined condensed financial statements for the periods presented. |
Lease Agreements |
On April 25, 2011, The Quad entered into an agreement pursuant to which it will lease from Caesars LINQ LLC ("The LINQ"), an indirect wholly owned subsidiary of Caesars Entertainment, a land parcel under an operating lease with an expiration date of April 25, 2026. The land parcel is used by The Quad for gaming and other space. Pursuant to the terms of the agreement, The Quad is required to pay The LINQ rent equal to approximately $1.3 million per month beginning on January 1, 2014. |
Bally’s Las Vegas leases land to JGB Vegas Retail Lessee, LLC ("JGB Lessee") under a ground lease that commences on the sooner of the Opening Date as defined in the Ground Lease as amended or February 28, 2015 and includes annual and monthly base rents with annual escalations as well as an annual percentage of revenue payable should JGB Lessee revenues exceed a Breakpoint as defined in the lease. GB Investor, LLC, a wholly-owned subsidiary of Caesars Entertainment, has an approximate 10% ownership interest in JGB Lessee. Monthly revenues from the ground lease are currently $0.4 million and are included in Other revenue in the Combined Condensed Statements of Operations. |