Exhibit 99.1
FINANCIAL INFORMATION OF CAESARS GROWTH PARTNERS, LLC
A SIGNIFICANT EQUITY METHOD INVESTEE OF CAESARS ACQUISITION COMPANY
EXPLANATORY NOTE
Unconsolidated Significant Subsidiary
Upon the completion of the Transactions described in our Annual Report on Form 10-K for the year ended December 31, 2013, Caesars Acquisition Company’s (the "Company," "CAC," "we," "our" and "us") sole material asset is its interest in Caesars Growth Partners, LLC ("CGP LLC"), which is accounted for using the equity method. As our investment in CGP LLC is considered to be significant for the period subsequent to the Transactions, CGP LLC's annual financial statements are required to be included as an exhibit to each CAC Annual Report on Form 10-K in accordance with SEC Rule 3-09 of Regulation S-X. Given the significance of this investment to the financial position and results of operations of CAC, we have elected to include selected financial information of CGP LLC in this Quarterly Report on Form 10-Q.
For a discussion of the results of operations for CGP LLC for the three and six months ended June 30, 2014 in comparison to the three and six months ended June 30, 2013 results of operations derived from the assets and entities that were acquired by or contributed to CGP LLC in connection with the transactions (referred to in the aggregate as Predecessor Growth Partners), please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations for Caesars Acquisition Company in Item 2 of its quarterly report on Form 10-Q.
CAESARS GROWTH PARTNERS, LLC
INDEX TO COMBINED AND CONSOLIDATED CONDENSED FINANCIAL INFORMATION
CAESARS GROWTH PARTNERS, LLC
COMBINED AND CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(In millions)
|
| | | | | | | |
| | June 30, 2014 | | December 31, 2013 |
| Assets | | | |
| Current assets | | | |
| Cash and cash equivalents | $ | 495.6 |
| | $ | 1,032.0 |
|
| Short-term investments | — |
| | 15.0 |
|
Receivables, net of allowance for doubtful accounts of $7.7 and $8.4, respectively | 94.1 |
| | 70.9 |
|
| Investment in notes from related party | 427.3 |
| | — |
|
| Interest receivable from related party | 9.0 |
| | 8.9 |
|
| Deferred tax assets | 4.0 |
| | 9.6 |
|
| Restricted cash | 25.2 |
| | 43.0 |
|
| Prepayments and other current assets | 23.2 |
| | 27.2 |
|
| Total current assets | 1,078.4 |
| | 1,206.6 |
|
| Investment in notes from related party | 474.8 |
| | 931.6 |
|
| Land, property and equipment, net | 2,448.8 |
| | 2,115.7 |
|
| Goodwill | 447.7 |
| | 449.2 |
|
| Intangible assets other than goodwill, net | 319.6 |
| | 288.7 |
|
| Restricted cash | 90.3 |
| | 316.8 |
|
| Deferred tax assets | 39.7 |
| | — |
|
| Deferred charges and other | 287.7 |
| | 138.2 |
|
| Total assets | $ | 5,187.0 |
| | $ | 5,446.8 |
|
| | | | |
| Liabilities and Equity | | | |
| Current liabilities | | | |
| Accounts payable | $ | 165.2 |
| | $ | 89.7 |
|
| Payables to related party | 40.4 |
| | 49.4 |
|
| Accrued expenses | 196.4 |
| | 183.1 |
|
| Accrued interest payable | 21.1 |
| | 5.6 |
|
| Foreign tax payable | 2.1 |
| | 1.8 |
|
| Deferred tax liabilities | 0.3 |
| | — |
|
| Current portion of long-term debt | 17.7 |
| | 4.0 |
|
| Total current liabilities | 443.2 |
| | 333.6 |
|
| Long-term debt | 2,245.0 |
| | 879.6 |
|
| Long-term debt to related party | 39.8 |
| | 179.0 |
|
| Convertible notes issued to related party | 47.7 |
| | 47.7 |
|
| Deferred tax liabilities | 9.2 |
| | 165.0 |
|
| Contingently issuable non-voting membership units | 355.0 |
| | 306.5 |
|
| Deferred credits and other | 84.5 |
| | 70.4 |
|
| Total liabilities | 3,224.4 |
| | 1,981.8 |
|
| | | | |
| Commitments and contingencies | | | |
| Redeemable non-controlling interests | 3.1 |
| | 3.9 |
|
| Equity | | | |
| Additional paid-in capital | 1,401.0 |
| | 2,780.6 |
|
| Retained earnings | 377.4 |
| | 402.1 |
|
| Accumulated other comprehensive income | 136.9 |
| | 233.6 |
|
| Total equity attributable to Caesars Growth Partners, LLC | 1,915.3 |
| | 3,416.3 |
|
| Non-controlling interests | 44.2 |
| | 44.8 |
|
| Total equity | 1,959.5 |
| | 3,461.1 |
|
| Total liabilities and equity | $ | 5,187.0 |
| | $ | 5,446.8 |
|
CAESARS GROWTH PARTNERS, LLC
COMBINED AND CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In millions)
|
| | | | | | | |
| | Three Months Ended June 30, 2014 | | Six Months Ended June 30, 2014 |
| Revenues | | | |
| Interactive Entertainment | | | |
| Social and mobile games | $ | 134.4 |
| | $ | 250.1 |
|
| WSOP and online real money gaming | 10.2 |
| | 18.7 |
|
| | 144.6 |
| | 268.8 |
|
| Casino Properties and Developments | | | |
| Casino | 175.7 |
| | 353.9 |
|
| Food and beverage | 57.1 |
| | 114.0 |
|
| Rooms | 64.9 |
| | 134.6 |
|
| Other | 38.6 |
| | 68.9 |
|
| Less: casino promotional allowances | (42.2 | ) | | (85.3 | ) |
| | 294.1 |
| | 586.1 |
|
| Net revenues | 438.7 |
| | 854.9 |
|
| | | | |
| Operating expenses | | | |
| Interactive Entertainment - Direct | | | |
| Platform fees | 41.0 |
| | 76.3 |
|
| Casino Properties and Developments - Direct | | | |
| Casino | 92.8 |
| | 184.3 |
|
| Food and beverage | 27.7 |
| | 52.2 |
|
| Rooms | 17.6 |
| | 36.4 |
|
| Property, general, administrative and other | 161.0 |
| | 322.4 |
|
| Write-downs, reserves, and project opening costs, net of recoveries | 8.4 |
| | 22.0 |
|
| Management fees payable to related parties | 8.7 |
| | 11.6 |
|
| Depreciation and amortization | 32.8 |
| | 61.0 |
|
| Impairment of goodwill and intangible assets | 15.5 |
| | 15.5 |
|
| Change in fair value of contingently issuable non-voting membership units | (27.6 | ) | | 48.5 |
|
| Change in fair value of contingent consideration | 31.9 |
| | 32.6 |
|
| Total operating expenses | 409.8 |
| | 862.8 |
|
| Income/(loss) from operations | 28.9 |
| | (7.9 | ) |
| Interest expense, net of interest capitalized | (62.4 | ) | | (79.6 | ) |
| Interest income | — |
| | 1.0 |
|
| Interest income - related party | 51.3 |
| | 100.1 |
|
| Loss on extinguishment of debt | (23.2 | ) | | (23.8 | ) |
| Loss before benefit from income taxes | (5.4 | ) | | (10.2 | ) |
| Benefit from income taxes | 15.3 |
| | 6.1 |
|
| Net income/(loss) | 9.9 |
| | (4.1 | ) |
| Net loss attributable to non-controlling interests | 2.9 |
| | 9.4 |
|
| Net income attributable to Caesars Growth Partners, LLC | $ | 12.8 |
| | $ | 5.3 |
|
CAESARS GROWTH PARTNERS, LLC
COMBINED AND CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(In millions)
|
| | | | | | | |
| | Three Months Ended June 30, 2014 | | Six Months Ended June 30, 2014 |
| Net income/(loss) | $ | 9.9 |
| | $ | (4.1 | ) |
| Other comprehensive loss, net of income taxes: | | | |
| Unrealized loss on investments in notes from related party | (105.9 | ) | | (96.7 | ) |
| Total other comprehensive loss | (105.9 | ) | | (96.7 | ) |
| Comprehensive loss | (96.0 | ) | | (100.8 | ) |
| Less: net loss attributable to non-controlling interests | 2.9 |
| | 9.4 |
|
| Comprehensive loss attributable to Caesars Growth Partners, LLC | $ | (93.1 | ) | | $ | (91.4 | ) |
CASESARS GROWTH PARTNERS, LLC
COMBINED AND CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In millions)
|
| | | | | | | | | | | | | | | | | | | |
| | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income | | Non-controlling Interests | | Total Equity |
| Balance at December 31, 2013, as previously reported | $ | 734.0 |
| | $ | 782.1 |
| | $ | 233.6 |
| | $ | 44.8 |
| | $ | 1,794.5 |
|
Prior-period adjustment (1) | 15.6 |
| | (15.6 | ) | | — |
| | — |
| | — |
|
| Balance at December 31, 2013, as restated | 749.6 |
| | 766.5 |
| | 233.6 |
| | 44.8 |
| | 1,794.5 |
|
Impact of acquired assets(2) | 2,031.0 |
| | (364.4 | ) | | — |
| | — |
| | 1,666.6 |
|
| Post-acquisition balances | 2,780.6 |
| | 402.1 |
| | 233.6 |
| | 44.8 |
| | 3,461.1 |
|
| Net income/(loss) | — |
| | 5.3 |
| | — |
| | (8.6 | ) | | (3.3 | ) |
Impact of purchased assets(3) | (1,500.0 | ) | | — |
| | — |
| | — |
| | (1,500.0 | ) |
| Issuance of Caesars Interactive common stock | 20.6 |
| | — |
| | — |
| | 2.2 |
| | 22.8 |
|
| Purchase of Caesars Interactive common stock | (22.9 | ) | | — |
| | — |
| | (2.5 | ) | | (25.4 | ) |
| Stock-based compensation | 4.1 |
| | — |
| | — |
| | — |
| | 4.1 |
|
| Sale of partial interest in Baltimore joint venture | 3.4 |
| | — |
| | — |
| | 8.3 |
| | 11.7 |
|
| Unrealized loss on investments in notes from related party, net of tax | — |
| | — |
| | (96.7 | ) | | — |
| | (96.7 | ) |
| Conversion of affiliate debt to equity | 139.9 |
| | — |
| | — |
| | — |
| | 139.9 |
|
| Transactions with parent and affiliates, net | (24.7 | ) | | (30.0 | ) | | — |
| | — |
| | (54.7 | ) |
| Balance at June 30, 2014 | $ | 1,401.0 |
| | $ | 377.4 |
| | $ | 136.9 |
| | $ | 44.2 |
| | $ | 1,959.5 |
|
| |
(1) | Represents a distribution from CGP LLC to its parent entities recorded against Additional paid-in capital during the year ended December 31, 2013. Because the amount did not exceed cumulative earnings, the distribution should have been recorded as a distribution from Retained earnings rather than from Additional paid-in capital. |
(2) Represents the December 31, 2013 equity balances related to the May 2014 acquisitions of Harrah's New Orleans, The Quad, Bally's Las Vegas and Cromwell. Because these acquisitions were accounted for as transactions among entities under common control, the financial information herein includes the financial results for these properties as if those businesses were combined into the CGP LLC reporting entity for the complete period presented.
(3) Represents the net purchase price for the acquisitions of Harrah's New Orleans, The Quad, Bally's Las Vegas and Cromwell in May 2014 net of the prepaid management fee recognized in Deferred charges and other and the reversal of Deferred tax positions and provision which were previously allocated from Caesars Entertainment to those properties prior to the acquisitions. CGP LLC does not record a tax provision for its Casino Properties and Developments segment as all entities within this segment are pass-through entities for income tax purposes.
CAESARS GROWTH PARTNERS, LLC
COMBINED AND CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In millions)
|
| | | |
| | Six Months Ended June 30, 2014 |
| Cash flows from operating activities | |
| Net loss | $ | (4.1 | ) |
| Adjustments to reconcile net loss to cash flows provided by operating activities | |
| Depreciation and amortization | 61.0 |
|
| Amortization of debt discount and deferred finance charges | 11.7 |
|
| Loss on early extinguishments of debt | 23.8 |
|
| Change in fair value of contingently issuable non-voting membership units | 48.5 |
|
| Change in fair value of contingent consideration | 32.6 |
|
| Accretion of discount on investments in notes from related party | (67.2 | ) |
| Impairment of goodwill and intangible assets | 15.5 |
|
| Stock-based compensation expense | 26.4 |
|
| Non-cash management fee payable to related parties | 2.7 |
|
| Debt issuances costs and fees write-off | 26.1 |
|
| Net transfers to parents and affiliates | (13.2 | ) |
| Net change in deferred income taxes | (29.5 | ) |
| Net change in long-term accounts | 6.0 |
|
| Net change in working capital accounts | (40.4 | ) |
| Cash flows provided by operating activities | 99.9 |
|
| Cash flows from investing activities | |
| Land, buildings and equipment additions, net of change in construction payables | (310.4 | ) |
| Payments to acquire business, net of cash acquired | (22.5 | ) |
| Payments to acquire businesses and assets related to the Acquired Properties Transaction | (1,808.2 | ) |
| Purchase of equity method investment | (1.3 | ) |
| Sale of short-term investments | 15.0 |
|
| Increase in restricted cash | (2,094.5 | ) |
| Decrease in restricted cash | 2,338.8 |
|
| Cash flows used in investing activities | (1,883.1 | ) |
| Cash flows from financing activities | |
| Proceeds from sale of CIE stock | 3.8 |
|
| Repurchase of management shares | (25.4 | ) |
| Sale of partial interest in Baltimore joint venture | 11.7 |
|
| Acquisition related contingent consideration payment | (5.6 | ) |
| Proceeds from issuance of long term debt | 1,838.6 |
|
| Debt issuance costs and fees | (37.6 | ) |
| Repayments under lending agreements | (496.9 | ) |
| Distributions to parents | (41.8 | ) |
| Cash flows provided by financing activities | 1,246.8 |
|
| Net decrease in cash and cash equivalents | (536.4 | ) |
| Cash and cash equivalents, beginning of period | 1,032.0 |
|
| Cash and cash equivalents, end of period | $ | 495.6 |
|
