Exhibit 99.3
Columbia Properties Tahoe, LLC
d/b/a MontBleu Casino Resort & Spa
Consolidated Condensed Financial Statements as of March 31, 2021 and
December 31, 2020 and for the three months ended March 31, 2021
(Unaudited)
COLUMBIA PROPERTIES TAHOE, LLC
INDEX TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
| | Page |
| Consolidated Condensed Balance Sheet | 3 |
| Consolidated Condensed Statements of Operations | 4 |
| Consolidated Condensed Statements of Net Parent Investment | 5 |
| Consolidated Condensed Statements of Cash Flows | 6 |
| Notes to Consolidated Condensed Financial Statements | 7 |
COLUMBIA PROPERTIES TAHOE, LLC
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
| (In thousands) | | March 31, 2021 | | | December 31, 2020 | |
| Assets | | | | | | | | |
| Current assets | | | | | | | | |
| Cash and cash equivalents | | $ | 2,160 | | | $ | 2,494 | |
| Accounts receivable, net | | | 1,696 | | | | 1,370 | |
| Inventories | | | 524 | | | | 537 | |
| Prepayments and other current assets | | | 994 | | | | 1,271 | |
| Total current assets | | | 5,374 | | | | 5,672 | |
| Property and equipment, net | | | 55,669 | | | | 56,259 | |
| Goodwill | | | 5 | | | | 5 | |
| Intangible assets | | | 4,301 | | | | 4,368 | |
| Deferred charges and other assets | | | 41,284 | | | | 41,644 | |
| Total assets | | $ | 106,633 | | | $ | 107,948 | |
| | | | | | | | | |
| Liabilities and Net Parent Investment | | | | | | | | |
| Current liabilities | | | | | | | | |
| Accounts payable | | $ | 496 | | | $ | 661 | |
| Accrued expenses and other current liabilities | | | 2,659 | | | | 2,813 | |
| Total current liabilities | | | 3,155 | | | | 3,474 | |
| Deferred credits and other liabilities | | | 65,868 | | | | 66,226 | |
| Total liabilities | | | 69,023 | | | | 69,700 | |
| Commitments and contingencies (Note 5) | | | | | | | | |
| Net parent investment | | | 37,610 | | | | 38,248 | |
| Total liabilities and net parent investment | | $ | 106,633 | | | $ | 107,948 | |
See accompanying Notes to Consolidated Condensed Financial Statements.
COLUMBIA PROPERTIES TAHOE, LLC
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| | | Three Months Ended March 31, | |
| (In thousands) | | 2021 | | | 2020 | |
| Revenues | | | | | | | | |
| Casino | | $ | 4,396 | | | $ | 2,721 | |
| Food and beverage | | | 1,704 | | | | 2,312 | |
| Hotel | | | 3,780 | | | | 2,624 | |
| Other | | | 679 | | | | 960 | |
| Net revenues | | | 10,559 | | | | 8,617 | |
| Operating expenses | | | | | | | | |
| Direct | | | | | | | | |
| Casino | | | 1,948 | | | | 2,003 | |
| Food and beverage | | | 1,073 | | | | 1,890 | |
| Hotel | | | 819 | | | | 922 | |
| Other | | | 107 | | | | 555 | |
| General and administrative | | | 3,179 | | | | 3,782 | |
| Depreciation and amortization | | | 1,063 | | | | 1,238 | |
| Total operating expenses | | | 8,189 | | | | 10,390 | |
| Net income (loss) | | $ | 2,370 | | | $ | (1,773 | ) |
See accompanying Notes to Consolidated Condensed Financial Statements.
COLUMBIA PROPERTIES TAHOE, LLC
CONSOLIDATED CONDENSED STATEMENTS OF NET PARENT INVESTMENT
(UNAUDITED)
| (In thousands) | | | |
| Balance as of January 1, 2020 | | $ | 40,701 | |
| Net loss | | | (1,773 | ) |
| Distributions to parent, net | | | (2,345 | ) |
| Balance as of March 31, 2020 | | $ | 36,583 | |
| | | | | |
| Balance as of January 1, 2021 | | $ | 38,248 | |
| Net income | | | 2,370 | |
| Distributions to parent, net | | | (3,008 | ) |
| Balance as of March 31, 2021 | | $ | 37,610 | |
See accompanying Notes to Consolidated Condensed Financial Statements.
COLUMBIA PROPERTIES TAHOE, LLC
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | Three Months Ended March 31, | |
| (In thousands) | | 2021 | | | 2020 | |
| Cash flows from operating activities | | | | | | | | |
| Cash flows provided by (used in) operating activities | | $ | 3,008 | | | $ | (584 | ) |
| Cash flows from investing activities | | | | | | | | |
| Purchase of property and equipment | | | (334 | ) | | | (56 | ) |
| Cash flows used in investing activities | | | (334 | ) | | | (56 | ) |
| Cash flows from financing activities | | | | | | | | |
| Distributions to parent, net | | | (3,008 | ) | | | (2,345 | ) |
| Cash flows used in financing activities | | | (3,008 | ) | | | (2,345 | ) |
| Net decrease in cash and cash equivalents | | | (334 | ) | | | (2,985 | ) |
| Cash and cash equivalents, beginning of period | | | 2,494 | | | | 3,085 | |
| Cash and cash equivalents, end of period | | $ | 2,160 | | | $ | 100 | |
See accompanying Notes to Consolidated Condensed Financial Statements.
COLUMBIA PROPERTIES TAHOE LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
In these notes, the words “Company,” “we,” “our,” and “us” refer to Columbia Properties Tahoe, LLC.
Note 1 — Organization and Basis of Presentation
Organization
The Company is a wholly owned subsidiary of Caesars Entertainment, Inc. (“Parent” or “CEI”). The Company and its wholly owned subsidiary MB Development, LLC, operate MontBleu Casino Resort & Spa (“MontBleu”) in Stateline, Nevada, under a license issued by the Nevada Gaming Commission (“NGC”), and is subject to the rules and regulations established by the NGC.
MontBleu is situated on approximately 21 acres in South Lake Tahoe, Nevada surrounded by the Sierra Nevada Mountains. In addition to a casino, the property offers a race and sportsbook, a hotel, restaurants and various non-gaming amenities, including retail shops, nightclubs, a showroom, meeting and convention space, a parking garage, a full-service health spa and workout area, an indoor heated lagoon-style pool with whirlpool and a wedding chapel. MontBleu’s primary feeder markets include Northern California, the Reno area and the Pacific Northwest.
On April 24, 2020, our Parent entered into an agreement to sell the Company to Bally’s Corporation. On April 6, 2021, Parent consummated the sale of equity interests of MontBleu for $15 million, subject to a customary working capital adjustment. The purchase price for MontBleu is due no later than the first anniversary of the consummation of the transaction.
Basis of Presentation
Our consolidated condensed financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), which require the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Significant estimates incorporated into the Company’s consolidated financial statements include useful lives for depreciable and amortizable assets, cash flows in assessing goodwill and indefinite-lived intangible assets for impairment and the recoverability of long-lived assets, self-insurance reserves, player loyalty program liabilities, contingencies and litigation, and claims and assessments. Management believes the accounting estimates are appropriate and reasonably determined. Actual amounts could differ from those estimates.
Our consolidated condensed financial statements include the accounts of the Company and its subsidiaries after elimination of all intercompany accounts and transactions.
The accompanying consolidated condensed financial statements have been prepared from separate records maintained by our Parent and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Company had been operated as entities unaffiliated with the Parent. Portions of certain expenses represent allocations from the Parent. See Note 6, “Related Parties.”
Effect of the COVID-19 Public Health Emergency
A novel strain of coronavirus (“COVID-19”) was declared a public health emergency by the United States Department of Health and Human Services on January 31, 2020. On March 13, 2020, the President of the United States issued a proclamation declaring a national emergency concerning COVID-19. As a result of the COVID-19 public health emergency, Parent began to receive directives from various governmental bodies for the closure of certain properties, and consistent with such directives, on March 17, 2020, Parent announced the temporary shutdown of properties in North America. COVID-19 is present in nearly all regions around the world and has resulted in travel restrictions and business slowdowns or shutdowns in affected areas. MontBleu reopened to the public June 4, 2020, however, there can be no assurance as to the time required for our operations to recover to levels prior to these closures, or whether future closures related to COVID-19 could occur.
Note 2 — Summary of Significant Accounting Policies
Additional significant accounting policy disclosures are provided within the applicable notes to the consolidated condensed financial statements.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents include cash maintained for gaming operations.
COLUMBIA PROPERTIES TAHOE LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Accounts Receivable and Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of casino accounts receivable. The Company issues markers to approved casino customers following background checks and assessments of creditworthiness. Trade receivables, including casino receivables, are typically non-interest bearing and initially recorded at cost. Accounts are written off when management deems the account to be uncollectible. Recoveries 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, historical collection experience and reasonable forecasts which consider current economic and business conditions. As of March 31, 2021 and December 31, 2020, the Company has estimated an allowance for doubtful accounts of $8 thousand and $55 thousand, respectively.
Inventories
Inventories, consisting of food, beverage and gift shop items, are stated at the lower of average cost, using a first-in, first-out basis, or net realizable value.
Self-Insurance Reserves
The Parent is self-insured for various levels of general liability and workers’ compensation coverage, which is provided to us. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported. The Parent utilizes independent consultants to assist management in its determination of estimated insurance liabilities. While the total cost of claims incurred depends on future developments, in managements’ opinion, recorded reserves are adequate to cover future claims payments. Self-insurance reserves are included in accrued other liabilities on the consolidated condensed balance sheet.
Outstanding Chip Liability
The Company recognizes the impact on gaming revenues on an annual basis to reflect an estimate of the change in the value of outstanding chips that are not expected to be redeemed. This estimate is determined by the difference between the total value of chips placed in service less the value of chips in the inventory of chips under our control. The outstanding chip liability is included in accrued other current liabilities on the consolidated condensed balance sheet.
Customer Relationships
The Company offers programs whereby participating customers can accumulate points for wagering that can be redeemed for free play on slot machines, food and beverage, merchandise and, in limited situations, cash. The incentives earned by customers under these programs are based on previous revenue transactions and represent separate performance obligations. Points earned, less estimated breakage, are recorded as a reduction of casino revenues at the standalone selling price of the points when earned based upon the retail value of the benefits, historical redemption rates and estimated breakage and recognized as departmental revenue based on where such points are redeemed upon fulfillment of the performance obligation. The loyalty program liability represents a deferral of revenue until redemption occurs, which is typically less than one year.
Complimentaries
The Company offers discretionary coupons and other discretionary complimentaries to customers outside of the loyalty program. The retail value of complimentary food, beverage, and other services provided to customers is recognized as a reduction to the revenues for the department which issued the complimentary and a credit to the revenue for the department redeemed. Complimentaries provided by third parties at the discretion and under the control of the Company are recorded as an expense when incurred.
The Company’s revenues included complimentaries and loyalty point redemptions totaling $1.1 million and $1.5 million for the three months ended March 31, 2021 and 2020, respectively.
Casino Revenue
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.
COLUMBIA PROPERTIES TAHOE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Non-gaming Revenue
Hotel, food and beverage and other operating revenues are recognized as services are performed and is the net amount collected from the customer for such goods and services. Hotel, food and beverage services have been determined to be separate, stand-alone performance obligations and are recorded as revenue as the good or service is transferred to the customer over the customer’s stay at the hotel or when the delivery is made for the food and beverage. Advance deposits for future hotel occupancy, convention space or food and beverage services contracts are recorded as deferred income until the revenue recognition criteria has been met. The Company also provides goods and services that may include multiple performance obligations, such as for packages, for which revenues are allocated on a pro rata basis based on each service's stand-alone selling price.
Advertising Expenses
Advertising costs are expensed in the period the advertising initially takes place and are included in general and administrative expense or casino expense, within operating expenses on the statement of operations. Advertising costs totaled $110 thousand and $224 thousand for the three months ended March 31, 2021 and 2020, respectively.
Income Taxes
The Company is a disregarded entity (single member LLC) of our Parent. The Company does not file separate tax returns and is included in the U.S. and state income tax returns as part of the consolidated group. Our Parent is ultimately responsible for the taxes payable of the combined group, as such, tax expense and related payables are not included in the consolidated condensed financial statement of the Company.
Note 3 — Property and Equipment
Property and equipment, net is as follows:
| (In thousands) | | As of March 31,
2021 | | | As of December 31,
2020 | |
| Land | | $ | 1,027 | | | $ | 1,027 | |
| Buildings and improvements | | | 51,226 | | | | 50,970 | |
| Furniture, fixtures, and equipment | | | 14,073 | | | | 13,824 | |
| Construction in progress | | | 272 | | | | 371 | |
| Total property and equipment | | | 66,598 | | | | 66,192 | |
| Less: accumulated depreciation | | | (10,929 | ) | | | (9,933 | ) |
| Total property and equipment, net | | $ | 55,669 | | | $ | 56,259 | |
| Depreciation Expense | | Three Months Ended March 31, | |
| (In thousands) | | 2021 | | | 2020 | |
| Depreciation expense | | $ | 996 | | | $ | 747 | |
COLUMBIA PROPERTIES TAHOE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 4 — Goodwill and Intangible Assets, Net
Goodwill and intangible assets, net, is as follows:
| (In thousands) | | As of March 31,
2021 | | | As of December 31,
2020 | | | Estimated Useful
Life |
| Goodwill | | $ | 5 | | | $ | 5 | | | Indefinite |
| | | | | | | | | | | |
| Gaming licenses | | | 568 | | | | 568 | | | Indefinite |
| Trademarks | | | 3,600 | | | | 3,600 | | | Indefinite |
| Customer relationships | | | 800 | | | | 800 | | | 3 years |
| Subtotal | | | 4,968 | | | | 4,968 | | | |
| Accumulated amortization | | | (667 | ) | | | (600 | ) | | |
| Total gaming licenses and other intangible assets, net | | $ | 4,301 | | | $ | 4,368 | | | |
Amortization expense with respect to intangible assets for the three months ended March 31, 2021 and 2020, totaled $67 thousand and $22 thousand, respectively, which is included in depreciation and amortization in the consolidated condensed statement of operations.
Gaming licenses 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 indefinite useful lives.
Estimated remaining amortization is as follows:
| | | Remaining | |
| (In thousands) | | 2021 | |
| Estimated annual amortization expense | | $ | 133 | |
Note 5 — Commitments and Contingencies
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 proceedings when the loss is probable and can be estimated. The current liability for the estimated losses associated with these proceedings is not material to the Company’s financial condition and those estimated losses are not expected to have a material impact on its results of operations. In addition, the Company maintains what it believes is adequate insurance coverage to further mitigate the risks of such proceedings. However, such proceedings can be costly, time consuming and unpredictable and, therefore, no assurance can be given that the final outcome of such proceedings may not materially impact the Company’s financial condition or results of operations. Further, no assurance can be given that the amount of scope of existing insurance coverage will be sufficient to cover losses arising from such matter. The Company is party to other ordinary and routine litigation incidental to our business. We do not expect the outcome of any such litigation to have a material effect on our financial position, results of operations, or cash flows, as we do not believe it is reasonably possible that we will incur material losses as a result of such litigation.
Note 6 — Related Parties
Net parent investment—Net parent investments primarily arise from cash transfers between the Company and the Parent related to casino operations provided by the Parent on our behalf offset by capital and financing activities.
Management fees and allocated general corporate expenses—The Company has an agreement with the Parent to provide certain management, administrative and corporate services to the Company in exchange for a fee. The Company did not incur an expense for shared services during the three months ended March 31, 2021. During the three months ended March 31, 2020, the Company incurred $186 thousand of management fees for shared services, which was included in general and administrative expenses in the consolidated condensed statement of operations.
COLUMBIA PROPERTIES TAHOE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CEI maintains a centralized treasury function whereby cash is deposited into our operating accounts, or swept from our operating accounts, while maintaining a targeted amount of cash needed for our day to day operations. Receivables from affiliates is the result of excess cash from operations being swept into the centralized company bank accounts. As a result of the sale of CEI’s equity interests, we do not expect to receive payment for excess cash sweeps and have recorded net distributions to Parent of $3.0 million and $2.3 million for the three months ended March 31, 2021 and 2020, respectively.
Note 7 — Retirement Plans
The Parent maintains a defined contribution plan under section 401(k) of the Internal Revenue Code for all employees with certain eligibility requirement as outlined in the plan document. The plan allows employees to defer a portion of their income on a pretax basis. The Company matches contributions equal to 50% of the first 6%. Matching contribution expenses for the three months ended March 31, 2021 and 2020 totaled $24 thousand and $49 thousand, respectively.
Note 8 — Subsequent Events
In preparing these consolidated condensed financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through July 30, 2021, the date the Company’s consolidated condensed financial statements were available to be issued. Other than those described in Note 1, we noted no items requiring disclosure.
