Basis of Presentation and Principles of Consolidation

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Use of Estimates

The accompanying unaudited consolidated condensed financial statements of Caesars have been prepared under the rules and regulations of the Securities and Exchange Commission applicable for interim periods, and therefore, do not include all information and footnotes necessary for complete financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”). The results for the interim periods reflect all adjustments (consisting primarily of normal recurring adjustments) that management considers necessary for a fair presentation of financial position, results of operations, and cash flows. The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 2019 fiscal year.

GAAP requires 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. Management believes the accounting estimates are appropriate and reasonably determined. Actual amounts could differ from those estimates.

In order to conform to the current year’s presentation, for the three and nine months ended September 30, 2018, $7 million and $17 million, respectively, were reclassified from Direct operating expenses to Property, general, administrative, and other on our Statements of Operations with no effect on Net income/(loss).

Reportable Segments

We view each property as an operating segment and aggregate all such properties into three regionally-focused reportable segments: (i) Las Vegas, (ii) Other U.S., and (iii) All Other, which is consistent with how we manage the business. See Note 16.

Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Balance Sheets that sum to amounts reported on the Statements of Cash Flows.



(In millions)	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	1,313	$	1,491
Restricted cash, current	137		115
Restricted cash, non-current	73		51
Total cash, cash equivalents, and restricted cash	$	1,523	$	1,657

Consolidation of Subsidiaries and Variable Interest Entities

Our consolidated financial statements include the accounts of Caesars Entertainment 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 using the cost method.

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, a gain or loss may be recognized upon deconsolidation.

Consolidation of Korea Joint Venture

CEC 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 CEC is the primary beneficiary, and therefore, we consolidate the Korea JV into our financial statements. As of September 30, 2019, the construction schedule for the project has been delayed and discussions regarding the project costs between us and our JV partner remain ongoing. In addition, the external debt financing by the Korea JV has also been delayed, which has impacted the timing of equity capital contributions by us, and our joint venture partner, in accordance with our joint venture agreement. We are currently in discussions with our joint venture partner regarding the project costs and financing plan for the project, as well as evaluating all of our options under the terms of the joint venture agreement. Possible outcomes include completing the project and related financing as originally budgeted, adding an additional equity partner, selling all, or part, of the parties’ ownership interest in the Korea JV, liquidating the joint venture or taking any other steps including those that we may agree with our joint venture partner. These possible outcomes could result in a material impairment of assets of the Korea JV and could also change our conclusion that we are the primary beneficiary of the joint venture, which could result in a material charge upon deconsolidating the joint venture. As reported by the joint venture, and consolidated in our financial statements, total net assets of $130 million as of September 30, 2019, was primarily composed of property and equipment valued on a cost basis, net of construction payable, of which we have a 50% interest.

Emerald Resort & Casino, South Africa Disposition

In May 2019, we entered into an agreement to sell Emerald Resort & Casino located in South Africa for total proceeds of approximately $47 million. We own 70% of this property while the remaining 30% is owned by local minority partners. Total cash proceeds for our 70% ownership and other adjustments total approximately $38 million. The transaction is expected to close in the fourth quarter of 2019, subject to regulatory approvals and other customary closing conditions, at which time any gain would be recognized. Emerald Resort & Casino is included in our All Other segment. The following table summarizes assets and liabilities classified as held for sale.



(In millions)	September 30, 2019
Cash and cash equivalents	$	5
Property and equipment, net	24
Goodwill	5
Intangible assets other than goodwill	10
Other	2
Assets held for sale	$	46

Current liabilities	$	4
Deferred credits and other liabilities	3
Liabilities held for sale included in Accrued expenses and other current liabilities	$	7

Rio All-Suite Hotel & Casino Disposition

On September 20, 2019, Rio Properties, LLC, a subsidiary of CEC, (“Rio Properties”) entered into a Purchase and Sale Agreement and Joint Escrow Instructions with a company controlled by a principal of Imperial Companies LLC (“Imperial”), to effect the purchase and sale of certain assets of Rio All-Suite Hotel & Casino (“Rio”) for total proceeds of approximately $516 million (with an option for Imperial to use seller financing of $40 million). CRC also executed a guaranty of certain obligations of Rio Properties (including post-closing obligations with respect to the lease described below). The transaction is expected to close in the fourth quarter of 2019, subject to other customary closing conditions. Upon closing, we will lease the property from Imperial for an initial term of two years at an initial annual rent amount of approximately $45 million and continue to operate the property subject to the terms and conditions of the lease. Imperial will have a one-time renewal option to extend the lease term for up to an additional twelve months for a maximum fee of approximately $7 million. We have recorded an impairment charge to the land and buildings within Property and Equipment, net for $380 million, which includes $6 million related to selling costs, during the quarter ended September 30, 2019 as the carrying value is higher than the fair value. Rio is included in our Las Vegas segment. The following table summarizes the assets classified as held for sale.



(In millions)	September 30, 2019
Intangible assets other than goodwill	$	11
Property and equipment, net	505
Fair value of assets held for sale	516
Estimated costs to sell	(6		)
Assets held for sale	$	510