Caesars Entertainment, Inc. - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 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 June 30, 2021


☐			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. 001-36629

CAESARS ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)


Delaware			46-3657681
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

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

(Address and zip code of principal executive offices)

(775) 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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.00001 par value	CZR	NASDAQ 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-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-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

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-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 July 29, 2021 was 213,429,619.

CAESARS ENTERTAINMENT, INC.

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION		2
Item 1.	Unaudited Financial Statements	2
	Consolidated Condensed Balance Sheets	2
	Consolidated Condensed Statements of Operations	3
	Consolidated Condensed Statements of Comprehensive Income (Loss)	4
	Consolidated Condensed Statements of Stockholders’ Equity	5
	Consolidated Condensed Statements of Cash Flows	6
	Notes to Consolidated Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Controls and Procedures	58

PART II. OTHER INFORMATION		59
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	60
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	64
Item 5.	Other Information	64
Item 6.	Exhibits	65

Signatures		66

PART I - FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED)


(In millions)	June 30, 2021		December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,128	$	1,776
Restricted cash and investments	237		2,021

Accounts receivable, net	395		342
Due from affiliates	25		44
Inventories	41		44
Prepayments and other current assets	242		253
Assets held for sale ($0 and $130 attributable to our VIEs)	4,248		1,583
Total current assets	6,316		6,063
Investment in and advances to unconsolidated affiliates	526		173
Property and equipment, net	14,393		14,735
Gaming rights and other intangibles, net	5,173		4,283
Goodwill	11,238		9,864
Other assets, net	1,170		1,267

Total assets	$	38,816	$	36,385
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	217	$	167
Accrued interest	317		229
Accrued other liabilities	1,613		1,263
Current portion of long-term debt	67		67
Liabilities related to assets held for sale ($0 and $130 attributable to our VIEs)	3,238		787
Total current liabilities	5,452		2,513
Long-term financing obligation	12,374		12,295
Long-term debt	13,838		14,073
Deferred income taxes	1,144		1,166
Other long-term liabilities	846		1,304
Total liabilities	33,654		31,351
Commitments and contingencies (Note 8)
STOCKHOLDERS' EQUITY:
Caesars stockholders’ equity	5,134		5,016
Noncontrolling interests	28		18
Total stockholders’ equity	5,162		5,034
Total liabilities and stockholders’ equity	$	38,816	$	36,385

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

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CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except per share data)	2021		2020		2021		2020
REVENUES:
Casino and pari-mutuel commissions	$	1,571	$	101	$	2,798	$	441
Food and beverage	281		7		450		63
Hotel	396		9		611		57
Other	254		10		435		39


Net revenues	2,502		127		4,294		600
EXPENSES:
Casino and pari-mutuel commissions	694		45		1,281		224
Food and beverage	166		9		274		62
Hotel	106		6		187		28
Other	79		1		148		10
General and administrative	418		67		798		165

Corporate	76		14		142		30
Impairment charges	—		—		—		161
Depreciation and amortization	301		49		566		99
Transaction costs and other operating costs	72		15		92		23
Total operating expenses	1,912		206		3,488		802
Operating income (loss)	590		(79)		806		(202)
OTHER EXPENSE:
Interest expense, net	(576)		(68)		(1,155)		(135)
Loss on extinguishment of debt	(23)		—		(23)		—

Other income (loss)	110		13		(23)		(10)
Total other expense	(489)		(55)		(1,201)		(145)
Income (loss) from continuing operations before income taxes	101		(134)		(395)		(347)
Benefit for income taxes	1		34		77		71
Net income (loss) from continuing operations, net of income taxes	102		(100)		(318)		(276)
Discontinued operations, net of income taxes	(30)		—		(34)		—
Net income (loss)	72		(100)		(352)		(276)
Net income attributable to noncontrolling interests	(1)		—		—		—
Net income (loss) attributable to Caesars	$	71	$	(100)	$	(352)	$	(276)

Net income (loss) per share - basic and diluted:
Basic income (loss) per share from continuing operations	$	0.48	$	(1.25)	$	(1.52)	$	(3.49)
Basic loss per share from discontinued operations	(0.14)		—		(0.16)		—
Basic income (loss) per share	$	0.34	$	(1.25)	$	(1.68)	$	(3.49)
Diluted income (loss) per share from continuing operations	$	0.48	$	(1.25)	$	(1.52)	$	(3.49)
Diluted loss per share from discontinued operations	(0.14)		—		(0.16)		—
Diluted income (loss) per share	$	0.34	$	(1.25)	$	(1.68)	$	(3.49)
Weighted average basic shares outstanding	209		80		209		79
Weighted average diluted shares outstanding	211		80		209		79

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

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CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2021		2020		2021		2020
Net income (loss)	$	72	$	(100)	$	(352)	$	(276)
Foreign currency translation adjustments	(11)		—		(11)		—
Change in fair market value of interest rate swaps, net of tax	10		—		22		—
Other	3		—		2		—
Other comprehensive income, net of tax	2		—		13		—
Comprehensive income (loss)	74		(100)		(339)		(276)
Comprehensive income attributable to noncontrolling interests	(1)		—		—		—
Comprehensive income (loss) attributable to Caesars	$	73	$	(100)	$	(339)	$	(276)

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

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CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)


	Caesars Stockholders’ Equity
	Common Stock									Treasury Stock
(In millions)	Shares	Amount		Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income		Amount		Non controlling Interests		Total Stockholders’ Equity
Balance, December 31, 2019	78	$	—	$	760	$	366	$	—	$	(9)	$	—	$	1,117

Issuance of restricted stock units	—	—		6		—		—		—		—		6
Net loss	—	—		—		(176)		—		—		—		(176)
Shares withheld related to net share settlement of stock awards	—	—		(7)		—		—		—		—		(7)
Balance, March 31, 2020	78	—		759		190		—		(9)		—		940
Issuance of restricted stock units	—	—		4		—		—		—		—		4
Issuance of common stock	21	—		772		—		—		—		—		772
Net loss	—	—		—		(100)		—		—		—		(100)

Balance, June 30, 2020	99	$	—	$	1,535	$	90	$	—	$	(9)	$	—	$	1,616





Balance, December 31, 2020	208	$	—	$	6,382	$	(1,391)	$	34	$	(9)	$	18	$	5,034
Issuance of restricted stock units	—	—		23		—		—		—		—		23
Net loss	—	—		—		(423)		—		—		(1)		(424)
Other comprehensive income, net of tax	—	—		—		—		11		—		—		11

Shares withheld related to net share settlement of stock awards	—	—		(14)		—		—		—		—		(14)

Balance, March 31, 2021	208	—		6,391		(1,814)		45		(9)		17		4,630
Issuance of restricted stock units	—	—		21		—		—		—		—		21
Issuance of common stock, net	5	—		454		—		—		(14)		—		440
Net income	—	—		—		71		—		—		1		72

Other comprehensive income, net of tax	—	—		—		—		2		—		—		2
Shares withheld related to net share settlement of stock awards	—	—		(13)		—		—		—		—		(13)
Acquired noncontrolling interests	—	—		—		—		—		—		10		10

Balance, June 30, 2021	213	$	—	$	6,853	$	(1,743)	$	47	$	(23)	$	28	$	5,162

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

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CAESARS ENTERTAINMENT, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended June 30,
(In millions)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:




















Net cash provided by (used in) operating activities	$	672	$	(81)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net	(177)		(41)

Acquisition of William Hill, net of cash acquired	(2,042)		—
Acquisition of gaming rights and trademarks	(272)		—

Proceeds from sale of businesses, property and equipment, net of cash sold	460		—
Proceeds from the sale of investments	44		—
Proceeds from insurance related to property damage	40		—
Investments in unconsolidated affiliates	(33)		(1)
Net cash used in investing activities	(1,980)		(42)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt and revolving credit facilities	—		465
Repayments of long-term debt and revolving credit facilities	(35)		(367)
Cash paid to settle convertible notes	(367)		—



Proceeds from issuance of common stock	—		772
Taxes paid related to net share settlement of equity awards	(27)		(7)

Net cash provided by (used in) financing activities	(429)		863

CASH FLOWS FROM DISCONTINUED OPERATIONS:
Cash flows from operating activities	(67)		—
Cash flows from investing activities	(916)		—
Cash flows from financing activities	591		—
Net cash used in discontinued operations	(392)		—



Effect of foreign currency exchange rates on cash	19		—
Increase (decrease) in cash, cash equivalents and restricted cash	(2,110)		740
Cash, cash equivalents and restricted cash, beginning of period	4,280		217
Cash, cash equivalents and restricted cash, end of period	$	2,170	$	957

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO AMOUNTS REPORTED WITHIN THE CONSOLIDATED CONDENSED BALANCE SHEETS:
Cash and cash equivalents	$	1,128	$	950
Restricted cash included in restricted cash and investments	237		3
Restricted and escrow cash included in other assets, net	385		4
Cash and cash equivalents and restricted cash - discontinued operations	420		—
Total cash, cash equivalents and restricted cash	$	2,170	$	957

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	923	$	126
Income taxes refunded, net	—		(17)
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Payables for capital expenditures	54		4
Convertible notes settled with shares	440		—
Land contributed to joint venture	61		—

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

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CAESARS ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

The accompanying consolidated condensed financial statements include the accounts of Caesars Entertainment, Inc., a Delaware corporation, and its consolidated subsidiaries which may be referred to as the “Company,” “CEI,” “Caesars,” “we,” “our,” or “us” within these financial statements.

This Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Annual Report”). Capitalized terms used but not defined in this Form 10-Q have the same meanings as in the 2020 Annual Report.

We also refer to (i) our Consolidated Condensed Financial Statements as our “Financial Statements,” (ii) our Consolidated Condensed Balance Sheets as our “Balance Sheets,” (iii) our Consolidated Condensed Statements of Operations and Consolidated Condensed Statements of Comprehensive Income (Loss) as our “Statements of Operations,” and (iv) our Consolidated Condensed Statements of Cash Flows as our “Statements of Cash Flows.”

Note 1. Organization and Basis of Presentation

Organization

The Company is 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, 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 series of acquisitions, including the acquisition of Eldorado Resort Casino Shreveport (“Eldorado Shreveport”) in 2005, MTR Gaming Group, Inc. in 2014, Circus Circus Reno and the 50% membership interest in the Silver Legacy that was 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 which Former Caesars became a wholly-owned subsidiary of the Company (the “Merger”).

On April 22, 2021, the Company completed the acquisition of William Hill PLC for £2.9 billion, or approximately $4.0 billion (the “William Hill Acquisition”). See below for further discussion of the William Hill Acquisition.

The Company owns, leases or manages an aggregate of 52 domestic properties in 16 states with approximately 55,300 slot machines, video lottery terminals (“VLTs”) and e-tables, approximately 3,000 table games and approximately 46,200 hotel rooms as of June 30, 2021. The Company operates and conducts sports wagering across 17 states plus the District of Columbia and operates regulated online real money gaming businesses in five states. 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 49 properties. The Company’s primary source of revenue is generated by our casino properties’ gaming operations, as well as online gaming, and the Company utilizes its hotels, restaurants, bars, entertainment, racing, sportsbook offerings, retail shops and other services to attract customers to its properties.

The Company has entered into several agreements to divest of certain properties and initiated plans to divest of other assets, including non-core properties or divestitures required by regulatory agencies. See Note 3 for a discussion of properties recently sold or currently held for sale and Note 15 for segment information.

Certain properties, including Harrah’s Louisiana Downs, Caesars Southern Indiana and Caesars Entertainment UK, including Emerald Resort & Casino (together “Caesars UK Group”), met held for sale criteria as of the date of the closing of the Merger. Additionally, as described below, William Hill non-U.S. operations met held for sale criteria as of the date of the closing of the William Hill Acquisition. These properties are appropriately classified as discontinued operations.

William Hill Acquisition

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. On April 20, 2021, a UK Court sanctioned the proposed acquisition and on April 22, 2021, the Company completed the acquisition of William Hill PLC for £2.9 billion, or approximately $4.0 billion. See Note 2.

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CAESARS ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

provided the Debt Financing (as defined below). The Bridge Credit Agreement provides for (a) a 540-day £1.0 billion asset sale bridge facility, (b) a 60-day £503 million cash confirmation bridge facility and (c) a 540-day £116 million revolving credit facility (collectively, the “Debt Financing”). The proceeds of the bridge loan facilities provided under the Bridge Credit Agreement were used (i) to pay a portion of the cash consideration for the acquisition and (ii) to pay fees and expenses related to the acquisition and related transactions. The proceeds of the revolving credit facility under the Bridge Credit Agreement may be used for working capital and general corporate purposes. The £1.5 billion Interim Facilities Agreement (the “Interim Facilities Agreement”) entered into on October 6, 2020 with Deutsche Bank AG, London Branch and JPMorgan Chase Bank, N.A., and amended on December 11, 2020, was terminated upon the execution of the Bridge Credit Agreement. On May 12, 2021, we repaid the £503 million cash confirmation bridge facility. On June 14, 2021, the Company drew down the full £116 million from the revolving credit facility and the proceeds, in addition to excess Company cash, were used to make a partial repayment of the asset sale bridge facility in the amount of £700 million. Outstanding borrowings under the Bridge Credit Agreement are expected to be repaid upon the sale of William Hill’s non-U.S. operations including the UK and international online divisions and the retail betting shops (collectively, “William Hill International”), all of which are held for sale and related activity is reflected within discontinued operations. See Note 3. Certain investments acquired will be excluded from the held for sale asset group. See Note 7 for investments in which the Company elected to apply the fair value option.

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 six months ended June 30, 2020 has been reclassified to Casino and pari-mutuel commissions expense and General and administrative expense based on the nature of the expense.

In June 2021, the Indiana Gaming Commission (“IGC”) amended its order that previously required the Company to sell a third casino asset in the state. As a result, Caesars will not be required to sell Horseshoe Hammond and Horseshoe Hammond no longer meets the held for sale criteria. The assets and liabilities held for sale have been reclassified as held and used for all periods presented measured at the lower of the carrying amount, adjusted for depreciation and amortization that would have been recognized had the assets been continuously classified as held and used, and the fair value at the date of the amended ruling. Additionally, amounts previously presented in discontinued operations have been reclassified into continuing operations for all periods presented.

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 (“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 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. 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 presentation of financial information herein for the periods after the Company’s acquisition of Former Caesars on July 20, 2020 and of William Hill on April 22, 2021 is not fully comparable to the periods prior to the acquisitions. In addition, the presentation of financial information herein for the periods after the Company’s sales of various properties is not fully comparable to the periods prior to their respective sale dates. See Note 2 for further discussion of the acquisitions and related transactions and Note 3 for properties recently sold or currently held for sale.

Consolidation of Subsidiaries and Variable Interest Entities

Our consolidated condensed financial statements include the accounts of Caesars Entertainment, Inc. and its subsidiaries after elimination of all intercompany accounts and transactions.

We consolidate all subsidiaries in which we have a controlling financial interest and variable interest entities (“VIEs”) for which we or one of our consolidated subsidiaries is the primary beneficiary. Control generally equates to ownership percentage,

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CAESARS ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

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.

Consolidation of Korea Joint Venture

The Company had 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 was a VIE and the Company was the primary beneficiary, and therefore, we had consolidated the Korea JV into our financial statements. As of December 31, 2020, the assets and liabilities of the Korea JV were classified as held for sale and consisted of $130 million of Property and equipment and Other assets and $130 million of current and other long-term liabilities. We sold our interest in the Korea JV on January 21, 2021 and derecognized its assets and liabilities from our Balance Sheets. There was no gain or loss associated with the sale.

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 U.S. All of the Company’s 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 COVID-19. As of June 30, 2021, the Company has resumed operations at substantially all of its properties, to the extent permitted by regulations governing the applicable jurisdiction, with the exception of Lake Charles which was severely damaged by Hurricane Laura (see Note 8), and Caesars Windsor. Caesars Windsor reopened under the new provincial guidelines on July 23, 2021. During the six months ended June 30, 2021, most of our properties have experienced positive trends as restrictions on maximum capacities and amenities available are eased.

The Company continued to pay 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 their furloughed period. The Company emphasized a focus on labor efficiencies as the Company’s workforce returns and operations resume in compliance with governmental or tribal orders, directives, and guidelines.

The COVID-19 public health emergency had a material adverse effect on the Company’s business, financial condition and results of operations for comparative periods in 2020, including the three and six months ended June 30, 2020, and for the three months ended March 31, 2021. As a result, the terms of our debt arrangements provide that the financial covenant measurement period is not effective through September 30, 2021, so long as we comply with a minimum liquidity requirement. See Note 9. In addition, on March 19, 2021, the Company filed a lawsuit against its insurance carriers for losses attributed to the COVID-19 public health emergency. See Note 8. Due to a triggering event resulting from the COVID-19 public health emergency, the Company recognized impairment charges of $116 million related to goodwill and trade names during the six months ended June 30, 2020.

Although the Company is experiencing positive operating trends thus far in 2021, the extent of the ongoing and future effects of the COVID-19 public health emergency on the Company’s business and the casino resort industry generally is uncertain. The extent and duration of the negative impact of the COVID-19 public health emergency will ultimately depend on future developments, including but not limited to, the duration and severity of the outbreak or new variants, restrictions on operations imposed by governmental authorities, the potential for authorities reimposing stay at home orders, travel restrictions 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, the efficacy and acceptance of vaccines, and the Company’s ability to adjust its cost structures for the duration of any such interruption of its operations.

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CAESARS ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (the “FASB”) issued the following authoritative guidance amending the FASB Accounting Standards Codification (“ASC”).

Effective January 1, 2021, we adopted Accounting Standards Updates (“ASU”) 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General, which did not have a material effect on our financial statements.

The following ASUs were not implemented as of June 30, 2021:

Previously Disclosed

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. The amendments in this update are intended to provide relief to the 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 has not yet adopted this new guidance and is evaluating the qualitative and quantitative effect the new guidance will have on its 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. As of June 30, 2021, all outstanding 5% Convertible Notes have been converted. The adoption of this standard is not expected to have a material impact on the Company’s Financial Statements.

Note 2. Acquisitions and Purchase Price Accounting

Merger with Caesars Entertainment Corporation

On July 20, 2020, the Merger was consummated and Former Caesars became a wholly-owned subsidiary of the Company. The strategic rationale for the Merger includes, but is not limited to, the following:

•Creation of 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 acquisition was determined with reference to its acquisition date fair value.


(In millions)	Consideration
Cash consideration paid	$	6,090
Shares issued to Former Caesars shareholders (a)	2,381
Cash paid to retire Former Caesars debt	2,356
Other consideration paid	48
Total purchase consideration	$	10,875

____________________

(a)Former Caesars common stock was converted into the right to receive 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 ten trading days ending on July 16, 2020).

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Final Purchase Price Allocation

The fair values are based on management’s analysis including work performed by third party valuation specialists, which were finalized over the one-year measurement period. The following table summarizes the allocation of the purchase consideration to the identifiable assets acquired and liabilities assumed of Former Caesars, with the excess recorded as goodwill as of June 30, 2021:


(In millions)	Fair Value
Current and other assets	$	3,540
Property and equipment	13,096

Goodwill	9,064
Intangible assets (a)	3,394
Other noncurrent assets	710
Total assets	$	29,804

Current liabilities	$	1,771
Financing obligation	8,149
Long-term debt	6,591
Noncurrent liabilities	2,400
Total liabilities	18,911
Noncontrolling interests	18
Net assets acquired	$	10,875

____________________

(a)Intangible assets consist of gaming rights valued at $396 million, trade names valued at $2.1 billion, Caesars Rewards programs valued at $523 million and customer relationships valued at $425 million.

As noted above, the purchase price allocation was subject to a measurement period and our estimates as of March 31, 2021 have been revised related to certain working capital adjustments and the related tax effect, which reduced both goodwill and noncurrent liabilities by $5 million as of June 30, 2021. Horseshoe Hammond no longer meets the held for sale criteria based on the June 2021 amended order from the IGC. See Note 1. The assets and liabilities previously held for sale have been reclassified as held and used under continuing operations for all periods presented resulting in changes in the presentation of the table above.

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 Former Caesars acquisition make use of Level 3 inputs, such as expected cash flows and projected financial results. The market approach indicates value for a subject asset based on available market pricing for comparable assets.

Trade receivables and payables 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 Former Caesars acquisition date. Assets and liabilities held for sale are recorded at fair value, less costs to sell, based on the 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 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 assessment	89
Discount (premium) attributable to other factors	2
Face value of financial assets	$	186

The fair value of land was determined using the 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. The value of building and site improvements was estimated via the income 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

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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 fair value for these intangible assets was determined using either the relief from royalty method and excess earnings method under the income approach or a replacement cost market approach.

Trademarks and Caesars Rewards were valued using the relief from royalty method, which presumes that without ownership of such trademarks or 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 or program. By virtue of this asset, the Company avoids any such payments and records the related intangible value of the Company’s ownership of the brand name or program. The acquired 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 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 needed to be replaced. We estimate the useful life of these customer relationships to be approximately seven years from the Merger date.

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 license intangible asset, which is net of charges for the use of other identifiable assets of the business including working capital, fixed assets and other intangible assets. The replacement cost of the gaming license was used as an indicator of fair value. The acquired gaming rights have indefinite lives, with the exception of one jurisdiction in which we estimate the useful life of the license to be approximately 34 years from the Merger date.

Goodwill is the result of expected synergies from the operations of the combined company and the assembled workforce of Former Caesars. The final assignment of goodwill to our reporting units has not been completed. The goodwill acquired will not generate amortization deductions for income tax purposes.

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 $3 million and $15 million for the three and six months ended June 30, 2021, respectively, and $13 million and $22 million for the three and six months ended June 30, 2020, respectively, in connection with the Merger. Transaction costs were associated with legal, IT costs, internal labor and professional services and were recorded in Transaction costs and other operating costs in our Statements of Operations.

For the period of January 1, 2021 through June 30, 2021, the properties of Former Caesars generated net revenues of $3.2 billion, excluding discontinued operations, and net loss of $469 million.

Acquisition of William Hill

On April 22, 2021, we completed the previously announced acquisition of William Hill PLC for cash consideration of approximately £2.9 billion, or approximately $4.0 billion, based on the GBP to USD exchange rate on the closing date.

Prior to the acquisition, William Hill PLC’s U.S. subsidiary, William Hill U.S. Holdco (“William Hill US” and together with William Hill PLC, “William Hill”) operated 37 sportsbooks at our properties in eight states. Following the William Hill Acquisition, we conduct sports wagering across 17 states across the U.S. plus the District of Columbia. Additionally, we operate regulated online real money gaming businesses in five states and continue to leverage the World Series of Poker (“WSOP”) brand, and license the WSOP trademarks for a variety of products and services. Extensive usage of digital platforms and growing bettor demand are driving the market for online sports betting platforms in the U.S. and the William Hill Acquisition positioned us to address this growing market. The Company intends to divest the non-U.S. operations including the UK and international online divisions and the retail betting shops, and retain certain investments.

The Company previously held an equity interest in William Hill PLC and William Hill US (see Note 4). Accordingly, the acquisition is accounted for as a business combination achieved in stages, or a “step acquisition.”

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As mentioned above, the total purchase consideration for William Hill was approximately $4.0 billion. The estimated purchase consideration in the acquisition was determined with reference to its acquisition date fair value.


(In millions)	Consideration
Cash for outstanding William Hill common stock (a)	$	3,909
Fair value of William Hill equity awards	30
Settlement of preexisting relationships (net of receivable/payable)	7
Settlement of preexisting relationships (net of previously held equity investment and off-market settlement)	20
Total purchase consideration	$	3,966

____________________

(a)William Hill common stock of approximately 1.0 billion shares as of the acquisition date was paid at £2.72 per share, or approximately $3.77 per share using the GBP to USD exchange rate on the acquisition date.

Preliminary Purchase Price Allocation

The purchase price allocation for William Hill is preliminary as it relates to determining the fair value of certain assets and liabilities, including goodwill, and is subject to change. 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 following table summarizes the preliminary allocation of the purchase consideration to the identifiable assets acquired and liabilities assumed of William Hill, with the excess recorded as goodwill as of June 30, 2021:


(In millions)	Fair Value
Other current assets	$	163
Assets held for sale	3,854
Property and equipment, net	55
Goodwill	1,373
Intangible assets (a)	696
Other noncurrent assets	307
Total assets	$	6,448

Other current liabilities	$	249
Liabilities related to assets held for sale (b)	2,103
Deferred income taxes	85
Other noncurrent liabilities	35
Total liabilities	2,472
Noncontrolling interests	10
Net assets acquired	$	3,966

____________________

(a)Intangible assets consist of gaming rights valued at $90 million, trademarks valued at $28 million, developed technology valued at $120 million, reacquired rights valued at $390 million and user relationships valued at $68 million.

(b)Includes debt of $1.1 billion related to William Hill International at acquisition date.

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 William Hill acquisition make use of Level 3 inputs, such as expected cash flows and projected financial results. The market approach indicates value for a subject asset based on available market pricing for comparable assets.

Trade receivables and payables 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 William Hill acquisition date. Assets and liabilities held for sale substantially represent William Hill International which has been valued using a combination of approaches including a market approach based on valuation multiples and EBITDA, the relief from royalty method and the replacement cost method.

The acquired net assets of William Hill included certain investments in common stock. Investments with a publicly available share price were valued using the share price on the acquisition date. Investments without publicly available share data were valued at their carrying value, which approximated fair value.

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Other personal property assets such as furniture, equipment, computer hardware, and fixtures were valued at the existing carrying values as they closely represented the estimated fair value of those items at the William Hill acquisition date.

Trademarks and developed technology were valued using the relief from royalty method, which presumes that without ownership of such trademarks or technology, the Company would have to make a series of payments to the assets’ owner in return for the right to use their brand or technology. By virtue of their ownership of the respective intangible assets, the Company avoids any such payments and records the related intangible value. The estimated useful lives of the trademarks and developed technology are approximately 15 years and six years, respectively, from the acquisition date.

Online user relationships are valued using a cost approach based on the estimated marketing and promotional cost to acquire the new active user base if the user relationships were not already in place and needed to be replaced. We estimate the useful life of the user relationships to be approximately three years from the acquisition date.

Operating agreements with non-Caesars entities allowed William Hill to operate retail and online sportsbooks as well as online gaming within certain states. These agreements are valued using the excess earnings method, estimating the projected profits of the business attributable to the rights afforded through the agreements, adjusted for returns of other assets that contribute to the generation of this profit, such as working capital, fixed assets and other intangible assets. We estimate the useful life of these operating agreements to be approximately 20 years from the acquisition date.

The reacquired rights intangible asset represents the estimated fair value of the Company’s share of the William Hill’s forecasted profits arising from the prior contractual arrangement with the Company to operate retail and online sportsbooks and online gaming. This fair value estimate was determined using the excess earnings method, an income-based approach that reflects the present value of the future profit William Hill expected to earn over the remaining term of the contract, adjusted for returns of other assets that contribute to the generation of this profit, such as working capital, fixed assets and other intangible assets. The forecasted profit used within this valuation is adjusted for the settlement of the preexisting relationship noted previously in the calculation of the purchase consideration in order to avoid double counting of this settlement. Reacquired rights are amortizable over the remaining contractual period of the contract in which the rights were granted and estimated to be approximately 24 years from the acquisition date.

Goodwill is the result of expected synergies from the operations of the combined company and future customer relationships including the brand names and strategic partner relationships of Caesars and the technology and assembled workforce of William Hill. The goodwill acquired will not generate amortization deductions for income tax purposes.

The fair value of long-term debt assumed has been calculated based on market quotes.

The Company recognized acquisition-related transaction costs of $62 million and $67 million for the three and six months ended June 30, 2021, respectively. These costs were associated with legal costs and professional services and were recorded in Transaction costs and other operating costs in our Statements of Operations.

For the period of April 22, 2021 through June 30, 2021, the operations of William Hill generated net revenues of $48 million, excluding discontinued operations (see Note 3), and net income of $107 million.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information is presented to illustrate the estimated effects of the William Hill Acquisition as if it had occurred on January 1, 2020. The pro forma amounts include the historical operating results of the Company and William Hill prior to the acquisition, with adjustments directly attributable to the acquisition. The pro forma results include adjustments and consequential tax effects to reflect incremental amortization expense to be incurred based on preliminary fair values of the identifiable intangible assets acquired, eliminate gains and losses related to certain investments and adjustments to the timing of acquisition related costs and expenses incurred during the three and six months ended June 30, 2021 and to recognize these costs during the six months ended June 30, 2020. The unaudited pro forma financial information is not necessarily indicative of the financial position or results that would have occurred had the William Hill Acquisition been consummated as of the dates indicated, nor is it indicative of any future results. In addition, the unaudited pro forma financial information does not reflect the expected realization of any synergies or cost savings associated with the acquisition.


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2021		2020		2021		2020
Net revenues	$	2,532	$	136	$	4,421	$	647
Net income (loss)	175		(143)		(265)		(445)
Net income (loss) attributable to Caesars	174		(143)		(265)		(445)

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Note 3. Assets Held for Sale

The Company periodically divests assets that it does not consider core to its business to raise capital or, in some cases, to comply with conditions, terms, obligations or restrictions imposed by antitrust, gaming and other regulatory entities. The carrying value of the net assets held for sale are compared to the expected selling price and any expected losses are recorded immediately. Gains or losses associated with the disposal of assets held for sale are recorded within other operating costs, unless the assets represent a discontinued operation.

Held for sale - Continuing operations

Baton Rouge

On December 1, 2020, the Company entered into a definitive agreement with CQ Holding Company, Inc. to sell the equity interests of Belle of Baton Rouge Casino & Hotel (“Baton Rouge”). The definitive agreement provides that the consummation of the sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals, and is expected to close in the third quarter of 2021. Baton Rouge met the requirements for presentation as assets held for sale as of June 30, 2021.

The assets and liabilities held for sale of continuing operations, accounted for at carrying value unless fair value is lower, were as follows as of June 30, 2021 and December 31, 2020:


	Baton Rouge
(In millions)	June 30, 2021		December 31, 2020
Assets:





Cash	$	2	$	2
Property and equipment, net	2		2


Other assets, net	1		1
Assets held for sale	$	5	$	5
Liabilities:
Current liabilities	$	3	$	2





Other long-term liabilities	1		1
Liabilities related to assets held for sale	$	4	$	3

The following information presents the net revenues and net loss for the Company’s property considered continuing operations, that is held for sale:


	Baton Rouge
	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2021		2020		2021		2020
Net revenues	$	5	$	2	$	9	$	8
Net loss	—		(3)		(1)		(13)

Held for sale - Sold

Evansville, MontBleu, Eldorado Shreveport, Kansas City and Vicksburg Divestitures

On June 3, 2021, the Company consummated the sale of the real property and equity interests of Tropicana Evansville (“Evansville”) to Gaming and Leisure Properties, Inc. (“GLPI”) and Bally’s Corporation (formerly Twin River Worldwide Holdings, Inc.), respectively, for $480 million, subject to a customary working capital adjustment, resulting in a gain of approximately $12 million. Evansville was within the Regional segment.

On April 6, 2021, the Company consummated the sale of the equity interests of MontBleu Casino Resort & Spa (“MontBleu”) to Bally’s Corporation for $15 million, subject to a customary working capital adjustment, resulting in a gain of less than $1 million. The purchase price for MontBleu is due no later than the first anniversary of the consummation of the transaction.

As a result of the execution of the agreement to sell MontBleu, an impairment charge totaling $45 million was recorded during the six months ended June 30, 2020 due to the carrying value exceeding the estimated net sales proceeds. The impairment

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charges resulted in a reduction to the carrying amounts of the right-of-use assets, property and equipment, and goodwill and other intangibles totaling $18 million, $23 million and $4 million, respectively. MontBleu was within the Regional segment.

Prior to their respective closing dates in 2020, Eldorado Shreveport, Isle of Capri Casino Kansas City (“Kansas City”), and Lady Luck Casino Vicksburg (“Vicksburg”) met the requirements for presentation as assets held for sale under GAAP. 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 income (loss) of held for sale properties, which were recently sold, for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended June 30, 2021				Six Months Ended June 30, 2021
(In millions)	MontBleu		Evansville		MontBleu		Evansville
Net revenues	$	—	$	27	$	11	$	58
Net income	—		13		4		26


	Three Months Ended June 30, 2020
(In millions)	Eldorado Shreveport		Kansas City		Vicksburg		MontBleu		Evansville
Net revenues	$	7	$	4	$	2	$	3	$	7
Net income (loss)	2		(1)		(1)		2		(9)


	Six Months Ended June 30, 2020
(In millions)	Eldorado Shreveport		Kansas City		Vicksburg		MontBleu		Evansville
Net revenues	$	30	$	18	$	7	$	12	$	40
Net income (loss)	4		2		(1)		(40)		(8)

The assets and liabilities held for sale were as follows as of December 31, 2020:


	December 31, 2020
(In millions)	MontBleu		Evansville
Assets:






Cash	$	3	$	7
Property and equipment, net	37		302
Goodwill	—		9
Gaming licenses and other intangibles, net	—		138
Other assets, net	32		49
Assets held for sale	$	72	$	505
Liabilities:
Current liabilities	$	8	$	12





Other long-term liabilities	63		24
Liabilities related to assets held for sale	$	71	$	36

Held for sale - Discontinued operations

In connection with the William Hill Acquisition, the Company intends to divest William Hill International. Accordingly, the assets and liabilities of William Hill International are classified as held for sale with operations presented within discontinued operations. See Note 1 and Note 2.

As a result of the Merger, certain Former Caesars properties, including Harrah’s Louisiana Downs, Caesars Southern Indiana, and Caesars UK Group, which includes Emerald Resorts & Casino, met held for sale criteria as of the date of the closing of the Merger. The sales of these properties are classified as held for sale with operations presented within discontinued operations. On July 16, 2021, the Company completed the sale of Caesars UK Group, in which the buyer assumed all liabilities associated with the Caesars UK Group, and recorded an impairment of $31 million as of June 30, 2021 within discontinued operations.

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On September 3, 2020, the Company and VICI Properties L.P., a Delaware limited partnership (“VICI”) entered into an agreement to sell the equity interests of Harrah’s Louisiana Downs to Rubico Acquisition Corp. for $22 million, subject to a customary working capital adjustment, which 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 third quarter of 2021.

On December 24, 2020, the Company entered into an agreement to sell the equity interests of Caesars Southern Indiana to the Eastern Band of Cherokee Indians (“EBCI”) for $250 million, subject to customary purchase price adjustments. The sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals, and is expected to close in the third quarter of 2021.

The following information presents the net revenues and net income (loss) for the Company’s properties that are part of discontinued operations for the three and six months ended June 30, 2021:


	Three Months Ended June 30, 2021
(In millions)	Harrah’s Louisiana Downs		Caesars UK		Caesars Southern Indiana		William Hill International
Net revenues	$	16	$	20	$	65	$	343
Net income (loss)	5		(39)		9		(2)


	Six Months Ended June 30, 2021
(In millions)	Harrah’s Louisiana Downs		Caesars UK		Caesars Southern Indiana		William Hill International
Net revenues	$	29	$	30	$	114	$	343
Net income (loss)	9		(46)		9		(2)

The assets and liabilities held for sale as discontinued operations, accounted for at carrying value unless fair value was lower, were as follows as of June 30, 2021 and December 31, 2020:


	June 30, 2021
(In millions)	Harrah’s Louisiana Downs		Caesars UK		Caesars Southern Indiana
Assets:
Cash	$	6	$	25	$	10
Property and equipment, net	10		75		416
Goodwill	3		3		136
Gaming licenses and other intangibles, net	5		29		23
Other assets, net	1		78		7
Assets held for sale	$	25	$	210	$	592
Liabilities:

Current liabilities	$	8	$	72	$	17
Other long-term liabilities (a)	5		111		335



Liabilities related to assets held for sale	$	13	$	183	$	352

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(UNAUDITED)


	December 31, 2020
(In millions)	Harrah’s Louisiana Downs		Caesars UK		Caesars Southern Indiana
Assets:
Cash	$	6	$	32	$	8
Property and equipment, net	11		75		418
Goodwill	3		3		136
Gaming licenses and other intangibles, net	5		28		23
Other assets, net	—		117		4
Assets held for sale	$	25	$	255	$	589
Liabilities:

Current liabilities	$	6	$	73	$	13
Other long-term liabilities (a)	6		120		332



Liabilities related to assets held for sale	$	12	$	193	$	345

____________________

(a)We have included $340 million and $336 million of deferred finance obligation as of June 30, 2021 and December 31, 2020, respectively, as held for sale liabilities for Caesars Southern Indiana and Harrah’s Louisiana Downs, which represent our preliminary purchase price allocation of the liability which will be derecognized upon completion of those divestitures.

Not included in the above table are assets and liabilities held for sale of $3.4 billion and $2.7 billion, respectively, related to William Hill International, which was held for sale on date that the William Hill Acquisition was consummated, as described in Note 2, and are considered discontinued operations. Liabilities held for sale include $627 million of debt related to the asset sale bridge facility and the revolving credit facility, which are expected to be repaid upon the sale of William Hill International, as described in Note 1. The Bridge Credit Agreement includes a financial covenant requiring the Bridge Facility Borrower to comply with a maximum total net leverage ratio of 10.50 to 1.00 beginning the fiscal quarter ending on September 30, 2021. The borrowings under the Bridge Credit Agreement are guaranteed by the Bridge Facility Borrower and its material wholly-owned subsidiaries (subject to exceptions), and are secured by a pledge of substantially all of the existing and future property and assets of the Bridge Facility Borrower and the guarantors (subject to exceptions). In addition, $1.1 billion of debt, at book value which approximates fair value, is held for sale related to two trust deeds assumed in the William Hill Acquisition. One trust deed relates to £350 million aggregate principal amount of 4.750% Senior Notes due 2026, and the other trust deed relates to £350 million aggregate principal amount of 4.875% Senior Notes due 2023. Each of the trust deeds contain a put option due to a change in control which allowed noteholders to require the Company to purchase the notes at 101% of the principal amount with interest accrued. The put period expired on July 26, 2021, and approximately £1 million of debt was repurchased. No financial covenants were noted related to the two trust deeds assumed in the William Hill Acquisition.

Note 4. Investments in and Advances to Unconsolidated Affiliates

William Hill

The Company previously entered into a 25-year agreement with William Hill, which became effective January 29, 2019 and 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. On April 22, 2021, the Company consummated its previously announced acquisition of William Hill PLC in an all-cash transaction. Prior to the acquisition, the Company accounted for its investment in William Hill PLC as an investment in equity securities. Additionally, we accounted for our investment in William Hill US as an equity method investment prior to the William Hill Acquisition. See Note 2 for further detail on the consideration transferred and the allocation of the purchase price.

NeoGames

The acquired net assets of William Hill included an investment in NeoGames S.A. (“NeoGames”), a global leader of iLottery solutions and services to national and state-regulated lotteries, and other investments. As of June 30, 2021, the Company held approximately 6 million shares of NeoGames common stock with a fair value of $377 million, which represents an ownership interest of approximately 24.5%. The Company has elected to account for the NeoGames investment under the fair value option under ASC 825 and remeasures the investment based on the publicly available share price (Level 1). See Note 7. For the period ended June 30, 2021, the Company recorded a gain of approximately $123 million, which is included within Other income (loss) on the Statements of Operations.

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(UNAUDITED)

Pompano Joint Venture

In April 2018, the Company entered into a joint venture with Cordish Companies (“Cordish”) to plan and develop a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the casino and racetrack at the Company’s Pompano property. As the managing member, Cordish will operate the business and manage the development, construction, financing, marketing, leasing, maintenance and day-to-day operation of the various phases of the project. Additionally, Cordish will be responsible for the development of the master plan for the project with the Company’s input and will submit it for the Company’s review and approval. In June 2021, the joint venture issued a capital call and we contributed $3 million. The Company has made cash contributions totaling $4 million and has contributed land. On February 12, 2021, the Company contributed 186 acres to the joint venture with a fair value of $61 million. Total contributions of approximately 206 acres of land have been made with a fair value of approximately $69 million, and the Company has no further obligation to contribute additional real estate or cash as of June 30, 2021. We entered into a short-term lease agreement in February 2021, which we can cancel at any time, to lease back a portion of the land from the joint venture.

While the Company holds a 50% variable interest in the joint venture, it is not the primary beneficiary; as such the investment in the joint venture is accounted for using the equity method. The Company participates evenly with Cordish in the profits and losses of the joint venture, which are included in Transaction costs and other operating costs on the Statements of Operations. As of June 30, 2021 and December 31, 2020, the Company’s investment in the joint venture is recorded in Investment in and advances to unconsolidated affiliates on the Balance Sheets.

Note 5. Property and Equipment


(In millions)	June 30, 2021		December 31, 2020
Land and improvements	$	2,108	$	2,187
Buildings, riverboats, and leasehold improvements	12,111		12,059
Furniture, fixtures, and equipment	1,509		1,419
Construction in progress	218		118
Total property and equipment	15,946		15,783
Less: accumulated depreciation	(1,553)		(1,048)
Total property and equipment, net	$	14,393	$	14,735

Our property and equipment are subject to various operating leases for which we are the lessor. We lease our property and equipment related to our hotel rooms, convention space and retail space through various short-term and long-term operating leases.


Depreciation Expense
	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2021		2020		2021		2020
Depreciation expense	$	264	$	42	$	509	$	85

Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset or the related lease.

Note 6. Goodwill and Intangible Assets, net

The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The Company determines the estimated 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 price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is recorded as goodwill.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Changes in Carrying Value of Goodwill and Other Intangible Assets


			Non-Amortizing Intangible Assets
(In millions)	Amortizing Intangible Assets		Goodwill		Other
December 31, 2020	$	501	$	9,864	$	3,782
Amortization	(57)		—		—
Acquired (a)	696		1,373		—
Acquisition of gaming rights and trademarks (b)	243		—		20
Other	1		1		(13)
June 30, 2021	$	1,384	$	11,238	$	3,789

____________________

(a)Includes goodwill and intangible assets acquired upon William Hill Acquisition. See Note 2 for further detail.

(b)Includes acquired royalty-free license of Planet Hollywood Trademark with an estimated useful life of 15 years.

Gross Carrying Value and Accumulated Amortization of Intangible Assets Other Than Goodwill


	June 30, 2021							December 31, 2020
(Dollars in millions)	Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets
Customer relationships	3 - 7 years	$	578	$	(138)	$	440	$	510	$	(92)	$	418
Gaming rights and other	20 - 34 years	174		(3)		171		84		(1)		83
Trademarks	15 years	271		(3)		268		—		—		—
Reacquired rights	24 years	390		(3)		387		—		—		—
Technology	6 years	121		(3)		118		—		—		—
		$	1,534	$	(150)	1,384		$	594	$	(93)	501

Non-amortizing intangible assets
Trademarks						2,148						2,161
Gaming rights						1,118						1,098
Caesars Rewards						523						523

						3,789						3,782
Total amortizing and non-amortizing intangible assets, net						$	5,173					$	4,283

Amortization expense with respect to intangible assets for the three months ended June 30, 2021 and 2020 totaled $37 million and $7 million, respectively, and for the six months ended June 30, 2021 and 2020 totaled $57 million and $14 million, respectively, which is included in depreciation and amortization in the Statements of Operations.


Estimated Five-Year Amortization
	Remaining 2021		Years Ended December 31,
(In millions)			2022		2023		2024		2025		2026
Estimated annual amortization expense	$	93	$	149	$	145	$	130	$	122	$	122

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(UNAUDITED)

Note 7. Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis: The following table sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the Balance Sheets at June 30, 2021 and December 31, 2020:


	June 30, 2021
(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Restricted cash and investments	$	1	$	1	$	—	$	2
Marketable securities	396		9		—		405
Derivative instruments - FX forward	—		3		—		3
Total assets at fair value	$	397	$	13	$	—	$	410
Liabilities:


Derivative instruments - interest rate swaps	$	—	$	61	$	—	$	61


Total liabilities at fair value	$	—	$	61	$	—	$	61


	December 31, 2020
(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Restricted cash and investments	$	1	$	3	$	44	$	48
Marketable securities	23		10		—		33
Derivative instruments - FX forward	—		40		—		40
Total assets at fair value	$	24	$	53	$	44	$	121
Liabilities:
Derivative instruments - 5% Convertible Notes	$	—	$	326	$	—	$	326
Derivative instruments - interest rate swaps	—		90		—		90
Total liabilities at fair value	$	—	$	416	$	—	$	416

The change in restricted cash and investments valued using Level 3 inputs for the six months ended June 30, 2021 is as follows:


(In millions)	Level 3 Investments
Fair value of investment at December 31, 2020	$	44
Change in fair value	7
Acquisition of William Hill	(51)
Fair value at June 30, 2021	$	—

Restricted Cash and Investments

The estimated fair values of the 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 the Company would expect to receive if the Company sold the restricted cash and investments. Restricted cash classified as Level 1 includes cash held in short-term certificate of deposit accounts or money market type funds. Restricted investments included shares acquired in conjunction with the Company’s sports betting agreements that contained restrictions related to the ability to liquidate shares within a specified timeframe. As a result of the William Hill Acquisition, no restricted investments are held as of June 30, 2021.

Marketable Securities

Marketable securities consist primarily of trading securities held by the Company’s captive insurance subsidiary, unrestricted shares acquired in conjunction with the Company’s sports betting agreements and investments acquired in the William Hill Acquisition for which the Company elected the fair value option (see Note 4). 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

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(UNAUDITED)

(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 the Company would expect to receive if the Company sold these marketable securities.

In November 2018, the Company entered into a 20-year agreement with The Stars Group Inc., which was subsequently acquired by Flutter Entertainment PLC (“Flutter”) to provide 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 U.S. Under the terms of the agreement, the Company received common shares, as a revenue share from certain operations of Flutter 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 initially received were subject to a one year restriction on transfer from the date they are received. All shares held were unrestricted as of June 30, 2021.

As of June 30, 2021 and December 31, 2020, the fair value of shares held was $9 million and $10 million, respectively, and is included in Prepayments and other current assets on the Balance Sheets. The Company recorded an unrealized loss of $1 million during the six months ended June 30, 2021, and an unrealized gain of $7 million and $3 million during the three and six months ended June 30, 2020, respectively, which were included in Other income (loss) on the Statements of Operations. On July 7, 2021, the Company sold all remaining Flutter shares for $9 million.

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. On June 29, 2021, all outstanding 5% Convertible Notes were converted. See Note 9 for further discussion. Upon mandatory conversion, no derivative liability associated with the conversion feature exists.

Forward contracts

The Company has entered into several foreign exchange forward contracts with third parties to hedge the risk of fluctuations in the foreign exchange rates between USD and GBP and to fix the exchange rate for a portion of the funds used in the William Hill Acquisition and repayment of related debt. On April 23, 2021, the Company entered into a foreign exchange forward contract to purchase £237 million at a contracted exchange rate, which was settled on June 11, 2021, resulting in a realized gain of $6 million, which was recorded in the Other income (loss) on the Statements of Operations. Similarly, the Company entered into foreign exchange forward contracts to sell £487 million at a contracted exchange rate. The forward term of the contracts ends on December 31, 2021. The Company recorded an unrealized gain of $3 million and $4 million during the three and six months ended June 30, 2021, respectively, related to forward contracts, which was recorded in the Other income (loss) on the Statements of Operations

On July 21, 2021, the Company entered into a foreign exchange forward contract to sell £150 million at a contracted exchange rate. The forward term of the contracts ends on March 31, 2022.

Interest Rate Swap Derivatives

We assumed Former Caesars interest rate swaps to manage the mix of assumed debt between fixed and variable rate instruments. As of June 30, 2021, we have seven interest rate swap agreements to fix the interest rate on $2.3 billion of variable rate debt related to the Caesars Resort Collection (“CRC”) Credit Agreement. The interest rate swaps are designated as cash flow hedging instruments. The 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 interest expense at settlement. Changes in the variable interest rates to be received pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows.

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CAESARS ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

The major terms of the interest rate swap agreements as of June 30, 2021 are as follows:


Effective Date	Notional Amount (In millions)	Fixed Rate Paid	Variable Rate Received as of June 30, 2021	Maturity Date
1/1/2019	250	2.196%	0.0925%	12/31/2021
12/31//2018	250	2.274%	0.0925%	12/31/2022
1/1/2019	400	2.788%	0.0925%	12/31/2021
12/31//2018	200	2.828%	0.0925%	12/31/2022
1/1/2019	200	2.828%	0.0925%	12/31/2022
12/31//2018	600	2.739%	0.0925%	12/31/2022
1/2/2019	400	2.707%	0.0925%	12/31/2021

Valuation Methodology

The estimated fair values of our 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 Other assets, net or Other long-term 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 Level 2.

Financial Statement Effect

The effect of derivative instruments designated as hedging instruments on the Balance Sheets for amounts transferred into Accumulated other comprehensive income (loss) (“AOCI”) before tax was a gain of $14 million and $29 million during the three and six months ended June 30, 2021, respectively. AOCI reclassified to Interest expense on the Statements of Operations was $15 million and $29 million for the three and six months ended June 30, 2021, respectively. As of June 30, 2021, the interest rate swaps derivative liability of $61 million was recorded in Other long-term liabilities. Net settlement of these interest rate swaps results in the reclassification of deferred gains and losses within AOCI to be reclassified to the income statement as a component of interest expense as settlements occur. The estimated amount of existing gains or losses that are reported in AOCI at the reporting date that are expected to be reclassified into earnings within the next 12 months is approximately $45 million.

Accumulated Other Comprehensive Income (Loss)

The changes in AOCI by component, net of tax, for the period through June 30, 2021 are shown below.


(In millions)	Unrealized Net Gains on Derivative Instruments		Foreign Currency Translation Adjustments		Other		Total
Balances as of December 31, 2020	$	26	$	8	$	—	$	34
Other comprehensive loss before reclassifications	(2)		—		(1)		(3)
Amounts reclassified from accumulated other comprehensive income	14		—		—		14
Total other comprehensive income (loss), net of tax	12		—		(1)		11
Balances as of March 31, 2021	$	38	$	8	$	(1)	$	45
Other comprehensive income (loss) before reclassifications	(5)		(11)		3		(13)
Amounts reclassified from accumulated other comprehensive income	15		—		—		15
Total other comprehensive income (loss), net of tax	10		(11)		3		2
Balances as of June 30, 2021	$	48	$	(3)	$	2	$	47

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CAESARS ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Note 8. Litigation, Commitments and Contingencies

Litigation

General

We are a party to various legal proceedings, which have arisen in the normal course of our business. 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 our consolidated financial condition or results of operations. Estimated losses are accrued for these proceedings when the loss is probable and can be estimated. While we maintain insurance coverage that we believe 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. The current liability for the estimated losses associated with these proceedings 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.

Centaur Transfer Fee

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 IGC upon the purchase of Hoosier Park Racing and Casino in 2017 from Centaur Holdings, LLC. Contemporaneous with the filing of the lawsuit, the Company notified the sellers that it was withholding payment of $50 million from amounts that were otherwise due to the sellers as a portion of a deferred payment for the purchase from the sellers. In the lawsuit, the Company sought 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 the sellers. The Defendants filed Motions to Dismiss the Company’s claims. On June 16, 2021, the Court granted Defendants’ Motion to Dismiss, dismissing the Company’s lawsuit, with prejudice. Thereafter, the Company reached an agreement with Defendants for repayment of the Transfer Fee that had been withheld, along with interest and a portion of Defendants’ attorneys’ fees. That payment was made on July 9, 2021. This matter is now closed.

COVID-19 Insurance Claims

The COVID-19 public health emergency had a significant impact on the Company’s business and employees, as well as the communities where the Company operates and serves. The Company purchased broad property insurance coverage to protect against “all risk of physical loss or damage” and resulting business interruption, unless specifically excluded by policies. The Company submitted claims for losses incurred as a result of the COVID-19 public health emergency which are expected to exceed $2 billion. The insurance carriers under the Company’s insurance policies have asserted that the policies do not cover losses incurred by the Company as a result of the COVID-19 public health emergency and have refused to make payments under the applicable policies. Therefore, on March 19, 2021, the Company filed a lawsuit against its insurance carriers in the state court in Clark County, Nevada. On June 8, 2021, the Company filed an amended complaint. Litigation is proceeding and there can be no assurance as to the outcome of the litigation.

Contractual Commitments

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

Capital Commitments

Harrah’s New Orleans

In April 2020, the Company and the State of Louisiana, by and through the Louisiana Gaming Control Board, entered into an Amended and Restated Casino Operating Contract. Additionally, the Company, New Orleans Building Corporation and the City entered into a Second Amended and Restated Lease Agreement (the “Ground Lease”). Based on these amendments related to Harrah’s New Orleans, the Company is required to make certain payments and to make a capital investment of $325 million on or around Harrah’s New Orleans by July 15, 2024. In connection with the capital investment in Harrah’s New Orleans, we expect to rebrand the property as Caesars New Orleans.

Atlantic City

As required by the New Jersey Gaming Control Board in connection with its approval of the Merger, we have funded $400 million in escrow to provide funds for a three year capital expenditure plan in the state of New Jersey. This amount is

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CAESARS ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

currently included in restricted cash in Other assets, net. As of June 30, 2021, our restricted cash balance in the escrow account is $351 million for future capital expenditures in New Jersey.

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 including communication with partner customer databases. Additionally, a selection of such partnerships provide Caesars with exclusivity to access the aforementioned rights within the casino and/or sports betting category. As of June 30, 2021, obligations related to these agreements were $574 million, which include obligations assumed in the William Hill Acquisition, with contracts extending through 2035. These obligations include leasing of event suites that are generally considered short term leases for which we do not record a right of use asset or lease liability. 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.

Self-Insurance

We are self-insured for workers compensation and other risk insurance, as well as health insurance and general liability. Our total estimated self-insurance liability was $223 million as of both June 30, 2021 and December 31, 2020 recorded in Accrued other liabilities in our Balance Sheets.

The assumptions, including those related to the COVID-19 public health emergency, 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 recent work stoppages and reductions in workforce, a reduction of claims in future periods could be beneficial to our financial condition and results of operations.

Contingencies

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 rooms furnished by Harrah’s New Orleans to patrons or guests at Harrah’s New Orleans hotel and certain third party hotels. Caesars appealed the trial Court’s decision to the Louisiana Court of Appeal, which Appeal was rejected. Caesars has since petitioned to the Louisiana Supreme Court for review of the Appeals Court’s decision. On January 9, 2021, the Louisiana Supreme Court issued a ruling granting in part and denying in part the Company’s Petition for Appeal. In its decision, the Supreme Court upheld the lower Courts’ decisions that the Company must pay taxes for complimentaries at Harrah’s New Orleans, but overturned the lower Courts’ rulings that the Company must pay such taxes for third party hotels. In June 2021, the Company settled the case and paid the Department $29 million. As of June 30, 2021, approximately $1 million remains accrued for the potential liability for taxes on parking and entertainment complimentaries.

Weather disruption - Lake Charles

On August 27, 2020, Hurricane Laura made landfall on Lake Charles as a Category 4 storm severely damaging the Isle of Capri Casino Lake Charles. During the six months ended as of June 30, 2021, the Company received insurance proceeds of approximately $40 million related to damaged fixed assets and remediation costs. The Company also recorded a gain of approximately $22 million as proceeds received were in excess of the losses incurred and the net book value of the damaged property. The property will remain closed until the third quarter of 2022 when construction of a new land-based casino is expected to be complete.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Note 9. Long-Term Debt

Long-term debt consisted of the following:


	June 30, 2021						December 31, 2020
(Dollars in millions)	Final Maturity	Rates	Face Value		Book Value		Book Value
Secured Debt
CRC Revolving Credit Facility	2022	variable (a)	$	—	$	—	$	—


CRC Term Loan	2024	variable (b)	4,535		4,159		4,133
CEI Revolving Credit Facility	2025	variable (a)	—		—		—
CRC Incremental Term Loan	2025	variable (c)	1,787		1,707		1,707
CRC Senior Secured Notes	2025	5.75%	1,000		982		981
CEI Senior Secured Notes	2025	6.25%	3,400		3,339		3,333
Convention Center Mortgage Loan	2025	7.70%	400		398		397
Unsecured Debt
5% Convertible Notes	2024	5.00%	—		—		288
CRC Notes	2025	5.25%	1,700		1,516		1,499
CEI Senior Notes	2027	8.125%	1,800		1,770		1,768
Special Improvement District Bonds	2037	4.30%	49		49		51
Long-term notes and other payables			2		2		2
Total debt			14,673		13,922		14,159
Current portion of long-term debt			(67)		(67)		(67)
Deferred finance charges associated with the CEI Revolving Credit Facility			—		(17)		(19)
Long-term debt			$	14,606	$	13,838	$	14,073

Unamortized premiums, discounts and deferred finance charges					$	768	$	883
Fair value			$	15,141

____________________

(a)Borrowing rates for our revolving credit facilities vary based on the election made at the time of draw down.

(b)LIBOR plus 2.75%.

(c)LIBOR plus 4.50%.


Annual Estimated Debt Service Requirements as of June 30, 2021
	Remaining		Years Ended December 31,
(In millions)	2021		2022		2023		2024		2025		Thereafter		Total
Annual maturities of long-term debt	$	32	$	67	$	67	$	4,438	$	8,226	$	1,843	$	14,673
Estimated interest payments	410		810		800		820		590		300		3,730
Total debt service obligation (a)	$	442	$	877	$	867	$	5,258	$	8,816	$	2,143	$	18,403

____________________

(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 forward-looking LIBOR curve and include the estimated impact of the seven interest rate swap agreements related to our CRC Credit Facility (see Note 7). Actual payments may differ from these estimates.

Current Portion of Long-Term Debt

The current portion of long-term debt as of June 30, 2021 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 debt are amortized to interest expense based on the related debt agreements primarily using the effective interest method. Unamortized discounts are written off and included in our gain or loss calculations to the extent we extinguish debt prior to its original maturity date.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

Fair Value

The fair value of debt has been calculated primarily based on the borrowing rates available as of June 30, 2021 and based on market quotes of our publicly traded debt. We classify the fair value of debt within Level 1 and Level 2 in the fair value hierarchy.

Terms of Outstanding Debt

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 (the “CRC Term Loan”), which was increased by $1.8 billion pursuant to an incremental agreement executed in connection with the Merger (the “CRC Incremental Term Loan”).

The CRC Term Loan matures in December 2024 and the CRC Incremental Term Loan matures in July 2025. The CRC Revolving Credit Facility matures in December 2022 and includes a $400 million letter of credit sub-facility. The CRC Term Loan and the CRC Incremental Term Loan require 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.

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, 2.25% per annum in the case of any LIBOR loan and 1.25% per annum in the case of any base rate loan, subject in the case of the CRC Revolving Credit Facility to two 0.125% step-downs based on CRC’s senior secured leverage ratio (“SSLR”), the ratio of first lien senior secured net debt to adjusted earnings before interest, taxes, depreciation and amortization. The CRC Revolving Credit Facility is subject to a financial covenant discussed below.

In addition, CRC is required to pay a commitment fee in respect of any commitments under the CRC Revolving Credit Facility in 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 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 $1.0 billion of available borrowing capacity, after consideration of $70 million in outstanding letters of credit under CRC Revolving Credit Facility, as of June 30, 2021.

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 $1.2 billion (the “CEI Revolving Credit Facility”). The CEI Revolving Credit Facility matures in July 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.

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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 $1.1 billion of available borrowing capacity, after consideration of $22 million in outstanding letters of credit and $48 million committed for regulatory purposes under CEI Revolving Credit Facility, as of June 30, 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 an indenture, dated July 6, 2020 (the “CRC Senior Secured Notes”), by and among the 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 Merger, CRC assumed the rights and obligations under the CRC Senior Secured Notes and the indenture governing such notes. 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 Senior Secured Notes due 2025

On July 6, 2020, the Escrow Issuer issued $3.4 billion in aggregate principal amount of 6.25% Senior Secured Notes due 2025 pursuant to an indenture dated July 6, 2020 (the “CEI Senior Secured Notes”), 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 indenture governing such notes 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 each year, commencing January 1, 2021.

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 of 8.3% per annum.

5% Convertible Notes

The 5% Convertible Notes were convertible into approximately 0.014 shares of the Company’s Common Stock (“Company Common Stock”) and approximately $1.17 of cash per $1.00 principal amount of the 5% Convertible Notes. During the six months ended June 30, 2021, the Company converted the remaining outstanding aggregate principal amount of the 5% Convertible Notes, which resulted in cash payments of $367 million, net of approximately $12 million paid into our trust accounts and the issuance of approximately 5 million shares of Company Common Stock. The fair value of the shares contributed to, and held in, the trust was $14 million, which is included within Treasury stock. The Company recognized a loss on the change in fair value of the derivative liability of $16 million recorded in Other income (loss) and a $23 million loss on extinguishment of debt, related to the unamortized discount, on the Statement of Operations.

CRC Notes

On October 16, 2017, CRC issued $1.7 billion aggregate principal amount of 5.25% senior notes due 2025 (the “CRC Notes”).

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”), 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 indenture governing such notes 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 each year, commencing January 1, 2021.

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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 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.

Due to the effects of the COVID-19 public health emergency, the current terms of the CEI Revolving Credit Facility and the CRC Credit Agreement provide that the financial covenant measurement period is not effective through September 30, 2021 so long as the Company and CRC, respectively, comply with a minimum liquidity requirement, which includes any such availability under the applicable revolving credit facilities.

As of June 30, 2021, the Company was in compliance with all of the applicable financial covenants described above.

Guarantees

The CEI Revolving Credit Facility and the CEI Senior Secured Notes are guaranteed on a senior secured basis by each existing and future material wholly-owned domestic subsidiary of CEI (subject to certain exceptions) and are secured by substantially all of the existing and future property and assets of CEI and its subsidiary guarantors (subject to certain exceptions). The CEI Senior Notes are guaranteed on a senior unsecured basis by such subsidiaries.

The CRC Credit Agreement and the CRC Senior Secured Notes are guaranteed on a senior secured basis by each existing and future material wholly-owned domestic subsidiary of CRC (subject to certain exceptions) and are secured by substantially all of the existing and future property and assets of CRC and its subsidiary guarantors (subject to certain exceptions). The CRC Notes are guaranteed on a senior unsecured basis by such subsidiaries.

Note 10. Revenue Recognition

The Company’s Statements 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 following the Merger and the William Hill Acquisition. Refer to Note 15 for additional information on the Company’s reportable segments.


	Three Months Ended June 30, 2021
(In millions)	Las Vegas		Regional		Caesars Digital		Managed and International		Corporate and Other		Total
Casino and pari-mutuel commissions	$	315	$	1,178	$	78	$	—	$	—	$	1,571
Food and beverage	171		109		—		1		—		281
Hotel	242		154		—		—		—		396
Other	127		49		8		65		5		254


Net revenues	$	855	$	1,490	$	86	$	66	$	5	$	2,502


	Three Months Ended June 30, 2020
(In millions)	Las Vegas		Regional		Caesars Digital		Managed and International		Corporate and Other		Total
Casino and pari-mutuel commissions	$	—	$	90	$	11	$	—	$	—	$	101
Food and beverage	—		7		—		—		—		7
Hotel	—		9		—		—		—		9
Other	—		8		—		—		2		10
Net revenues	$	—	$	114	$	11	$	—	$	2	$	127

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	Six Months Ended June 30, 2021
(In millions)	Las Vegas		Regional		Caesars Digital		Managed and International		Corporate and Other		Total
Casino and pari-mutuel commissions	$	541	$	2,145	$	112	$	—	$	—	$	2,798
Food and beverage	255		193		—		2		—		450
Hotel	357		254		—		—		—		611
Other	199		89		13		125		9		435


Net revenues	$	1,352	$	2,681	$	125	$	127	$	9	$	4,294


	Six Months Ended June 30, 2020
(In millions)	Las Vegas		Regional		Caesars Digital		Managed and International		Corporate and Other		Total
Casino and pari-mutuel commissions	$	—	$	422	$	19	$	—	$	—	$	441
Food and beverage	—		63		—		—		—		63
Hotel	—		57		—		—		—		57
Other	—		35		—		—		4		39
Net revenues	$	—	$	577	$	19	$	—	$	4	$	600

Accounts receivable, net include the following amounts:


(In millions)	June 30, 2021		December 31, 2020
Casino and pari-mutuel commissions	$	136	$	137
Food and beverage and hotel	59		25
Other	200		180
Accounts receivable, net	$	395	$	342

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 future racing and sports event wagers). 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 Balance Sheets.

The following table summarizes the activity related to contract and contract-related liabilities:


	Outstanding Chip Liability				Caesars Rewards				Customer Deposits and Other Deferred Revenue
(In millions)	2021		2020		2021		2020		2021		2020
Balance at January 1	$	34	$	10	$	94	$	13	$	281	$	172
Balance at June 30	32		7		96		13		324		167
Increase / (decrease)	$	(2)	$	(3)	$	2	$	—	$	43	$	(5)

The June 30, 2021 balances exclude liabilities related to assets held for sale recorded in 2021 and 2020 (see Note 3).

Lease Revenue

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

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nonlease components into a single lease component based on the predominant component in the arrangement. During the three and six months ended June 30, 2021, we recognized approximately $396 million and $611 million, respectively, and during the three and six months ended June 30, 2020, we recognized approximately $9 million and $57 million, respectively, in lease revenue related to lodging arrangements, which is included in Hotel revenues in the Statements of Operations.

Conventions

Convention 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 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 Statements of Operations, and during the three and six months ended June 30, 2021, lease revenue related to conventions was less than $1 million. During the three and six months ended June 30, 2020, lease revenue related to conventions was less than $1 million. Conventions substantially ceased in mid-March 2020 due to COVID-19 and have resumed in June 2021.

Real Estate Operating Leases

Real estate lease revenue is included in Other revenue in the Statements of Operations. During the three and six months ended June 30, 2021, we recognized approximately $44 million and $65 million, respectively, of real estate lease revenue. During the three and six months ended June 30, 2020, we recognized approximately $1 million and $3 million, respectively, of real estate lease revenue. Real estate lease revenue includes $6 million and $13 million of variable rental income for the three and six months ended June 30, 2021, respectively, and less than $1 million for the three and six months ended June 30, 2020.

Note 11. Earnings per Share

The following table illustrates the reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share computations for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except per share data)	2021		2020		2021		2020
Net income (loss) from continuing operations attributable to Caesars, net of income taxes	$	101	$	(100)	$	(318)	$	(276)
Discontinued operations, net of income taxes	(30)		—		(34)		—

Net income (loss) attributable to Caesars	$	71	$	(100)	$	(352)	$	(276)
Shares outstanding:
Weighted average shares outstanding – basic	209		80		209		79
Effect of dilutive securities:

Stock-based compensation awards	2		—		—		—

Weighted average shares outstanding – diluted	211		80		209		79

Basic income (loss) per share from continuing operations	$	0.48	$	(1.25)	$	(1.52)	$	(3.49)
Basic loss per share from discontinued operations	(0.14)		—		(0.16)		—
Net income (loss) per common share attributable to common stockholders – basic:	$	0.34	$	(1.25)	$	(1.68)	$	(3.49)

Diluted income (loss) per share from continuing operations	$	0.48	$	(1.25)	$	(1.52)	$	(3.49)
Diluted loss per share from discontinued operations	(0.14)		—		(0.16)		—
Net income (loss) per common share attributable to common stockholders – diluted:	$	0.34	$	(1.25)	$	(1.68)	$	(3.49)

For a period in which the Company generated a net loss, the weighted average shares outstanding - basic was used in calculating diluted loss per share because using diluted shares would have been anti-dilutive to loss per share.

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


	Three Months Ended June 30,		Six Months Ended June 30,
(In millions)	2021	2020	2021	2020
Stock-based compensation awards	—	—	3	1

Total anti-dilutive common stock	—	—	3	1

Note 12. Stock-Based Compensation and Stockholders’ Equity

Stock-Based Awards

The Company maintains long-term incentive plans which allow for granting stock-based compensation awards for directors, employees, officers, and consultants or advisers who render services to the Company or its subsidiaries, based on Company Common Stock, including performance-based and incentive stock options, restricted stock, restricted stock units (“RSUs”), performance stock units (“PSUs”), market-based performance stock units (“MSUs”), stock appreciation rights, and other stock-based awards or dividend equivalents. Forfeitures are recognized in the period in which they occur.

Total stock-based compensation expense in the accompanying Statements of Operations totaled $20 million and $4 million during the three months ended June 30, 2021 and 2020, respectively, and $43 million and $10 million during the six months ended June 30, 2021 and 2020. These amounts are included in Corporate expense in the Company’s Statements of Operations.

2015 Equity Incentive Plan (“2015 Plan”)

During the six months ended June 30, 2021, as part of the annual incentive program, the Company granted 603 thousand RSUs to employees of the Company with an aggregate fair value of $43 million and a ratable vesting period of either two or three years. Each RSU represents the right to receive payment in respect of one share of the Company’s Common Stock.

During the six months ended June 30, 2021, the Company also granted 80 thousand PSUs that are scheduled to vest in three years. On the vesting date, recipients will receive between 0% and 200% of the target number of PSUs granted, in the form of Company Common Stock, based on the achievement of specified performance and service conditions. The fair value of the PSUs is based on the market price of our common stock when a mutual understanding of the key terms and conditions of the awards between the Company and recipient is achieved. The awards are remeasured each period until such an understanding is reached. The aggregate value of PSUs granted during the six months ended June 30, 2021 was $8 million.

In addition, during the six months ended June 30, 2021, the Company granted 147 thousand MSUs that are scheduled to cliff vest in three years. On the vesting date, recipients will receive between 0% and 200% of the target number of MSUs granted, in the form of Company Common Stock, based on the achievement of specified market and service conditions. 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 six months ended June 30, 2021 was $15 million.

During the six months ended June 30, 2021, there were no grants of stock options and 79 thousand stock options were exercised. In addition, during the six months ended June 30, 2021, 661 thousand, 151 thousand, and 203 thousand of RSUs, PSUs and MSUs, respectively, vested under the 2015 plan.

Outstanding at End of Period


	June 30, 2021			December 31, 2020
	Quantity	Wtd-Avg (a)		Quantity	Wtd-Avg (a)
Stock options	80,738	$	24.93	176,724	$	22.57
Restricted stock units	2,319,459	48.71		2,414,111	42.55
Performance stock units (b)	427,007	65.33		500,482	48.32
Market-based stock units	387,486	77.26		446,087	49.37

____________________

(a)Represents the weighted-average exercise price for stock options, weighted-average grant date fair value for RSUs, weighted-average grant date fair value for PSUs where the grant date has been achieved, the price of CEI common stock as of the balance sheet date for PSUs where a grant date has not been achieved, and the fair value of the MSUs determined using the Monte-Carlo simulation model.

(b)PSUs were presented with RSUs as of December 31, 2020 in the 2020 Annual Report.

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Share Repurchase Program

In November 2018, the Company’s Board of Directors authorized a $150 million common stock repurchase program (the “Share Repurchase Program”) pursuant to which the Company may, from time to time, repurchase shares of common 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 the Company is required to repurchase under the Share Repurchase Program.

As of June 30, 2021, the Company has 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. No shares were repurchased during the six months ended June 30, 2021 and 2020.

Changes to the Authorized Shares

On June 17, 2021, following receipt of required shareholder approvals, the Company amended its Certificate of Incorporation to increase the number of authorized shares of common stock from 300 million to 500 million, and authorize the issuance of up to 150 million shares of preferred stock.

Note 13. Income Taxes

Income Tax Allocation


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2021			2020			2021			2020
Income (loss) from continuing operations before income taxes	$	101		$	(134)		$	(395)		$	(347)
Benefit for income taxes	1			34			77			71
Effective tax rate	(1.0)		%	25.4		%	19.5		%	20.5		%

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 assumed $767 million of additional net deferred tax liabilities net of necessary valuation allowances, plus $24 million in additional accruals for uncertain tax positions. As a result of the William Hill Acquisition, the Company assumed $200 million of additional net deferred tax liabilities net of necessary valuation allowances, plus $34 million in additional accruals for uncertain tax positions. $115 million of the additional deferred tax liabilities and $34 million of the accruals for uncertain tax positions relating to the William Hill Acquisition are presented in Liabilities related to assets held for sale.

The income tax benefit for the three months ended June 30, 2021 differed from the expected income tax expense based on the federal tax rate of 21% primarily due to the tax expense impact of a change in the United Kingdom tax rate enacted in June 2021, offset by tax benefits from nontaxable mark-to-market income, the reclassification of Horseshoe Hammond from held for sale, and changes in certain state tax laws enacted in June 2021. The income tax benefit for the six months ended June 30, 2021 differed from the expected income tax benefit based on the federal tax rate of 21% primarily due to tax benefits from nontaxable mark-to-market income, the reclassification of Horseshoe Hammond from held for sale, and changes in certain state tax laws enacted in June 2021, offset by tax expense from nondeductible expenses related to the convertible notes and a change in the United Kingdom tax rate enacted in June 2021.

The income tax benefit for the three months ended June 30, 2020 differed from the expected income tax benefit based on the federal tax rate of 21% primarily due to losses not tax-benefited, offset by the true-up of certain state tax benefits and state and local income taxes. The income tax benefit for the six months ended June 30, 2020 differed from the expected income tax benefit based on the federal tax rate of 21% primarily due to goodwill impairments and losses not tax-benefited, offset by the true-up of certain state tax benefits and state and local income taxes.

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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 its consolidated group. The Company is subject to exam by various state and foreign tax authorities. With few exceptions, the Company is no longer subject to examinations by tax authorities for years before 2017, and it is possible that the amount of the liability for unrecognized tax benefits could change during the next 12 months.

Note 14. Related Affiliates

REI

As of June 30, 2021, Recreational Enterprises, Inc. (“REI”) owned approximately 4.0% of outstanding common stock of the Company. The directors of REI are the Company’s Executive 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 also serves as the Vice President of REI and Gene 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 six months ended June 30, 2021 and 2020, there were no 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 C. S. & Y. Associates (“CSY”) which is an entity partially owned by REI (the “CSY Lease”). The CSY Lease expires on June 30, 2057. Annual rent pursuant to the CSY Lease is currently $0.6 million, paid quarterly. Annual rent is subject to periodic rent escalations through the term of the lease. As of June 30, 2021 and December 31, 2020, there were no 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 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 June 30, 2021		Six Months Ended June 30, 2021



Transactions with Horseshoe Baltimore
Management fees	$	2	$	4

Transactions with NeoGames

The Company holds an interest in NeoGames (see Note 4). NeoGames supports William Hill’s domestic iGaming market. William Hill compensates NeoGames for the costs associated with development of its platform as required. William Hill is a core customer of NeoGames.

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 consolidated entities. As of June 30, 2021, Due from affiliates, net was $25 million and represented transactions with Horseshoe Baltimore. As of December 31, 2020, Due from affiliates, net was $44 million, and represented transactions with Horseshoe Baltimore and William Hill. William Hill payables/receivables were settled in connection with the William Hill Acquisition. See Note 2.

Note 15. Segment Information

The executive decision maker of the Company reviews operating results, assesses performance and makes decisions on a “significant market” basis. Management views each of the 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 William Hill Acquisition, our principal operating activities occurred in three regionally-focused reportable segments: Las Vegas, Regional, and Managed, International, CIE, in addition to Corporate

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and Other. Following the William Hill Acquisition, the Company’s principal operating activities occur in four reportable segments. The reportable segments are based on the similar characteristics of the operating segments with the way management assesses these results and allocates resources, which is a consolidated view that adjusts for the effect of certain transactions between these reportable segments within Caesars: (1) Las Vegas, (2) Regional, (3) Caesars Digital, and (4) Managed and International, in addition to Corporate and Other. See table below for a summary of these segments. Also, see Note 3 and Note 6 for a discussion of any impairment of intangibles or long-lived assets related to certain segments.

The following table sets forth certain information regarding our properties (listed by segment in which each property is reported) as of June 30, 2021:

Las Vegas

Regional

Managed and International

Bally’s Las Vegas (a)

Eldorado Resort Casino Reno

Harrah’s Atlantic City (a)

Managed

Caesars Palace Las Vegas (a)

Silver Legacy Resort Casino

Harrah’s Laughlin (a)

Harrah’s Ak-Chin (a)

The Cromwell (a)

Circus Circus Reno

Harrah’s New Orleans (a)

Harrah’s Cherokee (a)

Flamingo Las Vegas (a)

MontBleu Casino Resort & Spa (c)

Hoosier Park (a)

Harrah’s Cherokee Valley River (a)

Harrah’s Las Vegas (a)

Tropicana Laughlin Hotel & Casino

Indiana Grand (a)

Harrah’s Resort Southern California (a)

The LINQ Hotel & Casino (a)

Isle Casino Hotel - Black Hawk

Caesars Atlantic City (a)

Horseshoe Baltimore (a)(g)

Paris Las Vegas (a)

Lady Luck Casino - Black Hawk

Caesars Southern Indiana (a)(b)(e)

Caesars Windsor (a)

Planet Hollywood Resort & Casino (a)

Isle Casino Waterloo

Harrah’s Council Bluffs (a)

Kings & Queens Casino (a)

Rio All-Suite Hotel & Casino (a)

Isle Casino Bettendorf

Harrah’s Gulf Coast (a)

Caesars Dubai (a)

Isle of Capri Casino Boonville

Harrah’s Joliet (a)

International (b)

Caesars Digital

Isle Casino Racing Pompano Park

Harrah’s Lake Tahoe (a)

Caesars Cairo (a)

Caesars Digital

Isle of Capri Casino Hotel Lake Charles

Harrah’s Louisiana Downs (a)(b)(f)

Ramses Casino (a)

Belle of Baton Rouge Casino & Hotel (h)

Harrah’s Metropolis (a)

Emerald Casino Resort (a)

Isle of Capri Casino Lula

Harrah’s North Kansas City (a)

Alea Glasgow (a)

Trop Casino Greenville

Harrah’s Philadelphia (a)

Alea Nottingham (a)

Eldorado Gaming Scioto Downs

Harveys Lake Tahoe (a)

The Empire Casino (a)

Tropicana Casino and Resort, Atlantic City

Horseshoe Bossier City (a)

Manchester235 (a)

Grand Victoria Casino

Horseshoe Council Bluffs (a)

Playboy Club London (a)

Lumière Place Casino

Horseshoe Hammond (a)

Rendezvous Brighton (a)

Tropicana Evansville (d)

Horseshoe Tunica (a)

The Sportsman (a)

William Hill International (i)

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(a)These properties were acquired from the Merger on July 20, 2020.

(b)These properties met the requirements for presentation as discontinued operations as of June 30, 2021. The sale of Caesars UK Group closed on July 16, 2021, in which the buyer assumed all liabilities associated with the Caesars UK Group.

(c)In April 2020, the Company entered into an agreement to sell MontBleu. The sale of MontBleu closed on April 6, 2021.

(d)On October 27, 2020, the Company entered into an agreement to sell Evansville. The sale of Evansville closed on June 3, 2021.

(e)On December 24, 2020, the Company entered into an agreement to sell Caesars Southern Indiana, which is expected to close in the third quarter of 2021.

(f)On September 3, 2020, the Company entered into an agreement to sell Harrah’s Louisiana Downs, which is expected to close in the third quarter of 2021.

(g)As of June 30, 2021, Horseshoe Baltimore was 44.3% owned by us and held as an equity-method investment.

(h)On December 1, 2020, the Company entered into an agreement to sell Belle of Baton Rouge, which is expected to close in the third quarter of 2021.

(i)As a result of the William Hill Acquisition, the sale of William Hill International met the requirements for presentation as discontinued operations as of June 30, 2021.

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. Additionally, certain of our properties operate off-track betting locations, including Hoosier Park, which operates Winner’s Circle Indianapolis and Winner’s Circle New Haven, and Indiana Grand, which operates Winner’s Circle Clarksville. The LINQ Promenade is an open-air dining, entertainment, and retail promenade located on the east side of the Las Vegas Strip next to The LINQ Hotel & Casino (the “LINQ”) that features the High Roller, a 550-foot observation wheel, and the Fly LINQ Zipline attraction. We also own the CAESARS FORUM

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CAESARS ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

conference center, which is a 550,000 square feet conference center with 300,000 square feet of flexible meeting space, two of the largest pillarless ballrooms in the world and direct access to the LINQ.

“Corporate and Other” includes certain unallocated corporate overhead costs and other adjustments, including eliminations of transactions among segments, to reconcile to the Company’s consolidated results.

The following table sets forth, for the periods indicated, certain operating data for the Company’s four reportable segments. We recast previously reported segment amounts to conform to the way management assesses results and allocates resources for the current year.


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2021		2020		2021		2020

Las Vegas:
Net revenues	$	855	$	—	$	1,352	$	—

Adjusted EBITDA	423		—		585		—


Regional:
Net revenues	1,490		114		2,681		577

Adjusted EBITDA	602		(8)		995		99


Caesars Digital:
Net revenues	86		11		125		19
Adjusted EBITDA	(5)		5		(7)		9
Managed and International:
Net revenues	66		—		127		—

Adjusted EBITDA	26		—		47		—


Corporate and Other:
Net revenues	5		2		9		4

Adjusted EBITDA	(42)		(8)		(81)		(16)

Reconciliation of Adjusted EBITDA - By Segment to Net Income (Loss) Attributable to Caesars

Adjusted EBITDA is presented as a measure of the Company’s performance. Adjusted EBITDA is defined as revenues less operating expenses and is comprised of net income (loss) before (i) interest income and interest expense, net of interest capitalized, (ii) income tax (benefit) provision, (iii) depreciation and amortization, and (iv) certain items that we do not consider indicative of our 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 the same or similar to some of the adjustments 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 a financial measure commonly used in our industry and should 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 industry. 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.

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CAESARS ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2021		2020		2021		2020
Adjusted EBITDA by Segment:
Las Vegas	$	423	$	—	$	585	$	—
Regional	602		(8)		995		99
Caesars Digital	(5)		5		(7)		9
Managed and International	26		—		47		—
Corporate and Other	(42)		(8)		(81)		(16)
	1,004		(11)		1,539		92
Reconciliation to net income (loss) attributable to Caesars:
Net income attributable to noncontrolling interests	(1)		—		—		—
Net loss from discontinued operations	(30)		—		(34)		—
Benefit for income taxes	1		34		77		71
Other income (loss) (a)	110		13		(23)		(10)
Loss on extinguishment of debt	(23)		—		(23)		—
Interest expense, net	(576)		(68)		(1,155)		(135)
Depreciation and amortization	(301)		(49)		(566)		(99)
Impairment charges	—		—		—		(161)
Transaction costs and other operating costs (b)	(72)		(15)		(92)		(23)
Stock-based compensation expense	(20)		(4)		(43)		(10)
Other items (c)	(21)		—		(32)		(1)
Net income (loss) attributable to Caesars	$	71	$	(100)	$	(352)	$	(276)

____________________

(a)Other income (loss) for the three and six months ended June 30, 2021 primarily represents a gain in the change of fair value of the Company’s investment in NeoGames offset by a loss on the change in fair value of the derivative liability related to the 5% Convertible Notes. Other income (loss) for the three and six months ended June 30, 2020 primarily represents change in fair value of the Company’s investment in William Hill PLC.

(b)Transaction costs and other operating costs for the three and six months ended June 30, 2021 and 2020 primarily represent costs related to the William Hill Acquisition and the Merger, various contract or license termination exit costs, professional services, other acquisition costs and severance costs.

(c)Other items primarily represent certain consulting and legal fees, rent for non-operating assets, relocation expenses, and business optimization expenses.


	Six Months Ended June 30,
(In millions)	2021		2020
Capital Expenditures, Net
Las Vegas	$	24	$	—
Regional (a)	124		37
Caesars Digital	15		—

Corporate and Other	15		4
Total	$	178	$	41

____________________

(a)Includes $1 million of capital expenditures related to properties classified as discontinued operations for the six months ended June 30, 2021.


(In millions)	June 30, 2021		December 31, 2020
Total Assets
Las Vegas	$	21,712	$	21,464
Regional	13,713		13,732
Caesars Digital	2,546		323
Managed and International	3,178		225
Corporate and Other (a)	(2,333)		641
Total	$	38,816	$	36,385

____________________

(a)Includes eliminations of transactions among segments, to reconcile to the Company’s consolidated results.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial position and operating results of Caesars Entertainment, Inc., a Delaware corporation, and its consolidated subsidiaries, which may be referred to as the “Company,” “CEI,” “Caesars,” “we,” “our,” or “us,” for the three and six months ended June 30, 2021 and 2020 should be read in conjunction with the unaudited consolidated condensed financial statements and the notes thereto and other financial information included elsewhere in this Form 10-Q as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“2020 Annual Report”). Capitalized terms used but not defined in this Form 10-Q have the same meanings as in the 2020 Annual Report.

We refer to (i) our Consolidated Condensed Financial Statements as our “Financial Statements,” (ii) our Consolidated Condensed Balance Sheets as our “Balance Sheets,” (iii) our Consolidated Condensed Statements of Operations and Consolidated Condensed Statements of Comprehensive Income (Loss) as our “Statements of Operations,” and (iv) our Consolidated Condensed Statements of Cash Flows as our “Statements of Cash Flows.” References to numbered “Notes” refer to Notes to Consolidated Condensed Financial Statements included in Item 1, “Unaudited Financial Statements.”

The statements in this discussion regarding our expectations of our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. Our actual results may differ materially from those contained in or implied by any forward-looking statements. See “CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS” in this report.

Objective

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to be a narrative explanation of the financial statements and other statistical data that should be read in conjunction with the accompanying financial statements to enhance an investor’s understanding of our financial condition, changes in financial condition and results of operations. Our objectives are: (i) to provide a narrative explanation of our financial statements that will enable investors to see the Company through the eyes of management; (ii) to enhance the overall financial disclosure and provide the context within which financial information should be analyzed; and (iii) to provide information about the quality of, and potential variability of, our earnings and cash flows so that investors can ascertain the likelihood of whether past performance is indicative of future performance.

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, Nevada. We partnered with MGM Resorts International to build Silver Legacy Resort Casino in Reno, Nevada in 1993 and, beginning in 2005, we grew through a series of acquisitions, including the acquisition of Eldorado Resort Casino Shreveport (“Eldorado Shreveport”) in 2005, MTR Gaming Group, Inc. in 2014, Circus Circus Reno and the 50% membership interest in the Silver Legacy that was 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, we completed the merger with Caesars Entertainment Corporation (“Former Caesars”) pursuant to which Former Caesars became our wholly-owned subsidiary (the “Merger”).

On April 22, 2021, we completed the acquisition of William Hill PLC for £2.9 billion, or approximately $4.0 billion (the “William Hill Acquisition”).

We own, lease or manage an aggregate of 52 domestic properties in 16 states with approximately 55,300 slot machines, video lottery terminals (“VLTs”) and e-tables, approximately 3,000 table games and approximately 46,200 hotel rooms as of June 30, 2021. We operate and conduct sports wagering across 17 states plus the District of Columbia and operate regulated online real money gaming businesses in five states. 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 49 properties. Our primary source of revenue is generated by our casino properties’ gaming operations, as well as online gaming, and we utilize our hotels, restaurants, bars, entertainment, racing, sportsbook offerings, retail shops and other services to attract customers to our properties.

We own 19 of our casinos and lease 28 casinos in the U.S. We lease 20 casinos from VICI Properties L.P., a Delaware limited partnership (“VICI”) pursuant to a regional lease, a Las Vegas lease and a Joliet lease. In addition, we lease seven casinos from GLP Capital, L.P., the operating partnership of Gaming and Leisure Properties, Inc. (“GLPI”) pursuant to a Master Lease (as

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amended, the “GLPI Master Lease”) and a Lumière lease. Additionally, we lease the Rio All-Suite Hotel & Casino from a separate third party.

We periodically divest of assets in order to raise capital or as a result of a determination that the assets are not core to our business. We also divested certain 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 June 30, 2021 is as follows:

Segment

Property

Date Sold

Location

Regional

Isle of Capri Casino Kansas City (“Kansas City”)

July 1, 2020

Missouri

Regional

Lady Luck Casino Vicksburg (“Vicksburg”)

July 1, 2020

Mississippi

Regional

Eldorado Resort Casino Shreveport (“Eldorado Shreveport”)

December 23, 2020 (a)

Louisiana

Regional

MontBleu Casino Resort & Spa (“MontBleu”)

April 6, 2021 (a)

Nevada

Regional

Tropicana Evansville (“Evansville”)

June 3, 2021 (b)

Indiana

Regional

Belle of Baton Rouge Casino & Hotel (“Baton Rouge”)

N/A (c)

Louisiana

Discontinued operations (d):

Regional

Harrah’s Louisiana Downs

N/A (e)

Louisiana

Regional

Caesars Southern Indiana

N/A (b)(f)

Indiana

Managed and International

Emerald Resort & Casino

July 16, 2021 (g)

South Africa

Managed and International

Caesars Entertainment UK

July 16, 2021 (g)

United Kingdom

Managed and International

William Hill International

N/A

United Kingdom

___________________

(a)On April 24, 2020, we entered into a definitive purchase agreement with Bally’s Corporation (formerly Twin River Worldwide Holdings, Inc.) 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 customary working capital adjustment. The sale of Eldorado Shreveport closed on December 23, 2020 and the sale of MontBleu closed on April 6, 2021. As a result of the sale of MontBleu, an impairment charge totaling $45 million was recorded during the six months ended June 30, 2020 due to the carrying value exceeding the estimated net sales proceeds from the sale.

(b)In connection with its review of the Merger, the Indiana Gaming Commission (“IGC”) determined on July 16, 2020 that, as a condition to their approval of the Merger, we were initially required to divest three properties within the state of Indiana in order to avoid undue economic concentration. On October 27, 2020, the Company entered into an agreement to sell Evansville to GLPI and Bally’s Corporation for $480 million in cash, subject to a customary working capital adjustment. The sale of Evansville closed on June 3, 2021. In addition, on December 24, 2020, the Company entered into an agreement to divest of Caesars Southern Indiana (see (f) below). On June 24, 2021, the IGC amended its order that previously required the Company to sell a third property and, as a result, we are not required to sell Horseshoe Hammond.

(c)On December 1, 2020, the Company entered into an agreement to sell the Baton Rouge to CQ Holding Company, Inc. Pursuant to the terms of the GLPI Master Lease, Baton Rouge will be removed from the GLPI Master Lease, and the rent payments to GLPI will remain unchanged. The transaction is expected to close in the third quarter of 2021 and is subject to regulatory approvals, and other customary closing conditions.

(d)These Former Caesars properties and William Hill’s non-U.S. operations met held for sale criteria as of their acquisition dates. These properties are classified as discontinued operations as of June 30, 2021.

(e)On September 3, 2020, the Company and VICI entered into an agreement with Rubico Acquisition Corp. to sell Harrah’s Louisiana Downs for $22 million, subject to a customary working capital adjustment, where the proceeds will be split between us and VICI. The sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals, and is expected to close in the third quarter of 2021.

(f)On December 24, 2020, the Company entered into agreement to sell Caesars Southern Indiana to the Eastern Band of Cherokee Indians (“EBCI”) for $250 million, subject to a customary working capital adjustment. Caesar’s annual payments to VICI under the regional lease will decline by $33 million upon closing of the transaction. Additionally, effective as of the closing of the transaction, Caesars and EBCI are expected to enter into a long-term agreement for the continued use of the Caesars brand and Caesars Rewards loyalty program at Caesars Southern Indiana. The sale is subject to satisfaction of customary conditions, including receipt of required regulatory approvals and is expected to close in the third quarter of 2021.

(g)On June 10, 2021, the Company entered into an agreement with Metropolitan Gaming Limited to sell Caesars Entertainment UK, including the interest in Emerald Resort & Casino (together, “Caesars UK Group”), in which the buyer assumed all liabilities associated with the Caesars UK Group. The sale closed on July 16, 2021.

Merger and Acquisition Related Activities

Merger with Caesars Entertainment Corporation

On July 20, 2020, the Merger was consummated and Former Caesars became a wholly-owned subsidiary of ours. The strategic rationale for the Merger includes, but is not limited to, the following:

•Creation of 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

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The total purchase consideration for Former Caesars was $10.9 billion. The estimated purchase consideration in the acquisition was determined with reference to its acquisition date fair value.

The Company recognized acquisition-related transaction costs of $3 million and $15 million for the three and six months ended June 30, 2021, respectively, and recognized $13 million and $22 million for the three and six months ended June 30, 2020, respectively. These costs were associated with legal, IT costs, internal labor and professional services and were recorded in Transaction costs and other operating costs in our Statements of Operations.

William Hill Acquisition

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. On April 20, 2021, a UK Court sanctioned the William Hill Acquisition and on April 22, 2021, the Company completed the acquisition for approximately £2.9 billion, or approximately $4.0 billion.

In connection with the William Hill Acquisition, on April 22, 2021, a newly formed subsidiary of the Company entered into a Credit Agreement (the “Bridge Credit Agreement”) with certain lenders party thereto and Deutsche Bank AG, London Branch, as administrative agent and collateral agent, pursuant to which the lenders party thereto provided the Debt Financing (as defined below). The Bridge Credit Agreement provides for (a) a 540-day £1.0 billion asset sale bridge facility, (b) a 60-day £503 million cash confirmation bridge facility and (c) a 540-day £116 million revolving credit facility (collectively, the “Debt Financing”). The proceeds of the bridge loan facilities provided under the Bridge Credit Agreement were used (i) to pay a portion of the cash consideration for the acquisition and (ii) to pay fees and expenses related to the acquisition and related transactions. The proceeds of the revolving credit facility under the Bridge Credit Agreement may be used for working capital and general corporate purposes. The £1.5 billion Interim Facilities Agreement (“Interim Facilities Agreement”) entered into on October 6, 2020 with Deutsche Bank AG, London Branch and JPMorgan Chase Bank, N.A., and amended on December 11, 2020, was terminated upon the execution of the Bridge Credit Agreement. On May 12, 2021, the Company repaid the £503 million cash confirmation bridge facility. On June 14, 2021, the Company drew down the full £116 million from the revolving credit facility and the proceeds, in addition to excess Company cash, were used to make a partial repayment of the asset sale bridge facility in the amount of £700 million. Outstanding borrowings under the Bridge Credit Agreement are expected to be repaid upon the sale of William Hill’s non-U.S. operations including the UK and international online divisions and the retail betting shops (collectively, “William Hill International”), all of which are held for sale and related activity is reflected within discontinued operations. Certain investments acquired will be excluded from the held for sale group.

We recognized acquisition-related transaction costs of $62 million and $67 million for the three and six months ended June 30, 2021, respectively. These costs were associated with legal costs and professional services and were recorded in Transaction costs and other operating costs in our Statements of Operations.

Partnerships and Acquisition Opportunities

NeoGames

The acquired net assets of William Hill included an investment in NeoGames S.A. (“NeoGames”), a global leader of iLottery solutions and services to national and state-regulated lotteries, and other investments. As of June 30, 2021, the Company held approximately 6 million shares of NeoGames common stock with a fair value of $377 million, which represents an ownership interest of approximately 24.5%. The Company has elected to account for the NeoGames investment under the fair value option under ASC 825 and remeasures the investment based on the publicly available share price (Level 1). For the period ended June 30, 2021, the Company recorded a gain of approximately $123 million, which is included within Other income (loss) on the Statements of Operations.

The Stars Group/Flutter Entertainment

In November 2018, we entered into a 20-year agreement with The Stars Group Inc., which was subsequently acquired by Flutter Entertainment PLC (“Flutter”) to provide options to obtain access to our second skin for online sports wagering and third skin for real money online gaming and poker with respect to our properties in the U.S. Under the terms of the agreement, we received common shares, as a revenue share from certain operations of Flutter under our 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 held were unrestricted as of June 30, 2021.

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Pompano Joint Venture

In April 2018, we entered into a joint venture with Cordish Companies (“Cordish”) to plan and develop a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the casino and racetrack at our Pompano property. As the managing member, Cordish will operate the business and manage the development, construction, financing, marketing, leasing, maintenance and day-to-day operation of the various phases of the project. Additionally, Cordish will be responsible for the development of the master plan for the project with our input and will submit it for our review and approval. In June 2021, the joint venture issued a capital call and we contributed $3 million. We have made cash contributions totaling $4 million and have contributed land. On February 12, 2021, we contributed 186 acres to the joint venture with a fair value of $61 million. Total contributions of approximately 206 acres of land have been made with a fair value of approximately $69 million and we have no further obligation to contribute additional real estate or cash as of June 30, 2021. We entered into a short-term lease agreement in February 2021, which we can cancel at any time, to lease back a portion of the land from the joint venture.

While we hold a 50% variable interest in the joint venture, we are not the primary beneficiary. As such the investment in the joint venture is accounted for using the equity method. We participate evenly with Cordish in the profits and losses of the joint venture, which are included in Transaction costs and other operating costs on the Statements of Operations. Our investment in the joint venture is recorded in Investment in and advances to unconsolidated affiliates on the Balance Sheets.

Reportable Segments