In this filing, the name "CEC" refers to the parent holding company,
Overview
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We view each property as an operating segment and aggregate such properties into
three regionally-focused reportable segments: (i)
Summary of Significant Events
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The following are the significant events and drivers of performance.
Accordingly, the remainder of the discussion and analysis of results in this
Item 2 should be read in conjunction with this summary.
Effect of the COVID-19 Public Health Emergency
A novel strain of coronavirus ("COVID-19") was declared a public health
emergency by the
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To manage the business through this period of uncertainty, we took steps to begin operating with a smaller, targeted workforce that is focused on maintaining basic operations while our properties remain closed. OnApril 2, 2020 , we announced furloughs that would affect approximately 90% of our employees at our domestic, owned properties inNorth America as well as our corporate employees. As part of our ongoing efforts we also took steps to support our employees through the effects of these difficult actions. OnMarch 27, 2020 , the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law. The CARES Act is a relief package intended to assist many aspects of the American economy. Two provisions of the CARES Act will serve to aid the Company's liquidity position, the employee retention credit and the deferral of employer-related FICA taxes. First, the employee retention credit provides employers a refundable federal tax credit equal to 50% of the first$10,000 of qualified wages and benefits paid to employees while they are not performing services afterMarch 12, 2020 and beforeJanuary 1, 2021 . Contributions to qualified medical plans also constitute creditable amounts. The credit is available to offset all federal employment withholdings owed in a particular quarter including both the employer and employee share of social security, Medicare taxes and withholdings for federal income taxes. To the extent that the credit exceeds employment withholdings, the employer may request a refund of prior taxes paid. Second, employers are permitted to defer the employer share of social security taxes otherwise owed on dates beginningMarch 27, 2020 and endingDecember 31, 2020 . Half of the total deferred payments are payable onDecember 31, 2021 and the remaining half are payable onDecember 31, 2022 . The Company intends to take full advantage of this tax deferral provision. The amount of the deferral is based on wages paid from April through December, which we are unable to estimate at this time. As a precautionary measure, onMarch 16, 2020 , we announced that we had fully drawn the remaining available amounts under each of the CRC Revolving Credit Facility and CEOC Revolving Credit Facility in order to increase our cash position and preserve liquidity and financial flexibility in light of the uncertainty and general volatility in the global financial markets. In accordance with the terms of each of the revolving credit facilities, the proceeds from these borrowings may be used in the future for working capital, general corporate or other purposes permitted by each of the revolving credit facilities. The amounts drawn under these revolving credit facilities are subject to financial covenants, which our lenders have agreed to waive throughSeptember 30, 2021 ; however, final approvals are not yet in place. As a result, for liquidity modeling purposes we have assumed that a required repayment of$826 million of the revolver borrowing will be repaid within the next 12 months. As an added measure, we are also in the process of obtaining relief for certain minimum capital expenditure requirements under our lease agreements. Although we expect such relief to be granted, we have not assumed a reduction in our capital expenditures for liquidity modeling purposes. After considering the measures that we have taken in order to maintain our basic operations while our properties remain closed, we estimate incurring approximately$9.0 million to$9.5 million per day of cash outflows which include operating expenses, rent, interest, debt service, and capital expenditures. Until our operations resume, we expect to continue to incur such cash operating expenses which will result in negative cash flows from operations. We have considered multiple scenarios with which our properties begin to reopen and profitability returns. Based on the assumptions in these scenarios, we believe our current liquidity is sufficient to support our operations for the next 12 months. However, these significant assumptions are highly subject to uncertainty and change related to events outside of our control, specifically as to when our properties may be allowed to open, at what levels of capacity, and customer demand. In preparation of reopening, we continue to take cautionary actions in response to the COVID-19 public health emergency. First and foremost, we are focusing on the health and safety of our employees. We have implemented real time changes in operating procedures to accommodate social distancing guidelines and support our employees, such as: • Establishing an internal response team led by senior leadership to review policies, procedures and key business decisions for the organization • Updating emergency succession plans for the CEO and senior management and reviewing them with theCompensation & Management Development Committee • Paying full time, part time and regularly scheduled team members who were impacted by either government or tribe-mandated closures of our properties for up to two weeks • Covering the biweekly deduction for medical benefit premiums for furloughed employees until the earlier ofJune 30, 2020 or the date that such employees return to work, for those currently enrolled in the company-sponsored health plan • Arranging for team members to work remotely by deploying available resources including additional technology, where applicable • Creating a Caesars Portal to provide team members with access to up-to-date communications and information
• Expanding certain benefits as permitted under the recently passed CARES Act
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• Hiring an external medical expert to provide advice and guidance for establishing the protocols and procedures as part of our robust reopening plan • Planning to implement additional cleaning and disinfection procedures in order to maintain healthy environments throughout the business. In addition, an independent employee assistance fund, Caesars Cares, has been established to support team members at our properties acrossthe United States who suffer unanticipated hardships, including during the closure of our properties as a result of the COVID-19 public health emergency. The uncertain duration of government or tribe-mandated closures of our properties and the overall deterioration of general economic conditions have materially affected significant inputs that are used to determine the fair value of certain of our indefinite-lived assets including goodwill. Accordingly, during the three months endedMarch 31, 2020 , we recorded impairments to certain intangible assets. We continue to monitor the rapidly evolving situation and guidance from domestic and international authorities, including federal, state and local public health authorities and may take additional actions based on such authorities' recommendations. In these circumstances, there may be developments outside of our control that require us to adjust our operating plan. Given the dynamic nature of this situation, the full extent of the effects of the COVID-19 public health emergency on our future financial condition, results of operations or cash flows is highly uncertain. For a more extensive discussion of the possible impacts of the COVID-19 public health emergency on our business, financial condition and results of operations, please refer to "Risk Factors" in Part II, Item 1A of this report. Proposed Merger ofCaesars Entertainment Corporation with Eldorado Resorts, Inc. OnJune 24, 2019 , Caesars, Eldorado Resorts, Inc., aNevada corporation ("Eldorado"), andColt Merger Sub, Inc. , aDelaware corporation and a direct wholly owned subsidiary of Eldorado ("Merger Sub"), entered into an Agreement and Plan of Merger (as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as ofAugust 15, 2019 , and as it may be further amended from time to time, the "Merger Agreement"), pursuant to which, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Caesars (the "Merger"), with Caesars continuing as the surviving corporation and a direct wholly owned subsidiary of Eldorado. OnNovember 15, 2019 , the respective stockholders of Caesars and Eldorado voted to approve the Merger. The transaction is expected to close mid-2020. In connection with the Merger, Eldorado will change its name toCaesars Entertainment, Inc. See Note 1. The Merger may have significant effects on us, including, among others, the significant diversion of management and employee attention from ordinary course matters. For a more extensive discussion of those and other possible effects, please refer to "Risk Factors" in Part II, Item 1A of this report. 33
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