Management Commentary
"We achieved revenue, income from operations and Property and Adjusted EBITDA growth in the fourth quarter, thanks to strong results in Las Vegas and from our international resorts and online activities," said Gary Loveman, chairman, president and chief executive officer of Caesars Entertainment. "Those gains were partially offset by challenges in certain regional domestic markets.
"The continued growth in Las Vegas was driven by robust international play and higher room and occupancy rates at our properties," Loveman said. "The outlook for continued strong group bookings and increased visitation to that market bodes well for the success of our Caesars Palace projects, including the Nobu hotel tower and restaurant additions and the Octavius Tower completion, which opened to the public in January this year. Work is progressing on the Linq retail, dining and entertainment experience that will open on the Strip in phases in mid to late 2013.
"Our regional performance continued to be impacted by reduced visitation, increased competition and, in the Illinois/Indianaregion, the closure of a key access route to our Southern Indiana property, which has since reopened," he said.
"We realized an estimated $63 million in incremental expense reductions during the fourth quarter from cost-cutting initiatives including Project Renewal, our program to streamline operations and prepare the company for sustainable long-term growth," Loveman said. "And we are vigorously pursuing that growth. Our two Ohio casino projects with Rock Gaming are moving forward, with Horseshoe Cleveland scheduled to debut in May this year and Horseshoe Cincinnati progressing toward a second-quarter 2013 opening.
"Our Caesars-Rock Gaming group, along with our local partners, is optimistic about getting the go-ahead for a 3,750-slot gaming operation in Baltimore," he said. "We're also excited about our alliance with Suffolk Downs that plans to bid for the Zone 1 casino license included in the casino-legalization bill signed late last year in Massachusetts.
"Another fourth-quarter accomplishment was our acquisition of the remaining 49% of online social-games operator Playtika, which has more than three million active daily users and which provides us with the opportunity to reach entertainment consumers around the world," Loveman said. "We applied for a license to offer online poker to residents of Nevada, which has implemented regulations for intra-state online gaming, and will pursue similar licenses in other states as opportunities arise.
"We also achieved record high customer-satisfaction scores for the fourth quarter and full year 2011 – the 11th straight year of gains in guest satisfaction with the services our employees deliver," he said. "I'm confident that record will continue as we prepare to launch an exciting expansion of our Total Rewards customer-loyalty program, already the industry's largest with more than 40 million customers.
"Finally, we began the new year with three transactions designed to strengthen our financial position," Loveman said. "We registered and listed a limited amount of Caesars Entertainment shares on the NASDAQ stock exchange, and announced an amend-and-extend debt transaction in combination with a bond sale that reduced our scheduled 2015 Caesars Entertainment Operating Company, Inc. bank maturities to $2.1 billion from $5.0 billion and extends maturity dates on $2.9 billion of debt for an additional three to five years. We anticipate pursuing similar transactions to bolster our balance sheet as market conditions warrant.
"I'm confident that our overall operational performance, organizational streamlining, financial enhancements and growth projects already under way are positioning us for sustainable growth in the years ahead," he said.
Financial Results
Quarterly Results
Net revenues for the fourth quarter of 2011 were $2,172.4 million, up $51.4 million, or 2.4%, from the year-earlier period. The increase in net revenues was due mainly to higher revenues in Las Vegas, and from our international and online businesses, including revenues related to Playtika which we acquired during the year, partially offset by a decline in net revenues at properties in the Midwest and Atlantic City.
For the fourth quarter of 2011, income from operations rose $80.5 million, or 61.4%, to $211.6 million from $131.1 in the year-ago fourth quarter. This increase was primarily due to higher revenues and cost reductions achieved as part of Project Renewal and previous cost reduction programs, as well as a $38.0 million decrease from 2010 in impairment charges related to goodwill and other non-amortizing intangible assets, partially offset by a favorable $23.5 million property tax adjustment recorded in the fourth quarter 2010.
Net loss attributable to Caesars for the fourth quarter of 2011 was $220.6 million, up $23.9 million, or 12.2%, from the fourth quarter of 2010. Higher net losses in the 2011 fourth quarter reflect higher interest expense resulting from the Company's de-designation of certain interest rate swaps during 2011 and gains on the early extinguishment of debt recognized in the fourth quarter of 2010 that did not recur in 2011, partially offset by higher income from operations and an increase in the benefit for income taxes. See "Other Items" below for further discussion of the Company's interest expense, early extinguishment of debt and income tax benefit.
Full-Year Results
Net revenues for 2011 were $8,834.5 million, up $15.9 million, or 0.2%, from 2010, as favorable results in Las Vegas, and from our international and online businesses, including revenues related to Playtika, were somewhat offset by revenue declines at properties in the Midwest and Atlantic City.
For the year, income from operations increased $343.2 million, or 64.5%, to $875.5 million from 2010. This increase was due mainly to a $182.0 million decrease from 2010 in impairment charges related to goodwill and other non-amortizing intangible assets, the effects of cost-reduction efforts under cost savings programs, including Project Renewal, and a $53.7 millionreduction in write-downs, reserves, recoveries, and project opening costs.
Net loss attributable to Caesars for 2011 decreased 17.3% to $687.6 million from $831.1 million in 2010, due primarily to higher income from operations and an increase in the benefit for income taxes, partially offset by higher interest expense, due mainly to the Company's de-designation of certain interest rate swaps during 2011 and gains on the early extinguishment of debt recognized in 2010 that did not recur in 2011.
Performance Metrics
The Company measures its performance in part through tracking of trips by rated customers, which means a customer whose gaming activity is tracked through our Total Rewards customer-loyalty system ("trips"), and by spend per rated customer trip ("spend per trip").
The following table reflects the percentage increase/(decrease) in trips and spend per trip for the U.S. regions for the fourth quarter and full year 2011 compared with the same periods in 2010.
"We achieved revenue, income from operations and Property and Adjusted EBITDA growth in the fourth quarter, thanks to strong results in Las Vegas and from our international resorts and online activities," said Gary Loveman, chairman, president and chief executive officer of Caesars Entertainment. "Those gains were partially offset by challenges in certain regional domestic markets.
"The continued growth in Las Vegas was driven by robust international play and higher room and occupancy rates at our properties," Loveman said. "The outlook for continued strong group bookings and increased visitation to that market bodes well for the success of our Caesars Palace projects, including the Nobu hotel tower and restaurant additions and the Octavius Tower completion, which opened to the public in January this year. Work is progressing on the Linq retail, dining and entertainment experience that will open on the Strip in phases in mid to late 2013.
"Our regional performance continued to be impacted by reduced visitation, increased competition and, in the Illinois/Indianaregion, the closure of a key access route to our Southern Indiana property, which has since reopened," he said.
"We realized an estimated $63 million in incremental expense reductions during the fourth quarter from cost-cutting initiatives including Project Renewal, our program to streamline operations and prepare the company for sustainable long-term growth," Loveman said. "And we are vigorously pursuing that growth. Our two Ohio casino projects with Rock Gaming are moving forward, with Horseshoe Cleveland scheduled to debut in May this year and Horseshoe Cincinnati progressing toward a second-quarter 2013 opening.
"Our Caesars-Rock Gaming group, along with our local partners, is optimistic about getting the go-ahead for a 3,750-slot gaming operation in Baltimore," he said. "We're also excited about our alliance with Suffolk Downs that plans to bid for the Zone 1 casino license included in the casino-legalization bill signed late last year in Massachusetts.
"Another fourth-quarter accomplishment was our acquisition of the remaining 49% of online social-games operator Playtika, which has more than three million active daily users and which provides us with the opportunity to reach entertainment consumers around the world," Loveman said. "We applied for a license to offer online poker to residents of Nevada, which has implemented regulations for intra-state online gaming, and will pursue similar licenses in other states as opportunities arise.
"We also achieved record high customer-satisfaction scores for the fourth quarter and full year 2011 – the 11th straight year of gains in guest satisfaction with the services our employees deliver," he said. "I'm confident that record will continue as we prepare to launch an exciting expansion of our Total Rewards customer-loyalty program, already the industry's largest with more than 40 million customers.
"Finally, we began the new year with three transactions designed to strengthen our financial position," Loveman said. "We registered and listed a limited amount of Caesars Entertainment shares on the NASDAQ stock exchange, and announced an amend-and-extend debt transaction in combination with a bond sale that reduced our scheduled 2015 Caesars Entertainment Operating Company, Inc. bank maturities to $2.1 billion from $5.0 billion and extends maturity dates on $2.9 billion of debt for an additional three to five years. We anticipate pursuing similar transactions to bolster our balance sheet as market conditions warrant.
"I'm confident that our overall operational performance, organizational streamlining, financial enhancements and growth projects already under way are positioning us for sustainable growth in the years ahead," he said.
Financial Results
Quarterly Results
Net revenues for the fourth quarter of 2011 were $2,172.4 million, up $51.4 million, or 2.4%, from the year-earlier period. The increase in net revenues was due mainly to higher revenues in Las Vegas, and from our international and online businesses, including revenues related to Playtika which we acquired during the year, partially offset by a decline in net revenues at properties in the Midwest and Atlantic City.
For the fourth quarter of 2011, income from operations rose $80.5 million, or 61.4%, to $211.6 million from $131.1 in the year-ago fourth quarter. This increase was primarily due to higher revenues and cost reductions achieved as part of Project Renewal and previous cost reduction programs, as well as a $38.0 million decrease from 2010 in impairment charges related to goodwill and other non-amortizing intangible assets, partially offset by a favorable $23.5 million property tax adjustment recorded in the fourth quarter 2010.
Net loss attributable to Caesars for the fourth quarter of 2011 was $220.6 million, up $23.9 million, or 12.2%, from the fourth quarter of 2010. Higher net losses in the 2011 fourth quarter reflect higher interest expense resulting from the Company's de-designation of certain interest rate swaps during 2011 and gains on the early extinguishment of debt recognized in the fourth quarter of 2010 that did not recur in 2011, partially offset by higher income from operations and an increase in the benefit for income taxes. See "Other Items" below for further discussion of the Company's interest expense, early extinguishment of debt and income tax benefit.
Full-Year Results
Net revenues for 2011 were $8,834.5 million, up $15.9 million, or 0.2%, from 2010, as favorable results in Las Vegas, and from our international and online businesses, including revenues related to Playtika, were somewhat offset by revenue declines at properties in the Midwest and Atlantic City.
For the year, income from operations increased $343.2 million, or 64.5%, to $875.5 million from 2010. This increase was due mainly to a $182.0 million decrease from 2010 in impairment charges related to goodwill and other non-amortizing intangible assets, the effects of cost-reduction efforts under cost savings programs, including Project Renewal, and a $53.7 millionreduction in write-downs, reserves, recoveries, and project opening costs.
Net loss attributable to Caesars for 2011 decreased 17.3% to $687.6 million from $831.1 million in 2010, due primarily to higher income from operations and an increase in the benefit for income taxes, partially offset by higher interest expense, due mainly to the Company's de-designation of certain interest rate swaps during 2011 and gains on the early extinguishment of debt recognized in 2010 that did not recur in 2011.
Performance Metrics
The Company measures its performance in part through tracking of trips by rated customers, which means a customer whose gaming activity is tracked through our Total Rewards customer-loyalty system ("trips"), and by spend per rated customer trip ("spend per trip").
The following table reflects the percentage increase/(decrease) in trips and spend per trip for the U.S. regions for the fourth quarter and full year 2011 compared with the same periods in 2010.
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