Caesars Entertainment, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with, and is qualified in its entirety by, the audited consolidated financial statements and the notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K. Caesars Entertainment, Inc., a Delaware corporation, is referred to as the “Company,” “CEI,” “Caesars,” or the “Registrant,” and together with its subsidiaries may also be referred to as “we,” “us” or “our.” Table of Contents 31 We also refer to (i) our Consolidated Financial Statements as our “Financial Statements,” (ii) our Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income (Loss) as our “Statements of Operations,” (iii) our Consolidated Balance Sheets as our “Balance Sheets,” and (iv) our Consolidated Statements of Cash Flows as our “Statements of Cash Flows.” References to numbered “Notes” refer to Notes to our Consolidated Financial Statements included in Item 8. 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 Item 1A, “Risk Factors—CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS,” of 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 that 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. Beginning in 2005, we grew through a series of acquisitions, including the acquisition of MTR Gaming Group, Inc. in 2014, Isle of Capri Casinos, Inc. (“Isle” or “Isle of Capri”) in 2017 and Tropicana Entertainment, Inc. 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”) and our ticker symbol on the NASDAQ Stock Market changed from “ERI” to “CZR”. On April 22, 2021, we completed the acquisition of William Hill PLC for £2.9 billion , or approximately $3.9 billion (the “William Hill Acquisition”). We currently own, lease or manage an aggregate of 52 domestic properties in 16 states with approximately 55,700 slot machines, video lottery terminals and e-tables, approximately 2,900 table games and approximately 47,700 hotel rooms as of December 31, 2021. 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. Our primary source of revenue is generated by our casino properties’ gaming operations, retail and online sports betting as well as online gaming, and we utilize hotels, restaurants, bars, entertainment, racing, retail shops and other services to attract customers to our properties. As of December 31, 2021, we owned 20 of our casinos and leased 26 casinos in the U.S. We lease 18 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 amended, the “GLPI Master Lease”) and a Lumière lease (together with the GLPI Master Lease, the “GLPI Leases”). Additionally, we lease the Rio All-Suite Hotel & Casino from a separate third party. See descriptions under the “GLPI Leases” and “VICI Leases.” Table of Contents 32 We also operate and conduct sports wagering across 21 states and domestic jurisdictions, 14 of which are mobile for sports betting, and operate regulated online real money gaming in five states. Our recently launched Caesars Sportsbook app operates on the Liberty platform, which we acquired in the William Hill Acquisition along with other technology platforms that we intend to migrate to the Liberty platform in the future, subject to required approvals. The map below illustrates Caesars Digital’s presence as of December 31, 2021: Subsequent to December 31, 2021, we launched mobile sports betting on our Liberty platform in New York on January 8, 2022 and Louisiana on January 28, 2022 and went live with retail sports betting in Washington on February 10, 2022. We are also in the process of expanding our Caesars Digital footprint into other states in the near term. Table of Contents 33 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 obtaining regulatory approvals related to closing of the Merger. A summary of recently completed and planned divestitures of our properties as of December 31, 2021 is as follows: Segment Property Date Sold Sales Price Regional Presque Isle Downs & Casino (“Presque”) January 11, 2019 $179 million Regional Lady Luck Casino Nemacolin (“Nemacolin”) March 8, 2019 * Regional Mountaineer Casino, Racetrack and Resort (“Mountaineer”) December 6, 2019 (a) Regional Isle Casino Cape Girardeau (“Cape Girardeau”) December 6, 2019 (a) Regional Lady Luck Casino Caruthersville (“Caruthersville”) December 6, 2019 (a) Regional Isle of Capri Casino Kansas City (“Kansas City”) July 1, 2020 (b) Regional Lady Luck Casino Vicksburg (“Vicksburg”) July 1, 2020 (b) Regional Eldorado Resort Casino Shreveport (“Eldorado Shreveport”) December 23, 2020 $140 million Regional MontBleu Casino Resort & Spa (“MontBleu”) April 6, 2021 $15 million Regional Tropicana Evansville (“Evansville”) June 3, 2021 $480 million Regional Belle of Baton Rouge Casino & Hotel (“Baton Rouge”) N/A * Discontinued operations: Regional Harrah’s Reno September 30, 2020 $42 million (c) Regional Bally’s Atlantic City November 18, 2020 $25 million (c) Regional Harrah’s Louisiana Downs November 1, 2021 $22 million (c) Regional Caesars Southern Indiana September 3, 2021 $250 million N/A Emerald Resort & Casino July 16, 2021 * N/A Caesars Entertainment UK July 16, 2021 * N/A William Hill International N/A £2.2 billion ____________________ * Not meaningful. (a) Mountaineer, Cape Girardeau and Caruthersville were sold for aggregate consideration of $385 million. (b) Kansas City and Vicksburg were sold for aggregate consideration of $230 million. (c) The proceeds of this sale were split between the Company and VICI. See Item 8. Financial Statements and Supplementary Data — Note 4 for further discussion on these key transactions and any applicable gain (loss) or impairment charges recorded. Merger and Acquisitions Related Activities Acquisition of William Hill 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 22, 2021, the Company completed the acquisition for £2.9 billion , or approximately $3.9 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 reflected within Table of Contents 34 discontinued operations. Certain investments acquired will be excluded from the held for sale group. On September 8, 2021, we entered into an agreement to sell William Hill International to 888 Holdings Plc for approximately £2.2 billion. After repayment of the outstanding debt under the Bridge Credit Agreement, described above, and other working capital adjustments, the Company expects to receive approximately £835 million, or $1.2 billion, subject to any permitted leakage, which is customary for sale transactions in the UK. The sale is subject to satisfaction of customary conditions, including receipt of the approval of shareholders of 888 Holdings Plc and regulatory approvals, and is expected to close in the second quarter of 2022. We recognized acquisition-related transaction costs of $68 million and $8 million for the years ended December 31, 2021 and 2020, respectively, excluding additional transaction cost associated with sale of William Hill International. These costs were associated with legal and professional services and were recorded in Transaction costs and other operating costs in our Statements of Operations. Consolidation of Horseshoe Baltimore On August 26, 2021, we increased our ownership interest in CBAC Borrower, LLC (“Horseshoe Baltimore”), a property which we also managed, to approximately 75.8% for cash consideration of $55 million. We were subsequently determined to have a controlling financial interest in Horseshoe Baltimore and have consolidated the results of operations of the property following our change in ownership. As a result of the increase in our ownership interest, our previously held investment was remeasured and we recognized a gain of $40 million for the year ended December 31, 2021. Management fees received prior to the consolidation event have been presented within our Managed and Branded segment. Operations following the consolidation event are presented within our Regional segment. 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 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. We recognized acquisition-related transaction costs in connection with the Merger of $30 million, $160 million and $80 million for the years ended December 31, 2021, 2020 and 2019, respectively. Investments and Partnerships 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. On September 16, 2021, the Company sold a portion of its shares of NeoGames common stock for $136 million which decreased its ownership interest from 24.5% to approximately 8.4%. As of December 31, 2021, the Company held approximately 2 million shares of NeoGames common stock with a fair value of $60 million. The shares have a readily determinable fair value and, accordingly, the Company remeasures the investment based on the publicly available share price (Level 1). For the year ended December 31, 2021, the Company recorded a loss to the investment in NeoGames of $54 million, which is included within Other income (loss) on the Statements of Operations. The Stars Group/Flutter Entertainment In November 2018, the Company entered into a 20-year agreement with The Stars Group Inc. (“TSG”) pursuant to which we agreed to provide TSG with options to obtain access to our second skin for online sports wagering and third skin for real money online gaming and poker, in each case with respect to states in which our properties are located. Under the terms of the agreement, we received 1 million TSG common shares. The fair value of the shares received was deferred and was recognized as revenue on a straight-line basis over the 20-year agreement term. In addition, we received a revenue share from the operation of the applicable verticals by TSG under our licenses. In December 2020, the Company sold a portion of these Flutter shares for net proceeds of $24 million. Table of Contents 35 On July 7, 2021, the Company sold all remaining Flutter shares for $9 million. The Company recorded a loss of $1 million during the year ended December 31, 2021, which is included within Other income (loss) on our Statements of Operations. 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, for a total of $4 million in cash since the inception of the joint venture. 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 December 31, 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 December 31, 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. Reportable Segments Segment results in this MD&A are presented consistent with the way our management 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 and Other. The William Hill Acquisition and rebranding of our interactive business (formerly, Caesars Interactive Entertainment “CIE” and now, inclusive of William Hill US, “Caesars Digital”) expanded our access to conduct sports wagering and iGaming gaming operations. As a result, the Company has made a change to the composition of its reportable segments. The Las Vegas and Regional segments are substantially unchanged, while the former Managed, International and CIE reportable segment has been recast for all periods presented into two segments; Caesars Digital and Managed and Branded. Accordingly, our principal operating activities occur in four reportable segments: (1) Las Vegas, (2) Regional, (3) Caesars Digital, and (4) Managed and Branded, in addition to Corporate and Other. See Item 2. “Properties” for listing of properties by segment. Presentation of Financial Information The financial information included in this Item 7 for the periods after our acquisitions of Former Caesars on July 20, 2020, William Hill on April 22, 2021 and of the increase in our ownership percentage and subsequent consolidation of Horseshoe Baltimore on August 26, 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. Refer to “Reportable Segments” above for a discussion of changes to the Company’s reportable segments. This MD&A is intended to provide information to assist in better understanding and evaluating our financial condition and results of operations. Our historical operating results may not be indicative of our future results of operations because of the factors described in the preceding paragraph and the changing competitive landscape in each of our markets, including changes in market and societal trends, as well as by factors discussed elsewhere herein. We recommend that you read this MD&A in conjunction with our audited consolidated financial statements and the notes to those statements included in this Annual Report on Form 10-K. Reclassifications Certain reclassifications of prior year presentations have been made to conform to the current period presentation. In June 2021, the Indiana Gaming Commission amended its order that previously required the Company to sell a third casino asset in the state of Indiana. As a result, Horseshoe Hammond no longer meets the held for sale criteria. The assets and liabilities previously held Table of Contents 36 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. Key Performance Metrics Our primary source of revenue is generated by our gaming operations, retail and online sports betting, as well as online gaming. Additionally we utilize our hotels, restaurants, bars, entertainment venues, retail shops, racing and other services to attract customers to our properties. Our operating results are highly dependent on the volume and quality of customers visiting and staying at our properties and using our sports betting and iGaming applications. Key performance metrics include volume indicators such as drop or handle, which refer to amounts wagered by our customers. The amount of volume we retain, which is not fully controllable by us, is recognized as casino revenues and is referred to as our win or hold. Slot win percentage is typically in the range of approximately 9% to 11% of slot handle for both the Las Vegas and Regional segments. Table game hold percentage is typically in the range of approximately 14% to 23% of table game drop in the Las Vegas segment and 18% to 21% of table game drop in the Regional segment. Sports betting hold is typically in the range of 5% to 9% and iGaming hold typically ranges from 3% to 4%. In addition, hotel occupancy, which is the average percentage of available hotel rooms occupied during a period, is a key indicator for our hotel business in the Las Vegas segment. See “Results of Operations” section below. Complimentary rooms are treated as occupied rooms in our calculation of hotel occupancy. The key metrics we utilize to measure our profitability and performance are Adjusted EBITDA and Adjusted EBITDA margin. Significant Factors Impacting Financial Results The following summary highlights the significant factors impacting our financial results during the years ended December 31, 2021, 2020 and 2019. Acquisitions and Transaction Costs • Acquisition of William Hill – On April 22, 2021, the Company consummated its previously announced acquisition of 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 of £2.9 billion , or approximately $3.9 billion. We recognized acquisition-related transaction costs of $68 million and $8 million for the years ended December 31, 2021 and 2020, respectively, excluding additional transaction costs associated with sale of William Hill International. • Consolidation of Horseshoe Baltimore – On August 26, 2021, the Company increased its ownership interest in Horseshoe Baltimore to approximately 75.8%. Prior to the purchase, the Company held an interest in Horseshoe Baltimore of approximately 44.3% which was accounted for as an equity method investment. Subsequent to the change in ownership, the Company was determined to have a controlling financial interest and has begun to consolidate the operations of Horseshoe Baltimore. As a result of the consolidation, the Company recognized a gain of $40 million during the year ended December 31, 2021. • Merger with Caesars Entertainment Corporation – The Merger closed on July 20, 2020. The Company recognized acquisition-related transaction costs in connection with the Merger of $30 million, $160 million and $80 million for the years ended December 31, 2021, 2020 and 2019, respectively. Divestitures and Discontinued Operations • Divestitures and Discontinued Operations – See “Overview” section above for detail on properties divested or held for sale, including related discontinued operations. Financing and Lease Transactions • Debt Transactions – In connection with the Merger, we issued new notes, entered into a new credit agreement and assumed certain of Former Caesars indebtedness. In addition, we terminated previously outstanding credit agreements and discharged outstanding notes. During 2021, we issued $1.2 billion in aggregate principal amount of 4.625% Senior Notes due 2029, we repriced the Incremental CRC Term Loan, we fully converted the outstanding the 5% Convertible Notes, we purchased or redeemed the entire $1.7 billion in aggregate principal amount of outstanding CRC Notes of, and we purchased $100 million in aggregate principal amount of CEI Senior Notes. As a result of these transactions, described more fully in the Liquidity and Capital Resources section below, we experienced some interest savings subsequent to these transactions. Additionally, we recorded a loss on extinguishment of debt of $236 million and Table of Contents 37 $197 million during the years ended December 31, 2021 and 2020, respectively, which is recorded within Loss on extinguishment of debt on the Statement of Operations. • VICI Leases – Upon consummation of the Merger, CEI assumed obligations of certain real property assets leased from VICI by Former Caesars under various lease agreements. We recorded interest expense of $1.1 billion and $519 million for the years ended December 31, 2021 and 2020, respectively, which was in excess of the cash lease payments as we continue to accrete up the liability during the earlier periods of the VICI Leases. Our VICI Leases also contain annual escalators based on the Consumer Price Index (“CPI”), with a floor of 2%. • GLPI Leases – We have accounted for the GLPI Leases as deferred financing obligations. We recorded interest expense in the amount of $111 million, $104 million and $99 million during the years ended December 31, 2021, 2020 and 2019, respectively, which was in excess of the cash lease payments as we continue to accrete up the liability during the earlier periods of the GLPI Leases. Our GLPI Leases also contain an annual escalation provision based on stated rates ranging from 1.25% to 2.0% per year. Other Significant Factors • COVID-19 Public Health Emergency – 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 our 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. During the year ended December 31, 2021, most of our properties experienced positive trends as restrictions on maximum capacities and amenities available were eased. Following temporary furloughs and salary reductions during 2020, the Company has emphasized a focus on labor efficiencies as operations resumed. As properties began to reopen during the year ended December 31, 2020, certain capacity restrictions, mask mandates, sanitation guidelines, and the federal COVID-19 vaccine and testing emergency temporary standard were adhered to as required by governmental or tribal orders, directives, and guidelines. We experienced positive operating trends in 2021, with a continued focus on operational efficiencies. Although we have experienced a decline in net income, Adjusted EBITDA and Adjusted EBITDA margins for the year ended December 31, 2021 exceeded pre-pandemic levels experienced in 2019 within our Las Vegas and Regional segments. However, certain revenue streams, such as convention and entertainment revenues, continued to be negatively impacted due to capacity restrictions in the first half of 2021. Future effects of COVID-19 from further outbreaks, including new variants, mask mandates or other restrictions are uncertain and could result in additional closures such as the temporary closure of Caesars Windsor from January 5, 2022 through January 31, 2022. Extensive closure periods impacting many of our properties would have a material adverse effect on future results of operations. • Impairment Charges – As a result of COVID-19, we recognized impairment charges in our Regional segment related to goodwill and trade names totaling $100 million and $16 million, respectively, during the year ended December 31, 2020. In addition, as a result of entering agreements to sell properties in our Regional segment, impairment charges totaling $99 million were recorded during the year ended December 31, 2020 due to the carrying value exceeding the net sales proceeds. In December 2021, the Company approved a capital plan which included the planned rebranding of certain of our properties, which is expected to be substantially complete by December 31, 2022. The Company utilized an income approach to determine the fair value of the trademarks subject to rebranding based on their expected future cash flows, which resulted in an impairment charge of $102 million. The adjusted carrying values of these trademarks, previously considered to have indefinite lives, have begun to be amortized over their respective remaining useful lives. • Weather and Construction Disruption – During the third quarter of 2021, our Regional segment was negatively impacted by natural disasters including Hurricane Ida in Louisiana and Mississippi and wildfires in the Lake Tahoe area. Harrah’s New Orleans, Harrah’s Lake Tahoe and Harvey’s Lake Tahoe all experienced temporary closures which lasted slightly more than one week. Additionally, in late August 2020, our Regional segment was negatively impacted by Hurricane Laura, causing severe damage to Lake Charles, which will remain closed until the second half of 2022 when construction of a new land-based casino is expected to be complete. During the year ended December 31, 2021 , we received insurance proceeds of $44 million related to damaged fixed assets and remediation costs. The Company also recorded a gain of $21 million as proceeds received for the cost to replace damaged property were in excess of the respective carrying value of the assets. • Caesars Sportsbook Launch and Rebranding – In connection with the launch and rebranding of the Caesars Sportsbook app during the year ended December 31, 2021, our Caesars Digital segment initiated a significant marketing campaign with distinguished actors, athletes and other media personalities. As new states and jurisdictions Table of Contents 38 have legalized sports betting, we have made significant upfront investment which has been executed through the marketing campaign and promotional incentives to establish ourselves as an industry leader. • Post-Merger Synergies – We continue to identify operating and cost efficiencies, including savings from the purchasing power of th e combined Caesars organization and targeted integrated marketing strategies, as well as the elimination of redundant costs such as accounting and professional expenses, certain payroll costs, and other corporate costs. As a result, we experienced margin improvements in our results of operations for the year ended December 31, 2021. Results of Operations The following table highlights the results of our operations: Years Ended December 31, (Dollars in millions) 2021 2020 2019 Net revenues: Las Vegas $ 3,409 $ 751 $ — Regional 5,537 2,660 2,494 Caesars Digital 337 95 26 Managed and Branded 278 107 — Corporate and Other (a) 9 15 8 Total $ 9,570 $ 3,628 $ 2,528 Net income (loss) $ (1,016) $ (1,758) $ 81 Adjusted EBITDA (b) : Las Vegas $ 1,568 $ 133 $ — Regional 1,979 711 719 Caesars Digital (476) 26 13 Managed and Branded 87 25 — Corporate and Other (a) (168) (101) (35) Total Segment Adjusted EBITDA $ 2,990 $ 794 $ 697 Net income (loss) margin (c) (10.6) % (48.5) % 3.2 % Adjusted EBITDA margin 31.2 % 21.9 % 27.6 % ___________________ (a) Corporate and Other includes revenues related to certain licensing arrangements and various revenue sharing agreements. Corporate and Other Adjusted EBITDA includes corporate overhead costs, which consist of certain expenses, such as: payroll, professional fees and other general and administrative expenses. (b) See the “Supplemental Unaudited Presentation of Consolidated Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)” discussion later in this MD&A for a description of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA related margins. (c) Net income (loss) margin is calculated as net income (loss) divided by net revenues. Consolidated comparison for the years ended December 31, 2021, 2020 and 2019 The following table highlights the results of our operations: Comparisons between 2021 and 2020 are described below. A discussion of changes in our results of operations between year ended December 31, 2020 compared to 2019 has been omitted from this Annual Report on Form 10-K and can be found in “ Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019 ” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The reclassification of Horseshoe Hammond from discontinued operations to continuing operations in the year ended December 31, 2020 did not result in material changes to the comparative analysis provided on Form 10-K for the fiscal year ended December 31, 2020. Table of Contents 39 Net Revenues Net revenues were as follows: Years Ended December 31, Variance Percent Change Variance Percent Change (Dollars in millions) 2021 2020 2019 2021 vs 2020 2020 vs 2019 Casino and pari-mutuel commissions $ 5,827 $ 2,482 $ 1,808 $ 3,345 134.8 % $ 674 37.3 % Food and beverage 1,140 342 301 798 * 41 13.6 % Hotel 1,551 450 300 1,101 * 150 50.0 % Other 1,052 354 119 698 197.2 % 235 197.5 % Net Revenues $ 9,570 $ 3,628 $ 2,528 $ 5,942 163.8 % $ 1,100 43.5 % ___________________ * Not meaningful. Consolidated revenues increased for the year ended December 31, 2021 primarily due to recent acquisitions including the Merger on July 20, 2020, the William Hill Acquisition on April 22, 2021, and the consolidation of Horseshoe Baltimore on August 26, 2021, offset by the divestiture of certain properties discussed above. In addition, net revenues for the year ended December 31, 2020 were negatively impacted by the COVID-19 public health emergency. All of our casino properties were temporarily closed for the period from mid-March 2020 through mid-May 2020. Further, many of our properties were operating under restrictive guidelines through the first half of 2021 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. Local and state regulations and the implementation of social distancing and health and safety protocols in response to COVID-19 resulted in reduced gaming capacity and hotel occupancy as well as limitations on the operation of food and beverage outlets, live entertainment events, and conventions. As of December 31, 2021, all of our properties have resumed certain operations, to the extent permitted, with the exception of Lake Charles which was severely damaged by Hurricane Laura and will remain closed until the second half of 2022 when construction of a new land-based casino is expected to be completed. Operating Expenses Operating expenses were as follows: Years Ended December 31, Variance Percent Change Variance Percent Change (Dollars in millions) 2021 2020 2019 2021 vs 2020 2020 vs 2019 Casino and pari-mutuel commissions $ 3,129 $ 1,271 $ 905 $ 1,858 146.2 % $ 366 40.4 % Food and beverage 707 265 239 442 166.8 % 26 10.9 % Hotel 438 170 99 268 157.6 % 71 71.7 % Other 373 140 46 233 166.4 % 94 * General and administrative 1,782 902 503 880 97.6 % 399 79.3 % Corporate 309 195 66 114 58.5 % 129 195.5 % Impairment charges 102 215 1 (113) (52.6) % 214 * Depreciation and amortization 1,126 583 222 543 93.1 % 361 162.6 % Transaction costs and other operating costs 144 270 37 (126) (46.7) % 233 * Total operating expenses $ 8,110 $ 4,011 $ 2,118 $ 4,099 102.2 % $ 1,893 89.4 % ___________________ * Not meaningful. Casino and pari-mutuel expenses consist primarily of salaries and wages associated with our gaming operations, marketing and promotions and gaming taxes. Hotel expenses consist principally of salaries, wages and supplies associated with our hotel operations. Food and beverage expenses consist principally of salaries and wages and costs of goods sold associated with our food and beverage operations. Other expenses consist principally of salaries and wages and costs of goods sold associated with our retail, entertainment and other operations. Casino and pari-mutuel, hotel, food and beverage, and other expenses for the year ended December 31, 2021 increased year over year as a result of our recent acquisitions, including the Merger, the William Hill Acquisition, and the consolidation of Horseshoe Baltimore. In addition, the reopening of substantially all of our properties to the extent permitted by regulations governing the applicable jurisdiction, the partial return of our workforce, and advertising costs consisting of television, radio and internet marketing campaigns directly attributable to the launch and rebranding of our Caesars Sportsbook app contributed Table of Contents 40 to the increase noted. These increases were partially offset as the Company focused on labor efficiencies and post-merger synergies, as described above. Additionally, during the year ended December 31, 2021, the Company managed increases in food costs and effectively improved margins by focusing on efficiencies within food and beverage venues and menu options. General and administrative expenses include items such as information technology, facility maintenance, utilities, property and liability insurance, expenses for administrative departments such as accounting, compliance, purchasing, human resources, legal and internal audit, and property taxes. General and administrative expenses also include other marketing expenses not directly related to our gaming and non-gaming operations. General and administrative expenses for the year ended December 31, 2021 increased year over year as the result of the reopening of all of our properties to the extent permitted by regulations governing the applicable jurisdiction, the Merger, the William Hill Acquisition and the consolidation of Horseshoe Baltimore. These increases were partially offset by a reduced cost structure implemented by the Company while our properties were temporarily closed due to the impact of COVID-19. Additionally, synergies associated with the combined companies from the Merger and the Company’s focus on labor efficiencies and expense savings resulted in reductions to certain administrative costs for the year ended December 31, 2021. Corporate expenses include unallocated expenses such as payroll, annual bonus plans, stock-based compensation, professional fees, and other various expenses not directly related to the Company’s operations. For the year ended December 31, 2021 compared to the same prior year period, corporate expenses increased primarily due to the Merger, the William Hill Acquisition and the consolidation of Horseshoe Baltimore. In addition, payroll costs increased as compared to the prior year period due to performance-based incentives and higher costs in the labor market. These costs have been partially offset by a decline in the corporate headcount. For the year ended December 31, 2021 compared to the same prior year period, depreciation and amortization expense increased primarily due to the recent acquisitions, including the Merger, the William Hill Acquisition, and the consolidation of Horseshoe Baltimore. Transaction costs and other operating costs primarily included expenses related to the William Hill Acquisition for the year ended December 31, 2021 and costs related to the Merger for the year ended December 31, 2020. Impairment charges in 2021 relate to the rebranding of certain of our properties. Impairment charges in 2020 relate to the impairment of goodwill and trade names recognized due to a triggering event resulting from COVID-19 and agreements to sell properties whereby the carrying value exceeded the estimated net sales proceeds. Other Expense Other expense was as follows: Years Ended December 31, Variance Percent Change Variance Percent Change (Dollars in millions) 2021 2020 2019 2021 vs 2020 2020 vs 2019 Interest expense, net $ (2,295) $ (1,202) $ (286) $ (1,093) (90.9) % $ (916) * Loss on extinguishment of debt (236) (197) (8) (39) (19.8) % (189) * Other income (loss) (198) 176 9 (374) * 167 * Benefit (provision) for income taxes 283 (132) (44) 415 * (88) (200.0) % ___________________ * Not meaningful. For the year ended December 31, 2021, interest expense, net increased year over year as a result of the Merger, the William Hill Acquisition and the consolidation of Horseshoe Baltimore. Outstanding debt assumed, additional debt raised, and assumed financing obligations resulted in the increase in interest expense. The increase was partially offset by reduction in interest expense due to the extinguishment of the 5% Convertible Notes, early extinguishment of the CRC Notes, partial repayment of the CEI Senior Notes and the repricing of CRC Incremental Term Loan. For the year ended December 31, 2021, the loss on extinguishment of debt was related to early repayment premiums, and extinguishment of deferred financing costs and discounts associated with the prepayments of the CRC Notes and CEI Senior Notes, the repricing of the CRC Incremental Term Loan, and the early extinguishment of the 5% Convertible Notes. The loss on extinguishment of debt for the year ended December 31, 2020 was related to the payment of outstanding debt in connection with the Merger. Table of Contents 41 For the year ended December 31, 2021, other income (loss) fluctuated year over year mainly due to a loss on the change in fair value of investments and a loss on the change in fair value of the derivative liability related to the 5% Convertible Notes. The effective tax rate was 22.3% for 2021, (8.2%) for 2020, and 35.2% for 2019. The effective tax rate in 2020 differed from the statutory rate of 21% primarily due to an increase in valuation allowance against the deferred tax assets due to the series of transactions with VICI during the year. Such transactions did not occur in 2021. Refer to Item 8. - Note 17 for the effective income tax rate reconciliation. Segment comparison for the years ended December 31, 2021, 2020 and 2019 Las Vegas Segment Years Ended December 31, Variance Percent Change Variance Percent Change (Dollars in millions) 2021 2020 2019 2021 vs 2020 2020 vs 2019 Revenues: Casino and pari-mutuel commissions $ 1,226 $ 319 $ — $ 907 * $ 319 * Food and beverage 702 130 — 572 * 130 * Hotel 968 186 — 782 * 186 * Other 513 116 — 397 * 116 * Net revenues $ 3,409 $ 751 $ — $ 2,658 * $ 751 * Table game drop $ 3,088 $ 1,082 $ — $ 2,006 185.4 % $ 1,082 * Table game hold % 20.2 % 16.6 % — % 3.6 pts 16.6 pts Slot handle $ 10,309 $ 3,498 $ — $ 6,811 194.7 % $ 3,498 * Hotel occupancy 82.1 % 47.2 % — % 34.9 pts 47.2 pts Adjusted EBITDA $ 1,568 $ 133 $ — $ 1,435 * $ 133 * Adjusted EBITDA margin 46.0 % 17.7 % — % 28.3 pts 17.7 pts Net income (loss) attributable to Caesars $ 641 $ (287) $ — $ 928 * $ (287) * ___________________ * Not meaningful. Las Vegas segment’s net revenues and Adjusted EBITDA increased as a result of the Merger and reopening of all of our Las Vegas properties in accordance with state and local regulations as of December 31, 2021. In June 2021, convention and entertainment venues began to reopen as COVID-19 capacity restrictions were lifted. During the year ended December 31, 2021, all of our reopened properties in the Las Vegas segment experienced an increase in net revenues and Adjusted EBITDA compared to Former Caesars’ prior year results as all properties were temporarily closed for a portion of 2020. Slot win percentage in Las Vegas during the year ended December 31, 2021 was within our typical range and hotel occupancy trended upward compared to 2020. Additionally, pent up demand positively impacted our results of operations in the Las Vegas segment for the year ended December 31, 2021. These positive trends, however, may not be sustained due to increasing costs and continuing uncertainty relating to COVID-19. Table of Contents 42 Regional Segment Years Ended December 31, Variance Percent Change Variance Percent Change (Dollars in millions) 2021 2020 2019 2021 vs 2020 2020 vs 2019 Revenues: Casino and pari-mutuel commissions $ 4,305 $ 2,079 $ 1,782 $ 2,226 107.1 % $ 297 16.7 % Food and beverage 438 211 301 227 107.6 % (90) (29.9) % Hotel 583 264 300 319 120.8 % (36) (12.0) % Other 211 106 111 105 99.1 % (5) (4.5) % Net revenues $ 5,537 $ 2,660 $ 2,494 $ 2,877 108.2 % $ 166 6.7 % Table game drop $ 4,349 $ 2,386 $ 1,328 $ 1,963 82.3 % $ 1,058 79.7 % Table game hold % 21.1 % 20.6 % 19.1 % 0.5 pts 1.5 pts Slot handle $ 44,667 $ 24,441 $ 16,955 $ 20,226 82.8 % $ 7,486 44.2 % Adjusted EBITDA $ 1,979 $ 711 $ 719 $ 1,268 178.3 % $ (8) (1.1) % Adjusted EBITDA margin 35.7 % 26.7 % 28.8 % 9 pts (2.1) pts Net income (loss) attributable to Caesars $ 637 $ (349) $ 385 $ 986 * $ (734) * ___________________ * Not meaningful. Regional segment’s net revenues and Adjusted EBITDA increased for the year ended December 31, 2021 compared to the same prior year period as a result of the Merger and consolidation of Horseshoe Baltimore. The increase was slightly offset by divestitures of certain properties and closures of certain properties due to Hurricane Ida and the Caldor fire. As of December 31, 2021, all of our properties in our Regional segment reopened, with the exception of Lake Charles which closed due to severe damage from Hurricane Laura and will remain closed until the second half of 2022 when construction of a new land-based casino is expected to be completed. Slot win percentage in the Regional segment during the year ended December 31, 2021 was within our typical range. Additionally, pent up demand positively impacted our results of operations in the Regional segment for the year ended December 31, 2021. These positive trends, however, may not be sustained due to increasing costs and continuing uncertainty relating to COVID-19. For the year ended December 31, 2021, our Regional segment’s net revenues, Adjusted EBITDA and Adjusted EBITDA margin increased compared to the prior year across all properties, including Former Caesars, due to reductions in workforce and marketing costs, synergies from the purchasing power of the combined Caesars organization, and the Company’s focus on higher margin food and beverage offerings. Caesars Digital Segment Years Ended December 31, Variance Percent Change Variance Percent Change (Dollars in millions) 2021 2020 2019 2021 vs 2020 2020 vs 2019 Revenues: Casino and pari-mutuel commissions $ 296 $ 84 $ 26 $ 212 * $ 58 * Other 41 11 — 30 * 11 * Net revenues $ 337 $ 95 $ 26 $ 242 * $ 69 * Sports betting handle (a) $ 6,046 $ 30 $ — $ 6,016 * $ 30 * iGaming handle 5,621 2,448 1,040 3,173 129.6 % 1,408 135.4 % Adjusted EBITDA $ (476) $ 26 $ 13 $ (502) * $ 13 100.0 % Adjusted EBITDA margin (141.2) % 27.4 % 50.0 % * (22.6) pts Net income (loss) attributable to Caesars $ (580) $ 26 $ 13 $ (606) * $ 13 100.0 % ___________________ * Not meaningful. Table of Contents 43 (a) Caesars Digital generated an additional $706 million of sports betting handle, which is not included in this table for the year ended December 31, 2021, for select wholly-owned and third-party operations for which Caesars Digital provides services and we receive all. or a share of, the net profits. Sports betting handle includes $40 million for the year ended December 31, 2021, related to horse racing and pari-mutuel wagers. Caesars Digital includes Caesars operations for retail and mobile sports betting, online casino, and online poker. It is comprised of the Caesars interactive business acquired in the Merger, operations acquired in the William Hill Acquisition and historical iGaming at Tropicana Atlantic City. Caesars Digital’s sports betting handle, iGaming handle, and net revenues increased significantly for the year ended December 31, 2021 compared to the same prior year period due to the acquisitions and the recent marketing launch of our new sportsbook. However, net revenues for the year ended December 31, 2021 were negatively impacted by a sports betting hold percentage that was below our typical range. The low hold percentage was driven in part by increased odds and profit boosts, which are promotional enhancements that improve odds or wager payouts for customers. In addition, our hold percentage was negatively impacted by competitive pricing strategies and lower than typical hold in certain betting markets. iGaming hold percentage for the year ended December 31, 2021 was within our typical range. In connection with the launch of our Caesars branded sportsbook and iGaming applications, we deployed a significant level of marketing spend to build brand awareness and acquire and retain customers. As sports betting and online casinos expand through increased state legalization and customer adoption, growth in marketing and promotional costs in highly competitive markets negatively impacts Caesars Digital Adjusted EBITDA and Adjusted EBITDA margins in comparison to prior periods. Managed and Branded Segment Years Ended December 31, Variance Percent Change Variance Percent Change (Dollars in millions) 2021 2020 2019 2021 vs 2020 2020 vs 2019 Revenues: Food and beverage $ — $ 1 $ — $ (1) (100.0) % $ 1 * Other 278 106 — 172 162.3 % 106 * Net revenues $ 278 $ 107 $ — $ 171 159.8 % $ 107 * Adjusted EBITDA $ 87 $ 25 $ — $ 62 * $ 25 * Adjusted EBITDA margin 31.3 % 23.4 % — % 7.9 pts 23.4 pts Net income attributable to Caesars $ 68 $ 29 $ — $ 39 134.5 % $ 29 * ___________________ * Not meaningful. We manage several properties and license rights to the use of our brands. These revenue agreements typically include reimbursement of certain costs that we incur directly. Such costs are primarily related to payroll costs incurred on behalf of the properties under management. The revenue related to these reimbursable management costs has a direct impact on our evaluation of Adjusted EBITDA margin which, when excluded, reflects margins typically realized from such agreements. The table below presents the amount included in net revenues and total operating expenses related to these reimbursable costs. Years Ended December 31, Variance Percent Change Variance Percent Change (Dollars in millions) 2021 2020 2019 2021 vs 2020 2020 vs 2019 Reimbursable management revenue $ 191 $ 73 $ — $ 118 161.6 % $ 73 * Reimbursable management cost 191 73 — 118 161.6 % 73 * ___________________ * Not meaningful. Managed and Branded segment’s net revenues and Adjusted EBITDA increased as a result of the Merger. Upon the consolidation of Horseshoe Baltimore, the operations of the property are included in the Regional segment above and management revenue is eliminated upon consolidation. Additionally, in connection with the closing of the sale of Caesars Southern Indiana on September 3, 2021, the Company and the Eastern Band of Cherokee Indians (“EBCI”) extended their existing relationship by entering into a 10-year brand license agreement, with cancellation rights in exchange for a termination fee at the buyer’s discretion following the fifth anniversary of the agreement, for the continued use of the Caesars brand and Caesars Rewards loyalty program at Caesars Southern Indiana. Caesars Southern Indiana was previously reported within the Regional segment and subsequent to the sale, as a result of the license agreement relating to the continued use of the Caesars brand and Caesars Rewards loyalty program at Caesars Southern Indiana, is reported within the Managed and Branded Table of Contents 44 segment. All of our managed properties have reopened as of December 31, 2021, however, a subsequent temporary closure of Caesars Windsor occurred from January 5, 2022 through January 31, 2022 due to COVID - 19. For the year ended December 31, 2021, net revenues and Adjusted EBITDA for Managed and Branded increased as compared to Former Caesars’ prior period. Corporate & Other Years Ended December 31, Variance Percent Change Variance Percent Change (Dollars in millions) 2021 2020 2019 2021 vs 2020 2020 vs 2019 Revenues: Other $ 9 $ 15 $ 8 $ (6) (40.0) % $ 7 87.5 % Net revenues $ 9 $ 15 $ 8 $ (6) (40.0) % $ 7 87.5 % Adjusted EBITDA $ (168) $ (101) $ (35) $ (67) (66.3) % $ (66) (188.6) % ___________________ * Not meaningful. Supplemental Unaudited Presentation of Consolidated Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) for the Years Ended December 31, 2021, 2020 and 2019 Adjusted EBITDA (described below), a non-GAAP financial measure, has been presented as a supplemental disclosure because it is a widely used measure of performance and basis for valuation of companies in our industry and we believe that this non-GAAP supplemental information will be helpful in understanding our ongoing operating results. Management has historically used Adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period results. Adjusted EBITDA represents net income (loss) before interest income or interest expense net of interest capitalized, (benefit) provision for income taxes, unrealized (gain) loss on investments and marketable securities, depreciation and amortization, stock-based compensation, impairment charges, transaction expenses, severance expense, selling costs associated with the divestitures of properties, equity in income (loss) of unconsolidated affiliates, (gain) loss on the sale or disposal of property and equipment, (gain) loss related to divestitures, changes in the fair value of certain derivatives and certain non-recurring expenses such as sign-on and retention bonuses, business optimization expenses and transformation expenses, certain litigation awards and settlements, losses on inventory associated with properties temporarily closed as a result of the COVID-19 public health emergency, contract exit or termination costs, and certain regulatory settlements. Adjusted EBITDA also excludes the expense associated with certain of our leases as these transactions were accounted for as financing obligations and the associated expense is included in interest expense. Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with GAAP. Adjusted EBITDA is unaudited and should not be considered an alternative to, or more meaningful than, net income (loss) as an indicator of our operating performance. Uses of cash flows that are not reflected in Adjusted EBITDA include capital expenditures, interest payments, income taxes, debt principal repayments, payments under our leases with affiliates of GLPI and VICI Properties Inc. and certain regulatory gaming assessments, which can be significant. As a result, Adjusted EBITDA should not be considered as a measure of our liquidity. Other companies that provide EBITDA information may calculate Adjusted EBITDA differently than we do. The definition of Adjusted EBITDA may not be the same as the definitions used in any of our debt agreements. Table of Contents 45 The following table summarizes our Adjusted EBITDA for the years ended December 31, 2021, 2020 and 2019, respectively, in addition to reconciling net income (loss) to Adjusted EBITDA in accordance with GAAP (unaudited): Year Ended December 31, 2021 (In millions) CEI Pre-Cons. Baltimore (d) Pre-Acq. WH US (e) Less: Divest. (f) Total (g) Net loss attributable to Caesars $ (1,019) $ (32) $ (33) $ (7) $ (1,091) Net income attributable to noncontrolling interests 3 — — — 3 Discontinued operations, net of income taxes 30 — — (23) 7 Benefit for income taxes (283) — (2) — (285) Other (income) loss (a) 198 40 (2) — 236 Loss on extinguishment of debt 236 — — — 236 Interest expense, net 2,295 9 — — 2,304 Impairment charges 102 — — — 102 Depreciation and amortization 1,126 10 8 — 1,144 Transaction costs and other operating costs (b) 144 6 27 — 177 Stock-based compensation expense 82 — — — 82 Other items (c) 76 — 2 — 78 Adjusted EBITDA $ 2,990 $ 33 $ — $ (30) $ 2,993 Year Ended December 31, 2020 (In millions) CEI Pre-Cons. Baltimore (d) Pre-Acq. WH US (e) Pre-Acq. CEC (h) Less: Divest. (f) Total (g) Net income (loss) attributable to Caesars $ (1,757) $ (11) $ (5) $ (1,059) $ 264 $ (2,568) Net income (loss) attributable to noncontrolling interests (1) — — (67) 63 (5) Discontinued operations, net of income taxes 20 — — — (20) — (Benefit) provision for income taxes 132 — (7) (224) 1 (98) Other income (a) (176) (10) (3) (45) (19) (253) Loss on extinguishment of debt 197 — — — — 197 Interest expense, net 1,202 15 1 750 (72) 1,896 Depreciation and amortization 583 16 22 559 (43) 1,137 Impairment charges 215 — — 189 (203) 201 Transaction costs and other operating costs (b) 270 1 23 71 (6) 359 Stock-based compensation expense 79 1 — 26 — 106 Other items (c) 30 (1) — 54 (3) 80 Adjusted EBITDA $ 794 $ 11 $ 31 $ 254 $ (38) $ 1,052 Table of Contents 46 Year Ended December 31, 2019 (In millions) CEI Pre-Cons. Baltimore (d) Pre-Acq. WH US (e) Pre-Acq. CEC (h) Less: Divest. (f) Total (g) Net income (loss) attributable to Caesars $ 81 $ (1) $ 1 $ (1,195) $ 53 $ (1,061) Net income (loss) attributable to noncontrolling interests — — — (3) 3 — (Benefit) provision for income taxes 44 — (1) (141) (47) (145) Other (income) loss (a) (9) (1) (3) 587 3 577 Loss on extinguishment of debt 8 — — — — 8 Interest expense, net 286 19 — 1,370 (83) 1,592 Depreciation and amortization 222 25 17 1,021 (97) 1,188 Impairment charges 1 — — 468 (50) 419 Transaction costs and other operating costs (b) 37 — 1 136 (31) 143 Stock-based compensation expense 20 — — 88 (1) 107 Other items (c) 7 — — 80 (2) 85 Adjusted EBITDA $ 697 $ 42 $ 15 $ 2,411 $ (252) $ 2,913 ____________________ (a) Other (income) loss primarily includes changes in fair value of investments, changes in fair value of the derivative liability related to the 5% Convertible Notes, and gains and losses on foreign currency exchange. (b) Transaction costs and other operating costs 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, retention bonuses, and business optimization expenses. (d) Represents results of operations for Horseshoe Baltimore for periods prior to the consolidation resulting from the Company’s increase in its ownership interest on August 26, 2021. Such figures are based on unaudited internal financial statements and have not been reviewed by the Company’s auditors and do not conform to GAAP. (e) Pre-acquisition William Hill represents results of operations for William Hill prior to the acquisition. Such figures are based on unaudited internal financial statements and have not been reviewed by the Company’s auditors and, for the 2021, 2020 and 2019 periods, do not conform to GAAP. (f) Divestitures include results of operations for certain properties divested. See Item 7 - Overview above. Such figures are based on unaudited internal financial statements and have not been reviewed by the Company’s auditors and do not conform to GAAP. (g) Such presentation does not conform to GAAP or the Securities and Exchange Commission rules for pro forma presentation; however, we believe that the additional financial information will be helpful to investors in comparing current results with results of prior periods. This is non-GAAP data and should not be considered a substitute for data prepared in accordance with GAAP, but should be viewed in addition to the results of operations reported by the Company. (h) Pre-acquisition CEC represents results of operations for Former Caesars prior to the Merger. Such figures are based on unaudited internal financial statements and have not been reviewed by the Company’s auditors and, for the 2020 and 2019 periods, do not conform to GAAP. Liquidity and Capital Resources We are a holding company and our only significant assets are ownership interests in our subsidiaries. Our ability to fund our obligations depends on existing cash on hand, contracted asset sales, cash flows from our subsidiaries and our ability to raise capital. Our primary sources of liquidity and capital resources are existing cash on hand, cash flows from operations, availability of borrowings under our revolving credit facilities, proceeds from the issuance of debt and equity securities and proceeds from completed asset sales. Our cash requirements may fluctuate significantly depending on our decisions with respect to business acquisitions or divestitures and strategic capital and marketing investments. As of December 31, 2021, our cash on hand and revolving borrowing capacity were as follows: (In millions) December 31, 2021 Cash and cash equivalents $ 1,070 Revolver capacity (a) 2,030 Revolver capacity committed to letters of credit (92) Revolver capacity committed as regulatory requirement (48) Total $ 2,960 ___________________ (a) Revolver capacity includes $995 million under our CEI Revolving Credit Facility, as amended, maturing in July 2025, $1,025 million under our CRC Revolving Credit Facility, maturing in December 2022 and $10 million under our Baltimore Revolving Credit Facility, maturing in July 2022. Table of Contents 47 During the year ended December 31, 2021, our operating activities generated operating cash inflows of $1.2 billion, as compared to operating cash outflows of $561 million during the year ended December 31, 2020 due to the results of operations described above in addition to the Merger, William Hill Acquisition and consolidation of Horseshoe Baltimore. In addition, we continue to improve our financial position and reduce our operating costs related to our debt through accelerated repayments, amendments to existing debt agreements and obtaining favorable rates on new borrowings which has resulted in, and is expected to continue to provide, interest expense savings. On September 21, 2021, CRC entered into a second amendment related to the CRC Incremental Term Loan to reduce the interest rate margins to 3.50% per annum in the case of any London Inter-bank Offered Rate (“LIBOR”) loan or 2.50% per annum in the case of any base rate loan. The CRC Incremental Term Loan is a LIBOR based loan of which the amendment lowers our annual interest cost by reducing the applicable margin by 100 basis points from 4.50% to 3.50%. During the year ended December 31, 2021, the Company purchased or redeemed all $1.7 billion 5.25% senior notes due 2025 (the “CRC Notes”) and recognized a $199 million loss on the early extinguishment of debt. During the year ended December 31, 2021, the Company purchased a total of $100 million in principal amount of the $1.8 billion 8.125% Senior Notes due 2027 (the “CEI Senior Notes”) and the Company recognized a $14 million loss on the early extinguishment of debt. On September 24, 2021, the Company issued $1.2 billion in aggregate principal amount of 4.625% Senior Notes due 2029 (the “Senior Notes”) pursuant to an indenture dated as of September 24, 2021 between the Company and U.S. Bank National Association, as Trustee. The Senior Notes will mature on October 15, 2029 with interest payable on April 15 and October 15 of each year, commencing April 15, 2022. Proceeds from the issuance of the Senior Notes, as well as cash on hand, was used to repay the CRC Notes, as described above. As a result of our increased ownership interest in Horseshoe Baltimore, we began to consolidate the aggregate principal amount of Horseshoe Baltimore’s senior secured term loan facility (the “Baltimore Term Loan”) and amounts outstanding, if any, under Horseshoe Baltimore’s senior secured revolving credit facility (the “Baltimore Revolving Credit Facility”). The Baltimore Term Loan matures in 2024 and is subject to a variable rate of interest calculated as LIBOR plus 4.00%. The Baltimore Revolving Credit Facility has borrowing capacity of up to $10 million available, matures in 2022, and is subject to a variable rate of interest calculated as LIBOR plus 6.00%. As of December 31, 2021, there was $10 million of available borrowing capacity under the Baltimore Revolving Credit Facility. 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 22, 2021, the Company completed the acquisition of William Hill PLC for £2.9 billion , or approximately $3.9 billion . In connection with the William Hill Acquisition, on April 22, 2021, a newly formed subsidiary of the Company (the “Bridge Facility Borrower”) 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 (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 International. Certain investments acquired have been excluded from the held for sale asset group. On September 8, 2021, the Company entered into an agreement to sell William Hill International to 888 Holdings Plc for approximately £2.2 billion. After repayment of the outstanding debt under the Bridge Credit Agreement, described above, the Company expects to receive approximately £835 million, or $1.2 billion, subject to any permitted leakage, which is customary for sale transactions in the UK. In order to manage the risk of changes in the GBP denominated sales price and expected proceeds, the Company has entered into foreign exchange forward contracts. The sale is subject to satisfaction of customary conditions, including receipt of the approval of shareholders of 888 Holdings Plc and regulatory approvals, and is expected to close in the second quarter of 2022. Table of Contents 48 We expect that our primary capital requirements going forward will relate to the expansion and maintenance of our properties, taxes, servicing our outstanding indebtedness, and rent payments under our GLPI Master Lease, the VICI Leases and other leases. We make capital expenditures and perform continuing refurbishment and maintenance at our properties to maintain our quality standards. Our capital expenditure requirements for 2022 are expected to increase compared to prior periods as a result of increased expansion projects, the rebranding of certain properties, implementation and migration of states to our Liberty platform and continued investment into new markets with our Caesars Sportsbook and iGaming applications in our Caesars Digital segment. In addition, we may, from time to time, seek to repurchase our outstanding indebtedness. Any such purchases may be funded by existing cash balances or the incurrence of debt. The amount and timing of any repurchase will be based on business and market conditions, capital availability, compliance with debt covenants and other considerations. In 2020, we funded $400 million to escrow as of the closing of the Merger and have begun to utilize those funds in accordance with a three year capital expenditure plan in the state of New Jersey. This amount is currently included in restricted cash in Other assets, net. As of December 31, 2021, our restricted cash balance in the escrow account was $297 million for future capital expenditures in New Jersey. As a condition of the extension of the casino operating contract and ground lease for Harrah’s New Orleans, we are also required to make a capital investment of $325 million in Harrah’s New Orleans by July 15, 2024. In connection with the capital investment in Harrah’s New Orleans, construction has begun and we are in the process of rebranding the property as Caesars New Orleans which we expect to be complete in 2024. On August 27, 2020 , Hurricane Laura made landfall on Lake Charles as a Category 4 storm. The hurricane severely damaged Lake Charles and the Company has begun to receive insurance proceeds related to, in part, estimated damages and repairs that have been incurred to the property. A portion of the proceeds received is expected to be utilized for the construction of a new land-based casino which is expected to be completed in the second half of 2022. We continue to expand into new markets with projects such as Caesars Virginia, which is expected to be a $500 million premier destination resort casino. The property plans to include a 500 room hotel and casino including slot machines, table games, WSOP Room and Caesars Sportsbook. Additionally, Caesars announced the plans to expand into Nebraska with a $75 million development of a Harrah’s casino and racetrack. Cash spent for capital expenditures totaled $520 million, $164 million, $171 million for the years ended December 31, 2021, 2020 and 2019, respectively, related to our growth, renovation, maintenance, and other capital projects. Due, in part, to constraints on the supply chain, certain projects and planned spend during 2021 are expected to be incurred during 2022. The following table summarizes our estimates for 2022 capital expenditures: (In millions) Low High Atlantic City $ 240 $ 260 Indiana racing operations 5 10 Total estimated capital expenditures from restricted cash 245 270 Growth and renovation projects 605 755 Caesars Digital 115 135 Maintenance projects 290 340 Total estimated capital expenditures from unrestricted cash and insurance proceeds 1,010 1,230 Total $ 1,255 $ 1,500 A significant portion of our liquidity needs are for debt service and payments associated with our leases. Our estimated debt service (including principal and interest) is approximately $840 million for 2022 . We also lease certain real property assets from third parties, including VICI and GLPI. We estimate our lease payments to VICI and GLPI to be approximately $1.2 billion for 2022 . On June 21, 2021, the Company delivered a notice of mandatory conversion to the trustee of the 5% Convertible Notes to convert all outstanding notes on June 24, 2021. All outstanding notes, at the election of either the Company or the holder, were subject to conversion 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 year ended December 31, 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 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. We have Table of Contents 49 divested of several international properties including an interest in a Korea joint venture and the Caesars UK Group, which includes Emerald Resort & Casino. The sale of the Caesars UK Group closed on July 16, 2021, and t he buyer assumed all liabilities associated with the Caesars UK Group. We also expect to divest of William Hill International in the second quarter of 2022 , as described above. On April 6, 2021, the Company consummated the sale of the equity interests of MontBleu for $15 million. The purchase price is due no later than the first anniversary of the consummation of the transaction. On September 3, 2020, the Company and 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. The proceeds were split between the Company and VICI. On November 1, 2021, the sale of Harrah’s Louisiana Downs was completed. The annual base rent payments under the Regional lease between Caesars and VICI remain unchanged. On June 3, 2021, the Company consummated the sale of the real property and equity interests of Evansville to GLPI and Bally’s Corporation, respectively, for $480 million in cash, subject to a customary working capital adjustment, resulting in a gain of $12 million. On December 1, 2020, the Company entered into a definitive agreement to sell the operations of Baton Rouge to CQ Holding Company, Inc. The transaction has received regulatory approvals and is expected to close in the first quarter of 2022, subject to other customary closing conditions. On December 24, 2020, the Company entered into an agreement to sell the equity interests of Caesars Southern Indiana to the EBCI for $250 million, subject to customary purchase price adjustments. On September 3, 2021, the Company completed the sale of Caesars Southern Indiana resulting in a gain of $12 million. In connection with this transaction, the Company’s annual base rent payments to VICI Properties under the Regional Master Lease were reduced by $33 million. If the agreed upon selling price for future divestitures does not exceed the carrying value of the assets, we may be required to record additional impairment charges in future periods which may be material. We expect that our current liquidity, cash flows from operations, availability of borrowings under committed credit facilities and proceeds from the announced asset sales will be sufficient to fund our operations, capital requirements and service our outstanding indebtedness for the next twelve months. However, we cannot be certain that the COVID-19 public health emergency will not adversely affect our business, financial condition and results of operations or cause disruption in the financial markets that could adversely affect ability to access additional capital. Debt and Master Lease Covenant Compliance The Caesars Resort Collection (“CRC”) Credit Agreement, the CEI Revolving Credit Facility, the Baltimore Term Loan and the indentures related to the CEI Senior Secured Notes, the CEI Senior Notes, the CRC Senior Secured Notes and the Senior 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 our ability to (among other items) incur additional indebtedness, make investments, make restricted payments, including dividends, grant liens, sell assets and make acquisitions. The CRC Revolving Credit Facility and the CEI Revolving Credit Facility include a maximum first-priority net senior secured leverage ratio financial covenant of 6.35:1, which is applicable solely to the extent that certain testing conditions are satisfied. The Baltimore Revolving Credit Facility includes a senior secured leverage ratio financial covenant of 5.0:1. Failure to comply with such covenants could result in an acceleration of the maturity of indebtedness outstanding under the relevant debt document. The GLPI Leases and VICI Leases contain certain covenants requiring minimum capital expenditures based on a percentage of net revenues along with maintaining certain financial ratios. The Bridge Credit Agreement associated with the planned divestiture of William Hill International, which is presented within liabilities held for sale, includes a financial covenant requiring the Bridge Facility Borrower to comply with a maximum total net leverage ratio of 10.50 to 1.00. The borrowings under the Bridge Credit Agreement are guaranteed by the Bridge Facility Borrower and the Bridge Facility Borrower’s 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). Additionally, no financial covenants are related to the $943 million of debt from the two trust deeds assumed in the William Hill Acquisition, which are also held for sale. As of December 31, 2021, we were in compliance with all of the applicable financial covenants described above. Table of Contents 50 Share Repurchase Program On November 8, 2018, our Board of Directors authorized a $150 million common stock repurchase program (the “Share Repurchase Program”) pursuant to which we 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 we are required to repurchase under the Share Repurchase Program. As of December 31, 2021, we have acquired 223,823 shares of common stock under the program at an aggregate value of $9 million and an average of $40.80 per share. No shares were repurchased during the years ended December 31, 2021 or 2020. Debt Obligations and Leases Baltimore Term Loan and Baltimore Revolving Credit Facility As a result of our increased ownership interest in Horseshoe Baltimore, we began to consolidate the aggregate principal amount of Horseshoe Baltimore’s senior secured term loan facility (the “Baltimore Term Loan”) and amount outstanding, if any, under Horseshoe Baltimore’s senior secured revolving credit facility (the “Baltimore Revolving Credit Facility”). The Baltimore Term Loan matures in 2024 and is subject to a variable rate of interest calculated as LIBOR plus 4.00%. The Baltimore Revolving Credit Facility has borrowing capacity of up to $10 million available and matures in 2022, subject to a variable rate of interest calculated as LIBOR plus 6.00%. As of December 31, 2021, there was $10 million of available borrowing capacity under the Baltimore Revolving Credit Facility. 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. On September 21, 2021, CRC entered into a second amendment related to the CRC Incremental Term Loan to reduce the interest rate margins to 3.50% per annum in the case of any LIBOR loan or 2.50% per annum in the case of any base rate loan. The CRC Term Loan and the CRC Incremental Term Loan are LIBOR based loans as of December 31, 2021. 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. We had $956 million of available borrowing capacity, after consideration of $69 million in outstanding letters of credit under the CRC Revolving Credit Facility, as of December 31, 2021. Table of Contents 51 CEI Revolving Credit Facility On July 20, 2020, we 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, as well as an incremental amendment thereto, which provide for a five-year CEI Revolving Credit Facility for an aggregate principal amount of $1.2 billion (the “CEI Revolving Credit Facility”). On November 10, 2021, we amended the CEI Revolving Credit Facility to establish reserves in the total amount of $190 million which are available only for permitted use. 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. Additionally, we are required to pay a commitment fee in respect of any unused commitments under the 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. We are 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. We had $924 million of available borrowing capacity under the CEI Revolving Credit Facility, after consideration of $23 million in outstanding letters of credit, $48 million committed for regulatory purposes and the reserves described above, as of December 31, 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. 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. We assumed the rights and obligations under the CEI Senior Notes and the indenture governing the CEI Senior 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. In September 2021, the Company began to repurchase CEI Senior Notes on the open market and, as of December 31, 2021, a total of $100 million in principal amount of CEI Senior Notes was purchased and the Company recognized a $14 million loss on the early extinguishment of debt. CRC Senior Secured Notes due 2025 On July 6, 2020, the Escrow Issuer 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. 5% Convertible Notes On October 6, 2017, Former Caesars issued $1.1 billion aggregate principal amount of 5.00% convertible senior notes maturing in 2024 (the “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 year Table of Contents 52 ended December 31, 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”). During the year ended December 31, 2021, the Company purchased or redeemed all $1.7 billion of the CRC Notes and recognized a $199 million loss on the early extinguishment of debt. Senior Notes due 2029 On September 24, 2021, the Company issued $1.2 billion in aggregate principal amount of 4.625% Senior Notes due 2029 (the “Senior Notes”) pursuant to an indenture dated as of September 24, 2021 between the Company and U.S. Bank National Association, as Trustee. The Senior Notes will mature on October 15, 2029 with interest payable on April 15 and October 15 of each year, commencing April 15, 2022. Proceeds from the issuance of the Senior Notes, as well as cash on hand, was used to repay the CRC Notes, as described above. Convention Center Mortgage Loan On September 18, 2020, we entered into a loan agreement with VICI to borrow a five-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. Beginning October 1, 2021, the Mortgage Loan is subject to an interest rate of 7.854% for the next twelve months. VICI Leases CEI leases certain real property assets from VICI under the following agreements: (i) for a portfolio of properties located throughout the United States (the “Regional Lease”), (ii) for Caesars Palace Las Vegas and Harrah’s Las Vegas (the “Las Vegas Lease”), and (iii) for Harrah’s Joliet Hotel & Casino (the “Joliet Lease”). The lease agreements, inclusive of all amendments, include (i) a 15-year initial term with four five-year renewal options, (ii) annual fixed rent payments of $1.1 billion, subject to annual escalation provisions based on the CPI and a 2% floor commencing in lease year two of the initial term and (iii) a variable element based on net revenues of the underlying leased properties, commencing in lease year eight of the initial term. The Regional Lease includes a put-call option whereby the Company may require VICI to purchase and lease back (as lessor) or whereby VICI may require the Company to sell to VICI and lease back (as lessee) the real estate components of the gaming and racetrack facilities of Harrah’s Hoosier Park Racing & Casino and Indiana Grand (“Centaur properties”). Election to exercise the option by either party must be made during the election period beginning January 1, 2022 and ending December 31, 2024. Upon either party exercising their option, the Centaur properties would be sold at a price in accordance with the agreement and leased back to CEI in accordance to the pre-existing terms of the Regional Lease. The sale of Caesars Southern Indiana to EBCI for $250 million was finalized on September 3, 2021 and as a result of the sale, Caesars’ annual payments to VICI Properties under the Regional Lease decreased by $33 million and variable rent under the lease shall exclude net revenue attributable to Caesars Southern Indiana. Our VICI Leases are accounted for as a financing obligation and totaled $11.1 billion as of December 31, 2021. See Note 10 to our Financial Statements for additional information about our VICI Leases and related matters. GLPI Leases The GLPI Master Lease, encompassing a portfolio of properties within the United States, provides for the lease of land, buildings, structures and other improvements on the land (including barges and riverboats), easements and similar appurtenances to the land and improvements relating to the operation of the leased properties. The GLPI Master Lease, inclusive of all amendments, provides for (i) an initial term of 20 years (through September 2038), with four five-year renewals at the Company’s option, (ii) annual land and building base rent of $24 million and $63 million, (iii) escalating provisions of building base rent equal to 101.25% of the rent for the preceding year for lease years five and six, 101.75% for lease years seven and eight and 102% for each lease year thereafter and (iv) relief from the operating, capital expenditure and financial covenants in the event of involuntary closures. Table of Contents 53 The Lumière Lease was entered into by the Company and GLPI, whereby the Company sold the real estate underlying Lumière to GLPI and leased back the property under a long-term financing obligation. The Lumière Lease, inclusive of all amendments, provides for (i) an initial term commencing on September 29, 2020 and ending on October 31, 2033, (ii) four five-year renewal options, (iii) annual rent payments of $23 million, (iv) escalation provisions commencing in lease year two equal to 101.25% of the rent for the preceding year for lease years two through five, 101.75% for lease years six and seven and 102% for each lease year thereafter, (v) maintaining a minimum of 1.20:1 adjusted revenue to rent ratio and (vi) certain relief under the financial covenant in the event of involuntary closures. The GLPI Leases are accounted for as financing obligations and totaled $1.2 billion as of December 31, 2021. See Note 10 to our Financial Statements for additional information about our GLPI Leases and related matters. Other Liquidity Matters We are faced with certain contingencies, from time to time, involving litigation, claims, assessments, environmental remediation or compliance. These commitments and contingencies are discussed in greater detail in “ Part I, Item 3. Legal Proceedings ” and Note 11 to our Financial Statements, both of which are included elsewhere in this Annual Report on Form 10-K. In addition, new competition among retail and online operations may have a material adverse effect on our revenues and could have a similar adverse effect on our liquidity. See “ Part I, Item 1A. Risk Factors—Risks Related to Our Business ” which is included elsewhere in this Annual Report on Form 10-K. Critical Accounting Policies and Estimates We prepare our financial statements in conformity with GAAP. In preparing our financial statements, we have made our best estimates and judgments of the amounts and disclosures included in the financial statements, giving regard to materiality. When more than one accounting principle, or method of its application, is generally accepted, we select the principle or method that we consider to be the most appropriate under specific circumstances. Application of these accounting principles requires us to make estimates about the future resolution of existing uncertainties. Certain of our accounting policies, including those in connection with business combinations, certain fair value measurements, income taxes, long-lived assets, goodwill and indefinite lived intangible assets, allowance for doubtful accounts related to certain gaming receivables, self-insurance reserves, and litigation, claims and assessments require that we apply significant judgment in defining the appropriate assumptions for calculating financial estimates. We consider accounting estimates to be critical accounting policies when: • the estimates involve matters that are highly uncertain at the time the accounting estimate is made; and • different estimates or changes to estimates could have a material impact on the reported financial position, changes in financial position, or results of operations. By their nature, these judgments and estimates are subject to an inherent degree of uncertainty. Our judgments and estimates are based on our historical experience, terms of existing contracts, observance of trends in the industry, information gathered from customer behavior, and information available from other outside sources, as appropriate. Due to the inherent uncertainty involving judgments and estimates, actual results may differ from those estimates. Our most critical accounting estimates and assumptions are in the following areas: Business Combinations We applied the provisions of Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations,” in the accounting for our acquisitions of Former Caesars, William Hill PLC, and our additional interest in Horseshoe Baltimore. It required us to recognize the assets acquired and the liabilities assumed at their acquisition date fair values, which were determined using market, income, and cost approaches, or a combination. Goodwill as of the respective acquisition dates was measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. Goodwill is generally the result of expected synergies of the combined company or an assembled workforce. Indefinite-lived intangible assets acquired primarily include trademarks, Caesars Rewards acquired in the Merger, customer relationships 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. Acquired trademarks, developed technology and Caesars Rewards were valued using the relief from royalty method, which presumes that without ownership of such trademarks, technology, or loyalty program, we would have to make a stream of Table of Contents 54 payments to a third party in return for the right to use their name, technology, or program. By virtue of this asset, we avoid any such payments and record the related intangible value of the Company’s ownership of the brand name, technology, or program. Customer relationships were valued using the cost approach and the incremental cash flow method under the income approach. The incremental cash flow method compares 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. 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 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. 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 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. 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. Reacquired rights were valued using the excess earnings method 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 the valuation was adjusted for the settlement of the preexisting relationship as a component of the purchase consideration. 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 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. Assets and liabilities which are designated as held for sale on an acquisition date are also measured at fair value, utilizing similar market, income and cost approaches described above, based on the underlying asset class held for sale. Cash flow estimates are significant to many valuations described above and may include forecasts with assumptions regarding factors such as recent and budgeted operating performance, future growth rates, and the determination of appropriate discount rates to estimate fair value. These inputs involve significant assumptions including the future effects of COVID-19 as well as the realization of synergies anticipated from a business combination, which may not be realized as projected. Certain assumptions, such as the effects of COVID-19, may be beyond our control. Fair Value Measurements We use interest rate swaps, which are derivative instruments classified as hedging transactions, to limit our exposure to interest rate risk. Derivative instruments are recognized in the financial statements at fair value. The estimated fair values of our derivative instruments are based on market prices obtained from dealer quotes. Such quotes represent the estimated amounts we would receive or pay to terminate the contracts. Our derivative instruments contain a credit risk that the counterparties may be unable to meet the terms of the agreements. We minimize that risk by evaluating the creditworthiness of our counterparties, which are limited to major banks and financial institutions. The fair values of our derivative instruments are 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. See Note 8 for more details regarding fair value measurements and Item 7A for quantitative and qualitative disclosures about market risk. Table of Contents 55 Income Taxes We and our subsidiaries file income tax returns with federal, state and foreign jurisdictions. Our income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities. Positions taken in tax returns are sometimes subject to uncertainty in the tax laws and may not ultimately be accepted by the IRS or other tax authorities. See Note 17 in the accompanying consolidated financial statements for a discussion of the status and impact of examinations by tax authorities. We record income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the expected future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and as attributable to operating loss and tax credit carryforwards. We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the “more likely than not” realization threshold. This assessment considers, among other matters, the nature, frequency, and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused, and tax planning alternatives. When there is a recent history of operating losses and negative normalized earnings and a return to operating profitability has not yet been demonstrated, we cannot rely on projections of future taxable earnings for purposes of assessing recoverability of our deferred tax assets. In such cases, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions. Our most significant deferred tax asset relates to the failed sale-leaseback obligation with VICI and GLPI (see Note 10). The reversal of this deferred tax asset requires judgment and estimates and has a material impact on the determination of the amount of valuation allowance required. Under the applicable accounting standards, we may recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The accounting standards also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and disclosure requirements for uncertain tax positions. Long-Lived Assets We have significant capital invested in our long-lived assets, and judgments are made in determining the estimated useful lives of assets, salvage values to be assigned to assets, and if or when an asset has been impaired. The accuracy of these estimates affects the amount of depreciation and amortization expense recognized in our financial results and whether we have a gain or loss on the disposal of an asset. We assign lives to our assets based on our standard policy, which is established by management as representative of the useful life of each category of asset. We review the carrying value of our long-lived assets whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. The factors considered by management in performing this assessment include current operating results, trends and prospects, planned construction and renovation projects, as well as the effect of obsolescence, demand, competition, and other economic, legal, and regulatory factors. In estimating expected future cash flows for determining whether an asset is impaired, assets are grouped at the lowest level of identifiable cash flows, which, for most of our assets, is the individual property. See Note 6 for additional information. Goodwill and Other Indefinite-lived Intangible Assets Assessing goodwill and indefinite-lived intangible assets for impairment is a process that requires significant judgment and involves detailed qualitative and quantitative business-specific analysis and many individual assumptions which fluctuate between assessments. We determine the estimated fair value of each reporting unit based on a combination of EBITDA, valuation multiples, and estimated future cash flows discounted at rates commensurate with the capital structure and cost of capital of comparable market participants, giving appropriate consideration to the prevailing borrowing rates within the casino industry in general. We also evaluate the aggregate fair value of all of our reporting units and other non-operating assets in comparison to our aggregate debt and equity market capitalization at the test date. EBITDA multiples and discounted cash flows are common measures used to value businesses in our industry. We determine the fair value of our indefinite-lived intangible assets using either the relief from royalty method or the excess earnings method under the income approach or replacement cost market approach. The determination of fair value of our Table of Contents 56 reporting units and indefinite-lived intangible assets requires management to make significant assumptions and estimates around the forecasts as well as the selection of discount rates and valuation multiples. Changes in these estimates could have a significant impact on the fair value of our reporting units, intangible assets and result in potential impairment. Forecasts and the determination of appropriate discount rates and valuation multiples used to determine the fair value of our reporting units and indefinite-lived intangible assets involves significant assumptions and estimates. Assumptions include those used to assess future effects of COVID-19 as well as the realization of synergies anticipated from acquisitions which may not be realized at the projected rate. We acquired William Hill PLC on April 22, 2021 and allocated the total purchase consideration transferred to the identifiable assets acquired and liabilities assumed based on their respective fair values and therefore, the fair value of the acquired reporting units and indefinite-lived intangible assets do not significantly exceed their respective carrying values. As of October 1, 2021, one other reporting unit in the Regional Segment with goodwill totaling $420 million had a fair value that did not significantly exceed its respective carrying values. To the extent gaming volumes deteriorate in the near future, discount rates increase significantly, or we do not meet our projected performance, we may recognize further impairments, and such impairments could be material. In addition, $352 million of goodwill within our Regional segment is associated with reporting units with zero or negative carrying value. See Note 7 for additional information. Allowance for Doubtful Accounts - Gaming We reserve an estimated amount for gaming receivables that may not be collected to reduce the Company’s receivables to their net carrying amount. Methodologies for estimating the allowance for doubtful accounts range from specific reserves to various percentages applied to aged receivables. Historical collection rates are considered, as are customer relationships, in determining specific reserves. As with many estimates, management must make judgments about potential actions by third parties in establishing and evaluating our reserves for allowance for doubtful accounts. As of December 31, 2021, a 5% increase or decrease to the allowance determined based on a percentage of aged receivables would change the reserve by approximately $14 million. Self-Insurance Reserves We are self-insured for various levels of general liability, employee medical insurance coverage and workers’ compensation coverage. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported. We utilize independent consultants to assist management in its determination of estimated insurance liabilities. While the total cost of claims incurred depends on future developments, in managements’ opinion, recorded reserves are adequate to cover future claims payments. Self-insurance reserves for employee medical claims, workers’ compensations and general liability claims are included self-insurance claims and reserves within Accrued other liabilities on the Balance Sheets. See Note 9. 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. Litigation, Claims and Assessments We utilize estimates for litigation, claims and assessments. These estimates are based on our knowledge and experience regarding current and past events, as well as assumptions about future events. If our assessment of such a matter should change, we may have to change the estimates, which may have an adverse effect on our financial position, results of operations or cash flows. Actual results could differ from these estimates. Recently Issued Accounting Pronouncements For information with respect to recent accounting pronouncements and the impact of these pronouncements on our Financial Statements, see Note 2, Summary of Significant Accounting Policies – Recently Issued Accounting Pronouncements , in the Notes.