Caesars Entertainment Management Discusses Q2 2012 Results - Earnings Call Transcript

Caesars Entertainment (CZR)

Q2 2012 Earnings Call

August 06, 2012 5:00 pm ET

Executives

Jacqueline Beato

Gary W. Loveman - Chairman, Chief Executive Officer, President, Interim Chief Financial Officer and Chairman of Executive Committee

Eric Hession - Vice President of Finance and Treasurer

Analysts

David Farber

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Susan Berliner - JP Morgan Chase & Co, Research Division

James Taylor

Dennis I. Forst - KeyBanc Capital Markets Inc., Research Division

Greg Roselli

Kevin Coyne - Goldman Sachs Group Inc., Research Division

Peter Dalena - Citigroup Inc, Research Division

Presentation

Operator

Good afternoon. My name is Kimberly, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Caesars Entertainment Second Quarter 2012 Earnings Conference Call. [Operator Instructions] Jackie Beato, you may begin your conference.

Jacqueline Beato

Good afternoon, and welcome to the Caesars Entertainment Second Quarter Results Conference Call. Joining me today are Gary Loveman, Chief Executive Officer; and Eric Hession, Senior Vice President of Finance and Treasurer of Caesars.

Following our prepared remarks this morning, we will turn the call over for your questions. A copy of our press release and a replay of this conference call will be available in the Investor Relations section of our website at caesars.com.

Before I turn the call over to Gary, I would like to call your attention to the following information. The Safe Harbor disclaimer in our public documents covers this call and the simultaneous live webcast at caesars.com. The forward-looking statements made during this conference call reflect the opinion of management as of the date of this call. There are risks and uncertainties with such statements, which are detailed in our filings with the SEC.

Please be advised that developments subsequent to this call are likely to cause these statements to become outdated with the passage of time. We do not intend, however, to update the information provided today prior to our next quarterly conference call. Further, today we are reporting second quarter results and first 6 months' results. These results are not necessarily indicative of results in future periods. Also, please note that prior to this call, we furnished a Form 8-K of this afternoon's press release to the SEC.

Property EBITDA and adjusted EBITDA are non-GAAP financial measures. Reconciliations of net loss to property EBITDA and net loss to adjusted EBITDA can be found in the tables in our press release.

This call, the webcast and its replay are the property of Caesars. It is not for rebroadcast or use by any other party without the prior written consent of Caesars. If you do not agree with these terms, please disconnect now. By remaining on the line, you agree to be bound by these terms.

I would now like to turn the call over to our CEO, Gary Loveman.

Gary W. Loveman

Thanks, Jacqueline. Thanks to everyone for joining us on the call today. Following a strong start to 2012, the second quarter was marked by deteriorating economic indicators in the United States and uncertainty elsewhere in the world. It won't come as a surprise to any of you that the weakening U.S. economy has led to a more difficult operating environment for our company and for the gaming industry broadly.

Despite the challenging environment, which impacted results in our core business, we made considerable progress in expanding our distribution network and we're optimistic about and committed to our capital efficient growth and investment strategy. While we invest our future, we're also maintaining a high level of discipline around our operating expenses.

As you recall from our previous conversations, our strategic imperatives are to expand our distribution network into higher growth markets, both on land and online, leverage our scale to drive efficiency in the way we conduct our business and attract best-in-class talent, invest in our core brands to increase their relevance and reach and further strengthen our capital structure and balance sheet.

During the second quarter, we saw weaker results in much of our core business amidst a different macro environment. While we're pleased to see visitation and occupancy in Vegas hold up during the quarter, gaming revenues were lower. In the Midwest, gaming results were slightly weaker, and Atlantic City continued to be a very challenging place and declining visitation and over-capacity continue to characterize that region.

As I mentioned earlier, we saw exciting developments on our growth pipelines during the quarter. I would like to spend a moment updating you on our progress in this regard.

First, in May, on the 14th, we opened Horseshoe Cleveland with our partner, Rock Gaming, to great fanfare. This opening, the first casino in Ohio, was gratifying for all of us. In the first 6 weeks of operation, more than 0.5 million people joined us there, and recently we've heard 1 million have now come through our doors.

We enrolled more than 50,000 new Total Rewards members. We're encouraged by the early results and are working to fine-tune the property to maximize its performance. Our management team for Cleveland is included in the managed international and other line of our financial reports. Also, in Ohio, we're running ahead of schedule to open Horseshoe Cincinnati early next spring and anticipate installing VLTs at the Thistle Down racetrack also in 2013.

Second, in June, we announced our plan to develop a Caesars-branded property in East Boston, center of the universe, if we're successful in winning a license there with our partners at Suffolk Downs. This property would be only the fifth to bear the flagship Caesars brand. We're excited to be pursuing a market that already attracts more than 20 million visitors annually, as the vibrant mix of historic sites, entertainment and of course, sports attraction and serves as a major business hub. We're optimistic about our prospects in Massachusetts and plan to submit our application to the Gaming Commission this fall.

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