Caesars Entertainment, Inc. (CZR) Q1 2015 Earnings Report, Transcript and Summary

Good afternoon and welcome to the Caesars Entertainment Corporation’s 2015 First Quarter Earnings Call. My name is Carol and I will be facilitating the audio portion of today’s broadcast. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. [Operator Instructions] At this time, I would like to turn the call over to Jennifer Chen, Director of Investor Relations for Caesars Entertainment.

Thank you, Carol. Good afternoon, and welcome to the Caesars Entertainment first quarter 2015 results conference call. Joining me today from Caesars Entertainment Corporation are Gary Loveman, Chief Executive Officer, and Eric Hession, Chief Financial Officer and Mark Frissora, President and CEO Designate. Following our prepared remarks, we will take 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 Eric, I’d like to call your attention to the following information. The Safe Harbor disclaimer in our public documents covers this call and the simultaneous 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 these 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 Please be advised that developments subsequent to this call are likely to cause these statements to become outdated with the passage of time, but we do not intend to update the information provided today prior to our next quarterly conference call. Further, today, we are reporting first quarter 2015 results. These results are not necessarily indicative of results in future periods. Also, please note that, prior to this call, we furnished on Form 8-K a copy of this afternoon’s press release to the SEC. Property EBITDA and adjusted EBITDA are non-GAAP financial measures. Reconciliations of net income and loss to property EBITDA and net income and loss to adjusted EBITDA can be found in the tables of our press release. This call, the webcast and its replay are the property of Caesars Entertainment Corporation. It’s not for rebroadcast or use by any other party without the prior written consent of Caesars Entertainment Corporation. If you do not agree with these terms, please disconnect now. By remaining on the line, you agree to be bound by these terms. As we move forward with this call the words company, Caesars, Caesars Entertainment, we, our and us refer to Caesars Entertainment Corporation and its consolidated entities, unless otherwise stated or context requires otherwise. Eric will now make some opening comments about the basis of our reporting before Gary speaks.

Thanks, Jen and thanks everyone for joining us. Before Gary reviewed our performance, I would like to point out a major change in the presentation of our results for our earnings released earlier today. Following the applicable guidance under generally accepted accounting principles Caesars Entertainment Corporation no longer consolidated Caesars Entertainment operating company after CEOC’s chapter 11 bankruptcy filing on January 15. However results for CEOC are included in our reported financial results for the first 15 days of the first quarter of 2015 and for the first full quarter of 2014. Following my brief remarks Gary will discuss company results as presented in the continuing CEOC column in the summary financial data of our earnings release. We believe discussing the continuing CEOC column of our financial data is more relevant to investors since it is a better measure of comparable year-over-year performance. As mentioned in the earnings release the continuing CEC call represents CERP, CGP Casinos, CIE and associated parent company and elimination adjustments and reflect the CEC structure as of March 31, 2015 and on a go forward basis with only 15 days of CEOC included in the 2015 reported CEC results and a full quarter in the 2014 results the reported CEC results do not provide a clear indicator of the core business conditions. As a reminder CERP is comprised of six properties and the LINQ promenade. CGP Casinos is comprised of six properties largely based in destination market and CIE is comprised of our social games business in our four money online gaming business. Additionally, we will provide supplemental information on today’s call for CEC as if we had continued to consolidate CEOC throughout the first quarter of 2015. We have also posted these supplemental materials on our Investor Relations website. These materials include both standalone CEOC financials and key metrics for the first quarter of 2015 and certain financial information for CEOC as if CEOC remained a consolidated entity during the first quarter. We believe this information is useful to investors who are trying to understand year-over-year business results for the subsidiary. Recall that CEOC and a [ph] number of our regional properties as well as Caesars Palace in Las Vegas and London Clubs International. With that, let me turn it over to Gary.

Good afternoon, thank you all for joining today’s call and for bearing with us to Eric’s explanation of the complexity use of the earnings release. We reported today the company’s best quarterly performance since 2008. The company’s first quarter net revenue increased 21% year-on-year to $1.1 billion and Adjusted EBITDA rose 37% to $301 million. Our results for the period were reflective of actions we’ve taken to improve performance and position the company for profitable growth. These actions include the further alignment of our cost structure to the current operating environment, investments in new and exciting hospitality amenities and ongoing investments in Caesars Interactive Entertainment. The combination of our efforts to increase revenue and further reduce spending led to significant margin expansion in the first quarter and fuels by optimism for the long term potential to return and sustain pre-crisis margin levels. First quarter revenue also benefited from another terrific quarter at CIE, the additions of Horseshoe Baltimore and the Cromwell as well as the advantage of favorable year-over-year hold. Market expansions in the quarter was driven predominantly by a combination of cost savings initiatives, lower corporate and overhead expenses and enhanced margins in food and beverage outlets. You’ll recall that corporate and overhead expenses as well as startup cost related to new restaurant offering wane on profitability in recent quarters. We are pleased that those negative impacts have abated and turned into positive drivers of performance here at the first quarter. Our cost reduction efforts have been focused on marketing efficiencies and labor savings and these are yielding great results. We met our expectations on efficiencies in the first quarter and consequently the business has produced much better flow through from top line revenue performance. Adjusted EBITDA margins have improved from the fourth quarter and year-over-year significantly. As discussed previously we continue to expect our recent efforts to deliver an incremental $250 million to $300 million of EBITDA across the company from cost savings and EBITDA enhancing initiatives such as pricing actions. This projection includes impact within CEOC. Investment in our hospitality offerings for our customers remains a priority particularly in Las Vegas where guests are demanding more innovative amenities. In recent years, we made a consorted effort to expand and enhance our portfolio of hospitality assets especially at Caesars Palace to broaden customer segments that visit our properties and offer guests the best in hospitality, dining and entertainment. I believe we have been quite successful in this regard. Along these lines in March both the Omnia Nightclub and the Seersucker Restaurant opened at Caesars Palace, Omnia which replaces Pure has quickly become one of the hottest clubs on the strip. Situated right outside the club’s main issues there is a new restaurant called Seersucker, the latest restaurant and lounge and celebrity chef Brian Malarkey franchisee. Separately we’re pleased to announce that Mr. Chow will open his seventh restaurant in Caesar’s Palace in the space previously occupied by Empress Court. Construction on this restaurant has begun and we anticipate an opening date later this year or early next. Also at Caesar’s Palace, we’ve added several new headliners at The Colosseum including Mariah Carey who begins her residency this evening and Reba McEntire and Brooks & Dunn whose show opens on June 17. Both shows have seen strong advance ticket sales and we eagerly anticipate the openings. Additionally, we are thrilled to say that Celine Dion will return The Colosseum stage in late August. Now let me provide you with some performance details for CERP, Caesars Entertainment Resort Properties and CGP. Caesars Entertainment Resort Properties delivered a particularly strong first quarter with revenue up 8% to $529 million. The majority of CERP’s business consists of six casino resort properties largely located in Vegas as well as The LINQ promenade. Top line growth was primarily driven by a 6% year-over-year increase in gaming revenue due to favorable hold at Palace and improved volumes at Harrah’s Atlantic City. The addition of new food and beverage outlets in The LINQ promenade and High Roller also contributed revenue increases in the quarter compared to the prior year period. Adjusted EBITDA grew 43% over the year period to $162 million and EBITDA margins expanded 10 percentage points quarter-over-quarter and 8 percentage points year-on-year. CERP’s flow through improved substantially as the pressure we had experienced from food and beverage margins in prior quarters have now subsided, now that the recently opened outlets comes fully ramped. Harrah’s Las Vegas in particular experienced significant EBITDA growth driven by S&P revenues coupled with improved margins due to operating and marketing expense additions. The LINQ promenade and High Roller also contributed to CERP’s results generating $7 million in Adjusted EBITDA for the quarter. While this project has taken longer to ramp than originally anticipated, we continue to feel strongly about its long-term potential and are refining our strategy and marketing efforts to drive greater growth including further optimization of the tenant mix at The LINQ promenade. We look forward to announcing new concepts at the promenade in coming quarters. Harrah’s Atlantic City also performed very well with volume improvements benefiting top line growth and effective cost control measures including marketing efficiencies driving enhanced property margins. That said, we believe there is still further room for improvement in Atlantic City and we are working to achieve it. We’re nearing completion of construction at the water front conference center adjacent to Harrah’s Atlantic City. We are optimistic the facility will be a successful addition to the marketplace. We expect to host our first guest in late August. Advance bookings have nicely exceeded our expectations with possibly 60 groups booked many of which represent new business to the region. More than 100,000 room nights have been booked with 60,000 of those occurring in the first 12 months following opening. This compared to roughly 23,000 groups nights at Harrah’s Atlantic City in 2015 prior to the building of this facility. Groups hosting meetings at the conference center have already signed contracts for events far off as 2019. In a market that has been predominantly comp driven, we’re encouraged by this level of activity in a heavily cash focused meetings and to merchant [ph] business. One of the primary objectives in building this facility was to stimulate new segment of visitation particularly mid-week and with cash paying customers and our progress is quite encouraging. Among the scheduled events is the World Education Congress in 2016, a global industry conference held by GE professional international that brings together several thousand buyers and leading professionals. We are looking forward to hosting this event as it showcases our waterfront facility and its capability, but more importantly will legitimize Atlantic City as the destination for business meetings generally. Caesars Growth Partners which consist of our interactive business in six destination market properties reported another impressive quarters. Revenues for the first three months of 2015 rose 36% compared to the prior year achieving $567 million with a 45% in adjusted EBITDA to $148 million. Performance was driven by exceptional growth in Caesar’s Interactive Entertainment primarily to attributable to social and mobile game business as well as the addition of the Cromwell and the opening of Horseshoe Baltimore. CIE generated record results in the quarter of $177 million in net revenue up 42% from the fourth quarter of 2014 and $63 million in adjusted EBITDA a 101% increase from the first quarter of last year primarily due to exceptionally strong organic growth in its social and mobile games business as a result of the teams focus on monetization and the release of new game content. Year-over-year monthly paying users increased from 511,000 to 762,000 and average revenue per user per day rose from $0.24 to $0.31. This spectacular performance in CIEs social and mobile games business continues to be driven by our strategy of growing the paying user base of our key five franchises across all major social and mobile platforms in creating engaging and compelling games that appeal to the interest of a wide array of people. Increasingly these offerings are connected by our total rewards, social royalty program. With respect to real money online gaming we continued to look for way to attract new customers and grow this business. We’re pleased to see growth in New Jersey and we continue to work on further enhancing our products and promotions for our four sites across two states. We were encouraged by momentum in Pennsylvania, California, and New York three important states for further legalization of online poker and online casino games. CGP’s remaining operations which include CGP’s six brick and mortar properties delivered 390 million of net revenue in the quarter, a 34% year-over-year increase. Adjusted EBITDA increased 20% to $85 million in the first quarter. This performance was driven primarily by the openings of Horseshoe Baltimore, and the Cromwell which are showing promising results though ramping a bit slower than initial expectations. Additionally, lower gaming volumes at Planet Hollywood and Harrah’s New Orleans were offset by increased efficiencies in marketing spend and other cost savings. The LINQ Hotel and Casino, the second phase of room renovation has concluded there and approximately 2200 rooms were back online shortly after the beginning of this month. With this latest development the entire property has been completely transformed earlier than scheduled and we anticipate coming in slightly under budget. Today, the hotel features newly upgraded rooms and suites with a fresh contemporary feel and floor to ceiling windows with views of the strip with a high roller [ph] . If you have a chance to see this property, you can hardly imagine what it was before. Additionally, all of the properties public spaces have been upgraded including the addition of a new pool, cabanas, a salon and spa and a signature lobby bar. These upgrades are already resulting in $45 increase in cash ADR and greater gaming and F&B revenue. Looking-forward we expect the activity at the Cromwell to pick up now that the property is entering its peak season with rates day club open to the summer. We also anticipate downward pressure on revenues in Harrah’s New Orleans following the smoking ban that recently went into effect on April 27. In other jurisdictions where bans have been implemented revenues have declined by as much as 20%. Additionally, we are expecting a revenue impacted Horseshoe Baltimore in the second quarter due to the recent mandatory six day curfew imposed at the end of April during the period of civil unrest in Baltimore. Now that in mind, let me turn it over to Eric to review CEC’s results as well as CEOC’s financial results performance in greater detail. Mr. Hession.

Thanks, Gary. I’ll start with a review of the company’s year-over-year results as reported in our earnings release. As a reminder these results refer to the continuing CEC column of the release and include CERP, CGP Casinos, CIE, an associated parent company and elimination adjustments. I will then discuss CEOC standalone results for the quarter. These can be found in our Investor Relations website. Finally I’ll discuss certain first quarter 2015 results for CEC as if we continue to consolidate CEOC throughout the first quarter of 2015. This information is also included as a supplement on our Investor Relation’s website. As Gary stated, first quarter net revenues increased 21% from the prior year to $1.1 billion with a corresponding 37% increase and adjusted EBITDA to $301 million. Broadly speaking revenue growth was driven primarily by new outlets and the interactive business. Performance also benefited from favorable hold and lower expenses. Hold for our properties in the first quarter was quite strong and contributed $15 million in incremental EBITDA with favorable hold at our domestic properties more than offsetting some unfavorable hold at our international properties. As you aware, we have had volatility in the past with respect to hold particularly in the third and fourth quarters of last year. Additionally we achieved strong flow through by active cost control. Combined this lead to strong bottom line EBITDA results in the quarter. While we are pleased with these results, we recognize the need for same-store top line growth to return to the business. Our management team is focused on identifying opportunities to drive the same-store revenues through numerous channels including marketing and by efficiently deploying our capital. Throughout the first quarter of the year and into the second, we have yet to realize this across the majority of our portfolio. Concurrently we will remain disciplined with respect to our expense structure and will vigilant in offsetting inflationary expenses such as labor and taxes that pressure our business. Casino revenue rose 22% to $549 million and casino operating income rose 29% to $265 million mainly due to the addition of the Cromwell and Horseshoe Baltimore. Excluding the new properties gaming revenue grew approximately 3%. Room revenue increased 4% to $204 million due to the higher cash ADR of approximately $13 led by increases of Bally’s Las Vegas and the Cromwell and by resort fees throughout our portfolios of properties. Overall RevPAR increased 8% year-over-year bringing lodging operating income improvement of approximately 7% to $153 million. Based on these results we believe that we have additional high return opportunities to invest in room product particularly in the Las Vegas market over the next few years. Food and beverage for the first quarter increased 8% to $200 million compared to the prior year period due to the opening of new outlets in Las Vegas including Giada at The Cromwell, guide theory [ph] outside of The LINQ Hotel & Casino and the opening of Horseshoe Baltimore. Profitability increased 8% year-over-year to $108 million. Other revenue rose 51% over the prior year to $274 million as a result of strong organic growth in CIE social and mobile games business and a full quarter of the Pacific Interactive acquisition from 2014 and by third party rent and entertainment revenue from the LINQ Promenade and Planet Hollywood. Operating expenses decreased significantly in the quarter due to cost savings initiatives, the impact of which can be seen in areas such as Casino expense, PG&A, and corporate expense. This led to an EBITDA margin improvement from 24% in Q1 of 2014 to 27% in Q1 of 2015. CEOC performance was also strong in the first quarter aided by favorable hold and solid cost control. CEOC generated $270 million in Adjusted EBITDA a 33% increase year-over-year despite generating a 2% year-over-year decline in net revenue to $1.2 billion. A decrease in revenue was driven by lower gaming volumes at Caesars Palace and poor hold at our London Clubs properties. The growth in EBITDA was attributable to favorable hold overall and our overall cost savings and EBITDA enhancing initiatives. Overall, we estimate the EBITDA impact from positive hold during the quarter for CEOC properties to be approximately $14 million. Caesars Palace performed well in the quarter as the previously referenced favorable year-over-year hold was able to partially offset a declining in gaming revenues and increased marketing and operational efficiencies can be credited for the strong flow through. In the regional markets, we’ve seen an improvement in margins but continue to experience relatively flat top line revenue growth. Visitation from VIP guests in our regional properties remains relatively flat while we continue to see declines in visitation from non-VIP guest. We’re encouraged that our business in Atlantic City is continuing to experience improvement and profitability. That said, the market is still broadly weak. Concerns remain with the tax and cost structure inherent in the market and we’re supportive of the state’s efforts to implement a long-term consistent structure. Although we’re optimistic about the opening of our new Waterfront Conference Center within CERP, our concerns with the long-term prospects of the market remained. Management is focused on execution and remains on track to reach the CEOC EBITDA plan of $1.024 billion in 2015. Now combining CEC with CEOC results for the full quarter net revenues increased 9% from the prior year to $2.2 billion with a corresponding 35% increase in Adjusted EBITDA to $572 million partially driven by favorable year-over-year hold which had a combined impact of $29 million positively. On a same store basis which excludes the impact of The LINQ promenade, Cromwell and Baltimore openings net revenue increased 3% from the prior year to $2.1 billion with the corresponding 31% increase in Adjusted EBITDA to $553 million. This information as well as CEOC standalone results can be found in a supplemental information package on our investor relations website. Now moving on to liquidity, at quarter end CERP had $337 million in total liquidity comprised of $212 million in cash and cash equivalents and $125 million capacity remaining of the CERP revolver. CGP liquidity at quarter end was $1.0 billion of which $845 million was in cash and cash equivalents with the remaining $150 million attributable to the CGPH revolver and $10 million relating to the Baltimore credit facility revolver which is consolidated into CGP. CES had $90 million in cash and cash equivalents. With that, let me turn it back over to Gary.

Thank you, Eric, I hope you all have referred all the information you need to consider the company’s performance in the first quarter is available to you though you may have to do a little bit more work independently that has been true in other cases. Before I make some concluding remarks, I would like to introduce Mark Frissora, who joins us today in our Board room and he will take over as CEO beginning the 1st of July. Since joining Mark and I have been working together to ensure a seamless transition and I am happy now to hand it over to Mark to say a few words. Mark.

Thank you, Gary, obviously Caesars is a leader in gaming, entertainment and hospital and Gary has driven significant growth during his tenure. I’m very honored and excited to assume leadership of such a substantial enterprise at this most important point in its history. Since moving to Las Vegas I have spent much of my time over the three months getting to know the business. I have met with the senior leadership and many employee within the organization as well as visited the majority of the domestic properties across the network. I have also started the licensing and regulatory process and received all the necessary approvals to begin operating to my current role. I appreciate the hospitality that Gary, Eric, and the rest of the senior leadership team have extended to me since my arrival. I am surely grateful for the pros of wisdom imparted to me as I get up to speed on the company and the industry. As a result of what I have seen and heard in these meetings I’m excited about the future of Caesars Entertainment. Despite the fact that Caesars has faced a tough operating environment I have been encouraged by the high engagement level of our employees and their strong focus on serving our customers. This focus has kept customer satisfaction levels high across the organization and provides a good foundation to grow and improve our business. I look forward to joining you on our second quarter earnings call this summer.

Thank you, Mark and welcome aboard. Since the financial crisis all of us have taken numerous steps to position Caesars Entertainment for growth while managing through what has certainly been a particularly challenging set of circumstances. During this period we have expanded into and build the best social games business in the world, added new properties in Maryland and Ohio and invested substantially in a number of innovative hospitality amenities particularly here in Las Vegas. Each of these is now contributing to top line and bottom line performance. We have also created a more efficient enterprise with minimal impact on customer service levels and the satisfaction and loyalty of our guest. Our first quarter performance where we achieved significant EBITDA margin improvement, is evident that these are of course yielding the results we had intended. On a personal note after 12.5 half years as the CEO of Caesars Entertainment this will be my last quarterly earnings call. I am delighted to conclude what needs to be more than 50 such calls with all of you on such a promising note. I look forward to continuing to serve as Chairman of the Board of this company. I am confident that Mark and the management team here will effectively execute on the initiatives underway to position Caesars for its nest phase of growth and development. These are really terrific times ahead for all of them. Before we begin to Q&A session, let me remind you as I have now for some quarters that we will not be answering any questions regarding the status of the CEOC chapter 11 process, or we say the various discussions with our creditors. With operator we will entertain questions.

[Operator Instructions] The first question comes from the line of David Farber from Credit Suisse. Your line is open.

Hi, guys good afternoon, how are you?

Good David.

Hi, Mark congrats on the new role, Gary will on this, you are waiting inside. I have a couple of questions first probably for Gary or maybe even Eric. It looks to us like OpEx was down some 90 million or so in the CEOC type of the house. So I was just wondering maybe you could walk us through were you finding these cost saving opportunities as you touched on it a little bit in the prepared remarks but maybe some additional color if you would. And then just remind us where you guys stand on the full cost saving story that 3 to 350, what’s been realized, what’s left have been realized and sort to how you see that mix spread out between CEOC, CERP and growth and then a couple of follow-ups? Thanks.

Yeah, David this is Gary. Let me try to describe broadly what has been undertaken here and then I will let Eric or Jackie describe the omnibus effort that you heard about. First, my remarks focus on CEC, we will not be giving replies on CEOC as you heard in Eric’s proceed we are giving specific results on CEOC, but as I have indicated before for many years the business was run under the presumption that there was a lot of elasticity in the behavior of customer such that if you gave them a further induce to come and see us, you could be rewarded with a profitable additional visit over a lot of experimental work and a lot of effort to see whether that elasticity remained, we modified our marketing programs rather significantly to be prudent with the use of additional marketing expense to drive incremental visits particularly among customers whose average daily worth is relatively low. I think the work led by Tariq Shaukat our CMO in this regard and all of his analytics team has been very highly informed and careful and a lot of the expense reduction you see is with respect to much more sophisticated marketing. The other major portion of it comes from labor efficiency, some of which are associated with these marketing modifications and some come from more sophisticated scheduling and awful lot of attention to operating as efficiently as we can in each of our markets. Eric, you want to comment on the Omnia business savings target and your thoughts on its future.

Yeah, absolutely, Gary. David as you know late last year we entered into a program to save between $250 million to $300 million across a variety of avenues and channels. We are well underway into that. I think you can see the results in all three credits and on a consolidated basis, in terms of the margin improvement. As we’ve enacted these efforts, we are continuing to evaluate the impact that they have both on the customer’s response to our marketing as well as the customer’s service that they receive in the outlets and we will be sure to moderate that as we move forward. At this point, we are still on target to achieve the full $250 million to $300 million for the full year and as Gary mentioned we’re not breaking that out into specific impacts by credit.

Could you talk through what you think you achieved in the first quarter?

We’re also not specifying that David and in part the challenges as you know we have the three different credits. We have filings that are put out monthly by CEOC for the group that’s within the bankruptcy proceeding and then so we’re only provided a consolidated target at this point.

Okay I’ll move over to CERP then. The flow through is, even the whole impact as better than we expected. I would be curious if you think with some of the food and beverage cost behind you guys if you think you’ll sort of see this margin improvement going forward and maybe where you guys think these properties can settle in now that you’ve been running that for the next year or so would be helpful. And then I’ll move away from CEOC? Thanks.

Yeah David this is Gary. I’ll make a comment about margins. We experienced some of the best margins at the aggregated level that we’ve had since 2008 and that’s the result of the things you’ve heard me and Eric and as Mark described in our comments, better marketing efficiencies, better operational cost containment, improved cash ADR, and I do think these things are likely to continue particularly in markets where we have better forward looking indicators like Las Vegas. So I think if you consider CERP as an example we can see the kind of margin sustaining that we’ve experienced here in the first quarter.

Okay and then just last from me. I would just be curious to hear just Gary your thoughts of where the business is today meaning, anything you see in April there’s been some operators who have been more optimistic than others. Just curiously here sort of where you stand on the regional markets of Las Vegas in particular and then that’s it from me? Thanks.

Yeah, I, we’re feeling pretty good about where the business looks in the second quarter and thereafter, David. Our business is I think looks very good for the reminder of the 2015 in Las Vegas due to the structural improvements at the maiden Atlantic City, you’ve seen the results there, you are and your compare quite favorably in all the credit. And I think you’ll continue to see that particularly with the benefit of the convention center opening in August, September of this year. In the regional markets as Eric indicated, it’s [indiscernible] not great, not bad, the margin improvement has been our friend in these instances you know most every case. And then the one where of course we’ve had concerns in New Orleans where we rather suddenly had a smoking ban placed in the latter part of last month and that’s not going to be an easy thing for the business to address given that smoking remains legal in all the surrounding parishes and in coastal Mississippi as well. So I think with the expectation of New Orleans, the rest of the businesses in the portfolio have a very encouraging outlook for the reminder of the year. I do not share Mr. Vinc [ph] pessimism in that regard.

Okay, thank you.

The other thing I would add to that David is that when you look at the Las Vegas market, we with the expectation of The LINQ Hotel, we have had a period where we’ve had general and modest construction disruption particularly in the CERP credit as we renovate the rooms that I alluded to in terms of where we see good return from the deployment of capital, we would expect some of the that coming through. Also in Las Vegas as we’ve mentioned the visitation and the hotel revenues have a real tailwind at this point. We’re seeing real pressure from a room rate standpoint, but then the gaming side again particularly the quinine as you see from the gaming reports has been relatively modest. And so for the rest of the year we do anticipate the strength on the room side. Operator, next question.

Your next question comes from the line of Susan Berliner from JPMorgan. Your line is open.

Hi, thanks, congratulations Gary and welcome Mark. Thank you. Thank you.

So, I want to start if I could with CapEx, I was wondering if you could give any updated thoughts, I guess this is for you Eric with regards to both maintenance and then if you can just tell us where we are with regards to the convention center at CERP, how much is remaining to be spent?

Yeah, absolutely CERP, so we are still within the range that we had originally provided on an aggregated level. The $570 million to $750 million total full year CapEx, certain credits are ahead of pace but due to construction projects that are underway at the beginning of the year and others are behind and we will accelerate as for example rooms are taken offline and heavy capital is spend. In response to your particular question about CERP, as you know the convention center is well underway, it opens later this year. We have approximately $40 million remaining to be spent and we still anticipate hitting that $130 million to $200 million range of total capital for the year.

Okay, great. And then I was wondering if you could talk about I noticed at CGP the cash amount was down by $100 million was there something purchase there for CIE or if you could talk about that?

Yeah, absolutely, that was the earn-out for the acquisitions that they had completed last year which was due and then fully anticipated as well as some share repurchases as part of the employee stock program and some other small items.

Great, and then I guess just, and I think Gary, you had mentioned about your concern for AC on your outlook and I was just curious why that was?

No, I am actually a little bit more buoyant about AC, what I said was that we have more opportunity ahead of us. The city and the state government are in the midst of a very important negotiations for the future of Atlantic City to try on the one hand to reduce what is an excessive level of spend in the municipality to something that would be more reasonable for a city of that size. And then second the object of that negotiation has on the property tax burdens of the remaining casinos there. And if that is done in any kind of rational fashion such that for example the property taxes would be commensurate with what we experience in other jurisdictions on either a revenue or particularly an EBITDA basis then the profitability of all the remaining participants in that market could be enhanced very substantially. You undoubtedly read that there seems to be agreement among the parties as to the introduction of a payment in lieu of tax provision called the pilot in New Jersey, which just haven’t happened yet. So, we like how the summer looks there through our properties given all the things we have done to make it more profitable particularly at t Harrah’s Atlantic City and now we wait for some favorable political news out of the New Jersey which could really help, so I know it sounds almost heretical to talk about something optimistic in Atlantic City after all these years but I am cautious and optimistic.

Great, and then I guess with regards to CERP with the free cash flow there, should we just assume that you will continue to focus on reducing the revolver there?

Yes, so with respect to the CERP credit, as you know the revolver was drawn to help fund the CapEx that we’re deploying at the various projects including the convention center. As I mentioned we do anticipate doing some room renovation where we think there are great returns in the relatively near term. So, we do focus on balancing the investment in the facility versus maintaining the profile to pay down the revolver. But reset assured we’re actively managing it and recognize that, that pay down over the long-term is where we want to go.

Great and just one last question from me with regards to New Orleans, can you give us any color if what has been the impact thus far. I know it was relatively recent and also if there is anything you’re trying to do to get any rebate or reduction in taxes in from that property?

Yes, I don’t want to comment on what the results have been in the few days since the end of April it’s been affected by the number of things like Jazz Fest and other events taking place in city. I would encourage you to look at the monthly results that are issued by the state of Louisiana where you get a lot of specificity about our property there, you can be sure that our colleagues, our political affairs team has been working in Baton Rouge to try to find some remedies along with the city to see if there is something as we can do to try to address what will undoubtedly be a painful issue there. We have had some experience with smoking bans that are brought on rather suddenly in other jurisdictions you have as well and I think you can guess what the impact on that is. Largely they don’t effect visitation much but they affect length of stay quite a bit. We’ll do things operationally to try to abate that but it will certainly be a bit of hit.

Right thanks you very much, good luck Gary.

Thank you.

Next call comes from the line of Kevin Coyne from Goldman Sachs. Your line is open.

Hi, good afternoon, thanks for taking the questions and hello to Mark and good luck to Gary. Just there has been a lot of attention on Macau and as it relates to let’s say Asian gaming play from Asian nationals over in Las Vegas and I know one of your competitors said that’s its relatively small and are only 5% of their gaming revenue. I was wondering if you would care to couch the exposure or mix of revenue you get from visitation from Asia?

While we get visitation from Asia really at two properties at Caesars Palace and at Harrah’s, usually at Lake Tahoe and that visitation is quite volatile month-to-month depending on largely on events, holidays and other invited events and we continue to think that this is going to be an important part of the offerings we have especially here at Caesars Palace. We have seen that in some of the results we have reported here in the first quarter and anticipate that being the case henceforth. I should add that Chinese visitors come from places other than Mainland China so many of our customers come from Malaysia, from Indonesia, from Taiwan, from a number of other places and our marketing teams are careful to continue to talk to customers in a variety of geographies.

Okay, thank you. Just switching to Baltimore for a second for Eric. I think this is best for you. In the Baltimore credit facility I think last I recall there was a financial covenant that kicked in a couple of quarters after opening. Is there any concerned about that covenant and if there is any pressure on the business?

No there is no concern at this point. Kevin you’re right it kicks in a few quarters after the official opening date as defined in the credit agreements and that is being worked on currently with the bank’s servicer and we have some final construction items that need to be completed by the contractor, so that date actually has not started, so we anticipate that the first covenant test will likely be in the first quarter of next year.

All right okay.

Even there we don’t anticipate any issues.

Great, thank you. Just a quick question on Atlantic City, obviously the numbers have been good, and it seems like others are perhaps getting some of the benefit from some of the property closures last summer, but I was just curious related to your rated play within the city, people who let’s say were historically Showboat customers, how sticky they have been coming to your properties, like you can even be able to retain most of that play, or is it just been perhaps you are benefiting from just other properties closing equally?

Kevin its good question. We have followed the activities of the Showboat customers carefully you might imagine and we have been quite successful with retaining than the other three properties. That was a result of some I think very effective marketing that we use with these guests in the periods the preceded the closure of the Showboat and continuing thereafter. We have not been as successful with moving customers from other entities that close Trump Plaza being an example or the Atlantic Club over that period as we have our own for reasons you can imagine, these were total award loyalist who were willing to change venue with us once Showboat was closed.

Great, and certainly great performance or great luck in the table hold side this quarter and of late, I was just curious either this quarter or last quarter have you had any changes to your casino credit policies which are perhaps helping give you a slight positive impact to the hold?

No. I mean this is just the large numbers doing expense. Some quarters it gives and some quarters it takes away. But there haven’t been any systemic modifications Kevin in the way the business is executed or way the credit is considered, it had had any bearing on there.

Okay, Gary, great thank you.

Thanks Kevin.

Your final question comes from the line of Dennis Farrell from Wells Fargo. Your line is open.

Dennis, we will have questions, the pressure is on now.

All right. Well I want to just talk about margins especially at CERP so you’ve got a good comparable there. I mean the margins there, are kind of trending on 28% to 29% which is I mean dramatically higher than what you have historically put up at that entity. And I am just wondering, how sustainable those are going forward? And I was just, want to get an idea, I mean on the table hold adjusted basis it seems to be around 28% which is I mean, I think higher than the original 24% or 25% expectations, so I wanted to get thoughts what’s driving that and how sustainable it is?

Yeah I’ll take a shot at this, I feel pretty strongly about and then I will let Eric and Jackie as they want to revise these. I think these margins are generally sustainable. Obviously you factored out hold which I appreciate you’re doing. But if you look at the hold adjusted or theoretical margins instead, I think we are in a point now where we can expect to see that continue. As I indicated this has been a function of both the improvement in the efficiency of our marketing and a variety of modifications in staffing. We’ve seen a significant reduction in the number of people working in some of these properties, I don’t expect that to be reversed. So I think as a result of substantially lower daily average operating cost in many of these businesses as well as more efficient marketing, we’re going to see this continue also when you have the kind of ADR and RevPAR improvement that we reported this quarter the margin benefit of that kid of flow through is very, very good, so we really had all cylinders striking with respect to margin expansion in these cases.

Kevin, this is Jackie. I agree with you.

This is Dennis.

Sorry Dennis.

All right.

I would agree with Gary. I think one thing to note is a lot of the increased flow through on this hotel side of the business like Eric alluded to on a go-forward basis, we might see a little disruption in that as we start to renovate additional rooms, so when you’re looking forward on your models there might be some blips due to that, but overall in the core business, we expect that to be sustainable.

What was the swing in Atlantic City last year versus this year? Was it a $10 million swing, or was it a $20 million swing. I’m just trying to get an idea - EBITDA swing?

You’re talking about three properties?

No I’m talking about the CERP, the CERP property?

Oh Eric likes it.

We don’t break it out Dennis.

Okay so, and then my last question of all I think which is important and you touched upon this a little bit is that Steve came out and commented about the summer kind of being uncertain and I know visibility for that time of the year is challenging in Las Vegas. I wanted to get your thoughts on why he is so cautious and why you’re more constructive?

My lawyers have often cautioned me not to speculate on the intentions of people other than myself so I’m not really not sure why drives Steve to say that. I will suggest that Steve’s market, he has essentially one big very luxurious property in Las Vegas with a very different constituency than we have across all properties in Las Vegas, so all I can suggest to you is that based on what see in the forward booking profile for our guest both on traveling independently and also as parts of groups and the events that we encourage our casino customers to attend, we are much more encouraged by what we see and perhaps Steve has been in his case and as far as the macro economics are concerned, I don’t see anything in the macroeconomic environment that I find discouraging with respect to conditions in Vegas being good for the remainder of certainly of the summer and throughout the remainder of 2015. So, I am not sure exactly what was provoking Steve beyond that but we feel very enthusiastic about what we see here for the remainder of the year.

Would you suggest...

I think no new supply additions coming to town over this period. We had a stable supply environment for some period of time. We reported including fundamentals in the hotels, got performance in our restaurants, new line, we have a number of new entities that are attractive to customers to come to our neighborhoods, so we like what we have available.

Is it fair to say that you are more domestically focused than some of the large operators that have more international play, I mean, I wondering if the strong dollars having an impact on their business more than yours?

Well, we’re certainly more domestically focused in Caesars. I think in MGM case it may, we may be much more similar, Sheldon’s is a bit of a mix, it could be even a strong dollar is a little bit more discouraging for inbound internationals in these case that could well be.

Okay great, enjoy your time. Thank you.

Are we considering anything about retirement? All right, operator I think that is the end of our call. Thank you to you and to everybody who joined us.

This concludes today’s conference call. You may now disconnect.