Caesars Entertainment, Inc. (CZR) Q2 2015 Earnings Report, Transcript and Summary

Hello and welcome to today's webcast. My name is Anita [ph] and I will be your facilitator today. All lines have been placed on mute to prevent any background noise. And please note that today's webcast is being recorded. During the presentation, we'll have a question-and-answer session. We will be taking questions via the phone line and instructions on how to do so will be given at the appropriate time. [Operator Instructions] It is now my pleasure to turn today’s program over to Jacqueline Beato, Senior Vice President of Finance and Treasurer for Caesars Entertainment. Jacqueline, the floor is yours.

Thank you. Good afternoon and welcome to the Caesars Entertainment Second Quarter 2015 Results Conference Call. Joining me today from Caesars Entertainment Corporation are Mark Frissora, Chief Executive Officer; and Eric Hession, Chief Financial Officer. A copy of our press release, the earnings presentation slide and a replay of this conference call are available in the Investor Relations section on our website at caesars.com. The slides are available for download on the Events and Presentation section and will accompany Mark and Eric's prepared remarks for those of you on the phone they would like to follow along. 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. Before we get on our way, I’d like to call your attention to the following information on Slide 1 through 4. 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 Please be advised that developments subsequent to this call are likely to cause these statements to become outdated with the passage of time, but we do not intend to update the information provided today prior to our next quarterly conference call. Today, we are reporting second quarter 2015 results. These results are not necessarily indicative of results in future periods. In addition, today's call will include non-GAAP financial measures, including property EBITDA, adjusted EBITDA and certain supplemental financial information. 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. As a reminder, Caesars Entertainment Corporation is a holding company with the following consolidated entities, Caesars Entertainment Resort Properties and Caesars Growth Partners which includes two reporting segments, CGP Casinos and CIE. CEC also owns 89% of Caesars Entertainment Operating Company. However, CEOC’s financial results do not include the results of CEOC and its subsidiaries following its Chapter 11 filing on January 15th and our result in loss of control over material decision given the approvals required by the Bankruptcy Court and Independent Committee. Also due to the bankruptcy and result in loss of material decisions, CEC generates no economic benefits from CEOC’s results. On this call, we’ll discuss certain supplemental financial information including CEOC consistent with the 2014 Caesars reporting. As such the supplemental financial information is non-GAAP and is presented of the benefit for user to understand year-over-year in a comparable fashion. This information is not comparable to GAAP results provided elsewhere in our presentation. Additionally, the results are not indicative of future performance or the results that would reported should the Restructuring Support Agreement be successfully completed. On today’s call, we will review both CEC’s reported financial information as well as the supplemental financial information for CEOC. Detail on the owned and managed properties in these entities is highlighted on Slide 4. This call, the webcast and its replay are the property of Caesars Entertainment Corporation. It’s not to 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. As seen on Slide 5, we’ll begin the call today with some high level remarks by Mark followed by review of our financial results by Eric before Mark wraps up with some concluding comments. We will then open up the call for your questions. Let me now turn the call over to Mark.

Thank you, Jackie. I am pleased to join today’s call as President and CEO of Caesars Entertainment. Before I turn it over to Eric to review the details of our quarterly results, I would like to share my early impressions of the company and the opportunities that I believe lie ahead. Unless indicated otherwise, my comments relate to Caesars system-wide including our deconsolidated subsidiaries CR. Starting on Slide 6, as I briefly mentioned on our last call since joining Caesars in February, I spent much of my time learning about the business, meeting with the leadership team and visiting properties across the network. I am encouraged by what I have found thus far and we believe we have a solid foundation which to grow and to further transform Caesars in to the world’s promenade entertainment company. Over the coming months, the senior leadership team and I will continue our strategic review of the business and together develop a strategy to drive growth and enhance performance for the near and longer term. While we have not yet completed this process, I can assure you my focus will on identifying opportunities to enhance growth, EBITDA margins and cash flow all the while keeping employee and customer satisfaction high. Taking together, our focus on these priorities will play critical role on improving all stakeholder returns. Our opportunities to strengthen performance range from initiatives that require minimum capital investment such as improving supply chain management or growing the number of active total rewords members to more intensive projects which could include investments in backend infrastructure and technology to yield greater efficiencies or expanding hospitality segments in destination markets. I would expect investments in Las Vegas room product which will drive cash ADR growth to be among the fist and highest priorities. I have no doubt that further investments in hospitality will be a major component of our strategic plan. I’ll communicate more details of our strategy procedures later this year. Continuing CEC reported a strong, very strong second quarter, which you can see on Slide 7. Net revenues for continuing CEC which as a reminder exclude CEOC increased 17% to $1.1 billion. Adjusted EBITDA grew 56% to $347 million. Adding CEOC to CEC on a supplemental basis, net revenues increased 8% year-on-year to $2.3 billion with a corresponding 42% increase in adjusted EBITDA to $647 million. Increased revenues were attributable to the openings of Horseshoe Baltimore and the Cromwell, the renovation of The LINQ Hotel, exceptional growth in the interactive entertainment business and strong hospitality performance. Marketing and operational efficiencies, favorable year-over-year hold as well as higher cash mix in hotel and food and beverage outlets were also contributors to results in the second quarter. As a result of all of these factors, the business delivered the highest quarterly EBITDA margin since 2007. Company’s system-wide performance is a testament to the contributions and commitment of our team across the company ranging from operators to the game developers and CIE and on to the marketing and analytics team in our corporate office. The significant improvement in EBITDA in the first half of the year were margins grew 591 basis points year-on-year was generated to the performance of new investments and disciplined expense management. Further, our continued improvements are still challenged by the fact that core gaming growth in the regions has not recovered to the extent seen in Las Vegas. As I mentioned earlier, hospitality’s substantial growth opportunity procedures and is an areas in which we have found and focused our efforts over the last several years as shown on Slide 8. While the majority of our hospitality investments have been concentrated in Las Vegas offerings have also been expanded in the regional markets. On the next several Slides, you can get a sense of projects across the Caesars system they are currently underway where have been recently completed. Moving to Slide 9, we have invested in development of the Waterfront Conference Center adjacent to Harrah’s Atlantic City. We’re very excited to open this facility in the coming weeks. Group room nights at Harrah’s Atlantic City for the first 12 months are more than triple the room nights realized in 2014 and double our underwriting case. Eric will provide additional details in his remarks. Turning to Slide 10, the renovation of The LINQ Hotel and Casino was completed in July completing transforming the property. Since the room renovation was completed in May, cash ADRs have increased 45% year-on-year. We anticipate this growth will stabilize later this year as the first renovated rooms came online last October. Harrah's New Orleans also finished an upgrade of half of its guest rooms in the second and third quarters of last year and we are developing plans to renovate the remaining rooms. On Slide 11, you can see some of the projects at CEOC. Many of the hospitality projects that we have discussed with you in recent years have been focused on Caesars Palace including a state-of-the-art conference center, the Garden of the Gods Pool Complex, the world’s first and only noble hotel and the Octavius Tower & Villas. A reminder that Octavius Tower & Villas room by served, we have also substantially upgraded our restaurant offerings at Caesars Palace including noble restaurant, Gordon Ramsay Pub & Grill and the Bacchanal Buffet. We also spoke last quarter about the opening of Omnia and Seersucker, new headliners of The Colosseum and the planned replacement of Empress Court with Mr. Chow. In May, VISTA Lounge open, which replaced Shadow Bar and is generating nearly triple the revenue of its predecessor. In addition to these investments in Las Vegas, other hospitality assets have also been enhanced across the CEOC regions including the renovation of Jack Binion's Steak House at Horseshoe Tunica and the remodel of Legends Restaurant to Smoke & Ray at Horseshoe Southern Indiana which is expected to be completed later this quarter. Harrah’s Lake Tahoe is also going to hotel and commencing space remodel with those new assets expected to come online in December this year. We’ve recognized that continued investment in hospitality entities across our owned and managed portfolios necessary to maintain and grow the business. Considering the improvement and cash flow, I expect this type of investment would just generated high returns to get over the new few years. We will be prudent as we evaluate future investment opportunities to ensure capital allocated project to create significant value for our stakeholders. Give our lower capital expenditures on room project after the economic crisis. We believe this will be an area that should offer rich returns for several years. Let me now turn the call over Eric for more detailed review of this quarter’s results.

Thank you, Mark. I’ll first start with continuing CEC’s consolidated results for the second quarter followed by a review of the company’s reportable segments and then discuss the supplemental information we have provided on our website which included CEOC’s second quarter performance as well as continuing CEC plus CEOC’s results. Slide 13 summarizes continuing CEC’s results which do not include our deconsolidated subsidiary CEOC. For the second quarter of 2015continuing CEC net revenues increased 17% to $1.1 billion with a 56% increase in adjusted EBITDA to $347 million. As previously discussed, top line improvements were attributable to the openings of Horseshoe Baltimore and the Cromwell and the renovation of The LINQ Hotel, organic growth in the interactive entertainment business and strong hospitality performance. Review improvement marketing and operational efficiencies, favorable year-over-year hold as well as strong hotel and F&B margins led to the year-on-year improvement in EBITDA with margins expanding 747 basis points. Excluding Horseshoe Baltimore and the Cromwell, same store net revenues increased 9% and adjusted EBITDA increase 51%. Moving to Slide 14 and Caesars Entertainment Resort Properties which is comprised of six casino resort properties largely located in Las Vegas as well as The LINQ promenade. Serve delivered revenue in the second quarter of $566 million an increase of 5% year-on-year. Performance was largely driven by higher gaming revenue and hotel revenues. The growth in gaming revenues was due to increases in slot revenue and favorable year-over-year table hold largely at Paris. Hotel revenue increases were attributable to 10.5% increase in cash ADR mainly from resort fees. Adjusted EBITDA increased 42% year-on-year to $182 million and margins expanded by 836 basis points due to a higher cash mix in hotel and F&B outlets, efficiencies in marketing and labor and favorable hold. Favorable hold at serve contributed approximately $8 million in EBITDA for the quarter. The Waterfront Conference Center adjacent to Harrah’s Atlantic City is nearly complete with the grand opening just around the corner. At the end of the quarter, capital expenditures at Harrah’s Atlantic City for the Conference Center were $112 million with a total $125 million budgeted for the project. The facility will began hosting guest at the end of August with a first large group in early September. Our nationwide sales forces focused on further building a pipeline of meetings and convention business to stimulate mid-week visitations from these cash paying customers. We are very pleased with the pace of preopening bookings and have a 150,000 room nights already scheduled at the facility, 90,000 of which are scheduled in the first 12 months opening. This compares to 23,000 group room nights realized in Harrah’s Atlantic City in 2014. Turning to Slide 15, Caesars growth partners which include the interactive entertainment business and fixed destination market properties posted a strong quarter. For the business as a whole, second quarter net revenues increased 31% to $576 million with a 52% increase in adjusted EBITDA to a $161 million. EBITDA margins expanded 381 basis points. Performance was driven by the social and mobile games business at CIE and the competed renovations at The LINQ Hotel as well as the additions of Horseshoe Baltimore and the Cromwell excluding the tow new openings, same store net revenues for CGP were up 12% year-over-year and adjusted EBITDA was up $42 million or 41% year-on-year. During the quarter, CGP faced a number of non-industry related challenges included the smoking ban was introduced in New Orleans and the civil unrest in Baltimore. Breaking apart the CGP results, we will first look at the CGP casino’s segment on Slide 16. Net revenue was $390 million in the second quarter, up 33% year-on-year. Adjusted EBITDA increased 49% to $91 million and margins grew 259 basis points. Top line results were primarily attributable to the openings of the Horseshoe Baltimore and the Cromwell and the renovation of The LINQ Hotel and Casino which experienced a 45% lift in cash ADR year-over-year along with higher gaming and F&B revenues. This performance was partially offset by lower gaming volumes at Harrah’s New Orleans due to the smoking ban that went into effect citywide on April 22nd. Horseshoe Baltimore’s performance was also adversely affected by the civil on rest. Year-on-year EBITDA growth for the CGP Casino segment was driven by improvements in marketing and operational efficiencies that was partially offset by the management fee expenses incurred after the May 2014 property acquisitions. We estimate that smoking ban in New Orleans is negatively impacted net revenue by approximately 10% in the second quarter and expect this to remain a headwind for the foreseeable future. We are actively exploring ways to mitigate this impact overtime including on property cost efficiencies, marketing measures and the potential development of new manatees such as outdoor smoking patios. Moving to Slide 17, momentum in the interactive entertainment business remained strong with CIE delivering another excellent quarter. Net revenues increased 28% to a $186 million and adjusted EBITDA rose 56% to $70 million. EBITDA margins expanded 660 basis points. Performance was mainly due to strong organic growth in our market leading social and mobile games business as we continued to focus on monetization and the release of new gaming contact. Monthly unique paying users grew to 796,000 in the second quarter from 539,000 last year. And average revenue per user per day increased to $0.31 up from $0.26 over that same period. On the real money gaming front, deposits and revenues increased in Nevada since the World Series of Poker tournament began at the end of May. In New Jersey, we continue to focus on cross marketing and cross promotional initiatives with total award. Separately, the World Series of Poker tournament which started at the end of the May was the largest even with a record 103,512 entries. We also have the largest live Poker tournament ever of clauses which has 22,374 entries. Turning to Slide 18, which shows the supplemental information on CEOC’s second quarter performance. Net revenue declined 2% year-on-year to $1.2 billion and adjusted EBITDA increased 42% to $303 million. The revenue decrease was primarily attributable to lower year-on-year reimbursable expenses from our managed properties. Excluding these reimbursable expenses, revenue was up 1% driven primarily by improvements in hotel and entertainment revenues which will partially offset by declines in casino and F&B revenue segments. The decline in casino and F&B revenues were influenced by marketing program changes which enhance the profitability of those business verticals. Year-on-year, the increase in EBITDA was driven by marketing operational efficiencies, favorable year-over-year hold and a higher cash mix in hotel and F&B outlet leading to the margin expansion of 779 basis points year-on-year. The EBITDA contribution from favorable hold during the quarter was approximately $8 million. Hospitality initiatives continued to perform strongly at Caesars Palace but the performance of the property was impacted by a substantial drop in Baccarat volume consistent with the industry-wide slowdown by respective customers. We believe weaker Baccarat volumes will persist through the remainder of the year. In CEOC’s region markets, net revenues declined modestly in the majority of the region. Visitation from VIP guests at the regional properties remains relatively flat while declines in visitation from retail guest have continued, partially as a result of the marketing program modifications. These challenges contributed to strong year-on-year EBITDA improvement. Now let’s take a look at the additional supplemental information for the second quarter on Slide 19. As Mark mentioned earlier, Caesars system-wide net revenues rose 8% from the prior year period to $2.3 billion and adjusted EBITDA grew 42% year-on-year to $647 million. During the quarter, positive hold contributed approximately $16 million in incremental EBITDA. Excluding the performance of the Cromwell and Baltimore opening, same store net revenues increased 4% year-on-year to $2.2 billion with a corresponding 40% increase in adjusted EBITDA to $630 million. Looking at revenue by category, casino revenue grew 6% aided by new developments and favorable year-over-year hold of across the Caesars live system. As I noted before, lower volumes in the high end international play have led to continued challenges across from baccarat. We do not anticipate these headwinds abating in the second half of the year. Excluding baccarat, table games and slot revenue both increased slightly in the quarter. F&B revenue increased 2% year-on-year benefitting from new developments. F&B profitability was up nicely due to improved margins and higher cash mix. Hotel revenue grew 12% year-on-year due to a 10.6% increase in cash ADR primarily as a result of resort fees. While hotel profitability increased due to a higher cash mix. Combined with strong organic pricing environment, this led to record levels of cash hotel revenues. For Las Vegas in particular, we experienced a very strong hotel environment during the second quarter with May being a record revenue month due to the May weather pack and a strong Memorial Day weekend. This performance coupled with ongoing expense reductions drove EBITDA margin expansion of 675 basis points. As part of the overall cost savings initiatives, marketing spend has been reduced considerably. This reduction impart is a result of work done to improve customer profitability and mix, while these adjustments have led to some declines on a gross volume basis, we believe that they have generated substantial improvements in casino profitability and EBITDA across the Caesars system. That said we are mindful that this is an area that needs to continuously monitor and adjusted to ensure we are driving benefits and improvements and profitability. Before I turn the call back over to Mark, let me briefly review liquidity on Slide 20. One item to note on our liquidity is that we did pay down $15 million of our outstanding CGPH revolver subsequent to the quarter. As our cash generation improves across CERP and CGPH will continue to focus on prioritizing investment in high return capital projects particularly in our hospitality offering. Now let me turn the call back over to Mark for some closing comments.

Thank you, Eric and please turn to Slide 22. Overall the second quarter was a continuation of a positive first quarter results, while gaming volumes continue to be mixed across the system, much of this itself and dos as we take actions to drive profit improvement. In particular, reductions and free slot play incentives have lowered reported gaming volumes but enhanced overall profitability. On the CERP side, hospitality amenities continue to perform quite well. Coupled with cost saving initiatives, we delivered strong margin expansion especially at our Las Vegas properties. For the second consecutive quarter, we achieved the highest property EBITDA margins for owned and managed CERP properties combined. Management will continue to be focused on retaining our industry leading margin percentage. As you know we had delivered these results despite CEOC’s bankruptcy proceedings. The restructuring of CEOC remains a fluid process and we will continue to provide updates on developments as appropriate. I know that the restructuring process in the state of our discussions with various creditors the topic of interest on everyone’s minds. However, given the ongoing negotiations proceedings, we will not be answering discussing questions of this nature during today’s Q&A session. Slide 23 is our outlook page. As far as industry trends, though the industry is showing modest to low growth, which is better than what we’ve seen over the last five years, we are far from peak levels. Hotel, food, beverage and entertainment revenues in Las Vegas continued to be a strong point with the hotel rate environment being a particularly bring spot. On the gaming front, slot gaming volumes in the regional markets are still not as strong as Las Vegas and we are exploring how to improve slot performance as we think about the development of our strategic plan. We will have more to report on this in the coming quarters. Regarding supply dynamics, most markets are stable to the proliferation of slot set bars in Illinois and the opening of a DC area casino post risk to our performance in those region. In Atlantic City, fundamentals for the properties we own and manage have been improving now that the market capacity has stabilized after server property closers. So far in the third quarter, we are off to an encouraging start, July gaming, food and beverage and hotel results have all been favorable, while still exhibiting the expected weakness discussed earlier in New Orleans and Caesars Palace volume. Early indications from our hotel bookings lead us to believe August will also have good demand in Las Vegas. Moving to Slide 24, is important to note for all of our stakeholders the following significant accomplishments procedures. This quarter, we delivered the highest margins in the Las Vegas Strip of any public casino company. Our nine Strip hotels grew faster than the industry. The Colosseum at Caesars Palace was named “Venue of the Decade” by Billboard Magazine. We are the number one global social mobile casino themed game provider. Caesars whole is a 100% gaming fair share premium across its domestic markets as measured by win per gaming unit. Our significant investments in hospitality assets over $1.3 billion during the last five years in Las Vegas alone are generating strong results and at 49 casinos worldwide, Caesars operates more casino locations than any other publically traded casino company. Moving to Slide 25, going forward, we are concentrated on the core business and identifying discreet actions we can take to grow the company. We will emphasis driving revenues and efficiencies, expanding margins and enhancing cash flow operations. Our strong performance in the second quarter demonstrates these attributes with EBITDA and EBITDA margins improving significantly year-over-year. On the expense side, we will remain focused on maximizing corporate and on property cost efficiencies while improving employee and customer satisfaction. We are making progress on our previously stated goal of generating the incremental 250 million to 300 million of EBITDA from cost savings and EBITDA enhancing initiatives including CEOC. Additionally CEOC is on track to meet or exceed its EBITDA at $1.024 billion in 2015. Together these efforts will tie into our strategic plan to drive strong future growth and profitability. With that we now open the call for questions. Operator?

[Operator Instructions] Your first question comes from the line of Susan Berliner from JPMorgan. Your line is open.

Hey, good afternoon.

Hey, good afternoon.

So I wanted to start with I guess your commentary Mark on July. I was wondering if you could talk about gaming and I guess on a - I guess apples-to-apples comparison because I know some of the comps which is the regional markets were easier, when you are talking about July, you are seeing any notable increases besides is your comps from last year?

We saw sequentially from June to July and improvement in July in general and we saw an increase year-over-year in pretty much all markets. So is that answer your question?

Sure. And then just with regards to the resort fees, I guess Eric, can you remind us when those were implemented last year?

So it’s two drivers see that are causing the increase, one is that we’ve expanded the number of our segments that book into the hotel that receive fee and then in addition we had increased our resort fees in January, so we had actually implemented them broadly prior to that.

Okay, great. And then was there any change I guess companywide or any of the entities with regards to maintenance CapEx?

No. No change with respect to maintenance CapEx.

Okay and I guess will just see that in the various SEC filings REIT entity? And that’s you have -

Are you talking about total CapEx or the specially made?

Yeah, specific to Q2 CapEx or you asking about the range of the expected CapEx?

Both actually.

Yeah, so for - I can give you that, now for Q2 CEOC spend 37 million, this is total CapEx. CERP spent 50 million, CGP spent 70 million and CES spend 6 million. As I mentioned earlier, the full year estimates are unchanged and we continue to be pacing well to hit all those ranges we previously provided.

Great and just a couple other follow-ups, I guess with regards to the AC convention center, I think you said you are 30 million less but I know if there is reimbursement coming from the state?

Yeah, Susan, I think we talked about how it works for forbid a prorate reimbursement from a spent that we spent the CapEx first and so that process continues throughout the build.

And Jackie, is there any amount that you expect to get back in 3Q or 4Q that you could provide to us?

No, we don’t have specific estimates on when we are going to get those.

Okay and then just on the CGPH side, the project CapEx spent there for the LINQ and what’s remaining there?

We - as you know the LINQ is open at this point, so we are basically paying invoices related to the project that have come in delayed behind when the assets put into service. We have approximately $25 million left that we anticipate coming in on that project.

Great and if I could sneak one and you guys didn’t talk about the performance of the LINQ and I was just wondering if you could talk about that at all?

Yeah, so we’re still very pleased with the response we are getting, the experience is great for the real the feedback we get from the customers is very positive. In prior periods we did breakout the actual EBITDA performance because it was new asset but now that we’ve annualized it and it’s been reflected in both periods. We haven’t been breaking it out and we don’t plan to going forward.

Great, thank you very much.

Thanks.

Your next question comes from the line of David Farber with Credit Suisse. Your line is open.

Hi guys, good afternoon. How are you?

Hi David.

Hi Mark - for the conference calls, I had a couple of questions, first I wanted to just tackle CERP for a minute, the margin was again better than we had expected which is promising. I am just curious what is driving that, you know at two quarters now at the 30, so what’s driving that and then what are your expectations for CERP margin into the back half? And then a couple of follow-ups, thanks.

So in general, our margins are being driven by marketing efficiency, if you will we’re getting much better at identifying customers that are profitable in those at we give things away that we probably shouldn’t because it doesn’t make sense, we are not driving incremental volume. So those efficiencies are helping out a lot. And then also our labor productivity in operations is a significant improvement year-over-year hence driving 10s of millions of dollars of improvement in the operating results. And then in terms of sustainability, we believe that all of this is sustainable, these margins are sustainable and that we’ve got other incremental projects and today that will continue to drive this kind of productivity improvement as well as we think the marketing efficiencies will continue as well.

Okay, that’s helpful. And then just following through that, if in fact we are able to see sort of better margins into the back half, what would you intend to do with the incremental free cash flow, you sort talked about projects, I am curious specifically on LINQ or CERP in general, would you use the free cash flow for what projects and would pay down potentially if that something to be curious, or excuse me, interested doing on the CERP side?

David, I’ll take the first half and then Mark can feel free to jump in on this if I miss anything. But - you’re right at the entity we’ll start to generate significant free cash flow as we continue to move forward. As we talked the assets in this portfolio consist of some rather large hotels. We mention that we think the returns from renovating those rooms are quite appealing right now, particularly in Las Vegas and also in Atlantic City with respect to the new convention center coming on. And so we are starting to evaluate which hotel tower to renovate and what sequence to maximize the returns. I think you’ll see starting a renovation at a hotel tower Paris here in Las Vegas shortly. And then as we move into next year, we’ll evaluate some other hotel towers as well. In combination with that we’ll evaluate the potential to pay down the remaining balance on the revolver as well. So it’s going to be a balancing effort based on the results and where we see the best opportunities.

Got it. Okay, that’s helpful. And then CEOC side of the house, we’re not six months into the year, just curious sitting here today with the outlook you talked about, how do you feel about the plan EBITDA you set up in the beginning of the year, is that attainable, is it reasonable or is it potentially too conservative, any thoughts around that and what you see for the balance of the year for CEOC? And then I have one other, thanks.

I mean on our remarks, we pretty much said that we expect to meet or beat our expectations. In terms of any other color it’s about the best I can do because out business has obviously some inherent volatility goes into the luck components the whole component and so we want to make sure we’ve giving you numbers then expectation you count on.

Okay, understood. And then just sort of the as an operator all the three larger segments, I am just curious from the day-to-day and may this question is for Eric if he can help, what sort of reliance you might have on the parent company, any thoughts around there if you could help us and are there any issues legal issues that could impact surplus growth with respect to the parent or thoughts around that would be helpful? And that’s it, thanks.

So, David, I’ll just remind you that the parent is essentially a holding company. It has the three end primary asset that it owns is a 100% of CERP, it consolidates CGP and then as 89% ownership in the COEC which is deconsolidate. So that’s about all the we can say, there is no real assets, there is no properties, there is no suppliers. Yeah so the point is it’s just a holding company. So it’s - other than that there is nothing significant.

Okay, very good, thanks for the time.

Thanks David.

[Operator Instructions] Your next question comes from the line of Kevin Coyne with Goldman Sachs. Your line is open.

Good afternoon. Thanks for taking the questions. Just had a follow-up just Sue’s question, did you say July was better than June or did you say it was better than the second quarter trends?

I think it’s in general probably let’s see I would June for sure and I wouldn’t say broadly the second quarter because as you May was kind of blowout for everyone in the industry because of the fight that was here in Vegas.

Okay, that’s fair. Just a quick question on baccarat play, would you say are people still coming to the market and just not spending at the level they did in the past or have people just completing start coming? And second part of that question is what indicators are you looking for over the medium to longer term as potential leading indicators to a return of that business or is some of that potentially permanently gone?

Some extend year-over-year there is a tough comp, so we should understand that begin. But secondly I think you know we expect the business to begin to slowing come back to historic levels as the issues that surrounding what’s going on in China the premier stands on gambling in general lighten up and we’ve had a lot of as you know kind of different thing that have occurred within Vegas in terms of regulations and tighter environments here and I think that also make sometimes the larger gamblers in China a little to come. So there is a lot of different drivers. In general, the whole industry experiencing this so we are not unique to the industry how we feel that we are doing awful a lot to make sure we market ourselves as one of the top Asian play houses with Caesars and plan at Hollywood and Paris and a lot of the facilities that we have for the billers that we have within the strip itself. And we are also able to leverage our big network and New Orleans, Atlantic City were some of that play as well.

Great, maybe just a question on status of let’s say room renovations in terms of how many room were offline this quarter versus the first quarter and versus a year ago, maybe Eric or Jackie can comment. And perhaps when you’ll see those rooms go back to a normal cadence of being offline?

Yeah, so Kevin, as you know we had a major renovation going on as a link and room started to come back online in October of last year and they fully came back online early in the second quarter. And so you would have seen during both the fourth quarter and the first quarter some significant room outage particularly at that property. As we move forward, again you’ll see some construction disruption from room renovation but we are planning to stagger the room renovations to ensure that we don’t have a significant number of hotel rooms out at anyone times such that they would materially impact the operations. And as I mentioned when we do analysis in terms of the returns from these projects we take into account the potential disruption from having the rooms out and we still believe these are extremely higher term projects.

Great, just one final on the 250 to 300 million of projected cost savings, would - give an update in terms of how much progress you’ve made on reaching that goal to date?

I think we try to steer clear giving projections on it but we feel bullish about how well we’ve done year-to-date and what we’re likely to do by the end of the year. So the best I can tell you at this point.

Okay, thank you.

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

Hi, I apologize, I just had a couple of follow-ups both actually on the CGPH side, I was wondering if you could reconcile the actual EBITDA for the restart to grow?

Reconcile it to what.

It just seems that the Caesars’ press release had a number in the CAC press release has a number for casino properties and then you put in EBITDA for I guess Baltimore and Cromwell and it just seems that people are coming up a little bit variation, so I just was wondering if you could confirm is it like 82 million?

So Sue I think it’s a breakout of the segment is different between the two press release, so the CAC press release has in other segment. I think if you look the Caesars press release CGP is in two segments that’s in CIE and then everything else. So if we take the other segment and the casino property segment from CAC press release they should match our press release. I don’t know if that reconcile that difference for you.

I think so, okay. And then just one quick follow-up on New Orleans, I know Eric you talked about contemplating doing something there and I guess I was wondering why way those just a function of drawing our plans to try to figure out exactly what you are going to do?

Yeah, we’re not waiting obviously, we are doing everything we can to offset the impact of the decline in revenues and we are being as aggressive as we feel as prudent in terms of both from marketing changes as well as operational changes. But in terms of the construction related items, it’s exactly as you noted we have to make sure that we think through what we want to do from a design perspective and then get the appropriate permits and construction process.

Okay, great, thank you very much.

There are no further questions at this time. I will turn the call back over to presenter.

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