Caesars Entertainment, Inc. (CZR) Q4 2015 Earnings Report, Transcript and Summary

Hello, and welcome to today's webcast. My name is Jen, and I'll be your web event specialist today. [Operator Instructions] It is now my pleasure to turn today's program over to Mr. Brian Blackman, Vice President of Investor Relations. Brian, the floor is yours.

Thank you, and good afternoon, and welcome to Caesars Entertainment fourth quarter and full year 2015 results conference call. Joining me today from Caesars Entertainment Corporation are Mark Frissora, President and Chief Executive Officer; and Eric Hession, Chief Financial Officer. A copy of our press release, certain earnings presentation slides and a replay of this conference call are available in the Investor Relations section of our website at caesars.com. The slides are available for download and will accompany Mark and Eric's prepared remarks for those of you on the phone that would like to follow along. Also, please note that prior to this call we furnished a copy of this afternoon's press release to the SEC in a Form 8-K and will shortly file our most recent Annual Report on Form 10-K. Before we get underway, I'd like to call your attention to certain statements and information on Slides 1 through 4, which we incorporate by this reference. The forward-looking statements Safe Harbor disclaimer in our public documents covers this call and the simultaneous webcast at caesars.com. This call, the webcast and its replay are the property of Caesars Entertainment Corporation. It's not for rebroadcast or used by any other party without the prior written consistent 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. Today's call will include discussion of certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin, property EBITDA and certain supplemental financial information. Reconciliations of net income and loss of 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 the two reportable segments, CGP Casinos and CIE. CEC also has a majority ownership of Caesars Entertainment Operating Company, but CEC's financial results do not include the results of CEOC and its subsidiaries following its Chapter 11 filing on January 15 of 2015. However, in addition to a review of CEC's reported financial information on this call, we will also discuss certain supplemental financial information regarding CEOC, including certain remarks that combine CEOC's results with those of CEC. This supplemental financial information is non-GAAP and is presented as a benefit for users to understand year-over-year results in a comparable fashion. This information is not preferable to GAAP results provided elsewhere in our presentation. Additionally, the results are not indicative of future performance or the results that would be reported such the Restructuring Support Agreement to be successfully completed. As used during 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 the context requires otherwise. As seen in today's agenda on Slide 5, we'll begin the call today with some high-level remarks by Mark, whose comments will generally relate to the entire Caesars system, including our deconsolidated subsidiary CEOC. Eric will then review our financial results, before Mark wraps up with some concluding comments. We will then open up the call for your questions. I'd like to now turn the call over to Mark.

Thank you, Brian. I am pleased to report that the company's excellent performance in the first three quarters of 2015 continued into the fourth quarter, culminating in the best full year performance for Caesars Enterprise since 2007. As Eric will discuss later in further detail, at continuing CEC, which excludes CEOC, full year net revenues increased 15% to $4.5 billion and full year adjusted EBITDA increased 46% to $1.3 billion. I will now speak more broadly to enterprise-wide performance, which adds CEOC to CEC. Beginning on Slide 6, you will see that we delivered solid annual improvement year-over-year across three critical measures, financial performance, customer satisfaction and employee engagement. Notably, our enterprise-wide adjusted EBITDA margins rose 662 basis points year-over-year to 26.5%, the highest annual EBITDA margin since 2007 pre-recession and expanded by more than 500 basis points year-over-year in each quarter of 2015. On a continuing CEC basis, adjusted EBITDA margins rose 608 basis points year-over-year. Additionally, we increased our customer satisfaction scores by 300 basis points across the enterprise as well as improved our overall score in our annual Employee Opinion Survey for the 10th consecutive year. These results were delivered amid the backdrop of considerable distractions, including the restructuring of Caesars Entertainment Operating Company and a challenging operating environment, particularly in the regional markets. They highlight the success for our improved operating model and our strategic investments in the business, which position the enterprise for enhanced financial performance going forward. Moving to Slide 7, enterprise-wide net revenues rose 6% year-over-year to $9.1 billion for the full year. On a continuing CEC basis, net revenues rose 15% year-over-year to $4.5 billion for the full year. Revenue growth was driven by higher hotel revenues with cash ADR up double-digits, aided by the expansion of resort fees across all properties and improved pricing in Las Vegas, as well as the full year contribution from Horseshoe Baltimore and The Cromwell and the renovation of the LINQ Hotel and Casino. We also benefit from continued solid organic growth in Caesars Interactive Entertainment and slightly higher gaming revenues, due to favorable year-over-year hold. As I mentioned earlier, the enterprise experienced notable margin expansion across each of four quarters in 2015, which is detailed on Slide 8. Our ability to drive cost savings initiatives through marketing and operational efficiencies help deliver an incremental $350 million of EBITDA in the full year, bringing our adjusted EBITDA to $2.4 billion, up $706 million or up 42% versus prior year. On a continuing CEC basis, adjusted EBITDA growth was a 46% increase versus prior year. A key contributor has been the reduction of enterprise-wide marketing spend relative to elevated spend in prior years. This has resulted in both reduced free slot play offers and a 4% reduction in casino direct expenses, as we implemented a more targeted approach on complimentary awards to enhance overall customer profitability. As we touched upon last quarter, we are also applying a low-cost high-quality operating model across all of our businesses by implementing Lean Sigma principles, a highly effective efficiency program. We formally rolled out the program at the beginning of the year and are gradually enacting it across the enterprise. Our efforts are focused on identifying process efficiencies, improving the customer service experience and increasing employee engagement. We have already recognized some immediate areas of opportunity, including front desk operations, high transaction food and beverage outlets, laundry facilities and housekeeping. We expect these efforts will steadily ramp up during 2016. The recapitalization of our hotel room product in Las Vegas to market levels over the last two years has been a meaningful driver of topline growth, due to our higher cash ADR. As you see on Slide 9, it has helped us deliver market leading EBITDA margins on the strip for the full year. We have demonstrated that room upgrades are an attractive low-risk opportunity to deploy cash and we will continue to pursue this opportunity. In 2016 we expect to complete renovations for more than 4,800 hotel rooms in Las Vegas and more than 5,700 owned or managed rooms across the enterprise, representing approximately 20% and 15% of total rooms across Las Vegas and enterprise-wide, respectively. We have several targeted investments, both in Las Vegas and our regional properties on the horizon. On Slide 10 and 11, you can see several of our ongoing capital projects, as we execute against this priority. These property upgrades include the transformation of the original tower at Caesars Place to create the Julius Tower as well as the renovation of the Augustus Tower at Caesars. Additionally, we will complete room upgrades at Paris, Planet Hollywood and Harrah's in Las Vegas. In our regional markets, we will renovate Harrah's Gulf Coast, Caesars Atlantic City and Horseshoe Tunica. These investments in our infrastructure across the enterprise will enhance our long-term performance and hospitality. Moving to Slide 12, Caesars offers a wide range of leading entertainment shows in the strip. We maintain the highest quality of performance at the Colosseum, including Celine Dion, who played for sold-out crowds during the fourth quarter as well as The AXIS Theater and the recent opening of Jennifer Lopez's spectacular show in January, which received rave reviews from critics and played to sold-out crowds. On top of these acts are a pool of celebrity talent at our Las Vegas venues continues to appeal to our guest at all age groups and interest. This includes Mariah Carey, and Reba McEntire and Brooks & Dunn at the Colosseum; Britney Spears at Planet Hollywood; Mat Franco's magic show at the newly renovated LINQ Hotel; and the new Rock of Ages show at the Rio All-Suite Hotel & Casino. As a result of our ongoing efforts to be at the forefront of the entertainment space, in 2015 Caesars Entertainment was named one of the three largest live entertainment promoters in North America, based on box office revenue; and the Colosseum was named the top venue in theatres of its size for the 11th time by Billboard Magazine. We remain focused on actively investing in our hospitality business to capture the growth and consumer spending towards these types of activities and ensure that our entertainment offerings are the best on the strip. On Slide 13, along with the expansion of our entertainment offerings, we are also investing in our food and beverage operations, ranging from upscale dining experiences to moderately priced restaurants and buffets. MR CHOW made its strip debut at Caesars Place, opening in stores in December. In 2016 The LINQ Promenade will add three new exciting tenants, Virgil's Real Barbecue, Gordon Ramsay's Fish & Chips and Amorino Gelato, while looking for a new anchor tenant in what was previously the Kitson location. Additionally, the Beer Park by Budweiser, located in Paris, Las Vegas, opened at the end of January as the strips first rooftop bar and grill. In Atlantic City, we have remodeled Bally's Wild Wild West Casino, opening it up to the Boardwalk and spanning available indoor and outdoor space, while refreshing our gaming products to create more of an entertainment space to target millennials. This renovation also includes three new food and beverage outlets in 2016, a new bar space with a stage called the Boardwalk Saloon, a counter serving Guy Fieri's award winning barbecue and the Atlantic City Snack Shack with a variety of options near the 24/7 happy hour Mountain Bar featuring a mechanical bull and beer pong tables. Another critical investment area for us has been the service technology, as seen on Slide 14. Across guest arrival, hotel, dining and gaming, we are modernizing the customer experience, while lowering cost. During the 2015 renovation of The LINQ Hotel, we centered the guest arrival experience and the technology and convenience, and were first to market in Las Vegas with the deployment of a fully integrated self-service check-in program that incorporates email, text, web, mobile app and kiosk. This is another way we are differentiating our hotel offering on the strip. For the first time, customers at The LINQ Hotel, Flamingo and Caesars Palace had a choice to interact with live front desk team member or visit a kiosk to check-in and receive their keys. On average, using the kiosk versus waiting in line for the front desk, reduces check-in time by 40%. Reception from the customers to date have been very encouraging and we are expanding the Las Vegas rollout to five more properties in 2016. Looking at Slide 15, we continue to focus on game innovation efforts and our strategy is twofold, reenergizing the core slot player and engaging the millennial and Generation X customer base. There are several underlying initiatives in motion to deliver on this strategy. First, we are launching new table game products, including our own proprietary side bets. Second, we are investing in the on-property experience. Third, we are introducing skill-based games. And fourth, we continue to challenge slot manufactures to innovate. In 2015 we aggressively trialed new table game products, such as side bets and new games, which are now on 15% of our retail tables, as we continually look for exciting new games to enhance the flavor experience and give them more choices and chances to win. Specifically, we recognized a growth opportunity in proprietary table game side bets and have made good progress in creating, patterning and launching several new side bet options over the last couple of years. Additionally, in order to engage tech-savvy millennials, we are working to create a more social, on-property experience by evolving our core design. With substantial modernization, we are attempting to create spaces that better integrate gaming and hospitality, and that maximize a group's ability to stay and play together. In addition to the TAG Sports Bar in O'Sheas Casino, Las Vegas and Bally's Wild Wild West Casino in Atlantic City, we will be building new pilot environment in at least two locations to trial customer experience and engagement in a more social setting. We are also making a concerted effort to expand and enhance our gaming product offerings in these millennial-friendly environments, by developing and deploying games for skill-based components. More to come soon on that front. And finally, we believe that the pace of innovation on the part of primary slot manufactures has been slow and have been pushing for the modernization of their product offerings. However, there are select new products that are driving improved performance and some of the target demographics we just mentioned. As an example, one of our main manufactures have been quickly developing slot designed to appeal the younger generations by incorporating some of the biggest most relevant brands today. While this type of product innovation will not drive meaningful change for our industry, slot games featuring Britney Spears and hit shows such as Game of Thrones and The Big Bang Theory are consistently landing the top 20 millennial handle pool games on our floors. Therefore, we will continue to invest in the floor, where we see meaningful opportunities. Let me now turn the call over to Eric for a more detailed review of the fourth quarter results.

Thank you, Mark. I'll first start with continuing CEC's consolidated results for the fourth quarter of 2015, followed by a review of the company's reportable segments, and then discuss the supplemental information we have provided on our website, which include CEOC's fourth quarter performance as well as continuing CEC plus CEOC results. Slide 17 summarizes continuing CEC results, not including CEOC, which is no longer consolidated. For the fourth quarter of 2015, continuing CEC net revenues increased 9% to $1.1 billion, adjusted EBITDA increased 52% to $305 million. On a per share basis, continuing CEC earned approximately $40 per share compared to a loss last year, which is largely due to $7.1 billion gain from the deconsolidation of CEOC in the first quarter of 2015, partially offset by a $1.1 billion charge to support the ongoing restructuring effort. Given these adjustments to earnings per share, our underlying year-over-year performance is most accurately represented through a strong adjusted EBITDA improvement. As Mark noted earlier, revenue performance was driven by strength in hospitality offerings as well as continued conversion in CIE's social and mobile games business. Specifically, growth in the hotel vertical was mainly due to higher room revenues at The LINQ Hotel, increased group room nights across our Las Vegas portfolio, resulting in our greatest annual group revenue since 2008 and resort fees driving higher cash ADR. The year-over-year improvement in EBITDA was primarily driven by net revenue increases, marketing and operational efficiencies and improved hotel customer mix. Slide 18 highlights the performance of Caesars Entertainment Resort Properties. Fourth quarter net revenues increased 3% to $517 million due to strong hotel performance driven by an increase in resort fees and improved hotel pricing power, higher food and beverage revenues and a positive impact from the recently opened Harrah's Atlantic City Waterfront Conference Center. Fourth quarter adjusted EBITDA increased 41% to $145 million, with margins expanding 745 basis points year-over-year due to marketing and operational efficiencies and a year-over-year decrease in bad debt expense. For the quarter there was an unfavorable impact of less than $5 million from hold, and for the full year hold was estimated to have a favorable impact between $12 million and $17 million. Turning to Caesars Growth Partners on Slide 19. CGP experienced another strong quarter. For the business as a whole, fourth quarter net revenues increased 14% to $600 million, adjusted EBITDA increased 52% to $157 million and adjusted EBITDA margins expanded by 662 basis points year-over-year. Revenue performance was driven by higher room revenues due to the renovations at The LINQ Hotel, which were completed earlier this year, the expansion of resort fees, strong organic growth in CIE's social and mobile games business and increased casino revenues at Horseshoe Baltimore. Within the CGP business, I'll first go over the CGP Casino segment in detail on Slide 20. CGP Casinos delivered fourth quarter net revenues of $392 million, growing 6% due to strong room revenue in The LINQ Hotel and Casino and the expansion of resort fees, offset by continued revenue from Harrah's New Orleans due to the smoking ban. Fourth quarter adjusted EBITDA increased 40% to $80 million, due to net revenue increases and marketing and operational cost efficiencies. For the quarter there was an unfavorable impact of less than $5 million from hold, and for the full year the estimated impact from favorable hold was between $10 million and $15 million. Harrah's New Orleans continues to adjust to the operational challenges from the smoking ban that went into effect in April of 2015. Since that time while volumes have fluctuated month-to-month, we've experienced on average roughly a 10% decline in gross gaming revenues. We're focused on mitigating the negative impact on our revenues to the extent possible by developing outdoor smoking patios that provide a more convenient alternative to our smoking guests, and that will have limited slot machine play. These patios in gaming are subject to certain state and city approvals. On Slide 21, we look at the Interactive Entertainment business, which we've spoken about frequently in 2015, as being a consistent contributor to our topline, due to increased conversion of the user base. Fourth quarter net revenues increased 33% to $208 million and adjusted EBITDA grew 67% to $77 million. EBITDA margins expanded 753 basis points year-over-year. In the fourth quarter, average monthly unique paying users grew from approximately 858,000 -- sorry, grew to approximately 858,000 from 657,000 in the same quarter last year. And the average revenue per user per day increased to $0.34 from $0.28 over that same period. Slide 22 shows the supplemental information on CEOC's fourth quarter performance. Adjusted EBITDA increased 44% to $246 million and EBITDA margins increased 698 basis points year-over-year. This increase was driven by a decline in direct casino expenses due to less promotional activities across properties and lower payroll cost, offsetting a 2% decrease in net revenues from the prior year to $1.1 billion. The EBITDA contribution from the favorable year-over-year hold for the quarter was between $12 million and $17 million and was between $50 million and $55 million for the year. In Las Vegas, hospitality amenities continued to perform well at Caesars Palace. The Julius Tower renovation took over 570 rooms offline at Caesars Palace during the fourth quarter of 2015, causing a slight quarterly decline in hotel revenues. These rooms are steadily coming back online in the current quarter. Consistent with the rest of the industry, we continue to see a challenging VVIP environment in Las Vegas, and we are anticipating flat baccarat volumes throughout 2016. In 2015, CEOC's regional markets experienced lower gross gaming revenues due to marketing program modification that have been implemented over the last nine months, with retail guest visitations showing notable declines. Despite the gross gaming revenue impact, we believe these modifications are profit enhancing and have not deteriorated our net market position, as evidenced by market share data. As noted on last quarter's call, by mid-2016 certain CEOC subsidiaries will transition the management responsibility of Horseshoe Cleveland, Horseshoe Cincinnati and ThistleDown Racino over to Rock Gaming and its subsidiaries, which currently own the three properties. We are working with Rock Gaming to ensure seamless transition and are taking the appropriate steps to minimize any disruption to customers. Although reward credits for total reward members can no longer be earned at these properties after the transition, existing reward credits will remain valid at Caesars Entertainment properties. On Slide 23, we will now review the supplemental information for the entire enterprise, representing continuing CEC plus CEOC for the quarter. Caesars Entertainment-wide net revenues increased 3.6% to $2.2 billion, mainly due to strong hotel revenue growth from pricing strength, particularly at the LINQ Hotel continued strong performance in the social games business at CIE and favorable year-over-year hold. We also expanded resort fees to include all of our hotels system-wide and increased fees at fees properties, which is a key driver of the 12.7% increase in cash ADR we experienced during the quarter. Revenue growth coupled with ongoing expense reductions, particularly around both marketing and labor efficiencies, resulted in adjusted EBITDA rising 48% to $549 million and EBITDA margins expanding 741 basis points year-over-year. During the quarter, positive year-over-year hold contributed approximately $10 million to $15 million and bringing the full year impact from positive hold to between $80 million and $85 million on a year-over-year basis. While our properties benefited from favorable hold in the full year 2015 period, we do expect this to normalize over time. Looking ahead, we expect to face headwinds related to inflationary cost increases, including salary and benefits, and we'll be focused on offsetting these to increase productivity efforts. Our marketing and operational efficiency programs begin to annualize, year-over-year comparisons will become more difficult. We also continue to be adversely impacted by restructuring efforts, as we navigate the bankruptcy process. This is largely in the form of elevated expenses across numerous parts of our business, which may accelerate over time. Slide 24 provides a snapshot of liquidity and capital expenditure at the quarter end for the CEC consolidated entities. The strength of our operating performance has driven strong cash flow generation and will enable continued reinvestment in these businesses. We continue to take a thoughtful approach on how to deploy our capital, ensuring it's invested on high-return projects. I'll now turn it over to Mark for his closing comments.

Thanks Eric. And as I said when I started today, 2015 was a strong year for Caesars, delivering the highest full year performance post financial crisis. Looking at Slide 26, you will see that exceeded our annual CEOC EBITDA target of $1 billion by $100 million, ending the year with $1.1 billion of full year EBITDA. Additionally, we exceeded our previously stated enterprise-wide goal of achieving an incremental $250 million to $300 million of EBITDA from cost savings and marketing efficiencies, delivering approximately $350 million in incremental EBITDA from these efforts. Amid the background of CEOC's restructuring process, we will continue to execute on our business plan, driving a balanced agenda of enhancing revenue growth and driving productivity gains to further improve margins and cash flow, while at the same time maintaining high-levels of employee and customer satisfaction. We improved both our annual Employee Opinion Survey and customer satisfaction scores in 2015 across the enterprise, a good validation that while we manage to drive greater efficiencies, we sustained our quality performance in terms of employees and customers. Looking briefly at January 2016 and February to date, we are encouraged by our results, as we have continued to see EBITDA margin improvement across the enterprise, as well as sequential growth in our Las Vegas region, driven by the world-renowned Consumer Electronics Show at the start of the year. However, we experienced weather-related regional pressure, given two brief property closures in the Northeast, due top winter storm Jonas. Based on these continued trends in operating performance to date, we feel confident in our ability to meet our operating goals for the rest of the year. To summarize on Slide 27, with our improved operating model, we are confident that we will continue to drive growth opportunities across our businesses in 2016 and beyond. Our team is beginning to execute on our cornerstone initiatives that will play a pivotal role in strengthening our foundation and positioning us for future value creation. These initiatives include: one, investing in Caesars' infrastructure to enhance long-term value; two, invigorating hospitality and loyalty marketing program; three, inspiring a sales and service culture; and finally, instituting a continuous improvement-focused operating model. By executing on these strategic initiatives and driving continuous improvement, as we continue to expect EBITDA margin expansion opportunities enterprise wide. We will now open the line for Q&A. At this time, we ask to keep your questions focused on the performance of the business and please do not ask questions about the ongoing restructuring process. Operator?

[Operator Instructions] Your first question comes from the line of Kevin Coyne from Goldman Sachs.

Just a quick question on 2016. It looks like you're going to renovate almost 5,000 more rooms in Las Vegas, which seems like it's continuing that accelerated pace, and you certainly have been getting great performance out of the ADR in those renovated rooms. But beyond 2016, will there be a further accelerated pace in '17 or will you revert back to a normal cadence of renovations?

Yes, we expect that the cadence will continue at this kind of a pace for probably in the foreseeable future, I'll say, the next three to four year given underinvested situation, as you know, over the last five years. So there is a lot more that came from and we've got a master plan that drives it by quarter, by year, so it's good for us, because we look at it as just an opportunity to invest in low-risk, high-return room refurbs, which we're pretty good at, and certainly, in the Vegas and most destination markets, you get a very high return on.

And I may have missed this in all the commentary, but have you stated in those renovated rooms what the incremental room rate you're getting is on a percentage basis?

It varies by property, but Eric, I don't know if you want any general guidelines that we give at all?

Sure, I can just give you some context, Kevin. When we renovate rooms substantially and change the branding of the tower, we then tend to be able to charge an enhanced premium something in the range of $48, $45. When it's a standard room renovation project where we don't necessarily change the theme of the room or just simply upgrade it, then we're kind of more in that $20 to $25 range, so it's a blend of those two, depending on what we decide to do with the particular tower and property.

Just turning to your comments on skills-based gaming, I believe I heard you mentioned that you're working to develop skills-based gaming. And I just wanted to clarify is Caesar's directly spending on that initiative or is that just an informal partnership with your gaming equipment vendors?

We're not investing in skills-based gaming in terms of -- we don't have standalone projects on that at all. We are doing side bets and we do develop our own table side bet games and we patent some of those, but nothing on skills-based games per se.

And in your commentary you mentioned that, Las Vegas was up in January sequentially due to CES, but was it also up year-over-year as well?

It was up year-over-year, Kevin.

And just my final question. I noticed the commentary didn't necessarily mention the High Roller. You did touch on the LINQ in terms of the F&B line up in terms of some new product coming in there, but I guess we've always thought that the wheel would ultimately have some potential for corporate and group events, and I'm not asking for specific performance stats, but can you tell us or give us any color in terms of how you feel about the performance to date and is there a push to get better performance out of that asset?

The wheel, as we mentioned before, Kevin, we provided a glimpse into the number of riders, that's generally consistent with that from the previous period. We do get a significant amount of group business and tour and travel business to join the wheel. One of the areas where we've seen particularly strong traction is with our Happy Half Hour promotion, where we have a bar cart in the wheel. And with it up-sell price on the ticket, customers can ride the wheel and have drinks while they are going around on the ride. So those efforts are definitely underway. It still drives a significant amount of business to the promenade and to the casinos that we have surrounding the wheel. And then from a return on investment perspective, we're pleased with the return from the initial capital investment.

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

So I wanted to start with -- I know in your presentation, you put for both CGPH casinos and CERP an unfavorable impact flat to $5 million. So I guess I was kind of curious why is it flat to $5 million? Is there a more precise?

So I'll address that. If you notice whenever we present a hold impact, we always provide a range. And part of the reason why we provide the range is because a predicted hold when you're talking about table games volatility has a number of factors including game mix, rules associated with the game, certain discounts and promotions that we offer and so we provide a range. It just happens that in this case the hold was modestly negative and our point estimate fell between the $0 million and $5 million range, so that's the range we provided.

And then when you talked about the bad debt expense from last year, can you just clarify exactly in CERP, was that added back? I assume that was added back to EBITDA last year, making it look higher, is that right?

No, it's the other way around. So it was not added back last year. We called it out last year as an item that was negatively impacting it. So this year's performance wouldn't have that associated bad debt expense.

And then just turning to CapEx. Can you help at all with, I guess, when some of these rooms will come out at some of your bigger room renovations?

When you say come out meaning have the construction projects be completed, so the rooms are back?

Yes. Or when they started, when they came out and when they're coming back in?

Yes. So we have a number of the room renovation projects underway. The Planet Hollywood phase one, which is a modest number of rooms we expect to be concluded this quarter, and then the large number will be concluded in the fourth quarter of this year. For Paris, again, we have the three projects that's currently underway that will be done also in this quarter and then the larger room products in the third quarter. You've heard us talk about the Julius Tower and we started the renovation in that on the fourth quarter and so the rooms are coming back at a regular pace now and we had sizeable percentage back for New Year's of last year. And then at Harrah's, we have a full tower down right now of around 600 rooms and that's expected to come back in the second quarter of 2016. So what we try to do is to space the room renovations, so that we as a market, from a market-wide perspective have a relatively constant amount of rooms out of service at any one time such that it doesn't negatively impact our ability to yield the hotel and can still run sizably high occupancies on the weekends, when we need the capacity.

And then just turning to the AC Convention Center, if you guys can provide a little bit of color of what you're seeing there? And also are you still expecting to get reimburse from the CRDA or is that not with everything going on in AC not going to happen?

So to answer that second question, the CRDA reimbursements were done, as the money was spent. So I think it was on every roughly $2 that we would spend, we'd get reimbursed a dollar on a month delay, something like that. And so to the extent that there is risk there, there maybe some few dollars remaining as we close up the project, but nothing substantial in terms of risk that we wouldn't get money from the CRDA. Overall, the convention center is performing exceptionally well and beyond our expectations. We continue to see very solid bookings. We anticipate that at the end of this quarter and as we head into the summer, we will start to see the number of actual room nights that are occupied pick up. As you know, convention here's typically don't have reluctance to book right around the time of opens of convention centers, because of the risk of delay to their project. But now that we've been open for five or six months those are starting to come in. And the feedback, we're getting continues to be very strong. The demand as we have mentioned before is also very strong in the Northeast corridor, and so we expect this project to be a very high-return, high-value projects for both the Harrah's Atlantic City and for the city.

My last question just has to do with margins, I guess, going into 2016. I know you had cited in one of the slides that you had inflationary cost pressures, but I know you also said margins were up so far. So I guess is there any guidance you can give with regards to what kind of additional improvement you can get from here?

I think we did say that we expected margin expansion, that's probably as aggressive as we want to get at this point in the year, given that the economy and other factors come into place. So we'll just feel good about our performance to date and feel positive enough to say that we expect margin expansion during the year.

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

I had a couple of questions. I wanted to just touch first in Las Vegas. It appears you're sort of on [ph] parity now with the strip in ADR after a number of years of lagging. So I was curious to hear how much more you think you can drive RevPAR in the Vegas portfolio? And maybe somewhat related to that is what your outlook is for Vegas RevPAR at '16? And then I had a couple of follow-ups.

Sure. We don't provide direct guidance, Dave, so I'll pass on that question. But what I can say is that our ADR increases despite having them been quite rapid over the last three years, we're still below our 2007 peak level. We're also below that of our peer set, when we look at our comparable assets. We believe there are a number of factors that drive that. Some are our operational efforts that we're undertaking to improve that, but others are capital-intensive, as we've mentioned and we're addressing the capital as Mark mentioned over the next three to four years and trying to improve the operational aspects that would help us get up to parity as quickly as we can.

The presentation has I think $350 million of incremental EBITDA related to cost savings and a lot of the marketing efficiencies. I was curious, if you think there is substantially more savings to come in your finding over the year? And what your thoughts are there? And then I had one last question.

I think that we are focused on improving productivity every year in the company. So we're developing a culture, where we try every year to figure out how to be more efficient. And this is why we had a great last year. Obviously, the rate of improvement is going to slow. But we still expect to find efficiency in our operations. We've got plans to do so. And we think we can find more ways to be efficient both in operations as well as in the marketing area and have plans to do so. We have a healthy set of initiatives this year that are offsetting those inflationary pressures that normal businesses have, and as well as the growth that we have planned for this year. So yes, we're feeling pretty good about productivity and hopefully this will be something that we'll be able to talk to for years to come.

My last question, I was just curious, if you guys consider any bond buybacks in entities outside of CEOC given some of the returns potentially there versus some other uses of capital, any thoughts there given where paper is trading currently? And that's it from me.

Yes. I think unfortunately, David, we can't address that question either talking about the capital structure at this point. We'll pass and you'll have to wait until we're done with the restructuring to really address any other capital structure questions.

There are no further questions at this time. I turn the call back over to Brian Blackman for final comments. End of Q&A

Well, we'd like to just wrap up and thank everyone for joining us on today's call. And we look forward to checking back in for our first quarter in a few months. Thank you very much.

Thank you for joining us. This does conclude our webcast. You may now disconnect. Have a good day.