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Caesars Acquisition Co CAESARS ACQUISITION CO FORM 10-Q (Quarterly Report) Filed 08/03/17 for the Period Ending 06/30/17 Address ONE CAESARS PALACE DRIVE LAS VEGAS, NV, 89109 Telephone 7024076000 CIK 0001575879 SIC Code 7011 - Hotels and Motels Industry Business Support Services Sector Industrials Fiscal Year 12/31 http://www.edgar-online.com © Copyright 2017, EDGAR Online, a division of Donnelley Financial Solutions. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, a division of Donnelley Financial Solutions, Terms of Use. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________ FORM 10-Q ____________________________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2017 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission File No. 001-36207 ___________________________________________ CAESARS ACQUISITION COMPANY (Exact name of registrant as specified in its charter) ___________________________________________ Delaware 46-2672999 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) One Caesars Palace Drive, Las Vegas, Nevada 89109 (Address of principal executive offices) (Zip Code) (702) 407-6000 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) _________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer o Accelerated filer x Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o Emerging growth company x If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 2, 2017 Class A Common Stock, $0.001 par value 138,984,958 CAESARS ACQUISITION COMPANY INDEX TO FINANCIAL STATEMENTS Page PART I. FINANCIAL INFORMATION Item 1. Unaudited Financial Statements Condensed Balance Sheets 3 Condensed Statements of Operations and Comprehensive (Loss)/Income 4 Condensed Statements of Stockholders' Equity 5 Condensed Statements of Cash Flows 6 Notes to Condensed Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations 21 Item 3. Quantitative and Qualitative Disclosures About Market Risk 35 Item 4. Controls and Procedures 36 PART II. OTHER INFORMATION Item 1. Legal Proceedings 37 Item 1A. Risk Factors 37 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 37 Item 3. Defaults Upon Senior Securities 37 Item 4. Mine Safety Disclosures 37 Item 5. Other Information 37 Item 6. Exhibits 38 Signature 39 Caesars Acquisition Company and its subsidiaries have proprietary rights to a number of trademarks used in this Quarterly Report on Form 10-Q that are important to its business, including, without limitation, The World Series of Poker . In addition, Caesars Entertainment Corporation, our joint venture partner in Caesars Growth Partners, LLC, and Caesars Entertainment Operating Company, Inc., and their respective subsidiaries, have proprietary rights to, among others, Caesars, Caesars Entertainment, Harrah's, Total Rewards, Horseshoe and Bally's. We have omitted the registered trademark (®) and trademark (™) symbols for such trademarks named in this Quarterly Report on Form 10-Q . 2 PART I. FINANCIAL INFORMATION Item 1 . Unaudited Financial Statements . CAESARS ACQUISITION COMPANY CONDENSED BALANCE SHEETS (UNAUDITED) (In millions, except par value and share data) June 30, 2017 December 31, 2016 Assets Current assets Cash and cash equivalents $ 34.2 $ 27.5 Receivable from related party 20.9 45.8 Prepayments and other current assets 1.1 1.8 Total current assets 56.2 75.1 Equity method investment in Caesars Growth Partners, LLC 1,629.8 1,605.8 Deferred tax assets 114.3 140.6 Total assets $ 1,800.3 $ 1,821.5 Liabilities and Stockholders' Equity Accrued income taxes $ — $ 28.5 Total current liabilities — 28.5 Deferred credits and other 96.0 94.2 Total liabilities 96.0 122.7 Commitments and contingencies (Note 6) Stockholders' Equity Common stock: $0.001 par value; 300,000,000 Class A shares and 900,000,000 Class B shares authorized at June 30, 2017 and December 31, 2016; 138,984,958 and 138,458,000 Class A shares issued and outstanding, respectively 0.1 0.1 Additional paid-in capital 1,034.7 1,028.5 Retained earnings 669.5 670.2 Total stockholders' equity 1,704.3 1,698.8 Total liabilities and stockholders' equity $ 1,800.3 $ 1,821.5 See accompanying Notes to Condensed Financial Statements. 3 CAESARS ACQUISITION COMPANY CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME (UNAUDITED) (In millions, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Revenues $ — $ — $ — $ — Operating expenses 8.0 7.3 17.3 13.9 Loss from operations (8.0) (7.3) (17.3) (13.9) Income from equity method investment in Caesars Growth Partners, LLC 4.7 24.4 18.5 48.8 (Loss)/income before benefit from/(provision for) income taxes (3.3) 17.1 1.2 34.9 Benefit from/(provision for) for income taxes 0.6 (8.6) (1.9) (17.2) Net (loss)/income (2.7) 8.5 (0.7) 17.7 Other comprehensive income — — — — Comprehensive (loss)/income $ (2.7) $ 8.5 $ (0.7) $ 17.7 (Loss)/earnings per share Basic $ (0.02) $ 0.06 $ (0.01) $ 0.13 Diluted $ (0.02) $ 0.06 $ (0.01) $ 0.13 Weighted average common shares outstanding Basic 138.9 137.4 138.8 137.4 Diluted 138.9 137.6 138.8 137.6 See accompanying Notes to Condensed Financial Statements. 4 CAESARS ACQUISITION COMPANY CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (In millions) Class A Additional Paid-in Total Stockholders' Common Stock Capital Retained Earnings Equity Balance at January 1, 2016 $ 0.1 $ 1,016.2 $ 51.1 $ 1,067.4 Net income — — 17.7 17.7 Stock-based compensation — 2.3 — 2.3 Balance at June 30, 2016 $ 0.1 $ 1,018.5 $ 68.8 $ 1,087.4 Balance at January 1, 2017 $ 0.1 $ 1,028.5 $ 670.2 $ 1,698.8 Net loss — — (0.7) (0.7) Stock-based compensation — 2.8 — 2.8 Common stock issuances — 3.4 — 3.4 Balance at June 30, 2017 $ 0.1 $ 1,034.7 $ 669.5 $ 1,704.3 See accompanying Notes to Condensed Financial Statements. 5 CAESARS ACQUISITION COMPANY CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (In millions) Six Months Ended June 30, 2017 2016 Cash flows from operating activities Net (loss)/income $ (0.7) $ 17.7 Adjustments to reconcile net (loss)/income to cash flows provided by operating activities Income from equity method investment in Caesars Growth Partners, LLC (18.5) (48.8) Distributions from equity method investee Caesars Growth Partners, LLC 18.5 12.3 Stock-based compensation 2.8 2.3 Deferred income taxes 26.3 13.9 Net change in long-term accounts 1.8 — Change in assets and liabilities: Prepayments and other current assets 0.7 4.4 Accrued income taxes (28.5) (0.1) Cash flows provided by operating activities 2.4 1.7 Cash flows provided by investing activities — — Cash flows from financing activities Proceeds from issuance of common stock 4.3 — Cash flows provided by financing activities 4.3 — Net increase in cash and cash equivalents 6.7 1.7 Cash and cash equivalents, beginning of period 27.5 19.1 Cash and cash equivalents, end of period $ 34.2 $ 20.8 See accompanying Notes to Condensed Financial Statements. 6 CAESARS ACQUISITION COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Note 1 — Description of Business and Basis of Presentation Organization and Description of Business Caesars Acquisition Company (the "Company," "CAC," "we," "our" and "us"), a Delaware corporation, was formed on February 25, 2013 to make an equity investment in Caesars Growth Partners, LLC ("CGP LLC"), a joint venture between CAC and subsidiaries of Caesars Entertainment Corporation ("CEC" or "Caesars Entertainment"). CAC directly owns 100% of the voting membership units of CGP LLC, a Delaware limited liability company, and accounts for its ownership in CGP LLC using the hypothetical liquidation at book value ("HLBV") approach to the equity method of accounting (see Note 3 — Equity Method Investment in Caesars Growth Partners, LLC ).
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