Caesars Entertainment, Inc.CZR
Caesars Entertainment, Inc. Fair Value Disclosure
Fair Value Measurements
Marketable Securities
Marketable securities consist primarily of trading securities held by the Company’s captive insurance subsidiary and deferred compensation plans. The estimated fair values of the Company’s marketable securities are determined on an individual asset basis based upon quoted prices of identical assets available in active markets (Level 1), quoted prices of identical assets in inactive markets, or quoted prices for similar assets in active and inactive markets (Level 2), and represent the amounts the Company would expect to receive if the Company sold these marketable securities. As of December 31, 2023 and 2022, the Company held $2 million in Level 1 securities and as of December 31, 2022 held an additional $2 million in Level 2 securities.
The Company held common shares of Flutter Entertainment PLC, which is a publicly traded company with a readily determinable share price. On July 7, 2021, the Company sold the remaining shares for $9 million and recorded a loss of $1 million on the sale date. Gains and losses have been included in Other income (loss) in the Statements of Operations.
Derivative Instruments
The Company does not purchase or hold any derivative financial instruments for trading purposes.
Forward contracts
The Company entered into several foreign exchange forward contracts with third parties to hedge the risk of fluctuations in the foreign exchange rates between USD and GBP. During the years ended December 31, 2022 and 2021, the Company recorded a gain of $73 million and $23 million, respectively, related to forward contracts, which was recorded in the Other income (loss) in the Statements of Operations. All forward contracts were settled as of July 1, 2022.
Interest Rate Swap Derivatives
The Company assumed Caesars Entertainment Corporation’s interest rate swaps to manage the mix of assumed debt between fixed and variable rate instruments. During the year ended December 31, 2022, the Company was party to four interest rate swap agreements to fix the interest rate on $1.3 billion of variable rate debt related to the CRC Credit Agreement. The interest rate swaps were designated as cash flow hedging instruments. The difference to be paid or received under the terms of the interest rate swap agreements was accrued as interest rates changed and recognized as an adjustment to interest expense at settlement. The term of the interest rate swaps ended on December 31, 2022.
Valuation Methodology
The estimated fair values of our interest rate swap derivative instruments were derived from market prices obtained from dealer quotes for similar, but not identical, assets or liabilities. Such quotes represented the estimated amounts we would receive or pay to terminate the contracts. The interest rate swap derivative instruments were included in either Other long-term assets, net or Other long-term liabilities on our Balance Sheets. Our derivatives were recorded at their fair values, adjusted for the credit rating of the counterparty if the derivative was an asset, or adjusted for the credit rating of the Company if the derivative was a liability. None of our derivative instruments were offset and all were classified as Level 2.
Financial Statement Effect
The effect of interest rate swaps designated as hedging instruments on the Balance Sheets for amounts transferred into Accumulated other comprehensive income (loss) (“AOCI”) before tax was a gain of $28 million during the year ended December 31, 2022. AOCI reclassified to Interest expense on the Statements of Operations was $12 million for year ended December 31, 2022. Net settlement of these interest rate swaps resulted in the reclassification of deferred gains and losses within AOCI to be reclassified to the income statement as a component of interest expense as settlement occurred.
Accumulated Other Comprehensive Income
The changes in AOCI by component, net of tax, for the periods through December 31, 2023 and 2022 are shown below.
| (In millions) | Unrealized Net Gains on Derivative Instruments | Foreign Currency Translation Adjustments | Other | Total | |||||||||||||||||||
| Balances as of December 31, 2021 | $ | 73 | $ | (36) | $ | (1) | $ | 36 | |||||||||||||||
| Other comprehensive income before reclassifications | 9 | 35 | — | 44 | |||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | 12 | — | — | 12 | |||||||||||||||||||
| Total other comprehensive income, net of tax | 21 | 35 | — | 56 | |||||||||||||||||||
| Balances as of December 31, 2022 | $ | 94 | $ | (1) | $ | (1) | $ | 92 | |||||||||||||||
| Other comprehensive income before reclassifications | — | 1 | 4 | 5 | |||||||||||||||||||
Total other comprehensive income, net of tax | — | 1 | 4 | 5 | |||||||||||||||||||
| Balances as of December 31, 2023 | $ | 94 | $ | — | $ | 3 | $ | 97 | |||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Feb 20, 2024 | Showing above |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 13, 2017 | |
| 2015 | Mar 15, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.