A new report shows Nevada's major hotel-casinos had a huge drop in net income in fiscal 2008 as a global economic downturn worsened, hanging onto $721.2 million or a third of what they netted in the previous year.
The report released Friday by the state Gaming Control Board showed the 266 resorts grossed $25 billion but were hammered by increasing expenses during the fiscal year ending last June 30. The net income is just 2.9 percent of the gross, down from 9.1 percent in fiscal 2007.
While payroll totals were down slightly in fiscal 2008, there were big jumps in interest expense and in a catchall "other" category that includes various legal expenses, insurance premiums and other items.
The annual "Gaming Abstract" report also shows that casino departments at the big resorts had a total of $132.2 million in bad debt expenses and $2.2 billion in complimentary services to high-rolling gamblers.
The combined expenses of casino, rooms, food and beverage departments increased by 16.2 percent from year to year, while total revenue decreased 1 percent and net revenue decreased by 68.6 percent.
"This reflects both the national and global economy," Control Board analyst Frank Streshley said. "During the first half of the fiscal year, revenues were still growing. But the second six months was the start of our current decline and we saw a material downturn."
Streshley also noted that the slump in the January-June 2008 period wasn't as bad as the decline since then.
The report also shows the big resorts had nearly $5 billion in earnings before taxes, interest, depreciation and amortization, or EBITDA. That figure, an indicator that analysts watch closely, is down from nearly $5.8 billion in the preceding year.
The EBITDA, 20 percent of the resorts' total $25 billion in revenue, compares with nearly $5.8 billion in EBITDA in the previous fiscal year. The prior year's revenue total was $25.3 billion and its net was $2.3 billion.
The fiscal 2008 net income of $721.2 million in the unaudited report is the money left over after various expenses and state taxes—but not federal taxes—are deducted from gross revenues. The clubs paid $913.2 million in state gambling tax and license fees.
Depending on individual clubs, the federal taxes can take a third or more of the net revenues. Post-federal tax figures aren't included in the report.
The $25 billion in statewide gross revenues in fiscal 2008 includes $12 billion from casino games, down about $440 million or 3.5 percent lower than the prior year.
As a percent of total revenues, casino games accounted for 48.2 percent of the total, down from 49.4 percent. Hotel rooms revenues amounted to $5.1 billion, down about $17 million or 0.3 percent. As a percentage of total revenues, rooms accounted for 20.4 percent of the total, about the same as in the previous year.
Restaurant food increased 3.5 percent to $3.5 billion, or 14.1 percent of the total; and liquor and other bar sales decreased nearly 5 percent to $1.3 billion. Other revenue, largely from leases of resort space to retail shops, restaurants or other businesses, increased 5.4 percent to $3 billion.
On the expense side of the ledger, interest expenses increased 26.1 percent to $2.12 billion; and "other" expenses increased 27.3 percent to $2 billion.
The gain in interest expenses reflects borrowing at higher interest rates and some debt-laden private equity buyouts of major resort properties.
Resort executives' pay decreased nearly 22 percent, to $43.7 million, and payroll for administrative, non-departmental employees decreased 0.7 percent to $1.23 billion.
Advertising expenses were down 0.7 percent at $427 million; and utility costs increased 4.6 percent to $463.5 million.
All those costs are listed under general and administrative expense, which totaled $10.06 billion. That's up 16.2 percent compared with the previous year.
In the separate "cost of sales" accounting category, a $14.2 billion total was 0.6 percent lower than the previous year's total.
"Cost of sales" includes money spent on departmental payrolls and on supplies for all hotel-casino operations. That's everything from new card decks for blackjack tables to food for restaurants and liquor for bars.
The category used up 56.9 percent of the gross revenue. General administrative costs took the rest.
The report is based on financial data from 266 hotel-casinos that each grossed more than $1 million during the year and account for almost all of Nevada's casino revenues. The resort total is down from 270 in the preceding year. Individual properties aren't listed by name.
A breakdown shows resorts on the Las Vegas Strip had gross revenues of $15.8 billion and a net win of $709.4 million, down 57.3 percent. Downtown Las Vegas resorts reported total revenue of $1.1 billion and a net win of $30.8 million, down 52.4 percent.
Major clubs in the Reno-Sparks area had a revenue total of $1.6 billion and a net profit of $58 million, down 50 percent. Clubs on Lake Tahoe's south shore had total revenue of $518.6 million and a net loss of $19.3 million, down 173 percent.
Casinos in the Carson City-Gardnerville area had total revenues of $176.3 million and a net income loss of $7.5 million, the same as in the preceding year; and clubs in Elko County had total revenues of $439.8 million and a net profit of $34.1 million, down 14.4 percent.Related Articles:
Gaming stocks now on the rebound?
Las Vegas billionaires: riches to rags?
December gaming revenues continue slump