Casinos post record net income

CARSON CITY -- A new report shows Nevada's major hotel-casinos posted their highest net income ever in fiscal 2007 -- a combined $2.3 billion.

The report released Thursday by the state Gaming Control Board also showed that the 270 resorts had nearly $5.8 billion in earnings before interest, taxes, depreciation and amortization, or EBITDA -- the indicator that analysts watch most closely.

The EBITDA, 23 percent of the resorts' $25.3 billion in revenue for the fiscal year that ended last June 30, compares with $5.4 billion in the previous fiscal year. The previous year's revenue was $24 billion and its net was $2.1 billion.

"This was the fifth straight year of increases in net income," control board analyst Frank Streshley said in going over the board's annual Gaming Abstract. "If you look at the profit made during a slowing economy, it shows the industry was managing its expenses."

"Revenues are still increasing. Expenses are too, but at a much lower rate," he added.

The net income of $2.3 billion 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 $965.9 million in state gambling tax and license fees.

Depending on individual clubs, the federal taxes can take a third or more of the net revenue. Figures after federal taxes aren't included in the report.

The report shows some big expenses last fiscal year -- including higher payroll totals and increases in interest expense. But there was a drop in a catchall "other" category, which includes various legal expenses, insurance premiums, garbage bills and other items.

Casino departments at the big resorts reported $123 million in bad debt expenses and $2.1 billion in complimentary services to high-rolling gamblers.

While the combined expenses of casino, rooms, food and beverage departments increased by 3.6 percent from year to year, revenue increased by 4.9 percent and net revenue increased by 8.9 percent.

The $25.3 billion in statewide gross revenues in fiscal 2007 includes $12.5 billion from casino games, up $671.7 million, or 5.7 percent, from the prior year.

Casino games accounted for 49.4 percent of revenue, up from 49 percent. Hotel rooms revenues amounted to $5.1 billion, or about 20 percent of the total. That percentage is unchanged from the previous year.

Restaurant food increased about 3 percent to $3.4 billion, or 13.5 percent of the total; and liquor and other bar sales increased about 7 percent to nearly $1.4 billion. Other revenue, largely from leases of resort space to retail shops, restaurants or other businesses, increased 2.7 percent to $2.85 billion.

On the expense side of the ledger, executives' pay increased 5.5 percent, to $55.8 million. Payroll for administrative, nondepartmental employees increased 5.8 percent to $1.24 billion; interest expenses increased 4.6 percent to $1.68 billion; and utility costs increased 4.7 percent to $443 million.

There was little change in advertising expenses, down 0.1 percent at $430.1 million; and "other" expenses decreased 2.5 percent to $1.57 billion.

All those costs are listed under general and administrative expense, which totaled $8.66 billion. That's up 2.2 percent from the previous year.

In the separate "cost of sales" accounting category, a $14.3 billion total was 5.9 percent higher than the previous year.

"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 56.6 percent of the gross revenue. General administrative costs took the rest. Both percentages were close to the percentages for the year before.

The report is based on financial data from 270 hotel-casinos that each grossed more than $1 million during the year and account for almost all of Nevada's casino revenues.

A breakdown shows resorts on the Las Vegas Strip had gross revenues of $15.8 billion and a net win of $1.66 billion, up 33 percent. Downtown Las Vegas resorts reported revenue of $1.1 billion and net win of $64.6 million, down 54 percent.

Major clubs in the Reno-Sparks area had a revenue of $1.64 billion and a net profit of $116 million, up 2.8 percent. Clubs on Lake Tahoe's south shore had revenue of $527.9 million and a net win of $26.5 million, down nearly 43 percent.

Casinos in the Carson City-Gardnerville area had revenues of $178 million and a net income loss of $7.5 million, and clubs in Elko County had revenues of $407.3 million and a profit of $39.8 million, up 7.9 percent.