Least profitable of the fortune 500

Threads: 65
Posts: 3412

Joined: Aug 8, 2010

August 16th, 2010 at 2:02:53 PM permalink

I assume these numbers are millions of $. A billion here, a billion there, and pretty soon, you're talking about some real money.

I somehow doubt that merging with a company (Harrah's) that is itself foundering under $31 billion of debt would save MGM. They bought into a business model that was unsustainable and now they are disintegrating because of that bad judgment. It will remain to the vultures to fight over the scraps.

If they had just concentrated on offering VALUE to their customers, MGM would still be alive and functional, recession or no. But they tried to go the "boutique casino" route, thinking--stupidly--that the core casino customer was the fat cat smoking a cigar with a blond bimbette on his arm. WRONG. The lifeblood of the casino industry has always been Joe Shlabotnik who drives up from L.A. with $500 to spend and basically stays awake and drunk for 48 hours, or until he goes broke, whichever comes first. Joe doesn't CARE about fancy-ass, insanely overpriced amenities. Steer him to the crap table and put a gin-and-tonic in his hand, and he's happy.

The fact that a believer is happier than a skeptic is no more to the point than the fact that a drunken man is happier than a sober one. The happiness of credulity is a cheap and dangerous quality.---George Bernard Shaw

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

August 16th, 2010 at 2:44:02 PM permalink

The numbers are in millions. McDonalds seems to be pulling in extra billions by persuading the Starbucks crowd that they can get a good cup of java for less at McD's.

Mistake or not, I don't see how MGM can undo their decisions. Right now they are dependent on selling those thousands of condominiums at City Center. While Excalibur and NY/NY are both very profitable (as well as the MGM Grand), they simply will never pull in enough to reverse the $11 billion spent on City Center.

FleaStiff

Threads: 265
Posts: 14484

Joined: Oct 19, 2009

August 16th, 2010 at 2:52:32 PM permalink

Quote: mkl654321
But they tried to go the "boutique casino" route, thinking--stupidly--that the core casino customer was the fat cat smoking a cigar with a blond bimbette on his arm. WRONG. The lifeblood of the casino industry has always been Joe Shlabotnik who drives up from L.A. with $500 to spend and basically stays awake and drunk for 48 hours, or until he goes broke, whichever comes first. Joe doesn't CARE about fancy-ass, insanely overpriced amenities. Steer him to the crap table and put a gin-and-tonic in his hand, and he's happy.

Perhaps. I really wonder sometimes just what the real "mix" in Vegas is. Super whales, ordinary whales, rich, average, poor, hookers, dealers at a different casino, dishwashers, drug dealer, drug user.

MGM: focuses on the upscale with the bimbo (bimbette?) who values quality surroundings and quality food and booze.
Evil Empire: focuses on the ignorant fanny-packed tourist who instead of being steered to a 1.414 percent craps table is steered to an 8 percent slot machine and has to wait a half hour for a half-splash of booze.

I think its the Belagio that has Prive, a private gambling area which serves a free Cognac that sells for 5,600.00 a bottle. Something tells me the men there know real value and their women may look stunning but are not bimbettes.
Unfortunately the gamblers there just don't lose enough to cover the interest on the debt.

If there is a takeover by The Evil Empire, the insider executives will drink that cognac themselves and then burden Harrah's with even more debt.

Its all a matter of hanging on until a turnaround takes place or until its too late to even hope for a turnaround miracle.

FleaStiff

Threads: 265
Posts: 14484

Joined: Oct 19, 2009

August 16th, 2010 at 3:00:50 PM permalink

Quote: pacomartin
Mistake or not, I don't see how MGM can undo their decisions. Right now they are dependent on selling those thousands of condominiums at City Center. While Excalibur and NY/NY are both very profitable (as well as the MGM Grand), they simply will never pull in enough to reverse the $11 billion spent on City Center.

Ain't nobody buying condominiums nowhere! Its all Vulture Funds buying the half-completed condominium or else buying up the various units at fire sale prices or its sharp individual buyers who either are vultures or are close enough to being a vulture that they think they are one. Even if some of those condominium units do indeed sell, they won't sell in THIS market for enough to bail out City Center. Even the fools who think they can do a profitable Buy-Leaseback on a Strip Condo are going to find out they've paid high for something that brings in very little income. All those condominiums were describing themselves as owner-occupied, non-rental developments, but everyone who bought is trying desperately to rent them out. The only ones making money on condos these days are the flippers who buy them at a noontime auction and sell them at a 3:00pm closing at a substantial markup.

mkl654321

Threads: 65
Posts: 3412

Joined: Aug 8, 2010

August 16th, 2010 at 3:03:44 PM permalink

Quote: pacomartin
The numbers are in millions. McDonalds seems to be pulling in extra billions by persuading the Starbucks crowd that they can get a good cup of java for less at McD's.

Mistake or not, I don't see how MGM can undo their decisions. Right now they are dependent on selling those thousands of condominiums at City Center. While Excalibur and NY/NY are both very profitable (as well as the MGM Grand), they simply will never pull in enough to reverse the $11 billion spent on City Center.

Real simple. Admit the mistake. Sell the condos for whatever the market will bring, ignoring what MGM thinks they SHOULD sell for. Use the cash thereby generated to shore up existing operations, and ride out the storm. Use Chinese Mafia accounting to inflate the paper loss from the sales of the condos to the maximum extent possible. That way, MGM's tax burden will be nonexistent for the next five years. Use the breathing space granted by the extra cash to shrink operations, improve existing properties, and re-tailor marketing to the new economic realities.

The preceding makes so much sense that I doubt that MGM bosses will consider it for a second.

The fact that a believer is happier than a skeptic is no more to the point than the fact that a drunken man is happier than a sober one. The happiness of credulity is a cheap and dangerous quality.---George Bernard Shaw

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

August 16th, 2010 at 3:04:59 PM permalink

Quote: FleaStiff
Ain't nobody buying condominiums nowhere!

Hence my argument for the merger. It is the only way that I can see economy of scale saving the company. And it would barely do that.

If it gets busted up and sold for parts, then the investors will take an incredible bath. They would rather sell it off intact to Harrah's and get something for the property.

Wizard
Administrator

Wizard

Threads: 1494
Posts: 26516

Joined: Oct 14, 2009

August 16th, 2010 at 3:07:06 PM permalink

Quote: FleaStiff
Ain't nobody buying condominiums nowhere!

I hear Stanford Wong is buying lots of them at firesale prices. Does anyone know how is doing with them?

"For with much wisdom comes much sorrow." -- Ecclesiastes 1:18 (NIV)

Nareed

Nareed

Threads: 373
Posts: 11413

Joined: Nov 11, 2009

August 16th, 2010 at 3:09:40 PM permalink

If I stayed at one of those condos, I'd triple check the sprinklers.

Donald Trump is a fucking criminal

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

August 16th, 2010 at 3:21:15 PM permalink

Quote: Wizard
I hear Stanford Wong is buying lots of them at firesale prices. Does anyone know how is doing with them?

Condos are a little risker than single family homes to purchase at firesale prices. The problem is that it is difficult to control the condo fees, and banks steer away from the property when there are very few owner occupied units. In the last recession some condo units dropped to ten cents on the dollar.

Usually the single family homes tend to push back with some demand before they drop through the floor.

mkl654321

Threads: 65
Posts: 3412

Joined: Aug 8, 2010

August 16th, 2010 at 3:47:19 PM permalink

Quote: pacomartin
Hence my argument for the merger. It is the only way that I can see economy of scale saving the company. And it would barely do that.

If it gets busted up and sold for parts, then the investors will take an incredible bath. They would rather sell it off intact to Harrah's and get something for the property.

Economies of scale don't apply for multiple casinos that operate essentially independently of one another, even if they are owned by the same company.

The cocktail napkins and the chips each have their own distinct logos. The restaurants all have different menus. One casino has exploding tigers, the next features not-quite-dead entertainers from the 70s. You get my drift.

The fact that a believer is happier than a skeptic is no more to the point than the fact that a drunken man is happier than a sober one. The happiness of credulity is a cheap and dangerous quality.---George Bernard Shaw

FleaStiff

Threads: 265
Posts: 14484

Joined: Oct 19, 2009

August 16th, 2010 at 3:51:27 PM permalink

Quote: mkl654321
Economies of scale don't apply for multiple casinos that operate essentially independently of one another, even if they are owned by the same company.

The economies of scale are in the databases! All the player club information is pooled, players can be cherry picked for certain casinos, lured more often and tracked no matter where they play or stay. Or at least that seems to be the current theory. Who knows if its actually working out that way.

mkl654321

Threads: 65
Posts: 3412

Joined: Aug 8, 2010

August 16th, 2010 at 5:28:06 PM permalink

Quote: FleaStiff
The economies of scale are in the databases! All the player club information is pooled, players can be cherry picked for certain casinos, lured more often and tracked no matter where they play or stay. Or at least that seems to be the current theory. Who knows if its actually working out that way.

The term "economy of scale" refers to PRODUCTION. It takes one blackjack dealer, one table, one deck of cards, and one rack of chips to deal blackjack to six people. It takes X amount of floor space, and X amount of support personnel, to install a slot machine. Those costs are not changed in any way by acquiring another casino across the street.

If two casinos could be physically merged, there would be some minor economies of scale in heating and cooling, food service, etc. But for the most part, a large casino, or a group of casinos, cannot operate more cheaply than a small one, or a single casino, all other things being equal.

The fact that a believer is happier than a skeptic is no more to the point than the fact that a drunken man is happier than a sober one. The happiness of credulity is a cheap and dangerous quality.---George Bernard Shaw

teddys

teddys

Threads: 150
Posts: 5527

Joined: Nov 14, 2009

August 16th, 2010 at 7:11:03 PM permalink

Quote: Wizard
I hear Stanford Wong is buying lots of them at firesale prices. Does anyone know how is doing with them?

Last I heard Stanford Wong was buying condominiums in the complex at 4200 S. Valley View, just south of the Rio. He had about 6 or 7, maybe more now. I asked him for advice, and took a look at some of them when I was in Vegas. (That's right, I asked Stanford Wong for advice on real estate). I went with an agent, and we looked at a lot of condos on the West side of the valley. Eventually, I ended up not pulling the trigger, but I may in the future. I think they are a good investment. People will always need a place to live, and especially that close to the strip, where most of the jobs are. The complex itself is pretty nice -- not deluxe, but solid. I'm actually surprised they are still there since it is prime land just off the strip. According to one of the maps I saw, there was a casino resort planned for that space at one point.

"Dice, verily, are armed with goads and driving-hooks, deceiving and tormenting, causing grievous woe." -Rig Veda 10.34.4

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

August 18th, 2010 at 1:39:44 PM permalink

Quote: mkl654321
The term "economy of scale" refers to PRODUCTION.

The EOS would be in "general and administrative" (i.e. backroom operations). Plus if you close some properties (like Circus Circus) you don't have to worry about the customers running to the competitors. You already own most of the strip so there is no place to run.

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

August 18th, 2010 at 3:21:20 PM permalink

I suppose that Harrah's could try and pick up the pieces if MGM goes bankrupt. Of course with station casinos the ownership looks like it will go back to Fertitta family with nothing missing.

FleaStiff

Threads: 265
Posts: 14484

Joined: Oct 19, 2009

August 18th, 2010 at 6:11:58 PM permalink

Quote: mkl654321
The term "economy of scale" refers to PRODUCTION. It takes one blackjack dealer, one table, one deck of cards, and one rack of chips to deal blackjack to six people. It takes X amount of floor space, and X amount of support personnel, to install a slot machine. Those costs are not changed in any way by acquiring another casino across the street.

So you consider economies of scale to exist only for the table and chairs. A casino can just open its doors and passively await the players: it gains nothing by having the ability to host conventions but funnel attendees to a variety of casinos. It gains nothing from all those databases. It gains nothing by sharing buffet tickets.

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

August 19th, 2010 at 3:28:27 PM permalink

If MGM and Harrah's did merge the number of independent casinos making over $72 million last year in the strip region would get firly small (plus the Cosmopolitan).
Wynn/Encore
The Venetian/Palazzo
Treasure Island Hotel and Casino

Hilton
Gold Coast Hotel and Casino
Palace Station
Palms Casino Resort

thecesspit

thecesspit

Threads: 53
Posts: 5936

Joined: Apr 19, 2010

August 19th, 2010 at 4:03:34 PM permalink

Quote: FleaStiff
So you consider economies of scale to exist only for the table and chairs. A casino can just open its doors and passively await the players: it gains nothing by having the ability to host conventions but funnel attendees to a variety of casinos. It gains nothing from all those databases. It gains nothing by sharing buffet tickets.

There's a point where there is nothing to be gained by getting bigger. Harrah's and MGM own a big percentage of the action each (so would there by a Monopoly aspect to this as well), so the incremental gain in increasing your advertising/marketing lists from 2 million to 4 million is nothing like the same as from 1 million to 2 million. PLUS there's a lot of overlap.. plenty of people will have MGM and Harrah's player club loyalties.

There'd be a gain, but I'm not sure that gain would be much above the cost of a merger.

"Then you can admire the real gambler, who has neither eaten, slept, thought nor lived, he has so smarted under the scourge of his martingale, so suffered on the rack of his desire for a coup at trente-et-quarante" - Honore de Balzac, 1829

mkl654321

Threads: 65
Posts: 3412

Joined: Aug 8, 2010

August 19th, 2010 at 6:00:20 PM permalink

Quote: FleaStiff
So you consider economies of scale to exist only for the table and chairs. A casino can just open its doors and passively await the players: it gains nothing by having the ability to host conventions but funnel attendees to a variety of casinos. It gains nothing from all those databases. It gains nothing by sharing buffet tickets.

You appear to grossly misunderstand the concept. "Economy of scale" means that as a productive entity grows, its costs of production per unit---"marginal cost" goes down. When Ford doubled in size, its cost of making cars went down. A casino that doubles in size, however, will still have the same marginal costs OF PRODUCTION--of actually processing and paying bets. The things you mention are reductions in operating costs, which while very real, aren't the same thing as economies of scale. (Also, something like being able to host conventions more efficiently is outside the scope of the operations of a CASINO; those are the functions of a large HOTEL.)

The fact that a believer is happier than a skeptic is no more to the point than the fact that a drunken man is happier than a sober one. The happiness of credulity is a cheap and dangerous quality.---George Bernard Shaw

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

August 20th, 2010 at 9:45:34 AM permalink

Harrah's may want to merge with MGM as a defensive position.

By my calculation the 9 MGM Resorts on the strip came to 33.8% of the strip revenue (gaming + everything else)while Harrah's resorts came to 19.6%. Naturally this does not include ARIA hotel which just opened at the end of 2009 and Planet Hollywood which was not purchased by Harrah's at this stage

If MGM goes bankrupt and loses properties at firesale, then Harrah's may have two or three new competitors on the strip. If someone (say Penn National Gaming) gets the Mandalay Bay/Luxor/Excalibur group that threesome earns twice as much as the Mirage.

The combined operation might control close to 66% of strip revenue.

FleaStiff

Threads: 265
Posts: 14484

Joined: Oct 19, 2009

August 20th, 2010 at 1:32:59 PM permalink

Quote: pacomartin
If

Now balance that "if" against Harrah's picking up those assets at bankruptcy prices.

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

August 21st, 2010 at 10:22:03 AM permalink

Quote: FleaStiff
Now balance that "if" against Harrah's picking up those assets at bankruptcy prices.

The only problem with purchasing the assets at bankruptcy is that you have to arrange your own financing. Heavily indebted HET may have been able to pick up debts on Planet Hollywood (with prior agreement from the owner), but it would be difficult to arrange credit on the tens of billions to buy signifigant MGM assets.

It would be more likely that the casinos would go to several different competitors. Pinnacle, Ameristar, Penn Gaming, Carl Icahn, possibly even Boyd and Station casinos.

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

August 26th, 2010 at 12:45:42 PM permalink

BUSINESS ALERT

Marriot currently has 3000 rooms in 15 mid level hotels in Vegas,

Select Service Lodging (1293 rooms)
4 Courtyard Inns
2 SpringHill Suites
2 Fairfield Inns

Extended Stay Lodging (842 rooms)
4 Residence Inns
1 TownePlace Suites

Full Service Lodging (796 rooms)
1 Marriot, Las Vegas
1 Renaissance Hotel, Las Vegas

They have another 1000 rooms in two high end resort properties.
The Grand Chateau Vacation Resort on Harmon Avenue across from Planet Hollywood and JW Marriott Las Vegas Resort & Spa (out of 46 hotels worldwide) which features the Rampart Casino operated by Cannery Resorts on the west side of town.

Marriot just signed an agreement to book rooms for the new 3000 room Cosmopolitan Hotel and Casino resort next to MGM's City Center. The property should open in November.

Do you think this will noticeably help the gaming numbers for the strip? Or will it just add to the high end rooms on the strip that nobody wants?

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

May 5th, 2011 at 9:51:00 PM permalink

Latest Release of Fortune 5000 shows Sands passing MGM Resorts in Revenue. Sands is now Industry leader in profit for the Fortune 500.

MGM Resorts is still one of the least profitable of the entire Fortune 500.

FORTUNE 500 CASINOS & HOTELS
Issue date: May 23, 2011

Rank	Company	Fortune 500 rank	Revenues	% change from 2009	Profits	% change from 2009	Revenues %	Assets %	Stockholders' Equity %	Employees
1	Marriott International	210	$11,691.0	7.2%	$458.0	N.A.	3.9%	5.1%	28.9%	129,000
2	Caesars Entertainment	277	$8,818.6	-1.0%	$(831.1)	-200.4	-9.4%	-2.9%	-50.9%	69,000
3	Las Vegas Sands	342	$6,853.2	50.2%	$599.4	N.A.	8.7%	2.8%	9.0%	34,000
4	MGM Resorts International	380	$6,019.2	0.7%	$(1,437.4)	N.A.	-23.9%	-7.6%	-47.9%	53,000
5	Starwood Hotels & Resorts	441	$5,071.0	7.6%	$477.0	553.4	9.4%	4.9%	19.3%	145,000
6	Host Hotels & Resorts	494	$4,442.0	5.4%	$(130.0)	N.A.	-2.9%	-1.0%	-2.1%	203

Here are the 15 least profitable of the Fortune 500 corporations
-40.88% AbitibiBowater (Forest and Paper Products)
-34.15% Energy Future Holdings ( Energy )
-24.00% PulteGroup (Homebuilders)
-23.88% MGM Resorts International
-17.27% Avaya
-14.26% Freddie Mac
-13.74% Masco
-13.64% Boston Scientific
-11.41% Williams
-11.02% SunGard Data Systems
-10.64% Sprint Nextel
-9.94% Great Atlantic & Pacific Tea
-9.84% First Data
-9.56% Eastman Kodak
-9.42% Caesars Entertainment

...

25.07% Apache
26.28% Intel
26.68% Philip Morris International
26.94% SanDisk
29.01% Google
29.54% Qualcomm
30.02% Microsoft
30.74% Amgen
33.33% MasterCard
33.63% Coca-Cola
36.50% Gilead Sciences
36.78% Visa
42.79% Devon Energy
53.65% Corning

Most profit (i.e. most money made)

92 $8,505 Google 29.01%
11 $8,761 Hewlett-Packard 6.95%
14 $10,602 Citigroup 9.55%
4 $11,358 ConocoPhillips 6.14%
56 $11,464 Intel 26.28%
6 $11,644 General Electric 7.68%
70 $11,809 Coca-Cola 33.63%
23 $12,362 Wells Fargo 13.26%
26 $12,736 Procter & Gamble 15.98%
7 $12,967 Berkshire Hathaway 9.52%
40 $13,334 Johnson & Johnson 21.65%
35 $14,013 Apple 21.48%
18 $14,833 International Business Machines 14.85%
1 $16,389 Wal-Mart Stores 3.89%
13 $17,370 J.P. Morgan Chase & Co. 15.04%
38 $18,760 Microsoft 30.02%
3 $19,024 Chevron 9.69%
12 $19,864 AT&T 15.94%
2 $30,460 Exxon Mobil 8.59%

FleaStiff

Threads: 265
Posts: 14484

Joined: Oct 19, 2009

May 6th, 2011 at 3:35:35 AM permalink

Its probably better that the MGM holdings go to several different competitors, otherwise we will have to see if anyone is making book on whether Las Vegas gets renamed Harrah's or Ceasars or simply Evil Empire.

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

May 7th, 2012 at 10:49:37 AM permalink

The Latest issue of Fortune shows MGM Resorts as now the most profitable corporation in the HOTEL/CASINO industry
and the 3rd most profitable of the entire Fortune 500 only slightly behind Visa and Devon Energy.

That is a little bit of a surprise

Caesars Entertainment was in the bottom 10 (out of 500) in profitability percentage. Only 45 / 500 corporations lost money.

Rank Company Revenues % Assets % Stockholders' Equity %
1 Marriott International 1.6% 3.4% N.A.
2 Las Vegas Sands 16.6% 7.0% 19.9%
3 Caesars Entertainment -7.8% -2.4% -68.3%
4 MGM Resorts International 39.7% 11.2% 51.2%
5 Starwood Hotels & Resorts 8.7% 5.1% 16.6%
6 Wynn Resorts 11.6% 8.9% 29.4%
Issue date: May 21, 2012

Revenues Profits
Rank Company Fortune 500 rank $ millions % change from 2010 $ millions % change from 2010
1 Marriott International 217 $12,317.0 5.4% $198.0 -56.8%
2 Las Vegas Sands 278 $9,410.7 37.3% $1,560.1 160.3%
3 Caesars Entertainment 288 $8,834.5 0.2% -$687.6 N.A.
4 MGM Resorts International 331 $7,849.3 30.4% $3,114.6 N.A.
5 Starwood Hotels & Resorts 434 $5,624.0 10.9% $489.0 2.5%
6 Wynn Resorts 462 $5,269.8 25.9% $613.4 283.1%
Issue date: May 21, 2012

Doc

Doc

Threads: 46
Posts: 7287

Joined: Feb 27, 2010

May 7th, 2012 at 11:26:44 AM permalink

Quote: pacomartin
That is a little bit of a surprise

Revenues Profits
Rank Company Fortune 500 rank $ millions % change from 2010 $ millions % change from 2010
...
4 MGM Resorts International 331 $7,849.3 30.4% $3,114.6 N.A.
...
Issue date: May 21, 2012

I would say the big surprise might be $3.1 billion profit on $7.8 billion revenue. Can that be right?

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

May 7th, 2012 at 12:21:53 PM permalink

Quote: Doc
I would say the big surprise might be $3.1 billion profit on $7.8 billion revenue. Can that be right?

Actually, Doc, as I am not an accountant, I don't understand how they do that calculation. But it doesn't seem correct to me either.

From Annual Report
In 2011, we acquired an additional 1% of the overall capital stock in MGM China (and obtained a controlling interest) and thereby became the indirect owner of 51% of MGM China. We recorded a gain of $3.5 billion on the transaction.

The company is doing better. For instance City Center
Lost $260.6 million in 2009
Lost $254.0 million in 2010
Lost $56.3 million in 2011 (big improvement)

But that is a far cry from adding $3.5 billion in profit for acquiring 1% of MGM China to get majority ownership. It seems like funny accounting to me.

Revenue from the old resorts went up by 4.59%

Change | 2011 revenue | 2010 revenue | Resort
7.33% | $1,114,711 | $1,038,593 | Bellagio
1.12% | $941,007 | $930,541 | MGM Grand Las Vegas
7.67% | $777,287 | $721,945 | Mandalay Bay
1.71% | $570,524 | $560,918 | The Mirage
4.54% | $566,072 | $541,494 | MGM Grand Detroit
2.19% | $340,940 | $333,634 | Beau Rivage
4.99% | $333,209 | $317,370 | Luxor
8.36% | $268,859 | $248,115 | New York-New York
2.50% | $257,047 | $250,768 | Excalibur
12.99% | $255,580 | $226,204 | Monte Carlo
5.54% | $195,675 | $185,412 | Circus Circus Las Vegas
-6.12% | $145,220 | $154,688 | Gold Strike Tunica
1.69% | $126,771 | $124,668 | Other resort operations
4.59% | $5,892,902 | $5,634,350 | Total

Doc

Doc

Threads: 46
Posts: 7287

Joined: Feb 27, 2010

May 7th, 2012 at 1:14:15 PM permalink

Quote: pacomartin
From Annual Report
In 2011, we acquired an additional 1% of the overall capital stock in MGM China (and obtained a controlling interest) and thereby became the indirect owner of 51% of MGM China. We recorded a gain of $3.5 billion on the transaction.

Well, that makes it sound as if without that one $3.5 billion transaction, their $3.1 billion profit would have been a loss. I'm not an accountant either, but it sounds just a bit as if when they owned 50% of MGM China they didn't include any of that profit on their own books, but now with 51% ownership they claim it all. If that is the case, it sounds a bit like the accounting version of that quote about statistics that Mark Twain said was attributed to Disraeli: "There are three kinds of lies: lies, damned lies, and statistics."

If they are going to include the MGM China profit, then they should include all of the MGM China revenues and costs. If the $7.8 billion reported revenue included that, then maybe the China operations are doing so well that over there they make more profit than revenue. Pretty clever those Chinese.

Edit: Could they even mean that 51% of MGM China is $3.5 billion and this is a one-time gain?

reno

reno

Threads: 124
Posts: 721

Joined: Jan 20, 2010

May 7th, 2012 at 4:36:05 PM permalink

Quote: pacomartin
Caesars Entertainment was in the bottom 10 (out of 500) in profitability percentage. Only 45 / 500 corporations lost money.

Why isn't Caesars more profitable??? They are the most geographically diversified casino company in America. Is it (just) because they're not in China?

And should Caesars really be sinking hundreds of millions of dollars into remodeling Imperial Palace, building a ferris wheel, and opening a new shopping mall? Does the Strip need another shopping mall?

Doc

Doc

Threads: 46
Posts: 7287

Joined: Feb 27, 2010

May 7th, 2012 at 5:48:25 PM permalink

Quote: reno
Why isn't Caesars more profitable???

I suspect that an outlandish amount of debt to be serviced can really cut into the profit.

pacomartin

Threads: 649
Posts: 7895

Joined: Jan 14, 2010

May 7th, 2012 at 6:11:14 PM permalink

Quote: reno
Why isn't Caesars more profitable??? They are the most geographically diversified casino company in America. Is it (just) because they're not in China?

And should Caesars really be sinking hundreds of millions of dollars into remodeling Imperial Palace, building a ferris wheel, and opening a new shopping mall? Does the Strip need another shopping mall?

Doc is correct. With a lot of companies it has nothing to do with operations. It has everything to do with corporate debt. Ceasars Entertainment took on so much debt when they went private, that they cannot earn enough in operations to overcome the interest payment.

Ceasars paid $2.12 billion in interest in 2012
Compare that with Property operating expenses -$(5.21) billion

Similarly with MGM Resorts. They report a net loss every quarter, but somehow they repeated a $3+ billion net income in the 2nd quarter by only acquiring a single percent of MGM Macau (giving them a majority share). So they end up reporting a profit of over $3 billion for the year, putting them almost to the very top of the Fortune 500.

But by my reasoning they should have lost money for the year. They were reporting a steady loss (albeit not nearly as bad as last year). The profit from MGM Macau just means they acquired a majority stake in the property. MGM Resorts continues to report a huge loss in first quarter 2012.

$(89,871) 1st quarter net loss
$3,450,690 2nd quarter net income includes $3,496,005 Gain on MGM China transaction
$(123,786) 3rd quarter net loss

On the other hand, LV Sands and Wynn are making serious money because of their investments in Asia.

reno

reno

Threads: 124
Posts: 721

Joined: Jan 20, 2010

May 7th, 2012 at 9:50:03 PM permalink

Quote: pacomartin
With a lot of companies it has nothing to do with operations. It has everything to do with corporate debt. Ceasars Entertainment took on so much debt when they went private, that they cannot earn enough in operations to overcome the interest payment.

Well, maybe they ought to sell off some properties (Paris? Rio? Planet Hollywood?) to pay off their enormous debt rather than spend hundreds of millions building a ferris wheel and a new shopping mall.

pacomartin