The press releases by the NJ Division are continually misusing the word and concept of "profit". For most companies the financial implication from being profitable, means you owe income tax to the IRS. But when the NJ authorities report profits, they are referring to EBITDA, earnings before interest, taxes, depreciation and amortization. And in NJ, it also means before the 1.25% payment to the CRDA. Ironically, Revel, the property most in financial distress, allowed the AC casino industry to show a net profit of over $700 million in the 2nd quarter, because they wrote off $1.3 billion of debt in their reorganization. Analyzing the other 11 casinos, 3 actually reported net income, Atlantic Club, Showboat and Tropicana, but the Atlantic Club's positive showing had to do with the $11 million non refundable deposit they received in their sale agreement.
Tropicana had no interest charged and Showboat only $35 thousand, greatly enhancing their statement of operations. Showboat was the only casino showing any tax due to the IRS.
If we eliminate Revel from the analysis of the industry's most recent performance, the EBITDA improves from $65 million to $106 million; but then we need to subtract depreciation of $58 million, inter company charges of $31 million, interest of $64 million and CRDA payments of $5 million; resulting in a pre tax loss of $51 million. Then non operating adjustments, like a write down of asset values, or a refund of real estate taxes, added another $8 million of losses and net IRS tax refunds of $14 million bring the final results to an after tax loss of $44 million. Since depreciation is a write down of the value of fixed assets, we actually have cash on hand, as long as we don't replace tired furniture or slot machines, leaking windows, heating and air conditioning systems, kitchen equipment and on and on. One of the reasons for Borgata's continuing success is the money they re-invest in their property, where other properties like Caesars, has a corporate balance sheet that does not permit much cash to replace assets and refurbish their properties. We need an accounting class for some that cover gaming to better understand a financial statement, so that we aren't continually overstating the health of AC's casino industry.