Key Takeaways
Railing against Carl Icahn may make NJ politicians feel good and show solidarity with Union voters; but grandstanding is not going to help keep Atlantic City casinos and resorts open. It is obvious, with new gaming competition in our previous markets, New York, Pennsylvania and now Maryland, that we have to cut back on gaming capacity. And with all AC casino resorts operating at a loss, why shouldn't owners expect employees and management to share in their financial hardship? Unfortunately press releases covering quarterly financial's, report operating earnings. That doesn't tell the full story, because they do not include the expenses of interest, real estate taxes, CRDA fees, building insurance, depreciation and other fixes costs. And all of these are cash expenses, except depreciation; and if that reserve is not spent, you wind up with tired carpets, outdated slot machines and deteriorating facilities (see Trump Plaza). Since 2006, when PA opened its first slot parlor, AC casino win has declined from $5.2 billion to last year's $2.5 billion (after removing free play, that wasn't offered in 2006). And net, pre tax profits, have declined from over $500 million to now a loss of $400 million plus, nearly a $billion decline. As for the Taj Mahal, Casino win has declined from 2007's $504 million to 2013's $257 million, operating earnings from $119 million to $19 million, a decline of $100 million. But the number an investor, like Carl Icahn, looks at is pre tax profits, and here the Taj has gone from a small profit of $2 million to a net loss of $30 million, since 2007. So its not unreasonable that Mr. Icahn would look to employees and management to share in the problems the AC industry is now facing, which could get worse. A new casino, Horseshoe, just opened in Baltimore; and a new casinos MGM, under construction, next to our Capital in DC. Plus new casinos planned in Philadelphia, and NY State, will undoubtedly get a share of our Northeast market. Taj went through a 3rd. bankruptcy in 2009, which wrote down $854 million in assets, and eliminated $814 million of debt, reducing interest costs from a high of $60 million to $26 million last year. But before Mr. Icahn, risks additional money on a loosing property, he is expecting, and deserves, some give backs from Unite Here and help from State Government. We need to remember that Mr. Icahn saved the Trop property, investing more money and hiring additional employees, to turn that casino resort around. And it is the best interest of all parties to try and keep another AC casino from closing on the Boardwalk. AC employees have to decide if unemployment, and its limited time frame, is better than a paying job, where the benefits are like they were in AC before casinos.
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