Caesars Entertainment reported a 2.3% revenue increase to $2.24bn for the third quarter of 2019, but the operator swung to a loss due to impairment costs from the company’s sale of the Rio All-Suites Resort & Casino for a lower fee than the company’s valuation.
Revenue increased slightly in every vertical except one. Casino made up just over half of the company’s $2.24bn of revenue, at €1.13bn, 2.6% more than in 2018. Food and beverages were the next largest source of revenue at $411m, up 0.7%, with revenue from hotel rooms following closely behind with $409m, up 3.5%.
Management fees contributed $15m to revenue, down 6.3%, while reimbursed management costs brought in $53m, up 3.9%. Other revenue increased 1.9% to $217m. Las Vegas venues brought in $973m for Caesars, up 6.9% from 2018.
Venues in the rest of the US brought in $1.12bn, 0.5% less than in 2018, a decline the company attributed to increased competition in Atlantic City and Southern Indiana. Revenue from locations outside of the US fell 4% to $144m, which Caesars said was primarily due to lower gaming volumes in the UK.
However, while revenues slightly increased, expenses rose 18% to $2.3bn. Casino expenses continued to be the largest cost, up 2.1% to $636m. Food and beverage costs rose 0.7% to $283m, while room costs increased 3.3% to $125m.
Property, general and administrative expenses increased by 0.6% to $477m.
Reimbursable management costs, all of which were reimbursed and counted as revenue, came to $53m, while depreciation and amortization costs fell 13.5% to $255m. Corporate expenses fell 21.5% to $62m.
However, the company incurred a new $380m loss from impairment costs, which it said could be attributed to land and buildings at the Rio, which was sold in September.
According to valuations made by Moelis & Co. and published in July 2017 during the merger of Caesars Entertainment Corporation and Caesars Acquisition Company, the Rio’s value was between $636m and $836m. However, its a company controlled by a principal of real estate investment vehicle Imperial Companies was for $516.3m.
Other operating costs increased 13.8% to $33m.
The increased expenses left the company with a $68m operating loss, down from a $232m profit last year. After $341m in interest costs and $27m in other income, Caesars posted a pre-tax loss of $382m.
The company received a $22m tax benefit for a $360m net loss, after reporting a $111m profit in 2018. After noncontrolling interests were accounted for, the net loss attributable to Caesars was $359m, compared to a $110m profit in 2018.
The company’s Las Vegas operations, which include the Rio, made a $237m loss, while other US operations made a $49m profit. Operations abroad made a $171m loss.
Caesars also stated in its results that its proposed $17.3bn merger with Eldorado Resorts remains on track to close in the first half of 2020.