Direct cost components
Year-to-date, Pinnacle Entertainment (PNK) has incurred direct costs in the following areas:
- food and beverages
- retail, entertainment, and other activities
The chart above shows that 87% of PNK’s direct costs resulted from casino operations. For PNK competitors Boyd Gaming (BYD) and Penn National Gaming (PENN), about 73% and 78%, respectively, of direct costs came from that source.
Taxes formed the bulk of PNK’s gaming expenses. The company had around $786 million in gaming expenses in 2014 year-to-date (or YTD), and about $416 million of this amount was from taxes.
Depreciation and amortization expenses increased in 2014 YTD as compared to the same period in the prior year. This increase resulted from the 2013 acquisition of Ameristar and the opening of Belterra Park in May 2014.
Corporate expenses include those for unallocated payroll, professional fees, travel, and other general and administrative activities that are not directly related to PNK’s casino and hotel operations. The realization of synergies from the Ameristar merger and integration partially offset PNK’s corporate expense increases in 2014 YTD.
It should be noted that direct costs are directly attributable to the specific product or output from which the company generates its revenues. Indirect costs such as depreciation and administrative expenses are difficult to assign to a specific product or output.