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twitterStation debt to take bite of workers’ benefit
Company will end match of 401(k) contributions, at least for time being
Tuesday, Dec. 2, 2008 | 2 a.m.
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Station Casinos’ decision to go private in a management-led buyout last year was hailed at the time as a smart, long-range strategy that would allow the company to escape the shortsighted demands of Wall Street.
Yet the debt needed to complete the $9 billion buyout forced what some Station employees will surely view as a shortsighted move: The company last week announced it will suspend its matching contributions to employee 401(k) plans starting Jan. 1 to cut costs.
Station is among the first gaming companies to suspend contributions to the retirement benefit.
The company said it will periodically evaluate the potential reinstatement of matching contributions.
The move isn’t surprising given that Station is among the most highly leveraged gaming companies during an unprecedented economic downturn that has disproportionately affected Las Vegas — a town dependent upon construction and population growth.
And yet it is perhaps more humbling for the dominant operator of suburban casinos, a business once believed to be largely sheltered from economic swings but that now appears to be bearing the brunt of the downturn.
Executives say companies can use cuts in 401(k) contributions, which can be viewed in some respects as a cut in pay, as a way to avoid the more drastic step of additional layoffs.
Station spokeswoman Lori Nelson said the company is looking at such actions “to keep as many of our team members employed as possible.”
Many casino companies, including Station, have laid off hourly workers in response to loss of business and have cut middle management to streamline operations.
Though Station has declined to disclose figures on total layoffs, the staff cuts are obvious at some of the company’s casinos, where gambling floors that would normally be busy during the week are nearly deserted. Rather than staff empty areas, the company, like many others, has reduced staff.
Although the economic decline was unanticipated, some say Station didn’t help its situation by spending more than $1 billion on Red Rock Resort, a luxurious locals casino that opened in phases starting in 2006. The company’s newest casino, Aliante Station, opened last month at a cost of $660 million.
Station reported about $5.4 billion in debt as of Sept. 30, up from $5.2 billion at the end of 2007, after the deal closed.
Compared with the same periods a year earlier, Station’s revenues were down 10 percent in the third quarter versus 7 percent in the second quarter, while earnings were down 13 percent, ahead of the second quarter’s 11 percent decline. At Green Valley Ranch, one of the company’s status properties, earnings are down 22 percent.
(Green Valley Ranch and Aliante Station are joint ventures between Station Casinos and the Greenspun family, which owns the Las Vegas Sun.)
It’s a major reversal for a company that has built or bought 14 casinos in about as many years and was propelled to unparalleled heights during the tourism and construction boom. The company’s growth plans, which were expected to be led by its planned Durango Station casino in the southwest and a proposed megaresort called Viva on Tropicana Avenue west of Interstate 15, will no doubt be on hold for years until the credit markets improve.
And yet, even critics of the company’s aggressive style and executive egos say Station’s experience competing fiercely for business, even when times were good, will stand the company in good stead as it makes what will likely be even more tough decisions in the coming months.
Last week, Station announced plans to exchange certain bonds coming due in the next few years for a pair of bond issues with 10 percent interest due 2016. That gives Station more time to pay its lenders but doesn’t fix the problem faced by many gaming companies — led by Station and Harrah’s Entertainment, which also went private a year ago through an expensive leveraged buyout.
Both companies are making interest payments on their debts yet still face potential defaults on bank loans given that banks generally require companies to maintain a certain amount of earnings relative to debts. Station has more than $10 of debt for every $1 of profit, a ratio that has increased in recent weeks as earnings have worsened and interest costs have risen. So-called leverage ratios that are more than eight or nine times earnings aren’t sustainable and could eventually lead banks to demand repayment, analysts say.
The industry’s two largest companies, Harrah’s and MGM Mirage, have not cut 401(k) contributions. Boyd Gaming, a Station competitor, declined to comment.
But MGM Mirage recently made two changes to its benefit plans to trim costs.
The company suspended contributions to a deferred compensation program for fewer than 1,000 high-level managers. Managers may still participate in the program, which allows them to receive a portion of their salary at a future date, though they no longer receive matching funds from the company. Also recently, MGM Mirage terminated a supplemental retirement program for executives that contributed company funds into a managed account.
While other major gaming companies haven’t yet made cuts to 401(k) contributions, gaming executives who requested anonymity say it’s an option that others will implement or at least consider amid the downturn.
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This is brutal! Casinos seem to be as reckless as their slotmachines are! For many years, Station Casinos officially and with pride declared being "Among the Top 100 US companies to work for". After such changes, I think they no longer fit into that cathegory. In my country, such moves are illegal. An employee's life does not end upon retirement. For Station Casinos apparently it does. It's obvious that people are unable to live upon their pension money solely. So what this means is more poverty for the elder and a very short sided money savings program for the company. Elder people in Vegas would perhaps spend some money gambling. But this way these people can't even afford that any longer! It's a shame to read about such methods. Pure and simple.
Boris Radtke, Switzerland
Again the entitlement mentality. Where in the Constitution does it say that the government or any company must put into a fund for your retirement or provide you a source of income in your retirement? Whatever happened to taking care of one's self? Save your own money! It was a perk to have the matching contribution - not a right. Every individual knows they will some day retire. Every individual has a responsibility to be accountable to themselves to save for that time. But then again, accountability and responsibility seem to be two words that are lost on most of today's citizens.
Monday, Culinary Union Secretary-Treasurer D. Taylor declined to discuss the union's organizing efforts of Station Casinos, but the Taylor and the Unions should be more worried about retaining the jobs for their current Strip operators union members.
With the latest Strip operators Union agreement the price point for casino services has cost thousands of union jobs, while Station Casino is retaining their team members.
Lack of a Union at Station Casinos allows the owners (including the pro-union Greenspun family, which owns the Las Vegas Sun) to address the current recession in the most favorable way for employees.
Culinary contracts mandate employers contribute 59 cents per hour worked to an employee's pension, but if you have no job you get no contribution. Station is in a position of making that contribution next year when conditions improve.
Maybe people feel some 'entitlement' from their own country because their own country seems to feel it's ok to use their tax money to take care of the rest of the world....... It only stands to reason that if we're gonna pay to take care of the rest of the world then maybe our government should be willing to help US out a little at retirement time. I see no problem with that logic at all.
I agree with azsk -
Is some level of financial security in the years when you are too old and health starts to fade - a sense of entitlement? It's a cornerstone of the America that used to exist before BIG CORPORATIONS devoured our culture and workforce with off-shoring jobs, cancerous expansion that destroyed the Main Street USA and Mom & Pop small buisness - and the corruption of Washington DC lobbyists.
After the plunder of America and when these Corporations get in financial trouble, they ask for tax payer money or they just sell to an obscure hedge fund from Dubai.
Matois, No one has mentioned anything about entitlements or the such. As a matter of fact Station Casinos devoloped it's 401K plan as an inducement to lure and keep skilled employees. Why would anyone in their right mind bring up the Consitution? It is irrelevant unless someone is simply granstanding? By the way it was Station Casinos who advertised themselves as the best employer and one of the best places to work in America. I think you post just to get a reaction without any concern for the facts. I have found that the self righteous who preach accountability and responsibility are the very ones who will take the first hand out. I would like to buy you for what are really worth and sell you for what you think your worth. Now that is a 401k.
Furture 2012, Your post is self serving and disingenuous. Station casinos bankrolled and lost the farm on the backs of the very employees it claimed had the best jobs in America. Do not for a minute compare the Greenspun family to these hucksters (Station Casino's) who have perpetuated this fraud on everyone they have come in contact with. There is a reason they went private and decided to not be publicly traded, Staion Casinos could not pass the scutiny of Wall Street. Station Casinos let greed lead them and now they can not service their debt. It is over. If you took the time to study the issues you would know that to.The unfortunate part of it is they lied to and took advantage of their employees.
Regarding your ignorance about the Culinary and the strip hotels, there will be lay offs but those same people will be brought back to work and if they chose will retire from their jobs in the furture. The same can not be said for Sation Casinos's employees. Think before you post such tripe.
So, as far as I remember, most casino employees , especially dealers and slot personnel, are not being paid much more than minimum wage. Is that correct? Minimum wage does not mean that a person is extremely underqualified or....."not capable" to find something that's better-paid. However, with the tips going down in the industry and increasing numbers of slotmachines versus de-creasing number of table games, it becomes more and more clear and a dealer life in Vegas has turned into a struggle. To make ends meet is one thing but to survive after retirement is a completely different story. In the country where I live- and I am not saying that everything is perfect- the company is to pay approx 5 per cent of my paycheck into a savings fund (pension fund), plus it adds another 5 per cent of its own into that fund. In other words, it's matching my amount. This is what we call the "2nd pillar". 1st pillar, that's my social security, which in no ways will be sufficient to pay for my living when I get older. However, even with 1st and 2nd pillar combined, life for a regular worker will not be easy when he's being retired. For that reason, our government gives us the chance to save tax-free up to a certain amount per year, that's money I will not get back before I retire. So, with all 3 pillars combined, life should be possible. I honestly can't see a way how a person depending on minimum wage and perhaps 2500-3000 dollars in wages in total per month is able to put enough money aside for his/her retirement unless there's something such as the 401k. The rich and wealthy of course, they don't care. They've got enough, anyway. I wonder if they would still talk the same way if they'd be the ones working tough for little money and then being cut their pension plan.
I like Station Casinos very much. However, now that I see a different face of the company, I might go gamble elsewhere on my next visit in Sin City.
Boris Radtke, Switzerland
Matois and Future 2012 seem to forget the demographic of casino customers. Many of those who come to Vegas to gamble just happen to be living on their 401K and other retirement benefits. How willing do you think the AARP and other organizations will be to invite their members to a Station Casino now that Station has decided on daily cash flow instead of supporting their employees? How many senior groups and tour companies around the country who cater to senior travel groups will be willing to sponsor trips to a casino that doesn't protect the very means these customers utilize in the first place? This is typical corporate short sightedness. Forget the Culinary Union. Station's own customers will likely bite back pretty hard against this move. The market will demonstrate their poor judgement.
Station Casinos are on the verge of not meeting it interest payments on its debt.
It if does not take these measures then it next step is reorganization in bankruptcy.
Boris, your 5 + 5 is similar to our 7 + 7 in FICA/Medicare. The flaw here is that the amount you pay in is rarely the amount you get back. As for Homer wanting to buy and sell me for what I'm worth, you don't have enough money, pal.
I just marvel at the attitude of the last 30-40 years that the government owes everyone (including big and small business) a handout and that corporate America owes every employee every perks. I'll be the first to agree that the US should keep a lot more dollars at home and fix what's broken here before shipping those dollars out of the country. What I don't understand is the mentality that corporations have an obligation to provide perks. Companies that can afford it should have the option to offer them. Companies that can't shouldn't be forced to offer them. As well, if someone chooses to gamble in working in a service oriented position that relies heavily on tips, they should be prepared for the day or days when those tips aren't there. Alternatively, the casinos could go to a tipless environment like the rest of the gaming world functions outside the US and then there would be no room to complain when one works for a straight hourly wage.
I do agree minimum wage is a joke for the most part. With the exception of some states and locales who have enacted living wage laws, it truly isn't possible for the average person to live on minimum wage. So what's the fix? I don't think there's a single best answer to that question. And certainly the people "we've" elected into office have no clue - including the scary guy going in who wants to spread the wealth.
Isn't 7&7 FICA / Medicare the cost for Medicare? As for me, I pay the full amount of my health insurance, but it's only me to decide the level of insurance (from public to private) and the percentage of my own share I pay up to a certain amount. Perhaps I don't get it right at this time.
As for our pension fund plan, this so-called "2nd pillar", that money goes into a pension fund that's of course cut in a percentage by the company A corp. managing big pension funds can't for instance go gambling on Wall Street with that money and burn the people's savings. Also, I pay my 5 and some per cent per month, and the company must match that amount, by law. By law it says "must match at least". Some very successful companies of our country pay 60 per cent and the employer pays 40 per cent, which is very generous. Some top league managers get it all on top of their salary, which in my eyes is a bit exaggerated.
Part-timers who make less than a certain amount of hours per week and are paid by the hour can't contribute in this pension funds plan, this only applies to full-timers or people with fixed work hours contracts. A student working 10 hours/week at a McDonald's store does not get those pension plan benefits. And it's making sense in a way.
I also agree that casino workers should not depend on minimum wage and therefore be forced to hassle for tips. It's not making any sense to me that a dealer who is making very little tips has a tough living although he's working diligently 40 hours/ week. They have a different system over here , so the tips and the guaranteed paycheck, that's a bit of a mix of both, and therefore guarantees a normal life to our casino employees, even if the tips go down. If the tips are really good, it's both parties that benefit, the company itself, and the employee up to a certain percentage.
Like you said, both sides have its Plus and Minus, it's hard to say what's the best solution. I just don't think it's a good idea to cut the 401K plan in order to save expenses. It will only make the employees unhappy and make them walk away as soon as they have found something new with better plans for their personal future. It might perhaps be a good idea to sell employees companies' stocks at a discount, making them shareholders and contribute them on the company's success. These stocks could be frozen for years (perhaps until retirement) and be a great pension plan to the workers. And a big motivation for these people to stick with the company and make it grow up. People who leave the company should then not be able to sell these stocks until retirement age but contribute on the dividends and such. A company such as Station Casinos that went private can't offer this. But there are tons of other companies that are already following such a policy over here in Europe. It might be something to help Vegas out of the slump?
Greetings
Boris
First of all - any money the government gives BACK to its' citizens is NOT a hand-out (unless the person receiving the money hasn't worked a day in their life). When the government gives BACK money to its' citizens it's just money the citizens GAVE THEM to begin with - so in a sense we have been giving the government one hand out after another and instead of investing wisely so we can ALL realize a very nice rate of return the government has choosen to take care of OTHER COUNTRIES needs instead and then when we, the citizens who gave the money to the government in the first place, when WE need it back to exist some look upon it as though people are looking for a hand-out. I prefer to call it a hand-BACK. Where do you think the government gets the money to begin with if not from its' taxpaying citizens? Why is this government always more concerned about taking care of other countries needs than they are about helping out their own citizens? Do you think the big-wigs (with all their tax loopholes) give a crap about the rest of us? Doubt it.
If Stations goes bankrupt this was going to happen anyway. What's worse, losing a 1000 jobs or having 10000 people not get a matching payment...
A lot of people stopped contributing to their 401K in this economy anyway, most of the ones still contributing are in pretty good paying jobs and contributing to retirement anyway so this impact isn't to people who REALLY need this to make ends meet long term.
It's not ideal, but this is a small move that affects a few to make a huge impact to many.
The company I work for stopped giving a company match last January. Im in sales and Its a tuff economy for everyone not just the casino workers. Best to keep the jobs we have and get trough this period. Some days I make 0 because its all commission based. The commission has been reduced from 8% to 3.5% and I hope the company survives. I did not complain when our company cut the 401k match or the commission because the whole town is taking a big hit. Like I said before I feel lucky to be able to make some money a few days a week. If you live in Las Vegas please go buy a new mattress cause most of us are really hurting now. No sales no Money and no other jobs to go to. Just using savings to afford gas, food, and dry cleaning to make it until the economy comes back. Just wanted to tell the Stations Employees It could and is worse for some of your neighbors.
it's brutal to watch this city die a little each day.
at some point, maybe next week, maybe next month, one of the local casinos in town is going to have to close.
I do not believe we are at the bottom yet either.
Next year, there will be a wave of layoffs throughout the country that will continue to drive down the tourist market here and will trigger more layoffs here.
I am hoping that 2010 will be the bottom.
Stations casinos might be forced to shut down one or two of its older casinos before it is over with.
Sounds like Station Casinos' plans for a new hotel and casino in Reno off the Mt. Rose highway are history. And the Bass Pro Shop to go with it??
As a matter of fact, I have been reading the latest action news and am getting more and more concerned about Las Vegas. I noticed that the number of prostitutes approaching me on several casino floors has dramatically increased. Along with that I am afraid that the crime rate eventually has to pull up since more and more people will be forced in a situation that they simply have nothing to lose anymore... I used to travel a lot to L-V from Europe, at least 2-3x per year. Chances, however, are great that 2009 will be a Zero-Vegas year for me. And I think I will not be the only one. Simply put, as long as the city is tightening up as quickly as economy is shrinking, visiting Vegas becomes less and less interesting. There are other places in the world worth visiting, there's gambling around the planet now, and if Las Vegas' casinos take away what once was the greatest attraction (promotions, funbooks, cheap hotel rooms, good and inexpensive dining, great videopoker machines) why would I then come to Vegas?
All those top marketing professionals who thought Vegas remains a Golden Goose till the end of our lives should finally understand that something must be done, eventually!
Greetings from Switzerland,
Boris Radtke
Boris seems to get it now why can't Vegas 'get it'
lol, I think there's a much more paperwork for the top managers than for a simple reader....These companies have billions of dollars in debts , and interests to pay on top of that, with no single-digit interest rate. I think that's probably one of the biggest problem they have to. I pray that Las Vegas Sands will not go bankrupt with all those projects they have going. Eventually they will or have to sell some of their projects. Or raise capital which would also make my stocks worth less. Anyway, although I am not a big fan of those super casinos on the Strip ( I love the locals places when I come visit) I have a big bet going that LVS will make it in Singapore with their Marina Bay Sands, Singapore project......good luck, LVS!
Stations makes the same moves as all the big names. They hire piss poor workers, leaving the qualifed unemployed because they like the young pretty people. They pay the bosses and owners exhorbetent amounts of money, taking from those who make the casinos money. Any idiot who thinks the managers or owners is the draw is a world class idiot. It is the employees, and I for one, am so glad to see these terriorists struggling. They steal from the employee to get fat and happy, and those who visit Station Casinos should stop going there and support good employers who are good for America and Nevada, not self serving arrogant stealing bastards.
Bartender, I think you hit the point! It's a shame, indeed. The companies try to save payroll by hiring people without experience bvecause they cost nothing. This is a policy being done in many companies these days.I see it myself at the company I work for. The payrolls may be a bit lower, but so are the revenues of such employees who have never been trained to deliver good service. On the other hand, the big collectors of the fat paychecks are acting from behind the curtain, unknown, unseen, but they keep collecting their fat bonusses. Shame on them!!!
Seriously?! If you honestly really think that Station Casinos is a bad Company, I don't even want to know what you people think about the Strip properties that are hiding their dirty little secrets and are dropping people left and right without even as much as a notice or regards to their economic situation. If you really research the Company you will find out that Station Casinos have found positions for about 70% of the Employees that were let go and were given at least a months notice prior. They also have a management team assigned to work directly with Employees that were layed off in the Company to assist them in any way. What Gaming Company actually takes the time to individually help the employees that were layed off? How is it that Station Casinos has managed to remain on the Fortunes list as the only Gaming company four years in a row? What company has benefit programs that will help first time home buyers with a down payment or give you the assistance you need to become a U.S Citizen. This is only a couple benefits that the company offers in their full book of benefits. The Company has managed to remain Union free by keeping the employees happy. I would definitely agree with stopping contributions versus having more people out of jobs and I'm sure the actual employees would agree. Station Casinos didn't make a nationally recognized brand by following the trends of other gaming companies. They look at what is in the best interest of the company to grow as a whole. Some casinos closed and almost all casinos are struggling during these time. But I'm positive that Station Casinos will remain on the Fortunes list because of what they are doing for the employees even during these times. Of course readers will only see the negative media because that is what our society feeds off of.