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Gaming Guru

Chris Jones
 

MGM Mirage Reports Most Profitable Quarter

22 April 2004

LAS VEGAS -- MGM Mirage capitalized on strong casino play and improved hotel demand to produce its most-profitable quarter since MGM Grand Inc. and Mirage Resorts merged nearly four years ago, company officials said Wednesday.

The Las Vegas-based gaming operator, whose 12 casino resorts include local properties Bellagio, The Mirage and MGM Grand, reported record cash flow and earnings per share during the three-month period ended March 31.

MGM Mirage's quarterly net income was $105.8 million, up from $51 million a year earlier. Adjusted earnings per share, which exclude one-time items, climbed to a record-high 70 cents, up from 38 cents per share a year ago. The latest results easily beat the 46 cents per share estimate of analysts polled by Thomson First Call.

Chairman and Chief Executive Officer Terry Lanni attributed that success in part to strong visitor traffic on the Strip, including both leisure and business travelers.

Cash flow, defined as earnings before interest, taxes, depreciation and amortization, was a record-high $370.5 million, up 29 percent from $287.7 million a year earlier.

Net revenue rose 12.4 percent to $1.07 billion from $951.9 million.

In a Wednesday research note, Goldman Sachs Group analyst Steve Kent said MGM Mirage's results showed Las Vegas is an extremely popular destination, a trend he expects will benefit the company throughout this year.

Analyst Ray Neidl of New York-based brokerage Blaylock & Partners said MGM Mirage's corporate strategy of targeting nongaming areas has paid off now that travel sectors around the world and in the United States have rebounded.

"They told me about a year ago that they thought gaming in Las Vegas was a mature industry and their growth was going to come from being a destination-type resort," Neidl said Wednesday. "That's what they've been putting emphasis on ... and it's allowed them to smash analysts' estimates."

Taken by category, MGM Mirage's casino revenue increased to $558.7 million, up nearly 12.6 percent from last year's reported $496.2 million first-quarter total. The company credited that gain to strong Super Bowl and Chinese New Year events as well as continuing improvements in the U.S. economy.

Buoyed by a company-record average daily room rate of $138, up from $127 a year ago, MGM Mirage's hotel revenue climbed to nearly $235 million, up 10 percent from $213.2 million.

MGM Mirage executives Bobby Baldwin and John Redmond also said travelers have recently begun booking rooms well in advance of their stays, reversing a shorter-booking window trend that began after the terror attacks of Sept. 11, 2001. Advance bookings indicate strong interest in the local travel sector, though Baldwin said the four resorts he oversees have not returned to pre-Sept. 11 advance booking levels.

MGM Mirage's strategy of placing company-owned, high-end restaurants and bars within its properties also paid dividends during the quarter. Fueled by the addition of eateries like New York-New York's Nine Fine Irishmen Pub and SeaBlue at MGM Grand, companywide food and beverage revenue was nearly $217.8 million, up 15.8 percent from $188 million.

Entertainment revenue also improved slightly from $65.1 million to $67.2 million in what was the company's first full quarter without the Siegfried & Roy show at The Mirage. The duo's long-running magic act closed permanently Oct. 3 due to injuries performer Roy Horn sustained when he was attacked onstage by a white tiger.

Impressionist Danny Gans also missed several scheduled first-quarter shows at The Mirage as he recovered from varying health problems. Those shows' losses were countered in part by "exceptional" ticket sales at New York-New York's new Zumanity production, the company said.

The absence of its two marquee shows, and renovations that closed its buffet, slowed The Mirage's quarter. Of the seven individual resorts whose individual performances were detailed in Wednesday's report, the nearly 15-year-old Las Vegas resort was the company's only property to report diminished revenue and cash flow totals.

By contrast, Bellagio and MGM Grand enjoyed their most-profitable quarters in history with revenue of $278.6 million and $223 million, respectively. Quarterly cash flows were $99 million at Bellagio and $75.8 million at MGM Grand.

MGM Mirage invested $174 million in capital improvements during the quarter.

The company in the quarter also closed its $215 million sale of two Golden Nugget properties to a group headed by Las Vegas businessmen Tim Poster and Thomas Breitling.

MGM Mirage shares rose 81 cents, or 1.76 percent, Wednesday to close at $46.96.

MGM Mirage Reports Most Profitable Quarter is republished from Online.CasinoCity.com.