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Howard Stutz
 

Mandalay Has Low-Key Goodbye

4 March 2005

LAS VEGAS -- With little fanfare and the absence of a conference call with analysts, Mandalay Resort Group gave its fond farewell as a public company Thursday, announcing fourth-quarter and fiscal year earnings with a simple statement devoid of comments.

The company, which will become part of MGM Mirage sometime this month once a $7.9 billion buyout is completed, reported net income of $229.1 million for the fiscal year that ended Jan. 31, compared with $149.8 million in the prior year.

Earnings per diluted share for the year were $3.31, compared with $2.31 per diluted share the year before.

In the fourth quarter, however, Mandalay said its net income of $16.4 million actually decreased 28.1 percent from the year before when the company reported $22.8 million.

The company waited until after the markets closed to announce its earnings and the company's stock price closed Thursday at $70.84, down 3 cents, or 0.04 percent. However, the buyout by MGM Mirage calls for shareholders of Mandalay stock to be paid $71 for each share owned.

Mandalay President and Chief Financial Officer Glenn Schaeffer was not available for comment.

In its statement, Mandalay said record rainfall in Southern California and Las Vegas contributed to lower-than-expected January profits, which reflected poorly on the fourth quarter.

Also, fourth-quarter results were affected by a low hold percentage on Mandalay Bay table games, which cost the company about $6.5 million during the three-month period.

An increase in the gaming tax in Michigan, which took effect Sept. 1, increased gaming taxes at the company's MotorCity Casino in Detroit by approximately $6.3 million during the quarter.

Michigan is one of the last regulatory hurdles blocking the completion of MGM Mirage's buyout of Mandalay Resort Group. State law requires that one of the companies' two Detroit casinos -- either the MGM Grand Detroit or the MotorCity -- must be sold before the transaction can be finalized.

MGM Mirage officials said they expect a sale to be completed before the end of March.

Once complete, MGM Mirage will control 12 Strip casinos.

Mandalay said its results also included several one-time charges during the fourth quarter, including merger-related costs of $4.3 million, an increase in reserve for worker's compensation claims of $3.1 million, a decrease in casino revenues related to jackpot reserves of $2.8 million, a $1.2 million write-off for discontinued projects and a gain of $3.8 million related to investments in the company's executive retirement plan.

Three of Mandalay's five major Strip casinos reported net income decreases in the fourth quarter compared with a year ago.

Only Mandalay Bay -- with net income of $15.6 million compared with net income of $7.6 million a year ago -- and Monte Carlo -- with net income of $20.2 million compared with net income of $17 million a year ago -- showed increases.