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Mandalay Reports Income Up

LAS VEGAS – (PRESS RELEASE) -- Mandalay Resort Group (NYSE: MBG) today announced results for its third quarter ended October 31, 2004. For the quarter, the company reported net income of $67.1 million, or $.99 per diluted share, compared with $40.6 million, or $.63 per diluted share, in the prior year. "Building on our expanding convention business and the overwhelming popularity of Las Vegas as a resort destination, Mandalay again delivered an impressive performance, notching its all-time record for the third quarter," noted Glenn Schaeffer, the company's President and Chief Financial Officer.

Results in the current year quarter include: (1) a change in accounting estimate with respect to the company's fixed jackpot reserves, which resulted in revenue of $8.2 million ($.08 per diluted share) included in casino revenue; (2) merger related costs (which are not deductible for tax purposes) of $6.6 million ($.10 per diluted share) included in corporate expense; (3) a reduction in other revenue of $3.4 million ($.03 per diluted share) related to adjusting the amortization of deferred income; and (4) a loss of $0.2 million representing the quarterly noncash adjustment of the carrying value of investments associated with the company's executive retirement plan. Results for the third quarter were also affected by higher health care costs, which rose $4.6 million, or 12%, versus the prior year quarter. For the nine months, health care costs were up $15.1 million, or 14%, versus the prior year, with the increase attributable to rising medical costs in general, a surge in "catastrophic" claims and an increase in the number of covered employees.

Results for the prior year third quarter include: (1) preopening expenses of $4.0 million ($.04 per diluted share) related primarily to THEhotel; and (2) a gain of $1.0 million ($.01 per diluted share) representing the quarterly adjustment to the carrying value of the company's executive retirement plan investments.

Average diluted shares outstanding in the quarter were 68.1 million versus 64.9 million in the prior year. This reflects the issuance of shares pursuant to the exercise of employee stock options over the course of the past year, as well as grants of restricted stock in March and April of this fiscal year. Total shares outstanding (excluding any dilutive effect from outstanding stock options) were 67.5 million at October 31, 2004, compared with 64.9 million at October 31, 2003.

Mandalay's operating cash flow (which is not a defined term under Generally Accepted Accounting Principles -- see Note 1 below) was $201.1 million for the quarter ended October 31, 2004, compared with $167.0 million in the prior year quarter. The financial schedules accompanying this release provide a reconciliation of operating cash flow to net income as required by the Securities and Exchange Commission's Regulation G.

LAS VEGAS STRIP

Operating cash flow at the company's Las Vegas Strip properties (including the 50%-owned Monte Carlo) increased $42.4 million, or 33%, in the third quarter, driven by an 18% increase in revenue per available room ("REVPAR"), and a 14% increase in casino revenues (a 10% increase excluding the effect of the change in accounting estimate for fixed jackpots discussed previously). All of the company's Strip properties, including the Monte Carlo, reported record third quarter results. "Mandalay continued its trend of stellar REVPAR comparisons on the Las Vegas Strip, with the third quarter marking the sixth consecutive quarter of double-digit percentage increases," remarked Mr. Schaeffer.

Mandalay Bay generated operating cash flow of $66.2 million in the third quarter, an increase of 48% from the prior year. REVPAR rose 13%, as room rates at Mandalay averaged $210 with 90% occupancy during the quarter, including the additional 1,117 suites in THEhotel (which opened December 2003). Meanwhile, casino revenues at Mandalay Bay rose 13% during the third quarter despite a low hold percentage on its table games.

Luxor produced operating cash flow of $40.3 million, a 28% increase compared with $31.5 million last year. REVPAR was up 12%, while casino revenues rose 24%. At Excalibur, operating cash flow increased 22%, to $31.6 million from $26.0 million a year ago. REVPAR at this property was up 16% and casino revenues grew 12%. At Circus-Circus, operating cash flow was $19.9 million in the third quarter, up 24% from the prior year, as REVPAR increased 16% and casino revenues increased 8%. For its part, Monte Carlo (50%-owned by Mandalay) reported operating cash flow of $30.8 million, up 28% from the prior year quarter. REVPAR at Monte Carlo increased 15%, while casino revenues rose 16%.

OTHER NEVADA MARKETS

Combined operating cash flow at the company's other Nevada properties (in Reno, Laughlin, Jean and Henderson) increased $2.5 million from the prior year third quarter. While expanding Native American gaming in California continues to impact our operations, the rebound in the economy has contributed to improved results at these properties. Please refer to the financial schedules accompanying this release for additional details by market.

OTHER MARKETS

In Elgin, Illinois, operating cash flow at the 50%-owned Grand Victoria was $15.4 million in the third quarter, up 14% from $13.5 million in the prior year quarter. The increase was due in part to a higher than normal accrual rate for gaming taxes in the prior year third quarter, which was necessitated by an increase in gaming taxes which took effect July 1, 2003 and raised the top-end rate to 70% on annual gaming revenues exceeding $250 million.

In Detroit, Michigan, MotorCity generated operating cash flow of $35.5 million compared with $32.5 million last year, despite an increase in the gaming tax rate which took effect September 1, 2004 (and impacted Mandalay's earnings in the quarter by approximately $.02 per diluted share). Meanwhile, in Tunica County, Mississippi, operating cash flow at the company's Gold Strike Resort was $6.6 million compared with $7.8 million a year ago.

RECENT DEVELOPMENTS

On August 2, 2004, the company paid a quarterly dividend of $.27 per share to shareholders of record July 15, 2004. Pursuant to the terms of the merger agreement with MGM MIRAGE, Mandalay may not declare additional dividends pending completion of the merger.

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