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 MGM Reports 4th Quarter Earnings of $39 million Compared
with $23.7 million a Year Ago Despite a
Slow New Year's Holiday
Hotel Statistics
January 28, 2003 - 

2002 Company Highlights 

  • Net revenue of over $4.0 billion for the year, up 1% from 2001; 
  • EBITDA(1) increased 8% to $1.2 billion; 
  • Adjusted EPS grew to $1.87, up 36% from 2001; 
  • Reduced debt by $314 million, including the Company's $44 million share of debt repaid by Monte Carlo; 
  • Repurchased 6.4 million shares of Company common stock for $208 million; 
  • Invested $295 million of capital in the Company's properties and for development and expansion projects. 
  • Entered into a Revised Development Agreement with the City of Detroit for development of a permanent casino complex; 
  • Completed the sale of the Company's South Africa interests; 
  • Implemented several technological initiatives designed to enhance both revenues and the Company's industry-leading cost structure, including Players Club and IGT's EZ-Pay(TM); 
  • Announced two agreements with Cirque du Soleil for new shows at New York-New York and MGM Grand Las Vegas; 
  • Announced a $375 million expansion program at Bellagio, including a 925-room Spa Tower and enhanced and expanded spa, retail, restaurant and conference offerings. 
Overall Financial Results

Adjusted EPS of $0.28 for the fourth quarter was significantly above the prior year, but was below expectations due to lower-than-expected casino volume in December, primarily from weakness in the national high-end business. Hotel and other operating results were generally above 2001's fourth quarter results.

"The fourth quarter proved that we are still in a challenging environment and that the economic recovery in the United States is still a work in progress," said Terry Lanni, MGM MIRAGE's Chairman and CEO. "We continue to refine the manner in which we market to our national customers, as we remain alert to global and national conditions which could have a short-term impact on leisure travel," Mr. Lanni said.

Full-year Adjusted EPS was $1.87, compared with $1.37 for the year ended December 31, 2001. Full-year GAAP EPS was $1.83, an increase of 73% over the $1.06 reported in 2001 and an all-time record for the Company. For the full year results, Adjusted EPS excludes the $11.4 million ($0.05 per share, net of tax) received from the early buyout of the Company's management agreements in South Africa.

"We are proud of our 2002 results, which produced record earnings for our company in spite of a difficult environment. This was clearly due to the tireless efforts of our 43,000 employees and their focus on our customers and cost efficiencies," Mr. Lanni said.

Detailed Financial Results

The following table shows key financial results on a Company-wide basis for the fourth quarter and for the full year.

                                 Three months ended           Year ended
                                    December 31,              December 31,
                                 2002         2001         2002          2001
                                                  (In millions)
        Casino revenue, net    $533.6        $487.7     $2,189.7      $2,163.8
        Non-casino
         revenue, net           449.1         402.0      1,841.6       1,809.0
        Net revenue             982.7         889.7      4,031.3       3,972.8
        EBITDA                  262.0         228.2      1,228.4       1,133.1
        Net income               39.0          23.7        292.4         169.8
        Adjusted Earnings        43.4          27.9        299.1         220.5

Net revenue in the fourth quarter grew 10% from the 2001 fourth quarter, benefiting from the relatively easy comparisons after the events of September 11, 2001. Compared with the 2000 fourth quarter, net revenue was down 4%.  Casino revenue increased by 9% in the 2002 quarter, but decreased 7% from the fourth quarter of 2000. Table games volume was up 7% over the 2001 quarter, due mostly to increased baccarat play, but was down 13% compared with the 2000 quarter. Table games volume was negatively impacted by weakness in the national high-end business. Table games hold percentages were within a normal range for all three periods. Slot revenue in the quarter was up 6% over 2001, led by strong performances at Bellagio and The Mirage.

Non-casino revenue was up 12% in this year's quarter, as a result of continued year-over-year improvement in visitation trends. Hotel occupancy was 84.6% in the fourth quarter of 2002, up from 82.7% in 2001, but still lower than occupancy of 88.6% in the 2000 quarter. For the fourth quarter of 2002, the average daily room rate ("ADR") was $104, up 12% when compared with the fourth quarter of 2001 and back to even with rates earned in the 2000 period.  As a result, revenue per available room ("REVPAR") increased 14% to $88 in the 2002 fourth quarter when compared with 2001 and was slightly below 2000. These improving hotel trends continue to have a positive impact on food and beverage, entertainment and retail revenue.

For the quarter, EBITDA was up 15% over the year-ago period. The Company achieved a 26.7% EBITDA margin in the 2002 fourth quarter, up from 25.6% in 2001. The increase was primarily the result of increased revenues in the quarter. Operating expenses were 9% higher in the 2002 quarter than in 2001, primarily the result of increased payroll and insurance costs.

Adjusted Earnings increased by 56% in the fourth quarter due to the increase in EBITDA, offset by higher net interest expense. Net interest expense was higher due mostly to the Company's decision to suspend development of its wholly-owned Atlantic City development project, resulting in lower capitalized interest.

Net income for the fourth quarter of 2002 included a net $4.6 million of items excluded from Adjusted Earnings. These items included preopening and start-up expenses of $9.1 million related to the Company's Borgata investment, Players Club implementation and online activities; a restructuring credit of $6.6 million, which included $9.9 million reversal of lease buyout accruals no longer considered probable of payment, offset by $3.3 million of early contract termination costs at MGM Grand Las Vegas for the EFX show and a restaurant lease; and write-downs and impairments of $2.1 million related to assets abandoned or replaced with new construction. In the fourth quarter of 2001, similar items totaled $6.4 million.

For the full year, net revenues were slightly higher than in 2001 as business levels continued to improve throughout the year, while EBITDA increased by 8%, largely as a result of a lower cost structure implemented in late 2001. The Company's EBITDA margin in 2002 was an impressive 30.5%. Net income increased by 72% as a result of improved EBITDA and lower net interest expense, restructuring charges, and write-downs and impairments.

Financial Position 

  • Repaid $314 million of debt in 2002, including the Company's $44 million share of debt repaid by Monte Carlo; 
  • Repurchased 4.4 million shares of Company common stock in the quarter at a total cost of $138 million. For the year, the Company repurchased 6.4 million shares of Company common stock at a total cost of $208 million. Including shares purchased so far in the first quarter of 2003, the Company has now completed its previously authorized 10 million share repurchase program initiated in September 2001. 
  • Invested $37 million of additional capital contributions in Borgata in 2002, along with expenditures for common areas of the Renaissance Pointe site.
The Company invested $93 million of capital during the quarter on maintenance and growth initiatives, bringing the total for 2002 to $295 million. At December 31, 2002, the Company had $685 million of available borrowings under its senior credit facilities.

"We are well positioned financially as we move into 2003," said MGM MIRAGE President, CFO and Treasurer Jim Murren. "We have a strong balance sheet and will continue to repay debt and invest in our premier properties. We also believe the projects we've decided to invest in -- the Bellagio expansion, Detroit, Borgata, the Cirque du Soleil shows, resort upgrades and improvements in slot technology -- will enhance our portfolio and generate excellent returns on investment," Mr. Murren said.

Operational Highlights

  • Entered into an agreement with Turnberry Associates to jointly develop a luxury condominium-hotel complex at MGM Grand Las Vegas.
  • Successfully launched Players Club at The Mirage, Treasure Island, MGM Grand Detroit, MGM Grand Las Vegas and Bellagio, with final roll-outs expected at Beau Rivage, New York-New York and Golden Nugget Las Vegas in 2003. 
  • Began installation of IGT's EZ-Pay(TM) cashless gaming system at the Company's resorts, with conversion of almost all of the Company's slot machines expected by mid-2003. 
  • Earned second straight AAA Five-Diamond Award at Bellagio, the largest resort to ever earn the award, and restaurants Picasso at Bellagio and Renoir at The Mirage. 
  • Further enhanced our resorts with world-class restaurants and entertainment offerings, including Craftsteak by James Beard Award-winning Chef Tom Colicchio and Zuri, an upscale lounge at MGM Grand Las Vegas, and Zax, an exciting restaurant and late night entertainment venue at Golden Nugget Las Vegas.
"We're constantly looking for new ways to improve our customers' experiences, which we believe is the key driver of our long-term success," Mr.  Murren said. "Our technological, entertainment and expansion initiatives will generate returns in 2003, and will help us maintain our position as the premier gaming company."

Outlook

  • Anticipate the opening of Borgata in the summer of 2003. 
  • Expect the new Cirque du Soleil show at New York-New York to open in summer of 2003. 
  • Forecast capital expenditures of $375 to $425 million in 2003, including development expenditures related to the Bellagio expansion, EZ Pay(TM) system, and theatres for the two new Cirque du Soleil shows.
"Our objective is to continue to maximize free cash flow and, in turn, enhance shareholder value. Excess cash will largely be utilized to reduce debt," Mr. Lanni said. "We also continue to assess development opportunities and intend to maintain financial flexibility to capitalize on opportunities as they arise."
 
 
MGM MIRAGE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands) (Unaudited)

                               Three Months Ended         Twelve Months Ended
                            December 31,  December 31, December 31, December 31,
                                2002         2001          2002          2001 Revenues:
           Casino            $533,583      $487,677   $2,189,720    $2,163,808
           Rooms              207,034       181,683      841,481       837,288
           Food and beverage  190,224       167,708      757,602       725,335
           Entertainment,
            retail
            and other         160,521       150,717      670,810       653,442
                            1,091,362       987,785    4,459,613     4,379,873
           Less:
            promotional
            allowances        108,643        98,051      428,318       407,071
                              982,719       889,734    4,031,295     3,972,802
        Expenses:
           Casino             277,234       266,375    1,104,124     1,123,583
           Rooms               60,092        51,927      229,568       233,434
           Food and beverage  115,752        94,596      427,763       412,684
           Entertainment,
            retail
            and other         108,734       100,114      433,585       439,205
           Provision for
            doubtful
            accounts            7,616        12,499       28,352        71,244
           General and
            administrative    158,564       142,574      611,866       596,334
           Corporate expense   11,671         8,117       43,856        37,724
           Preopening and
            start-up
            expenses            9,115         2,035       21,467         5,106
           Restructuring
            costs (credit)     (6,600)        3,825      (17,021)       23,721
           Write-downs and
            impairments         2,134           571       14,712        47,955
           Depreciation and
            amortization      101,656        98,692      398,623       390,726
                              845,968       781,325    3,296,895     3,381,716

        Income from
         unconsolidated
         affiliate              7,268         6,547       32,361        36,816

        Operating Income      144,019       114,956      766,761       627,902

        Non-Operating Income
         (Expense):
           Interest income        931           918        4,515         6,106 
Interest expense, net      (82,414)      (75,281)    (295,626)     (349,478)
           Interest
            expense from
            unconsolidated
            affiliate              --          (378)        (596)       (2,370)
           Other, net            (457)       (1,660)      (8,740)       (4,571)
                              (81,940)      (76,401)    (300,447)     (350,313)

      Income Before
      Income Taxes and
      Extraordinary Item    62,079        38,555      466,314       277,589
     Provision for income taxes     (23,035)   (14,867)   (173,551)   (106,996)
        Income Before
         Extraordinary Item    39,044        23,688      292,763       170,593
        Extraordinary Item:
           Loss on Early
            Extinguishment
             of Debt, net          --            --         (328)         (778)

       Net Income             $39,044       $23,688     $292,435      $169,815

       Per Share Of
        Common Stock:
           Basic:
           Income Before
            Extraordinary
            Item                $0.25         $0.15        $1.85         $1.07 
Extraordinary Item, net              --            --           --            --
           Net Income
            Per Share           $0.25         $0.15        $1.85         $1.07
           Weighted
            Average Shares
            Outstanding
            (000's)           155,387       157,336      157,809       158,771

           Diluted:
           Income Before
            Extraordinary
            Item                $0.25         $0.15        $1.83         $1.06 
Extraordinary Item, net              --            --           --            --
           Net Income
            Per Share           $0.25         $0.15        $1.83         $1.06
           Weighted
            Average Shares
            Outstanding
            (000's)           157,229       158,994      159,940       160,822
 

                              MGM MIRAGE AND SUBSIDIARIES
                                   SUPPLEMENTAL DATA
                                      (Unaudited)

                                Three Months Ended      Twelve Months Ended
                      December 31,  December 31, December 31,  December 31,
                                2002          2001         2002          2001

        Net Income            $39,044       $23,688     $292,435      $169,815
        Preopening
         and start-up
         expenses, net          7,220         1,323       15,249         3,319
        Restructuring
         costs
         (credit), net         (4,290)        2,486      (11,064)       15,418
        Write-downs and
         impairments, net       1,387           371        9,563        31,171
        Management
         agreement
         termination
         fee, net                  --            --       (7,419)           --
        Extraordinary
         item, net                 --            --          328           778

        Adjusted Earnings     $43,361       $27,868     $299,092      $220,501
 

        Per Share Of Common Stock:
           Basic:
           Net Income           $0.25         $0.15        $1.85         $1.07
           Preopening
            and start-up
            expenses, net        0.05          0.01         0.10          0.02
           Restructuring
            costs
            (credit), net       (0.03)         0.02        (0.07)         0.10
           Write-downs and
            impairments, net     0.01            --         0.06          0.20
           Management
            agreement
            termination
            fee, net               --            --        (0.04)           --
           Extraordinary
            item, net              --            --           --            --

           Adjusted Earnings    $0.28         $0.18        $1.90         $1.39

           Weighted
            Average Shares
            Outstanding
            (000's)           155,387       157,336      157,809       158,771

           Diluted:
           Net Income           $0.25         $0.15        $1.83         $1.06
           Preopening
            and start-up
            expenses, net        0.05          0.01         0.10          0.02
           Restructuring
            costs
            (credit), net       (0.03)         0.02        (0.07)         0.10
           Write-downs and
            impairments, net     0.01            --         0.06          0.19
           Management
            agreement
            termination
            fee, net               --            --        (0.05)           --
           Extraordinary
            item, net              --            --           --            --

           Adjusted Earnings    $0.28         $0.18        $1.87         $1.37

           Weighted
            Average Shares
            Outstanding
            (000's)           157,229       158,994      159,940       160,822
 


MGM MIRAGE AND SUBSIDIARIES SUPPLEMENTAL DATA - 
PROPERTY OPERATING RESULTS (in thousands)

                            Three Months Ended         Twelve Months Ended
                      December 31,  December 31, December 31,  December 31,
                                2002         2001          2002          2001
        NET REVENUES:
           Bellagio          $232,163      $202,183     $970,867      $936,279
           MGM Grand
            Las Vegas         190,840       156,545      734,086       714,859
           The Mirage         137,749       124,280      571,305       602,566
           Treasure Island     81,006        78,012      343,673       354,952
           New York-New York   56,464        47,360      218,298       209,312
           Primm Valley
            Resorts            48,330        46,920      209,538       206,676
           Golden Nugget
            Las Vegas          46,152        43,033      176,729       176,242
           Golden Nugget
            Laughlin           10,242        11,018       45,073        46,740
           MGM Grand Detroit   95,130        96,294      391,064       360,334
           Beau Rivage         66,750        67,375      290,585       294,543
           Boardwalk            8,297         7,577       32,665        34,246
           MGM Grand Australia  9,596         8,356       35,320       31,784
           MGM Grand
            South Africa           --           781       12,092         4,269
                             $982,719      $889,734   $4,031,295    $3,972,802

        EBITDA:
           Bellagio           $67,985       $56,186     $336,304      $288,352
           MGM Grand
            Las Vegas          50,644        35,387      212,877       174,266
           The Mirage          31,966        26,175      152,151       155,243
           Treasure Island     19,986        17,074       95,004        94,160
           New York-New York   21,010        17,251       86,145        82,527
           Primm Valley
            Resorts             5,760         8,172       35,012        42,309
           Golden Nugget
            Las Vegas           6,824         7,563       25,415        32,671
           Golden Nugget
            Laughlin              554           704        4,658         3,613
           MGM Grand Detroit   34,229        40,418      157,540       144,346
           Beau Rivage         10,792        7,811       60,086        56,372
           Income from
            Unconsolidated
            Affiliate           7,268         6,547       32,361        36,816
           Boardwalk              962           307        4,450         4,539
           MGM Grand Australia  4,015         3,838       14,314        13,715
           MGM Grand
            South Africa           --           763       12,081         4,205
                             $261,995      $228,196   $1,228,398    $1,133,134
 

MGM MIRAGE AND SUBSIDIARIES
                        SUPPLEMENTAL STATISTICAL INFORMATION
                                 Three Months Ended        Twelve Months Ended
                  December 31,  December 31, December 31, December 31,
                                 2002          2001         2002          2001
        ROOM STATISTICS:
           Bellagio
              Occupancy %       90.2%         91.3%        93.9%         94.1%
              Average Daily
               Rate (ADR)        $188          $156         $180          $174
              Revenue per
               Available Room
               (REVPAR)          $170          $143         $169          $163

           MGM Grand Las Vegas
              Occupancy %       85.6%         81.7%        90.6%         91.2%
              Average Daily
               Rate (ADR)        $114          $107         $111          $112
              Revenue per
               Available Room
               (REVPAR)           $98           $87         $101          $103

           The Mirage
              Occupancy %       88.5%         89.7%        94.1%         94.3%
              Average Daily
               Rate (ADR)        $118          $105         $118          $119
              Revenue per
               Available Room
               (REVPAR)          $104           $94         $111          $112

           Treasure Island
              Occupancy %       92.6%         90.5%        94.9%         94.3%
              Average Daily
               Rate (ADR)         $94           $84          $93           $95
              Revenue per
               Available Room
               (REVPAR)           $87           $76          $88           $90

           New York-New York
              Occupancy %       92.8%         89.8%        95.2%         94.6%
              Average Daily
               Rate (ADR)         $96           $81          $92           $86
              Revenue per
               Available Room
               (REVPAR)           $89           $72          $88           $81

           Primm Valley Resorts
              Occupancy %       56.5%         51.2%        61.7%         57.9%
              Average Daily
               Rate (ADR)         $38           $38          $37           $38
              Revenue per
               Available Room
               (REVPAR)           $21           $19          $23           $22

           Golden Nugget
            Las Vegas
              Occupancy %       89.3%         88.4%        94.3%         94.2%
              Average Daily
               Rate (ADR)         $62           $61          $60           $62
              Revenue per
               Available Room
               (REVPAR)           $56           $53          $56           $58

           Golden Nugget
            Laughlin
              Occupancy %       74.1%         81.4%        83.8%         90.8%
              Average Daily
               Rate (ADR)         $35           $34          $38           $33
              Revenue per
               Available Room
               (REVPAR)           $26           $28          $32           $30

           Beau Rivage
              Occupancy %       88.8%         89.2%        92.1%         93.9%
              Average Daily
               Rate (ADR)         $75           $73          $86           $79
              Revenue per
               Available Room
               (REVPAR)           $66           $65          $79           $75

           Boardwalk
              Occupancy %       75.0%         73.4%        73.8%         84.1%
              Average Daily
               Rate (ADR)         $62           $58          $62           $64
              Revenue per
               Available Room
               (REVPAR)           $47           $43          $46           $53

           MGM Grand Australia
              Occupancy %       59.7%         70.7%        71.8%         74.1%
              Average Daily
               Rate (ADR)         $65           $55          $68           $58
              Revenue per
               Available Room
               (REVPAR)           $39           $39          $49           $43
 

                            MGM MIRAGE AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS
                         (in thousands, except share data)
                                    (Unaudited)
                                       ASSETS
                                                     December 31,    December 31,
                                                         2002           2001

        CURRENT ASSETS:
              Cash and cash equivalents                $211,234       $208,971
              Accounts receivable, net                  139,935        144,374
              Inventories                                83,582         78,037
              Income tax receivable                          --         12,077
              Deferred income taxes                      84,348        148,845
              Prepaid expenses and other                 86,311         69,623
                  Total current assets                  605,410        661,927

        PROPERTY AND EQUIPMENT, NET       8,762,445      8,891,645

        OTHER ASSETS:
              Investment in unconsolidated
               affiliates                               710,802        632,949
              Goodwill and other intangible
               assets, net                              256,108        139,178
              Deposits and other assets, net            170,220        171,744
                  Total other assets                  1,137,130        943,871
                                                    $10,504,985    $10,497,443
 

        LIABILITIES AND S 
        CURRENT LIABILITIES:
              Accounts payable                          $69,959        $75,787
              Income taxes payable                          637             --
              Current portion of long-term debt           6,956        168,079
              Accrued interest on long-term debt         80,310         78,938
              Other accrued liabilities                 596,523        565,106
                  Total current liabilities             754,385        887,910

        DEFERRED INCOME TAXES                         1,765,114      1,746,272
        LONG-TERM DEBT                                5,213,778      5,295,313
        OTHER LONG-TERM OBLIGATIONS                107,564         57,248
        S     Common stock ($.01 par value:
               authorized 300,000,000 shares,
               issued 166,393,025 and 163,685,876
               shares and outstanding
               154,574,225 and 157,396,176
               shares)                                    1,664          1,637
              Capital in excess of par value          2,125,626      2,049,841
              Deferred compensation                     (27,034)            --
              Treasury stock, at cost
               (11,818,800 and 6,289,700 shares)       (317,432)      (129,399)
              Retained earnings                         890,206        597,771
              Other comprehensive loss                   (8,886)        (9,150)
                  Total stockholders' equity          2,664,144      2,510,700
                                                    $10,504,985    $10,497,443

(1) EBITDA is earnings before interest, taxes, depreciation and amortization, restructuring, preopening and start-up expenses, write-downs and impairments and corporate expense. EBITDA information is presented solely as a supplemental disclosure because management believes that it is a widely used measure of operating performance in the gaming industry. EBITDA should not be construed as an alternative to operating income, as an indicator of the Company's operating performance, or as an alternative to cash flows from operating activities, as a measure of liquidity, or as any other measure of performance determined in accordance with generally accepted accounting principles. The Company has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in EBITDA. It should also be noted that other gaming companies that report EBITDA information may calculate EBITDA in a different manner than the Company.

MGM MIRAGE is one of the world's leading and most respected entertainment, hotel and gaming companies that owns and operates 15 casino properties located in Nevada, Mississippi and Michigan. 

Statements in this release which are not historical facts are "forward-looking" statements and "safe harbor statements" under the Private Securities Litigation Reform Act of 1995 that involve risks and/or uncertainties, including risks and/or uncertainties as described in the company's public filings with the Securities and Exchange Commission.

Contact:
James J. Murren, 
President, Chief Financial Officer and Treasurer, +1-702-693-8877
http://www.mgmmirage.com

Also See MGM Mirage Reports Net income of $69.6 million, Big Turnaround from Loss $14.4 million for 3rd Qtr Last Year / Hotel Operating Statistics / Oct 2002
Despite a Tough Fourth-quarter, MGM Mirage Revenues Grew to $4.01 billion, up 29% for the Year / Property Operating Results / Jan 2002


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