May 30, 2003 - The power of its flagship Mandalay Bay megaresort allowed Mandalay Resort Group to withstand a revenue hit from the war in Iraq, company President Glenn Schaeffer said Thursday. 

"We had two war-torn months, and March was a big hole in the middle of the quarter," Schaeffer said during a conference call for industry analysts and investors that followed Mandalay Resort's release of its quarterly numbers for the period ended April 30. "It would be fair to call it an even quarter compared with an all-time record quarter last year." 

Mandalay Resort's net income fell 9.8 percent to $44 million from $48.9 million, a drop that was masked on a per-share basis by the company's share repurchase plan. 

Income increased by 1 cent on a per-share basis, to 69 cents from 68 cents, reflecting the drop in shares outstanding to 64.2 million from 71.3 million. 

The per-share result was below the consensus estimate of 79 cents per share made by 17 analysts surveyed by Thomson/First Call. 

"The fundamental strength of our financial policy was evident in our first-quarter results," Schaeffer noted in a statement. "Despite the significant distraction of the war in Iraq, as well as a hesitant economy, we essentially matched our record prior-year results." 

Companywide revenue was up 1 percent to $616.5 million from $610.6 million. Costs and expenses were up 1.6 percent to $502.1 million from $494.1 million. 

Cash flow, defined as earnings before interest, taxes, depreciation and amortization, was $172.4 million, down 8.4 percent from $188.3 million. 

Cash flow is a widely used measure of casino industry profitability. 

Schaeffer said that despite the war, Mandalay Resort was the first major Strip operator to report a positive quarterly comparison for the important hotel revenue metric, revenue per available room. 

Mandalay Bay drove that increase, he said. 

Boosted by its new convention center, Mandalay Bay reported an average room rate of $201 in the quarter, up 16.2 percent from $173 in the 2002 quarter. Mandalay room revenues fueled the property's 15.7 percent cash-flow increase, to $46.4 million from $40.1 million. 

Mandalay's center hosted 19 trade shows during the quarter, a number Schaeffer is confident will increase as positive word of the convention center spreads. 

"The convention center is getting rave results. ... It's working according to plan," Schaeffer said, noting that 18 percent of its midweek room sales last year went to conventioneers. The number will at least double this year, he predicted. "The proof is in the pudding. We have a star in the making here." 

McDonald Investments analyst Dennis Forst said Mandalay's convention center investment appears to be money well spent. 

"It's off to a great start," Forst said after the conference call. 

Jefferies & Co. debt analyst Larry Klatzkin said his company has always been bullish on the convention center's prospects. 

"But it takes time," Klatzkin added. "Conventions have booking windows of two or three years. Over time, we expect the convention center to be a big driver for (Mandalay) room rates, and they have the most rooms to fill on the Strip." 

Schaeffer predicted the property's new all-suite hotel tower will boost future Mandalay results. The $230 million, 1,122-suite tower is now under construction and on pace to open in November. 

"The tower will be a significant driver of growth for us," Schaeffer said.

Luxor cash flow dipped to $32.5 million from $34.4 million, a 5.5 percent drop Schaeffer attributed largely to the war's impact. 

Excalibur cash flow dropped to $25.1 million from $26 million; Circus Circus cash flow fell to $15.8 million from $18.9 million. 

Monte Carlo, which Mandalay Resort operates for its 50-percent partner MGM Mirage, reported $22.4 million in cash flow, down from $26.5 million. 

Since the quarter ended, May results have been strong, with both Mandalay Bay and Luxor producing double-digit increases in revenue per available room, Schaeffer said, noting that June looks promising as well. "If the world will only remove itself ... an upward trend seems indicated." 

Mandalay's other Nevada markets, in Reno, Jean, Laughlin and at the Boulder Pass in Henderson, reported soft results, weakness Schaeffer blamed on the continuing growth of tribal casinos. 

The big increase in Illinois' top casino tax rate to 50 percent was entirely responsible for a 26.1 percent drop in cash flow at its Grand Victoria riverboat in Elgin, Schaeffer said. 

Cash flow numbers declined at Mandalay's majority-owned MotorCity casino in Detroit, to $32.8 million from $36.3 million. Mandalay's Tunica, Miss., riverboat, the Gold Strike, reported an increase in cash flow, to $7.3 million from $7.1 million. 

Mandalay reported its results after Thursday's market close. Mandalay shares closed at $29.42 in trading on the New York Stock Exchange, down 8 cents, or 0.3 percent. 

Mandalay Resort's net income fell 9.8 percent to $44 million from $48.9 million. 

Shares closed Thursday at $29.42 in trading on the New York Stock Exchange, down 8 cents. 

Companywide revenue was up 1 percent to $616.5 million from $610.6 million. 

Luxor cash flow dipped to $32.5 million from $34.4 million. 

Excalibur cash flow dropped to $25.1 million from $26 million. 

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