$126.9 million Compared to Last Year $47.2 million
Planned Acquisition of Mandalay Resort Group
On Track to Close in the 1st Qtr of 2005
|LAS VEGAS, Oct. 20, 2004 - MGM MIRAGE (NYSE: MGG) today reported its
third quarter 2004 financial results. Adjusted earnings from continuing
operations per diluted share ("Adjusted EPS") rose 68% to $0.57 in the
third quarter of 2004 from $0.34 in the 2003 quarter, representing the
Company's best third quarter performance in its history and continuing
a strong trend of year-over-year increases in earnings during 2004. The
Company's targeted enhancements to its Las Vegas resorts led to increased
customer spending, and Las Vegas visitation remains robust. REVPAR (revenue
per available room) rose 10% at the Company's Las Vegas resorts in the
2004 quarter, on top of an 8% increase in 2003 compared to 2002. Other
factors affecting current period results included table games hold percentage
toward the low end of the Company's normal range, offset by the benefit
of continued strong collections of casino receivables resulting in a lower
bad debt provision than the prior year quarter. The lower bad debt provision
equates to a benefit of approximately $0.07 per diluted share for the current
quarter. Casino revenues increased 5% despite the low table games hold
percentage, as slot revenues increased a solid 9%.
Adjusted EPS (and Adjusted Earnings) excludes discontinued operations, preopening and start-up expenses, restructuring costs, net property transactions, tax adjustments and loss on early retirement of debt(1). On a GAAP (Generally Accepted Accounting Principles) basis, diluted earnings per share from continuing operations doubled to $0.54 for the third quarter of 2004 from $0.27 in the 2003 quarter. GAAP diluted EPS, including the results of discontinued operations, was $0.89 in the 2004 period versus $0.31 in 2003.
"All of our resorts continue to generate industry-leading results, with our success in the third quarter building upon the foundation we've established throughout 2004," said Terry Lanni, MGM MIRAGE's Chairman and CEO. "We believe these positive trends will continue into the fourth quarter and throughout 2005. All of our indicators point to continued success for the Las Vegas leisure and convention businesses in the foreseeable future, and our resorts are uniquely positioned to benefit from that success."
Third Quarter Company Highlights
The following table shows key financial results on a Company-wide basis
for the third quarter and year to date.
Except where noted, all references in this release to operating results, including statistical information, exclude the results of Golden Nugget Las Vegas, Golden Nugget Laughlin, MGM Grand Australia and MGM MIRAGE Online for all periods presented. The results of these operations are classified as discontinued operations.
Net revenue in the third quarter increased 6% from the 2003 third quarter. This increase was due to strong casino and hotel volumes, continued increases in room rates and higher spending by our customers throughout our resorts.
Casino revenue increased 5% in the 2004 quarter. Table games volume, including baccarat, was consistent with prior year levels. The Company's table games hold percentage was toward the low end of the normal range in the September 2004 quarter, and was consistent with the hold percentage experienced in 2003. Company-wide slot revenue in the quarter was up 9% from 2003. Several resorts experienced double-digit increases in slot revenues, including New York-New York, TI, Beau Rivage, MGM Grand Detroit, and Primm Valley Resorts.
Non-casino revenue was up 7% in the quarter. Hotel revenue was up 8%, with a higher occupancy rate of 93% in the third quarter of 2004 versus 92% in 2003, and a higher average daily room rate ("ADR") of $125 versus $116 in 2003. As a result, revenue per available room ("REVPAR") was $117, an increase of 9% over 2003. REVPAR at the Company's Las Vegas resorts was up 10% over the prior year to $134.
Food and beverage, entertainment, retail and other revenues were up 5% in the 2004 quarter. The Company believes it is capturing a greater share of customer spending due to the exciting new restaurant, entertainment and other amenities introduced in the past year.
Consolidated EBITDA increased 20% for the quarter, reflecting the strong revenue results and operating leverage inherent with higher hotel room rates. The property-level EBITDA margin was 34% in 2004, up from 30% in the prior year quarter and the Company's highest third quarter margin since the 2000 merger of MGM Grand and Mirage Resorts. Additionally, the Company benefited from the increased contribution of Borgata, leading to an increase in income from unconsolidated affiliates of 75% over 2003. Operating income increased 40% due to the increased property-level EBITDA and lower preopening and restructuring expenses in the current year.
Third quarter Adjusted Earnings increased 54% compared to 2003 due to the increase in operating income described above. Net interest expense increased due to higher average borrowings, slightly higher variable market interest rates and the issuance of fixed rate debt in the quarter.
For the third quarter of 2004, Adjusted Earnings excluded a net $6.5 million ($4.7 million, net of tax) of items. These items included:
The Company's effective income tax rate was 37.4% in the third quarter versus 35.8% in the prior year's quarter. The net tax adjustments described above caused a portion of the increase in the effective rate. Additionally, the Company incurred higher-than-normal non-deductible costs related to funding support of ballot initiatives in Michigan.
Income from discontinued operations includes the results of the Golden Nugget Las Vegas and Golden Nugget Laughlin resorts, MGM MIRAGE Online and MGM Grand Australia. Pretax income from discontinued operations was $76 million in the third quarter of 2004, including a $74 million gain ($51 million, net of tax) on the sale of MGM Grand Australia. This compares to income of $9 million, including $3 million of allocated interest, in the 2003 period.
Third quarter capital investments of $173 million included $79 million for the Bellagio expansion and $15 million related to the renovation of the Emerald Tower and the 29th floor suites at MGM Grand Las Vegas. Other expenditures related to continued enhancements to dining and entertainment venues, as well as the completion of the standard room remodel project at New York-New York.
During the quarter, the Company issued $1.0 billion of fixed rate debt at favorable interest rates. In August 2004, the Company issued $550 million of 6 3/4% senior notes due 2012 at par and in September 2004, the Company issued $450 million of 6% Senior Notes due 2009 at a premium to yield 5.65%. Upon issuance, these proceeds were used to repay amounts outstanding under the Company's senior credit facility.
In addition, the Company has received sufficient commitments from its lenders to increase the capacity of its senior credit facility to $7 billion, providing the necessary financing for the pending Mandalay acquisition.
As of September 30, 2004, the Company had approximately $2.3 billion of available borrowings under its existing senior credit facility.
"We have created the financial foundation for the upcoming merger with Mandalay Resort Group with the recent issuances of Senior Notes and our commitments on a new senior credit facility," said MGM MIRAGE President, CFO and Treasurer, Jim Murren. "While the fixed rate issuances have a negative short-term impact on reported EPS, we believe our capital structure provides us the optimal post-acquisition financing at attractive rates. We expect to rapidly de-leverage our Company, utilizing the significant free cash flow generated by the combination of MGM MIRAGE and Mandalay," Mr. Murren said.
The Company expects REVPAR growth to be in the 8-10% range in the fourth quarter of 2004, on top of a 5% year-over-year increase in the 2003 fourth quarter. Property-level EBITDA is expected to increase over the prior year, benefiting from strong customer activity, offset by several factors including increased gaming taxes in Detroit and 3% fewer room nights available. For the full year 2004, the Company will earn over $1.4 billion in property-level EBITDA, an all-time record and well in excess of the Company's original expectations. Taking into account the higher non-operating items, primarily higher interest expense, the Company expects to earn in the range of $0.35 to $0.45 in the fourth quarter on an Adjusted EPS basis, compared to $0.36 in the prior year.
"We are pleased with the continued positive REVPAR trends and ongoing
strength across all operating areas, and expect such trends to continue
into 2005," Mr. Murren said. "A significant contributor to fourth quarter
profits is the New Year's holiday and the period leading up to New Year's,
and it is difficult for us to predict results for that period at this early
MGM MIRAGE (NYSE: MGG), one of the world's leading and most respected hotel and gaming companies, owns and operates 11 casino resorts located in Nevada, Mississippi and Michigan, and has investments in two other casino resorts in Nevada and New Jersey. The company is headquartered in Las Vegas, Nevada, and offers an unmatched collection of casino resorts with a limitless range of choices for guests. Guest satisfaction is paramount, and the company has approximately 40,000 employees committed to that result.
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.
|Also See:||Pansy Ho Chiu-king and MGM MIRAGE Will Co-own and Jointly Operate a Major Hotel Casino in Macau S.A.R. / June 2004|
|MGM MIRAGE Almost Doubles 2nd Qtr Profit, $104.7 million compared with $53.8 million Previous Year / Hotel Statistics / July 2004|