News for the Hospitality Executive
MGM Mirage Loses $1.15 billion in 4th Qtr 2008
Vegas Strip Hotels 2008 Full Year REVPAR Falls to $114
Long Term Debt Totals $13.47 billion
Company Enters into an Amendment to Its Senior Credit Facility Providing
a Waiver of Financial Covenants through May 15, 2009
LAS VEGAS, March 17, 2009 - MGM MIRAGE (NYSE: MGM) today reported its 2008 fourth quarter and full year financial results and provided details of a waiver and amendment of its senior credit facility.
Summary of Fourth Quarter Operating Results
The Company reported a fourth quarter diluted loss per share from continuing operations of $4.15, including a non-cash goodwill and indefinite-lived intangible asset impairment charge of $1.2 billion, or $4.25 per share, compared to earnings per share of $2.85 in the prior year quarter, which included a $1.03 billion, or $2.23 per share, gain on the CityCenter transaction. The Company notes that fourth quarter results were impacted by global economic conditions and market trends, and that these trends have continued into the first quarter. The Company earned net revenues of $1.6 billion and Property EBITDA(2) of $327 million in the fourth quarter of 2008, which included $27 million of preopening and start-up expenses and net property transactions.
The non-cash impairment charge, which is included in "Property transactions, net," relates to goodwill and other indefinite-lived intangible assets recognized in the 2005 acquisition of Mandalay Resort Group. Goodwill was assigned primarily to Mandalay Bay, Luxor, Excalibur, and Gold Strike Tunica; this impairment charge represents substantially all of the goodwill recognized at the time of the Mandalay acquisition and a minor portion of the value of trade names related to the Mandalay resorts. The charge resulted from several factors: 1) lower market valuation multiples for gaming assets; 2) higher discount rates resulting from turmoil in the credit markets; and 3) reduced cash flow forecasts for the affected resorts based on current market conditions.
The following table lists significant items which affect the comparability of the current and prior year quarterly results (EPS impact shown, net of tax, per diluted share; negative amounts represent charges to income):
Three months ended December 31,
Summary of Senior Credit Facility Waiver and Amendment
"We are pleased to have obtained this waiver and amendment of our senior credit facility. While there is still work to be done, this is a positive step that provides us with the opportunity to continue to work with our financial advisors and our bank group in addressing the Company's current financial position," said Jim Murren, Chairman and Chief Executive Officer of MGM MIRAGE. "The current economic climate remains challenging, but we are still driving high occupancy at our resorts, which are in terrific shape. We continue to provide our guests with world-class customer service and a renewed value proposition."
Detailed Discussion of Fourth Quarter Operating Results
Rooms revenue decreased 21% as market conditions impacted rates and occupancy leading to a 21% decrease in Las Vegas Strip REVPAR(1). Average room rates decreased 15% at the Company's Las Vegas Strip resorts and occupancy decreased from 93% to 85%.
The following table shows key hotel statistics for the Company's
Las Vegas Strip resorts:
The Company's non-gaming revenues excluding rooms decreased 9%. Such revenues were impacted by the decreased customer spending and lower occupancy at the Company's resorts. The Company continues to generate a significant portion of its revenue from its non-gaming businesses by providing new and exciting experiences for its guests. For example, the Company recently opened the Terry Fator show at The Mirage and, in conjunction with its partners at Disney Theatrical Productions, plans to open the Broadway sensation The Lion King at Mandalay Bay in May 2009.
Corporate expense decreased to $26 million compared to $53 million in
the prior year quarter as a result of cost reduction efforts throughout
the year. The Company continues to implement new cost saving programs to
maximize its margins and cash flows.
Operating income decreased 60% on a comparable basis to the prior year quarter, excluding the non-cash goodwill and indefinite-lived intangible asset impairment charge in 2008, the CityCenter gain in 2007, property transactions, insurance recoveries, profits from The Signature at MGM Grand, and preopening and start-up expenses.
Property EBITDA of $327 million was also impacted by certain of the items discussed above and was down 41% on a comparable basis to the prior year quarter with a margin of 22% compared to 31%. The following table lists the items that impacted comparability of Property EBITDA (income/ (expense)):
Three months ended December 31,
Full Year 2008 Results
Year ended December 31,
Liquidity and Financial Position
The Company was in compliance with its financial covenants under its senior credit facility at December 31, 2008. However, if the recent adverse conditions in the economy in general - and the gaming industry in particular - continue, the Company believes that it will not be in compliance with those financial covenants during 2009. In fact, given these conditions and the recent borrowing under its senior credit facility, the Company does not expect to be in compliance with these financial covenants at March 31, 2009. As a result, on March 17, 2009 the Company obtained an amendment to the senior credit facility, as discussed above, which included a waiver of the requirement to comply with such financial covenants through May 15, 2009. Following expiration of the waiver on May 15, 2009, the Company will be subject to an event of default related to the expected noncompliance with financial covenants under the senior credit facility at March 31, 2009.
The Company intends to work with its lenders to obtain additional waivers or amendments prior to that time to address future noncompliance with the senior credit facility; however, the Company provided no assurance that it will be able to secure such waivers or amendments. The lenders holding at least a majority of the principal amount under the Company's senior credit facility could, among other actions, accelerate the obligation to repay borrowings under our senior credit facility in such an event of default. As a result of such event of default, under certain circumstances, cross defaults could occur under the Company's indentures and the CityCenter $1.8 billion senior secured credit facility, which could accelerate the obligation to repay amounts outstanding under such indentures and the CityCenter credit facility and could result in termination of the unfunded commitments under the CityCenter credit facility. As a result of the conditions described above, the report of the Company's independent registered public accounting firm on the Company's consolidated financial statements for the year ended December 31, 2008 contains an explanatory paragraph with respect to the Company's ability to continue as a going concern. The Company has included additional information about its liquidity and financial position in its recently filed Form 10-K, including a detailed discussion of the impact of the matters described above.
"We view the recently executed waiver and amendment as a strong show
of support by our long-term relationship banks," said Executive Vice President
and Chief Financial Officer of MGM MIRAGE, Dan D'Arrigo. "We look forward
to further dialog with our lenders as we consider all viable options to
improve our capital structure, which may include asset dispositions, raising
additional debt and/or equity capital, and modifying or extending our outstanding
MGM MIRAGE will hold a conference call to discuss its
fourth quarter earnings results at 6:00 p.m. Eastern Daylight Savings Time
today. The call can be accessed live at www.companyboardroom.com or www.mgmmirage.com,
or by calling 1-800-526-8531 (domestic) or 1-706-634-6528 (international).
Until March 24, 2009, a complete replay of the conference call can be accessed
by dialing 1-706-645-9291, access code 89680497. A complete replay of the
call will also be made available at www.mgmmirage.com.
(1) REVPAR is hotel Revenue per Available Room.
MGM MIRAGE (NYSE: MGM), one of the world's leading and most respected companies with significant holdings in gaming, hospitality and entertainment, owns and operates 17 properties located in Nevada, Mississippi and Michigan, and has 50% investments in four other properties in Nevada, New Jersey, Illinois and Macau. CityCenter, an unprecedented urban metropolis on the Las Vegas Strip scheduled to open in late 2009, is a joint venture between MGM MIRAGE and Infinity World Development Corp, a subsidiary of Dubai World. MGM MIRAGE Hospitality has entered into management agreements for future casino and non-casino resorts in the People's Republic of China, Abu Dhabi, U.A.E. and Vietnam. The Company has entered into an agreement to sell its Treasure Island property on the Las Vegas Strip. MGM MIRAGE supports responsible gaming and has implemented the American Gaming Association's Code of Conduct for Responsible Gaming at its properties. MGM MIRAGE has received numerous awards and recognitions for its industry-leading Diversity Initiative and its community philanthropy programs. For more information about MGM MIRAGE, please visit the company's website at http://www.mgmmirage.com.
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:||MGM Mirage Still Roaring; Properties Pull in Record Revenues / April 2005|