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MGM Mirage Reports a 3rd Quarter drop of 34.6% in Earnings;
Largely Caused by a Decline in Table Game Luck
By Jeff Simpson, Las Vegas Review-Journal
Knight Ridder/Tribune Business News

Oct. 22, 2003 - Strip kingpin MGM Mirage on Tuesday reported a third-quarter drop in earnings, falling to 36 cents per share compared with 52 cents in last year's quarter.

The results were slightly below analysts' consensus estimate of 37 cents per share but slightly above the company's recent 35-cent guidance.

Companywide earnings dropped to $54.9 million from $84 million, a 34.6 percent decline.

MGM Mirage revenue was up 4.3 percent, to $989.6 million from $948.9 million, and operating cash flow was down 4.6 percent, to $279 million from $303.1 million.

MGM Mirage said the quarterly income drop was largely caused by a decline in table-game luck, as the 2002 third-quarter results benefited from a favorable table game hold percentage of about 22 percent, at the upper end of the 18 percent to 22 percent range company executives consider normal.

The most recent quarterly hold percentage fell at the low end of that range, executives said.

MGM Mirage controls an estimated 60 percent of the Strip's high-end gambling market, which is almost exclusively fueled by table play, particularly baccarat.

"We, and most investors, thought they were being conservative, but table hold (luck factor) played a big role here," Fulcrum Global Partners casino analyst Joe Greff wrote in a Tuesday research note.

Bad luck notwithstanding, MGM Mirage executives were upbeat about the company's performance and prospects.

"Our third-quarter performance was satisfying on many fronts, including an increase in demand for resort travel, and increased spending among our visitors. We also saw solid business levels in the key national high-end customer segment," Terry Lanni, MGM Mirage chairman and chief executive officer, said in a Tuesday statement. "We expect that the upcoming convention and holiday season will likely provide further data to support the recent positive trends."

Lanni opened a Tuesday morning conference call with industry analysts and investors with remarks about the recent cancellation of The Mirage's "Siegfried & Roy" show after Roy Horn was injured when he was bitten by one of the show's white tigers.

Lanni said company bosses deeply appreciate the duo's contribution to the company's and the Strip's success. Mirage Resorts CEO Bobby Baldwin added that execs are praying for Horn's recovery from his injuries.

MGM Mirage executives estimate the show's cancellation will cost the company about $2.5 million in fourth-quarter cash flow. The 2004 impact, presuming no replacement for the show is in place by the end of the year, would be about $12.5 million in lost cash flow.

Deutsche Banc casino industry debt analyst Andrew Zarnett said the effect of the show's cancellation largely depends on MGM Mirage's ability to find another tenant for the duo's 1,500-seat theater.

"It all depends on what they can creatively do with the theater," Zarnett said. "At the end of the day, it comes down to getting bodies in the seats."

One thing Zarnett said he hopes MGM Mirage doesn't do is return to Cirque du Soleil for another show.

The company already has Cirque shows at Bellagio, "O", and Treasure Island, "Mystre." It opened another during the third quarter at New York-New York, "Zumanity," and plans another for a new theater at MGM Grand.

Lanni said the company remains extremely interested in overseas expansion opportunities, particularly in the United Kingdom.

The company's executives plan to travel to England on Nov. 6 for a licensing hearing for the company's 25 percent stake in Metro Casinos Ltd. and the jointly owned casino they plan to open in Bristol.

Lanni said the company also plans to continue pursuing casino opportunities in Thailand and Macau.

Other quarterly property cash flow results the company reported included those at:

-- The Mirage, which fell 5.3 percent to $40.8 million from $43.1 million.

-- MGM Grand, up 9.7 percent to $58.7 million from $53.5 million.

-- New York-New York, up 19.8 percent to $26 million from $21.7 million.

-----To see more of the Las Vegas Review-Journal, or to subscribe to the newspaper, go to

(c) 2003, Las Vegas Review-Journal. Distributed by Knight Ridder/Tribune Business News. MGG,

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