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MGM Mirage Posts 38% Drop in 1st Qtr Net Income, 
$51 million vs 82 Million
Hotel Operating Statistics
April 16, 2003 - MGM MIRAGE today reported its first quarter 2003 financial results. Adjusted earnings per diluted share ("Adjusted EPS") was $0.40 in the first quarter of 2003, versus $0.52 in the 2002 quarter. First quarter Adjusted EPS was in line with the Company's previously announced guidance of $0.35 to $0.40. 

Adjusted EPS (and Adjusted Earnings) excludes preopening and start-up expenses, restructuring costs, and property transactions, net(1). Diluted EPS computed in accordance with generally accepted accounting principles ("GAAP EPS") decreased to $0.33 for the first quarter of 2003 from $0.51 in the 2002 quarter. 

"We performed largely as we expected in the first quarter, which is particularly noteworthy given current economic and world events. Our resorts posted solid results due to strong business volumes," said Terry Lanni, MGM MIRAGE's Chairman and CEO. "We are cognizant of near-term challenges, but continue to focus on maximizing the power of our brands, superior resorts, and world-class employees to generate market-leading results." 

First Quarter 2003 Company 

  • Earned revenues of $1.02 billion, up 1% from 2002; 
  • Amended the 364-Day Revolving Credit Facility, extending the maturity to April 2, 2004 and securing total available borrowings of $525 million. 
  • Used $101 million of cash to repay debt and repurchase common stock; 
  • Invested $88 million of capital in the Company's properties, including maintenance and expansion projects; 
  • Opened Tabu, the Ultra-Lounge, at MGM Grand Las Vegas, and Caramel and Mist, new lounges at Bellagio and Treasure Island, respectively. 
  • Announced a new Irish Pub at New York-New York, complementing the resort's improved entertainment amenities, including the new Cirque du Soleil show, Zumanity, slated to open this summer. 
Detailed Financial Results

The following table shows key financial results on a Company-wide basis for the first quarter. 
                                                    Three months ended 
                                                            March 31, 
                                                       2003           2002 
                                                            (In millions) 
        Casino revenue, net                  $  545.3        $  567.4 
        Non-casino revenue, net                 476.6           440.0 
        Net revenue                           1,021.9         1,007.4 
        Property-level EBITDA(2)            301.8           324.1 
        EBITDA (after corporate expense)(2)    288.0           313.5 
        Operating income                        167.6           207.9 
        Net income                               51.0            82.0 
        Adjusted Earnings                        60.9            83.4 

Net revenue in the first quarter grew 1% from the 2002 first quarter, benefiting from strong hotel and other non-gaming results throughout much of the quarter, offset by lower gaming revenues. Casino revenue decreased by 4% in the 2003 quarter. Table games volume, including baccarat, was down 1% from the 2002 quarter. Table games hold percentages were within a normal range for both periods, but the hold percentage was higher in last year's quarter. Slot revenue in the quarter was up 4% from 2002. Bellagio had another strong quarter in slots, with revenue up 10% in the quarter. This was Bellagio's fourth straight quarter of double-digit year-over-year slot revenue growth. New York-New York also posted a strong 19% increase in slot revenues over last year. MGM Grand Detroit slot revenues were down 3% compared to last year. 

Non-casino revenue was up 8% in this year's quarter, as a result of continued year-over-year improvement in visitation trends and room rates. Hotel occupancy was 90% in the first quarter of 2003, up slightly over 89% in 2002, while the average daily room rate ("ADR") was $120, up 8% over 2002. As a result, revenue per available room ("REVPAR") increased 8% to $108 in the 2003 first quarter when compared with 2002. 

Food and beverage, entertainment, retail and other revenues showed solid gains in the first quarter. These revenues increased 16% at MGM Grand Las Vegas, even after the impact of closing the EFX! show in January 2003. This resort's mix of dining and entertainment has improved significantly since last year, as management's transformation of the resort continues to benefit financial results. Bellagio and The Mirage also showed strong growth in food and beverage revenues, up 7% and 8%, respectively. 

For the quarter, EBITDA was down 8% from the year-ago period, and operating income was down 19%. The decrease in EBITDA was primarily the result of increased labor costs in the quarter, along with increased property taxes and insurance costs. Operating income decreased due to those items and higher preopening expenses and net property transactions. 

Adjusted Earnings and net income decreased by 27% and 38%, respectively, in the first quarter due to the decrease in operating income and higher net interest expense. Net interest expense was higher due to the Company's decision to suspend development of its wholly-owned Atlantic City development project, resulting in lower capitalized interest, and the prior year savings from interest rate swaps. 

Net income for the first quarter of 2003 included a net $14.8 million ($9.9 million, net of tax) of items excluded from Adjusted Earnings. These items included: 

  • Preopening and start-up expenses of $7.4 million, including $4.2 million related to the Company's Borgata investment and $1.7 million related to Players Club; 
  • Net property transactions of $6.8 million, resulting primarily from asset impairments and demolition costs associated with the closure of the EFX!  show ($4.7 million), and other asset impairments at MGM Grand Las Vegas ($1.4 million); 
  • Restructuring costs of $0.6 million. 


In the first quarter of 2002, similar items totaled $2.2 million ($1.5 million, net of tax), and consisted of preopening expenses related primarily to MGM MIRAGE Online and Borgata. 

Financial Position 

  • Repaid $34 million of debt; 
  • Repurchased the remaining 1.4 million shares of Company common stock available under the 2001 authorization at a total cost of $36 million; 
  • Announced Board of Director approval for a new 10 million share repurchase program, and repurchased 1.2 million shares under the new authorization at a total cost of $31 million. 
First quarter capital expenditures of $88 million included costs related to continued implementation of new slot technology, the Bellagio expansion, construction of the two new theatres for Cirque du Soleil at New York-New York and MGM Grand Las Vegas, and other maintenance expenditures. 

After giving effect to the extension of the 364-day credit facility, the Company has approximately $654 million of available borrowings under its senior credit facilities, with no public debt maturities until 2005. 

"We are pleased to have secured continuing available credit at terms consistent with our past borrowings. Our extended facility also gives us the flexibility needed to pursue development opportunities," said MGM MIRAGE President, CFO and Treasurer Jim Murren. "We are analyzing a variety of growth opportunities, and while we explore them we are actively returning value to shareholders through targeted investments in our existing resorts, debt reductions, and prudent stock repurchases consistent with the strength of our balance sheet," Mr. Murren said. 

Operational Highlights 

  • Successfully launched Players Club at Beau Rivage, the sixth resort linked to the program; 
  • Continued installation of IGT's EZ-Pay(TM) cashless gaming system at the Company's resorts, with over 10,000 machines converted to cashless technology by quarter-end; 
  • Further enhanced our resorts with world-class lounge and entertainment offerings, including Tabu, the Ultra Lounge, at MGM Grand Las Vegas, Caramel bar and lounge at Bellagio, and Mist bar and lounge at Treasure Island. Outlook 
  • Anticipate the opening of Borgata this summer, with our final capital contributions of up to $40 million to be made in the second and third quarters; 
  • Forecast capital expenditures (excluding required contributions to Borgata) of $100 million in the second quarter of 2003, including continued development expenditures related to the Bellagio expansion and theatres for the two new Cirque du Soleil shows. 
"Global events and the current state of the economy create a difficult environment in which to forecast performance," said Mr. Lanni. "Incoming call volumes are slightly lower than last year's pace while we continue to operate with shortened booking windows. While these conditions may put pressure on near-term performance, we are confident that the Las Vegas market will once again prove its durability, and that an improving economy and resolution to global uncertainties will spur increased spending by our customers." 
 
 
 
 
 
                                MGM MIRAGE AND SUBSIDIARIES 
                         CONSOLIDATED STATEMENTS OF OPERATIONS 
                         (In thousands, except per share data) 
                                      (Unaudited) 
                                                         Three Months Ended 
                                                      March 31,       March 31, 
                                                         2003           2002 
       Revenues: 
         Casino                                        $545,343       $567,389 
         Rooms                                          225,539        206,499 
         Food and beverage                              201,937        188,180 
         Entertainment, retail and other                162,049        152,955 
                                                      1,134,868      1,115,023 
         Less: Promotional allowances                   112,938        107,617 
                                                      1,021,930      1,007,406 
       Expenses: 
         Casino                                         287,405        281,604 
         Rooms                                           63,137         53,953 
         Food and beverage                              113,946         97,585 
         Entertainment, retail and other                108,259         99,835 
         Provision for doubtful accounts                  7,966         12,058 
         General and administrative                     150,256        147,483 
         Corporate expense                               13,746         10,635 
         Preopening and start-up expenses                 7,431          2,239 
         Restructuring costs                                605             -- 
         Property transactions, net                       6,784             -- 
         Depreciation and amortization                  105,613        103,373 
                                                        865,148        808,765 

       Income from unconsolidated affiliate              10,789          9,225 

       Operating income                                 167,571        207,866 

       Non-operating income (expense): 
         Interest income                                  1,777          1,240 
         Interest expense, net                          (85,988)       (72,597) 
         Interest expense from unconsolidated affiliate      --           (277) 
         Other, net                                         389         (2,623) 
                                                        (83,822)       (74,257) 

       Income before income taxes                        83,749        133,609 
         Provision for income taxes                     (32,746)       (51,653) 

       Net income                                       $51,003        $81,956 

       Per share of common stock: 
         Basic: 
         Net income per share                             $0.34          $0.52 

         Weighted average shares outstanding            152,110        158,011 

         Diluted: 
         Net income per share                             $0.33          $0.51 

         Weighted average shares outstanding            153,549        160,152 
 

                              MGM MIRAGE AND SUBSIDIARIES 
         RECONCILIATION OF GAAP NET INCOME AND EPS                         (In thousands, except per share data) 
                                      (Unaudited) 
                                                          Three Months Ended 
                                                       March 31,      March 31, 
                                                          2003           2002 

       Net income                                       $51,003        $81,956 
       Preopening and start-up expenses, net              5,088          1,455 
       Restructuring costs, net                             393             -- 
       Property transactions, net                         4,410             -- 
       Adjusted earnings                                $60,894        $83,411 

       Per diluted share of common stock: 
         Net income                                       $0.33          $0.51 
         Preopening and start-up expenses, net             0.04           0.01 
         Restructuring costs, net                            --             -- 
         Property transactions, net                        0.03             -- 
         Adjusted EPS                                     $0.40          $0.52 

         Weighted average diluted shares outstanding    153,549        160,152 
 

                              MGM MIRAGE AND SUBSIDIARIES 
                      RECONCILIATION OF OPERATING INCOME                                     (In thousands) 
                                      (Unaudited) 
                           Three Months Ended March 31, 2003 
                                  Depreci-  Preopening           Property 
                                  ation and     and     Restruc- trans- 
                        Operating  amorti-   start-up    turing  actions, 
                         income    zation    expenses     costs   net    EBITDA 
       Bellagio          $40,281   $27,872      $--       $--     $10   $68,163 
       MGM Grand 
        Las Vegas         26,879    20,188      591        25   6,331    54,014 
       The Mirage         29,694    12,435       --       300     (69)   42,360 
       Treasure Island    18,081     8,219       --        --     (77)   26,223 
       New York-New York  19,471     5,950       52        --      42    25,515 
       MGM Grand Detroit  28,197     8,581       --        --     156    36,934 
       Beau Rivage        10,002     4,641       --        --     206    14,849 
       Other operations   12,336     9,715      884        --     (32)   22,903 
       Unconsolidated 
        affiliate         10,789        --       --        --      --    10,789 
                         195,730    97,601    1,527       325   6,567   301,750 
       Corporate 
        and other        (28,159)    8,012    5,904       280     217   (13,746) 
                        $167,571  $105,613   $7,431      $605  $6,784  $288,004 
 

                           Three Months Ended March 31, 2002 
                                  Depreci-  Preopening           Property 
                                  ation and     and     Restruc- trans- 
                        Operating  amorti-   start-up    turing  actions, 
                         income    zation    expenses     costs   net    EBITDA 
       Bellagio          $63,346   $23,299      $--       $--     $--   $86,645 
       MGM Grand 
        Las Vegas         33,093    22,268       --        --      --    55,361 
       The Mirage         27,353    12,651       --        --      --    40,004 
       Treasure Island    17,216     8,380       --        --      --    25,596 
       New York-New York   8,421    11,198       --        --      --    19,619 
       MGM Grand Detroit  40,335     5,791       --        --      --    46,126 
       Beau Rivage         9,362     6,182       --        --      --    15,544 
       Other operations   15,332     9,563    1,098        --      --    25,993 
       Unconsolidated 
        affiliate          9,225        --       --        --      --     9,225 
                         223,683    99,332    1,098        --      --   324,113 
       Corporate 
        and other        (15,817)    4,041    1,141        --      --   (10,635) 
                        $207,866  $103,373   $2,239       $--     $--  $313,478 
 

                              MGM MIRAGE AND SUBSIDIARIES 
                       SUPPLEMENTAL DATA - NET REVENUES BY RESORT 
                                     (In thousands) 
                                      (Unaudited) 

                                                          Three Months Ended 
                                                       March 31,      March 31, 
                                                         2003           2002 
       Bellagio                                      $  240,364     $  244,448 
       MGM Grand Las Vegas                              184,143        184,987 
       The Mirage                                       150,107        140,397 
       Treasure Island                                   89,942         86,601 
       New York-New York                                 61,911         50,322 
       MGM Grand Detroit                                 94,769        103,619 
       Beau Rivage                                       70,411         71,902 
       Other operations                                 130,283        125,130 
                                                     $1,021,930     $1,007,406 
 

MGM MIRAGE AND SUBSIDIARIES 
                          SUPPLEMENTAL DATA - HOTEL STATISTICS 
                                      (Unaudited) 
                                                           Three Months Ended 
                                                        March 31,      March 31, 
                                                          2003           2002 
       Bellagio 
        Occupancy %                                       91.7%          92.8% 
        Average daily rate (ADR)                           $238           $217 
        Revenue per available room (REVPAR)                $219           $202 

       MGM Grand Las Vegas 
        Occupancy %                                       92.7%          90.2% 
        Average daily rate (ADR)                           $119           $113 
        Revenue per available room (REVPAR)                $111           $101 

       The Mirage 
        Occupancy %                                       92.2%          93.0% 
        Average daily rate (ADR)                           $149           $139 
        Revenue per available room (REVPAR)                $137           $130 

       Treasure Island 
        Occupancy %                                       94.9%          95.2% 
        Average daily rate (ADR)                           $110            $99 
        Revenue per available room (REVPAR)                $104            $94 

       New York-New York 
        Occupancy %                                       99.0%          95.0% 
        Average daily rate (ADR)                           $101            $90 
        Revenue per available room (REVPAR)                $100            $85 

       Beau Rivage 
        Occupancy %                                       91.0%          91.6% 
        Average daily rate (ADR)                            $87            $81 
        Revenue per available room (REVPAR)                 $79            $74 

       Other operations 
        Occupancy %                                       78.4%          77.8% 
        Average daily rate (ADR)                            $53            $52 
        Revenue per available room (REVPAR)                 $42            $41 
 

                              MGM MIRAGE AND SUBSIDIARIES 
                              CONSOLIDATED BALANCE SHEETS (In thousands, except share data) 
                                      (Unaudited) 
                                         ASSETS 
                                                       March 31,    December 31, 
                                                         2003           2002 Current assets: 
         Cash and cash equivalents                  $   172,134    $   211,234 
         Accounts receivable, net                       134,586        139,935 
         Inventories                                     68,066         83,582 
         Deferred income taxes                           65,604         84,348 
         Prepaid expenses and other                      87,572         86,311 
            Total current assets                        527,962        605,410 

       Property and equipment, net                    8,739,506      8,762,445 

       Other assets: 
         Investment in unconsolidated affiliates        713,682        710,802 
         Goodwill and other intangible assets, net      257,351        256,108 
         Deposits and other assets, net                 192,835        170,220 
            Total other assets                        1,163,868      1,137,130 
                                                    $10,431,336    $10,504,985 

                          LIABILITIES AND S     Current liabilities: 
         Accounts payable                            $   75,168     $   69,959 
         Income taxes payable                            13,445            637 
         Current portion of long-term debt                7,356          6,956 
         Accrued interest on long-term debt              56,267         80,310 
         Other accrued liabilities                      567,665        592,206 
            Total current liabilities                   719,901        750,068 

       Deferred income taxes                          1,761,541      1,769,431 
       Long-term debt                                 5,184,236      5,213,778 
       Other long-term obligations                      112,594        107,564 
       Stockholders' equity: 
         Common stock ($.01 par value: 
          authorized 300,000,000 shares, 
          issued 166,399,089 and 
          166,393,025 shares and outstanding 
          152,021,689 and 154,574,225 shares)             1,664          1,664 
         Capital in excess of par value               2,125,999      2,125,626 
         Deferred compensation                          (25,195)       (27,034) 
         Treasury stock, at cost (14,377,400 and 
          11,818,800 shares)                           (384,172)      (317,432) 
         Retained earnings                              941,209        890,206 
         Other comprehensive loss                        (6,441)        (8,886) 
            Total stockholders' equity                2,653,064      2,664,144 
                                                    $10,431,336    $10,504,985 

(1) Adjusted Earnings (and Adjusted EPS) is presented solely as a supplemental disclosure because management believes that it is 1) a widely used measure of performance, and 2) a principal basis for valuation of gaming companies, as this measure is considered by many to be a better measure on which to base expectations of future results than GAAP net income. A reconciliation of Adjusted Earnings and EPS to GAAP net income and EPS is included in the financial schedules accompanying this release. 

(2) EBITDA is earnings before interest, taxes, depreciation and amortization, restructuring, preopening and start-up expenses, and property transactions, net. EBITDA is presented solely as a supplemental disclosure because management believes that it is 1) a widely used measure of operating performance in the gaming industry, and 2) a principal basis for valuation of gaming companies. Management uses property-level EBITDA (EBITDA before corporate expense) as the primary measure of the Company's operating resorts' performance, including the evaluation of operating personnel. 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 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. Also, other gaming companies that report EBITDA information may calculate EBITDA in a different manner than the Company. A reconciliation of EBITDA to operating income is included in the financial schedules accompanying this release. 

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:

MGM MIRAGE
James J. Murren
President, Chief Financial Officer and Treasurer
+1-702-693-8877
www.mgmmirage.com



 
Also See: 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 / Jan 2003
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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