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Press Release: MGM MIRAGE
April 22, 2004
LAS VEGAS, NV -- MGM MIRAGE (NYSE: MGG) yesterday reported its first quarter 2004 financial results. Adjusted earnings
from continuing operations per diluted share ("Adjusted EPS") increased to an all-time record $0.70 in
the first quarter of 2004 from $0.38 in the 2003 quarter. The increase resulted from strong visitor levels and
customer spending in all areas, highlighted by a significant 11% increase in REVPAR (revenue per available room)
at the Company's Las Vegas Strip resorts.
Adjusted EPS (and Adjusted Earnings) excludes discontinued operations, preopening and start-up expenses, restructuring
costs, property transactions, and loss on early retirement of debt.(1) On a GAAP (Generally Accepted Accounting
Principles) basis, diluted earnings per share from continuing operations more than doubled to $0.66 for the first
quarter of 2004 from $0.32 in the 2003 quarter. GAAP diluted EPS, including the results of discontinued operations,
was $0.72 in the 2004 period versus $0.33 in 2003.
"Our first quarter was satisfying in many regards and we achieved several milestones, including record EPS
and EBITDA. This was our most profitable quarter ever, with the highest EBITDA margin since the formation of MGM
MIRAGE four years ago," said Terry Lanni, MGM MIRAGE's Chairman and CEO. "These results further validate
our strategy of operating the premier resorts on the Las Vegas Strip. Bellagio and MGM Grand, for example, each
had their most profitable quarter ever. We expect to build momentum throughout 2004 as we continue to roll out
new and exciting guest amenities at several of our resorts."
First Quarter 2004 Company Highlights
* Generated net revenues of $1.07 billion, up 12% from 2003;
* Produced property-level EBITDA(2) of $370.5 million, up 29% over prior
year and an all-time Company record for any quarter, and operating
income of $255 million, up 60% over 2003;
* Invested $174 million of capital in the Company's resorts, including
the Bellagio room remodel and expansion project, and the new theatre
for a Cirque du Soleil show scheduled to open at MGM Grand Las Vegas
in 2004;
* Reduced debt by $139 million in the quarter, including the repurchase
of $49 million of the Company's publicly-traded debt securities;
* Repurchased 2.9 million shares of Company common stock for
$121 million. The Company is authorized to repurchase 5.1 million
shares as of March 31, 2004;
* Issued $525 million of 5.875% Senior Notes due 2014;
* Closed the sale of the Golden Nugget resorts in Las Vegas and Laughlin
for $215 million;
* Announced the proposed sale of MGM Grand Australia to SKYCITY
Entertainment Group Limited for A$195 million (approximately
$143 million), expected to close by the third quarter.
Detailed Financial Results
The following table shows key financial results on a Company-wide basis for the first quarter:
Three months ended
March 31,
2004 2003
(In millions)
Casino revenue $ 558.7 $ 496.2
Non-casino revenue, net 507.7 455.7
Net revenue 1,066.4 951.9
Operating income 254.7 159.5
Income from continuing operations 97.1 48.8
Discontinued operations, net 8.7 2.2
Net income 105.8 51.0
____________________________________________________________________
Property-level EBITDA(2) $ 370.5 $ 287.7
EBITDA (after corporate expense)(2) 354.8 274.0
Adjusted Earnings 102.4 57.9
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 first quarter increased 12% from the 2003 first quarter. Results were strong in all operating
departments. A solid convention calendar and increased visitation to Las Vegas yielded significant gains in room
rates and considerable increases in gaming volumes.
Casino revenue increased by 13% in the 2004 quarter. Table games volume, including baccarat, was up 12% from the
prior year's quarter, with a 15% increase at the Company's Las Vegas Strip resorts, resulting from strong Chinese
New Year and Super Bowl events and continued improvement in the United States economy. Table games hold percentages
were within a normal range for both periods. The Company had previously announced that table games hold percentages
were below normal through Chinese New Year, but results for the remainder of the quarter, subsequent to Chinese
New Year, were more favorable. Company-wide slot revenue in the quarter was up 10% from 2003, led by double-digit
increases at MGM Grand Las Vegas, New York-New York, The Mirage and MGM Grand Detroit.
Non-casino revenue was up 11% in the quarter. Hotel revenue was up 10%, with occupancy of 90% in the first quarter
of 2004, consistent with 2003, and a higher average daily room rate ("ADR") of $138 versus $127 in 2003.
This is the highest quarterly ADR in the Company's history. As a result, REVPAR was $124, up 9% over REVPAR of
$114 in 2003. REVPAR at the Company's Las Vegas Strip resorts increased 11%, impacted positively by strong conference
and group business and higher rates across all segments.
Food and beverage revenue increased 16%, as new restaurants such as the Nine Fine Irishmen Pub at New York-New
York, and Fiamma Trattoria and SeaBlue at MGM Grand Las Vegas have allowed guests to spend a greater share of their
dining budget at the Company's resorts. Entertainment revenues were up slightly in the 2004 quarter despite the
closure of the Siegfried & Roy show in October 2003 and fewer performances by Danny Gans at The Mirage. Zumanity,
which debuted in August 2003, continues to perform exceptionally well at New York-New York. Retail revenues were
up 10%, driven by new retail outlets and increased spending by guests.
EBITDA was up 29% for the quarter, reflecting the operating trends described above and the benefit of the results
from Borgata. The percentage increase in EBITDA was higher than the percentage increase in net revenue due to the
enhanced pricing power in non-gaming amenities, which largely flows through to profit. The Company's property-level
EBITDA margin was 35% in 2004 versus 30% in the 2003 quarter. Operating income increased 60% over the 2003 quarter,
and the Company's operating margin improved to 24% from 17% in 2003. The higher percentage increase in operating
income than EBITDA was due to lower preopening and start-up expenses and lower property transactions in 2004.
First quarter Adjusted Earnings increased by 77% compared to 2003 due to the higher operating income. Net interest
expense increased over the 2003 quarter due to higher average borrowings and the cessation of interest capitalization
on the Company's investment in Borgata, which opened on July 3, 2003. For the first quarter of 2004, Adjusted Earnings
excluded $8.0 million ($5.2 million, net of tax) of items as follows:
* Net property transactions of $1.7 million ($1.1 million, net of tax),
including $0.9 million of demolition costs, primarily at Bellagio in
connection with the room remodel and expansion projects, and other net
losses on disposal of assets;
* Restructuring costs of $0.4 million ($0.3 million, net of tax);
* Preopening and start-up expenses of $0.4 million ($0.2 million,
net of tax);
* Loss on early retirement of debt of $5.5 million ($3.6 million, net
of tax) related to the repurchase and retirement of the Company's
publicly-traded debt securities, classified within "Other, net".
In the first quarter of 2003, items excluded in the determination of Adjusted Earnings included $6.5 million ($4.3
million, net of tax) of preopening and start-up expenses, primarily related to Borgata and Players Club; restructuring
costs of $0.6 million ($0.4 million, net of tax); and property transactions of $6.8 million ($4.4 million, net
of tax) related to assets abandoned or replaced in connection with construction projects and demolition costs at
MGM Grand Las Vegas.
Income from discontinued operations includes the results of Golden Nugget Las Vegas, Golden Nugget Laughlin, MGM
Grand Australia, and MGM MIRAGE Online. Pretax income from discontinued operations was $14 million in the 2004
quarter compared to $5 million in the 2003 quarter. The current year quarter includes the $8 million gain on the
sale of the Golden Nugget resorts. The prior year quarter included significant expenses related to MGM MIRAGE Online's
start-up efforts. Interest allocated to discontinued operations was $1 million for the first quarter of 2004 and
$3 million for the 2003 period.
Financial Position
The Company generated significant operating cash flow in the first quarter as a result of its positive operating
results. The Company utilized available cash flow, including the $215 million received from the sale of the Golden
Nugget resorts and $71 million of proceeds upon exercise of employee stock options, to repay $139 million of net
debt, invest $174 million in capital projects, repurchase $49 million of the Company's publicly-traded debt securities,
and repurchase $121 million of the Company's common stock.
First quarter capital investments of $174 million included $58 million for the Bellagio expansion, $43 million
for construction of the new theatre for Cirque du Soleil at MGM Grand Las Vegas, costs related to the Bellagio
and New York-New York room remodel projects and other routine capital expenditures.
In order to take advantage of historically low interest rates and ensure maximum flexibility for future growth
prospects, the Company issued $525 million of 5.875% Senior Notes due 2014, the proceeds from which were used to
repay amounts outstanding under the Company's senior credit facility. As of March 31, 2004, the Company had $1.5
billion available under its senior credit facility.
In November 2003, the Company's Board of Directors approved a 10 million share repurchase program. During the first
quarter of 2004, the Company repurchased 2.9 million shares of common stock for $121 million under this authorization,
leaving 5.1 million shares available for future purchase as of March 31, 2004.
"Our strong operating results and financing transactions in the first quarter have further strengthened our
balance sheet and enhanced our ability to profitably grow our company," said Jim Murren, MGM MIRAGE President
and CFO. "We are pleased with the operating performance of our existing resorts and are excited about the
prospects of globally expanding our portfolio."
Outlook
"Our extraordinary first quarter demonstrates the tremendous operating leverage inherent in our market-leading
resorts. If current trends continue, we expect to produce year-over-year gains in earnings throughout 2004. At
this early stage, we believe the current earnings estimate consensus of $0.51 per share for the second quarter
of 2004, as reported on First Call on April 20, 2004, is reasonable," Mr. Murren said. "Our current forecast
indicates that company-wide REVPAR for the second quarter will be up approximately 7% over last year, with REVPAR
at our Las Vegas Strip resorts up a vibrant 9%." The Company's guidance includes the impact of business interruption
of approximately $0.01 per share, net of our preliminary estimates of insurance recoveries, resulting from the
recent power outage at Bellagio.
MGM MIRAGE will hold a conference call to discuss its earnings results and outlook for the first quarter of 2004
at 11:00 a.m. Eastern Daylight 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). A complete replay of the conference
call will be made available at www.mgmmirage.com.
(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 income from continuing operations computed in
accordance with generally accepted accounting principles ("GAAP").
Reconciliations of GAAP income from continuing operations and EPS to
Adjusted Earnings and EPS are included in the financial schedules
accompanying this release.
(2) EBITDA is earnings before interest and other non-operating income
(expense), 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. Reconciliations of
operating income to EBITDA are included in the financial schedules
accompanying this release.
MGM MIRAGE (NYSE: MGG), one of the world's leading and most respected hotel and gaming companies, owns and operates
12 casino resorts located in Nevada, Mississippi, Michigan and Australia, 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. Its portfolio of brands include AAA Five Diamond award-winner
Bellagio, MGM Grand Las Vegas - The City of Entertainment, The Mirage, Treasure Island ("TI"), New York
- New York, Boardwalk Hotel and Casino and 50 percent of Monte Carlo, all located on the Las Vegas Strip; Whiskey
Pete's, Buffalo Bill's, Primm Valley Resort and two championship golf courses at the California/Nevada state line;
the exclusive Shadow Creek golf course in North Las Vegas; Beau Rivage on the Mississippi Gulf Coast; and MGM Grand
Detroit Casino in Detroit, Michigan. The Company is a 50-percent owner of Borgata, a destination casino resort
at Renaissance Pointe in Atlantic City, New Jersey. Internationally, MGM MIRAGE also owns a 25 percent interest
in Triangle Casino, a local casino in Bristol, United Kingdom. The Company has entered an agreement to sell MGM
Grand Australia in Darwin, Australia, pending finalization. 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.
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31, March 31,
2004 2003
Revenues:
Casino $ 558,723 $ 496,221
Rooms 234,961 213,298
Food and beverage 217,764 188,077
Entertainment 67,242 65,143
Retail 45,098 41,090
Other 51,086 52,349
1,174,874 1,056,178
Less: Promotional allowances 108,438 104,304
1,066,436 951,874
Expenses:
Casino 277,603 262,016
Rooms 61,832 57,906
Food and beverage 119,549 105,252
Entertainment 46,579 46,733
Retail 28,512 26,586
Other 32,884 30,485
Provision for doubtful accounts 6,877 7,636
General and administrative 146,281 138,300
Corporate expense 15,738 13,746
Preopening and start-up expenses 381 6,547
Restructuring costs 414 605
Property transactions, net 1,739 6,816
Depreciation and amortization 97,553 100,550
835,942 803,178
Income from unconsolidated affiliates 24,172 10,789
Operating income 254,666 159,485
Non-operating income (expense):
Interest income 903 1,708
Interest expense, net (89,810) (82,798)
Non-operating items from
unconsolidated affiliates (6,205) (151)
Other, net (7,154) 768
(102,266) (80,473)
Income from continuing operations
before income taxes 152,400 79,012
Provision for income taxes (55,260) (30,236)
Income from continuing operations 97,140 48,776
Discontinued operations
Income from discontinued operations,
including gain on disposal of $8,186
(three months 2004) 13,869 4,732
Provision for income taxes (5,161) (2,505)
8,708 2,227
Net income $ 105,848 $ 51,003
Per share of common stock:
Basic:
Income from continuing operations $ 0.68 $ 0.32
Discontinued operations 0.06 0.02
Net income per share $ 0.74 $ 0.34
Weighted average shares outstanding 142,115 152,110
Diluted:
Income from continuing operations $ 0.66 $ 0.32
Discontinued operations 0.06 0.01
Net income per share $ 0.72 $ 0.33
Weighted average shares outstanding 146,847 153,549
MGM MIRAGE AND SUBSIDIARIES
RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS
AND EPS TO ADJUSTED EARNINGS AND EPS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31, March 31,
2004 2003
Income from continuing operations $ 97,140 $ 48,776
Preopening and start-up expenses, net 248 4,256
Restructuring costs, net 269 393
Property transactions, net 1,130 4,430
Loss on debt retirements, net 3,593 --
Adjusted earnings $ 102,380 $ 57,855
Per diluted share of common stock:
Income from continuing operations $ 0.66 $ 0.32
Preopening and start-up expenses, net -- 0.03
Restructuring costs, net -- --
Property transactions, net 0.01 0.03
Loss on debt retirements, net 0.03 --
Adjusted EPS $ 0.70 $ 0.38
Weighted average diluted shares outstanding 146,847 153,549
MGM MIRAGE AND SUBSIDIARIES
SUPPLEMENTAL DATA - NET REVENUES BY RESORT
(In thousands)
(Unaudited)
Three Months Ended
March 31, March 31,
2004 2003
Bellagio $ 278,634 $ 240,364
MGM Grand Las Vegas 223,020 184,143
The Mirage 139,054 150,107
Treasure Island 99,796 89,942
New York-New York 82,793 61,911
MGM Grand Detroit 103,917 94,769
Beau Rivage 72,986 70,411
Other operations 66,236 60,227
$1,066,436 $ 951,874
MGM MIRAGE AND SUBSIDIARIES
SUPPLEMENTAL DATA - EBITDA BY RESORT
(In thousands)
(Unaudited)
Three Months Ended
March 31, March 31,
2004 2003
Bellagio $ 99,019 $ 68,163
MGM Grand Las Vegas 75,829 54,014
The Mirage 40,128 42,360
Treasure Island 31,303 26,223
New York-New York 32,124 25,515
MGM Grand Detroit 38,562 36,934
Beau Rivage 16,789 14,849
Other operations 12,565 8,902
Income from unconsolidated affiliates 24,172 10,789
$ 370,491 $ 287,749
MGM MIRAGE AND SUBSIDIARIES
RECONCILIATION OF OPERATING INCOME TO EBITDA
(In thousands)
(Unaudited)
Three Months Ended March 31, 2004
Depreci- Pre-
ation opening Property
and and Restruc- trans-
Operating amorti- start-up turing actions,
income zation expenses costs net EBITDA
Bellagio $ 77,091 $20,352 $ -- $ -- $1,576 $ 99,019
MGM Grand
Las Vegas 51,977 23,518 338 -- (4) 75,829
The Mirage 27,411 12,657 -- -- 60 40,128
Treasure
Island 22,651 8,660 -- -- (8) 31,303
New York-
New York 24,757 7,453 (86) -- -- 32,124
MGM Grand
Detroit 30,699 7,474 -- -- 389 38,562
Beau Rivage 11,674 5,304 -- -- (189) 16,789
Other
operations 8,265 4,385 -- -- (85) 12,565
Unconsolidated
affiliates 24,172 -- -- -- -- 24,172
278,697 89,803 252 -- 1,739 370,491
Corporate
and other (24,031) 7,750 129 414 -- (15,738)
$254,666 $97,553 $ 381 $ 414 $1,739 $354,753
Three Months Ended March 31, 2003
Depreci- Pre-
ation opening Property
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 3,905 4,997 -- -- -- 8,902
Unconsolidated
affiliates 6,716 -- 4,073 -- -- 10,789
183,226 92,883 4,716 325 6,599 287,749
Corporate
and other (23,741) 7,667 1,831 280 217 (13,746)
$159,485 $100,550 $ 6,547 $ 605 $6,816 $274,003
MGM MIRAGE AND SUBSIDIARIES
SUPPLEMENTAL DATA - HOTEL STATISTICS
(Unaudited)
Three Months Ended
March 31, March 31,
2004 2003
Bellagio
Occupancy % 95.4% 92.7%
Average daily rate (ADR) $255 $238
Revenue per available room (REVPAR) $243 $221
MGM Grand Las Vegas
Occupancy % 92.2% 92.7%
Average daily rate (ADR) $139 $119
Revenue per available room (REVPAR) $128 $110
The Mirage
Occupancy % 94.2% 92.5%
Average daily rate (ADR) $156 $148
Revenue per available room (REVPAR) $147 $137
Treasure Island
Occupancy % 96.5% 96.0%
Average daily rate (ADR) $123 $110
Revenue per available room (REVPAR) $118 $106
New York-New York
Occupancy % 97.5% 98.4%
Average daily rate (ADR) $119 $102
Revenue per available room (REVPAR) $116 $100
Beau Rivage
Occupancy % 86.1% 91.0%
Average daily rate (ADR) $ 91 $ 87
Revenue per available room (REVPAR) $ 78 $ 79
Other operations
Occupancy % 69.2% 68.9%
Average daily rate (ADR) $ 43 $ 44
Revenue per available room (REVPAR) $ 30 $ 30
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
March 31, December 31,
2004 2003
ASSETS
Current assets:
Cash and cash equivalents $ 196,413 $ 178,047
Accounts receivable, net 161,883 139,475
Inventories 63,230 65,189
Income tax receivable -- 9,901
Deferred income taxes 48,498 49,286
Prepaid expenses and other 88,516 89,641
Assets held for sale 86,516 226,082
Total current assets 645,056 757,621
Property and equipment, net 8,718,333 8,681,339
Other assets:
Investments in unconsolidated affiliates 772,976 756,012
Goodwill and other intangible assets, net 232,671 267,668
Deposits and other assets, net 277,383 247,070
Total other assets 1,283,030 1,270,750
$10,646,419 $10,709,710
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 95,229 $ 85,439
Income taxes payable 58,605 --
Current portion of long-term debt 9,687 9,008
Accrued interest on long-term debt 76,808 87,711
Other accrued liabilities 525,122 559,445
Liabilities related to assets held
for sale 7,235 23,456
Total current liabilities 772,686 765,059
Deferred income taxes 1,732,256 1,765,426
Long-term debt 5,394,989 5,521,890
Other long-term obligations 135,544 123,547
Stockholders' equity:
Common stock ($.01 par value: authorized
300,000,000 shares, issued
171,194,901 and 168,268,213 shares
and outstanding 143,143,001 and
143,096,213 shares) 1,712 1,683
Capital in excess of par value 2,261,525 2,171,625
Deferred compensation (16,795) (19,174)
Treasury stock, at cost
(28,051,900 and 25,172,000 shares) (882,378) (760,594)
Retained earnings 1,239,751 1,133,903
Accumulated other comprehensive income 7,129 6,345
Total stockholders' equity 2,610,944 2,533,788
$10,646,419 $10,709,710
Source: MGM MIRAGE