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November 28, 2014

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Monte Carlo loses $12.68 per second when it’s closed

As long as the majority of its rooms and its casino are reopened quickly, the Monte Carlo fire shouldn't have a big economic impact on its owner, MGM

Mirage.

MGM Mirage collectively reports its operating results for its 10 Strip casinos (Bellagio, Mirage, Treasure Island, MGM Grand, New York-New York,

Mandalay Bay, Luxor, Excalibur, Monte Carlo and Circus Circus), so we'll use a series of educated guesses, using the company's revenue and cash flow numbers, to estimate the Monte Carlo fire's impact on the company's results.

MGM Mirage reported Las Vegas Strip revenues of $6.2 billion in 2006 and has yet to report full-year results for 2007. Cash flow for its Strip properties in 2006 was $2 billion. Cash flow is the casino industry's preferred metric for profitability, also called EBITDA -- earnings before interest, taxes, depreciation and amortization. More recent numbers, through the second quarter of 2007, show increases that should result in the company's Strip casinos posting revenues of about $6.5 billion and cash flow of about $2.16 billion in 2007.

Monte Carlo's revenue and cash flow certainly ranks below that of Bellagio, MGM Grand, Mirage and Mandalay Bay, and is probably close to the property results posted by the remaining five MGM Mirage Strip properties: Treasure Island, New York-New York, Luxor, Excalibur and Circus Circus.

Using those numbers -- and these are the biggest educated guesses involved in these calculations -- we'll estimate Monte Carlo's annual revenues at $400 million and its annual cash flow at $135 million.

If the entire property is closed for business, those annual numbers would translate into a revenue loss of $1.1 million per day, $45,662 per hour, $761.04 per minute and $12.68 per second.

Cash flow would be lost at the rate of $369,863 per day, $15,410 per hour, $256.85 per minute and $4.28 per second. Of course, the cash flow losses could be partially offset by any expense-side gains — in other words, savings that would be realized by eliminating costs like salaries, food and beverage expenses, utilities, etc.

The reality check for this exercise is that most of Monte Carlo's 3,002 rooms will likely quickly reopen as will the casino's gaming floor. Rooms and gaming are the big two revenue and cash flow drivers, so the economic impact should be relatively small, relatively quickly.

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