MGM Grand earnings soar

Gary Thompson

Thursday, Oct. 14, 1999 | 12:01 p.m.

Extraordinary performances by its Las Vegas, Primm and Australian resorts and the successful opening of the first hotel-casino in Detroit propelled MGM Grand Inc.'s third-quarter financial results to record levels, the Las Vegas company said today.

The upbeat news was partially offset by MGM Grand Chairman Terry Lanni's confirmation that he would resign by year-end to spend more time with his family in Los Angeles. Though he leaves the company with one of the best management teams in the gaming industry, Lanni will be missed both by MGM and his colleagues throughout the casino business as one of its most respected and articulate spokesmen.

Before one-time charges related primarily to the Detroit opening, MGM Grand's third-quarter earnings jumped to 70 cents per fully diluted share from 31 cents in the year-ago period. Analysts had projected the company would earn 52 cents a share in the latest quarter.

Cash flow soared to a record $124.1 million, as casino and hotel business improved across the board. Occupancy at the flagship 5,005-room MGM Grand on the Las Vegas Strip was 99.8 percent despite the openings of several new hotel-casinos in the past year.

That compares with an average occupancy rate for hotels nationwide of 73 percent in July, the latest month for which results are available.

Casino revenues and margins also improved as slot and table game business picked up and the hold percentage for casino games rose from last year's below-normal rates.

The company reported third-quarter net income before the nonrecurring charges of $42.4 million, or 70 cents a share, compared with net of $17.1 million, or 31 cents a share, in the year-earlier period. Revenue rose to $400.3 million from $193.7 million.

One-time charges including preopening expenses for Detroit reduced the latest period's net to 21 cents a share.

For the first nine months of 1999, MGM reported net income of $100 million, or 79 cents a share after 92 cents a share of writeoffs, compared with net of $47.7 million, or 84 cents a share, in the 1998 period.

"These are great numbers," said Dave Ehlers, chairman of Las Vegas Investment Advisors Inc. "You've got to give them a lot of credit. They've done a large number of awfully good things in the past few years."

MGM Grand President Alex Yemenidjian said cash flow at the company's three Primm, Nev., resorts -- acquired seven months ago -- rose 52 percent in the latest quarter, while the cash-flow margin was up 10 percentage points.

He said MGM's temporary Detroit casino is attracting nearly 15,000 customers a day and signing up 30,000 members a month to its slot club. MGM will install 200 more slots to the facility to meet demand and added 2,200 more parking spaces to the 3,200 already available by Dec. 1.

Yemenidjian said the company has booked several entertainment events for next year that will cement MGM's position as "the entertainment leader of Las Vegas."

Jim Murren, MGM's chief financial officer, said cash flow at the MGM Grand was up 22 percent in the quarter and casino revenue 28 percent higher as the hold percentage for all table games was above last year's below-normal rate.

Baccarat drop rose 6 percent, helped by customers staying at the MGM Grand's ultra-luxurious Mansion. Describing the Mansion's guests as "very, very rich," Lanni said 40 percent are from domestic markets, 50 percent from the Asian-American and Far East markets and 10 percent from other countries.

Murren said New York-New York posted increased cash flow and its 45 percent cash-flow margin still remains the highest on the Strip. Occupancy rates rose for the fourth consecutive quarter, to 98.1 percent, despite new properties that have opened, he said.

The Australian casino operations saw cash flow and margins improve, Murren said.