Tuesday, April 18, 2000 | 11:01 a.m.
MGM Grand Inc. launched the Strip's earnings reporting season with a roar today, beating analyst earnings expectations by 12 percent for the quarter ending March 31 -- the sixth consecutive quarter MGM Grand has exceeded profit forecasts.
But the strong earnings weren't confined to MGM Grand -- Phoenix-based Aztar Corp., owner and operator of the neighboring Tropicana hotel-casino, beat estimates by 56 percent.
Analysts had expected a significant surge in MGM Grand's earnings, given the fact MGM Grand added the MGM Grand Detroit and New York-New York since the year-ago quarter. But what they hadn't fully expected was a 34 percent surge in operating income at MGM Grand's flagship property on the Strip.
"I knew Detroit would be strong, but Vegas was better than I expected," said Stuart Linde, gaming analyst with Lehman Bros. "That one really exceeded (expectations)."
"In general, you're only going to see upside in prices for the sector. There's good momentum going into the second quarter."
In early afternoon trading on Wall Street, MGM Grand was up $2.06, to $28.25, while Aztar rose 75 cents to $10.
MGM Grand, currently preparing to acquire Mirage Resorts Inc. in a $6.7 billion deal, reported net income of 38 cents per diluted share, up 30 cents per share from the quarter ending March 31, 1999. Before one-time charges, MGM Grand earned 42 cents per diluted share, up 91 percent from the year-ago period.
Revenues for the quarter increased 76 percent, to $442.9 million, while cash flow rose 99 percent to $144.6 million -- both records for the company.
About one-half of those increases were the direct result of MGM Grand Detroit, which opened last July. In the first quarter, the MGM Grand Detroit contributed $101.3 million in net revenues and $35.8 million in cash flow.
Results were also boosted by MGM Grand's acquisition of Primadonna Resorts in March 1999. The acquisition gave MGM Grand full control of the New York-New York, boosting its share of cash flow from the property from $9.7 million to $23.4 million. The three Primm casinos produced cash flow of $19.8 million, up from $6 million in the year-ago period.
But the true star in growth was the MGM Grand hotel-casino. The property produced net revenues of $216.7 million, an 11 percent increase, while cash flow rose an impressive 33 percent, to $61 million. The revenue figure was the highest in the MGM Grand's history, while cash flow was the highest since the second quarter of 1996.
MGM Grand attributed these gains to "strong international and national customer activity," as well as a long list of high-profile entertainment events, including the New Year's Eve Barbra Streisand concert and the ESPY awards. Jim Murren, president and chief financial officer for MGM Grand, said results were also boosted by the property's recently completed room remodeling, the high-end Mansions at MGM Grand and strong convention business.
"The conference center is a big weapon for our midweek business," Murren said.
These developments, MGM Grand said, helped boost slot volume by 12 percent, and table game play by 15 percent. Room occupancy for the quarter was 97.2 percent, up from 96.5 percent in the year-ago quarter and average daily room rates edged up $1 to $110.
The next big booster for MGM Grand's revenues, the acquisition of Mirage Resorts, is now expected to close by the third quarter at the latest, up from original estimates of a fourth-quarter close, Murren said. Now the deal lies primarily in the hands of state gaming regulators and Mirage shareholders.
"I can see that light at the end of the tunnel and it's very bright," Murren said. "We and Mirage and working to get this thing closed as soon as possible."
Across Tropicana Avenue, results also improved substantially at the Tropicana hotel-casino, operated by Aztar.
Aztar reported operating cash flow of $6 million from the Tropicana in the quarter ending March 30, double the cash flow reported in the year-ago period. Revenues at the Tropicana rose 6 percent, to $38.1 million, while occupancy reached 95 percent.
Investors often overlook the Strip property as a contributor to Aztar's earnings, Linde said, "and that allows them to surprise, because Las Vegas did terrific."
Aztar's Tropicana in Atlantic City posted operating cash flow of $24.6 million, a 14 percent increase, and revenues of $111 million, a 14 precent rise.
The two Tropicanas' strength helped Aztar post net income of $11 million, or 25 cents per diluted share, up from $2.9 million, or 6 cents per share, in the year-ago quarter. Revenues rose 11 percent, to $211.5 million, while overall operating cash flow rose 25 percent to $46.2 million.
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