Cutting costs at Mirage pays off for MGM

Thursday, Oct. 19, 2000 | 11:26 a.m.

MGM Grand Inc.'s decision to acquire the Mirage Resorts empire is paying off for MGM, as the combined company today reported record revenue and net income for the first full quarter since the merger was announced.

Buoyed by solid results at the Bellagio hotel-casino on the Las Vegas Strip and Beau Rivage in Biloxi, Miss. -- two expensive projects launched by former Mirage Chief Executive Steve Wynn -- MGM MIRAGE reported earnings for the third quarter ended Sept. 30 of 42 cents per share, beating analysts' estimates.

The company reported net income of $67.4 million on revenues of $1.1 billion compared with net income of $12.6 million on revenues of $400.4 million in the same quarter a year ago.

The 42 cents per share earned in the third quarter compared with 10 cents per share in the third quarter of 1999 and beat the consensus of analysts polled by First Call Corp. of 36 cents per share.

The news was encouraging to investors, as the company's stock this morning climbed $1 from Wednesday's closing price, to $32.81.

Nine out of 14 analysts following the company's stock have recommended a "strong buy" or "buy" rating today.

"Our business strategies are working as evidenced by the exceptional same-store operating performance across our broad-based portfolio," said Terry Lanni, chairman of the board of MGM MIRAGE. "We have experienced strong occupancy companywide in the current quarter and future booking trends across all segments look solid going forward."

"It was a very good quarter for MGM MIRAGE," said Adam Steinberg, a gaming analyst for CIBC World Markets, New York. "They've done a good job cutting expenses at the Mirage properties. That was the strategy they outlined when they acquired the properties and they are executing the plan."

The company previously announced the sale of $66 million in nonstrategic assets during the quarter, bringing the total to about $220 million in assets sold since the acquisition, which closed May 31.

Although the company's flagship MGM Grand hotel-casino slumped with net revenues of $193.7 million for the quarter compared with revenues of $200.5 million for the same period in 1999, Bellagio's revenues climbed to $260.4 million from $245.5 million at the same time.

Revenues also were up at the Mirage hotel-casino ($156.2 million, up from $140.1 million in the third quarter of 1999), New York-New York ($56.2 million, up from $52.5 million), MGM Grand Detroit, which opened in July 1999 ($106.7 million, up from $72 million) and Beau Rivage ($84 million, up from $80.5 million).

Revenues were flat at the Golden Nugget in downtown Las Vegas and the Golden Nugget in Laughlin as well as the company's three hotel-casino properties in Primm.

Cash flow improved at every property in the company. The continued improvement was especially important at Beau Rivage, which dragged down the price of Mirage stock after it initially failed to meet financial targets. Cash flow in the quarter of $20.3 million was up from $17.4 million.

Occupancy rates were between 98 and 100 percent for the quarter at the MGM Grand, Bellagio, Mirage, New York-New York, Treasure Island, the Golden Nugget and Beau Rivage. The average daily room rate increased at all of those properties except Beau Rivage from the third quarter of 1999 to this year's third quarter.

The occupancy rate fell at the Primm properties and the Golden Nugget in Laughlin from third quarter 1999 to the most recent quarter, from 76.8 percent to 65.3 percent at Primm and 94.7 percent to 91.9 percent in Laughlin.

The company also reported it has sold its interest in the MGM Grand-Bally's Monorail to the Las Vegas Monorail Co., a nonprofit corporation that is extending the monorail system three miles north to the Las Vegas Convention Center and the Sahara hotel-casino.