MGM Mirage’s profit surpasses expectations

Tuesday, Feb. 1, 2005 | 10:59 a.m.

With a buyout of Mandalay Resort Group on the horizon, MGM Mirage rode increased gaming and room revenue to a record fourth quarter, the company said today.

The company, owner of the MGM Grand, Bellagio and Mirage resorts, outpaced analysts' expectations and said even better results appear to be ahead.

Net income declined to $67.9 million, 47 cents a share, from $91.7 million, 62 cents a share a year earlier. In fourth quarter 2003, the company's results included a $32.6 million gain from the sale of property near the Shadow Creek Golf Course in North Las Vegas, affecting earnings by 16 cents a share.

Revenue was up 11 percent to $1.06 billion from $959.9 million for previous year's fourth quarter.

A survey of 18 analysts by Thomson Financial expected the company would earn 44 cents a share.

Marc Falcone, a gaming analyst with Deutsche Bank Securities Inc., said strong casino revenue also drove results.

In a note to investors today, Falcone said casino revenue increased 10 percent, driven by a 9 percent jump in slot revenue and 12 percent higher table game win. Baccarat volume also grew 40 percent.

He cited particularly strong performance at Bellagio, New York-New York and Treasure Island.

Chief Financial Officer Jim Murren said today cash flow for the company's resorts is expected to climb above the $400 million mark in the first quarter -- a standard that has never been achieved by any gaming company. He said the $9.4 billion merger with the Mandalay Resort Group is on track.

"We've had a great dialogue with the Mandalay family and still expect that transaction to be completed by the end of the quarter," Murren said in an interview this morning. "We've worked with the state and federal regulators and raised all the money we need to complete the transaction."

Murren explained that he anticipates the state Gaming Control Board and the Nevada Gaming Commission would schedule hearings on the deal only after federal authorities have given their approval.

Although there are several factors driving MGM Mirage's improved revenue stream, Murren said the opening of Wynn Las Vegas later this year wouldn't hurt the company.

"We're excited about the opening of Wynn," Murren said. "It's a beautiful property, a market expander. We've been watching with great anticipation because we look at it as a property that would expand the market and bring more people to Las Vegas. Since we own most of the quality properties in the city, we will be a major beneficiary of an expanded market."

Some of the reasons revenue has increased and is on track to climb even more:

Executives also noted the company's investments in international markets. The company last year announced a joint venture agreement with Pansy Ho to develop a hotel and casino resort in Macau. Chief Executive Officer Terry Lanni said during a conference call that construction is expected to begin in the second quarter, with the resort opening in 2007.

The company also is in the initial stages of applying for a license to operate a resort in Singapore. Lanni said the initial stages of the application process will conclude this month and the government there will then announce a list of companies that would be invited to submit formal proposals.

Lanni also said the company is continuing its efforts in Great Britain, where new gaming legislation has been moved from the House of Commons to the House of Lords. Final tax proposals -- a key issue in the British gaming legislation -- have yet to be finalized.