MGM MIRAGE (NYSE: MGM) today reported its third quarter 2006 financial results, achieving record third quarter revenues and earnings. Diluted earnings per share was $0.54, a 74% increase over the $0.31 per share earned in 2005, driven by strong top-line performance -- 5% increase in net revenues -- and higher operating margins.
Highlights from the quarter include:
* 5% increase in gaming revenues, with strong high-end table games
volume and a solid 5% increase in slots revenue;
* 3% increase in hotel revenues, led by a 6% increase in Las Vegas
Strip REVPAR;(1)
* Property EBITDA(2) of $637 million, a 19% increase over the prior
year;
* Property EBITDA margins increased to 33% versus 30% in the 2005 third
quarter;
* Beau Rivage, which was open for 33 days in the quarter, earned
Property EBITDA of $16 million, versus $12 million in the 2005
quarter, when it was open for two months;(3)
The following table lists significant items which affect the comparability of the current year and prior year results (EPS impact shown, net of tax, per diluted share; negative amounts represent charges to income):
Three months ended September 30, 2006 2005
------------------------------------------------------------------------
Profits from The Signature at MGM Grand $0.06 $--
Incremental stock compensation - adoption
of SFAS 123® (0.04) --
Preopening and start-up expenses (0.01) (0.01)
Property transactions, net -- (0.05)
Tax adjustments 0.02 (0.01)
"The third quarter once again demonstrated our Company's ability to grow organically and generate meaningful increases in cash flow," said Terry Lanni, MGM MIRAGE's Chairman and CEO. "We are extremely pleased with the record performances turned in by several resorts, and especially proud of the recently re-opened Beau Rivage. Our valued employees are excited to be back to work, and we are glad to be a part of the revival of the Gulf Coast."
Net revenue of $1.9 billion is an all-time Company record for the third quarter. Results in most operating areas were consistent with this trend, as strong gaming results were accompanied by higher customer volumes at restaurants and shows and contributions from new amenities such as the Love show and new restaurants at Mirage.
The 5% increase in gaming revenue was led by double-digit increases in slot revenues at several resorts, including Bellagio, MGM Grand Las Vegas, Mandalay Bay, TI, MGM Grand Detroit and Gold Strike Tunica. Baccarat volume was also particularly impressive, up 22%, continuing the trend from the second quarter. Table games hold percentages were near the mid-point of the normal 18-22% range in both periods, though higher in the 2006 period.
Non-gaming results were strong, with new shows and restaurants contributing positively to results and continued strength in room rates. The 6% increase in Las Vegas Strip REVPAR represents the Company's thirteenth consecutive quarter of year-over-year REVPAR growth. The following table shows key hotel statistics for the Company's Las Vegas Strip resorts:
Three Months Ended
---------------------------
September 30, September 30,
2006 2005
------------- -------------
Occupancy % 96% 97%
Average Daily Rate (ADR) $140 $133
Revenue per Available Room (REVPAR) $135 $128
Revenue growth carried through to the profit line, as the Company was able to increase its margins, leading to increases in operating income, EBITDA and Property EBITDA. The Company's operating income increased 26% to $428 million, which includes $27 million of profit from closings on the final units of Tower 1 of the Signature at MGM Grand. The operating margin was 22% in the current quarter versus 19% in the 2005 quarter.
Detailed Discussion of Certain Charges
In the third quarter of 2006, the Company incurred minimal property transactions. In the 2005 period, net property transactions of $23 million largely related to the write-off of assets replaced in connection with expansion and remodel projects at Bellagio, Mirage and TI.
Preopening and start-up expenses of $6 million in the 2006 quarter related primarily to CityCenter, MGM Grand Macau, the permanent facility at MGM Grand Detroit and The Signature at MGM Grand. Preopening and start-up expenses in 2005 -- $6 million -- related primarily to CityCenter, as well as new restaurants at MGM Grand Las Vegas and The Signature at MGM Grand.
Positive tax adjustments of $6 million in the 2006 third quarter related to a reduction in reserves required for certain complimentary costs. The IRS had historically challenged the deductibility of certain complimentaries provided to customers, but recent IRS guidance indicated that they would no longer challenge the deductions.
Earnings per share for the 2006 third quarter include the impact of implementing SFAS 123® on January 1, 2006. Under this new standard, the cost of employee stock awards are required to be recognized as an expense. The Company classified the incremental expense of $17 million as a result of implementing the standard as follows:
Three months ended September 30, 2006
-------------------------------------------------------------
(In thousands)
Casino $3,845
Other operating departments 1,589
General and administrative 4,836
Corporate expense and other 7,117
-------
$17,387
=======
Financial Position
Third quarter capital investments totaled $610 million, which included $198 million for CityCenter, $70 million for the permanent MGM Grand Detroit hotel and casino, $164 million for rebuilding efforts at Beau Rivage, $45 million for a new corporate aircraft and $31 million of additional investments in MGM Grand Macau. Remaining capital expenditures of $102 million included spending on the new theatre and new restaurants at Mirage, new amenities at Mandalay Bay, and other routine capital expenditures.
During the third quarter of 2006, the Company repurchased 3 million shares of its common stock for $106 million, leaving 8 million shares available under the Company's current authorization. At September 30, 2006, the Company had $2.1 billion of available borrowings under its senior credit facility. Subsequent to quarter-end, the Company announced that it had amended its credit facility. The total capacity remains at $7 billion, the term loan component was increased from $1.5 billion to $2.5 billion, the pricing was reduced and the maturity was extended to October 2011. In addition, the Company has the ability to solicit additional lender commitments to increase the facility's capacity to $8 billion.
"Our financial strength continues to be the foundation for future growth at MGM MIRAGE, and the continued confidence of our stakeholders is proof that our strategies are sound," said Jim Murren, MGM MIRAGE President, CFO and Treasurer. "With the amended credit facility and our resorts' success in generating cash flows, we will continue to have financial flexibility for our growth initiatives while still being able to re-invest in our market leading resorts."
Outlook
"We are looking forward to another successful quarter in the fourth quarter, as our resorts continue to attract high quality visitors from all segments. We expect higher Property EBITDA and our fourteenth consecutive quarter of REVPAR growth, resulting in an estimate of GAAP diluted EPS from continuing operations of approximately $0.40 to $0.45 per share in the fourth quarter of 2006, compared to $0.33 per share in the prior year," Mr. Murren said.
The Company expects to recognize approximately $40-45 million of profits in the fourth quarter related to sales of Tower 2 at The Signature at MGM Grand. The Company expects to recognize the remaining profits on Tower 2, approximately $30-35 million, in the first quarter of 2007. In addition, the Company's Laughlin operations -- Colorado Belle and Edgewater -- and the Primm Valley Resorts will be classified as discontinued operations beginning in the fourth quarter as a result of the Company's agreement to sell these properties.
The Company's EPS estimate incorporates the impact of the following significant items (EPS impact shown, net of tax, per diluted share; negative amounts represent charges to income):
2006 2005
Three months ended December 31, estimate actual
--------------------------------------------------------------------------
Profits from The Signature at MGM Grand $0.09-0.10 $--
Incremental stock compensation - adoption
of SFAS 123® (0.03) --
Preopening, property transactions and other (0.02) (0.03)
Tax adjustments -- 0.01
MGM MIRAGE will hold a conference call to discuss its third quarter earnings results and outlook for the fourth quarter at 11:00 a.m. Eastern Standard Time today. The call can be accessed live at www.companyboardroom.com or www.mgmmirage.com, or by calling 1-800-526-8531 (domestic) or 1-706-634-6528 (international). Until November 16, 2006, a complete replay of the conference call can be accessed by dialing 1-706-645-9291, access code 8744175. A complete replay of the call will also be made available at www.mgmmirage.com. Supplemental detailed earnings information will also be available on the Company's website.
1 REVPAR is hotel Revenue per Available Room.
2 "EBITDA" is earnings before interest and other non-operating income
(expense), taxes, depreciation and amortization. "Property EBITDA" is
EBITDA before corporate expense and stock compensation expense. EBITDA
information is presented solely as a supplemental disclosure because
management believes that it is 1) a widely used measure of operating
performance in the gaming industry, and 2) a principal basis for
valuation of gaming companies. In addition, capital allocation, tax
planning, financing and stock compensation awards are all managed at
the corporate level. Management uses Property EBITDA as the primary
measure of the Company's operating resorts' performance, including the
evaluation of operating personnel. EBITDA should not be construed as
an alternative to operating income, as an indicator of the Company's
operating performance; or as an alternative to cash flows from
operating activities, as a measure of liquidity; or as any other
measure determined in accordance with generally accepted accounting
principles. The Company has significant uses of cash flows, including
capital expenditures, interest payments, taxes and debt principal
repayments, which are not reflected in EBITDA. Also, other gaming
companies that report EBITDA information may calculate EBITDA in a
different manner than the Company. Reconciliations of consolidated
EBITDA to net income and of operating income to Property EBITDA are
included in the financial schedules accompanying this release.
3 Beau Rivage earned operating income of $10 million and $5 million in
the third quarters of 2006 and 2005, respectively, with depreciation
and amortization of $6 million and $7 million in the corresponding
periods.
* * *
MGM MIRAGE (NYSE: MGM), one of the world's leading and most respected hotel and gaming companies, owns and operates 23 properties located in Nevada, Mississippi and Michigan, and has investments in three other properties in Nevada, New Jersey and Illinois. The Company has entered into agreements to sell its three Primm Valley Resort properties located in Primm, Nevada and its Colorado Belle and Edgewater properties located in Laughlin, Nevada. In addition, the Company has major new developments under construction in Nevada, Michigan and Macau S.A.R. CityCenter is a multi-billion dollar mixed-use urban development in the heart of the Las Vegas Strip; a new MGM Grand hotel and casino complex is being built in downtown Detroit; and the Company has a 50% interest in MGM Grand Macau, a hotel-casino resort currently under construction in Macau S.A.R. MGM MIRAGE supports responsible gaming and has implemented the American Gaming Association's Code of Conduct for Responsible Gaming at its properties. MGM MIRAGE also has been the recipient of numerous awards and recognitions for its industry-leading Diversity Initiative and its community philanthropy programs. For more information about MGM MIRAGE, please visit the company's website at http://www.mgmmirage.com/.
Statements in this release which are not historical facts are "forward looking" statements and "safe harbor statements" under the Private Securities Litigation Reform Act of 1995 that involve risks and/or uncertainties, including risks and/or uncertainties as described in the company's public filings with the Securities and Exchange Commission.
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Revenues:
Casino $ 844,644 $ 805,277 $2,487,982 $2,184,468
Rooms 491,511 478,462 1,535,808 1,208,277
Food and
beverage 387,029 368,186 1,161,295 963,848
Entertainment 125,702 114,904 330,812 318,762
Retail 75,384 75,248 214,287 189,590
Other 142,110 127,291 398,983 295,099
------------ ------------ ------------ ------------
2,066,380 1,969,368 6,129,167 5,160,044
Less:
Promotional
allowances (164,405) (161,125) (481,476) (431,710)
------------ ------------ ------------ ------------
1,901,975 1,808,243 5,647,691 4,728,334
------------ ------------ ------------ ------------
Expenses:
Casino 426,194 415,236 1,283,983 1,115,792
Rooms 141,537 143,065 420,148 337,949
Food and
beverage 239,078 239,581 699,459 594,358
Entertainment 91,450 82,839 241,720 227,705
Retail 48,001 48,475 140,888 123,292
Other 86,671 76,853 232,575 180,835
General and
administrative 302,430 288,728 849,036 696,805
Corporate
expense 35,184 32,112 110,415 90,554
Preopening and
start-up
expenses 6,083 6,147 27,308 12,568
Restructuring
costs (credit) -- 11 1,035 (59)
Property
transactions,
net 282 22,637 36,326 28,633
Depreciation
and
amortization 163,536 161,566 483,793 423,734
------------ ------------ ------------ ------------
1,540,446 1,517,250 4,526,686 3,832,166
------------ ------------ ------------ ------------
Income from
unconsolidated
affiliates 66,138 49,006 158,773 114,936
------------ ------------ ------------ ------------
Operating
income 427,667 339,999 1,279,778 1,011,104
------------ ------------ ------------ ------------
Non-operating
income
(expense):
Interest
income 2,650 3,156 8,422 10,172
Interest
expense,
net (193,899) (193,150) (586,630) (461,966)
Non-operating
items from
unconsolidated
affiliates (4,627) (4,344) (11,563) (11,535)
Other, net (1,654) 1,894 (8,031) (15,578)
------------ ------------ ------------ ------------
(197,530) (192,444) (597,802) (478,907)
------------ ------------ ------------ ------------
Income before
income taxes 230,137 147,555 681,976 532,197
Provision
for income
taxes (73,875) (54,345) (235,283) (186,740)
------------ ------------ ------------ ------------
Net income $ 156,262 $ 93,210 $ 446,693 $ 345,457
============ ============ ============ ============
Per share of
common stock:
Basic:
Net income
per share $ 0.55 $ 0.33 $ 1.58 $ 1.21
============ ============ ============ ============
Weighted
average
shares
outstanding 281,836 286,752 283,423 284,938
============ ============ ============ ============
Diluted:
Net income
per share $ 0.54 $ 0.31 $ 1.53 $ 1.16
============ ============ ============ ============
Weighted
average
shares
outstanding 289,258 298,885 291,744 296,753
============ ============ ============ ============
MGM MIRAGE AND SUBSIDIARIES
SUPPLEMENTAL DATA - NET REVENUES
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Las Vegas
Strip $1,543,101 $1,452,235 $4,671,092 $3,766,319
Other Nevada 159,745 163,802 469,034 353,674
MGM Grand
Detroit 116,141 107,652 345,142 331,054
Mississippi 82,988 84,554 162,423 277,287
------------ ------------ ------------ ------------
$1,901,975 $1,808,243 $5,647,691 $4,728,334
============ ============ ============ ============
MGM MIRAGE AND SUBSIDIARIES
SUPPLEMENTAL DATA - PROPERTY EBITDA
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Las Vegas
Strip $ 486,621 $ 404,828 $1,528,117 $1,172,828
Other Nevada 21,971 26,183 71,756 56,922
MGM Grand
Detroit 38,421 36,814 114,020 114,450
Mississippi 25,011 15,416 42,401 67,456
Unconsolidated
resorts 64,814 50,436 154,154 113,959
------------ ------------ ------------ ------------
$ 636,838 $ 533,677 $1,910,448 $1,525,615
============ ============ ============ ============
MGM MIRAGE AND SUBSIDIARIES
DETAIL OF CERTAIN CHARGES AFFECTING PROPERTY EBITDA and EBITDA
(In thousands)
(Unaudited)
Three Months Ended September 30, 2006
Preopening
and Property
start-up Restructuring transactions,
expenses costs net Total
------------ ------------ ------------ ------------
Las Vegas
Strip $ 3,998 $ -- $ 69 $ 4,067
Other Nevada -- -- (21) (21)
MGM Grand
Detroit 647 -- -- 647
Mississippi -- -- 167 167
Unconsolidated
resorts 1,324 -- -- 1,324
------------ ------------ ------------ ------------
5,969 -- 215 6,184
Corporate and
other 114 -- 67 181
------------ ------------ ------------ ------------
$ 6,083 $ -- $ 282 $ 6,365
============ ============ ============ ============
Three Months Ended September 30, 2005
Preopening
and Property
start-up Restructuring transactions,
expenses costs net Total
------------ ------------ ------------ ------------
Las Vegas
Strip $ 7,313 $ 11 $ 22,361 $ 29,685
Other Nevada -- -- -- --
MGM Grand
Detroit 4 -- -- 4
Mississippi 260 -- 276 536
Unconsolidated
resorts (1,430) -- -- (1,430)
------------ ------------ ------------ ------------
6,147 11 22,637 28,795
Corporate and
other -- -- -- --
------------ ------------ ------------ ------------
$ 6,147 $ 11 $ 22,637 $ 28,795
============ ============ ============ ============
MGM MIRAGE AND SUBSIDIARIES
DETAIL OF CERTAIN CHARGES AFFECTING PROPERTY EBITDA and EBITDA (continued)
(In thousands)
(Unaudited)
Nine Months Ended September 30, 2006
Preopening
and Property
start-up Restructuring transactions,
expenses costs net Total
------------ ------------ ------------ ------------
Las Vegas
Strip $ 19,024 $ 1,035 $ 32,635 $ 52,694
Other Nevada -- -- (171) (171)
MGM Grand
Detroit 1,924 -- 1 1,925
Mississippi -- -- 177 177
Unconsolidated
resorts 5,969 -- -- 5,969
------------ ------------ ------------ ------------
26,917 1,035 32,642 60,594
Corporate and
other 391 -- 3,684 4,075
------------ ------------ ------------ ------------
$ 27,308 $ 1,035 $ 36,326 $ 64,669
============ ============ ============ ============
Nine Months Ended September 30, 2005
Preopening
and Property
start-up Restructuring transactions,
expenses costs (credit) net Total
------------ ------------ ------------ ------------
Las Vegas
Strip $ 11,252 $ 7 $ 27,787 $ 39,046
Other Nevada -- -- (63) (63)
MGM Grand
Detroit 4 -- 304 308
Mississippi 335 -- 316 651
Unconsolidated
resorts 977 -- -- 977
------------ ------------ ------------ ------------
12,568 7 28,344 40,919
Corporate and
other -- (66) 289 223
------------ ------------ ------------ ------------
$ 12,568 $ (59) $ 28,633 $ 41,142
============ ============ ============ ============
MGM MIRAGE AND SUBSIDIARIES
RECONCILIATION OF CONSOLIDATED EBITDA TO NET INCOME
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
------------ ------------ ------------ ------------
EBITDA $ 591,203 $ 501,565 $1,763,571 $1,434,838
Depreciation
and
amortization (163,536) (161,566) (483,793) (423,734)
------------ ------------ ------------ ------------
Operating
income 427,667 339,999 1,279,778 1,011,104
------------ ------------ ------------ ------------
Non-operating
income
(expense):
Interest
expense,
net (193,899) (193,150) (586,630) (461,966)
Other (3,631) 706 (11,172) (16,941)
------------ ------------ ------------ ------------
(197,530) (192,444) (597,802) (478,907)
------------ ------------ ------------ ------------
Income before
income taxes 230,137 147,555 681,976 532,197
Provision
for income
taxes (73,875) (54,345) (235,283) (186,740)
------------ ------------ ------------ ------------
Net income $ 156,262 $ 93,210 $ 446,693 $ 345,457
============ ============ ============ ============
MGM MIRAGE AND SUBSIDIARIES
RECONCILIATION OF OPERATING INCOME TO PROPERTY EBITDA
(In thousands)
(Unaudited)
Three Months Ended September 30, 2006
Depreciation
Operating and
income amortization EBITDA
------------ ------------ ------------
Las Vegas Strip $ 355,282 $ 131,339 $ 486,621
Other Nevada 12,493 9,478 21,971
MGM Grand Detroit 33,865 4,556 38,421
Mississippi 16,353 8,658 25,011
Unconsolidated resorts 64,814 -- 64,814
------------ ------------ ------------
482,807 154,031 636,838
Stock compensation (17,387)
Corporate and other (28,248)
------------
$ 591,203
============
Three Months Ended September 30, 2005
Depreciation
Operating and
income amortization EBITDA
------------ ------------ ------------
Las Vegas Strip $ 275,464 $ 129,364 $ 404,828
Other Nevada 16,452 9,731 26,183
MGM Grand Detroit 30,327 6,487 36,814
Mississippi 6,313 9,103 15,416
Unconsolidated resorts 50,436 -- 50,436
------------ ------------ ------------
378,992 154,685 533,677
Stock compensation --
Corporate and other (32,112)
------------
$ 501,565
============
Nine Months Ended September 30, 2006
Depreciation
Operating and
income amortization EBITDA
------------ ------------ ------------
Las Vegas Strip $1,131,278 $ 396,839 $1,528,117
Other Nevada 42,466 29,290 71,756
MGM Grand Detroit 103,310 10,710 114,020
Mississippi 22,746 19,655 42,401
Unconsolidated resorts 154,154 -- 154,154
------------ ------------ ------------
1,453,954 456,494 1,910,448
Stock compensation (55,093)
Corporate and other (91,784)
------------
$1,763,571
============
Nine Months Ended September 30, 2005
Depreciation
Operating and
income amortization EBITDA
------------ ------------ ------------
Las Vegas Strip $ 835,422 $ 337,406 $1,172,828
Other Nevada 32,107 24,815 56,922
MGM Grand Detroit 94,551 19,899 114,450
Mississippi 45,725 21,731 67,456
Unconsolidated resorts 113,959 -- 113,959
------------ ------------ ------------
1,121,764 403,851 1,525,615
Stock compensation --
Corporate and other (90,777)
------------
$1,434,838
============
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
September 30, December 31,
2006 2005
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 343,716 $ 377,933
Accounts receivable, net 343,491 352,673
Inventories 117,335 111,825
Deferred income taxes 63,693 65,518
Prepaid expenses and other 134,298 110,634
--------------- ---------------
Total current assets 1,002,533 1,018,583
--------------- ---------------
Real estate under development 128,116 --
Property and equipment, net 17,227,810 16,541,651
Other assets:
Investments in unconsolidated
affiliates 1,082,664 931,154
Goodwill 1,307,118 1,314,561
Other intangible assets, net 375,115 377,479
Deposits and other assets, net 521,244 515,992
--------------- ---------------
Total other assets 3,286,141 3,139,186
--------------- ---------------
$ 21,644,600 $ 20,699,420
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 439,782 $ 265,601
Income taxes payable 25,503 125,503
Current portion of long-term debt -- 14
Accrued interest on long-term debt 196,022 229,930
Other accrued liabilities 892,849 913,520
--------------- ---------------
Total current liabilities 1,554,156 1,534,568
--------------- ---------------
Deferred income taxes 3,377,594 3,378,371
Long-term debt 12,955,822 12,355,433
Other long-term obligations 215,617 195,976
Stockholders' equity:
Common stock ($.01 par value:
authorized 600,000,000 shares,
issued 359,554,443 and
357,262,405 shares and
outstanding 280,580,590 and
285,069,516 shares) 3,596 3,573
Capital in excess of par value 2,700,768 2,586,587
Deferred compensation (360) (3,618)
Treasury stock, at cost (78,973,853
and 72,192,889 shares) (1,596,984) (1,338,394)
Retained earnings 2,434,418 1,987,725
Accumulated other comprehensive loss (27) (801)
--------------- ---------------
Total stockholders' equity 3,541,411 3,235,072
--------------- ---------------
$ 21,644,600 $ 20,699,420
=============== ===============
FCMN Contact: dan_d'arrigo@mgmmirage.com
SOURCE: MGM MIRAGE
CONTACT: Investment Community, JAMES J. MURREN, President, Chief
Financial Officer & Treasurer, +1-702-693-8877, or News Media, ALAN M.
FELDMAN, Senior Vice President, Public Affairs, +1-702-891-7147, both of MGM
MIRAGE
Web site: http://www.companyboardroom.com/
Web site: http://www.mgmmirage.com/