MGM Mirage Reports Third Quarter Financial Results
| 06 November 2009 |    |
The following table lists items which affect the comparability of the current and prior year quarterly results (EPS impact, net of tax, per diluted share; negative amounts represent charges to income):
Three months ended September 30, 2009 2008 ------------------------------------------------------------------------- Preopening and start-up expenses $ (0.01) $ (0.01) Property transactions net: Investment in CityCenter non-cash impairment charge (1.40) - Other property transactions, net (0.02) (0.08) Income (loss) from unconsolidated affiliates: CityCenter joint venture residential non-cash impairment charge (0.30) - Borgata joint venture insurance proceeds 0.02 -The following key results for the quarter are presented on a "same store" basis excluding the results of TI in the prior year as the Company completed the sale of TI in March 2009:
-- Net revenue decreased 9% to $1.5 billion; -- Casino revenue decreased 1% with strong baccarat results during the quarter; -- Las Vegas Strip REVPAR(1)1 decreased 23% compared to the prior year quarter versus a 31% year-over-year decrease in the second quarter of 2009; -- Property EBITDA(2) was $415 million excluding items outlined in the detailed discussion below, or down 12%; and -- MGM Grand Macau earned operating income of $50 million, including depreciation expense of $23 million. The Company's 50% share of MGM Grand Macau's operating results was approximately $24 million, which is included in income (loss) from unconsolidated affiliates."We continue to show sequential improvement in our operating results over the course of 2009. Property EBITDA on a comparable basis increased from $379 million in the second quarter to $415 million in the third quarter with sequential improvement in our margins as well - 25% in the second quarter increasing to 27% in the third quarter," said Jim Murren, MGM MIRAGE Chairman and Chief Executive Officer. "We continue to earn occupancy through our superior assets and focus on the customer, resulting in increased market share. We expect CityCenter to grow our business significantly and we are extremely excited to open this tremendous asset, with Vdara opening in less than a month on December 1, followed by Crystals on December 3, Mandarin Oriental on December 4, and Aria Resort and Casino on December 16."
Detailed Discussion of Third Quarter Operating Results
(Results are presented on a same store basis excluding TI)
Casino revenue declined 1%, with table games revenue up 7% and slots revenue down 6%. The Company's table games volume was up 3% in the quarter, including a 75% increase in baccarat volume. The overall table games hold percentage was slightly above the Company's normal 18% to 22% range in the current year period; in the prior year quarter the hold percentage was near the top end of the range. The 6% decrease in slots revenue represents a sequential improvement from the 11% year-over-year decrease in the second quarter of 2009 and 13% year-over-year decrease in the first quarter of 2009.
Rooms revenue decreased 21% while Las Vegas Strip REVPAR decreased 23%. Anticipated weakness in convention traffic led to lower room rates, however increased leisure and casino business has led to sequential improvements in occupancy throughout 2009. The following table shows key hotel statistics for the Company's Las Vegas Strip resorts:
Three months ended September 30, 2009 2008 ------------------------------------------------------------------- Occupancy % 95% 95% Average Daily Rate (ADR) $ 105 $ 136 Revenue per Available Room (REVPAR) $ 100 $ 129Corporate expense increased to $32 million compared to $24 million in the 2008 third quarter. The prior year quarter included a $7 million reversal of bonus accruals.
The current quarter loss from unconsolidated affiliates of $133 million includes a $203 million non-cash charge related to the impairment of residential real estate under development at CityCenter. Excluding this item, income from unconsolidated affiliates increased 81% as a result of strong operating results at MGM Grand Macau and Borgata, as well as approximately $14 million for the Company's share of insurance proceeds recognized by Borgata.
Property EBITDA as reported was $203 million. On a comparable basis Property EBITDA was $415 million, down 12% from the prior year quarter with a margin of 27% compared to a 28% margin in the prior year quarter. The following table lists the items that impacted comparability of Property EBITDA (expense/(income)):
Three months ended September 30, 2009 2008 ------------------------------------------------------------------- (In thousands) Preopening and start-up expenses $10,058 $5,451 2008 bonus accrual reversal - (14,325) Property transactions, net 13,438 1,856 Income (loss) from unconsolidated affiliates: CityCenter joint venture residential non-cash impairment charge 202,559 - Borgata joint venture insurance proceeds (14,367) -Operating loss for the third quarter was $963 million. After adjusting for items affecting comparability, including a total company-wide bonus accrual reversal of $22 million in the prior year, operating income decreased 16% compared to prior year with a margin of 13% compared to a 14% margin in the prior year. The Company has continued to manage its cost structure with full-time equivalents down 12% for the third quarter compared to the 2008 quarter, despite achieving occupancy levels equal to prior year. Non-operating expense increased to $195 million in the current year quarter mainly due to higher interest costs associated with the Company's fixed rate senior note issuances in the fourth quarter of 2008 and during 2009 and higher interest rates on the Company's senior credit facility, which factors were partially offset by higher capitalized interest.
Financial Position
Effective November 4, the Company and its lenders amended its senior credit facility to permit the Company to:
-- Issue additional unsecured debt to refinance certain existing debt so long as the maturity of the newly issued debt is not earlier than the maturity of the debt being refinanced or six months after the date the senior credit facility is set to mature. -- Issue, in addition to any such refinancing debt, up to $1 billion of other unsecured debt, provided that 50% of the net cash proceeds over $250 million must be applied to permanently reduce outstanding senior credit facility balances; -- Issue additional equity securities, subject to compliance with the certain provisions, provided that 50% of the net cash proceeds over $500 million must be applied to reduce outstanding senior credit facility balances."This amendment restores our credit facility to normal operating terms in line with our past arrangements," said Dan D'Arrigo, MGM MIRAGE Executive Vice President and Chief Financial Offer. "Our uniquely strong relationship with our bank group provides us with confidence in our ability to further enhance our financial position."
At September 30, 2009, the Company had approximately $4.3 billion of borrowings outstanding under its senior credit facility with available borrowings of $1.4 billion. The Company's cash balance was $897 million at September 30, 2009, higher than normal due to net proceeds of approximately $451 million from its September issuance of $475 million 11.375% senior unsecured notes due 2018. In October, the Company used these proceeds to pay down the senior credit facility, including a permanent reduction in the facility of $226 million.
During the third quarter of 2009 the Company made capital investments of approximately $28 million related to various ongoing capital projects at its resorts and funded the remaining $89 million required pursuant to the Company's irrevocable letter of credit to CityCenter.
"Our $475 million unsecured senior notes due were issued at an attractive yield in September, and our recent bank amendment is another important step in our ongoing re-capitalization strategy," said Mr. D'Arrigo. "Net of proceeds from our senior notes issuance, debt at the end of the quarter was $12.5 billion and we will remain focused on strategically de-leveraging our balance sheet."
MGM MIRAGE will hold a conference call to discuss its third quarter results 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 1-706-758-3659 (international). Until November 11, 2009, a complete replay of the conference call can be accessed by dialing 1-800-642-1687 or 1-706-645-9291, access code 35345375. 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.
MGM MIRAGE (NYSE: MGM), one of the world's leading and most respected companies with significant holdings in gaming, hospitality and entertainment, owns and operates 16 properties located in Nevada, Mississippi and Michigan, and has 50% investments in four other properties in Nevada, New Jersey, Illinois and Macau. CityCenter, an unprecedented urban metropolis on the Las Vegas Strip scheduled to open in late 2009, is a joint venture between MGM MIRAGE and Infinity World Development Corp, a subsidiary of Dubai World. MGM MIRAGE Hospitality has entered into management agreements for future casino and non-casino resorts throughout the world. MGM MIRAGE supports responsible gaming and has implemented the American Gaming Association's Code of Conduct for Responsible Gaming at its properties. MGM MIRAGE has received 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 Web site 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, 2009 2008 2009 2008 ------------- ------------- ------------- ------------- Revenues: Casino $ 699,806 $ 739,331 $ 1,990,103 $ 2,271,978 Rooms 340,165 458,051 1,045,504 1,500,322 Food and beverage 344,284 395,090 1,040,540 1,229,045 Entertainment 128,568 135,673 369,998 408,541 Retail 54,525 69,205 156,785 202,060 Other 138,073 155,335 419,248 478,664 ------------- ------------- ------------- ------------- 1,705,421 1,952,685 5,022,178 6,090,610 Less: Promotional allowances (172,198) (167,154) (496,005) (506,355) ------------- ------------- ------------- ------------- 1,533,223 1,785,531 4,526,173 5,584,255 ------------- ------------- ------------- ------------- Expenses: Casino 367,720 383,406 1,093,068 1,200,948 Rooms 108,273 136,313 325,247 412,846 Food and beverage 196,778 237,130 590,137 720,201 Entertainment 91,422 94,667 267,786 288,617 Retail 33,684 42,411 99,760 128,070 Other 91,261 99,389 260,562 307,521 General and administrative 290,766 326,831 825,130 971,016 Corporate expense 31,928 24,466 99,295 83,537 Preopening and start-up expenses 10,058 5,505 27,539 17,626 Restructuring costs - - 493 329 Property transactions, net 971,208 32,326 779,331 34,984 Depreciation and amortization 170,651 200,102 521,877 591,659 ------------- ------------- ------------- ------------- 2,363,749 1,582,546 4,890,225 4,757,354 ------------- ------------- ------------- ------------- Income (loss) from unconsolidated affiliates (132,893) 38,572 (113,169) 89,728 ------------- ------------- ------------- ------------- Operating income (loss) (963,419) 241,557 (477,221) 916,629 ------------- ------------- ------------- ------------- Non-operating income (expense): Interest income 857 5,910 11,535 13,056 Interest expense, net (181,899) (144,751) (554,822) (439,844) Non-operating items from unconsolidated affiliates (14,613) (9,552) (38,058) (26,731) Other, net 826 2,125 (234,693) 791 ------------- ------------- ------------- ------------- (194,829) (146,268) (816,038) (452,728) ------------- ------------- ------------- ------------- Income (loss) before income taxes (1,158,248) 95,289 (1,293,259) 463,901 Benefit (provision) for income taxes 407,860 (34,011) 435,495 (171,176) ------------- ------------- ------------- ------------- Net income (loss) $ (750,388) $ 61,278 $ (857,764) $ 292,725 ============= ============= ============= ============= Per share of common stock: Basic: Net income (loss) per share $ (1.70) $ 0.22 $ (2.40) $ 1.04 ============= ============= ============= ============= Weighted average shares outstanding 441,214 276,417 357,348 280,926 ============= ============= ============= ============= Diluted: Net income (loss) per share $ (1.70) $ 0.22 $ (2.40) $ 1.02 ============= ============= ============= ============= Weighted average shares outstanding 441,214 279,846 357,348 287,604 ============= ============= ============= ============= 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, 2009 2008 2009 2008 ------------- ------------- ------------- ------------- Las Vegas Strip $ 1,224,563 $ 1,450,899 $ 3,603,099 $ 4,569,476 Other Nevada 33,070 41,334 94,845 117,005 MGM Grand Detroit 124,753 139,859 389,365 430,067 Mississippi 125,463 135,357 369,667 408,980 Management operations 25,374 18,082 69,197 58,727 ------------- ------------- ------------- ------------- $ 1,533,223 $ 1,785,531 $ 4,526,173 $ 5,584,255 ============= ============= ============= ============= 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, 2009 2008 2009 2008 ------------- ------------- ------------- ------------- Las Vegas Strip $ 286,731 $ 398,998 $ 867,405 $ 1,361,238 Other Nevada 1,704 3,226 3,406 1,806 MGM Grand Detroit 26,823 33,849 100,992 106,785 Mississippi 29,580 26,208 89,713 82,194 Management operations 1,874 5,066 10,785 13,815 Unconsolidated resorts (143,379) 34,535 (139,984) 74,536 ------------- ------------- ------------- ------------- $ 203,333 $ 501,882 $ 932,317 $ 1,640,374 ============= ============= ============= ============= MGM MIRAGE AND SUBSIDIARIES DETAIL OF CERTAIN CHARGES AFFECTING PROPERTY EBITDA and EBITDA (In thousands) (Unaudited) Three Months Ended September 30, 2009 ------------------------------------- Preopening Property and start-up Restructuring transactions, expenses costs net Total ------------- ------------- ------------- ------------- Las Vegas Strip $ (614) $ - $ 5,059 $ 4,445 Other Nevada - - - - MGM Grand Detroit - - 5,906 5,906 Mississippi - - - - Management operations - - 2,473 2,473 Unconsolidated resorts 10,672 - - 10,672 ------------- ------------- ------------- ------------- 10,058 - 13,438 23,496 Corporate and other - - 957,770 957,770 ------------- ------------- ------------- ------------- $ 10,058 $ - $ 971,208 $ 981,266 ============= ============= ============= ============= Three Months Ended September 30, 2008 ------------------------------------- Preopening Property and start-up Restructuring transactions, expenses costs net Total ------------- ------------- ------------- ------------- Las Vegas Strip $ 1,494 $ - $ 1,765 $ 3,259 Other Nevada - - 20 20 MGM Grand Detroit - - - - Mississippi - - 71 71 Management operations - - - - Unconsolidated resorts 3,957 - - 3,957 ------------- ------------- ------------- ------------- 5,451 - 1,856 7,307 Corporate and other 54 - 30,470 30,524 ------------- ------------- ------------- ------------- $ 5,505 $ - $ 32,326 $ 37,831 ============= ============= ============= ============= MGM MIRAGE AND SUBSIDIARIES DETAIL OF CERTAIN CHARGES AFFECTING PROPERTY EBITDA and EBITDA (continued) (In thousands) (Unaudited) Nine Months Ended September 30, 2009 ------------------------------------ Preopening Property and start-up Restructuring transactions, expenses costs net Total ------------- ------------- ------------- ------------- Las Vegas Strip $ 138 $ 493 $ (211) $ 420 Other Nevada - - 6 6 MGM Grand Detroit - - 5,906 5,906 Mississippi - - 157 157 Management operations - - 2,473 2,473 Unconsolidated resorts 27,401 - - 27,401 ------------- ------------- ------------- ------------- 27,539 493 8,331 36,363 Corporate and other - - 771,000 771,000 ------------- ------------- ------------- ------------- $ 27,539 $ 493 $ 779,331 $ 807,363 ============= ============= ============= ============= Nine Months Ended September 30, 2008 ------------------------------------ Preopening Property and start-up Restructuring transactions, expenses costs net Total ------------- ------------- ------------- ------------- Las Vegas Strip $ 2,114 $ 329 $ 926 $ 3,369 Other Nevada - - 2,207 2,207 MGM Grand Detroit 135 - 8 143 Mississippi - - 73 73 Management operations - - - - Unconsolidated resorts 15,276 - - 15,276 ------------- ------------- ------------- ------------- 17,525 329 3,214 21,068 Corporate and other 101 - 31,770 31,871 ------------- ------------- ------------- ------------- $ 17,626 $ 329 $ 34,984 $ 52,939 ============= ============= ============= ============= MGM MIRAGE AND SUBSIDIARIES RECONCILIATION OF CONSOLIDATED EBITDA TO NET INCOME (LOSS) (In thousands) (Unaudited) Three Months Ended Nine Months Ended ---------------------------- ---------------------------- September 30, September 30, September 30, September 30, 2009 2008 2009 2008 ------------- ------------- ------------- ------------- EBITDA $ (792,768) $ 441,659 $ 44,656 $ 1,508,288 Depreciation and amortization (170,651) (200,102) (521,877) (591,659) ------------- ------------- ------------- ------------- Operating income (loss) (963,419) 241,557 (477,221) 916,629 ------------- ------------- ------------- ------------- Non-operating income (expense): Interest expense, net (181,899) (144,751) (554,822) (439,844) Other (12,930) (1,517) (261,216) (12,884) ------------- ------------- ------------- ------------- (194,829) (146,268) (816,038) (452,728) ------------- ------------- ------------- ------------- Income (loss) before income taxes (1,158,248) 95,289 (1,293,259) 463,901 Benefit (provision) for income taxes 407,860 (34,011) 435,495 (171,176) ------------- ------------- ------------- ------------- Net income (loss) $ (750,388) $ 61,278 $ (857,764) $ 292,725 ============= ============= ============= ============= MGM MIRAGE AND SUBSIDIARIES RECONCILIATION OF OPERATING INCOME TO PROPERTY EBITDA (In thousands) (Unaudited) Three Months Ended September 30, 2009 ------------------------------------- Depreciation Operating and income (loss) amortization EBITDA ------------- ------------- ------------- Las Vegas Strip $ 158,274 $ 128,457 $ 286,731 Other Nevada 238 1,466 1,704 MGM Grand Detroit 17,889 8,934 26,823 Mississippi 13,593 15,987 29,580 Management operations 847 1,027 1,874 Unconsolidated resorts (143,379) - (143,379) ------------- ------------- ------------- 47,462 155,871 203,333 Stock compensation (9,319) Corporate and other (986,782) ------------- $ (792,768) ============= Three Months Ended September 30, 2008 ------------------------------------- Depreciation Operating and income (loss) amortization EBITDA ------------- ------------- ------------- Las Vegas Strip $ 249,481 $ 149,517 $ 398,998 Other Nevada 1,588 1,638 3,226 MGM Grand Detroit 19,587 14,262 33,849 Mississippi 10,480 15,728 26,208 Management operations 2,531 2,535 5,066 Unconsolidated resorts 34,535 - 34,535 ------------- ------------- ------------- 318,202 183,680 501,882 Stock compensation (8,870) Corporate and other (51,353) ------------- $ 441,659 ============= Nine Months Ended September 30, 2009 ------------------------------------ Depreciation Operating and income (loss) amortization
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