Las Vegas Sun

March 20, 2019

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MGM gains offset by expansion costs

Major casino operators reported strong quarterly financial performances, although debt restructuring, renovation write-offs and construction disruptions impacted net income at two of the biggest companies.

MGM Grand Inc. said debt defeasance and a $31.4 million one-time charge led to a third-quarter loss, though earnings jumped 59 percent from the 1995 period before costs associated with the company's $250 million expansion project.

Bally Entertainment Corp., Station Casinos Inc. and Primadonna Resorts Inc. reported higher quarterly earnings, while ITT Corp. said baccarat losses and construction disruptions led to a flat earnings performance for the period.

MGM reported a net loss of $35.5 million for the Sept. 30 quarter, compared with net income of $15.9 million, or 33 cents a share, in the 1995 period. Revenue was $198.4 million, compared with $198.3 million in the year-earlier quarter.

Operating cash flow jumped 15 percent to $61.8 million from $53.6 million, while per-share net rose to 46 cents a share from 33 cents, both before the extraordinary charge.

MGM Chairman Terry Lanni said Tuesday there was a "strong likelihood" that gaming will be legalized in Mexico, a target for MGM expansion, and that Argentina will be a major marketplace for MGM Grand. In South Africa, MGM has filed for two licenses and expects a decision on its applications to be made by next March.

MGM President Alex Yemenidjian said Las Vegas casino revenues were up slightly due to a higher table game drop, while the occupancy rate climbed to 98 percent from 93 percent.

Even though the company "played luckier" in the latest quarter, baccarat drop was down slightly because the 1995 period featured Mike Tyson's first prize fight and an extra weekend, Yemenidjian said.

Year-to-date casino revenues were up 23 percent and room revenues are up 9 percent, he said.

New York-New York, MGM's joint venture with Primadonna Resorts, will open on time and on budget Jan. 3, Lanni said.

Kenneth Feld, producer of the Siegfried & Roy at The Mirage, is creating a new production show called "Mad-Hattan" specifically geared toward New York-New York that will open in May, he added.

Yemenidjian said MGM majority shareholder Kirk Kerkorian's recent acquisition of MGM Studios has led to creation of a task force comprised of executives from both companies that is studying ways to take advantage of the unique alliance between the gaming and entertainment companies.

Bally Entertainment notched its third consecutive quarter of record earnings, according to Chairman Arthur Goldberg. Net income rose to $25.3 million, or 36 cents a share, from $6 million, or 11 cents a share on 18.8 million fewer shares, in the 1995 period. Revenue rose to $306.7 million from $287.1 million.

"Continued earnings growth at our property in Las Vegas and strong results at our new properties in New Orleans and Mississippi represented the largest increases from a year ago," Goldberg said.

Two Bally expansion projects in Atlantic City and the company's plans to build Paris hotel-casino in Las Vegas "continue on schedule," he said, as does the merge with Hilton Hotels Corp., which is expected to be completed by the end of the year.

Station said strong results at Palace and Boulder Stations and Station Casino St. Charles propelled net income applicable to common stock to $8.3 million, or 24 cents a share, from $7.3 million, or 21 cents a share, in the 1995 quarter. Net revenue rose 15 percent to $138 million from $119.8 million, the company said. Texas Station earnings lagged as a result of higher marketing costs and expenses of building a new parking garage.

ITT reported net income of $67 million, or 57 cents a share, compared with 1995 third-quarter net of $67 million, or 56 cents a share. Revenue edged up to $1.67 billion from $1.62 billion in the year-earlier quarter, ITT said.

Chairman Rand Araskog said ITT's hotel, information services and entertainment businesses "are exhibiting strong growth," though several factors impacted performance of the gaming division.

A drop in high-roller business during the quarter at Caesars Palace and the Desert Inn, which also suffered from construction disruptions, and increased competition in Mississippi combined to produce a $30 million decline in cash flow, to $76 million in the latest quarter.

"As we execute our major gaming expansion and renovation program in Las Vegas and Atlantic City," Araskog said, "the 1997 gaming results could continue to be affected by construction disruption."

Primadonna said net income rose to $6.8 million, or 22 cents a share, from $6 million, or 19 cents a share, in the 1995 quarter. Revenue slipped to $63 million from $64.2 million.

Despite the gains, Primadonna President Gary Primm said the company was "hoping to do better." The 1996 quarter was affected by one less weekend and heavy Olympic television coverage, he said.