Mirage will disclose less financial data on properties

As a new financial reporting cycle begins, a few publicly owned casino companies are planning to stop divulging data about operations at their individual properties.

Companies such as Mirage Resorts argue that disclosing "property-specific" results gives information that's far more valuable to potential competitors than to investors.

And because of Mirage's position as a leader in gaming industry financial relations, some analysts and investors fear other casino companies will adopt a similar strategy, making the task of assessing a company's performance more difficult.

Publicly held casino operators and suppliers today begin reporting their financial results for the quarter ended March 31. Analysts and investors have been eagerly awaiting the numbers, which in Las Vegas will reflect the first full three-month period since the opening of Bellagio last October.

Since then, Las Vegas air passenger traffic, visitor volume and gaming win have all increased following two years' of flat results. Adding a full quarter of results from casino companies to the other numbers will give the investment community a better picture of the economic dynamics at work in gaming.

But Credit Suisse First Boston analyst David Anders reported this week that investors "will be forced to address the issue of whether less financial disclosure equals an improved valuation."

Anders notes that Mirage will stop providing revenue and cash-flow numbers for its individual properties, such as Beau Rivage, Bellagio, Mirage, Treasure Island and the Golden Nugget.

Instead, the company will provide company-wide revenue and cash-flow, as well as "a slight increase in public disclosure of specific corporate-wide variables such as baccarat drop, gaming-device revenue and room rates," he said.

According to Anders, Mirage executives believe property-specific results don't enhance investors' understanding of the company, "but do dramatically aid companies attempting to raise capital for additional competing facilities."

"Without property-specific information, Mirage argues that it would be difficult for new competitors to 'market off of a Mirage property,' " Anders says.

"In other words, new competitors would not be able to highlight to prospective investors how much a specific Mirage property generates in (cash flow) relative to the initial investment, and ultimately imply what their new facility could generate.

"We believe there is some validity to this claim, as we believe that both the Venetian and the Aladdin employed such tactics in raising funds for their stand-alone projects," Anders says.

The competitive issue has become "extremely pertinent" on the Mississippi Gulf Coast, where Mirage recently opened its $675 million Beau Rivage, Anders says. The new resort will transform the area from a drive-in market to a regional destination, he predicts.

"As this occurs, many major casino companies that currently don't have operations on the Gulf Coast are going to evaluate the opportunity. Mirage doesn't want to make it easy for them."

Anders says the lack of interest in the gaming industry during the 1980s spurred individual companies to provide property-level results in a bid to make it easier for analysts and investors to understand them.

In particular, he says, the property-specific results "have proved invaluable in analyzing the return on new capital in a market and impact on existing projects."

With its new disclosure strategy, Mirage hopes "to raise the cost of capital for potential competitors," Anders says.

"However, if most other companies follow suit, we believe that ultimately the overall cost of capital -- at least from the equity market's perspective -- may increase for the entire industry."

Anders suggests that a possible compromise position is for casino companies to follow the lead set by Harrah's Entertainment, which groups the performance of casinos in specific geographic regions into segments.

"Analysts can generally use the regional data to gauge the general health of an individual market and the aggregate performance of Harrah's properties within that market," he says.

A Mirage spokesman couldn't be reached for comment. The company is expected to report its first-quarter results the week of May 3. A spokesman at Park Place Entertainment said the company would continue reporting property results.

Circus Circus Enterprises Inc., which has also reported the performance of individual properties, hasn't had any discussions about changing, a spokeswoman said.

Another casino operator that doesn't plan to eliminate property-level reporting is MGM Grand Inc., according to Bear Stearns & Co. analyst Jason Ader. MGM is due to report first-quarter results the week of April 26.

Most analyst expect Las Vegas casino operators to post stronger results over the year-ago quarter because of the increased visitation attributed to the openings of Bellagio and, early last month, Mandalay Bay.

The anticipated opening of the Venetian sometime in the next few weeks, the Resort at Summerlin in June and Paris-Las Vegas in September are expected to attract additional visitors.

The key questions is whether the expected increase will be sufficient to meet the supply of new hotel rooms being added to the Las Vegas market this year.

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