Monday, Feb. 22, 1999 | 11:09 a.m.
The Bellagio hotel-casino blasted out of the starting gates last October, boosting Mirage Resorts Inc.'s revenues and cash flows in the final quarter of 1998 despite being open only 77 days.
But costs associated with opening the $1.6 billion resort caused the company to lose $20.1 million in the quarter. The Bellagio also drew customers away from Mirage's other resorts, a "cannibalization effect" analysts say was in line with their expectations.
In the fourth quarter, which ended Dec. 31, Mirage Resorts lost $20.1 million, or 11 cents per share, down from earnings of $49.3 million, or 26 cents per share, in the year-ago quarter. But revenues increased from $377.3 million a year ago to $572.6 million.
For the year, Mirage Resorts earned $81.7 million, or 43 cents per share, compared to $207.6 million, or $1.08 per share in 1997. Revenues increased to $1.68 billion in 1998 from $1.55 billion in 1997.
Earnings before interest, taxes, depreciation and amortization -- cash flows or EBITDA -- increased from $91.4 million in the fourth quarter of 1997 to $119.6 million.
The increased revenues and cash flows, as well as the quarterly losses, were all due to the Bellagio. The resort generated $244.1 million in revenues, and $53 million in cash flows in the quarter.
But $88 million in opening costs -- which included hiring and training employees and operating the reservation office and marketing departments -- dragged earnings down. Without the non-recurring opening costs, Mirage Resorts would have earned 20 cents per share in the quarter.
Bellagio also had an effect on other Mirage Resorts properties. Revenues and cash flows were down at each of the company's other Las Vegas properties.
At the Mirage hotel-casino, revenues dropped from $202.3 million in the fourth quarter of 1997 to $161.2 million, while cash flows dropped from $52.2 million to $35.6 million. At the Treasure Island hotel-casino, revenues dropped to $95 million in the fourth quarter from $101.5 million in the year-ago quarter, while cash flows declined from $27 million to $20 million.
Revenues at the downtown Golden Nugget hotel-casino fell from $52.3 million in the fourth quarter of 1997 to $51.3 million, while cash flows dropped from $10.5 million to $9.2 million.
The Golden Nugget-Laughlin was the only Mirage Resorts property to buck the trend, posting cash flow increases from $1.8 million to $2.1 million though revenues declined from $14.3 million to $14.2 million. Mirage revenues from the partially-owned Monte Carlo Strip resort were flat.
Analysts say Bellagio clearly drew business away from the other Mirage Resorts properties, but say that was expected.
"There was cannibalization at the Mirage (hotel-casino), but that was expected," said Jason Ader, an analyst with Bear, Stearns & Co. Inc.
"To some degree, the Mirage was down a little bit because of the Bellagio, but not as much as I expected," said Brian Egger, an analyst at Donaldson, Lufkin & Jenrette.
Overall, both analysts were impressed with the results.
"The Bellagio's numbers were very strong," said Ader.
"It was somewhat better than I expected," said Egger.
Egger had expected Mirage to make only 18 cents per share before the Bellagio opening expenses. He's pleased the company instead made 20 cents per share before opening expenses.
Mirage stock was up $1.06 on the news in early afternoon trading, to $19.81 from a close of $18.75 Friday.
BT Alex. Brown and NationsBank Montgomery both raised their ratings on the stock. Ader said the Mirage earnings news would add to the upward pressure on all gaming stocks.
"I think the gaming stocks have clearly turned the corner," said Ader.