Thursday, April 19, 2001 | 10:54 a.m.
MGM MIRAGE continued a stronger-than-expected casino earnings season this morning, handily topping analyst profit expectations for the quarter ended March 31.
The Las Vegas-based casino giant posted net income of $83.9 million, or 52 cents per diluted share, an increase of 89 percent over the year-ago quarter on a net income basis. The consensus estimate was 44 cents per share.
Revenues soared 152 percent to $1.07 billion, while cash flow increased 137 percent to $343.6 million.
But the big earnings increase came as a direct result of MGM Grand Inc.'s $6.4 billion buyout of Mirage Resorts Inc. in May 2000.
Had the two companies been one in the year-ago quarter, revenues would have been flat, while cash flow would have been up just 3 percent.
Company officials emphasized that they had to contend with some calendar quirks during the quarter this year -- New Year's play fell in 2000, rather than 2001, due to the fact New Year's fell on a Sunday this year. And there was one less day in February this year and one less weekend day.
"Overall, I thought the numbers were really quite solid," said Brian Egger, gaming analyst with CS First Boston. "Half of the surprise came from better than expected (cash flow) on companywide basis. In the current market, it's relatively encouraging, given the challenging economy."
Egger said he was also encouraged by indications that revenue per average room -- a key indicator of hotel performance -- was up 8 percent to 14 percent across MGM MIRAGE's Las Vegas properties.
The performance of individual properties was a mixed bag. Several properties -- most notably, the MGM Grand Las Vegas, the Beau Rivage in Biloxi, the Mirage and the company's casinos in Primm and Laughlin -- showed significant declines in cash flow. Yet these declines were offset by sizable cash flow gains at other properties, including the Bellagio, Treasure Island, the New York-New York and the Golden Nugget in downtown Las Vegas.
"This illustrates how strategic the purchase of Mirage (Resorts) was to the overall company," said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown. "While they don't have geographic diversification, they have property diversification. This enabled them to have a strong quarter overall while some properties are weak."
Still, investors appeared concerned about the lowered performance of some MGM MIRAGE properties. By midday MGM MIRAGE traded at $28.42, down 98 cents on the day.
The largest dollar decline in cash flow came at the MGM Grand, where cash flow fell 21 percent to $48 million. The company blamed decreased baccarat play and lower-than-normal table game hold for the decrease, noting that room revenues and food and beverage revenues reached all-time highs. The property was also affected by the temporary closure of its EFX show, following the departure of entertainer Tommy Tune.
Beau Rivage in Biloxi, Miss., a historic trouble spot for Mirage Resorts, posted a 17 percent decline in cash flow to $14.9 million. MGM MIRAGE blamed this decline on disruption caused by the expansion of the resort's buffet and slot floor, a project that should be complete by next month.
The Mirage posted $54.6 million in cash flow, a 2.6 percent decline over the year-ago period -- but still the second-highest quarterly cash flow figure the Mirage has posted in three years. Low table game hold reduced casino revenues by $9 million in the quarter, though this was offset by a $12 million gain in non-casino revenue. Bobby Baldwin, chief executive of Mirage Resorts, said the Mirage is already seeing benefits from the expansion of its convention center, a project completed in mid-March.
The company's Primm and Laughlin properties were hammered during the quarter, with each reporting a decline of more than 40 percent in cash flow to a combined $12.9 million. A long laundry list of problems were identified there, including high energy costs in California, growing competition from tribal casinos in California and an unusually high number of closures of Interstate 15.
But balancing these difficulties were huge quarters at the Bellagio, Treasure Island and the Golden Nugget Las Vegas.
The Bellagio posted a whopping $93.5 million in cash flow for the quarter, better than many properties do in a year. That's an all-time high for the property, and a 45 percent increase over 2000. The Bellagio's casino was helped by higher-than-normal table game hold, while revenue per available room shot up 12 percent to $195 per day.
The next best gainer for the quarter was, surprisingly, the Golden Nugget Las Vegas, which reported $11.9 million in cash flow, an 11 percent increase and the best performance for the downtown property since 1996. MGM MIRAGE attributed the gain to a surge in non-casino revenues.
Treasure Island posted $31 million in cash flow, up 8 percent, the best quarter in five years. Despite a $2 million decline in casino revenues, non-casino revenues surged ahead $5 million, driven by big increases in hotel room rates and revenues. Entertainment revenues also rose due to an expansion of the Treasure Island's theater and increases in ticket prices.
The New York-New York reported cash flow of $23.5 million, essentially unchaged from last year, while the MGM Grand Detroit reported a 2 percent increase in cash flow despite new competition from the Greektown casino.
Monte Carlo reported net revenue of $69.5 million and cash flow of $24.7 million, about flat with last year's quarter. As a joint venture with Mandalay Resort Group, Monte Carlo generated $11.6 million in cash flow for MGM MIRAGE.
The adjacent Holiday Inn Casino Boardwalk reported net revenue of $9.1 million and cash flow of $1.7 million, both off slightly from the 2000 quarter.
During their conference call, MGM MIRAGE officials expressed comfort with current analyst expectations for the remainder of the year, and stated they are not seeing any weakness in hotel room demand yet. The consensus estimate for 2001 stands at $1.66 per share.
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