MGM Mirage reports rosy profit, outlook

By Liz Benston

Tuesday, April 19, 2005 | 10:54 a.m.

MGM Mirage officials said the company shattered profit records at several Las Vegas Strip resorts in the first quarter and that the remainder of the year also looks strong.

Executives also said they expect the company's acquisition of Mandalay Resort Group to close on Monday.

At a meeting Thursday, Illinois regulators are expected to approve the transfer of Mandalay's half interest in the Grand Victoria riverboat casino into an escrow trust. The move would mark the last regulatory hurdle in the $7.9 billion transaction and pave the way for the Illinois Gaming Board to approve MGM Mirage to take control of the interest at a later date.

General managers -- some Mandalay officials who will stay on with the company, others appointed by MGM Mirage -- will be in place at the Mandalay properties as soon as Monday, executives said.

MGM Mirage set new quarterly records in revenue and operating income, while the Bellagio -- the company's most profitable resort -- made more money than ever in the first quarter.

"Vegas is on fire," said John Redmond, Chief Executive of MGM Grand Resorts. "The entire year looks extremely strong."

The opening of the Wynn Las Vegas megaresort next week isn't expected to hurt demand for the company's resorts and will only drive more tourism, executives said.

"They're opening at the best possible time for them and frankly, for us," MGM Mirage President and Chief Financial Officer Jim Murren said.

Executives said they expect room revenue to grow by at least 10 percent in the second quarter, in part driven by strong bookings.

"This is the strongest that we've seen in Las Vegas," Redmond said of future bookings. "The future looks extremely bright."

Earnings in the first quarter were $111.1 million or 75 cents per share compared with $105.8 million or 72 cents per share for the first quarter of 2004.

Revenue, including promotional expenses, rose 13 percent to $1.2 billion.

Excluding certain one-time expenses not related to operations, the company earned $128.1 million or 87 cents per share, a quarterly record. That included a loss on the early retirement of debt and start-up costs related to new attractions. Analysts expected the company to earn an average of 75 cents per share.

That compares with $102.4 million or 70 cents per share for the first quarter of 2004.

Average daily hotel rates rose 12 percent to $155 and occupancy rates rose 2 percentage points to 92 percent. Las Vegas Strip occupancy was 97 percent.

New high-end amenities helped results, executives said. The opening of the 925-room spa tower at Bellagio drove foot traffic at the resort and boosted baccarat play and table game volume to its highest levels yet, they said. The opening of a new poker room, relocated sports book and bar at MGM Grand also attracted more customers, they said.

MGM Mirage will begin work in July on a new employee parking garage at Bellagio that will trigger the construction of its $4.7 billion CityCenter project next door at the site of its Boardwalk casino. The garage will take at least a year to build at a cost of more than $100 million. Employees now use surface parking at the Boardwalk, which will eventually be cleared to make way for CityCenter's debut in 2009.

The company is working with architects and designers to plan CityCenter and is still in the process of selecting partners to operate boutique hotels on the site.

"Just about every hotel company in the world wants to be here," Murren said. "It's just a matter of navigating that."

Construction of condominiums behind MGM Grand also are under way. The first tower, built with partner Turnberry Associates, is set to open in May 2006 while the second tower will begin construction this month for occupancy in December 2006, executives said. Construction on a third tower will begin by early next year.

Officials also said they are hopeful that they will resume work to develop a casino at the Aqueduct race track in Queens, New York. Plans had been delayed there after legal problems with the track's operator and concerns over high casino taxes.