MGM Mirage Reports Record Results

20 Oct 2004

LAS VEGAS – (PRESS RELEASE) -- MGM MIRAGE (NYSE: MGG) today reported its third quarter 2004 financial results. Adjusted earnings from continuing operations per diluted share ("Adjusted EPS") rose 68% to $0.57 in the third quarter of 2004 from $0.34 in the 2003 quarter, representing the Company's best third quarter performance in its history and continuing a strong trend of year-over-year increases in earnings during 2004. The Company's targeted enhancements to its Las Vegas resorts led to increased customer spending, and Las Vegas visitation remains robust. REVPAR (revenue per available room) rose 10% at the Company's Las Vegas resorts in the 2004 quarter, on top of an 8% increase in 2003 compared to 2002. Other factors affecting current period results included table games hold percentage toward the low end of the Company's normal range, offset by the benefit of continued strong collections of casino receivables resulting in a lower bad debt provision than the prior year quarter. The lower bad debt provision equates to a benefit of approximately $0.07 per diluted share for the current quarter. Casino revenues increased 5% despite the low table games hold percentage, as slot revenues increased a solid 9%.

Adjusted EPS (and Adjusted Earnings) excludes discontinued operations, preopening and start-up expenses, restructuring costs, net property transactions, tax adjustments and loss on early retirement of debt(1). On a GAAP (Generally Accepted Accounting Principles) basis, diluted earnings per share from continuing operations doubled to $0.54 for the third quarter of 2004 from $0.27 in the 2003 quarter. GAAP diluted EPS, including the results of discontinued operations, was $0.89 in the 2004 period versus $0.31 in 2003.

"All of our resorts continue to generate industry-leading results, with our success in the third quarter building upon the foundation we've established throughout 2004," said Terry Lanni, MGM MIRAGE's Chairman and CEO. "We believe these positive trends will continue into the fourth quarter and throughout 2005. All of our indicators point to continued success for the Las Vegas leisure and convention businesses in the foreseeable future, and our resorts are uniquely positioned to benefit from that success."

Third Quarter Company Highlights

* Generated net revenues of $1.04 billion, up 6% over 2003;

* Company-wide REVPAR of $117, up 9% over prior year's quarter;

* Produced property-level EBITDA(2) of $348 million, up 20% over the 2003 quarter. Operating income was up 40% over the prior year, to $222 million. The Company's property-level EBITDA margin was 34%;

* Opened several new restaurants and entertainment venues, including the remodeled Todd English's Olives and Michael Mina's signature restaurant at Bellagio, Shibuya at MGM Grand Las Vegas, and Tangerine, the new nightclub at TI;

* Invested $173 million of capital in the Company's properties, including continued construction of the Bellagio expansion, continued enhancements at MGM Grand Las Vegas and the completion of the remodel of all the standard rooms at New York-New York;

* Issued $1 billion of senior notes at favorable fixed interest rates in two separate transactions;

* Obtained commitments to increase the borrowing capacity of the Company's senior credit facility to $7 billion, providing the necessary financing for the Mandalay acquisition at an attractive cost of capital.

Detailed Financial Results

Except where noted, all references in this release to operating results, including statistical information, exclude the results of Golden Nugget Las Vegas, Golden Nugget Laughlin, MGM Grand Australia and MGM MIRAGE Online for all periods presented. The results of these operations are classified as discontinued operations.

Net revenue in the third quarter increased 6% from the 2003 third quarter. This increase was due to strong casino and hotel volumes, continued increases in room rates and higher spending by our customers throughout our resorts.

Casino revenue increased 5% in the 2004 quarter. Table games volume, including baccarat, was consistent with prior year levels. The Company's table games hold percentage was toward the low end of the normal range in the September 2004 quarter, and was consistent with the hold percentage experienced in 2003. Company-wide slot revenue in the quarter was up 9% from 2003. Several resorts experienced double-digit increases in slot revenues, including New York-New York, TI, Beau Rivage, MGM Grand Detroit, and Primm Valley Resorts.

Non-casino revenue was up 7% in the quarter. Hotel revenue was up 8%, with a higher occupancy rate of 93% in the third quarter of 2004 versus 92% in 2003, and a higher average daily room rate ("ADR") of $125 versus $116 in 2003. As a result, revenue per available room ("REVPAR") was $117, an increase of 9% over 2003. REVPAR at the Company's Las Vegas resorts was up 10% over the prior year to $134.

Food and beverage, entertainment, retail and other revenues were up 5% in the 2004 quarter. The Company believes it is capturing a greater share of customer spending due to the exciting new restaurant, entertainment and other amenities introduced in the past year.

Consolidated EBITDA increased 20% for the quarter, reflecting the strong revenue results and operating leverage inherent with higher hotel room rates. The property-level EBITDA margin was 34% in 2004, up from 30% in the prior year quarter and the Company's highest third quarter margin since the 2000 merger of MGM Grand and Mirage Resorts. Additionally, the Company benefited from the increased contribution of Borgata, leading to an increase in income from unconsolidated affiliates of 75% over 2003. Operating income increased 40% due to the increased property-level EBITDA and lower preopening and restructuring expenses in the current year.

Third quarter Adjusted Earnings increased 54% compared to 2003 due to the increase in operating income described above. Net interest expense increased due to higher average borrowings, slightly higher variable market interest rates and the issuance of fixed rate debt in the quarter.

For the third quarter of 2004, Adjusted Earnings excluded a net $6.5 million ($4.7 million, net of tax) of items. These items included:

* Preopening and start-up expenses of $1.6 million ($1.0 million, net of tax), primarily related to new restaurants and KA, the new Cirque du Soleil production scheduled to open in November 2004, at MGM Grand Las Vegas;

* Restructuring costs of $1.6 million ($1.0 million, net of tax), the result of staffing reductions at MGM Grand Detroit as a result of the recent gaming tax increase in Michigan;

* Net property transactions of $1.7 million ($1.1 million, net of tax), including demolition costs related to the Bellagio expansion, and other net losses on disposal of assets;

* Tax adjustments of $1.6 million, representing additional state deferred taxes related to capital investments in New Jersey, partially offset by the reversal of reserves for prior year tax issues as the statutes of limitations on those years expired.

In the third quarter of 2003, items excluded in the determination of Adjusted Earnings totaled $17.1 million ($11.2 million, net of tax) and included preopening and start-up expenses of $7.3 million ($4.8 million, net of tax), primarily related to Borgata and New York-New York; restructuring costs of $4.0 million ($2.6 million, net of tax), primarily related to the termination of an operating lease at MGM Grand Las Vegas; property transactions, net of $2.6 million ($1.7 million, net of tax), primarily related to demolition costs for the Bellagio expansion and the KA theatre at MGM Grand Las Vegas; and loss on early retirement of debt of $3.2 million ($2.1 million, net of tax).

The Company's effective income tax rate was 37.4% in the third quarter versus 35.8% in the prior year's quarter. The net tax adjustments described above caused a portion of the increase in the effective rate. Additionally, the Company incurred higher-than-normal non-deductible costs related to funding support of ballot initiatives in Michigan.

Income from discontinued operations includes the results of the Golden Nugget Las Vegas and Golden Nugget Laughlin resorts, MGM MIRAGE Online and MGM Grand Australia. Pretax income from discontinued operations was $76 million in the third quarter of 2004, including a $74 million gain ($51 million, net of tax) on the sale of MGM Grand Australia. This compares to income of $9 million, including $3 million of allocated interest, in the 2003 period.

Financial Position

Third quarter capital investments of $173 million included $79 million for the Bellagio expansion and $15 million related to the renovation of the Emerald Tower and the 29th floor suites at MGM Grand Las Vegas. Other expenditures related to continued enhancements to dining and entertainment venues, as well as the completion of the standard room remodel project at New York-New York.

During the quarter, the Company issued $1.0 billion of fixed rate debt at favorable interest rates. In August 2004, the Company issued $550 million of 6 3/4% senior notes due 2012 at par and in September 2004, the Company issued $450 million of 6% Senior Notes due 2009 at a premium to yield 5.65%. Upon issuance, these proceeds were used to repay amounts outstanding under the Company's senior credit facility.

In addition, the Company has received sufficient commitments from its lenders to increase the capacity of its senior credit facility to $7 billion, providing the necessary financing for the pending Mandalay acquisition.

As of September 30, 2004, the Company had approximately $2.3 billion of available borrowings under its existing senior credit facility.

"We have created the financial foundation for the upcoming merger with Mandalay Resort Group with the recent issuances of Senior Notes and our commitments on a new senior credit facility," said MGM MIRAGE President, CFO and Treasurer, Jim Murren. "While the fixed rate issuances have a negative short-term impact on reported EPS, we believe our capital structure provides us the optimal post-acquisition financing at attractive rates. We expect to rapidly de-leverage our Company, utilizing the significant free cash flow generated by the combination of MGM MIRAGE and Mandalay," Mr. Murren said.

Outlook

The Company expects REVPAR growth to be in the 8-10% range in the fourth quarter of 2004, on top of a 5% year-over-year increase in the 2003 fourth quarter. Property-level EBITDA is expected to increase over the prior year, benefiting from strong customer activity, offset by several factors including increased gaming taxes in Detroit and 3% fewer room nights available. For the full year 2004, the Company will earn over $1.4 billion in property-level EBITDA, an all-time record and well in excess of the Company's original expectations. Taking into account the higher non-operating items, primarily higher interest expense, the Company expects to earn in the range of $0.35 to $0.45 in the fourth quarter on an Adjusted EPS basis, compared to $0.36 in the prior year.

"We are pleased with the continued positive REVPAR trends and ongoing strength across all operating areas, and expect such trends to continue into 2005," Mr. Murren said. "A significant contributor to fourth quarter profits is the New Year's holiday and the period leading up to New Year's, and it is difficult for us to predict results for that period at this early stage."

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	MGM Mirage Reports Record Results 20 Oct 2004 LAS VEGAS – (PRESS RELEASE) -- MGM MIRAGE (NYSE: MGG) today reported its third quarter 2004 financial results. Adjusted earnings from continuing operations per diluted share ("Adjusted EPS") rose 68% to $0.57 in the third quarter of 2004 from $0.34 in the 2003 quarter, representing the Company's best third quarter performance in its history and continuing a strong trend of year-over-year increases in earnings during 2004. The Company's targeted enhancements to its Las Vegas resorts led to increased customer spending, and Las Vegas visitation remains robust. REVPAR (revenue per available room) rose 10% at the Company's Las Vegas resorts in the 2004 quarter, on top of an 8% increase in 2003 compared to 2002. Other factors affecting current period results included table games hold percentage toward the low end of the Company's normal range, offset by the benefit of continued strong collections of casino receivables resulting in a lower bad debt provision than the prior year quarter. The lower bad debt provision equates to a benefit of approximately $0.07 per diluted share for the current quarter. Casino revenues increased 5% despite the low table games hold percentage, as slot revenues increased a solid 9%. Adjusted EPS (and Adjusted Earnings) excludes discontinued operations, preopening and start-up expenses, restructuring costs, net property transactions, tax adjustments and loss on early retirement of debt(1). On a GAAP (Generally Accepted Accounting Principles) basis, diluted earnings per share from continuing operations doubled to $0.54 for the third quarter of 2004 from $0.27 in the 2003 quarter. GAAP diluted EPS, including the results of discontinued operations, was $0.89 in the 2004 period versus $0.31 in 2003. "All of our resorts continue to generate industry-leading results, with our success in the third quarter building upon the foundation we've established throughout 2004," said Terry Lanni, MGM MIRAGE's Chairman and CEO. "We believe these positive trends will continue into the fourth quarter and throughout 2005. All of our indicators point to continued success for the Las Vegas leisure and convention businesses in the foreseeable future, and our resorts are uniquely positioned to benefit from that success." Third Quarter Company Highlights * Generated net revenues of $1.04 billion, up 6% over 2003; * Company-wide REVPAR of $117, up 9% over prior year's quarter; * Produced property-level EBITDA(2) of $348 million, up 20% over the 2003 quarter. Operating income was up 40% over the prior year, to $222 million. The Company's property-level EBITDA margin was 34%; * Opened several new restaurants and entertainment venues, including the remodeled Todd English's Olives and Michael Mina's signature restaurant at Bellagio, Shibuya at MGM Grand Las Vegas, and Tangerine, the new nightclub at TI; * Invested $173 million of capital in the Company's properties, including continued construction of the Bellagio expansion, continued enhancements at MGM Grand Las Vegas and the completion of the remodel of all the standard rooms at New York-New York; * Issued $1 billion of senior notes at favorable fixed interest rates in two separate transactions; * Obtained commitments to increase the borrowing capacity of the Company's senior credit facility to $7 billion, providing the necessary financing for the Mandalay acquisition at an attractive cost of capital. Detailed Financial Results Except where noted, all references in this release to operating results, including statistical information, exclude the results of Golden Nugget Las Vegas, Golden Nugget Laughlin, MGM Grand Australia and MGM MIRAGE Online for all periods presented. The results of these operations are classified as discontinued operations. Net revenue in the third quarter increased 6% from the 2003 third quarter. This increase was due to strong casino and hotel volumes, continued increases in room rates and higher spending by our customers throughout our resorts. Casino revenue increased 5% in the 2004 quarter. Table games volume, including baccarat, was consistent with prior year levels. The Company's table games hold percentage was toward the low end of the normal range in the September 2004 quarter, and was consistent with the hold percentage experienced in 2003. Company-wide slot revenue in the quarter was up 9% from 2003. Several resorts experienced double-digit increases in slot revenues, including New York-New York, TI, Beau Rivage, MGM Grand Detroit, and Primm Valley Resorts. Non-casino revenue was up 7% in the quarter. Hotel revenue was up 8%, with a higher occupancy rate of 93% in the third quarter of 2004 versus 92% in 2003, and a higher average daily room rate ("ADR") of $125 versus $116 in 2003. As a result, revenue per available room ("REVPAR") was $117, an increase of 9% over 2003. REVPAR at the Company's Las Vegas resorts was up 10% over the prior year to $134. Food and beverage, entertainment, retail and other revenues were up 5% in the 2004 quarter. The Company believes it is capturing a greater share of customer spending due to the exciting new restaurant, entertainment and other amenities introduced in the past year. Consolidated EBITDA increased 20% for the quarter, reflecting the strong revenue results and operating leverage inherent with higher hotel room rates. The property-level EBITDA margin was 34% in 2004, up from 30% in the prior year quarter and the Company's highest third quarter margin since the 2000 merger of MGM Grand and Mirage Resorts. Additionally, the Company benefited from the increased contribution of Borgata, leading to an increase in income from unconsolidated affiliates of 75% over 2003. Operating income increased 40% due to the increased property-level EBITDA and lower preopening and restructuring expenses in the current year. Third quarter Adjusted Earnings increased 54% compared to 2003 due to the increase in operating income described above. Net interest expense increased due to higher average borrowings, slightly higher variable market interest rates and the issuance of fixed rate debt in the quarter. For the third quarter of 2004, Adjusted Earnings excluded a net $6.5 million ($4.7 million, net of tax) of items. These items included: * Preopening and start-up expenses of $1.6 million ($1.0 million, net of tax), primarily related to new restaurants and KA, the new Cirque du Soleil production scheduled to open in November 2004, at MGM Grand Las Vegas; * Restructuring costs of $1.6 million ($1.0 million, net of tax), the result of staffing reductions at MGM Grand Detroit as a result of the recent gaming tax increase in Michigan; * Net property transactions of $1.7 million ($1.1 million, net of tax), including demolition costs related to the Bellagio expansion, and other net losses on disposal of assets; * Tax adjustments of $1.6 million, representing additional state deferred taxes related to capital investments in New Jersey, partially offset by the reversal of reserves for prior year tax issues as the statutes of limitations on those years expired. In the third quarter of 2003, items excluded in the determination of Adjusted Earnings totaled $17.1 million ($11.2 million, net of tax) and included preopening and start-up expenses of $7.3 million ($4.8 million, net of tax), primarily related to Borgata and New York-New York; restructuring costs of $4.0 million ($2.6 million, net of tax), primarily related to the termination of an operating lease at MGM Grand Las Vegas; property transactions, net of $2.6 million ($1.7 million, net of tax), primarily related to demolition costs for the Bellagio expansion and the KA theatre at MGM Grand Las Vegas; and loss on early retirement of debt of $3.2 million ($2.1 million, net of tax). The Company's effective income tax rate was 37.4% in the third quarter versus 35.8% in the prior year's quarter. The net tax adjustments described above caused a portion of the increase in the effective rate. Additionally, the Company incurred higher-than-normal non-deductible costs related to funding support of ballot initiatives in Michigan. Income from discontinued operations includes the results of the Golden Nugget Las Vegas and Golden Nugget Laughlin resorts, MGM MIRAGE Online and MGM Grand Australia. Pretax income from discontinued operations was $76 million in the third quarter of 2004, including a $74 million gain ($51 million, net of tax) on the sale of MGM Grand Australia. This compares to income of $9 million, including $3 million of allocated interest, in the 2003 period. Financial Position Third quarter capital investments of $173 million included $79 million for the Bellagio expansion and $15 million related to the renovation of the Emerald Tower and the 29th floor suites at MGM Grand Las Vegas. Other expenditures related to continued enhancements to dining and entertainment venues, as well as the completion of the standard room remodel project at New York-New York. During the quarter, the Company issued $1.0 billion of fixed rate debt at favorable interest rates. In August 2004, the Company issued $550 million of 6 3/4% senior notes due 2012 at par and in September 2004, the Company issued $450 million of 6% Senior Notes due 2009 at a premium to yield 5.65%. Upon issuance, these proceeds were used to repay amounts outstanding under the Company's senior credit facility. In addition, the Company has received sufficient commitments from its lenders to increase the capacity of its senior credit facility to $7 billion, providing the necessary financing for the pending Mandalay acquisition. As of September 30, 2004, the Company had approximately $2.3 billion of available borrowings under its existing senior credit facility. "We have created the financial foundation for the upcoming merger with Mandalay Resort Group with the recent issuances of Senior Notes and our commitments on a new senior credit facility," said MGM MIRAGE President, CFO and Treasurer, Jim Murren. "While the fixed rate issuances have a negative short-term impact on reported EPS, we believe our capital structure provides us the optimal post-acquisition financing at attractive rates. We expect to rapidly de-leverage our Company, utilizing the significant free cash flow generated by the combination of MGM MIRAGE and Mandalay," Mr. Murren said. Outlook The Company expects REVPAR growth to be in the 8-10% range in the fourth quarter of 2004, on top of a 5% year-over-year increase in the 2003 fourth quarter. Property-level EBITDA is expected to increase over the prior year, benefiting from strong customer activity, offset by several factors including increased gaming taxes in Detroit and 3% fewer room nights available. For the full year 2004, the Company will earn over $1.4 billion in property-level EBITDA, an all-time record and well in excess of the Company's original expectations. Taking into account the higher non-operating items, primarily higher interest expense, the Company expects to earn in the range of $0.35 to $0.45 in the fourth quarter on an Adjusted EPS basis, compared to $0.36 in the prior year. "We are pleased with the continued positive REVPAR trends and ongoing strength across all operating areas, and expect such trends to continue into 2005," Mr. Murren said. "A significant contributor to fourth quarter profits is the New Year's holiday and the period leading up to New Year's, and it is difficult for us to predict results for that period at this early stage."

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MGM Mirage Reports Record Results