MGM Mirage reports results
Highlights from the quarter include:
* 13% increase in gaming revenues, representing strong Las Vegas Strip
results and the contribution from Beau Rivage;(1)
* 8% increase in hotel revenues, with an 8% increase in Las Vegas Strip
REVPAR;(2)
* Property EBITDA(3) of $740 million compared to $537 million in the 2005
quarter.
The Company recently made significant progress on several development initiatives, including:
* Announced a second development in Macau with the Company's partner
Pansy Ho; planning for a site in Cotai has begun;
* Began taking reservations for CityCenter residential units, with
tremendous early success at converting deposits to contracts;
* Finalized agreements with the Mashantucket Pequot Tribal Nation for the
Foxwoods expansion -- to be branded MGM Grand and expected to open in
2008 -- and other future joint projects;
* Made progress on separate agreements to develop luxury non-gaming
resorts worldwide with two partners, Mubadala Development Company of
Abu Dhabi, U.A.E. and the Diaoyutai State Guesthouse in Beijing,
People's Republic of China;
* Announced an agreement with American Nevada Corp. and Diamond Resorts
to develop a new mixed-use community in Jean, Nevada.
The following table lists significant items which affect the comparability of current year and prior year results (earnings per share impact shown, net of tax, per diluted share; negative amounts represent charges to income):
Three months ended December 31, 2006 2005
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Profits from The Signature at MGM Grand $ 0.15 $ --
Incremental stock compensation
- adoption of SFAS 123® (0.03) --
Preopening and start-up expenses (0.02) (0.01)
Property transactions, net
(including insurance recovery income) 0.17 (0.02)
Tax adjustments -- 0.01
"Our strong fourth quarter performance validates our disciplined approach to re-investing in our core assets and providing world-class, unmatched experiences to our customers," said Terry Lanni, MGM MIRAGE's Chairman and CEO. "Our plans to expand our operations, both in the United States and overseas, are designed to leverage our tremendous brands into new markets."
During the quarter, the Company entered into agreements to sell the Primm Valley Resorts, excluding the Primm Valley Golf Club, for $400 million and the Laughlin properties (Colorado Belle and Edgewater) for $200 million. The results of these operations have been classified as discontinued operations in the accompanying financial statements and schedules. Earnings per share from discontinued operations for the 2006 quarter was $0.01, leading to diluted earnings per share, including discontinued operations, of $0.69 for the current quarter versus $0.33 in the prior-year quarter.
For the full year 2006, net revenues were $7.2 billion, an increase of 17% over $6.1 billion in 2005, largely as a result of the full year of Mandalay results and continued operating strength, particularly in the hotel and gaming areas. Property EBITDA was $2.6 billion, a 28% increase over the prior year, and diluted earnings per share from continuing operations was $2.18 versus $1.47 earned in 2005, an increase of 48%. Property EBITDA and earnings per share benefited from a full year of operations for the Mandalay Resort Group properties, the sale of condominium units at The Signature at MGM Grand, and income from Hurricane Katrina insurance recoveries.
Detailed Discussion of Fourth Quarter Results
Net revenue for the quarter increased $187 million, or 11%, to $1.846 billion from $1.659 billion in prior year; Beau Rivage contributed $89 million of the increase. The Company's resorts continue to capitalize on healthy market conditions with new and upgraded amenities and the continued rollout of the Players Club loyalty program to the Mandalay Resort Group properties.
The 13% increase in gaming revenues included strong results of fourth quarter events, including New Years weekend, and the reopening of Beau Rivage. Table games revenue was up 13% - 8% excluding Beau Rivage -- with a higher hold percentage in the current year. Table games hold percentages were within the normal 18-22% range for both periods. Slots revenue benefited from the contribution of Beau Rivage; excluding Beau Rivage slots revenue was up 1% compared with the 2005 quarter.
Non-gaming revenue exceeded the prior-year quarter by 10%. Higher room rates and occupancy percentages at our Las Vegas Strip resorts led to an 8% increase in Las Vegas Strip REVPAR -- the highest quarter-over-quarter REVPAR growth this year, and particularly impressive following a strong 8% increase in the 2005 fourth quarter. The following table shows key hotel statistics for the Company's Las Vegas Strip resorts:
Three Months Ended
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December 31, December 31,
2006 2005
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Occupancy % 93% 92%
Average Daily Rate (ADR) $ 151 $ 142
Revenue per Available Room (REVPAR) $ 140 $ 130
Food and beverage revenue increased 7% for the quarter -- 2% without Beau Rivage -- due to new restaurants and lounges at several resorts, including The Mirage and Mandalay Bay. Entertainment revenue was up 19%, largely due to the tremendous success of Love at The Mirage.
The Company's operating margins increased to 28% from 20% in the 2005 quarter. Operating income increased 49% to $508 million, which includes $65 million of profit from closings on a portion of the units of Tower 2 of The Signature at MGM Grand and operating income of $94 million from Beau Rivage (which includes the $86 million of income from insurance recoveries), offset by $15 million in stock compensation expense. Excluding these items, operating income was up 7%, with an operating margin of 21% for the current-year quarter. Property EBITDA increased 38% to $740 million; excluding the items noted above, Property EBITDA was up 6% and the Property EBITDA margin was 32%, which is consistent with the prior year.
Detailed Discussion of Certain Items
In the fourth quarter of 2006, net property transactions included income from Hurricane Katrina insurance recoveries of $86 million, partially offset by write-downs related to corporate assets of $5 million. In the 2005 period, net property transactions of $8 million largely related to the write-off of assets replaced in connection with expansion and remodel projects at Mandalay Bay and The Mirage.
Preopening and start-up expenses of $9 million in the 2006 quarter related primarily to CityCenter, MGM Grand Macau, Tower 2 of The Signature at MGM Grand, and the permanent facility at MGM Grand Detroit. Preopening and start-up expenses of $3 million in 2005 related primarily to Jet at The Mirage, MGM Grand Macau, and The Signature at MGM Grand.
Earnings for the 2006 fourth quarter include the impact of implementing SFAS 123® on January 1, 2006. Under this new standard, the cost of employee stock awards are required to be recognized as an expense. The Company classified the incremental expense of $15 million as a result of implementing the standard as follows:
Three months ended December 31, 2006
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(In thousands)
Casino $ 2,972
Other operating departments 117
General and administrative 4,261
Corporate expense and other 7,715
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$ 15,065
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Financial Position
Fourth quarter capital investments totaled $518 million, which included $271 million for CityCenter, $68 million for the permanent MGM Grand Detroit hotel and casino, and $63 million related to Beau Rivage. Remaining capital expenditures of $116 million included routine capital expenditures at various resorts. Of this amount, approximately $19 million related to spending on a room remodel project and new amenities at Mandalay Bay, and approximately $9 million related to room remodel projects at Excalibur and TI.
During the quarter, the Company received an additional $190 million in insurance recoveries related to Hurricane Katrina's impact on Beau Rivage, bringing total recoveries to date to $355 million.
In December, the Company issued $750 million of long-term, fixed rate debt at 7.625%, which it used to reduce outstanding borrowings under its senior credit facility. At December 31, 2006, the Company had $2.6 billion of available borrowings under its $7 billion senior credit facility.
"In addition to our renowned portfolio of resorts, our real estate holdings in Las Vegas and Atlantic City along with our signature brands provide tremendous future value," said Jim Murren, MGM MIRAGE President, CFO and Treasurer. "Our proven development and operating expertise combined with these valuable assets provide considerable short and long-term growth opportunities for the Company."
Outlook
Mr. Murren continued, "We expect 2007 to be another year of strong financial performance. We expect outstanding returns on new amenities to drive organic growth. As demonstrated by the significant increases in cash flow at The Mirage and MGM Grand, our efforts at Mandalay Bay, Luxor and several other properties should lead to increased customer volumes and better pricing at these resorts."
"Our development pipeline will create additional value in 2007, with major new projects coming on line in Detroit and Macau," Mr. Murren said. "We remain focused on maintaining our solid financial position, while executing on our strategic long-term growth projects, particularly CityCenter."
"As the industry leader in providing detailed financial information, we continue to provide supplemental data for our Las Vegas Strip resorts on our website and invite you to listen to our conference call for further discussion on the Company's future outlook and developments."