MGM MIRAGE Reports Record Fourth Quarter and Full Year Results
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MGM MIRAGE Reports Record Fourth Quarter and Full Year Results
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Category: Worldwide
This is a press release selected by our editorial committee and published online for free on 2006-02-27
MGM MIRAGE (NYSE: MGM) today
reported record fourth quarter and full year 2005 financial results,
highlighted by impressive revenue growth in all operating areas.
Adjusted earnings from continuing operations per diluted share ("Adjusted
EPS") was $0.35 in 2005, representing the Company's best fourth quarter
performance ever, and an increase of 25% over the $0.28 earned in the 2004
quarter(1,2). The Company continues to benefit from the addition of the
resorts acquired in the Mandalay Resort Group ("Mandalay") merger, as well as
strong operating trends at existing resorts. The fourth quarter results
punctuate a record year for MGM MIRAGE, with full year Adjusted EPS of $1.62
versus $1.28 in 2004.
Net revenues increased 65% to $1.8 billion for the quarter. Same-store(3)
net revenues were $1.1 billion for the quarter, up 11% over prior year.
Revenues were strong in all operating areas. Highlighting the gaming results
was an 11% increase in same-store slot revenues.
Non-gaming revenues also increased significantly, with same-store hotel
revenues up 20% and same-store food and beverage revenues up 17%. REVPAR
(revenue per available room) at the Company's Las Vegas Strip Resorts
increased 8% on both a same-store and pro forma (including Mandalay for both
periods) basis.
The top-line growth carried through to the profit line, with same-store
property-level EBITDA(4) up 11% to $359 million. Total property-level EBITDA
for the quarter was a record $562 million, and property-level EBITDA margins
remained solid at 33%.
The Company achieved these impressive financial results in spite of the
negative impact of the following items:
* The Company's table games hold percentage was approximately 200 basis
points lower than the prior year quarter;
* Corporate expense increased to $40 million from $32 million in the third
quarter due to non-recurring merger integration costs and litigation
accruals;
* The closure of Beau Rivage in August 2005 following Hurricane Katrina
hurt comparisons to the prior year. Beau Rivage earned operating income
of $13.8 million in the 2004 fourth quarter, or approximately $0.03 per
diluted share;
* The prior year fourth quarter benefited from an $11.5 million
adjustment, approximately $0.02 per share, net of tax, related to the
Company's share of certain tax credits at Borgata.
Adjusted EPS (and Adjusted Earnings) excludes discontinued operations,
preopening and start-up expenses, restructuring costs, property transactions,
tax adjustments and gains or losses on early retirement of debt(2). On a GAAP
(Generally Accepted Accounting Principles) basis, diluted earnings per share
increased to $0.33 in the 2005 quarter from $0.26 in 2004.
For the full year, GAAP diluted earnings per share from continuing
operations increased to $1.50 in 2005 from $1.21 in 2004. GAAP diluted
earnings per share, including the results of discontinued operations, was
$1.50 versus $1.43 in 2004. The 2004 results included pre-tax gains of $74
million on the sale of MGM Grand Australia and $8 million on the sale of the
Golden Nugget Subsidiaries, as well as the operations of these resorts prior
to their sales.
"2005 was clearly a landmark year for MGM MIRAGE," said Terry Lanni, MGM
MIRAGE's Chairman and CEO. "I am particularly impressed by the performance of
our entire family of employees, who continue to ensure that our resorts are
the finest in the world, as evidenced by the impressive public response and
financial returns generated by new restaurants, hotel rooms and nightclubs at
our resorts. We look forward to continuing our operating success in 2006, and
we are already off to a strong start, as we hosted a record number of guests
during the Chinese New Year period and are seeing continued strength in both
gaming and non-gaming revenues," Mr. Lanni said.
Fourth Quarter Company Highlights
* Generated net revenues of $1.8 billion; on a same-store basis, net
revenues were $1.1 billion, up 11% from 2004;
* Produced property-level EBITDA of $562 million; on a same-store basis,
property-level EBITDA was $359 million, up 11% over prior year;
operating income was $346 million in the quarter versus $213 million in
2004;
* Invested $323 million of capital in the Company's resorts and
development projects, including $74 million on Project CityCenter,
$36 million on the MGM Grand Detroit permanent casino and $51 million
on the rebuilding of Beau Rivage;
* Repurchased 3.5 million shares of Company common stock for $132 million;
* Opened several new restaurants at The Mirage, as well as the new Jet
nightclub.
Full Year Company Highlights
* Generated record full year net revenues of $6.5 billion; on a same-store
basis, net revenues were $4.4 billion, an increase of 11% from 2004;
* Produced record full year property-level EBITDA of $2.1 billion; on a
same-store basis, property-level EBITDA was $1.5 billion, up 10% over
prior year; operating income was $1.4 billion in 2005 versus $951
million in 2004, with record results at several resorts, including
Bellagio and MGM Grand Las Vegas;
* Closed the Mandalay merger on April 25, 2005, with total consideration
of $7.3 billion;
* Invested $916 million of capital in the Company's existing resorts and
development initiatives. Major investments included the continued
repositioning of MGM Grand Las Vegas, including the debut of the West
Wing and Skylofts room products and two restaurants featuring the
world-renowned cuisine of legendary chef Joel Robuchon; $177 million of
our required investment in MGM Grand Paradise, which broke ground on the
$1 billion MGM Grand Macau resort; the MGM Grand Detroit permanent
casino; design work for Project CityCenter; and ongoing enhancements at
The Mirage, including the theatre for the new Cirque du Soleil show;
* Repurchased 5.5 million shares of Company common stock for $217 million;
* Reduced debt by $419 million since the close of the Mandalay merger;
* Announced further details of Project CityCenter, including an all-star
lineup of world-class architects and designers, Mandarin Oriental as the
manager of a non-gaming boutique hotel, and Taubman as the Company's
retail partner;
* Responded rapidly in Mississippi after Hurricane Katrina, and
immediately began the rebuilding process, with a target reopening date
in the second half of 2006.
Detailed Financial Results
The following table shows key financial results for the fourth quarter and
full year:
Three months ended Year ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
(In millions)
Casino revenue, net $ 797.2 $ 572.6 $2,981.7 $2,224.0
Non-casino revenue, net 956.4 490.1 3,500.3 2,014.1
Net revenue 1,753.6 1,062.7 6,482.0 4,238.1
Operating income 346.1 213.2 1,357.2 950.9
Income from continuing
operations 97.8 74.9 443.3 349.9
Discontinued operations,
net -- -- -- 62.4
Net income 97.8 74.9 443.3 412.3
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Property-level EBITDA(4) $562.0 $353.8 $2,128.5 $1,455.9
EBITDA (after corporate
expense)(4) 521.9 329.2 1,997.9 1,378.0
Adjusted Earnings(2) 101.9 81.2 479.7 371.1
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 and MGM Grand Australia for all periods
presented. The results of these operations are classified as discontinued
operations.
Net revenue in the fourth quarter increased 65% from prior year and 11% on
a same-store basis. Hotel results, as well as results in other non-gaming
areas, were strong as visitor volumes and the Company's market-leading resort
amenities continue to drive revenue growth across all business lines.
Casino revenue increased 39% in the 2005 quarter and 3% on a same-store
basis. Slot revenue in the quarter was up an impressive 11% from 2004 on a
same-store basis, on top of a 9% year-over-year increase in the 2004 fourth
quarter, driven in part by the success of our Players Club loyalty program and
targeted marketing events. Bellagio's slot revenue increased 35% to an all-
time quarterly record, as the resort continues to benefit from increased
volume following the Spa Tower expansion. MGM Grand Las Vegas had its highest
ever quarterly slot revenue, up 16% over prior year.
On a same-store basis, table games volume, including baccarat, was up 2%,
against a strong prior year comparison, a 14% increase in the 2004 quarter
over 2003. These results were driven by several major entertainment events in
the quarter, as well as strong New Year's visitation. Table games hold
percentages were near the low end of the Company's normal range (18%-22%) for
the 2005 period, and were approximately 200 basis points lower than the
prior-year quarter (approximately 130 basis points lower on a same-store
basis).
Non-casino revenue was up 95% in the quarter and 19% on a same-store
basis. Hotel revenue increased 111% (20% on a same-store basis), as market
trends and the quality of our resorts continue to lead to increased room
rates. The following table shows key hotel statistics for the Company's Las
Vegas Strip resorts on a same-store and pro forma basis (pro forma statistics
include Mandalay and Monte Carlo for both periods):
Three Months Ended
------------------------------
December 31, December 31,
2005 2004
------------ ------------
Same-store basis:
Occupancy % 93% 95%
Average Daily Rate (ADR) $163 $148
Revenue per Available Room (REVPAR) $152 $141
Pro forma basis:
Occupancy % 92% 90%
Average Daily Rate (ADR) $142 $133
Revenue per Available Room (REVPAR) $130 $120
On a same-store basis, the Company had 11% (160,000) more room nights
available on the Las Vegas Strip in the current year period due to the
Bellagio expansion and remodeled Skylofts and West Wing rooms at MGM Grand Las
Vegas, which are achieving higher rates than before the remodel. The 8%
increase in same-store Las Vegas Strip REVPAR comes on top of a 13%
year-over-year increase in the 2004 quarter.
Mr. Lanni noted, "As it relates to Mandalay, we have successfully executed
on our strategy to increase occupancy at these resorts. This has led not only
to strong increases in room revenues, but has driven increased customer
volumes at restaurants, entertainment venues and on the gaming floor, and our
strategy has clearly led to enhanced financial performance at these resorts."
Food and beverage revenue increased 78% (17% on a same-store basis),
resulting from new restaurants and lounges added since last year, particularly
at MGM Grand Las Vegas and The Mirage, as well as additional volume generated
by the Spa Tower addition at Bellagio.
Entertainment revenues were also up significantly, 33% on a same-store
basis, over the prior year quarter, largely as a result of the contribution
from KA at MGM Grand Las Vegas, which debuted in December 2004.
Property-level EBITDA increased 59% for the quarter (11% on a same-store
basis) and the same-store property-level EBITDA margin of 33% was consistent
with the 2004 quarter, despite the lower table games hold percentage.
Operating income increased 62% over prior year as a result of the trends
described above.
Fourth quarter 2005 Adjusted Earnings increased by 25% compared to 2004
due primarily to the higher operating income, offset by higher interest
expense as a result of the Mandalay merger. For the fourth quarter of 2005,
Adjusted Earnings excluded $7.9 million ($4.1 million, net of tax) of items as
follows:
* Net property transactions of $8.2 million ($5.4 million, net of tax),
primarily related to several minor capital projects abandoned during the
quarter and assets written-off in preparation for new construction,
particularly at Mandalay Bay and The Mirage;
* Preopening and start-up expenses of $3.2 million ($2.2 million, net of
tax), including $1.6 million related to the Jet nightclub at The Mirage,
$0.9 million related to MGM Grand Macau, and $0.6 million related to The
Signature at MGM Grand.
* A benefit of $3.5 million resulting from a federal income tax credit
related to wage continuation payments to workers displaced by Hurricane
Katrina.
In the fourth quarter of 2004, items excluded in the determination of
Adjusted Earnings totaled $9.7 million ($6.3 million, net of tax), including
$6.7 million of preopening and start-up expenses related to the Bellagio
expansion and KA, $3.3 million of property transactions and a $0.3 million
credit to restructuring costs.
Financial Position
The Company generated significant operating cash flow in the fourth
quarter as a result of its positive operating results and the addition of
Mandalay. The Company utilized available cash flow to make capital
investments in its resorts and development projects as well as repurchase its
common stock, without significantly increasing net borrowings. During the
fourth quarter, the Company repurchased 3.5 million shares of its common stock
for $132 million. Fourth quarter capital investments totaled $323 million,
which included expenditures for the theatre for the Beatles/Cirque du Soleil
production show at The Mirage, new restaurants and the Jet nightclub at The
Mirage, continued design work for Project CityCenter, construction of the
permanent casino at MGM Grand Detroit, rebuilding efforts at Beau Rivage, and
other routine capital expenditures.
"Our strategy of making targeted capital expenditures in our resorts
continues to be validated by our resorts' outstanding financial performance,"
said Jim Murren, MGM MIRAGE President, CFO and Treasurer. "We will continue
to strategically invest in high-return projects that generate increased
operating income at our resorts. We will also be making continued investments
in key domestic and international growth projects which will enhance our
overall growth rate for years to come. Our strong cash flow and superior
access to low-cost debt financing will allow us to maintain our financial
strength even while growing the company significantly."
Outlook
The Company expects its eleventh consecutive quarter of increased Las
Vegas Strip REVPAR (on a pro forma basis, including Mandalay for both
periods), driven in part by increased occupancy, particularly at Mandalay
resorts, which will also drive increased revenues in all operating areas.
"Once again, we expect a year-over-year increase in first quarter
earnings, with Adjusted EPS expected to be up almost 30% to approximately
$0.55 per share compared to record first quarter earnings of $0.43 per share
last year," Mr. Murren said. "This is despite the continued closure of Beau
Rivage, which contributed approximately $0.03 per share in the 2005 first
quarter." The Company noted that stock compensation expense of approximately
$0.05 per share will be excluded from Adjusted EPS when first quarter results
are reported.
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