MGM MIRAGE Reports First Quarter Results

LAS VEGAS, May 6 /PRNewswire-FirstCall/ -- MGM MIRAGE today reported its first quarter 2008 financial results. The Company earned $0.40 per diluted share from continuing operations in the first quarter, compared to $0.55 in the prior year. The Company experienced low-single digit percentage decreases in both gaming and non-gaming revenues on a quarter-over-quarter basis, while earnings were also negatively impacted by the temporary closure of Monte Carlo and ramp-up costs related to the recent opening of two major resorts.

Key results for the quarter: -- Net revenue decreased 2% to $1.9 billion; -- Las Vegas Strip REVPAR(1) decreased 4%; -- Casino revenue decreased 3%, mainly as result of lower table games volume at the Company's Las Vegas Strip resorts; -- Property EBITDA(2) was $575 million, a 12% decrease from the 2007 quarter; -- Monte Carlo earned Property EBITDA of $14 million compared to $34 million in prior year quarter; the resort was closed from January 25, 2008 through February 14, 2008 due to a rooftop fire, and approximately 20% of its rooms and suites remained out of service at quarter-end; -- Completed a joint tender offer with Dubai World for the purchase of 15 million shares of common stock, of which the Company purchased 8.5 million shares at a total cost of $680 million; -- Repurchased an additional 7 million shares of common stock in the open market for $427 million.

The following table lists certain items which affect the comparability of the current year and prior year quarterly results (earnings per share impact shown, net of tax, per diluted share; negative amounts represent charges to income):

Three months ended March 31, 2008 2007 Profits from The Signature at MGM Grand........ $- $0.02 Preopening and start-up expenses............... (0.01) (0.03)

"Our business should be evaluated in the context of the state of the economy," said Terry Lanni, MGM MIRAGE's Chairman and CEO. "The gaming industry and our company have seen considerable growth within the last several years, and even with near-term weaker economic conditions our resorts are still attracting premium customers and generating tremendous cash flow. We are focused on our fundamental strategies which have consistently produced positive results."

Detailed Discussion of First Quarter Operating Results

Casino revenue decreased 3%, mainly due to a decrease in table games volume of 4%. The overall table games hold percentage was near the high-end of the normal 18% to 22% range in the current quarter and slightly higher than in the 2007 quarter. Slots revenue decreased 1% compared to the prior year. Several of the Company's Las Vegas Strip resorts reported increases in slots revenue including Bellagio, The Mirage, and Mandalay Bay, which all reported mid-single digit percentage increases. Excluding Monte Carlo, Las Vegas Strip slots revenue was consistent with the prior year. Additionally, slots revenue at MGM Grand Detroit increased 9% as a result of increased capacity in the permanent casino.

Rooms revenue decreased 6%, with a 4% decrease in Las Vegas Strip REVPAR. Average room rates were down 2% at the Company's Las Vegas Strip resorts. Las Vegas Strip occupancy also decreased, and the Company had approximately 60,000 less rooms available, mainly due to the Monte Carlo fire. The following table shows key hotel statistics for the Company's Las Vegas Strip resorts:

Three months ended March 31, 2008 2007 Occupancy %............................. 93% 96% Average Daily Rate (ADR)................ $165 $169 Revenue per Available Room (REVPAR)..... $155 $162

Food and beverage revenue decreased 4% as the Company's restaurants and nightclubs were also impacted by the decrease in occupancy and the slowdown in consumer spending. Entertainment revenues held steady, despite fewer concerts and sporting events, led by strength in the Company's Cirque du Soleil production shows.

The Monte Carlo was closed from January 25, 2008 through February 14, 2008 due to a rooftop fire and a significant portion of its rooms and suites remained out of service through the end of the quarter. The Company maintains substantial property and business interruption insurance and to date has received a total of $50 million of insurance recoveries, including $22 million received as of the end of the first quarter. The Company recorded recoveries of costs incurred during the period, but will not record recoveries for lost profits until all contingencies with the insurance claim have been resolved. Monte Carlo earned Property EBITDA of $14 million compared to $34 million in the prior year quarter.

MGM Grand Macau, of which the Company owns 50%, was open for its first full quarter of operations and produced Property EBITDA of $43 million and operating income of $23 million. The Company recognized its share of MGM Grand Macau's results as follows: $10 million of income in the "Income from unconsolidated affiliates" line, and $5 million of expense in the "Non-operating items from unconsolidated affiliates" line for the Company's share of MGM Grand Macau's interest expense and other non-operating expenses.

Operating income decreased 23% for the quarter to $341 million as a result of the decrease in revenue described above, and the increased costs of operating the larger MGM Grand Detroit. The Company's operating margin was 18% and Property EBITDA margin was 31% in the quarter versus 23% and 34%, respectively, in the 2007 quarter. Preopening and start-up expenses were lower during the current quarter and mainly related to the Company's share of preopening expenses at CityCenter. Additionally, the prior year quarter included $8 million of profit from closings on units of The Signature at MGM Grand Las Vegas.

"We must continue to concentrate on our customers and the celebrated experiences we provide at our resorts," said Jim Murren, MGM MIRAGE President and Chief Operating Officer. "Additionally, we have always been committed to operating our resorts at maximum efficiency. Over the past several months we have been implementing various new revenue enhancement and cost savings initiatives. We will continue to make substantial long-term investments in our people and resorts."

Financial Position

First quarter capital investments totaled $236 million which included $61 million on room and suite remodel projects, primarily at The Mirage, TI, and Excalibur; expenditures of $10 million for remediation efforts at Monte Carlo; $19 million of trailing payments for MGM Grand Detroit; and $28 million for corporate aircraft. The remaining $118 million was for other routine capital expenditures and various new and upgraded amenities at the Company's resorts.

During the quarter, the Company repaid $180 million of its senior notes at maturity, and the Company and Dubai World each funded $200 million of construction costs for CityCenter. The Company and Dubai World are currently in discussions with several financial institutions with regard to bank financing for the project.

The Company purchased 8.5 million shares upon completion of its joint tender offer with Dubai World for a total cost of $680 million. Additionally, the Company repurchased 7 million shares in the open market for $427 million during the first quarter, leaving 2.6 million shares available under the Company's share repurchase authorization. Available borrowing capacity under the Company's senior credit facility was $1.9 billion as of March 31, 2008.

"Our company continues to generate strong cash flow and has significant debt capacity under our credit facilities," said Dan D'Arrigo, MGM MIRAGE Executive Vice President and Chief Financial Officer. "This combination provides ample capital flexibility to meet all of our strategic growth initiatives and maintain our strategic focus during a difficult time in the credit markets."

MGM MIRAGE will hold a conference call to discuss its first quarter earnings results and outlook for the second quarter of 2008 at 11:00 a.m. Eastern Daylight Time today. The call can be accessed live at http://www.companyboardroom.com/ or http://www.mgmmirage.com/, or by calling 1-800-526-8531 (domestic) or 1-706-634-6528 (international). Until Tuesday, May 13, 2008, a complete replay of the conference call can be accessed by dialing 1-706-645-9291, access code 42415451. A complete replay of the call will also be made available at http://www.mgmmirage.com/. Supplemental detailed earnings information will also be available on the Company's website.

(1) REVPAR is hotel Revenue per Available Room. (2) "EBITDA" is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization. "Property EBITDA" is EBITDA before corporate expense and stock compensation expense. EBITDA information is presented solely as a supplemental disclosure because management believes that it is 1) a widely used measure of operating performance in the gaming industry, and 2) a principal basis for valuation of gaming companies. In addition, capital allocation, tax planning, financing and stock compensation awards are all managed at the corporate level. Management uses Property EBITDA as the primary measure of the Company's operating resorts' performance, including the evaluation of operating personnel. EBITDA should not be construed as an alternative to operating income, as an indicator of the Company's operating performance; or as an alternative to cash flows from operating activities, as a measure of liquidity; or as any other measure determined in accordance with generally accepted accounting principles. The Company has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in EBITDA. Also, other gaming companies that report EBITDA information may calculate EBITDA in a different manner than the Company. Reconciliations of consolidated EBITDA to net income and of operating income to Property EBITDA are included in the financial schedules accompanying this release. * * *

MGM MIRAGE , one of the world's leading and most respected development companies with significant holdings in gaming, hospitality and entertainment, owns and operates 17 properties located in Nevada, Mississippi and Michigan, and has 50% investments in four other properties in Nevada, New Jersey, Illinois and Macau. MGM MIRAGE is developing major casino and non-casino resorts, separately and with partners in Las Vegas, Atlantic City, the People's Republic of China and Abu Dhabi, U.A.E. MGM MIRAGE supports responsible gaming and has implemented the American Gaming Association's Code of Conduct for Responsible Gaming at its properties. MGM MIRAGE has received numerous awards and recognitions for its industry-leading Diversity Initiative and its community philanthropy programs. For more information about MGM MIRAGE, please visit the company's website at http://www.mgmmirage.com/.

Statements in this release which are not historical facts are "forward looking" statements and "safe harbor statements" under the Private Securities Litigation Reform Act of 1995 that involve risks and/or uncertainties, including risks and/or uncertainties as described in the company's public filings with the Securities and Exchange Commission.

MGM MIRAGE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended ------------------------------ March 31, March 31, 2008 2007 ------------------------------ Revenues: Casino $ 790,464 $ 811,939 Rooms 518,741 549,004 Food and beverage 402,392 417,449 Entertainment 134,838 134,248 Retail 64,037 68,250 Other 147,973 122,070 ----------- ----------- 2,058,445 2,102,960 Less: Promotional allowances (174,812) (173,525) ----------- ----------- 1,883,633 1,929,435 ----------- ----------- Expenses: Casino 416,563 411,792 Rooms 136,797 135,185 Food and beverage 236,272 235,704 Entertainment 95,664 97,243 Retail 43,164 43,744 Other 92,564 68,808 General and administrative 320,374 311,674 Corporate expense 32,450 33,955 Preopening and start-up expenses 5,164 14,276 Restructuring costs 329 - Property transactions, net 2,776 5,019 Depreciation and amortization 194,339 168,277 ----------- ----------- 1,576,456 1,525,677 ----------- ----------- Income from unconsolidated affiliates 34,111 41,375 ----------- ----------- Operating income 341,288 445,133 ----------- ----------- Non-operating income (expense): Interest income 3,466 2,657 Interest expense, net (149,789) (184,011) Non-operating items from unconsolidated affiliates (9,891) (5,106) Other, net 230 (2,728) ----------- ----------- (155,984) (189,188) ----------- ----------- Income from continuing operations before income taxes 185,304 255,945 Provision for income taxes (66,958) (92,935) ----------- ----------- Income from continuing operations 118,346 163,010 ----------- ----------- Discontinued operations: Income from discontinued operations - 7,846 Provision for income taxes - (2,683) ----------- ----------- - 5,163 ----------- ----------- Net income $ 118,346 $ 168,173 =========== =========== Per share of common stock: Basic: Income from continuing operations $ 0.41 $ 0.57 Discontinued operations - 0.02 ----------- ----------- Net income per share $ 0.41 $ 0.59 =========== =========== Weighted average shares outstanding 288,943 284,021 =========== =========== Diluted: Income from continuing operations $ 0.40 $ 0.55 Discontinued operations - 0.02 ----------- ----------- Net income per share $ 0.40 $ 0.57 =========== =========== Weighted average shares outstanding 298,400 295,577 =========== =========== MGM MIRAGE AND SUBSIDIARIES SUPPLEMENTAL DATA - NET REVENUES (In thousands) (Unaudited) Three Months Ended ------------------------ March 31, March 31, 2008 2007 ----------- ----------- Las Vegas Strip $1,548,057 $1,626,343 Other Nevada 36,850 44,432 MGM Grand Detroit 144,780 116,134 Mississippi 134,222 142,526 Other 19,724 - ----------- ----------- $1,883,633 $1,929,435 =========== =========== MGM MIRAGE AND SUBSIDIARIES SUPPLEMENTAL DATA - PROPERTY EBITDA (In thousands) (Unaudited) Three Months Ended ------------------------ March 31, March 31, 2008 2007 ----------- ----------- Las Vegas Strip $ 479,496 $ 548,842 Other Nevada (685) (1,996) MGM Grand Detroit 34,412 34,826 Mississippi 27,370 35,403 Other 4,579 - Unconsolidated resorts 29,367 38,142 ----------- ----------- $ 574,539 $ 655,217 =========== =========== MGM MIRAGE AND SUBSIDIARIES DETAIL OF CERTAIN CHARGES AFFECTING PROPERTY EBITDA and EBITDA (In thousands) (Unaudited) Three Months Ended March 31, 2008 --------------------------------- Preopening and Property start-up Restructuring transactions, expenses costs net Total ----------- ------------- ------------- --------- Las Vegas Strip $ 226 $ 329 $ 2,789 $ 3,344 Other Nevada - - - - MGM Grand Detroit 194 - 8 202 Mississippi - - 5 5 Unconsolidated resorts 4,744 - - 4,744 ----------- ------------- ------------- --------- 5,164 329 2,802 8,295 Corporate and other - - (26) (26) ----------- ------------- ------------- --------- $ 5,164 $ 329 $ 2,776 $ 8,269 =========== ============= ============= ========= Three Months Ended March 31, 2007 ---------------------------------- Preopening and Property start-up Restructuring transactions, expenses costs net Total ----------- ------------- ------------- --------- Las Vegas Strip $ 8,472 $ - $ 278 $ 8,750 Other Nevada - - 4,630 4,630 MGM Grand Detroit 2,379 - - 2,379 Mississippi - - (2) (2) Unconsolidated resorts 3,233 - - 3,233 ----------- ------------- ------------- --------- 14,084 - 4,906 18,990 Corporate and other 192 - 113 305 ----------- ------------- ------------- --------- $ 14,276 $ - $ 5,019 $ 19,295 =========== ============= ============= ========= MGM MIRAGE AND SUBSIDIARIES RECONCILIATION OF CONSOLIDATED EBITDA TO INCOME FROM CONTINUING OPERATIONS (In thousands) (Unaudited) Three Months Ended ------------------------- March 31, March 31, 2008 2007 ----------- ------------ EBITDA $ 535,627 $ 613,410 Depreciation and amortization (194,339) (168,277) ----------- ------------ Operating income 341,288 445,133 ----------- ------------ Non-operating income (expense): Interest expense, net (149,789) (184,011) Other (6,195) (5,177) ----------- ------------ (155,984) (189,188) ----------- ------------ Income from continuing operations before income taxes 185,304 255,945 Provision for income taxes (66,958) (92,935) ----------- ------------ Income from continuing operations $ 118,346 $ 163,010 =========== ============ MGM MIRAGE AND SUBSIDIARIES RECONCILIATION OF OPERATING INCOME TO PROPERTY EBITDA (In thousands) (Unaudited) Three Months Ended March 31, 2008 --------------------------------- Depreciation Operating and income amortization EBITDA ----------- ------------ ---------- Las Vegas Strip $ 333,297 $ 146,199 $ 479,496 Other Nevada (2,186) 1,501 (685) MGM Grand Detroit 20,061 14,351 34,412 Mississippi 11,813 15,557 27,370 Other 2,581 1,998 4,579 Unconsolidated resorts 29,367 - 29,367 ----------- ------------ ---------- 394,933 179,606 574,539 Stock compensation (11,203) Corporate and other (27,709) ---------- $ 535,627 ========== Three Months Ended March 31, 2007 --------------------------------- Depreciation Operating and income amortization EBITDA ----------- ------------ ---------- Las Vegas Strip $ 414,945 $ 133,897 $ 548,842 Other Nevada (3,871) 1,875 (1,996) MGM Grand Detroit 28,864 5,962 34,826 Mississippi 20,237 15,166 35,403 Unconsolidated resorts 38,142 - 38,142 ----------- ------------ ---------- 498,317 156,900 655,217 Stock compensation (13,580) Corporate and other (28,227) ---------- $ 613,410 ========== MGM MIRAGE AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) March 31, December 31, 2008 2007 -------------- --------------- ASSETS Current assets: Cash and cash equivalents $ 327,745 $ 412,390 Accounts receivable, net 390,452 412,345 Inventories 124,190 126,116 Deferred income taxes 56,464 63,453 Prepaid expenses and other 135,269 105,412 Assets held for sale 54,435 55,670 -------------- --------------- Total current assets 1,088,555 1,175,386 -------------- --------------- Property and equipment, net 16,845,320 16,823,704 Other assets: Investments in unconsolidated affiliates 2,487,363 2,482,727 Goodwill 1,262,922 1,262,922 Other intangible assets, net 358,987 359,770 Deposits and other assets, net 852,732 623,177 -------------- --------------- Total other assets 4,962,004 4,728,596 -------------- --------------- $ 22,895,879 $ 22,727,686 ============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 169,419 $ 219,556 Construction payable 67,546 76,524 Income taxes payable 20,034 284,075 Accrued interest on long-term debt 152,096 211,228 Other accrued liabilities 855,067 929,424 Liabilities related to assets held for sale 3,761 3,880 -------------- --------------- Total current liabilities 1,267,923 1,724,687 -------------- --------------- Deferred income taxes 3,406,120 3,416,660 Long-term debt 12,777,215 11,175,229 Other long-term obligations 348,903 350,407 Stockholders' equity: Common stock, $.01 par value: authorized 600,000,000 shares, issued 368,865,942 and 368,395,926 shares and outstanding 278,721,429 and 293,768,899 shares 3,689 3,684 Capital in excess of par value 3,978,213 3,951,162 Treasury stock, at cost: 90,144,513 and 74,627,027 shares (3,222,272) (2,115,107) Retained earnings 4,338,754 4,220,408 Accumulated other comprehensive income (loss) (2,666) 556 -------------- --------------- Total stockholders' equity 5,095,718 6,060,703 -------------- --------------- $ 22,895,879 $ 22,727,686 ============== ===============