Mirage fourth-quarter results a record

LAS VEGAS - MGM Mirage Inc. reported a more than 25 percent drop in fourth-quarter earnings on Tuesday, but still beat analyst expectations thanks to increased gambling play and expensive hotel rooms at the company's Las Vegas Strip properties.

For the three months ending Dec. 31, the gambling giant company earned $67.9 million, or 47 cents per share, down from $91.7 million, or 62 cents per share, a year ago.

Excluding tax adjustments and one-time items including a land sale in the fourth quarter of 2003, the company said it earned 51 cents per share in the most recent quarter, up from 36 cents per share on a comparable basis the previous year. The company said it was the best fourth quarter performance in its history.

Analysts surveyed by Thomson First Call had predicted earnings of 44 cents a share.

The company said that Thomson First Call expectations of 74 cents a share in the first quarter of 2005 were reasonable because of the upcoming convention business, Super Bowl and Chinese New Year festivities.

In trading Tuesday afternoon, MGM Mirage shares rose $1.98, or 2.8 percent, to close at $73.79 on the New York Stock Exchange. The stock has traded in a 52-week range of $39.61 to $77.40.

MGM Mirage is the world's second-largest gambling company according to revenues. It owns the Bellagio, Treasure Island, MGM Grand and Mirage hotel-casinos.

The company generated revenues of $1.18 billion in the fourth quarter, up 10 percent from 2003.

Casino revenue increased 10 percent and non-casino revenue was up 11 percent in the fourth quarter.

"Gaming volumes are at levels we haven't seen in several years," Terry Lanni, MGM Mirage chairman and chief executive, said in a conference call.

Hotel revenue was up 10 percent, with an occupancy rate of 90 percent in the fourth quarter versus 88 percent in 2003. The average daily room rate was $134 compared to $122 a year ago.

For the full year, MGM Mirage earned 405.3 million, or $2.80 per share, up from 243.6 million, or $1.61 per share in 2003. The company reported revenues of $4.67 billion, up from $4.27 billion in 2003.

MGM Mirage also reported record cash flow of $1.46 billion for the year, an increase of 23 percent over 2003.

Cash flow, or earnings before interest, taxes, depreciation and amortization, is a widely used measure of casino industry profitability.

In an interview, MGM Mirage President Jim Murren said that he still expects his company's merger with Mandalay Resort Group to close in the first quarter of 2005.

In June, MGM Mirage agreed to purchase Mandalay for $4.8 billion in cash, $2.5 billion in debt and $600 million convertible debentures. The company has already secured financing for the blockbuster deal that will give it majority control of the hotel rooms on the Strip.

The combined company is also preparing to sell one of its two Detroit casinos; either the MGM Mirage-owned MGM Grand or the MotorCity Casino, which Mandalay has a majority stake in. Michigan law requires the city's casinos to be separately owned.

Murren said his company has received about a half dozen offers for the MGM Grand. He expects to sell one of the Detroit properties soon.

"We'll have Detroit resolved by the end of the first quarter and that will allow us to close on the Mandalay transaction," he said.

In the conference call, Lanni added that the company's casino in the Chinese enclave Macau is targeted to open in early 2007.

Casino analysts continued to be bullish about MGM Mirage's prospects.

"We continue to believe that MGM Mirage will work from here," Bear, Stearns & Co. analyst Joe Greff wrote in an investor's note. "Near-term, trends in Las Vegas continue to be robust."

Greff said red-hot convention volumes, cheap air fare and new MGM Mirage initiatives continue to make the company an attractive investment.

Deutsche Bank gambling analyst Marc Falcone said the "strength of the market is just tremendous."


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