Casino Operator MGM Resorts Loses $883.5M in 2Q

Aug 3, 2010 8:40 AM

Casino operator MGM Resorts International (MGM) said Tuesday that its second-quarter loss grew with a new $1.12 billion writedown on its investment in CityCenter in Las Vegas, even as its revenue rose 3 percent.

The mammoth casino complex on the Las Vegas Strip cost $8.5 billion to build but has not shown an operating profit since it opened in December. This is the second time MGM Resorts has written down the value of its investment in the 50-50 joint venture with Dubai World, which it touted as central to its future in Las Vegas.

Given the company's estimate in October that its share of CityCenter was worth $2.44 billion, implying a total value of $4.88 billion, the new charge effectively values the whole project at $2.64 billion, not including its condominiums.

The good news for MGM Resorts was all from the Chinese gambling enclave of Macau, where its net income was $40 million.

Shares of MGM Resorts fell 31 cents, or 2.8 percent, to $10.96 Tuesday morning.

MGM Resorts said the CityCenter charge amounted to $1.64 per share during the three months ending June 30. The company took a separate $29 million charge, 4 cents per share, to write down the value of CityCenter's condominiums, also the second such charge.

The Las Vegas company said it lost $883.5 million, or $2 per share, compared with a loss of $212.6 million, or 60 cents per share, last year.

Revenue rose about 3 percent to $1.54 billion.

Without the one-time charges on CityCenter, other property transactions and income from forfeited condo deposits at the development, MGM Resorts' loss was 35 cents per share.

Analysts, whose forecasts generally exclude one-time items like the writedown, expected a loss of 24 cents per share on revenue of $1.46 billion.

CityCenter took an operating loss of $128 million, hurt by impairment charges on its condominiums and lower-than-expected gambling wins on table games, which reduced earnings $24 million before taxes, depreciation and amortization.

The Aria Resort & Casino, the 4,000-room centerpiece casino-resort of CityCenter, was 80 percent full during the quarter at an average daily rate of $178 per night.

MGM Resorts took a $955 million charge against the value of CityCenter in the third quarter last year, and an $86 million charge in the first quarter this year on the falling value of its residential units.

MGM Resorts International, which changed its name from MGM Mirage in June to reflect a more global brand focus, said its losses in Las Vegas were partially offset by revenue from its joint venture in Macau, the Chinese gambling enclave.

The MGM Macau casino-resort earned $40 million during the second quarter, compared with an operating loss of $8 million during the same quarter last year. The casino is a 50-50 partnership with Pansy Ho, the daughter of gambling magnate Stanley Ho.

MGM Resorts said it had $13.3 billion in debt as of June 30 and $570 million of invested cash.