MGM: Times are tough but improvement ahead

May 5, 2009 5:08 PM
Earnings by Ray Poirier | MGM MIRAGE Inc. (MGM) reported its first fiscal quarterly results after the close of the market on Monday and the results were not surprising: Business in Las Vegas, where the company has most of its casinos, was lousy, but business at its regional properties held up well.

Net revenue during the period was $1.5 billion, down some 20% from last year’s first quarter. Operating income was $355 million compared to $341 million in the comparable period. However, that figure was inflated by the pre-tax gain of $190 million from the sale of the TI or Treasure Island Hotel/Casino.

Net income was $105,199 or $0.38 per share compared to $118,346 or $0.40 per share in 2008.

The company said revenues were negatively impacted by increased convention cancellations – particularly in January and February at the Las Vegas properties – and a continued decline in discretionary spending due to the weakened economy.

Occupancy on the Las Vegas Strip was unusually low in January and February but returned to normalcy of 95% in March.

"While we experienced significant group cancellations early in the quarter and experienced a continuation of negative consumer spending trends from the fourth quarter," said Jim Murren, chairman and CEO, "cancellations have tapered off and we see signs that business levels seem to be stabilizing.

"Our resorts have seen sequential increases in occupancy levels through the first quarter and into April, and our forward booking pace is improving. This is allowing us the opportunity to better yield our room pricing."

As for its financial position, the company noted that it had reached an agreement with its senior lenders for a further waiver of noncompliance through June 30.

"We continue to work constructively with our advisors and senior lenders to find a comprehensive long-term solution to improve our financial position," said Dan D’Arrigo, executive vice president and CFO.

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