Can MGM Mirage cut its way to prosperity? Terror Tuesday dealt a blow to the company ”” and sank its third quarter profits ”” but Chairman Terry Lanni says the lion is back in the black.
“We implemented cost containment strategies which included a significant reduction in payroll and a refocusing of several of our marketing programs,’’ Lanni said last week. “Current trends indicate our initiatives are working, as we are once again profitable and we have recalled many of our employees. We expect to be profitable throughout the fourth quarter.’’
Still, challenges lay ahead. MGM Mirage is heavily tied to the Las Vegas market, where visitation dropped 14 percent in September. From Sept. 11 to Sept. 30, the company’s Strip hotels reported an unprecedented low occupancy of 64 percent. Typically, occupancy tops 90 percent during that period.
Compared to a strong third quarter last year, the 2001 period was forgettable for MGM. Revenues fell 5 percent to $993 million while operating cash flow plunged 59 percent to $237 million and casino revenues dipped 3.5 percent to $552 million. The company also reported a loss after one-time charges stemming from layoffs and a write-down on its two Atlantic City parcels.
Bellagio reported $62.3 million in cash flow, a 28 percent decline. New York-New York’s $18 million EBITDA was down 27 percent. MGM Grand, at $31 million, was off 39 percent. Mirage ($27 million) and Treasure Island ($19 million) were each down 33 percent while the Golden Nugget’s cash flow of $4 million was off 47 percent.
MGM Grand Detroit posted $33 million in cash flow, down 23 percent. The company’s three Primm properties were down 43 percent at $11.2 million, and Golden Nugget Laughlin reported $82,000 in cash flow, down 91 percent. The Beau Rivage in Biloxi fared best, registering a 17 percent decline to $17 million.
Nevertheless, the company’s free cash flow enabled it to reduce debt by $103 million. Since the acquisition of Mirage Resorts on May 31, 2000, MGM has slashed its outstanding debt balance by $947 million.
Jason Ader of Bear Stearns praised Lanni & Co. for wringing out “significant cost synergies’’ as a result of the Mirage purchase. Since the buyout, MGM has sold off $242 million in “non-strategic’’ assets.
Noting that business picked up in October, Lanni sees better times ahead. “Based on early indications, we are optimistic that this recovery will accelerate into 2002,’’ he predicted.