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With hospitality emphasis,
Mandalay’s earnings get big boost

Dec 9, 2003 6:44 AM

A few years back, executives of Mandalay Resort Group (MBG) decided to underscore hospitality by focusing on convention groups, rather than just gaming. Now that vision has borne fruit as shown in the recent record results reported for the third quarter that ended on October 31.

Net income for the period was $40.6 million or $0.63 per diluted share compared to the previous year’s $33.2 million or $0.47 per diluted share.

From comments made by company officials, results for the fourth quarter are expected to be equally beneficial. Added to the current operation will be a new 1,122 all suite tower at the Mandalay Bay Resort that has been dubbed THEhotel. The tower will open on Dec. 17.

The new addition is consistant with the company’s expansion of its high-end hospitality services. Earlier this year, a new convention center was opened, as well as additional high-end retail shops. The new tower is expected to strongly enhance the company’s focus.

Commenting on the quarterly experience, Glenn Schaeffer, president and CFO, said there was "strong demand for the Las Vegas Strip and what we’ve seen so far in the fourth quarter would not be any different from what we’ve seen in the third."

Business has been so good, Schaeffer said, that the company is considering its final addition to the Miracle Mile on the Strip but that the construction probably wouldn’t begin until sometime in 2005.

Included in the third quarter report was a $4 million charge related to pre-opening expenses of THEhotel. Also, the numbers included a gain of $1 million on the value of investments associated with the company’s executive retirement plan.

On Nov. 1, the company paid a quarterly dividend of $0.25 per share to shareholders of record on Oct. 15. However, that quarterly dividend will be increased to $0.27 for the next quarterly payment that will be made on Feb. 2, 2004 to shareholders of record on Jan. 15, 2004.

The company indicated that the average number of shares outstanding stood at 64.9 million shares compared to the previous year when the number stood at 71.1 million shares. The decline was due primarily to the repurchase by the company of 4.4 million shares and the acquisition through an earlier agreement of 3.3 million shares.

MBG’s operating cash flow for the most recent quarter was $167 million. A year earlier the cash flow was $152 million. The properties on the Las Vegas Strip accounted for a 24% in cash while the revenue per available room jumped 19%.

For its properties outside Las Vegas, the company said operating cash flow declined some 8% reflecting "the effects of expanded Native American gaming in California."

In Detroit, where the company operates a temporary casino, cash flow was up slightly while its riverboat in Elgin, Ill., dropped to $13.5 million from last year’s $21.6 million reflecting the impact of recently imposed higher gaming taxes.