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US – MGM down on the cost of remodelling Mandalay Bay and Monte Carlo

By - 3 November 2014

MGM Resorts, the operator with the most casinos on the Las Vegas Strip, reported a loss $20.2m for the third quarter, from $22.3m.

Consolidated net revenue came in at $2.5bn, a one per cent increase over the prior year quarter whilst net revenue at the company’s domestic resorts increased two per cent compared to the prior year quarter. These were affected by a slight downturn in gambling revenues alongside expenses for remodelling its Mandalay Bay and Monte Carlo hotels on the Strip.

Casino revenue related to wholly owned domestic resorts decreased four per cent compared to the prior year quarter due primarily to a decrease in table games hold percentage. Table games hold percentage in the third quarter of 2014 was 19.8 per cent compared to 21.5 per cent in the prior year quarter. Slots revenue decreased slightly at the company’s wholly owned domestic resorts compared to the prior year quarter but increased one per cent at the company’s Las Vegas Strip resorts. CityCenter earned Adjusted EBITDA related to resort operations of $64m, a two per cent increase over the prior year quarter.

Jim Murren, Chairman and Chief Executive Officer of MGM Resorts International, said: “Our consolidated net revenues increased by one per cent and EBITDA increased by two per cent during the quarter. In Las Vegas, the market continues to improve as our top line revenues grew three per cent. While we expected to have some negative impact to margins during the quarter as a result of the disruptions related to our investments in Delano at Mandalay Bay and the Strip frontage at Monte Carlo, we were also negatively affected by lower year over year table games hold and an increase in certain expenses. Looking forward, we remain highly focused on increasing revenues and expanding margins while driving operating leverage in an improving market. MGM China reported a 12 per cent increase in EBITDA to$214m and margin expansion of 330 basis points despite a difficult market. The construction of MGM Cotai is progressing well and is on time, and on budget, for a fall 2016 opening.”

MGM China earned net revenue of $794m, a two per cent decrease compared to the prior year quarter. VIP table games revenue decreased 19 per cent due primarily to a decrease in VIP table games turnover of 19 per cent compared to the prior year quarter, as well as a decrease in hold percentage to 2.7 per cent in the current year quarter compared to 2.8 per cent in the prior year quarter.

Main floor table games revenue increased 34 per cent compared to the prior year quarter. Main floor table games volume increased 15 per cent and hold percentage was 28 per cent in the current year quarter compared to 24 per cent in the prior year quarter.

Operating income was $140m compared to $114m in the prior year quarter.

In September 2014, the company was relicensed in the state of New Jersey. As a result, the Company resumed accounting for its 50% interest in Borgata under the equity method and has adjusted its prior period financial statements retroactively as required by generally accepted accounting principles.

Dan D’Arrigo, Executive Vice President, CFO and Treasurer of MGM Resorts International, added: “Since our last earnings release, we have made significant progress in achieving certain financial goals. We were unanimously approved for a casino license in the state of New Jersey, and as a result received $83 million in cash from our previous trust arrangement. MGM Resorts along with AEG secured a $200 million bank facility to fund the development and construction of our new 20,000 seat arena which is underway on the Las Vegas Strip between New York-New York and Monte Carlo. We continue to invest in our properties and our people going forward, that caused some incremental expenses and some revenue and cost in terms of disruption.”

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