Tuesday, casino operator MGM Mirage (MGM) announced that its second-quarter net income slipped nearly 69% from last year, hurt by a reduction in room rate and lower visitor spending due to current economic conditions.
The company's income from continuing operations for the quarter plunged to $113 million or $0.40 per share from $182.8 million or $0.62 per share in the year-ago quarter. On average, 20 analysts polled by FirstCall/Thomson Financial expected the company to earn $0.42 per share.
Including discontinued operations, the company's net income for the second quarter of 2007 was $360 million or $1.22 per share.
The recent second-quarter net income includes $19 million, or $0.04 per share net of tax, of insurance recovery income related to the Monte Carlo fire. The year-ago quarterly net income included $63 million or $0.14 per share net of tax, of residential sales at The Signature at MGM Grand. The year-ago quarterly result also included $264 million of pre-tax gains from the sale of discontinued operations namely the Primm Valley Resorts and Laughlin Properties.
Quarterly revenues decreased 2% to $1.89 billion from $1.94 billion in the comparable period a year before. Wall Street analysts had a consensus revenue estimate of $1.89 billion.
According to MGM, Casino revenue decreased 4% to $742 million in the recent second quarter from $773.9 million last year, mainly as result of lower table games volume at the company's Las Vegas Strip resorts and a 10% decline in Las Vegas Strip slots revenue.
The company said that its Rooms revenue for the quarter decreased 6% to $523.5 million, with a 5% decline in Las Vegas Strip Revenue per Available Room or REVPAR. At the company's Las Vegas Strip resorts, REVPAR for the quarter dropped to $150 from $159 last year.
Las Vegas Strip occupancy for the quarter decreased slightly to 97% from 98% in the year-ago quarter. Average daily rate or ADR during the quarter slid to $155 from $162 in the comparable period a year before.
Food and beverage revenue increased 2% to $431.5 million in the second quarter of 2008 from $424.7 million in the year-ago period. Entertainment revenue for the quarter was $138 million, compared to $143 million in the year-ago period.
According to the company, despite a difficult comparison, entertainment revenue for the recent second-quarter was down only 4% as the second quarter of 2007 featured the Oscar de la Hoya-Floyd Mayweather fight.
The company's operating income decreased 29% for the quarter to $334 million from $468.9 million in the year-ago quarter.
MGM's property EBITDA for the quarter slipped 18% to $563.9 million from $686 million in the year-earlier quarter.
The company said that its corporate expense decreased to $27 million in the second quarter of 2008 from $44 million in the year-ago period, due to the impact of cost reduction measures implemented during the quarter and lower accruals for profit-based bonuses.
MGM Grand Macau, of which the company owns 50%, recorded Property EBITDA of $23 million and an operating loss of $5 million. The results represent only the company's second full quarter of operations at MGM Grand Macau.
During the quarter, MGM repurchased 2.6 million shares of its common stock in the open market for $134 million, completing its December 2007 share buyback plan. In May 2008, the company's Board of Directors authorized a new 20 million share repurchase program. MGM is yet to repurchase shares under the new approval.
During the quarter, MGM and Dubai World each funded $300 million of construction costs for CityCenter. MGM's CityCenter is a $9.2-billion, 68-acre project. The first phase of the project is under construction on the Las Vegas Strip between Bellagio and Monte Carlo.
For the recent six months ended June 30, MGM's income from continuing operations declined to $231 million or $0.79 per share from $345.9 million or $1.17 per share in the year-ago period.
Including discontinued operations, the company's net income for the first half of fiscal 2007 was $528 million or $1.79 per share.
The company's revenues for first half of fiscal 2008 decreased to $3.78 billion from $3.86 billion a year before.
Commenting on the results, Jim Murren, President and COO of MGM MIRAGE said, "Our resorts are clearly positioned to be the standard of quality in our industry, and our results reflect that competitive position. While we had mixed results, some of our properties generated increases in cash flow in this challenging environment, and our cost reduction efforts continue to gain traction without impacting guest service; we expect these initiatives will benefit us well into the future. We believe in the durability of the Las Vegas market and that over time it will continue to grow in line with historical trends. Our own forward booking trends show improvement in the fourth quarter of 2008 and into 2009."
MGM is currently up 6.84% or $2.09 trading at $33.08 on a volume of 2.08 million shares.
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