MGM MIRAGE Reports Third Quarter Results for Sg Online Casino
MGM MIRAGE today reported earnings before nonrecurring expenses of 19 cents per diluted share for the 2001 third quarter, compared with 45 cents per diluted share in the 2000 quarter. Consolidated net revenue was down 5.3% to $993 million in the 2001 quarter compared with $1.05 billion in the comparable 2000 quarter. For the three months ended September 30, 2001, operating cash flow (“EBITDA”) was $236.5 million when compared with $336 million in the prior year’s quarter. Net income before nonrecurring expenses during the 2001 quarter was $30.1 million compared with $73.2 million in the prior year’s quarter.
These results reflect a substantial decline in business volumes at the Company’s hotel and casino resorts immediately after the terrorist attacks of September 11, 2001. The Company’s hotels on the Las Vegas Strip averaged an unprecedented low 64% occupancy level from September 11th through September 30th. This reduction in customer traffic also resulted in lower casino, food and beverage and retail revenue. Mid-week occupancy levels have now significantly improved, and weekend occupancy has nearly returned to pre-attack levels, albeit at reduced rates. Accordingly, casino and non-casino revenue continue to rebound.
“Prior to the events of September 11th, our Company was on track to achieve another strong quarterly operating performance. Obviously the result of the terrorist attacks had a profound impact on the hotel and travel industry and our business,” said Terry Lanni, Chairman and Chief Executive Officer of MGM MIRAGE. “Our management team undertook a detailed analysis of our current operations in terms of the impact of September 11th. To respond to these historic challenges, we implemented cost containment strategies which included a significant reduction in payroll and a refocusing of several of our marketing programs. The objective of this approach is to rebuild revenue and profitability in order to bring back as many of our displaced employees as possible. 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, the degree of which will depend on business volumes which have continued to improve since late September. Based on early indications, we are optimistic that this recovery will accelerate into 2002.”
Layoffs and terminations related to the payroll deductions resulted in an after-tax restructuring charge of $12.9 million (8 cents per share). The Company has achieved reductions in most operating expense categories, including payroll and purchasing, and has restructured several corporate functions. Management also reassessed the carrying value of certain assets and accordingly recognized an after-tax impairment loss of $30.8 million (19 cents per share) for the three months ended September 30, 2001. Including these nonrecurring items, the Company reported a loss of 9 cents per share for the three months ended September 30, 2001 compared with earnings of 42 cents per share during the prior year’s quarter.
During the three months ended September 30, 2001, the Company’s free cash flow enabled it to reduce debt by $103 million. Since the acquisition of Mirage Resorts on May 31, 2000, the Company has reduced its outstanding debt balance by $947 million.
“Despite the events of September 11th, our Company remains financially strong on Sg Online Casino. We currently have over $730 million of available liquidity with no public debt maturities until 2005. During the quarter we utilized free cash flow to repurchase approximately 2.2 million shares under our 10 million share repurchase program at an average cost of $20.47 per share,” said Jim Murren, President and CFO of MGM MIRAGE. “The Company has completed several important cost saving programs and has significant flexibility in its capital requirements over the next few years. Our overall business objectives remain the same. We will continue to grow our business, manage our cost structure and maximize free cash flow for debt reductions, internal growth, acquisitions and share repurchases.”