Tuesday, October 12, 2010

MGM Resorts (MGM) Also Pre-announces Terrible Third Quarter 2010 Results

From today's announcement of third quarter 2010 results:

Net revenue for the third quarter of 2010 is expected to be approximately $1.56 billion. Excluding reimbursed costs revenue mainly related to the Company’s management of CityCenter (approximately $89 million in the 2010 third quarter and $16 million in the 2009 third quarter), net revenue is expected to be approximately $1.47 billion, a decrease of 3% from 2009. Reimbursed costs revenue represents reimbursement of costs, primarily payroll-related, incurred by the Company in connection with the provision of management services.

Las Vegas Strip REVPAR was $97 for the third quarter of 2010, a decrease of 2% from the third quarter of 2009, with occupancy of 93% and an average daily rate of $105. Bellagio and Mandalay Bay both recorded REVPAR increases in the third quarter.

Third quarter total casino revenue was approximately 9% lower than the prior year, with slots revenue down approximately 3% for the quarter.

Operating loss for the third quarter of 2010 is expected to be approximately $206 million which includes the CityCenter investment impairment, the Borgata impairment and the Company’s share of the CityCenter residential impairment charge discussed further below.
Operating loss includes a variety of non-cash items which I have added back to come up with a third quarter adjusted EBITDA of approximately positive $271 million.

Unfortunately, the company's third quarter interest expense was $285 million, which EBITDA failed to cover, meaning that they burned $14 million. And, that's not counting the cash that needs to be invested (cap ex) to maintain the hotels, something that competitor CEO Steve Wynn commented on in last quarter's conference call.

Year-to-date adjusted EBITDA for 2010 has been $670 million, compared with $852 million for the first three quarters of 2009 - so it's down 22%!

Truly, the bulls' optimism regarding MGM is wildly inconsistent with the facts. See my comments regarding the massive stock offering by MGM and its largest holder Tracinda.

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