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US – MGM still at a loss despite revenue improvement

By - 4 November 2013

MGM continued to show improvements in its financial health in its third quarter but still posted losses for the quarter.

Revenue came in at $2.46bn, representing an increase of 9.2 per cent from the third quarter of 2012 but the operator still recorded a loss of US$31.9m narrowing by 486.6 per cent from third quarter of 2012.

Jim Murren, MGM Resorts International Chairman and CEO, said: “I am pleased to report another solid quarter with double digit EBITDA growth and increased margins, led by strength at MGM China and our Las Vegas Strip properties. These results are reflective of the continued market share gains from programs such as M life and our focus on international marketing strategies combined with our best in class collection of resorts and amenities.”

For the first nine months of 2013, the company has lost $118.3m compared with losses of $543.9m for the same period a year earlier.

Casino revenue related to wholly owned domestic resorts increased three per cent compared to the prior year quarter. Table games revenue increased 10 per cent and the overall table games hold percentage in the third quarter of 2013 was 21.5 per cent compared to 20.4 per cent for the prior year quarter.  Slots revenue increased one per cent with a three per cent increase at the Company’s Las Vegas Strip resorts. In Las Vegas, MGM experienced increased occupancy and average daily room rates at every Strip property apart from CityCenter and Circus Circus.

MGM China earned net revenue of $808m, a 22 per cent increase over the prior year quarter, due primarily to increases in VIP revenues and main floor table games revenues;

VIP table games turnover increased 28 per cent from the prior year quarter, while hold percentage was 2.8 per cent in the current year quarter compared to three per cent in the prior year quarter;

Main floor table games and slots win increased 31 per cent and four per cent respectively, compared to the prior year quarter;

Adjusted EBITDA of $191m, a 25 per cent increase over the prior year quarter, including $8m of branding fee expense in the current quarter versus $5m in the prior year quarter; and

MGM China’s operating income was $114m compared to $61m in the prior year quarter.

MGM China is currently developing a second resort and casino, MGM Cotai, on an approximately 17.8 acre site in Cotai, Macau.  MGM Cotai will feature approximately 1,600 hotel rooms, casino, convention and meeting space, entertainment, spa, retail outlets and food and beverage offerings. Groundbreaking took place in February 2013 and the project continues to remain on pace for an anticipated early 2016 opening.  In May 2013, MGM China signed a deal with China State Construction to serve as sole general contractor for the project. The total project budget, excluding capitalised interest and land, is $2.6bn.

Dan D’Arrigo, MGM Resorts International Executive Vice President, CFO and Treasurer, added: “We continue to execute on our goals of improving the Company’s free cash flow. This is evidenced by our year to date EBITDA growth of 17 per cent as well as an expected reduction in our cash interest expense this year of approximately $220m. We continue to be opportunistic in accessing the capital markets as indicated by our recent CityCenter refinancing, which will lower its annual cash interest expense by approximately $80m.”

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