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MGM Mirage books 1Q profit including casino sale

MGM Mirage books 1Q profit including casino sale

MGM Mirage said Monday it booked a first-quarter profit including a hefty gain from selling a hotel and casino, but its adjusted results missed expectations as companies continued to cancel conventions at its Las Vegas Strip resorts.
During a conference call with investors, MGM Chairman and Chief Executive Jim Murren said business conditions in Las Vegas were "brutal in the early part of the year." After the steep declines, he said demand is improving and room rates seem to be "firming," but warned, "We're not out of the woods yet by any stretch in this market."
"When people came to visit us in January, they left their wallets at home," Murren later added during an interview. "Now, at least they've got their wallets in their pockets and they're spending a little more." Whether that trend continues, he said, remains to be seen.
"We're certainly not confident enough to be forecasting anything other than what we see in front of our eyes."
Nevertheless, investors were cheered by signs that the worst may be over. MGM Mirage shares jumped 44 cents, or 4.7 percent, to $9.88 in after-hours trading, after gaining $1.58, or 20.1 percent, to close the regular session at $9.44. The stock has traded between $1.81 and $53.67 during the past 52 weeks.
The Las Vegas-based company also said that it is close to announcing how it will restructure to meet its liquidity needs and improve its balance sheet, which could include selling assets, raising new capital and modifying its existing debt agreements.
Terms of some of the company's debt are waived until June 30. During the conference call, Murren predicted that MGM will announce those details by late May or early June, well before that deadline.
For the quarter that ended March 31, MGM Mirage earned $105.2 million, or 38 cents per share, compared with a profit of $118.3 million, or 40 cents per share, a year ago. But latest-quarter results include a 44-cent-per-share one-time gain from selling the Treasure Island hotel and casino in Las Vegas and smaller one-time gains related to a fire at MGM Mirage's Monte Carlo resort and casino.
Without those special items, MGM's losses totaled 10 cents per share, Murren said.
Analysts polled by Thomson Reuters, who generally exclude such one-time gains, expected MGM Mirage to lose just 7 cents per share.
MGM Mirage's revenue fell 20 percent to $1.5 billion from $1.88 billion in the first quarter of 2008, also shy of analysts' $1.58 billion forecast.
MGM, which is majority owned by billionaire Kirk Kerkorian, said convention cancellations jumped in January and February, but tapered off later in the quarter. The cancellations forced it to fill rooms with leisure travelers at lower rates, the company said.
As a result, its revenue per available room on the Las Vegas Strip dropped 34 percent during the quarter. Revenue per available room, or revpar, is a key gauge of a lodging company's performance because it measures both occupancy and room rates.
"Our resorts have seen sequential increases in occupancy levels through the first quarter and into April, and our forward booking pace is improving," Murren said in a statement. "This is allowing us the opportunity to better yield our room pricing."
Despite those positive signs, Oppenheimer & Co. analyst David Katz said several questions will continue to weigh on the company for the remainder of this year. At the top of the list are how the company will resolve its liquidity problems and how its CityCenter casino complex will perform once it opens on the Las Vegas Strip at the end of this year.
In April, MGM announced that it had reached a deal with partner Dubai World and the pair's lenders to complete the $8.5 billion project, which had become uncertain in light of the company's massive debt and falling revenue.
"Now that CityCenter is financed, the big question is how it's going to open _ what's it going to look like from an operating perspective?" Oppenheimer said.
During the call, Murren addressed rumors that the company is considering selling its resorts in Detroit and Mississippi.
"There is an extremely high level of interest for many of our MGM assets, including Detroit and Mississippi," he said.
But Katz noted that the state of the credit markets will determine the price of any asset sales.
"I would expect that there is a lot of tire kicking going on, but at the same time we should all be cognizant of how the credit markets are," he said.
During the conference call, Murren sought to reassure investors on that point. "I can assure you there are going to be no fire sales here," he said.
As of March 31, the company said it had approximately $14.4 billion in debt and about $1.4 billion in cash on hand.
Murren predicted that MGM will have resolved its 2009 maturities and developed plans to meet its future obligations by the end of this year. The CEO also expects the CityCenter's opening to be a major success story. He noted, however, that the company remains "shell shocked" by its difficulties during this downturn.
"We realize every now and again just how vulnerable we can be to the U.S. economy and the global economy," he said. "We felt that we were more resilient than we turned out to be."