MGM MIRAGE (MGM, Financial) filed Quarterly Report for the period ended 2009-09-30.
MGM MIRAGE is an entertainment hotel and gaming company headquartered in Las Vegas Nevada which owns and/or operates through subsidiaries casino properties on three continents. Its U.S. holdings include: the MGM Grand Hotel and Casino Bellagio The Mirage Treasure Island NewYork- New York Hotel and Casino the Boardwalk Hotel and Casino and 50% of Monte Carlo; the Golden Nugget; Whiskey Pete's Buffalo Bill's and the Primm Valley Resort in Primm Nevada as well as two championship golf courses at the California/Nevada Stateline. Mgm Mirage has a market cap of $4.3 billion; its shares were traded at around $9.74 with and P/S ratio of 0.5. Mgm Mirage had an annual average earning growth of 23.9% over the past 10 years. GuruFocus rated Mgm Mirage the business predictability rank of 4-star.
In September 2009, we issued $475 million of 11.375% senior notes due 2018 for net proceeds of $451 million. In October 2009, we used the net proceeds to pay down amounts outstanding under the senior credit facility, including a permanent reduction of $226 million as required by the senior credit facility.
In addition, included in Income (loss) from unconsolidated affiliates for the third quarter of 2009 is our share of an impairment charge relating to CityCenter residential real estate under development (REUD). CityCenter was required to review its REUD for impairment as of September 30, 2009, mainly due to CityCenters September 2009 decision to discount the prices of its residential inventory by 30%. This decision and related market conditions led to CityCenter managements conclusion that the carrying value of the REUD is not recoverable based on estimates of undiscounted cash flows. As a result, CityCenter was required to compare the fair value of its REUD to its carrying value and record an impairment charge for the shortfall. Fair value of the REUD was determined using a discounted cash flow analysis based on managements current expectations of future cash flows. The key inputs in the discounted cash flow analysis included estimated sales prices of units currently under contract and new unit sales, the absorption rate over the sell-out period, and the discount rate. This analysis resulted in an impairment charge of approximately $348 million of the REUD. We recognized 50% of such impairment charge, adjusted by certain basis differences, resulting in a pre-tax charge of $203 million.
Our operating loss for the third quarter of 2009 included two significant impairment charges totaling approximately $1.16 billion related to CityCenter which are discussed above and in the accompanying notes to our consolidated financial statements. Operating results for the third quarter of 2009 benefited from $14 million of income related to our share of insurance proceeds recognized at The Borgata and the prior year included a $22 million dollar impact from the reversal of bonus accruals. Excluding these items, other property transactions, and preopening and start-up expenses, operating income decreased 16% on a same store basis for the third quarter and we achieved an operating margin of 13% compared to a margin of 14% in the third quarter of 2008. For the nine months, operating results was benefited by a pre-tax gain of $187 million on the TI sale and $22 million of insurance recoveries related to the Monte Carlo fire, both in the first quarter. On a comparable basis excluding the items discussed above, our operating income was down 42% for the nine month period. On that basis, we achieved an operating margin of 12% in the 2009 nine month period compared to 17% in 2008.
We recognized a loss from unconsolidated affiliates of $133 million for the third quarter and $113 million for the nine month period in 2009. These results include the $203 million impact from the impairment charge recorded by CityCenter related to its residential real estate under development. Excluding this impact, income from unconsolidated affiliates increased 81% for the third quarter as a result of increased operating results for MGM Grand Macau and Borgata.
Net interest expense increased to $182 million in the 2009 third quarter from $145 million in the 2008 period. For the nine months, net interest expense increased to $555 million from $440 million. Gross interest expense increased due to higher average debt balances during the 2009 periods, higher borrowing rates under our senior credit facility and newly issued senior secured notes, as well as breakage fees incurred in conjunction with voluntary repayments of our revolving credit facility. Capitalized interest increased due to higher CityCenter investment balances and higher weighted average cost of debt.
Read the The complete ReportMGM is in the portfolios of Private Capital of Private Capital Management, Brian Rogers of T Rowe Price Equity Income Fund, John Keeley of Keeley Fund Management.
MGM MIRAGE is an entertainment hotel and gaming company headquartered in Las Vegas Nevada which owns and/or operates through subsidiaries casino properties on three continents. Its U.S. holdings include: the MGM Grand Hotel and Casino Bellagio The Mirage Treasure Island NewYork- New York Hotel and Casino the Boardwalk Hotel and Casino and 50% of Monte Carlo; the Golden Nugget; Whiskey Pete's Buffalo Bill's and the Primm Valley Resort in Primm Nevada as well as two championship golf courses at the California/Nevada Stateline. Mgm Mirage has a market cap of $4.3 billion; its shares were traded at around $9.74 with and P/S ratio of 0.5. Mgm Mirage had an annual average earning growth of 23.9% over the past 10 years. GuruFocus rated Mgm Mirage the business predictability rank of 4-star.
Highlight of Business Operations:
Concurrently with the close of the above transactions on May 19, 2009, we delivered a notice of redemption for the $100 million of outstanding 7.25% senior debentures of Mirage Resorts, Incorporated (MRI), our wholly owned subsidiary. The notes were redeemed in June 2009, at a total cost of approximately $127 million. Additionally, in May 2009, we commenced tender offers to purchase all $820.0 million of our outstanding 6.0% senior notes due October 2009 and all $226.3 million of our outstanding 6.50% senior notes due July 2009, of Mandalay Resort Group, our wholly owned subsidiary. As of the close of the tender offers in June 2009, we had received valid tenders for $762.6 million of the senior notes due October 2009 and $122.3 million of the senior notes due July 2009 and purchased such notes essentially at par value.In September 2009, we issued $475 million of 11.375% senior notes due 2018 for net proceeds of $451 million. In October 2009, we used the net proceeds to pay down amounts outstanding under the senior credit facility, including a permanent reduction of $226 million as required by the senior credit facility.
In addition, included in Income (loss) from unconsolidated affiliates for the third quarter of 2009 is our share of an impairment charge relating to CityCenter residential real estate under development (REUD). CityCenter was required to review its REUD for impairment as of September 30, 2009, mainly due to CityCenters September 2009 decision to discount the prices of its residential inventory by 30%. This decision and related market conditions led to CityCenter managements conclusion that the carrying value of the REUD is not recoverable based on estimates of undiscounted cash flows. As a result, CityCenter was required to compare the fair value of its REUD to its carrying value and record an impairment charge for the shortfall. Fair value of the REUD was determined using a discounted cash flow analysis based on managements current expectations of future cash flows. The key inputs in the discounted cash flow analysis included estimated sales prices of units currently under contract and new unit sales, the absorption rate over the sell-out period, and the discount rate. This analysis resulted in an impairment charge of approximately $348 million of the REUD. We recognized 50% of such impairment charge, adjusted by certain basis differences, resulting in a pre-tax charge of $203 million.
Our operating loss for the third quarter of 2009 included two significant impairment charges totaling approximately $1.16 billion related to CityCenter which are discussed above and in the accompanying notes to our consolidated financial statements. Operating results for the third quarter of 2009 benefited from $14 million of income related to our share of insurance proceeds recognized at The Borgata and the prior year included a $22 million dollar impact from the reversal of bonus accruals. Excluding these items, other property transactions, and preopening and start-up expenses, operating income decreased 16% on a same store basis for the third quarter and we achieved an operating margin of 13% compared to a margin of 14% in the third quarter of 2008. For the nine months, operating results was benefited by a pre-tax gain of $187 million on the TI sale and $22 million of insurance recoveries related to the Monte Carlo fire, both in the first quarter. On a comparable basis excluding the items discussed above, our operating income was down 42% for the nine month period. On that basis, we achieved an operating margin of 12% in the 2009 nine month period compared to 17% in 2008.
We recognized a loss from unconsolidated affiliates of $133 million for the third quarter and $113 million for the nine month period in 2009. These results include the $203 million impact from the impairment charge recorded by CityCenter related to its residential real estate under development. Excluding this impact, income from unconsolidated affiliates increased 81% for the third quarter as a result of increased operating results for MGM Grand Macau and Borgata.
Net interest expense increased to $182 million in the 2009 third quarter from $145 million in the 2008 period. For the nine months, net interest expense increased to $555 million from $440 million. Gross interest expense increased due to higher average debt balances during the 2009 periods, higher borrowing rates under our senior credit facility and newly issued senior secured notes, as well as breakage fees incurred in conjunction with voluntary repayments of our revolving credit facility. Capitalized interest increased due to higher CityCenter investment balances and higher weighted average cost of debt.
Read the The complete ReportMGM is in the portfolios of Private Capital of Private Capital Management, Brian Rogers of T Rowe Price Equity Income Fund, John Keeley of Keeley Fund Management.
