Las Vegas Hotel
MGM Mirage---Murren, James---Chief Finance Officer (slow)
>> the number three u.s. casino company said the loss of the siegfried and roy magic show at the mirage casino would reduce fourth quarter profit 1 cent a share. net become at 31 cents a share, that’s compared to $69.6 million, or 43 cents a share a year ago. meanwhile, revenues rose 4.5% to $1.10 billion. jane joining us from las vegas is the company’s chief financial officer, james murren. welcome.
>> thank for having me. some people are looking at some of those numbers that don’t match up as well to the same quarter a year ago. can you give us a sense of what’s happening with that? and how do you expect to turn that around?
>> sure. we had revised our estimates, in fact, we revised our estimates further than even before that. the original estimate was 30 cents. we revised the guidance to 35 cents and we came in at 36 cents. the reason for the reduction in net income year over year is almost purely on a nonoperating standpoint. we were capitalizing in interest last year and we had more expenses last year than we did this year. the operating performance was actually up at most of our properties. and as you said earlier, the revenues were also up.
>> have you mean? vegas a turnaround in the economy and having more people visiting you and using your hotels?
>> we have seen a gradual but very consistent improvement in the consumer. we’ve seen it actually all year. and certainly we’re having a better year here in 2003 than we had last year in 2002. we see a consumer willing to spend a little bit more money. we’re getting better room rates than our hotel rooms. they’re spending more money in our retail stores and restaurants. and as a result, we’re seeing a better activity for the consumer into the fourth quarter as well.
>> let’s talk about the type of consumer you attract to your casino. many of them, upper end consumers, are they coming? are they spending? are they spending in many of the shops that you have in these casinos that have a lot of very expensive items in them?
>> well, they are. the items are a little bit less expensive than elsewhere. but honestly, we’re a pretty good indicator of the health of consumer confidence. and consumer spending in general. we saw the consumer in 2002 that was tired and basically pretty worn out. it was tough to get them to spend money and to increase pricing in any of our venues in 2002. we’re seeing a consumer that feeling better, that is spending a little bit more money and having a little bit more fun. and as a result, we’re seeing a higher profitability in a lot of our non-gaming sectors. that is a trend that we believe will continue throughout 2004. and maybe into 2005.
>> are they above pre 9-1 levels yet?
>> they’re not. convention is up versus 2002, but we’re not back to our 2000 or early 2001 level. we think we’ll probably see that next year, although that’s not as certain a forecast as the retail customer, which has been a real opportunity of strength over the past several quarters.
>> let’s talk a bit about what’s happening with the siegfried & roy show at the mirage casino. a lot of people have concerns. they’ve seen the show. they’re concerned for roy. but another concern for you, even beyond the concern you’ve had with someone you’ve worked with for years. you have a concern of revenue that’s going to drop. what’s the extent it’s going to have on your bottom line?
>> well, the impact is fairly significant, but as you said earlier, not as ig significant as our feelings toward roy and siegfried & roy and obviously the whole production show. we will take a charge here in the fourth quarter of $4 million. that relates to severance and other related expenses to the folks we had to let go as a result of this show being closed, as well as a small writedown in the theatre itself. on an ongoing basis, the financial impact is 1 cent a share per quarter. where obviously 4 cents a share annually. that would assume the show room stays closed for all of next year. and although this is very premature to say, i don’t think that’s an accurate assumption because we’ll probably utilize that show room for other activity at some point later when it’s more appropriate.
>> so you’ll be looking into perhaps bringing in another act if the siegfried & roy act cannot continue.
>> we will have to utilize that show room at some point in time. but that is―for a property as large as the mirage property,ites not something we feel is a priority right now. we have plenty of entertainment and retail opportunities. we really haven’t focused on what to do there. we’re only focusing on roy’s health.
>> is there any affect on the bottom line, spotlighting las vegas here. you have a las vegas show on tv right now. “c.s.i.” is based in vegas. is there a push for people to visit vegas?
>> there’s no question that the combined marketing efforts of not only resorts themselves like our company and our competitors out here, but also the other channels of distribution, of marketing, have had a good impact on las vegas. and it’s really hard not to think about las vegas, no matter where you are in the u.s. whether it be because of movies or tv shows or advertisements. and that is all good for us really. that’s particularly good for us at mgm mirage.
>> thank very much. james murren, mgm mirage. low fare airlines may continue to take customers from traditional carriers.
