美高梅國際酒店集團 (MGM) 2004 Q4 法說會逐字稿

Good morning.

Welcome to the MGM Mirage fourth quarter conference call.

Joining the call from the Company today are Terry Lanni, Chairman and Chief Executive Officer MGM Mirage.

Jim Murren, President, CFO and Treasurer MGM Mirage.

Bobby Baldwin, President and Chief Executive Officer, Mirage Resorts.

John Redmond, President and Chief Executive Officer, MGM Grand Resorts.

Gary Jacobs, EVP, General Counsel and Secretary, MGM Mirage.

Participants are in a listen-only mode.

After the Company's remarks, there will be a question and answer period. [OPERATOR INSTRUCTIONS] Now I would like to turn the call over to Mr. Jim Murren.

Well, thank you, Lonnie and good morning, everyone.

As you know, we broadcast our conference call on the Internet on MGM Mirage.com and also on companyboardroom.com.

A replay of this call will be available on our website.

We have filed an 8K this morning with our press release.

That filing was to the SEC this morning.

Before we begin, I need to say that information to be presented on this call may contain forward-looking statements as defined by the SEC.

Such forward-looking statements are protected by the Safe Harbor amendments of the Private Securities Litigation Reform Act of 1995.

You can identify these statements by the use of words like we expect, we anticipate and similar phrases.

These forward-looking statements may include information about future earnings, expected business developments, anticipated capital expenditures, future financing alternatives or other statements made about future periods.

Forward-looking statements involve risks and uncertainties and could cause -- that could cause actual results to differ materially from estimates.

Listeners should also refer to our disclosures about risks and uncertainties made in our annual report on form 10K for the year ended December 31, 2003, filed by the SEC.

Well, that's enough of that.

So, I'm going to turn it over to Terry and we will begin.

Sometime we should trade the positions, Jim.

I could read it with a lot more interest.

Yes, you could! [ Laughter ]

Good morning, Ladies and gentlemen.

As you know, we have reported adjusted EPS from continuing operations of $0.51 for the fourth quarter.

That's up from $0.36 in the same quarter of the prior year.

Full year adjusted EPS was $2.52 in the current year compared to $1.52 in 2003.

Our results represent the best quarter in the history of our Company.

I should say the best fourth quarter in the history of our Company.

Outlook is also solid with a strong convention calendar, excellent New Year's volumes which we experienced, and both sides of the fiscal calendar, kind of hit in the middle in the last few years.

And we have very high expectations for our Super Bowl Sunday, as well as Chinese New Year's.

Fourth quarter,some business trends I want to share with you is that room demand continues at a very strong pace and room pricing remains as strong.

Gaming volumes are at levels we haven't seen literally for several years.

Our baccarat volume was up 40 percent over the fourth quarter of 2003.

The most significant increases we've seen in several years.

We've only seen the really -- really beginning of the impact of the Bellagio expansion.

The new Cirque du Soleil show at MGM Grand Las Vegas and other enhancements to our resorts, which Bobby and John will discuss in more detail in a few moments.

We will also be adding several new amenities to The Mirage.

These targeted investments will further strengthen our operations, we believe, throughout 2005.

On the Mandalay Bay resorts front, as we said before, we are investing, as you know, $8 billion in a company with great people, with substantial brands as well as physical assets and look forward to a smooth and successful integration of that company into MGM Mirage.

We have received approval to date from the state of Mississippi subject to the FTC approvals.

We continue to work regularly with the individuals representing the state, and at the federal level, expect this to move as we have always indicated and be able to close by the end of the first quarter.

We are in the process of divesting one of the Detroit assets, as you know and that's in accordance with Michigan requirements.

We have a merger integration team that we have formed at MGM Mirage and that team is in place, working quite efficiently and we will incorporate the Mandalay Bay people at the earliest possible date in that process.

Project City Centers is something we are all very excited about.

The future for that project City Center will be one that will really change the dynamics of the gaming industry and to really obviously here, to the whole area of Las Vegas, and the center strip.

As you noted we have already indicated it will headed, that whole project by Bobby Baldwin.

We have already selected an overall executive architect and are currently in the process of selecting an architect for the main casino resort element of the project City Center.

An update on Macau.

We believe our previously announced joint venture with Pansy Ho presents us with a significant growth opportunity in that dynamically expanding market of Macau.

Our partner is well respected, and we are working closely on the design and plans for the project with her, our architects and our consultants.

We expect to begin construction in the second quarter of 2005 and are targeting an opening in early 2007.

A lot has been in the news recently about Singapore.

We have announced our intent to submit a proposal, along with Capital Land, for a casino and entertainment resort complex in Marina Bay front in Singapore.

The first phase of that is a submission of the request for concept and that is due at the end of February, and we are well along in the process of having that in the position to be submitted with our partner Capital Land, within the required time frame.

This represents a tremendous opportunity to expand our presence into a world class resort destination such as Singapore.

On the United Kingdom, legislation moving forward, actually with passage last week in the House of Commons, a week ago yesterday and it now moves to the House of Lords for a hearing toward the end of February , and then it will be moved back to the House of Commons for final consideration.

While the pace will be slower and the scale will be smaller than we had first believed, we believe there are still interesting opportunities there.

This won't be as large and as available as early as we had originally anticipated.

The tax regime is yet to be defined and that obviously has a significant impact on the potential of our investments as well as others, I suspect, investing in it that marketplace.

We continue to work with local officials in various cities and our partners, various partners, in the potential development.

And that's kind of an update on a general basis.

Now I'd like to turn the call to Jim Murren to talk about our financial results in far more detail.

Well, thank you, Terry.

A few general comments before I turn it off to Bobby and John.

Our table game volume was excellent in the fourth quarter, as Terry mentioned.

Our overall volume was actually up 14 percent.

Our whole percentage on table was in the normal range for both periods, right in the middle of the normal range, actually, for both periods.

Slot revenue was up 9 percent in the quarter.

We had particularly strong slot performances at our Las Vegas properties, including Bellagio, New York-New York, Mirage, TI, and also at Beau Rivage and Primm.

On the hotel side, our RevPAR was $120.00, up 12 percent over 2003.

The strip RevPAR was up a little bit more, up 13 percent.

That was on top of a 5 percent year-over-year increase the prior quarter.

We had forecasted, as you recall, 8 to 10 percent growth in RevPAR so we did better than we thought in the fourth quarter on that front, as well.

ADR was 134 versus 122 in the prior year.

Our occupancy was 90 percent versus 88 percent in 2003.

That increased volume and higher pricing crashed to the bottom line, our property EBITDA was $354 million, that's versus 296 a year ago and materially above our guidance, we said on our last call that we thought we'd do at least $300 million in EBITDA in the fourth quarter.

We did 354.

The margin was excellent at 33 percent versus 31 a year ago and that is a record fourth quarter margin for the Company, remember going back to when MGM Mirage and Grand Resorts came together in 2000.

I'm going to turn it over to Bobby now and get back to you a little bit later with some guidance.

Good morning.

I'll report on the fourth quarter results for Bellagio, The Mirage, Treasure Island and Beau Rivage.

Fourth quarter EBITDA for the 4 properties was $179.1 million, up about $30 million, or 20 percent from the prior year.

Net revenue for the group increased 12.5 percent while margins improved 200 basis points to over 30 percent.

Results were helped by a particularly busy October and a strong week leading up to New Year's.

For the year, EBITDA increased $96 million or 15.6 percent on record revenues of over $2.3 billion.

Bellagio became the first casino resort in Las Vegas history to take in over $1 billion in net revenues, operating revenues, for the calendar year.

Also, The Mirage had its highest cash flow year since the opening of Bellagio in 1998.

On the casino side for the group, fourth quarter table games revenue increased $16.6 million or 13.4 percent, on a 15.6 percent increase in slot.

Volume was especially strong throughout the New Year's weekend.

Slot revenue was up $16.6 million or 14 percent during the quarter on a 14.5 percent increase in handle.

This marks the 15th straight quarter slot handle has increased for this group.

On the nongaming hotel revenue for the group was up $19.2 million or 15.4 percent during the fourth quarter on a 9.4 percent increase in combined RevPAR.

Overall booking trends continue to remain very strong in the first quarter, especially in regards to the convention and FIT segment.

Other nongaming divisions continue to excel at all four of these properties.

Restaurant revenues increased 8 percent.

Revenue from bars and lounges increased 20 percent.

And entertainment revenue was up over 9 percent.

Also as a side note, Bellagio settled in the fourth quarter its insurance claim regarding the power outage last April.

As a result, Bellagio recorded an additional $2.9 million in insurance proceeds in in the fourth quarter and that closes out that claim.

At The Mirage casino hotel, the New York-style Carnegie Deli is expected open on Super Bowl weekend.

A new high limit gaming area at The Mirage will also open in the second quarter and work continues on the new Beatles Cirque du Soleil showroom, scheduled for an opening September of '06.

The new Treasure Island buffet called Dishes opened in November to rave reviews.

Also in Treasure Island, the north entry and pedestrian bridge to the Fashion Show mall, will be completed in the second quarter of this year.

In Biloxi, we began construction of the new Tom Fazio design championship golf course called Fallen Oak, and a full service clubhouse at Beau Rivage.

Finally as it relates to the spa tower, on December 23rd, we successfully opened the 928-room Bellagio spa tower.

The tower consists of 819 standard rooms and 109 suites.

This increases Bellagio's total room base to 3933 rooms.

Guest feedback has been tremendous not only for the new rooms, but for the expanded spa and salon facilities, the Sensi restaurant, the new retail outlets, and the 70,000 square feet of additional meeting space.

Guests have been particularly fascinated with the new Jean-Philippe Pâtisserie 24-foot high chocolate fountain.

Results for the first month of operation for the spa tower have been especially encouraging.

Overall, hotel revenues in January were up 45 percent.

Occupancy increased several points to 96 percent over last January.

The increased traffic flow from the spa towers generated additional revenue throughout the property.

Bellagio, as you know, has always been successful in generating ancillary revenue from our hotel guests.

In the first month since the opening of the spa tower, continues this trend.

In January, slot handle increased dramatically due to a combination of not only spa tower, but some excellent winter spa promotions, restaurant and bar revenues were up 15 percent, and spa and salon revenues were up 62.5 percent.

That concludes my report and I will turn over to Mr. John Redmond.

Thanks, Bobby.

Good morning, everyone.

The fourth quarter put an exclamation point on the record performance of MGM Grand Resort properties for 2004.

In spite of room renovations, significant construction disruption and monorail closures, EBITDA for the year at the Grand and New York-New York were up 31 percent and 32 percent respectively, to record highs of $290.4 million and $131.9 million.

But for a 600 basis point tax increase and the cost of the 'let voters decide' ballot initiative, EBITDA for 2004 at MGM Grand Detroit would have been up 12 percent to $167.8 million, also a record for the property.

At the Grand, EBITDA of $62.4 million was the best fourth quarter in the history of the property.

As has been the case throughout the year, the impressive results were driven by strong gaming and nongaming performance.

Room revenue for the quarter was down approximately 8 percent, due to the renovation of 48 rooms on the 29th floor, and the 700 rooms in the Emerald Tower that I previously mentioned.

These renovations resulted in 95,000 fewer available rooms during the quarter.

The renovated 29th floor will be branded the SKYLOFTS, which are two-story suites, or lofts, with 24 feet of floor to ceiling glass.

The first phase of 15 skylofts opened December 23rd and to date, 32 of these skylofts have been completed.

The remaining lofts will be completed by the end of March or early April.

When renovated, the Emerald Tower rooms will be rebranded the West Wing. 150 of these rooms are expected to be completed by the middle of this month with additional rooms being returned to inventory on a weekly basis, thereafter, with all rooms being completed by the end of Q1.

These ongoing room renovations will reduce the Q1 '05 available rooms by approximately 58,000.

The Dome area, which is in the southwest corner of the building is currently a construction zone, as well.

A new poker room, bar and race and sports book are being added, and will be opened in phases with Racing Sports opening at the end of March, and the poker room and bar by the end of April.

Two new [Joelle Robishan] restaurants will occupy the existing Race & Sports Book area.

The new Cirque show, KA opened November 26th in the 1,950 seat theater.

As we previously mentioned, the show, as expected, has received strong demand and is driving significant traffic in the building.

A quick update on the residences, the condo hotel project with Turnberry, a Tower 1, as we previously mentioned, is sold out.

It was under construction.

It's expected to be completed by April of '06. 402 of the 576 units in Tower 2 are sold out, as well.

And construction is scheduled to begin by the end of March or early April this year, '05, on Tower 2.

An update on the convention market.

The early demand for the first six months is extremely strong.

Convention room nights for Q1 of '05 should be up in the 7 to 8 percent range over Q1 prior year, and the rate should be up around 11 percent.

If you look at the '05 LVCVA convention calendar, which our group handled by the LVCVA with 10,000 or more attendees, the number of attendees for Q1 is expected to be up approximately 15 percent, and Q2 is forecasted to be up approximately 66 percent.

I could not help but notice that a significant number of the groups are at Mandalay Bay.

Moving to New York-New York, EBITDA at New York-New York exceeded $31 million every quarter.

The models' consistency in '04, but saved its best for last with EBITDA of $35.7 million in Q4, which was up 37 percent over Q4 prior year.

Table games drop and win were up 13 percent and 8 percent respectively, and slot handle and win were up 23 percent and 22 percent respectively.

Table and slot volume in win were the highest ever achieved at the properties.

With no significant capital expenditures scheduled at New York-New York, 2005 is a free cash flow story.

Moving to Detroit, EBITDA for the quarter was $32.3 million versus 38 Q4 prior year.

The results for the quarter were adversely impacted by $10.8 million in additional expenses relating to the gaming tax increase and the let voters decide ballot initiative.

EBITDA exclusive of these two items would have been $43.1 million, the best Q4 in the history of the property.

By the way, last Saturday the property enjoyed its highest coin-in ever in the history of the property for one day.

Atlantic City, as all of you know, given the Atlantic City reporting requirements the gaming revenue for the quarter was very strong at Borgata.

The impressive performance of the property led to the approval by the boards of Boyd gaming and MGM Mirage to expand the property in two phases to include additional gaming, food and beverage, and rooms, which was previously announced.

Boyd Gaming will provide greater details on a performance of the property during their scheduled conference call.

On that, I will turn it over to Jim Murren.

Thank you, John.

A few financial items -- our corporate expense was $24 million in the quarter, that was higher than our guidance.

We said about $20 million.

The entire delta was due to development expenses, primarily overseas.

Interest expense was also higher than the prior year, obviously we have higher debt levels right now with fixed rate debt, also higher, as we prepare ourselves for the Mandalay resort group acquisition.

Gross interest was consistent with our guidance at $110 million, our cap interest was 9 for net interest of 101.

Our effective tax rate was 38.5.

We had given guidance of 37 percent but the overseas development costs and that ballot initiative that John referred to are nondeductible, and that's why our tax rate was a bit higher.

We had very little restructuring in the quarter and small amounts of property transactions.

The preopening expenses were $6.7 million, that's primarily the cost show at MGM Grand and also the Bellagio expansion.

We did not acquire shares in the fourth quarter.

We were very active last year, however, as you know we bought 8 million shares in 2004 for a cost of $349 million.

We have a 10 million share authorization in place at this time.

We repaid $111 million of debt in the quarter and we spent, in terms of capital expenditures, $168 million.

That brought our total for 2004 at $684 million.

Our guidance was $200 million for the quarter and $700 million for the year.

We spent a bit less than that in the fourth quarter and there will be a little bit of carryover into 2005.

Before I turn it over to your questions, I will give you some guidance as we typically do, in the current quarter here now, the first quarter.

And, of course, this guidance excludes any impact from the Mandalay merger which we expect will close by the end of this quarter.

We expect companywide RevPAR in the first quarter to be up in the 10 percent range over 2004.

That's versus an extremely strong first quarter last year.

We expect our corporate expense to be in the low $20 million range, kind of in the low 20s.

We think gross interest will be between 105 and $110 million, that's a little bit lower than the fourth quarter, as we are refinancing some of our fixed rate debt.

Approximately $675 million of fixed rate debt with credit facility borrowings.

Our cap interest will be also lower, we think, around $5 million, depreciation, we're estimating at about $110 million for the quarter and our tax rate, we're estimating at 37 percent.

As we said in our release, we believe that the First Call consensus of $0.74 is reasonable.

That would be an increase over last year's record first quarter, even with the higher interest expense from that fixed rate debt we talked about.

This implies property level cash flow of at least $400 million, versus $370.5 million in the first quarter of '04.

That, of course, would be the first time we've ever had a property cash flow at the quarterly level that begins with a 4.

With over $400 million of cash flow at the property level in the first quarter.

Pretty huge number.

We don't expect any significant preopening or restructuring or any property transactions in the quarter.

We will incur about a $20 million pretax loss due to the early retirement of debt.

We're redeeming the 6 7/8 senior notes that are due in 2008.

We've already announced that and will book that in this quarter.

In terms of capital expenditures, we think we'll spend, for this year, around $450 million for 2005.

That excludes any investments in Macau or in Detroit or any of the Mandalay resorts, which we obviously will talk about in greater detail in the future.

That does include significant maintenance capital and the theater at Mirage for the new Cirque show.

Some minor spending on CityCenter, as well as the new parking garage here at Bellagio for the Bellagio employees, we're beginning that this year.

With that, I think we have about 30 minutes for questions.

So, I will turn it back to Lonnie and get right to it.

At this time, I'd like to remind everyone, if you would like to ask a question, press star, then the number one on your telephone keypad.

Your first question comes from Robin Farley of UBS.

Thanks, I've got three questions.

First, it looks like your capitalized interest came in a little higher than what we were looking for.

Can you tell us how much of CityCenter -- how much capitalized interest may be associated with that?

$1.5 million, Robin.

$1.5 million per quarter?

That's what it was in the fourth quarter.

It will be about that in the first quarter, too.

Okay.

And then your baccarat volume was up very significantly.

Where do you see it now and relative to pre-9/11 level?

It took a while to get some of that volume to come back, are we back to the levels yet or not yet?

Oh, the baccarat levels?

What would you say, Terry?

I think they're actually slightly higher than pre-9/11.

Okay.

And then the last question is just with this year with the Super Bowl and Chinese New Year being very close -- you know, within the same week of each other.

Do you think that will have any impact?

Last year it was a little more spread out and maybe you would have had separate impact from that.

Do you think that's going to be a factor?

They were pretty close last year to each other because the Super Bowl was extended one week.

There wasn't that much difference.

They are basically right next to each other, but if you look at the flow end for the Super Bowl, those same people leave Monday morning, and the parties people have for Chinese New Year, really aren't coming in until Tuesday or Wednesday.

Really it works perfectly.

Okay, great.

Thanks.

And, Robin, I gave you $1.5 million in CityCenter.

It's going to be closer to $3 million in the current quarter.

It was $1.5 million in the fourth quarter because we began that in late November when the Board approved that project.

Okay, great.

Thank you.

Thank you.

Your next question comes from Joe Greff of Bear Stearns.

Good morning, guys.

Terry, you mentioned you had high expectations for Super Bowl and Chinese New Year's, I was hoping you could expand on that.

I don't know if you to talk in terms of volume or credit extension or things like that?

And just a follow-up question, I guess for Bobby, on Bellagio in the fourth quarter, and this is just a clarification, RevPAR was flat and maybe you could just reconcile that with respect to the strong revenue and EBITDA growth in the quarter if that's sort of a mix issue or just kind of room renovation issue with respect to the prior quarter?

Thanks.

Joe, the first question, relative to Super Bowl and the China New Year's, I will take them separately.

First, on Super Bowl, obviously on each of these, you really don't know until people actually arrive and study the particular play.

But if you can study the past patterns of the individuals, Super Bowl this year looks to be up low double-digits, as far as the level of anticipated credit being involved in cash play.

But again, you can't tell until the people actually come in on how they particularly perform.

In the area of Far East Chinese New Year's, I would say the same, probably holds true.

A -- low double-digits, based upon early indications.

I met last night with the people in our Far East marketing area and they're very bullish on this particular Chinese New Year's period.

It seems to be a continuation of what we saw in the far eastern play in the western new year.

So, we're hopefully optimistic it's going to be a very strong duel hit here, a positive hit, with the Super Bowl -- we really don't know until afterwards, what the results will be.

And, Joe, on the -- on Bellagio's RevPAR, it was flat for the quarter, essentially because my room inventory increased dramatically, about 50,000 room nights for the quarter, or about 20 percent.

As you combine the effect for the typical room remodel being completed in the fourth quarter of last year, and the new spa tower coming on line in December of this year.

ADR was up, in spite of the fact that RevPAR was flat.

We think that RevPAR for the first quarter will be flat to slightly up, and the ADR should be up significantly as we absorb this additional inventory.

So, it's really just an inventory issue.

I think I mentioned in my comments that hotel occupancy total for Bellagio was about 96 percent for January.

It was in the high 89 percent last year.

So, we haven't only increased our inventory significantly, we've increased our occupancy, and that's had some temporary effect on RevPAR.

Excellent, thank you.

Thank you.

Your next question comes from Larry Klatzkin of Jefferies and Company.

Hey, guys.

As you work the two companies together, how do you -- have you started trying to work bookings for -- you know, for rooms at the MGM Grand in anticipation for the convention center linking with Mandalay?

Or how are you working that?

No, Larry, we're -- as you know, we're not allowed to do that right now.

We've been working with the regulators and we think that process has gone well and -- and obviously we'll comport with our time table to close the deal by the end of the quarter, but we've had no integration with Mandalay as it relates to room pricing or booking trends.

You've seen some nice gains in the second and third quarter as you guys start working stuff together.

Could you talk at all about the kind of synergies -- you know, of how big it could be between the companies?

Any feeling at all you could talk about?

The best way to handle that, Larry, is to point you back to MGM Grand and Mirage Resorts since the playbook was written then, and we were very clear as to what the revenue enhancement and cost savings were, related to putting those two companies together.

A lot of the same things will occur here.

We clearly see a great benefit in combining these companies, both on the cost side and on the revenue side and we are somewhat specific as to what those savings in revenue enhancements were and you were around for that, so, I'd just look back at that and remember that The Mirage transaction was a $6.4 billion deal.

The Mandalay transactions, about -- about an $8 billion deal.

So, we see a lot of benefit, obviously are of putting these companies together.

We're all excited about it.

I think the Mandalay folks are, as well.

And we're going to be very specific going forward as soon as we're able to, just as we were last time.

But I -- $200 million of synergies is not an unrealistic expectation.

We can't comment, Larry.

I was afraid of that, in a way.

How sweet is that fountain, by the way? [ Laughter ]

It is -- it's -- how many pounds is that?

It's like a ton of chocolate, Randy?

Two tons of chocolate pouring through that fountain.

It's about as cool as it gets.

Is that in the garden room or actually in the spa tower?

It's in the spa tower expansion.

John Philipe has his own shop and it's just breathtakingly beautiful.

It's 20 to 24 feet tall.

Some kid with creativity hooked up three of those straws to one another and stuck it through the crease in the glass and got him a little dose. [ Laughter ]

That's cool!

Okay.

Hey, do you have any significant conflict -- any chance you two or anything for you guys going forward for entertainment?

I'm sorry, Larry -- the concerts going forward?

Yeah, anything significant that might boost numbers?

Well, we've got Rod Stewart coming up.

I'm going to that.

Is Cher coming back again?

She played last week.

Okay.

Anything else, John?

I thought she was directing that to the synergy opportunities of Mandalay again, but I wasn't sure, Larry, where you were going to the question.

I'm thinking more for the MGM side, I'm not asking Mandalay.

We have some great events that we're in early discussions in some cases and advanced discussions in others.

But they're very exciting and we expect the calendar to be as strong if not stronger than last year.

Very interesting calendar we have unfolding.

I think you find, Larry, that a number of people are just working their planned tours now and announce them at the end of winter, I think in the spring.

But there's some very, very interesting ones out there.

People have not been here before, who are playing -- considering to play at Las Vegas, which will be very exciting if it comes to fruition and I think it will.

And some very exciting fights, too.

Excellent.

And then -- right now Singapore that is -- are you expecting one or two licenses there?

I mean I know, you know, it's in the harbor, you guys may have a decent chance.

What does it look like, how that's going to work out?

We took a look at all the different potential sites.

In fact it was our development people who came up with the idea of the marina site and suggested that to the government.

We looked at Santos Island, we think it's an interesting opportunity, but not for our company.

Our interest is focused more on the arena, and that's why we're bidding on the marina site.

It will be -- it will be a very exciting opportunity.

There will be one or two or more, the government has yet to determine.

That they're going through a three-phase process.

The concept will be complete ad by the end of February.

They haven't stated how long they will be reviewing that.

From that, they will create a short list to move to the request for proposal.

From that they will select the entities, or entities they're going to have.

Your guess is as good as mine or any of ours, if there's one, two or more.

And the last question --

Come on, Larry!

In the process of Macau, what's the next thing to hear for that?

Well, this is Gary Jacobs.

We're making very good progress in Macau.

We are working with Pansy Ho, our partner and our architects, our consultants are designing it, and we anticipate that we will be starting construction in the second quarter, just as we have been planning.

I mean it's a very exciting market for us and a very exciting opportunity for us.

And as I say, it's going -- going forward as we had contemplated.

Okay.

Thanks.

Sorry, no more.

Thanks, guys, good quarter.

Thank you.

Your next question comes from Jeff Logsdon of Harris Nesbitt.

Thank you.

Can you go through the Detroit scenario here?

We have the [Lockhue] boys that still aren't happy.

You talked about perhaps a preference for selling the Mandalay property, now it's more your property.

Can you give us a better feel for what's going to happen there?

Sure, Larry.

Maybe Gary will jump in.

So, Jeff, the issue here is that we have to sell one of these properties.

We can only own, as you know, up to 10 percent of the second one, if we have a majority interest there.

We have kept our options open intentionally.

There is an enormous amount of interest to operate a casino in Detroit, as John indicated.

The fourth quarter was just another example of how strong the market is and we're off to a good start here in 2005, in our property, the MGM Grand Detroit.

We have an OM out there, an offer and memorandum out there on our Detroit casino.

We've had a lot of interest in it and we're sorting through that process right now.

We expect that that process will be favorable to us.

And we expect, and of course, we're working with the Michigan authorities, that we'll be able to effectuate this type of transfer within the timetable that we've talked about and close Mandalay like we said at the end of the first quarter.

Obviously, Michigan is a complicated state and there is the Lockhue issue out there, and we feel our position is as it always has been, quite strong.

And it will not deter the transfer of the asset of MGM Grand, if that's the direction we're going.

Perhaps you could handicap Illinois, as well?

Relative to getting a third or fourth commissioner there so that you can get an approval vote?

Well, I -- I can't speak for the governor or for the state.

But, again, we've -- this situation has been in place since we announced the Mandalay deal.

We have been working on this since June in terms of how to effectively work on the Illinois situation.

I think we feel very comfortable that there again we'll be able to close Mandalay in that fashion, even though there isn't currently a quorum.

Great, thanks.

Thank you.

Your next question comes from Jay Cogan of Banc of America Securities.

Yeah, good morning.

I have a few more questions on Macau.

First, I was wondering if you could tell us, you know, where Nevada is or other regulators are in regards to the ventures relationship with Pansy Ho, and will we get some clarification that all is okay on that prior to you breaking ground, possibly?

Second, sounds like you're accelerating projects in that market.

I wondered if you could talk a little bit more about that?

And finally, Jim, is it possible, as we think about your investment in Macau, that the 280 which you've already outlined in your 10-Q, including the loan to the venture, is really all you end up putting in from a cash basis, kind of just continue to lever up the entity at the project level and thus your own cash investment will be relatively limited?

Okay, that's a bunch of questions.

You want to take that first, Gary?

I will take the regulatory one first I mean we are working with all of the relevant regulators in connection with the Macau transaction.

Technically there is only one formal requirement, which is Mississippi, which has a foreign gaming statute, which requires that all gaming activities outside of the state of Mississippi be approved, at least in terms of jurisdiction, and Macau being one of those jurisdictions, we will have to get the approval there.

They have already approved Macau as a jurisdiction for other companies.

All of the other processes that we're going through are consultations with our regulators, and one can't speak for them, we are making, as I say, we are making what we believe to be satisfactory progress and we anticipate concluding and actually being in construction in the second quarter.

Yeah, and as it relates to how we will fund that, Jay, I think that's a good assumption to make, we have indicated in our public filings the obligation of MGM Mirage into the joint venture of $280 million.

The balance of the project will be funded through equity from our partner, as well as bank debt, we'll probably hit the bank market sometime in April or May to do a large bank deal related to the Macau transaction and open it up, as we indicated, in 2007.

The proceeds from the operation of that property will likely be able to fund future expansions, of not only that property, but perhaps a second or a third casino, also, in Macau.

So, at this point in time, we do not anticipate any further MGM Mirage obligation outside of the $280 million that we put into our Q.

Great, that's helpful.

Thank you.

Your next question comes from Dennis Forst of KeyBanc.

Good morning.

I wanted to ask about shares outstanding, first of all, they were up over $2.5 million sequentially.

And obviously you didn't buy back any shares as you said.

Was there a fair amount of option exercises?

Or more to do with the stock appreciation and the treasury method, how did that work?

Dennis, as you know, the way that works, as the stock moves up, the stock calculation changes in terms of options.

Combination of, there's more options going into the calculation and there was some exercise of options in the quarter, and the balance of that was what you saw there.

Okay, do you know about how many shares were exercised?

Or -- it looks like basic outstanding went up about a million.

Is that -- that could be about right.

Okay.

And then I wanted to get a couple of clarifications from Bobby on the Bellagio numbers.

You said in January that hotel revenues were up about 45 percent.

Does that mean room revenues?

Yes.

Hotel room revenues.

Okay.

And then I was confused your forecast for the first quarter, Bobby.

You said RevPAR would be about flat, but ADR up strong?

RevPAR and ADR would be up --

Both would be up.

Slightly, slightly.

But the overall hotel revenue would be up significantly, similar to what we've seen in January, just as a result of the additional inventory being sold into the market.

Okay, but the occupancy in January was up 7 percentage points? 96 versus 89, did you say?

That's correct.

Okay.

That would -- and then are there -- in general, Jim, are there any other properties with significant remodels of rooms other than MGM or are most of those properties going to be fully operable?

Yeah, there aren't any significant room remodel programs.

We have some at TI.

We talked about it a little bit, and some at New York-New York, but very little for this year.

We did that obviously accelerated a lot of those remodel programs so that we'd have a very strong, clean year this year to fight very effectively in 2005.

Yep.

And clearly you will.

Okay, thanks a lot.

Your next question comes from David Anders of Merrill Lynch.

I'm all set, thank you.

Once again, if you would like ask a question, press star, then the number 1 on your telephone keypad.

At this time, there are no further questions.

Well, that's terrific and I want to thank you all on behalf of MGM Mirage for participating on this call and as always, if you have any follow-up questions, please feel free to give my office a call.

Take care.

This concludes today's MGM Mirage conference call.

You may now disconnect.