美高梅國際酒店集團 (MGM) 2005 Q1 法說會逐字稿

Good morning.

Welcome to the MGM Mirage, first 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.

Participants are in a listen-only mode.

After the company's remarks there will be a question and answer period.

If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad.

If you would like to withdraw your question, press the pound key.

Now, I would like to turn the call over to Mr. Jim Murren.

Thank you, Paige, and good morning, everyone.

As you know we are broadcasting this call on our Internet site, mgm-mirage.com, as well as on companyboardrooms.com.

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

We filed a 8(K) this morning with our press release with the SEC.

I need to remind you that information we present 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 such statements by the use of the words "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 that could cause actual results to differ materially from estimates.

Listeners should refer to our disclosures about risks and uncertainties made in our annual report on form 10(K) for the year ended December 31, 2004, filed with the SEC.

And we actually, as I hope you know, have two press releases this morning, one on, of course, our earnings and one on positive developments in the SAR Macau.

So with that, I'll turn the conference call over to Terri Lanni.

Thank you very much, gentlemen.

Good morning, ladies and gentlemen.

We have reported, as you -- I think -- already know, adjusted EPS from continuing operations of $0.87 for the first quarter and that's up from $0.70 in the first quarter of the prior year.

This is a new quarterly record for EPS for us for any quarter; it exceeds the previous record of $0.74 set last year in the second quarter.

Our forecast is also promising for the second quarter and frankly, for the rest of the year, especially once we add the tremendous Mandalay portfolio of assets and employees which I'll chat about in a few moments.

Let's talk a little bit about first quarter business trends.

Room demand continues at a very strong pace and room pricing remains very strong.

We had great success in selling out the additional 928 rooms at Bellagio in the Spa Tower and Bobby's going to discuss that in a lot more detail in a few moments.

Gaining volumes continued to also be strong.

We had strong customer volume this quarter.

Our baccarat volume alone was up 39% over the 2004 first quarter, following a significant year over year increase in the fourth quarter last year.

Our hold percentage was well below normal during the key Chinese New Year period, but for the quarter as a whole, we were within our normal range.

The opening of the Bellagio expansion, Spa Tower, and continued impact of our ongoing repositioning of MGM Grand, Las Vegas, drove especially strong results at those two resorts and, frankly, all of our resorts benefited from a strong convention calendar and high utilization of resort restaurants, entertainment venues and other amenities at our properties.

As I mentioned, I want to chat a little bit about Mandalay Bay.

We announced the proposed sale of Mandalay's Motor City Casino in Detroit to Marian Illitch which was approved last week by the Michigan Gaming Authorities.

The status of the one remaining state or any regulatory entity in which we have responsibility is Illinois.

Last week on the 14th of April, there was a first hearing before the Illinois Gaming Control Board and I think you know the Illinois Gaming Board has now fully constituted with all five members.

It had been shy three of the five from August of last year until very recently, about a month ago, but the governor has submitted these new members.

So they have a full body that heard that message last week in which we talked about and presented to them a escrow arrangement that would place the interests of Mandalay Bay's 50% interest in Grand Victoria in Elgin in escrow.

And the management, upon the conclusion of this transaction, would switch to the fixtures from Mandalay Bay and that escrow would stay in place until such time as we would be licensed as a company and as individuals.

The final hearing for a vote on that matter is now scheduled formally for Thursday of this week at a meeting of the Illinois Gaming Board.

They have a requirement of a two-hearing rule in which you would discuss matters and then vote at the second hearing and we are -- we are hopeful that at the meeting on Thursday, the Board will vote to approve the escrow arrangement.

If that does occur as we suspect it will, we would then be in a position to close the Mandalay Bay transaction two business days thereafter, which, because of the calendar would mean that we would close and acquire Mandalay Bay through merger on Monday, April 25th.

That's our anticipated date at this time.

Jim mentioned to you that we had a separate press release today along with the earnings release and that we are very pleased to say that we did release details earlier this morning regarding our joint ventures receipt of approval for the subconcession.

At the critical step, in order for the joint venture to move forward, we now expect to break ground very soon on construction of a world class resort, MGM Grand Macau, which we expect to open in 2007.

The date for that ground breaking will be determined with ourselves and our partners and more importantly by the feng shui who has been engaged to determine the appropriate date to begin that ground breaking.

This is the first of hopefully multiple developments along with our partner in Macau.

In Singapore, I think you noted, as of yesterday that the government of the Republic of Singapore announced that they are moving forward with the legalization of casino gaming and they desire to have two large casino resorts in Singapore.

We are looking forward to participating in the bidding process with our partner, Capital Land, and we're obviously very excited about the prospects for developing a world class facility in that particular Republic and it's going to be an interesting and tough competition, but we are going to build and design a significant property which we think will be very, very engaging and hopefully so that we would be selected at the appropriate time, and we suspect that will be somewhere towards the end of this calendar year.

With that I'd like to turn the meeting over to Jim Murren to discuss the detailed financial results.

Thank you, Terry.

Before I give it off to John and Bobby, I'll give you a few more bits of information on the quarter.

Terry mentioned our table games volume was very strong.

Overall volume was up 9% on tables.

Our whole percentage was spot on the midpoint of our range in both periods both this year and last year.

Terry mentioned that we made some customers very happy during Chinese New Year's and yet still for the quarter our whole percentage was in that normal range and in fact, I don't know what makes a trend, but the last 20 quarters in a row we've been within that table games hold range of 18% to 22%.

Our slot revenue was up 13% in the quarter.

Bobby will talk about the impact of the Spa Tower expansion and the overall growth to Bellagio, had an impact in that.

But we saw that really at several resorts including Bellagio and also, though, New York - New York, Beau Rivage, MGM Grand Detroit, et cetera.

On the hotel side, where RevPAR was up a lot more than we had given guidance.

We had forecast about 10% growth in RevPAR.

It was actually up 15% in the first quarter.

The Strip was up 15%, as was the Company.

Our ADR was a new record at 155 versus 138 a year ago.

And our occupancy was also up 92 versus 90 last year.

We had 97% occupancy on our Las Vegas Strip resorts, 97%.

So of course that all translated into a record in terms of cash flow.

Our EBITDA for the first quarter was $437 million.

That's versus $371 a year ago.

Our margins were also up, a very strong 36% versus 35% a year ago and that, of course, is a record first quarter margin for our Company.

So with that, I'll turn it over to John Redmond to get into MGM Grand Resorts.

Thank you, Jim.

Good morning, everyone.

MGM Grand Resorts had another stellar quarter with MGM Grand Detroit, MGM Grand and New York - New York all exceeding Q1 of prior year.

At the Grand, it had its best quarter ever with EBITDA of $88.3 million, up 16.5% over prior year Q1.

Table games, drop and win, slots, handle and win, room revenue, Rev4 and ADR, food and beverage revenue and entertainment revenue were all the highest ever achieved in the history of the property, which speaks to the across the board gaming and non-gaming demand for the product and validates the investment and transformation of the property.

The impressive room revenue results were achieved despite the fact that we had 64,000 fewer available room nights in the quarter due to the Emerald Tower West Wing and 29 floor Sky Loft renovation rebranding projects which I have spoken about in the past.

Early guest feedback for both these projects, the West Wing and the Sky Lofts, has exceeded our expectations.

Throughout Q1, the south end of the casino floor, commonly referred to as the dome area, had a significant amount of construction disruption as well.

A new race and sports book, poker room and bar were completed in this area by the end of the quarter and are having the expected impact given the early results.

The second quarter and going forward will be the first time since 2003 that the property will not be faced with significant construction disruption.

The Cirque show Ka just came back the 15th of this month from its scheduled dark days which started March 23rd.

The show is doing extremely well, driving foot traffic and business, as expected, in the building.

A quick update on the Residences, the -- which is, of course, the Turnberry project on the back of the property there.

The Tower A is sold out and under construction and on schedule for owner guest occupancy May of '06.

Approximately 530 of the 575 units of Tower B have been sold out as of today.

Construction on that tower scheduled to start this month, with owner guest occupancy scheduled for December '06 on Tower B. Tower C was released for sale last week and given the early interest and pacing on Tower B, construction could start late '05 or early '06 on this tower.

With regards to the convention market, Q1 was very strong and in line with the guidance provided in the prior conference call.

The second quarter should be very strong as well, with convention room nights at the Grand up in the 53% to 55% range and ADR should be up in the 5% to 6% range.

New York - New York had its best quarter ever with EBITDA up 20% to $38.5 million.

Like MGM Grand, New York - New York enjoyed record volume and win in all major areas.

Hotel occupancy of 99.2% with an ADR up 17.5% for approximately $140 speaks to the strong demand for this property.

Moving to Detroit, EBITDA for the quarter at the Grand there was an incredible $38.9 million versus $38.6 million in Q1 prior year.

I say incredible, because the gaming taxes, of course, are 600 basis points higher this year than the prior year Q1, which cost us an additional $7.2 million in tax.

The Detroit gaming market for Q1 of '05 was up $15.5 million over Q1 '04.

MGM Grand Detroit accounted for $12 million or 77% of the increase.

Don't forget when looking at Q2, last year we enjoyed the benefit of the Windsor strike.

And of course moving to Atlantic City, Borgata's results as you know continues to be very strong and board gaming will give greater detail on that property during the scheduled conference call.

On that note I'll turn it over to my colleague, Bobby Baldwin.

Thank you, John.

Good morning, everyone.

I'll be reporting on the Mirage Resorts division of the company as it relates to its largest four properties, Bellagio, The Mirage, Treasure Island, and Beau Rivage as a group.

First quarter EBITDA for the four properties was $224 million, up $37 million or 20% from the first quarter last year.

Net revenue for the group increased 14% while margins increased 160 basis points to over 33%.

The $118 million in EBITDA for Bellagio was the largest quarterly EBITDA in Nevada ever.

It also surpasses the average Bellagio first quarter since the opening of this facility by about 47%.

The average has been about $80 million since -- for the first quarter since the hotel has opened.

The Mirage also had its best first quarter ever since 2000.

For the group first quarter table games revenue increased $13 million or 9% on a 12% increase in drop.

Bellagio reported highest quarterly baccarat table games drop ever.

Slot revenue for the group was up $22 million or about 18% during the quarter on a 15% increase in handle.

This represents the largest percentage increase in slot handle in the last four years.

Results were strong for all properties, especially Bellagio, which is seeing the benefits of increased traffic created by the Spa Tower.

Hotel revenue for the group was up $32 million or 22% during the first quarter or an 11% increase in combined RevPAR and an increased 9% in room inventory.

Bellagio room revenue increased 36% or $22 million based on the strength of the Spa Tower.

The occupancy rate at Bellagio increased slightly despite the addition of 99,000 extra room nights in the first quarter.

The Mirage, Treasure Island and Beau Rivage all show double-digit percentage increases in RevPAR for the first quarter.

All four properties had record first quarter hotel revenues.

Bellagio, Mirage and Treasure Island also achieved their best hotel results ever in any quarter.

Overall booking trends continue to remain very strong.

The upcoming convention calendar is busy and both Bellagio and Mirage will increase their convention room nights in the second quarter and throughout the remainder of the year.

Overall, advanced reservations are very strong in spite of the new competition in the Las Vegas marketplace.

The Mirage, Treasure Island and Beau Rivage should once again achieve significant increases in RevPAR for the second quarter.

Bellagio's RevPAR is forecasted to be flat, even with this increased inventory relating to the Spa Tower.

This quarter represents the first full quarter with the Bellagio Spa Tower.

For the quarter, Bellagio slot handling increased over 30%.

Increases could be seen in all denominations of slot machines.

Restaurants and bar revenue was up 18%, catering and banquets revenue increased 31% and we also had substantial increases in the spa, salon, mini bar and other small businesses.

As it relates to a construction update, Bellagio will open its new expanded poker room in the last week of April.

At the Mirage, the New York style Carnegie Deli opened in the first quarter and the results from that facility are exceeding expectations.

Also the new high limit gaming area will be open late in the second quarter at the Mirage casino hotel.

The new Treasure Island or TI North Entrance and Spring Mountain pedestrian bridge should be completed late in the second quarter.

This entrance will allow Treasure Island or TI to take full advantage of the increased pedestrian flows from that part of the Las Vegas strip.

As it relates to City Center, we're very excited to have selected a world renowned architect, Caesar Pelli, as the design architect for the hotel-casino component of City Center.

Pelli designed the Petronas Towers in Malaysia, as well as many other award-winning structures around the world.

Construction on the Bellagio employee parking garage will begin in July.

This is really the first phase of City Center, since we have to remove all of the employee parking currently on that 66-acre site and put those cars in an employee garage for -- for Bellagio.

The construction period will be about 13 months for that garage.

And that concludes my report.

Jim?

Well, thank you, Bobby.

I would like to give you a little more on the financial side and then give you some guidance for the second quarter.

Looking at corporate expense there's $27 million in the quarter.

That was a bit higher than our guidance.

We had said it would be more in the lower $20 million range.

The reason for that is we had higher than expected development costs in the quarter.

We also had higher aircraft costs both in terms of maintenance and in terms of fuel in the second -- in the first quarter and our charitable contributions was higher than forecasted as well.

Our interest expense was consistent with our guidance, obviously higher than the prior year because we had issued about a billion dollars of fixed rate debt in the third quarter of '04 and so therefore interest expense was higher year over year as we prepare for the merger with Mandalay resort group.

Our tax rate was 36.5%.

We had given guidance of 37%.

We talked about this before, but we had a loss of the early retirement of debt of $19.5 million.

That's because we redeemed our 6 and 7, 8 senior notes due in '08 and that of course allowed us to release the collateral on all of our senior debt and so now we have an unsecured bank facility.

Preopening startup expenses were $2.5 million.

That was mostly here at Bellagio and a little bit at the MGM Grand, including the Residences at MGM Grand, a few new restaurants and that new poker room John talked about.

Property transactions as defined here was $4.2 million.

That's mostly the demo work at the Mirage for the new show room and also over at the MGM Grand for the rooms remodel that John talked about.

Everything else was very minor in terms of restructuring and other items.

From a financial position perspective, we did not acquire shares in the first quarter.

We instead took our free cash and after Cap Ex, which I'll talk about, we repaid debt, quite a bit more than we had actually thought.

We repaid debt by $124 million in the first quarter and in fact, when you'll see the full release there, our leverage at the end of the first quarter actually dipped below four times, which was pretty spectacular when we think of it.

We were 5.8 times when we acquired Mirage way back in 2000 and that has plummeted from 5.8 to slightly under 4 times at the end of last quarter.

We spent in the first quarter $105 million in Cap Ex.

The guidance was a little bit higher than that, but our guidance for the year was and still is $450 million.

And before I turn it over to questions I'd like to give some guidance, a little bit more flesh to the second quarter.

We typically as you know, do this, try to give you as much information as we can.

Of course, this guidance excludes any impact from the Mandalay merger which Terry indicated could happen as soon as next week and we've also already said many times before, but to remind you that we expect the Mandalay merger to be immediately accretive to our earnings.

So the guidance we gave is just MGM Mirage as it stands today.

We said that we thought the company wide RevPAR this quarter, the second quarter, would be up in the 10% range.

Obviously, we've been doing better than that.

We're up against a tough comp, but we're off to a strong start here in April and we feel that's a very comfortable number to give you, up at least 10%.

Both -- that's company wide and here on our Las Vegas resort properties.

We think the corporate expense will be in the mid $20 million range this quarter.

Interest expense should be consistent with the first quarter -- again, this is before taking into account the Mandalay transaction.

Gross would be around $105 with cap interest in the $3 to $5 million range.

Depreciation in the second quarter we're guessing to be in the $115 to $120 million range.

That's up from the first quarter and that's because here at Bellagio we're accelerating certain assets here toward the back of the property as we prepare for the new garage that Bobby mentioned and the expansion with City Center.

And our tax rate will be in the 36% to 37% range in the second quarter and that's pretty much like we had in the first quarter.

So the guidance in terms of adjusted earnings per share, we said in our release $0.70, $0.75.

I would remind you also that that is before Mandalay.

That's -- I guess the Street's around $0.74, but that's a meaningless number since many of the quarterly estimates have Mandalay in it and some of them don't and I don't think there's any information to be derived from the first call number.

But nonetheless, we're giving you guidance before Mandalay which we expect to be additive to earnings of $0.70 to $0.75 and we're off to a good start.

We don't expect really any significant preopening or restructuring or any property transactions this quarter.

From lastly, on Cap Ex, as I indicated, no real change.

We still expect to spend around $450 million this year and that excludes, as it always has, any investments in Macau, which we've already before talked about what our investment would be in that joint venture in prior public releases, but to remind you, we've said that our total obligation there is about $280 million.

It also excludes any investments in MGM Grand Detroit, as it has always has, and of course Mandalay, which we'll talk more about as we put these two companies together.

It does include everything that we've talked about before, including the theater at the Mirage, a lot of spending at our properties here to continue the momentum that we have and some minor spending on project City Center.

So with that, I think we have exactly 30 minutes for your questions.

So I'll turn it back to Paige to get right on it.

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

We'll pause for just a moment to compile the Q and A roster.

Your first question comes from Elisha Hendricks with Lehman Brothers.

Good morning, guys.

A few questions.

One is, Jim, I noticed in the release the allowance of debt for bad accounts wasn't broken out.

Can you elaborate on that or just give us those details, maybe this year versus last year?

And secondly, just wondering if you could talk us through how you plan on financing Macau?

Obviously, you've talked about that before, but just wanted to hear that.

And then also just on Treasure Island, even though it seemed like some of the top line metrics were okay, the EBITDA was down year over year so just wondering if there was anything in particular there?

And then finally, just moving on to promotions, I'm wondering if you're seeing the promotional environment heating up given the new competition that's coming on?

I'll hit the first couple of those and bounce it over to Bobby for TI.

We are getting to be a pretty big company, so we haven't broken out the bad debt provision in this quarter but I can tell you, I think last year it was $6.9 million. $6.9.

It was higher this year.

It was in the mid-8's.

And so we had higher provisions here.

And in terms of the reserve percentage it's -- it actually was up a little bit for the -- versus the fourth quarter.

So we've had good collection activity and we are providing very adequately for any potential bad debts and in fact, the number was -- as an expense higher this year than last year.

And that will be broken out in your queue?

Yes, it will in the queue.

And in terms of Macau, the idea there is, of course, we put in our equity, part of which is in the form of a joint venture loan, our partner puts in equity.

That entity goes out and finances the enterprise through bank financing, and depending on the timing of the ground breaking, which is beyond our control, but we think it's going to happen soon, we expect to be in the bank market this quarter with a bank deal to largely finance the overall construction of MGM Grand Macau and the number we put in the press release, I think was $975 million.

That is everything.

That includes the fee for the subconcession which we've never disclosed.

It includes the land which, of course, you can't own there in the SAR, so it's the land from the government, as well as all of the construction.

And we try to give you a little bit of help in terms of the scope of that project by giving you some of the elements to it, but consider that we'll be breaking ground and we believe -- and beginning the financing of it this quarter, probably in May, and opening up in '07.

I think -- I'll go off to Bobby on TI, if I could.

Elisha, this is Bobby.

Treasure Island had a pretty solid quarter.

They were down primarily because they were off in whole percentage even though the group of hotel was spot on, Treasure Island was off about 310 basis points in whole percentage.

They also had a few less shows with Mystere, based on timing of vacations and that sort of thing.

I think you had one last question.

Yeah, with -- just with the promotional environment.

Are you seeing any different?

You guys will say no.

I'm looking at John and Bobby.

No, obviously the market out here is really robust for the whole market and that's really wonderful for the benefit of win resorts.

It's opening up at the best possible time for them and frankly, also for us.

And so the promotional activity has not increased whatsoever.

And just quickly last on Macau, to make this clear.

All of the hurdles that you had, everything's clear and you guys are good to go?

That's correct.

Great.

Okay.

Thanks.

Your next question comes from Larry Klatskin with Jefferies and Company.

Hey, guys.

She took up a lot of my questions, but I've got a couple more.

Could you give me just a snap shot of your balance sheet when you close, let's say, next Monday?

I guess the debt number would be the big one, Larry, and literally and the one you want to know.

The overall debt will be a little bit over $ 13 billion on a pro forma basis.

Let's say, I don't know, $13.2 or something, Dan?

Something like that.

But that's of course before the sale of Mandalay's interest in Motor City which we have already articulated the scope of that.

So pro forma for that, it drops down into the -- kind of the $12.7 kind of range, $12.8 maybe, but maybe $12.7.

And falling as we obviously reduce bank debt.

So in the leverage, therefore, would be a little bit under six times, almost ironically or otherwise, probably exactly what Mirage was on a pro forma basis with us in the high 5's.

And our LIBOR spread on the bank facility will be 162.5 probably.

That's right.

Wow.

Nice.

Thank you.

Second question, future bookings?

Well, I'll bounce that to Bobby or John in terms of future bookings.

I saw one thing as they're getting their notes on it, clearly the bookings are stronger this year going into the second and third quarter than they were last year, especially in the summer months, but I'll turn it over to these guys.

Larry, this is John Redmond.

This is as strong as we've ever seen it.

I mean, I mentioned for Q2, you're looking at up 52% to 53% on convention side.

All other sectors we're seeing very strong demand.

It's got to be the strongest we've seen here in Las Vegas; the future looks extremely bright.

That's excellent.

Larry, on the -- on the Mirage resorts, we're the same as of course John is.

Future bookings are very strong.

There is some competition in the marketplace.

Of course, some new competition coming in at the end of the month, but that's only about a 2% increase in the room inventories in Las Vegas.

Right.

It's a drop in the bucket.

Right.

One of your competitors is mentioning that even though you may build Macau you may never open it.

Could you discuss that issue?

What can stop you from opening it or what you expect to happen?

Well, we -- we've been fighting this a little bit, but -- Bobby says feng shui.

We focus on our company as you know, Larry, and we learned if you can't say anything nice just don't say anything at all, and we believe that we've done everything that we possibly can do.

We of course have been unanimously approved to operate in that marketplace in -- by the Mississippi Gaming Commission which has already spoken on this matter.

We have been working with all our regulatory bodies very closely.

We have a tremendous partner and have great confidence in this joint venture.

We have been working quite actively also in the SAR and in that government and we will do nothing but what we always do here and we're moving rapidly forward to this conclusion which we think is inevitable for us.

Terry did you want to mention anything more?

Some of the comments that have been made, we may want to put extra security on the project, because some people don't like competition, but I think Jim has given the information.

That's a fair answer.

I -- I guess the -- the other thing is is just for your City Center, you know, you've really never discussed it on the call but you've put press releases out.

Anything you could add on that project that might enlighten us a little bit more about what it could bring to you guys and such?

Well, Larry, I kind of look at it like Macau.

When we're ready, we're ready.

But this is the most, we believe, most dramatic departure in our valley's history and it requires a very professional effort from the beginning and it began with the initial departure, which was to hire world class urban planner, which of course we did and it starts from there.

And we have been very busy.

Bobby is running this project expertly with many people here and many people outside of MGM Mirage, so that we have hired not only urban planners but expert architects, not only the iconic one that Bobby mentioned, Caesar Pelli, but also executive architects and others.

We have been working on our retail program on our residential program, on our boutique or smaller hotel program, Randy Mooreton has been actively engaged in those dialogues.

And I think Randy, who's here, I guess about every hotel brand in the world wants to be here, so it's a matter of stiff-arming and navigating and figuring out what makes the most sense for City Center, for our vision, which is really to create this modern, multi-use, urban environment which will help propel Las Vegas on to a real playing field as a metropolitan market.

A lot of work is being done.

Bobby mentioned the hard construction because that will be visible.

Once we build the new Bellagio employee garage and its accoutrements around it, we'll be able to relocate those employees that are surface parking on the site today.

That will be done next year, I guess Bobby, in the summer maybe of next year?

July of next year the garage will be done.

That will trigger an awful lot of visible work, because we'll be clearing the site which includes a lot of construction and -- that's there today in preparing the site for City Center.

So that will be visible to you, but there's a lot of work behind the scenes relating to the partnerships on the residential, the retail, the hotel as well as getting all the architects in line because this isn't going to be a themed project, but in fact, the collaboration of many world class experts in architecture design and construction and -- and a real departure.

As to what it means for earnings per share, or in terms of return on investment, we have not yet given guidance.

We could tell you that this project is ambitious, but one that we could tackle and one that we will phase over time so as not to deter from our overall board's objectives of maintaining and in fact, improving our financial capabilities and it also will be done over multiple years, but open in '09 and we believe that the return on investment will be superior to simply building a casino-hotel here in this market.

Great, Jim.

Thanks and congratulations on a good quarter.

Thank you.

Your next question is from Steve Kent with Goldman Sachs.

Good morning.

A couple of things.

First, on the MBG merger, Jim, are you going to do another separate filing when that occurs providing more details on expectations from that, management structure, who will be running the operations on an on going basis or sort of what should we expect if anything next Tuesday or Wednesday?

And then the second question, Jim, you guys have done an incredible job maintaining high single digit, low double digit slot growth over the past couple of years.

Does the merger with Mandalay Bay accelerate that?

I mean, do you think that you could sustain it in their business, take some of the best practices in the MGM system and you know, bring it into the Mandalay Bay and could you just talk about that?

Well, sure.

And you need to be home, Steve.

That's -- yeah.

That's -- you get kudos being on the call with that voice.

We are -- we will put out obviously a release the second week close on Mandalay and we are not going to provide a substantial amount of financial information at that time but we have already in fact -- Terry has already worked closely with Bobby and John in terms of the management structure, in terms of the -- the reporting lines and in terms of who's running what and we certainly will provide all of that information, as well as kind of a preliminary road map of what MGM Mirage would look like.

As it relates to cost savings and revenue enhancements, if you recall what we did in the Mirage merger is we did give estimates as to the combination of quote-unquote "synergy" is a word I personally detest, but the overall culmination value which we will provide in due course, but not next week.

We will say that we've been working very hard with the Mandalay folks.

We're excited about actually being one, but we have been working well prior to this point on a variety of integration endeavors, in fact 32 different areas in which we're working and we could say at this point there are certainly are cost savings that will accrue to the combined Company, both at corporate and at the operating level as we centralize some areas and use some best practices that we find in both companies, but -- and I think that we might have said this before.

We really view this as a revenue story.

There's enormous value in putting these companies together from a revenue perspective.

There are already areas where we've identified on both sides of the Company, significant revenue opportunities as we use some of the elements of the new combined Company and our data base and our assets together.

So it will be profound.

It -- it reinforces our initial impression, which is that this transaction will be immediately accretive or additive to the MGM Mirage shareholders.

It will happen quickly because we're well aware of the Mandalay assets and of their people of which we have high respect, and we will do as we did before, give you a estimate and then provide you a report card on a quarterly basis on how we're doing.

Jim, I'd like to add a couple point to that.

One, just so Steve knows, we are not creating a third group of companies.

What we've decided to do is take the Mandalay Bay properties and divide them between Bobby and John and as you know, many of the Mandalay senior people have decided to move on to new ventures in this industry and outside the industry, but we have a situation that some of their general managers will remain in their particular roles at the properties as they are.

Others will be leaving and they will be succeeded by individuals which we have already determined internally with John and Bobby and I as to who those individuals will be and those people will be in place and we would expect them to be in place as early as Monday afternoon.

Okay.

Thanks.

Your next question comes from Harry Curtis with JP Morgan.

Good morning.

Two quick questions.

One is a follow-up or a clarification.

Bobby and John, you'd talked about forward trends.

Can you give us a little bit more specific information about July and August trends?

Are you still as positive about those demand in pricing trends as you would be for this second quarter?

This is John, Harry.

The -- are you -- if you're talking about across the board in all the sectors meaning, you know wholesale up, IT, et cetera, we are.

I mean, as I said, the Vegas is on fire.

The entire year looks extremely strong.

Second quarter -- second quarter we had the most clarity on, but the remaining quarters look extremely strong and -- and Vegas is the place to be.

There's no doubt about it.

And I'd echo that, Harry.

Okay.

Second question, Jim, if you could give us an update on Aqueduct, the tax rate has come down and I'm wondering if you've amended your plans and is it a more attractive project to go forward with?

I might bounce it off to Terry but the answer is yes and we have re-engaged ourselves with that process.

We are, correct me if I'm wrong, Terry, we are now updating our budget, our time line, and we are excited about that opportunity which had laid dormant for a while and I think largely forgotten by the street, but not by us and we are working hard on it at this point.

I think the important thing here is that the legislation which was signed last weekend by Governor Pataki allows us to have security for the investment that we're going to make and the loan that we're going to make to the Indira people and that was very important to us.

And it also gives us protection that our agreement extends beyond our franchise date which ends, I think, December 31, 2007 at which time I'm sure it will be put up for bid and Indira and others will be bidding for that at the time.

So we feel more comfortable about that.

We can move forward.

We are going through the budget reviews and because of material costs which we all know have been increasing, that we -- the budget probably will be increased.

We'll be looking at that now and will have something determined by next week.

Do you have anything to determine on the earliest that can be up and running?

We'll know more about that next week.

I would guess it would be another 14 to 15 months.

Thank you very much.

Thank you.

Your next question comes from Joe Greff with Bear Stearns.

Good morning, gentlemen.

Jim -- or maybe Bobby or John?

Could you just remind us what high end tournaments you have scheduled in the second and third quarter and then maybe if you could just talk a little bit broadly about how the pro formas look for those tournaments?

Blackjack, baccarat or poker tournaments?

Baccarat and I guess anything at Shadow Creek.

Well, we have a typical array of tournaments, two or three a month as relates to table games, slots and the golf tournaments.

So I -- I could just tell you that business is usual.

We have a little more promotional activity in the marketplace in Las Vegas because business is so strong so we have a few extra events.

And what Bobby means by promotional activity -- it's defined differently.

It's in terms of having events, because obviously you don't have the events if you don't think you you're going to do well with them

Okay.

And in terms of the higher end -- I mean, how -- how would you characterize the volume indicators that you're seeing now?

At Bellagio we had the highest baccarat drop and the highest total table games drop ever and those trends -- the trends for the remainder of the year look very, very strong.

And John didn't mention it actually this time, but for music and entertainment, the lineup in the arena is like ridiculous right now.

I mean, do you want to --

Well, some acts of course have been announced, some acts have not.

Oh.

Sorry.

Can't announce those.

The ridiculous part you can.

If you only knew.

You get acts like U 2, I mean it goes without saying when you look at how quick they sold out.

We have other acts of that caliber that look like they're going to happen this year as well.

But you know, we -- we -- between myself and Bobby and the properties we have responsible for, there's -- there's tournaments that are on going on a monthly basis.

When you're looking at the high end, it really comes down to like Chinese New Year, American New Year, et cetera.

These other tournaments that you're talking about don't move the needle to the extent that you might think when you're -- when you're looking at the numbers, but some of these other bigger events whether it be boxing.

You know about the Trinidad fight that we have here, some of the bigger concerts.

They have the bigger impact than some of these slots and what-not that you're referring to.

Great.

Excellent.

Thanks, guys.

Your next question comes from Jake Cogan with Banc of America.

Just want to dot a few I's and cross a few T's here.

Don't want to beat a dead horse, Jim, but basically, if you do close it on Monday and you won't give initial financial guidance, is it going to be the second quarter call that we should expect that or would the be something before then?

And I have a couple of questions on Macau.

I was just wondering if it is 2007 you're opening the first property, is it a mid '07 opening now with a second quarter construction start?

And can you talk about where and when the other projects that you're identifying in Macau could come on stream?

Okay.

On Mandalay, we have to -- Bob's reminding me, will file a -- we've done this actually a couple times before in some of our public filings, but a pro forma on an LTM basis with Mandalay.

So you will have some information there in terms of how Mandalay is doing, but the real information that you'll want -- and actually that will be meeting and I'll direct everyone to look at that filing.

It will be about a month after we actually close the transaction.

And then the real meat in its forward looking guidance would be on the second quarter could and if we're correct we'll have two months of Mandalay here in the quarter and I think that will be positive.

And I'm sorry.

I missed your second one in Macau.

Just for the opening.

Is it a a mid '07 opening for the 2007 first project?

And on the other projects that you're looking at, I was wondering if there is any way to help identify where they might be and what the timing is for those two -- one or two additional projects that you've been talking about?

We're looking at -- This is Terry Lanni.

But we're looking at the second half of '07.

It will depend a lot of that feng shui as to when we can begin ground breaking aspects, but I would guess the second half would be the best way to look at it.

As far as additional sites, we're working with the government.

We've had conversations with the Chief Executive, Edmund Ho about particular sites.

As you know, most of the land is owned by the government and we are attempting to find other sites.

We are convinced that we'll be successful in that.

The location yet to be defined.

We're looking at a multiple of areas.

And lastly just on Detroit.

What should we expect now that you're keeping MGM Grand and with all the other capital projects you have on the table, what should we expect the timing of the permanent to be and I don't know if you have a Cap Ex plan for that?

Well, this is John Redmond.

It's impossible to predict the start of a -- of the permanent because there's zero clarity on the resolution of lack view, but obviously as you can see from the numbers, with everything that was going on in Detroit, whether it be the Motor City facility or our own that people are looking at, we never took our eye after the ball.

The results speak for themselves.

The trends going forward, we think, are just a repeat of what we've seen in the first quarter.

So everything in Detroit looks -- looks great, but there's absolutely zero clarity on the permanent.

Great.

Thanks a lot.

Your next question comes from Bill Lerner with Prudential.

A couple questions.

One, heroically, you guys were able to get occupancy up at the Bellagio in the quarter, even with 30% more rooms.

In that respect are you still turning away room nights there and I'm not sure -- any quantification would be great and then just follow up.

Oh, yes, we still get regrets.

We still have more demand than we can satisfy.

We -- as you've seen in the past, a lot of times people will expand their facilities and then they suffer an occupancy right away.

We intentionally priced down just a little bit in order to make sure that we were able to absorb these additional room nights, but we still have a heavy regret pattern and business is strong and demand is as strong for the Spa Tower as it is for Bellagio in total.

Okay.

That's helpful.

Just a -- any comment, yet on Mirage show room, in terms of timing anyway?

When you'll know who fills that and so forth?

Well, we have a joint venture agreement three ways with The Apple which is the Beatles' company, and Cirque Du Soleil and Mirage Casino Hotel.

So we have a three way partnership.

That show room is under construction currently.

The Siegfried and Roy show room was torn out and removed and the new show room will be turned over to us in -- well, the show is going to open in September of '06.

And we get the theater December of this year.

Okay.

And actually just wanted to follow up.

On the MGM Grand Residences, I think you talked about six towers there.

Any determination on whether you end up building all six and you know, obviously the pacings look great, I'm sure, so what can you say on that?

Well, right now we're just sticking with the three tower approach.

Demand of course as we mentioned has been very strong, but that's our -- our plan right now is to stick with just the three towers.

Thanks, guys.

Thank you.

Your next question comes from Robin Farley with UBS.

Thanks.

I have a couple of questions.

Looks like a couple cents in the quarter came from the press release mentioned a favorable resolution regarding the Mirage acquisition.

I wonder if you could give a little color on that.

And also wanted to just clarify, Jim, when you were talking about the Cap Ex budget, the $450 million, you said does include City Center, but does not include anything from Macau?

I just want to clarify that.

And if that's the case, what do you expect to spend in Macau this year of your $280 million obligation.

And then last question, Singapore, have -- aside from the general announcement, have -- have you heard anything more definitive about whether you're one of the finalists for the two properties and -- and when do you expect to hear?

Sure, Robin.

Let me hit those.

As I'm thinking about that I want to comment on what Bill said too.

As I was thinking about it, of course RevPAR we've given guidance of strong double digit RevPAR in the quarter but RevPAR of course isn't GAAP.

And room revenue is GAAP and with all these new rooms that we have now and of course the -- the west wing over at MGM in the Spa Tower, a 10%, just to give you a rough idea what this means to us.

A 10% increase in RevPAR, if that's what we do, translates to a high teens increase in room revenue.

A question that we didn't get, but I think a relevant one.

As it relates to what we articulated in the release, we felt that it was meaningful to break it out.

We typically do have crews like any company, have crews go one way or another in any given quarter, but this was a little bit larger.

So this was $0.03 positive to us.

This was set up back in 2000.

Mirage was debating with the tax authorities its issue on fine art sales tax, if you recall as the public company Mirage talked about that quite a bit.

And so we had set up a reserve for, you know, the possibility of an unfavorable ruling on that.

It turned out to be a favorable ruling, and we therefore reversed that and articulated that in the quarter and that was, I think, $0.03 a share.

That's the fine arts sales tax issue.

As it relate to Cap Ex, I think was your next one, Robin?

Yes.

The Cap Ex of $450 does include some work here at City Center.

The work is not meaningful in '05.

In fact, it's not really meaningful in '06, unless you're talking about the garage which we would have built anyway.

In fact, we had to build.

The garage is going to be one of the -- the most elaborate garages here and will cost -- I think a significant amount.

Bobby, it's like -- ?

$109 million.

$109 million.

That's bled between this year and next and we're incorporating that part into what we're talking about.

The other City Center work is more minor and that relates to some of the other infrastructure work that we do.

It does not include Macau as I said, and so Macau is on top of that and we articulated that as being $280 million total.

Part of that is a loan and part of that is equity into the project and so to be conservative you would add the $280 right on top of the $450 and was there anything else on Cap Ex?

Oh, no.

That was the Cap Ex question.

And then Singapore was the final question.

Oh, we haven't heard, Terry, have we, in terms of -- ?

I don't think anyone has heard.

They merely said they want to move forward.

We have heard that two of the original bidders may have been excluded.

We don't know who they were because they didn't meet the criteria, but I don't think there's any indication of any determination beyond that that I know of.

So at the moment you're not yet working on a more enhanced bid at this point?

It's still waiting to hear?

What they're doing is they've asked everyone to provide additional details as we understand it, and there's a series of meetings that are scheduled in the next two weeks with government officials and the Republic at which time they will come up with a request for proposal definition, which is the next phase.

And there's talk that they want to make a decision and a selection of the two successful bidders by the end of the year.

That's the extent of what our knowledge is.

Great.

Thank you.

And I -- you know, I think we can take one last question, Paige which I think we're right at our termination time.

Your last question comes from Dennis Forst with Keybanc.

Good morning.

I did have a couple of bookkeeping and then I wanted to try and dissect the Bellagio RevPAR number.

First of all, Jim, the -- the $0.03 from the Mirage and that $0.09 charge on extinguishment of debt, both of those are in "other expense"?

Are they both in that $15.7 million of "other" expense?

Yes.

They are.

And what was cap interest in the quarter?

You used a range of 3 to 5 going forward.

What was it in the quarter?

It was 3.

$3 million.

Okay.

And then lastly, for -- for Bobby, the RevPAR at Bellagio, I was having a little trouble understanding that.

Are the new spa rooms selling at a higher absolute rate than the average rate for the original 3,000 rooms?

No, they're the same.

They're all the same?

Okay and you said you were a little aggressive on rate because of the additional rooms.

Do you -- I mean, in hindsight, do you wish you would have priced them higher if -- if you had higher occupancy, even with the additional rooms, the -- would it have made sense, you know, with 20/20 hindsight to be more aggressive on that rate?

No, because I probably would have lost a couple of points in occupancy.

I went for the occupancy first.

Okay.

Just like I would in a new project.

The first goal is to fill the hotel, the second is to get it mixed properly and the third is to get it priced as high as you can.

And that pretty much answers my last question which would be the second quarter we're going to see more of the same, using rate to make sure that the rooms get filled?

Well, the process is going to be refined and has been improved even since we opened the tower in December.

So RevPAR was down 2.5% at Bellagio for the quarter and we're forecasting RevPAR flat for the second quarter.

Okay.

So you'll see an improvement there.

Yeah.

Okay.

Quarter over quarter improvement.

And then do you think by this time next year that Bellagio room rate will be similar to Wynn's?

Well, I don't know what Wynn's is, what Wynn's rate is going to be, but we'll be able to give you a little more guidance there maybe in the next call after we see some of Steve's results.

Okay.

Great.

Thanks a lot.

You're welcome.

Thank you.

And operator, I think that's it for us.

So on behalf of MGM Mirage thank you very much for participating on this call and as always, give us a call if you have any follow-up questions.

This concludes the MGM Mirage first quarter conference call.

You may now disconnect.