美高梅國際酒店集團 (MGM) 2005 Q2 法說會逐字稿

Good morning and welcome to the MGM Mirage second quarter conference call.

Joining the call from the company today are Terry Lanni, Chairman and Chief Executive Officer of MGM Mirage, Jim Murren, President, CFO and Treasurer of MGM Mirage, John Redmond, President and Chief Executive Officer of MGM Grand Resorts, Gary Jacobs, EVP, General Counsel and Secretary of MGM Mirage, and John (Corchez), SVP and Chief Financial Officer of the Bellagio.

[OPERATOR INSTRUCTIONS].

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

Please go ahead, sir.

Well, thank you, (Paige) and good morning everyone.

As you know, we are broadcasting this conference call live on our internet site, mgm-mirage.com, also on companyboardroom.com.

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

We filed today an 8K with our press release.

We filed that with the SEC this morning.

We also put a considerable amount of additional financial information on our website, and that will give you really great detail on how we did in the quarter and also how MGM Mirage is on a pro forma basis with the acquisition of Mandalay Resort Group.

I need to read the Safe Harbor disclosure, as always.

And, as you know, 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 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 that could cause actual results to differ materially from estimates.

I would also like to refer the listeners to our disclosures about risks and uncertainties we put in our annual report on Form 10-K when we filed for the year of December 31, 2004.

So, with that I would like to turn it over to Terry Lanni to discuss overall results.

Thank you very much, Jim and good morning, ladies and gentlemen.

As you noted in the introductions, Bobby Baldwin is not with us today.

He is traveling on matters relating to the City Center project which has been previously announced, and we have in his stead today John (Corchez), who is the Chief Financial Officer of Bellagio who will be giving some updated -- some information relative to Mirage Resorts.

Today, we reported adjusted EPS from continuing operations of $0.46 for the second quarter which, as we noted in our release, is the highest quarterly EPS in our Company's history.

That is an increase from the $0.37 per share we earned in the second quarter of 2004 which represents a 25% increase quarter-to-quarter.

Mandalay Bay -- we are moving rapidly and efficiently, I think, in the integration of Mandalay into MGM Mirage.

We quickly established our governance and our organizational structure and we have strong leadership at each of the newly acquired resorts.

Many of those individuals came from our management ranks, from MGM Mirage preacquisition.

We believe that is a testament to the significant bench strength that we have developed over the years within the company.

There was very little turnover at Mandalay properties.

There were less than 200 employees out of a total of 31,500 who left the Company.

And morale, we think, is very high as our management and the employees at Mandalay look forward to an exciting future.

Jim is going to update you on the progress we are making on expected cost savings as well as revenue enhancements later in this call.

Let me talk a little bit about the second quarter business trends.

Our room demand continues at a strong pace across our portfolio and room pricing remains very strong particularly at our Las Vegas strip resorts.

This is the result of our ongoing investment in our resorts which has allowed us to attract more new and repeat customers wanting to experience our brands.

At Mandalay, we have implemented our room occupancy and pricing policies and have already seen significant impacts on RevPar in those particular properties.

The opening of the Bellagio expansion spa tower and continued impact of the new amenities at MGM Grand Las Vegas have driven strong results at those resorts, especially in slots and food and beverage.

A little bit on the development update, if we may.

On Macau -- continues to move forward.

We broke ground in June of this year and we expect to open that facility in the second half of 2007.

The financing we expect also will be in place very shortly, and initial demand to Jim Murren and our financial people for a credit facility has been very strong.

Project City Center, which Bobby Baldwin is responsible for -- several new design architects have been signed up for the various aspects of City Center.

Caesar Pelli is continuing to further the design for the 4000 room hotel-casino, and we selected a general contractor for the bulk of the project with construction to begin next year.

We have already commenced construction on the Bellagio employee parking garage which will open in mid-2006.

Overall, City Center will feature 18 million square feet of casino, hotel, retail and residential space and is scheduled to open, as we previously announced, in late 2009.

With that, I would like to turn it back to Jim to discuss details of our financial report.

Well, thank you, Terry.

Before I get into the numbers I want to kind of walk you through all the disclosure we gave this morning because it is considerable.

Of course in the release itself, we have all the actual results for this quarter, the second quarter, versus the prior year.

We also, to make it more meaningful, gave you a same store comparison -- basically the legacy MGM Mirage properties this year versus last year.

We also have in the schedules with the release, our actual results which includes Mandalay since its acquisition on April 25.

So, you have quite a bit of information there.

On top of that on our website, which we encourage you to look at because we have got an awful lot of information there, we have detailed financial results, not only by geographic groups but by property.

And we also have done it on a pro forma basis, calendarizing the Mandalay results, so you have good clean comparisons to look at for the Mandalay properties '04 and so far in '05.

And, of course, we have it all done to reconcile to GAAP.

I hope that helps you a lot.

We not only want to be the gaming leader but the disclosure leader as it relates to financials and we are proud of the numbers and want to get you as much as possible.

So with that, getting to the numbers, we had good table gains volume in the second quarter.

And, our whole percentage was down a bit.

It was within that range we have talked about.

We have typically, on tables, been between 18 and 22% and in fact we have been there consistently since we put the MGM and Mirage together over five years ago.

Our whole percentage was down about 100 basis points year-over-year but, again, within that range.

Our slot revenue was up strongly.

It was up 7% on a same store basis and particularly strong results which both Johns will talk about -- both in the case of the Spa Towers -- had a big impact on Bellagio's slot revenues and the MGM Grand had tremendous results in slots related to some of the capital improvements there.

On the hotel side, our RevPar on a same store basis was up 16% on the strip, while strip was up 15%, overall up 16%.

We had forecasted a 10% growth in RevPar so we pretty substantially beat our forecast in terms of RevPar.

ADR was up strongly, as well, in the quarter.

From an EBITDA cash flow standpoint, our property level EBITDA was 394 million.

That was up 6% versus 372 a year ago.

We had lower margins this quarter versus last year and that was affected by a couple nonrecurring items.

One, we had changed the way we -- the methodology on workman's comp, which -- we were using a case reserve methodology which had been the industry standard.

People have gravitated toward an actuarial methodology, which on a one-time basis impacted earnings this second quarter by about $10 million.

We also had a higher bad-debt expense versus a year ago.

So, the delta there was around $10 million.

We talked about that last year in the second quarter.

We had great collection activity in the prior-year quarter and our whole percentage, as I mentioned earlier, was down year-over-year.

So, those impacted margins.

With those in mind, margins would have been essentially flat.

From a standpoint of Mandalay, I want to get into that a little bit.

We have mentioned in the release that we have looked at and have identified at least 100 million of synergies -- a word I hate -- but, let's call revenue enhancements and cost savings.

Many of them have already been implemented.

The others will be implemented over the next few weeks or months.

The big items there, of course, would be in the areas of corporate expense, board-related expenses.

Purchasing is a big number already and will get much larger.

That is probably over 20 million already there, corporate is around 30.

We have consolidated some areas like -- the racing sports, for example, saved us a couple of million dollars there.

And we have identified just a huge menu of opportunities, not only on the cost side, but on the revenue side.

If we could take you back for a second to the Mirage transaction, if you recall when we were putting MGM and Mirage together we had identified, I think, around 75 million is what we used, preacquisition.

That number grew throughout the following year.

In fact, I think by the time we closed the book on Mirage, we had extracted over $150 million of revenue enhancement/cost savings in that transaction.

This is a bigger company that we just acquired.

We see a lot of opportunity here and we are off to an extremely strong start.

From a standpoint of other ideas, I think John Redmond will get into it.

But, we clearly have our slot leader on the strip from our technology standpoint and just upgrading and modernizing the slot floor alone will have -- which we are doing right now, which John will get into -- will have a profound impact, we believe, on revenue which is not in my numbers.

Obviously, also, we are going to be rolling Player's Club throughout the major strip properties which, if history is any guide, will have a big impact on revenue.

So, I guess the first message on cost savings/revenue enhancements is we have identified kind of in-the-bank 100 million on an annualized basis.

That number, we expect, will grow.

We will report to you, as we did last time, on a quarterly basis our progress -- give you a report card -- see how we are doing.

We see an awful lot of opportunity above and beyond what we have already banked, and I think you will see tremendous uplift on revenues.

We have already seen that in the short period of time of putting these companies together.

So with that, I will turn it over to John Redmond and talk about MGM Grand Resorts.

Thank you, Jimmy.

Good morning, everyone.

I want to take this time to briefly discuss some of the properties within MGM Grand Resorts that are on the Strip and Detroit as well.

Starting with MGM Grand, the Q2 was the highest EBITDA -- the second-highest EBITDA ever in the history of the property, coming in at 87.2 million versus 83.1 million in Q2 prior year.

These impressive results were driven by the record room revenue and the addition of the (Kashow).

As discussed in previous conference calls, the 700 old Marina Tower rooms were renovated and rebranded the West Wing.

Prior to this renovation, the ADR newsroom was approximately 25% less than the standard hotel room.

This renovation of rebranding has enabled us to achieve rate parity and attract a customer of a higher discretionary-spend profile, helping to drive incremental gaming and food and beverage revenue.

The foot traffic driven by (Kos) and the ancillary business impact, coupled with the higher-quality West Wing customer, helped produce record volumes in slots, entertainment and food and beverage.

The (Magic) casino expansion was also completed during the quarter, which added three high-end gaming parlors and two new (Gerald Robishaw) restaurants, will open before the end of Q3.

Just a quick update on the residences.

Towers One and Two are sold out, under construction, and scheduled to open May and December, respectively, of next year.

Approximately 250 of the 575 units in Tower Three are sold, and construction on that tower is expected to start in the September, October time frame of this year.

The Q4 Grand Garden event calendar is worth touching on, given how impressive it is starting off, with The Eagles, followed by Jimmie Buffett, U2, the Rolling Stones and Paul McCartney.

There is something for all of our great casino customers in that lineup.

Terry spoke briefly about the management depth in the company and the MGM Grand epitomizes that philosophy, in that seven key senior executives left the property to assume roles at Mandalay Bay.

And, as results show, the property never skipped a beat.

And (Kamal Aziz) has done a great job there.

With regard to the convention mark at MGM Grand, the convention room nights were up approximately 33% in Q2, with the rate up approximately 8%.

Looking out to Q3, convention room nights should be up approximately 28%, and the ADR should be up approximately 18% over Q3 prior year.

It is also worth pointing out that the second quarter was the best booking period in the history of the property with approximately 157,000 convention room nights booked for future quarters.

Discussion of the convention segment is a great segue into the Mandalay Bay, Luxor and Excalibur properties.

Mandalay Resort Group properties I have responsibility for -- we are extremely excited about the upside opportunities with these properties.

We have great management teams in place and the primary focus has been, and will continue to be, driving occupancy with a negligible, or at least not a negative, impact on rates.

This approach is absolutely key given the somewhat isolated location on the Strip with respect to Mandalay and Luxor and the lack of foot traffic as a result.

This strategy has resulted in significant improvement in occupancy and overall financial performance of the properties, given the increase and room/guest traffic.

In addition to occupancy, a great deal of attention was paid to the product mix on the floor, in particular slot machines.

Between the three properties, approximately 24% of the machines are not TITO.

And, approximately 17% of the machines are older than five years.

By early Q1 of next year, we will have changed out all the non-TITO and old slot product in the case -- and, in the case of Excalibur, added additional product.

After these changes have been made, these properties will not only be 100% TITO, but approximately 61% of the machines will be less than one year old and the denomination mix will be appropriate for the market and the customers.

We continue to evaluate all other capital expenditure requirements for these three properties.

We have a track record of investing capital in a prudent way and those projects have produced significant returns and have maximum impact.

Projects that meet such requirements will start late this year or early next year.

With regards to the convention segment at Mandalay Bay, from the period 4/25 when we got involved until 6/30, we have booked approximately 213,000 room nights towards future quarters.

Again, the best booking period in the history of that property as well.

For Q3, the convention room nights should be up approximately 18% at Mandalay at a rate slightly ahead of Q3 of prior year.

Moving over to Detroit -- Q2 was a stellar quarter with EBITDA of 39.1 million versus 44.4 million in Q2 prior year.

But for the 600 basis point increase in the gaming tax, the quarter EBITDA would have been better than prior year, even though prior year Q2 was positively impacted by the winter casino strike.

With the lack of (of view decision) behind us, we are close to completing our evaluations of our permanent facility plans and look forward to developing that project as well.

At this time, I will turn it over to John (Forchess) to discuss the Mirage results.

Thank you, John.

I will be reporting on the second quarter highlights for Mirage Resorts.

My report will include highlights for Bellagio, the Mirage, the integration of Monte Carlo and a construction update.

The Spa Tower at Bellagio continues to drive strong results.

Hotel revenue is up 25 million, or 42%, for the second quarter.

Even with the addition of 928 rooms from the Spa Tower and the opening of a new Strip resort, we were able to increase both occupancy and ADR at Bellagio in the second quarter.

The Bellagio expansion is also large contributor to slot revenue.

Slot revenue at Bellagio is up 11 million, or 33%, for the quarter compared to prior year.

An interesting statistic is the fact that, before the Spa Tower opened, Bellagio never had a quarter where the slot revenue exceeded $40 million.

Since the opening of the Spa Tower, slot revenue in the first and second quarter was 48 million and 43 million respectively.

As a side note, a new property opened on the Strip in April and I am pleased to report that Bellagio has done very well since that opening.

Indicators such as baccarat drop, slot handle, and RevPar have all increased during the second quarter compared to the prior year.

At the Mirage, hotel revenue is also strong.

RevPar for the second quarter was $166, compared to $148 last year, an increase of $18 or 12%.

Booking trends continue to be very strong for all Strip properties and we expect RevPar increases to continue into the third quarter.

The Mirage's gaming revenue for the quarter is down $4 million, or 5%.

This is primarily due to construction projects which resulted in a temporary decrease of approximately 200 slot machines and one table games (paid).

The integration of Monte Carlo is well underway.

The tram connecting to Bellagio was re-opened at the end of the first quarter helping to increase foot traffic.

Monte Carlo will also be converting slot board to 100% ticket-in-ticket-out technology.

Our popular Players Club Loyalty system will also be implemented to further integrate Monte Carlo into the MGM Mirage family of properties.

An additional benefit to the acquisition of Monte Carlo will be a direct connection into the Project City Center.

A quick construction update -- at the Bellagio, the newly renovated and expanded poker room opened on April 27, with tremendous results.

Also, the remodeled baccarat bar was opened earlier this month.

And, construction of a new high-limit table games area is on schedule and expected to open during the third quarter.

At the Mirage, a new high-limit table games area was successfully opened in June.

Construction projects currently underway and expected to open by the end of the year include the remodel of two fine dining restaurants and a new Jet nightclub from the Creators of Light.

Construction on the Beatles-themed Cirque Du Soleil showroom is progressing and is scheduled to open during the second quarter of 2006.

Down south at (Bole la vage), the new lobby lounge named 875 opened in May.

The $4 million lounge has already made the top 100 list in Nightclub and Bar Magazine.

This is the only bar on the coast to do so.

And lastly, the construction of a new Fazio-designed golf course is proceeding as scheduled. 80% of the course has been sodded and construction of the clubhouse began last week.

The golf course is expected to open in the first quarter of 2006.

That concludes my report, and I will turn it back over to Jim Murren.

Well, thank you, John.

I would like to give you some other financial data for the quarter and then get into our forecast for the third.

You see that the actual corporate expense was 32 million.

That was higher than we had given you -- obviously, the guidance we had given you was 20 million but that was pre-Mandalay.

It ended up being about 25 million pre-Mandalay.

As I have mentioned earlier, we have already cut a lot of corporate expense out of Mandalay so on a going-forward basis, you should be using around 120 million a year in corporate expense on a combined basis.

Interest expense, of course, was higher related to the transaction.

Our gross interest was 174 million, cap interest was 7, so we had net interest of 167.

That compares to numbers of ninety-eight five and 93 million of net interest, respectively, in the prior year.

You might notice our unconsolidated income was basically flat, up a little bit.

Couple things to note there -- obviously (Bogata) was up year-over-year in the quarter, but we had a couple of changes there.

We added two (Beau) properties for two months, Grand Victoria and Silver Legacy were in for two months the quarter, basically.

But Monte Carlo was out for two months because, of course, it is a 100% owned operation right now.

So, it is kind of an apples-to-oranges comparison.

From an adjusted net income standpoint, the little items -- and they are all very small this year in the quarter -- pre-opening startup was 3.9 million, most of that was at the MGM Grand Macau property and also a little bit at City Center.

Property transactions was under $2 million, 1.8.

That was some demo work at the Mirage for the new showroom that John talked about and some work at the MGM regarding room remodels.

We had a couple of tax adjustments in the quarter which benefited us so we broke that out for you and deducted that to get to adjusted earnings.

We realized $11 million benefit related to repatriating money from the sale of the MGM Grand Australia property.

We offset that with some additional state tax deferred expense related to the Mandalay merger.

Everything else is even more minor than that.

From a financial perspective we didn't acquire any shares in the second quarter.

We did, however, reduce debt dramatically -- in fact, $513 million of debt reduction, that is -- well, actually, that is astonishing -- big reduction in debt in the second quarter.

From a capital expenditure standpoint, we spent 121 million in the quarter, about 17 million of which was at the Mandalay properties.

For the year, our guidance is 550 million and that includes Mandalay.

So, that means we will spend around 225 million in the second half of this year.

We don't have any, as John said, significant capital plans for Mandalay right now other than the new slot technology.

We do have several maintenance projects and cleanups that we are working on now at all the properties and, of course, at the Mandalay properties.

We are rolling Players Club, our database player management system, throughout the properties.

That will take about a year and a half.

And, this is a big number, but we will have over 35 million names in our data base, which is a lot, I would say.

From a standpoint of -- also in capital, we made our equity investment in the Macau in the second quarter -- that was early in the quarter -- at 177 million.

Going forward, the only other financial obligation is a partner loan of 100 million.

We have previously disclosed that.

Before I turn it over to the questions we will give you some guidance, as we typically do, for the current quarter, the third quarter, consistent with what we try to give you on an ongoing basis.

We expect another very strong quarter as it relates to Company-wide, but certainly as it relates to RevPar.

We think RevPar will be up around 8% over '04 -- that is on a pro forma basis -- at our Las Vegas properties.

That, by the way, is versus a comparison of up 12% year-over-year in the prior-year quarter.

And we, of course, are generating significant new business on the hotel side at the Mandalay properties.

We had over 50,000 occupied room nights year-over-year just at the Mandalay properties this year's last second quarter versus the prior year.

So, we are driving a lot more business into all of our properties but RevPar, in particular, looks like it will be stronger.

And rooms revenue, therefore, will be in excess of that.

In fact, to give you a comparison -- we mentioned, on the Strip, before Mandalay in the second quarter that our RevPar was up 15%.

Our rooms revenue was actually up 24% in the second quarter on an excluding Mandalay basis.

So, we are driving a lot of revenue with this RevPar and obviously it is flowing through to a lot of profit.

From an income statement standpoint, I gave you the corporate expense number already.

Interest expense -- basically around 200 million of gross in the third quarter.

Maybe, capitalized interest will be 8 to 10 million.

Depreciation in the third quarter we are forecasting to be approximately 165 million.

And our tax rate, like the last quarter, will be around 36 to 37%.

From a debt perspective, we issued $500 million of ten-year paper in the second quarter.

We hit the market pretty well on that.

That was at 6 5/8.

I think ten-year (inaudible) was around 394 when we did that.

Obviously, it has moved up since then.

Our fixed-to-floating -- we are at 60% fixed as of the end of the quarter, 40% floating and, obviously, strategy is to become more fixed as time goes by as we rapidly deleverage the Company.

Our leverage, by the way, was around 5.5 times at the end of the second quarter, roughly.

From a standpoint earnings per share, we have looked at the Street consensus and we think it is reasonable.

The Street is at $0.42.

We don't think there will be any significant pre-opening, restructuring charges or anything in this third quarter.

It is a pretty simple quarter.

I gave you the capital expenditures guidance and that, of course, excluded Macau and Detroit but it does include all the maintenance capital -- the theater at the Mirage that John (Corchess) talked about, the golf course which -- I hate golf, but I am told it is a beautiful course -- and all the slot technology that we are acquiring and some spending at City Center.

From the standpoint of debt reduction we expect, obviously, to continue to deleverage the Company over time and continue to improve our balance sheet even while we are investing in our properties.

So, with that we have -- oh, that is pretty good.

We have about 25, 30 minutes for your questions so I will turn it over to (Paige) and we will get right to it.

[OPERATOR INSTRUCTIONS] Your first question comes from Steve Kent with Goldman Sachs.

Good morning, Jim.

Just a couple of quick questions.

I know it is early on Macau, but could you just give us a little sense for the construction environment in Macau?

What are you seeing there as you start to move dirt around?

Are there enough construction workers?

What are some of the real big milestones we should be looking for to see that you are right on track, right on time for this project over the next 12 to 24 months?

And then, I know you gave a little bit of color on the Wynn opening and the impact, but maybe you could just give a little bit more on sort of what you are seeing on the high-end gaming revenue movement -- whether people are staying in your hotels, gambling but also taking a visit over to Wynn and spending some money there.

I am assuming some of that is going on.

But is it greater or less than what you originally thought was going to happen -- just on the movement of high rollers back and forth between your properties and Wynn?

Okay, Steve.

I will try to hit both of those and anyone can, obviously, jump in.

First on Macau, we are really very fortunate.

We have a tremendous contractor building this project for us.

The company's name is Hip Hing.

And they built, I think -- they built the airport in Macau and the tallest building in Macau and they are a very major contractor.

And, they are extremely well organized and have all the subs in line and so, from a labor perspective, we are in very good shape there.

And a pleasant surprise lately, all raw material prices, actually, have been coming down -- particularly steel coming down dramatically, but all raw material prices have been coming down.

So, we feel very good about our construction budget at this point in time.

So, from a standpoint of timing, labor and now cost as well, it is a positive story.

And, Terry mentioned when we think we will open it.

As relates to Steve Wynn's beautiful new property and what has happened to us -- well, it has done as we had expected and it obviously has grown to market.

And I guess, one example of this would be looking at Bellagio which would be a property that I am sure he had his gun sights set for.

I think our table drop in the second quarter alone was up, what John, around 20% or something -- ?

17.

-- 17%.

Our rated and unrated table drop was up 17% in the second quarter.

That is about as good a number you can hope for and that is right after the opening.

In fact, you can look at, Company-wide, we had very strong table play at the high end.

So, the high-end business for us is all about what we provide to the customers, which is the variety of restaurants, the best rooms, Shadow Creek, all of our entertainment.

And, the customers are speaking very loudly that they love MGM Mirage on the high end.

And, I don't know if there is anything else to add to that unless you -- Terry or John?

I just would add this that it seems to me that, if you take a look at the original opening of that property, we would have historically, people come and stay in one hotel casino from the Far East and they generally visit two others when they are here.

Our goal has always been to have the other two be MGM Mirage properties.

Now, we have the advantage of having the hotel at Mandalay Bay which can cater to the higher end.

But, we saw instances where people did make their second or third stop the Wynn property and our goal is to bring those people back.

We have seen some very strong movement in that regard where the people who have made Wynn the second or third point on their stop staying at one of our properties are now coming back to the point where they stay at Bellagio but they go to MGM Grand, Mandalay Bay, or Mirage.

So, that is our goal.

That is what we have had historically.

And, I believe we will have great success in this matter.

Just going off of Terry, we are obviously almost a month into Q3.

We still haven't seen negative impact whatsoever.

And Mandalay Bay for Q2 had its highest baccarat month in the history of the property.

Great.

Thank you.

Thank you.

Your next question comes from Robin Farley with UBS.

Thank you.

Two questions.

One is just looking at the results on a same store basis, it looks like your rooms in service -- just based on the Bellagio Tower and some rooms that had been out of service for renovations last year -- rooms in service were up maybe 6%, maybe 9% something in that range and that the gaming volume, the table volume and spa revenue was not up as much.

Is that just the Mirage property -- what you talked about having some things out at the Mirage property or were there other properties where that was the case also?

And then the second question is just wanted to get back in the envelope what Mandalay contributed to earnings for the quarter.

Is it fair to say it is 0.10 to $0.12 range for EPS?

There is, obviously, a couple things we use to make assumptions about but maybe you can give us a range.

Thanks, Robin.

I don't know how much I can give you on this.

But, our rooms available, I think Dan, was up around 7.5, 8% -- ?

Right, on a same store basis.

-- on a same store basis and, of course, our whole percentage was lower year-over-year which impacted our gaming revenue.

Even the table volume, the table drop?

Yes, and where we had lower table drop we had at the Mirage.

We had some issues there because, we have -- of course, we don't have a show.

We don't have restaurants.

And it has been under construction.

So, I would say on that case that is where I -- right, John?

Is that right, John?

Yes, and every other property, just about, there was at or above in terms -- the number for rooms.

So, we have actually picked up market share overall.

We have picked it up in baccarat in general.

We have picked it up in tables, in general.

And some properties in particular, like Bellagio and the Grand, had tremendous results on volume, on gaming volume -- better than twice what the rooms were.

From a standpoint of the accretion to Mandalay -- frankly, we haven't figured it out from a EPS perspective.

And, I am a little bit hesitant to give you a guess number.

We knew before we acquired Mandalay that it would be accretive.

Many things have worked out better than we had expected.

Obviously the interest rate environment has been far better than we had projected when we made that quite bold statement before we acquired Mandalay.

We didn't have to issue any equity which had a profound impact on accretion.

And also, we got a nice number for Motor City, a little bit more frankly than we thought we would get for it, which resulted in lower overall debt.

So, from the standpoint of per share number, I am not ready to give you that.

I could figure something out.

But I would say that, if you will recall, we had given guidance on the second quarter pre-Mandalay and I think there was like $0.35 to $0.38 then?

We said on a post-split basis that we felt 35 to 38 was a good number.

We actually -- the MGM legacy properties did better than that.

And so, you would have to add Mandalay to that.

So, that will get you pretty close.

When you say "close," is that $0.10 to $0.12 range is -- roughly?

It is way too high.

As I said, MGM legacy -- our guidance was $0.35 to $0.38 pre-Mandalay.

The MGM properties did better than that.

So, you can estimate a number.

Let us say for, sake of argument, $0.40, plus or minus.

So, Mandalay would be added to that.

And that is including -- when you say the legacy properties did better than that original guidance, just to clarify, you are including even the impact of -- you mentioned some of the lower margins due to the actuarial adjustment, higher bad debt and the hold issue -- even with those factored in, the properties pre-Mandalay did better than that range?

Yes, they did.

Great.

Thank you.

Your next question comes from Joe Greff with Bear Stearns.

Good morning, everyone.

Jim, I don't know if you can talk about 2006 CapEx, but can you talk about some of the things that you are thinking about at Mandalay and some of the other CapEx items?

Well, we will next call for sure, Joe.

We clearly had identified, pre-Mandalay, many projects that we felt would be very impactful to earnings at the Mandalay properties.

We obviously have a different philosophy as it relates to capital than most of our competitors.

And I think the results speak for themselves.

It is not a mystery why we do so well.

It is because we invest so much money in our brands, renovating and upgrading our properties, in our people, et cetera.

So, I think you could assume the same with Mandalay.

They had one thing you did know -- they had a rooms remodel scheduled at Mandalay Bay, correct John?

That is correct.

And we pushed that off, actually, a little bit because we are evaluating what John and his team are looking at what, exactly, we would like to do to Mandalay Bay from a rooms remodel standpoint.

But we renovate, as you know, all our rooms on a defined schedule, around five years.

And, we will be doing that, certainly, at Mandalay Bay -- I think Luxor as well.

I think next quarter you will hear a lot about food and beverage opportunities, casino layout and upgrades, retail opportunities, room projects which we think will drive very good returns.

And, I think I will make a comment on that, and that is that I would look at the MGM Grand at a template.

We have totally repositioned that property and that is why it is achieving record results right now.

And, we took a property with fairly mediocre restaurant, room and retail offerings and have made it one of the best in our marketplace here.

And,we intend to do that -- add up the properties that we own.

And, we have seen very, very high ROI on those type of capital expenditures and we would expect the same at the Mandalay investments.

Great, and just another question and maybe it is for John.

Can you talk about the group bookings for 2006 -- I guess how they look relative to maybe how they looked like this time last year?

Maybe you want to deal with kind of inclusive and then (enclusive) of Mandalay.

Well, you can look at either way.

I mean, they are both extremely strong.

But, when you look at '06 -- looking at where we stand at this point in time this year -- and you look at it versus this point in time last year, at the MGM Grand we are up in a range of about 26%. and at Mandalay Bay we are up around 39%.

So, it is a -- very strong ,as you can see.

Great.

Thank you.

Your next question comes from Harry Curtis with J.P. Morgan.

Good morning.

A couple of quick questions.

Could you talk about just specifically your baccarat revenues going forward?

Do you think they can at least stay flat?

You mentioned that your table drop was up 17% since Wynn opened.

But looking forward, do you think that the baccarat drop can stay flat over the next couple of quarters?

I would be disappointed if it stayed flat.

I think we can increase it and we have seen indications of that.

Preliminary thoughts of people visiting coming up toward the third and fourth quarter look very, very strong -- from the Far East especially.

So, I doubt we would see anything flat.

Okay.

And then, Jim, you have got a fair amount of invested capital coming.

Can you just talk about how much debt you might be able to pay down over the next 6 to 12 months relative to that investment?

That is a good question, Harry.

Maybe a good idea is to go back and I will give you rough numbers because I am going to do it off the top of my head so don't hold me to it exactly but I think that would be a good schedule to actually do, Dan.

When we acquired Mirage, that was -- what in May of 2000, so in that, in basically five years we incurred a considerable amount of debt.

If you recall then that was cash transaction.

We paid $6.4 billion for Mirage.

And yet, over that five year period of time, we reduced debt by a billion dollars and, at the same time, we invested $2 billion in our properties and bought back about a billion dollars worth of stock, plus or minus.

Those are kind of rough numbers.

But we look at our capital plans in a continuum and certainly we are going to reduce debt while we are investing considerable amount of money into these growth initiatives and I wouldn't rule out share repurchases.

We actually have authorized a 20 million share repurchase program.

We have been very aggressive repurchasers of our shares in the past, about a billion six worth of stock since 1998, in fact, at a nice average cost of, like, 13 to $14 a share.

And we look at it in a continuum.

So, I guess my answer to -- we are a bigger company today.

We are throwing off a significant amount of free cash.

We are going to balance our debt reduction, which is a priority right now, with the capital to grow this company.

The capital will be spent on high ROI projects that we have proven our success in terms of upgrading the existing facilities and in growth initiatives like Macau, like City Center, and like Detroit.

And, from a standpoint of share repurchase that will be balanced with those two major initiatives.

And, I would expect that we do all three in significant dollars over the next five years.

You ended the quarter at a gross debt around twelve three.

And I don't want to pin you to anything, but I will take a modest crack at it.

In the next 12 months, do you think that that could get to 11.5 or 11.8, somewhere in that neighborhood?

Well we paid off $500 million in, basically, two months which is pretty good.

And, we are investing right now.

I would say that, over the next 12 months, we should at least be able to pay off another 500 million.

And, I think that that is in the context of doing everything else that we have talked about.

And if you look at what we have got going on right now -- City Center.

We aren't spending a lot right now.

The big capital dollars are in '07, '08, '09, really.

And so, we will throwing off a lot of free cash even with the capital that we are anticipating spending.

And as I say, I wouldn't rule out share repurchase as well.

Very good.

Thank you.

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

Good morning, Jim, and everybody else.

I got a few questions.

First, just a housekeeping one.

Could somebody just go over the residences at MGM in terms of the opening dates?

I missed a couple of those -- just want to make sure that I have them straight.

I think you might have said, or somebody might have said, that the first two towers are actually opening simultaneously in May of '06 -- I wanted to check that, plus the third tower.

And then also, into Macau and Singapore I was wondering -- you talked about the first project in Macau.

Can you give us an update on what would be the earliest you might see a second joint venture project in Macau?

And then, in regards to Singapore, could you give us an update on what your thoughts are there and your opportunities?

Jay, this is John Redmond.

I will touch base on the residences.

I mentioned Towers One and Two will open May and December, respectively, of next year -- so, Tower One in May, Tower Two in December.

Tower Three construction will start in the September, October time frame of this year and open approximately 18 months after that.

Great.

That is helpful.

I missed that December part.

Jay, this is Terry Lanni.

On Macau, we are obviously focusing right now on -- our primary objective is the development of MGM Grand Macau.

We are in the preliminary stages of looking for additional land in other areas of Macau because we see it as a very strong and growing market.

But, there is nothing to report at this particular point.

We and our partner are very intent on a broader based involvement in Macau beyond a single hotel/casino.

And in Singapore, recently we had, as I think everyone knows in the world, Prime Minister Lee and Foreign Minister (Mao), and if I go any further, I will begin to sound like President Bush about the for

We are obviously interested in that particular marketplace.

The request for concept phase is completed.

The Prime Minister indicated they are expecting as many as 12 different proposals for the first facility which is the integrated resort to be built in the marina district in Singapore.

I think that it is fair to say that the expectation is sometime in the third quarter -- probably towards the end of that.

The request for proposal will be provided and we will evaluate that and determine what our next step would be, depending upon that request for proposal.

Okay.

And if I could just ask some quickies here on Project City Center.

I know there is a lot that goes into the development plan in regards to what you are going to own and what you might joint venture on, et cetera.

Is it possible to get an update in regards to capital expectations for that, even though it is a few years out as we are looking at longer term models?

And also, in regards to the residential development or condo hotel development how that net basis might play out?

Well, I think we are going to have a lot to say on our next quarter call because we certainly want to give you a complete picture.

We will be -- I hate to dribble out information other than what we already provided except to say that we are in construction now in fact because we are building the new parking garage for all the Bellagio employees which will open up next summer.

That parking garage is important because our employees are, today, surface parking on the City Center site.

Then we will, immediately after that, begin doing -- that is about a $90+ million dollar garage.

It is a beautiful garage.

And, it better be for 90 -- And, we will be doing some CapEx as we prepare the rest of the site -- knock down some buildings, improve the site and getting it ready for City Center.

And then I think from a residential perspective, we are learning quite a bit about this market.

It obviously is extremely strong, especially if you have the good locations.

And City Center -- you don't get a better location, residentially, than City Center.

If the residences at MGM Grand is any indicator of the value of being associated with a brand like MGM Mirage has, and having a location which is superior to any in the marketplace, we have a feeling that the demand will be extraordinary.

In fact, we already know that it will be extraordinary for the residential component.

We would want to control that if we could.

But obviously, we are going to own much of this, if not most of the project.

And we will be able to give you a very detailed pro forma by the end the year, certainly -- but a lot more information at the third quarter including names of architects, contractors, retail partners, residential ideas, et cetera, as the year progresses.

Great.

Look forward to it.

Thank you.

Your next question comes from Bill Lerner with Prudential.

Thanks guys.

Two questions, Jim, this is the first one.

You had mentioned the, kind of, the starting point in the bank, 100 million in cost saves because of the Mandalay deal.

Could you just clarify, is that on a gross basis?

My sense is maybe you would need to add some costs to the Mandalay system and so maybe there is a net number or maybe I am wrong.

And then the second one is, on City Center -- you seem to have the opportunity to buy down the cost of that project substantially.

I want to get your sense on whether you might consider selling filler retail space there or selling some hotel pads.

I just want to get some color there?

Sure, that is a net number -- the cost savings.

So that is a number that translate directly into earnings.

And, I think that number will grow.

Okay.

From a standpoint at City Center, if I understood the question correctly, would we sell down some of our capital there by selling, perhaps, some of the retail other components of that?

I would -- my answer to that, is that is very premature.

And retail is going to be extremely successful, we believe.

This is not going to be yet another mall in Las Vegas but something that hasn't been accomplished before, here but is extraordinarily successful in other parts of the country.

And the -- Frank Visconti, who is running that effort for us with our retail partners soon to be disclosed, have very, very high expectations for the revenue per foot that we will get out of the retail.

So, that is generally not something we would want to give away or sell at this point in time, nor do we need to, because we certainly have the financial resources to build the project.

That's helpful, Jim.

Thanks.

Your next question comes from David (Andrews) with Merrill Lynch.

Great.

Two questions.

First, Jim, was the MGM Grand margin affected by the workers comp disproportionately or the hold, just because it is declined?.

And second, for John Redmond, is there any way you could to categorize or just give us a feel for who the average buyer of your kind of hotel properties are?

Yes, the Grand was hit by the workman's comp issue.

John might want to expand upon that and get to the other one.

Yes, we were hit as well, close in the neighborhood of about 2 million.

And with respect to (inaudible), that impacted the margin as you mentioned, David.

And when you look at the average buyer, as for residences, you are now in the Tower Three.

We are selling these residences -- this product now right now in Tower Three -- on average that is just under 1000 a foot.

The units are anywhere from 600 feet for the studio, 900 feet, one bedroom or 1500 feet for the two bedroom when people combine them.

So, 1000 a foot for a million five for one of these on average.

Obviously, some people are paying upwards of 13, 1400 a foot.

Some are paying a little less so it is blending out at that.

Your average buyer is specifically a second home, third home, fourth home buyer type of thing.

These are well-heeled individuals.

They love the hotel component of the package.

But we are very excited by this, which is why we are moving quickly to go ahead and go into the ground on Tower Three as a time frame that is quicker than what we looked at in doing a Tower One.

So very, very impressed by the fire and how quickly we're selling this product and that's what gets us so excited, as Jim alluded to, when you are looking at the City Center location.

If we are getting 1000 a foot at the Grand, you can only imagine what City Center is going to command.

Great, thank you.

Your next question comes from (Amy Marcel) with Jeffreys and Company.

Actually, it's Larry.

How are you doing?

Good results, guys.

Couple quick questions, the hold hit, could you quantify how much that was and was that at the Mirage also?

It was at the Mirage also, and it's roughly around 10 million.

All right.

Yes.

Okay.

Second, July trend for Las Vegas, I am hearing good things, is that the case?

Yes.

Can you talk about what kind of gains you are seeing Company-wide, or not, really?

We gave the RevPar guidance and we are off to a good start here in the third quarter and John gave pretty clear indicators on our convention business which in general looks like it is going to be very robust in the third quarter, gaming business has also started off well.

So -- at least as strong as the room numbers.

So, we are off to a good start.

As far as convention bookings go, how does it look for the next year, next half of the year for the convention center?

John, I think, touched on that, didn't you, John -- or -- ?

We gave for the next quarter --

But I am looking a little longer term, as people book out a little bit.

Well, we touched base on '06 on one of the questions we got.

I guess the gentleman asked and we gave some guidance in that regard.

If you look at '06, the fourth quarter '05 is in the same range.

When you look at that same approach, that I mentioned for '06, you're over 50% ahead in booking pace in '05 as well, when you compare it to where we stood this time last year.

So obviously the balance of '05, third and fourth quarter are very strong and '06, as I previously mentioned, as well, is very strong at this point.

And you are adding slots to the Excalibur?

Did I get that right?

That is correct.

How many?

Right now we are probably looking in the neighborhood of about 170 machines.

Okay.

And then the last question is, how did Bobby do in the world series of poker?

You have to ask him.

He didn't win.

Okay, operator, I think we are running into the time and we will take one question and then -- one more -- and then we will have to wrap it up.

Your final question comes from Dennis Forst with Keybanc.

Okay.

Wanted to ask about capital expenditures, Jim.

I was trying to reconcile the number.

You said 121 of capital expenditures in the second quarter?

That's correct.

And that brings it about -- that should be about 230 for the first half?

That's right.

And you said 225 in the second half?

Yes, but overall about 550, because --

How is that?

The (inaudible) difference is City Center and other capital.

The second half capital I gave you was excluding the growth initiatives.

I should have been more clear.

So, the 225 is primarily maintenance in the second half?

Yes, but as we define maintenance which is a little bit -- it's the theater at the Mirage, it's restaurants at the Mirage, it's the nightclub at the Mirage, it's more the restaurants and everything going on at the Grand.

It's the slot machine, we have a very large purchase of slot machines that will be -- especially at the Mandalay properties and all that is in that number.

And on top of it, the difference is City Center and other growth.

Okay.

So new (de novo) building?

Yes.

And then what is a typical going forward maintenance Cap Ex, pure maintenance, would you guess, on an annualized basis?

I don't know yet.

To be honest.

We're going to know that.

That's a good question to ask on the next quarter because, what's going to happen is all the properties -- of course, we would know it on the MGM -- Legacy MGM properties, but we are spending a lot of time on the Mandalay properties.

And they were running around 100 million a year, 50 to 100 million a year.

We were running around 200 million a year.

So, to give you a rough guess right away, I would say let's say 300 million.

But I will give you a much better number at the end.

And then lastly, on the residences, when those are sold, can you give us an idea of how much cash is going to come into the till and how much profit is going to go through the income statement?

Well, we recognize the income -- Bob, correct me if I'm wrong -- when we get the certificate of occupancy.

And I think John gave you the two opening -- days --

Sure.

We haven't disclosed what that profit is to us, but it's a substantial number.

And we will have to decide if we will give that out to you.

What we are going to do, obviously, is break it out so you will know exactly what the number is and we certainly know what the number will be.

But it's a big number.

And then on an ongoing basis, we expect to get cash flow because those units will be -- we hope almost always occupied.

And therefore we will get cash flow through food and beverage, rental of the rooms are share, and entertainment, which we've estimated to be several million dollars a year.

Okay, great.

Thank you.

Thanks a lot.

And operator, I think that will be it and I will -- on behalf of everyone here thank you very much.

I hope you found it interesting and helpful.

As always, we are around for your questions.

This concludes today's MGM Mirage second quarter conference call.