美高梅國際酒店集團 (MGM) 2005 Q4 法說會逐字稿

Good morning, and welcome to the MGM MIRAGE fourth-quarter conference call.

Joining the call from the Company today are Terry Lanni, Chairman and Chief Executive Officer;

Jim Murren, President, CFO, and Treasurer;

John Redmond, President and CEO of MGM Grand Resorts;

Bobby Baldwin, President and CEO of Mirage Resorts; and Gary Jacobs, EVP, General Counsel, and Secretary. [OPERATOR INSTRUCTIONS] Thank you.

I would now like to turn the call over to Jim Murren, President, CFO, and Treasurer.

Please go ahead, sir.

Thank you, and good morning, everyone.

As always, our call this morning is being broadcast on our website, MGMmirage.com, as well as on companyboardroom.com.

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

We filed a Form 8-K this morning with our press release.

In addition we have significant financial information on our website that gives you great detail behind the numbers that we put in our release, as well as pro forma information and information on the Mandalay resort properties for the prior year.

As always we need to remind you that information we present in 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 that we make in our annual report on Form 10-K for the year ended December, 2004, which we file with the SEC.

With that mouthful, I'll turn it over to Terry Lanni for an overall discussion of our results.

[Begin Audio Difficulties] Thank you, Jim, you get to do all the fun stuff.

This morning we reported adjusted EPS for continuing operations as noted in our release as $0.35 for the fourth quarter of 2005, that's an increase of 25% from the $0.28 per share we earned in the same quarter of 2004.

We exceeded our key forecasts for the quarter.

Forecast pro forma strip REVPAR as you might remember to be up 6%.

But actually for us increased 8%.

Our EPS forecast was the range of $0.30 and $0.35.

Most recent consensus for the Street was $0.33.

Western New Year's was strong across the board in our properties.

The new restaurants and other improvements at the Mirage are getting tremendous reviews and have already been positive.

Positive -- Mandalay we have successfully executed our strategy to increase occupancy, as part of that, the Company acquired in April of 2000.

Which has really led to strong increases in room revenues as well as increased customer buying in restaurants, entertainment venues, and on the games.

I think it's fair to say that our strategies clearly led to enhanced financial performance.

High end, if we could talk a little bit about that.

We hosted a record number of guests during the Chinese New Year's this period.

At our properties in the strip.

And that's basically, if you look at it, Bellagio, MGM Grand, and Mandalay Bay, and Mirage.

Those properties are focused at the higher end international business.

We believe the conditions are very strong in the Asian markets involved in that part of our--.

Let's talk a little bit about development.

Macau, our construction continues to be on pace.

I was there last week.

We're on target for the fourth quarter, 2007, openings announced--.

Singapore, we're in the process of preparing our proposal.

We all know that proposals are due in the marina district March 29, of this year.

And that clearly will call for an iconic development worthy of its place as the centerpiece of Singapore's Marina Bay district, a great location, it deserves an iconic.

Our resort itself is being designed by a team of world-class, international architects.

The integrated resort will feature a variety of destination dining establishments, renowned entertainment, a world-class spa, and of particular, emphasis on meeting and convention facility.

Goals that we've put forward will achieve Singapore's goal of drawing both business and leisure travel.

While also serving as a new icon of Singapore.

We believe that our joint venture with Capital Land provides the best economic impact for the government of Singapore.

And we believe we are the leading resort based gaming company in the world.

Project CityCenter and MGM Grand Detroit, Bobby and John will provide more details on that in their remarks shortly.

In New Jersey, we'll remind you that Borgata is expanding in New Jersey.

The market is performing very well overall.

We have significant land holdings at Borgata which we continue to, evaluate for future development.

There's no reason that a CityCenter east -- develop on that 55-acre site, buildable site next to Borgata with welcome enhancement thanks to already successful--.

With that I'd like to turn this back over to Jim for a few comments. [End audio difficulties]

Thank you, Terry.

Just as a reminder we have a lot of information on our website.

So I'd encourage you to take a look at that in addition to our release this morning.

We talk about the same-store results in our release, and we give you all the Mandalay properties, as well as Monte Carlo, of course, on the website.

You also will recall that we are incurring expenses at Beau Rivage.

We are not recording those expenses because we believe we're adequately insured for those expenses.

But we are not recording income or lost profit for Beau Rivage until we settle our claims with the insurers, and we're working nicely with them right now.

We had a very strong quarter, as Terry mentioned.

There were some items in there that affected the quarter that I want to bring to your attention because the quarter was perhaps a bit stronger than even at first blush.

Of course, once -- one item would be Beau Rivage.

It earned $0.03 for us last year.

It didn't this year.

Another item there is that we had significant merger-related expenses in the quarter.

That was a couple cents a share.

So we had given you guidance of corporate expense of in the low $30 million range.

It was 40 and largely that was due to corporate-related merger expenses which we believe is corporate.

And we don't exclude that from our adjusted earnings.

Also in the quarter, we had a tax adjustment credit last year in the 2004 period which added a couple cents to the fourth quarter of '04.

So as strong as the quarter was, if you put it on an apples-to-apples basis our earnings per share would have been up over 60% in the quarter.

And that is not even taking into account the fact that our hold was down year-over-year.

So it was a very strong quarter across the board.

We're very proud of the results from an operating perspective.

And we certainly have set ourselves up nicely for growth in the first quarter of this year and going forward.

I mentioned a little bit about the hold.

We mentioned it in the quarter release.

It was down about 200 basis points on tables year-over-year.

That's about $0.05 a share difference.

To put that in perspective for you, between the fourth quarter, this one we just reported versus a year ago.

So a significant change in whole percentage.

Both periods within our normal range of 18 to 22, but the fact that just that delta is a lot of earnings per share.

We had very good table volume.

And both -- it was up on a same-store basis, as well.

And our slot volume and handle were up substantially.

So our slot handle was up 11%, revenues were up 11% against tough comps.

We're very proud of that result.

We had great results as you know.

You could see from the release.

But particularly strong at Bellagio and MGM Grand and MGM Grand Detroit.

And we've had great slot play really around our company properties.

And that's because we've expanded the amenities throughout the resorts.

We expect those slot volumes to continue on a going-forward basis because of the amenities we're adding to Mirage, our other properties in general, and we're excited about that.

I'm sure Bobby's going to talk about the new show at the Mirage.

From a hotel perspective, the hotel demand was very strong really across the board.

Pricing's up and strong.

We had great room revenue, up 20% on a same-store basis.

It's pretty amazing given the size of our company.

And of course, when you get better people in your buildings from a profit perspective, you see great result in your food and beverage, your entertainment retail, and gaming.

We saw that surely.

So our overall revenues for I guess available room, if you want to look at it that way, grew far more than even the hotel revenue per available room.

Significant, double-digit increase.

You just looked at the room revenue, room REVPAR was up 8% against a tough comp, and we a lot more rooms available to rent this year, 160,000 more room nights in the current year quarter.

That's because of the Bellagio spa expansion and the remodel and expansion at MGM Grand.

So very good on a same-store basis, also on a pro forma basis.

And I guess the punchline there is not only is our room REVPAR up, but our overall revenues per available room were up more substantially in a healthy, double-digit rate.

We mention our same-store property EBITDA was up 11%.

And our margins were very high again at 33%.

And that's consistent with the prior-year period.

Terry mentioned finally on Mandalay, and we'll get into this more later on, but they did great.

The properties did great in the quarter.

The cash flows are up 10%.

We have tremendous people running those properties.

And the results speak for themselves.

And the integration of Mandalay into the family of MGM MIRAGE is going smoothly and very profitably.

We've already booked significant savings.

The last number we had articulated was 125 million of cost savings on an annualized basis between revenue uplift and cost savings.

I'm proud to say we're now up to a little over 135 million, and that number is rising as we continue to integrate, find ways of creating more power within the MGM MIRAGE family.

And improve profitability.

So with that I'll turn it over to John Redmond to talk about MGM Grand resorts.

Thanks, Jim.

Good morning, everyone.

Every property in the MGM Grand resorts experienced EBITDA growth of at least 8% in Q4 of '05, versus Q4 of '04.

At the Grand, Q4 continued its impressive performance with EBITDA of 72.2 million in the quarter versus 62 million in Q4 prior year.

The best fourth quarter in the Company's history.

REVPAR at the property was up approximately 11.7% as we continue to see strong acceptance of the West Wing room product.

Foot traffic was very strong driven by cost, monorail passengers, and the stellar Grand Garden event calendar which led to record revenue in slots, food and beverage, and entertainment.

For the year, MGM Grand ended up with EBITDA of 331.2 million.

Far and away eclipsing the previous best-year EBITDA of 290.4 million.

Next to Bellagio, MGM is the second highest EBITDA producer on the strip.

A quick update on The Residences.

Towers one and two are under construction and scheduled to open under the name The Signature at MGM Grand in May and December of this year.

Two weeks ago we began taking hotel reservations on The Signature.

Tower three, sales continue to be very strong with approximately 437 of the 575 units sold.

And we expect Tower three to be completed Q2 of '07.

The average sales price per square foot in Tower one was $788.

Tower two, $940.

And Tower three, $1,033 a square foot to date.

For the two-week period ending February 6, 16 units sold at an average price per square foot of $1,263.

Project CityCenter is more compelling after each sale at The Signature.

With regard to the convention market MGM Grand, the convention room nights were up approximately 49% in Q4 with the rate up approximately 20%.

Looking to Q1 '06, convention room nights are flat compared to a very strong Q1 in '05, and ADR should be up approximately 5% over Q1 prior year.

Booking trends for future quarters continue to be strong.

The Grand will have approximately 60,000 more available rooms in Q1 '06 versus Q1 of the prior year due to the West Wing construction which finished up in the latter part of Q1 prior year.

Moving to Mandalay Bay, Q4 was the highest fourth quarter in the history of the property, with EBITDA 58.1 million versus 51.1 million in Q4 prior year.

The catalyst for this impressive improvement was an increase in occupancy from 79% to just over 85% while increasing ADR to $206.

The increase in occupancy of approximately 26,000 room nights led to record fourth-quarter volumes in slots, food and beverage, and retail.

With regard to the convention segment at Mandalay Bay, convention room nights were up approximately 25.6% over Q4 prior year.

And the rate was up approximately 4.4%.

As with the Grand, demand in this segment continues to be very strong.

For Q1, '06, convention room nights should be up approximately 16% with the rate flat compared to Q1 prior year.

As I'd mentioned in the past quarters, our strategy for Mandalay Bay, Luxor, and Excalibur, is to drive occupancy and to focus on getting the proper product mix on the slot floors.

As with Mandalay Bay, we have improved occupancy of Luxor and in the fourth quarter, we replaced 1,000 slot machines at the three properties.

With new machines, bringing the total replaced machines to 1,900 for the year.

We still have approximately 500 more machines to replace.

This strategy has led to record EBITDA, room, and slot revenue at Luxor, and record EBITDA and slot revenue at Excalibur.

For the fourth quarter, slot revenue growth between the three properties increased 16%, with Luxor leading the way with 23% growth in slot revenue.

Luxor's EBITDA was up approximately 8% to 35.6 million without the benefit of a marquee show.

We're excited about the opening last week of the Broadway smash hit "Hairspray" which opened to great reviews.

Record slot revenue on Excalibur helped drive EBITDA to 32.2 million, up approximately 17% over Q4 of prior year.

With regard to the capital projects for MGM Grand resorts in the first two quarters of '06 we will complete the purchase of the remaining 500 slot machines I previously referred to at the Mandalay Bray properties.

In addition at Mandalay Bay we have begun a renovation and expansion of the pool area which would give us much needed additional deck space.

Currently during peak season, we cannot accommodate our guests out at that pool.

The renovation will provide further revenue opportunities with the addition of cabanas and bars.

As a result of the pool remodel, we are moving the wedding chapel away from the pool area to free up that valuable deck space to a location that overlooks the pool area along the walkway to the convention area.

We have also begun the remodeling of Rum Jungle and in the second quarter we will begin the remodeling of the restaurant 3950, transforming it into a new restaurant with a concept from a well-known chef.

We have also begun construction on multiple Starbucks in Mandalay Bay, Luxor, and Excalibur.

At Luxor, we continue to evaluate a master plan as we feel this property has tremendous potential.

During the second quarter we'll begin construction on a new nightclub which will replace Raw.

Given Excaliburs location on the strip, we feel there is tremendous upside by making more moderate improvements.

In the second quarter '06, we will be relocating the race and sports book along with the poker room to make way for a new restaurant/bar concept there.

We're very excited about these projects and look forward to announcing additional high ROI capital projects in the future quarters.

Moving to Detroit, Q4, again, very strong with EBITDA $36.9 million versus 32.3 million in Q4 prior year.

Couldn't help but take a look at Detroit.

If you normalize the rate of tax to what it was when the property opened, that property for the year would have done just around 180 million in EBITDA.

Beginning January 1 of this year, the gaming tax effectively increases by another 200 basis points.

Work on a permanent facility is well underway with an expected opening date in late Q4 '07 or early Q1 '08.

The budget for the 400 room, 100,000 square-foot casino complex is 765 million, 56% of which has been committed to date.

With the opening of the permanent facility, the gaming taxes roll back 500 basis points.

With that I'll turn it over to my colleague, Bobby Baldwin, to talk about Mirage resorts.

Thank you, John.

Good morning, everyone.

My report will include highlights for Bellagio, the Mirage, Beau Rivage, and then finally an update on Project CityCenter.

Bellagio's fourth-quarter EBITDA was 107 million.

The best fourth quarter ever for Bellagio, an increase of 14 million or 15% compared to the prior year.

Slot revenue for the quarter exceeded 50 million for the first time in Bellagio's history.

This 35% increase over the fourth quarter of 2004 is a testament to both the new spa tower and our customers' loyalty to the Bellagio brand.

Some questioned the idea of adding 1,000 rooms onto Bellagio a few years back.

And just to kind of put that question to rest, the Spa Tower cost $387 million.

And in its first year of operation, it did -- the Bellagio did $90 million more than its previous four-year average in EBITDA.

Table games drop for the quarter increased 10% compared to the prior year.

A 19% increase in blackjack drops can be attributed to the successful debut of Club Purvey, the new high-limit blackjack room which opened in September.

In addition, baccarat drop was the highest fourth quarter since 1999.

Following the gaming trend, the nongaming segments also had a very strong fourth quarter compared to last year.

Hotel revenue increased $19 million or 31%, with a $10 increase in Adr in spite of a 68,000 increase in occupied room nights.

In addition, food and beverage revenues increased 11 million or 15%, and retail revenue increased 18% compared with fourth quarter of 2004.

Expenses associated with operating the Spa Tower have now normalized at a level less than originally expected.

Bellagio's fixed expenses decreased by $86,000 a day in the fourth quarter, compared to the first six months the Spa Tower was in operation, improving the EBITDA margin to 33.7% for the quarter, up 40 basis points from the year before.

At the Mirage fourth-quarter hotel revenue was a record 41.6 million, ADR increased at the Mirage casino/hotel 5.2% or $8 to 161, and occupancy increased 40 basis points, to 95.8%.

Casino revenues also continue to drive strong results.

Table games revenue increased 26% compared to the fourth quarter of '04.

In addition, slots generated a fourth-quarter revenue record of 37 million at the Mirage.

Several large-scale construction projects which began in mid 2005 opened for business during the fourth quarter.

In October, the Mirage opened its new, high-limit slot room with a more contemporary decor and centralized casino location.

Three new restaurants also opened during the quarter.

Fin, a high-end contemporary Chinese restaurant, Stack, an American grill concept presented by the Light Group, opened in December.

Along with a fully redesigned Kokomo steak house and lobby lounge.

Finally, Jet, a new 16,000 square foot nightclub from the creators of Light opened December 30, 2005, in time for the New Year's celebration.

The opening weekend brought revenues in excess of $600,000 with no impact to the business at Bellagio's Light nightclub or Tangerine at Treasure Island.

Several projects still in the works at the Mirage include the new Japanese restaurant that opens in August of '06, as well as the Beatles' themed Cirque du Soleil production scheduled to open May, 2006.

The EBITDA impact of the show, the new Beatles show and the expected traffic from that show would be calculated at 12.5 million for 2006 and 25 million in EBITDA impact for 2007 and beyond.

As it relates to Beau Rivage, the Beau Rivage team has been working at full speed on the reconstruction effort.

All demolition, cleanup, and remediation work is complete, and the property has advanced into a full-scale construction site.

There are over 1,000 workers being utilized in the rebuilding effort.

We expect to reopen Beau Rivage on August 29, of this year, the anniversary of Hurricane Katrina.

The property will open with 1,200 rooms, selected retail stores, eight of the restaurants, and all bars and lounges.

The balance of the amenities will reopen during the fourth quarter.

World renowned designers are working diligently to create new and fresh environments for our guests to experience.

We have the best teams from Ginsler, Gates, and Tishman for design, documentation, construction, coordination, and construction management.

Beau Rivage will reopen with three newly designed gourmet restaurants, a new steak house, a hip, Asian concept, and a Beau Rivage version of Olive's.

Beau Rivage will also open with a new poker room, contemporary high-limit gaming areas, and a completely reconfigured casino layout.

We are currently in the process of remodeling all typical rooms and enhancing the look and feel of all of our suites.

The Tom Fazio designed Fallen Oak golf course is scheduled to open in November of this year.

We feel this addition will complete our portfolio as a full service destination resort on the Gulf Coast.

We are confident in the future strength of the Biloxi market, especially now with last week's report showing January gaming revenues at $62 million or 69% of the gaming revenues generated in January of '05.

This was achieved only with three of the nine casinos in operation.

Imperial Palace, Isle of Capris, and The Palace.

Finally on CityCenter, we have begun a schematic design of each of the buildings within CityCenter.

Over the next 18 months the architects of record will prepare the construction documents and of course these documents will be used for subcontractor bidding and procurement and, ultimately, construction.

Demolition of the smaller buildings along the Las Vegas Strip is underway.

The Boardwalk hotel and casino closed on January 9, 2006.

Demolition of this building is scheduled for April, 2006.

Excavation work for the Tuttelli designed hotel/casino will start in May of this year, and foundation work will start in August.

The new Bellagio employee garage adjacent to Frank Sinatra Boulevard is progressing on schedule.

It's in its sixth floor and is on schedule for completion in July.

As you know, Project CityCenter encompasses 66 acres, and it was the site for surface parking for Bellagio employees.

The new CityCenter residential sales center will be located on the Las Vegas Strip, between New York-New York and Monte Carlo.

The building is scheduled to open to the public in the third quarter of this year.

The residential sales center will demonstrate the vision, experiences, product offerings, and lifestyles to be found at CityCenter.

These attributes will be manifested through architectural modeling, both real and virtual, and by mockups of prototypes, unit layouts, fixtures, and finishes of each of the residential buildings.

Residential sales will begin in the third quarter of this year.

And that concludes my report.

And I'll turn it back to Mr. Murren.

Thank you, Bobby.

A few other details about the quarter, and then we'll get into guidance and then to your questions.

Our gross interest in the quarter was very consistent with guidance.

It was 206 million.

Our capitalized interest was 12.

So our net interest in the fourth quarter was 194 million.

Our tax rate actually turned out to be 34% because that included a one time tax credit related to the Katrina relief.

We excluded that from our adjusted earnings, that was $0.01.

Without that it would have been 36%, which is what we said in our guidance.

We had preopening and startup expenses, a small number this quarter, of 3 million.

That's mostly related to the Jet nightclub, which is I hear pretty cool, Bobby.

I've never been there.

Yes.

And a little bit in Macau, the signature product that John talked about at MGM Grand.

So 3 million in property startup expenses.

And property transaction was 8 million in the quarter.

There's nothing really there that's significant.

Some small projects that were written off at TI and at Bellagio.

So the bottom line on the quarter from a cash flow standpoint, a tremendous result we believe, 562 million of property cash flow.

Most profitable casino company in the fourth quarter, best margins on the Strip.

And the Mandalay transaction was highly accretive in the fourth quarter.

And we believe, frankly, we've only scratched the surface as we continue to put these companies together.

In the quarter, we bought back 3.5 million shares for 132 million.

For the year, therefore, we bought back 5.5 million shares, for 217 million.

We have 14.5 million shares left on our authorization.

In terms of CapEx, we spent 323 million in the quarter.

That includes all of our existing resorts and on development initiatives, it's about 50/50.

Half of it was on development, that would be MGM Grand Detroit, CityCenter, and the Beau Rivage we're building.

And the other half was on our existing resorts.

And that would be primarily at the Mirage and at Mandalay Resort properties.

We've given you a guidance of around 200 million.

But as you recall, that excluded Detroit and Beau Rivage.

So our actual spending on an apples-to-apples basis is about 230 million.

A little bit more than our guidance.

Our debt balance was up a touch in the quarter.

Our leverage is 5.4 times, consistent with the prior quarter.

And we feel like our leverage will stay in kind of the mid 5 range throughout this year.

Since the merger with Mandalay, we've reduced debt by $419 million, while still investing over $600 million of capital into our resorts.

And I -- also as I said earlier, we bought back $217 million of stock.

At the end of the year we had $2.2 billion available under our senior credit facility.

So we have attractive financing at very low rates.

And substantial cash flow to fuel our growth.

Before I turn it over to questions, I'll give you, as we typically do, some guidance for the current quarter.

The first quarter, 2006.

We think, yet again our REVPAR will be up in the first quarter.

This will be the 11th consecutive quarter of increases in REVPAR on a year-over-year basis.

And we believe our overall revenues per room will be up even more than our room revenue.

We believe that our corporate expense will be in the low $30 million range, lower than it was in the fourth quarter.

Most of the merger-related expenses, which we include in corporate, are behind us.

And so that number will come down quarter to quarter.

Our interest expense will be generally consistent with the fourth quarter gross interest of maybe 210 to 215 million, cap interest of around 15 million.

Our depreciation we estimate to be for the current quarter between 155 and 160 million.

And our income tax rate will be in the 36 to 37% range.

Adding all that up we've given guidance in our release of around $0.55 a share on an adjusted basis.

There will be very little in terms of pre-opening restructuring, and other it might be $0.02 a share.

The adjusted earnings also exclude stock option compensation expense, which we said in our release, repeated again here, that we estimate to be around $0.05 a share in the current quarter, and that will decline slightly as we move out throughout the year and into next year.

We expect our cash flows to be obviously up substantially on an actual basis, and we believe they'll also be up on a pro forma basis in the first quarter and that strong cash flow we believe will continue throughout the year.

Largely fueling our variety of growth initiatives at our existing and our new properties.

Getting to capital expenditures, we believe that at our existing resorts, our maintenance capital will be around 500 million for this year.

The kind of projects that John and Bobby talked about in terms of these very high return on investment projects like we've done before at our existing Strip resort properties, the overall number we believe to be around 500 million.

And on growth, we expect to spend around $800 million this year.

That's on CityCenter, which is moving apace.

MGM Grand Detroit, and investments overseas at MGM Grand Macau.

So about 1.3 billion in total.

That excludes Beau Rivage because we're rebuilding that, and that's insurance funded.

So for the forecast for the first quarter of CapEx we estimate it to be around 350 million to 400 million for the quarter.

John mentioned the sales per unit on the signature product at the MGM Grand, our residential hotel condo product.

Recall that we'll be booking profit on that in the second quarter of this year.

We expect profit to us in excess of $40 million booked into the second quarter.

And we expect profit in excess of $60 million in the fourth quarter of this year.

And more to come, right, John, next year.

So with that, I think we've got about 23 minutes or so to make sure we get to your questions.

And I'll turn it over to our operator.

Thank you.

[OPERATOR INSTRUCTIONS] Your first question comes from the line of Lawrence Klatzkin with Jefferies & Company.

Hey, Jim, good results and good presentation.

One quick question.

That options expense and dollar amount.

Would that $0.05 we had, translate that for the quarter, and for the year.

It's a little over 20 million.

I think it's around 22 million for the quarter.

And that declines slightly throughout the year.

So that the annual number will be sub 80 million.

Less than 80.

Okay.

As -- as far as Macau goes, is there any possibilities of anything else you guys are doing there away from this one project?

There's a very good possibility that we'll do other projects.

We certainly intend to try.

And we think that we will.

Do you want to add to that, Terry?

No, we've had a chance to look and we met with representatives from government last week in Macau and highlighted a couple of sites that we think would be important along with our partner and discussions with them on that right now.

Okay, so more to come.

As far as depreciation, I noticed it was kind of moved around a lot, in some of the properties like Monte Carlo.

Was there anything -- was something open at Monte Carlo, or some of the others that would jump it around a lot?

No, we took out the garage at Monte Carlo.

We're accelerating depreciation of that because that's going to be closing as part of the CityCenter development.

And we have some five-year life items that are rolling off at the Grand in Detroit in particular.

Okay, okay.

That's helpful.

REVPAR first quarter, still looking 5, 6% up?

I didn't say that, Larry.

No, I'm just asking.

I'm making a guess, it will be 5, 6%.

Could you comment?

Well, I'd comment that it will be up, I think it will be up nicely.

And I think that it will be yet again, another quarter of good REVPAR growth.

But I'm looking at it from a total revenue perspective, and I think that will be up even more.

Okay.

As far as the luck goes, any one property affected by the holds versus others?

All right, that's your last question.

And yes.

The Bellagio was probably the most and probably the Grand to a lesser extent.

Yes.

It was really -- we're lower year-over-year.

It was a lot of money.

It's within our range.

We're not unhappy with the result.

But when you add it all up, there was a substantial difference in profit.

It was $0.05 a share year-over-year.

So that's a lot of money.

But it was really across the board.

But mostly, Bobby, it was Bellagio mostly, Mandalay, and MGM.

All right.

Thanks, guys.

Good results.

Your next question comes from Bill Lerner with Prudential.

Thanks, guys.

You got the voice delay on?

Two questions.

First, maybe for Bobby.

Based on what you're seeing in the Biloxi market for those three properties that have reopened, how quickly do you think you can ramp back up to those, let's say, $0.03 a share in EPS contribution per quarter?

Well, originally I thought that might be tough going until we analyzed all the zip codes associated with our customers in Biloxi, at Beau Rivage.

And it turned out of our top 70 or 80 zip codes, they were really unaffected by this giant storm.

So it looks like all the businesses there, we just need to get open.

So I think that we'll ramp up almost immediately.

And I thought it was going to be much slower initially, but based on the response that I saw in January, and of course we're monitoring the operations from the three companies that are open, the traffic is backed up.

And the customers are wrapped around the corner to play.

So I think the customers are in pretty good shape in the general five-state region.

And I expect to get to full throttle pretty quickly.

Great.

And then the second one just on MGM Macau, where are you guys at in considering additional gaming positions at that property?

I mean in addition to the recent scope change where you did take up the tables of slot accounts some?

Well, what we're doing there is we are leaving a fair amount of space to be built out in the first phase, if you will.

Depending upon how the market is adjusting, and we think it's going to adjust fairly significantly here in '06, slots are picking up dramatically at the existing properties.

And the room operators are growing in numbers.

So we -- a lot of space for buildout and a lot of flexibility.

We thought that was important.

Terry, I think it's like 70,000 square feet of space.

So it -- the shell is all done.

It will be quick and relatively inexpensive to fit it all out depending on demand.

Great.

Okay.

That's helpful.

Thanks, guys.

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

Thank you.

Good morning, everybody.

Jim or Terry or Bobby, whoever wants to answer this, I've got three questions related to Project CityCenter, one is, it's pretty clear that the condo market in Vegas is somewhat nuanced.

At least that's what we've seen in our work.

I think you kind of demonstrate that with what's going on at Turnberry with your Gen-X venture there.

I was kind of wondering if you could talk a little bit more about your plans to expand the residential component of Project CityCenter.

Also I was just kind of curious, there's still a lot of green between now and late 2009.

How do you get comfortable that it's 7 billion not 8 billion let's say in terms of gross CapEx, and then finally, can you comment a little bit about the financing.

Just in terms of how -- with the increased residential sales you should be getting increased sales proceeds.

But how is it going to flow from a timing standpoint?

And how does that affect kind of the longer term financing needs for the Company?

Jim, I'll take the first two, and you can take the third.

Got it.

So the first relates to the condo or the condo/hotel market in Las Vegas.

And there are a lot of projects in Las Vegas.

Some of the projects are -- have canceled in the recent months.

Many of the -- better projects, of course, are going forward and being very successful.

We've actually studied the depth of the market considerably with studies by firms such as ERA, PricewaterhouseCoopers, and McKenzie.

And they all confirm what we already know.

That the market is strong as it relates to this kind of residential accommodations.

We also, of course, have the direct results from John Redmond's MGM Grand Signature development.

And when you look at how much absorption the market can take, it looks like quite a bit.

And for example, with CityCenter, we have expanded the units from 1,640 units initially to 2,800 units currently in the residential offering.

When you think about well, how much inventory is that.

Well, 1,500 of the units are condo/hotel units at CityCenter.

That's about what John Redmond has already sold in the last couple of years at MGM Grand Las Vegas.

And as John reported at very strong prices.

So we're confident about the retail component of CityCenter.

There may be some projects in Las Vegas like elsewhere in the United States or in the world that don't have as strong of locations as don't have as strong as developers that may not be all that successful.

But we're confident that we have a good residential program for CityCenter.

As to the budget for CityCenter, we've all been in the business a very long time.

And budgets are very important to the understanding of our business.

We announced the intentions for CityCenter in November of 2004 with a general scope and a general price tag in 2004 dollars of $5 billion gross.

Well, since then we've spent 14 months and a great deal of energy in close collaboration with all of our partners, and we've determined that the project in its final design scope would be about $7 billion.

But that's in 2008 dollars.

Since that's 2008 is when we're going to buy the project out.

So 800 million of this money is just the difference between talking about '04 dollars and '08 dollars.

So there's a $1.2 billion real increase in CityCenter since it was originally announced.

So where is the 1.2?

Well, it's in a couple of areas.

One, we expanded the scope for the Pelle design casino/hotel tower and we've upgraded the scope of the casino/hotel offering.

We've told you we've added many units to the residential component.

And that increased the cost but it also increased the sales proceeds enough to offset the additional cost, gross cost for CityCenter.

Finally, we also, in the beginning contemplated some equity residential partners.

In the end, we didn't have any equity residential partners.

So the project is all ours, and we own everything on CityCenter before we sell the residence.

Finally, how much comfort -- it's not going to be more than $7 billion.

Well, we have a complete, nailed down design scope.

So everything's done, the working drawings are in progress.

We have the highest rated construction management and architectural firms available to us.

We have other firms that have dealt with the pricing for procurement of materials and labor and sense that this is the correct amount of money because we do have a final design scope, and we have a lot of experience in this regard.

Thank you, Bob.

And I'll take your other there, Jay.

And I like nuance by the way.

I think that's a good word.

That's the word of the day from a residential perspective.

Not everyone is doing well on the residential side here.

And we certainly are.

And the location of CityCenter is the best location possible for residential sales just about.

So we continue to expect that to do extremely well.

From a financing--.

I'd like to add one more point to that.

Sure.

Bobby had mentioned that we originally contemplated the potential of having partners.

We had a number of people who wanted to be partners in the residential aspect.

We decided it was such a strong market, we wanted to do it on our own.

So that was our decision.

I think we should clarify that.

Yes, and it's also, that's our decision for today.

I mean, we're keeping our options open down the road for any part of CityCenter.

But we think it's very important to own it now, own all of it.

The more control we have, the better off we are in the long term.

From a standpoint of financing, we're going to use the MGM model.

We get hard deposits when we make -- when there are reservations and then we also get a hard deposit again, right, John, with the contract.

It's like, what, 10% and 10%?

So we're going to generate substantial cash, which we can use, which we will use, as part of the CityCenter funding.

We have substantial bank capacity, as you know, in a deal that we just did last year.

And we're throwing off a substantial amount of cash right now as evidenced by the last quarter and by our guidance for the current quarter.

So we have a variety of proceeds, sources from free cash flow from our financing sources we borrow at very attractive rates.

And through the deposit and other revenue related to residential.

And we're going to keep our options open there.

We believe that that's the best strategy for maximizing the profit potential of CityCenter on a going-forward basis.

And we certainly have great ability to fund CityCenter between now and opening.

Okay, great.

Thanks, Jim.

Your next question comes from Harry Curtis with JP Morgan.

Good morning.

Could you talk about in a little greater detail whatever hurdles are remaining for you to open in Macau in the fourth quarter of '07, particularly regulatory.

Sure, Harry.

First thing, as you know, the one requirement that we had of one jurisdiction to get at affirmation, actual vote of the commission was in the state of Mississippi, which was granted some time ago unanimously after a thorough and one-year investigation of the issues.

Obviously we have requirements as we did in the state of Nevada, we had with Nyra we had filed an application as we chose to do now for the state of Nevada regarding the partnership and the involvement in Macau.

That is proceeding.

We and our partner are cooperating fully as we understand it with the authorities.

We know we are and we believe that our partner is.

In turn there is, the term is used in New Jersey because they have some arcane terms on occasion and it's investigation.

Which is underway in New Jersey and again we are cooperating fully with them and we understand that our partners are also.

And I think Mr. Auriemma of the Division of Gaming Enforcement so indicated as recently as last week or early this week.

The process continues.

We're confident that we will be moving forward.

And we're growing, the construction is moving along, as we indicated earlier.

We fully expect to be in business there in the fourth quarter of '07.

Thank you.

Your next question comes from Celeste Brown with Morgan Stanley.

Hey, guys.

Hello.

Can you give the breakdown of the table volume with and without baccarat.

Table volume growth, sorry.

We haven't in the past, but I'll take a peek at it.

Maybe you can call me offline, maybe we can give you a little more guidance on that.

Okay, great.

Can you discuss a little bit the economics of the Signature rentals once they're up and running.

How much of a room rental do you keep, and what should we really expect in terms of additional revenues once these things start coming on line?

The question I guess is additional revenue cash flow.

We haven't given guidance on that yet.

John said we are just taking reservations now.

We expect that would enhance the profitability of the brand from a cash flow perspective.

I don't know if you have more specific?

Well, I think, obviously the condo/hotel component is unique.

We have not been in that line of business yet, if you will.

But we're starting to take reservations on it.

We know there's -- we believe there will be a ramp-up just because of the timing of closing all the units.

I mean, obviously, we don't have access to in essence rent these units from a hotel perspective until individuals close on their purchase and agree to put them back into the inventories.

So until we have a little bit better understanding as to how many individuals will elect to do that since we don't have any history associated with that and what the ramp-up time is for that it would be difficult to provide any guidance in that regard.

But I think, by the middle of this year we'll understand the issue a lot more.

Do you have a send for the revenue split on the room revenue yet?

If you rent one out?

Pardon me?

If you rent a room, how much do you keep versus the how much the owner of the unit keeps?

That we're still working out through, too.

That's -- some of that information is going to be finalized, probably by the end of February or early March.

That will start going out to the individual owners.

So we're still working that through.

But we're close to having that finalized.

Okay.

Thank you.

And Celeste, my General Counsel reminded me, I can't tell you anything off line.

Okay.

Because I like my job.

But what we have said in the past, we give you volume numbers.

We haven't broken it out.

But we -- it's pretty consistent throughout the range of our price points and our table play.

Okay.

Thank you.

Your next question comes from Joseph Greff with Bear Stearns.

Hey, guys, how are you?

Good.

Question for John or for you, Jim, at the MGM Grand.

Sounds like the Skylofts have been a driver of good rate growth there.

When do you anniversary of the Skylofts?

Well, actually I don't know now but the bigger drive more than the Skylofts has been West Wing.

That's the approximately 700 rooms what were renovated that I have made reference to for about a year now.

And that -- that's been a much bigger driver of rates.

You may recall that of the original Marina Tower.

That was a very -- actually a terrible product.

And when you look at the West Wing now, it's fabulous.

And close to achieving rate parity with the standard rooms at MGM.

So when you look at the number of rooms there, 700 as opposed to the number of units in the Skylofts, 50 plus, that's a far bigger driver in terms of the rate than what's been happening in that building.

Did you open those wings, John.

Yes.

It was just we complete all the renovation of that product.

It was late Q1.

Great, thanks.

Your next question comes from Dennis Forst with KeyBanc.

That was good timing because I wanted to follow-up on Joe's question about MGM Grand if I could, John.

Looking at the quarterly numbers for '05, fourth quarter had the lowest revenue of the year, yet it had the highest costs of the year.

Was there something in the fourth quarter that drove costs up and you had the lowest margin, the only margin of the year below 30% at the Grand.

Well, again, someone earlier had asked about the whole percentages.

And Jim I think had mentioned that that was one of our properties that was on the lower end of the range and compared to prior years.

So that was most of what accounts for the, what looks like a lower margin in that quarter.

Okay.

So that was an anomaly.

But the run rate on costs of about $180 million is normal now?

180 million?

Yes, I just subtracted EBITDA from total revenues and got an operating cost of about $180 million.

You did that on the fourth quarter?

Correct.

That's not really a good barometer to use of basing it right off the fourth quarter.

Okay.

For extrapolating for an entire year.

It is not a good -- okay.

Then Jim, I had one quick question for you.

I had missed on your guidance, near the end you said something about a $0.02 charge, and I missed what that was.

Either it was $0.02 and that was the only thing I heard.

Well, we have -- we're going to have probably preopening around $0.02 a share in the quarter.

Okay.

That's what it was.

Thanks a lot.

At this time there are no further questions.

Are there any closing remarks?

Well, I guess the closing remark that it's perfectly at 9:00 our time.

That's good timing, as always.

We're here and available for any follow-up questions, and on behalf of MGM Mirage, I want to thank you very much for participating on the call.

Thank you.

Thank you for participating in today's conference call.

You may now disconnect.