美高梅國際酒店集團 (MGM) 2006 Q3 法說會逐字稿

Good morning and welcome to the MGM MIRAGE third 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;

Bobby Baldwin, President and Chief Executive Officer of Mirage Resorts;

John Redmond, President and Chief Executive Officer of MGM Grand Resorts; and Gary Jacobs, EVP, General Counsel and Secretary of MGM Mirage. [OPERATOR INSTRUCTIONS] Now, I would like to turn the call over to Mr. Jim Murren.

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

As you know, we're broadcasting this conference call live on our Website, mgmmirage.com, as well as on companyboardroom.com.

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

This morning we filed an 8-K with our press release.

In addition, we posted on our Website additional information, which gives you significant detail beyond the numbers as is our custom.

You will find that on the Website now and I encourage you to take a look at it.

I'm obligated to read the Safe Harbor disclosure as I do every quarter.

Information we present on this call may contain forward-looking statements as defined by the SEC.

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

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

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

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

Listeners should also refer to our disclosures about risks and uncertainties that we make in our filings with the SEC.

So with that, I would like to turn the call over to Terry Lanni for an overall discussion of our results.

Thank you, Jim.

And good morning, ladies and gentlemen.

Earlier today we reported diluted earnings, EPS, if you will, of $0.54 for the third quarter.

This is an all-time record for any quarter in the Company's history, for which we're quite proud.

Operating results, I'm going to talk a little bit about that.

Net revenues increased over $90 million for the quarter, which represents a 5% increase quarter to quarter comparison.

We had very strong slot results, with slot revenues up 5%.

Several of those resorts of ours had particularly strong slots results, including a 15% increase at Bellagio, 17% increase at TI, and a 12% increase at MGM Grand Las Vegas.

These results one again demonstrate the real power of our Players Club program.

As we have mentioned before, we're converting the Mandalay Resorts to Players Club.

With Mandalay Bay, Luxor and Monte Carlo having recently converted and the remaining properties expected to come online between now and the middle of 2007.

On the baccarat front, our volume increased 22% for the quarter.

The rends in the high end segment remain very strong and we see that strength continuing into the important New Year's period, Western New Year's as well as Chinese New Year's.

Operating income was $428 million, representing an increase of 26%.

And property EBITDA was $637 million, up 19% with excellent margins, as Jim will cover in more detail shortly.

Beau Rivage, Bobby will discuss the property's results and continued construction activity.

And I wanted to comment on the fact that we met our commitment to the Gulf Coast and to our employees, opening on time, on the one-year anniversary of hurricane Katrina.

And the credit for this accomplishment extends broadly.

But leading the group obviously is Bobby Baldwin, going to George Corchis, the President of the Beau Rivage and his entire team.

And the many Las Vegas-based employees, as well as employees based in Biloxi, Mississippi, who assisted in the rebuilding effort over the past year.

We're very pleased to be leading the way in the rebuilding of the Biloxi market.

We're obviously committed to the Gulf Coast community, and we've delivered on those commitments and promises.

Laughlin and Primm properties, as we've announced recently this week, we're selling the Colorado Belle and Edgewater properties in Laughlin to a group led by Anthony Marnell III.

And Primm Valley Resort to Herbst Gaming.

The valuation in each transaction is in excess of 9 times cash flow.

A bit of an update on Macau.

Our construction pace continues to move rapidly as we have now reached the 24th floor of the 32-story hotel tower.

The joint venture has been making excellent progress assembling its management team under the leadership of Bob Moon, who is President of MGM Mirage International operations and also serving as the pResident of the MGM Grand Macau property.

We and our partner Pansy Ho plan to open this spectacular resort in late 2007.

Project CityCenter, Bobby is going to be talking more about that as he makes his presentation.

And then also, John Redmond will be discussing the Detroit permanent casino.

They are progressing quite well.

And they'll give you more details on that.

I'd now like to turn the conversation over to Jim for a few more comments on our financial results.

Well, thank you, Terry.

Consistent with our prior quarters we're reporting GAAP earnings here.

And also consistent with prior quarters we have, as I mentioned earlier, significant supplemental information in the release.

This is the first quarter in which we have the Mandalay Resort properties in for the entire quarter, so you have a nice clean year-over-year comparison.

There are several items which affect the comparability of earnings.

We listed them in the press release but I would like to highlight a couple of them here.

One is, of course, the profit from the unit sales at the Signature.

That's obviously in the current year only.

That was $0.06 a share, or $26 million.

To bring the total profit for Tower 1 to, net of expenses, it's $52 million for us.

That's a pretty good effort.

Also in the quarter, this quarter, we had only about $0.01 a share in preopening and property transactions.

A year ago it was $0.06.

This year, of course, we're as, is corporate America, we're expensing stock options, that was $0.04 a share.

And we had a positive adjustment in our income tax, it was $0.02 a share this year.

It was a negative $0.01 a year ago.

So there was a nice Delta year-over-year on taxes.

A little more detail.

Our gaming revenues, as Terry mentioned, were up 5%.

Slots revenue were was up 5%.

Table game revenue was up 6%, as Terry mentioned, due to very strong baccarat volumes, they were up 22%.

Our hold percentage in the quarter was within our normal range, both in this quarter and year ago.

In fact, they're both right around the middle of our range, although it was a bit higher this year versus last year.

The Mirage property it was the primary beneficiary of the better hold and on the other hand, it had a huge quarter even without that benefit.

Mandalay Bay would have been the one that was actually hurt by a lower hold percentage.

From a hotel perspective, our hotel revenue is up 3% in the quarter led by very strong REVPAR growth here in Las Vegas.

Now, REVPAR was up 6% against a very tough comp.

Our REVPAR was up 9% in the year-ago quarter.

And finally, in terms of cash flows, property EBITDA of $637 million, that was up 19% versus $534 million in 2005.

Our margin was 33% versus 30% a year ago.

Several items affected that comparison.

One, of course, is the profit from the Signature.

That positively impacted property EBITDA by, as I said, $26 million.

In addition, we had about $22 million less in property transactions and preopening expenses in the current year.

Adjusting for those items, property EBITDA still increased about -- a little over 10% with a margin of 32% this year versus a margin of 31% on a comparative basis last year.

So with, that I'm going to turn it over to Bobby Baldwin to talk more about Mirage Resorts.

Thank you.

Good morning, everyone.

Thank you, Jim.

I'll report on the third quarter results for Mirage Resorts.

My report will include highlights for Bellagio, The Mirage, Beau Rivage and CityCenter.

Bellagio's third quarter was $98 million, this was the highest third quarter ever reported for Bellagio, and was $28 million, or 39% more than the third quarter of '05.

Bellagio gaming revenue of $124 million was up $10 million, or 9% from the third quarter of '05.

Slot win was up $6 million led by a 27% increase in slot handle.

Table games revenue was up $4 million or about 6% compared -- one moment.

On comparable hold percentages quarter to quarter.

Hotel revenues in the third quarter was up $6 million or 7% on a $13 increase in ADR.

REVPAR of $229 was up $16, or about 7% over last year.

This was the highest third quarter REVPAR in Bellagio's history.

Terry mentioned some of the highlights relating to the Mirage casino hotel.

Mirage's EBITDA for the third quarter was $70 million, the highest in the last 10 years.

EBITDA was $27 million in Q3 of 2005.

Gaming revenue at the property was up $29 million, or 45% over the previous year.

Table games revenue benefited from an unusually high hold percentage this year versus a lower than normal hold percentage in the prior year.

Table games volume was up an impressive 17%.

And slot handle was also up 2.3% at the property.

The Mirage continues to break hotel revenue records by posting $44 million in the third quarter, the highest third quarter in Mirage's history for hotel revenue.

REVPAR of $172 at the resort was up $8, or 5% versus last year.

The food and beverage revenues continued to climb at the Mirage with the success of the new restaurants, lounges, and nightclubs opened within the last year.

Mirage food and beverage revenue is up over 42% versus the prior year.

There's still more to come at the Mirage with the Revolution, a new 7,000 square foot Beatles and Cirque du Soleil themed ultra-lounge scheduled to open in the fourth quarter of this year.

The success of the LOVE Show has been phenomenal in its first quarter.

In its first full quarter, show occupancy was 94%, and the show grossed $25 million in ticket revenue.

Advanced ticket sales continue to be strong.

As it relates to Beau Rivage, as Terry mentioned, George Corchis and others have done a fine job in the reconstruction and reopening effort at Beau Rivage.

It did successfully reopen to capacity crowds on August 29, as Terry mentioned, a year after this terrible hurricane.

On opening day we recorded the highest daily slot handle in the history of the property, $29 million in slot handle in the first day.

So, business was very robust on the reopening.

EBITDA for the current year's quarter, which includes 33 days, was $14.8 million.

Now, this compares to $12.2 million during the 59-day period in the third quarter of '05.

Of course, that period was interrupted by the hurricane.

For the month of September at Beau Rivage, we had $12.8 million in EBITDA, which was the highest September recorded at Beau Rivage.

Third quarter slot handle increased $209 million or 85% over the same 33-day period in 2004, the only period that we can compare.

Slot win per unit was $416 per unit.

Both September slot handle and revenue were monthly records, of course, for Beau Rivage.

Table games revenue also increased $3.1 million September to September.

And the successful opening has clearly reestablished Beau Rivage as the market leader in a rebounding Gulf market.

The final quarter of 2006 will be led by the retail promenade, which just recently opened.

The retail store did not open with the rest of the hotel on August 29.

It opened on October 27.

And also, we're going to complete all the amenities as it relates to Beau Rivage by the end of the year.

The much anticipated golf course, Falling Oak, designed by the renowned golf course architect Tom Fazio, will open exclusive to hotel guests on November 6.

Three uniquely designed specialty restaurants are scheduled to open December 15, followed by the show opening just in time to celebrate the New Year on December 29.

While discussing Mississippi operations I'd also like to recognize the impressive third quarter results at Gold Strike in Tunica led by Holly Gagnon and her team.

The revenues were up in all divisions, and EBITDA for the quarter was $9.6 million versus $3.7 in '05.

Finally, as it relates to CityCenter, the construction on CityCenter is, of course, underway and continues on budget and on track for the forecast of November 2009 opening.

The 60-story 4,000 hotel room -- casino-hotel designed by Kelly Clark is beginning to take shape and form work on the third story is now visible.

The Monte Carlo garage has been demolished and a new 7,800-car garage will be built in its place.

This will serve CityCenter employees and guests and also guests of Monte Carlo.

Excavation is underway for the [Vadara] Tower, the Mandarin Tower, the [Vir] Towers, the retail podium for the casino hotel, the [Tenafa] garage, and the convention center for the casino hotel.

Foundations on each of those structures are expected to start within the next two months.

From a cost perspective, the focus continues to be placed on identifying and capitalizing on cost savings opportunities, of course, in the bidding and procurement process for the work at CityCenter.

We have locked in final pricing on major trades such as steel and concrete for the first major structure, the [Pelay] casino hotel Tower.

If you have been by the site you might notice there's a concrete batch plant capable of producing about 350 cubic yards of concrete per day -- or per hour.

And this plant is designed to provide the 1 million cubic yards of concrete necessary for the construction of CityCenter.

As it relates to CityCenter's residential component, CityCenter will have four condominium developments encompassing five high-rise towers.

And the CityCenter residential division has focused on recruitment marketing, sales training, lead generation, and the ramp-up of all the sales momentum associated with CityCenter's residential component.

The residential marketing team has successfully completed a process developing the branding and positioning platform for the four distinct product offerings.

The friends and family program, which is the first part of the marketing and sales program, which was launched in October, and interest has been outstanding.

We began taking reservations from this program on October 16.

The residential gallery at Bellagio, which displays the master plan model and artist renderings opened in early in October and is hosting about 500 prospective buyers per day.

Another residential gallery at the Mirage is scheduled to open in February of next year and it should see a similar flow of prospects.

Construction of the 30,000 square foot residential sales pavilion fronting the Las Vegas strip between Monte Carlo and New York New York will be complete in November.

And will animate, articulate, and demonstrate the promise of CityCenter, specifically our four residential offerings.

It is designed to deliver an unprecedented buyer experience and we'll have a grand public opening on New Year's day.

In November our VIP sales group will embark on a trip to Asia with stops in Hong Kong, Taipei, and visiting MGM Mirage's top casino customers, along with hosting a broker events in various cities.

Also in November, CityCenter Realty Corp., MGM Mirage's wholly owned brokerage Company, will host a program launch event for the top 300 sales agents locally and regionally as it relates to condominium sales.

Residential sales to the public begins January 1.

And that's the conclusion of my report and I'll turn it over to John Redmond.

Thanks, Bobby.

Good morning, everyone.

I'll be, of course, talking about MGM Grand Resorts.

The group had a very strong quarter, as evidenced by the impressive Las Vegas strip properties growth in ADR and slot revenue of 5.2% and 9.3% respectively.

We also saw record revenues throughout many of the departments at all of the properties.

At that Grand, we had a solid quarter with EBITDA after preopening of $83.6 million versus $81.2 million in Q3 of the prior year.

This was the highest third quarter EBITDA in the property's history.

The property continues to see strong demand, as evidenced by the record quarter in slot revenue and near record revenues in room, food, and beverage.

Also in the third quarter, the remaining units in Tower 1 of the Signature closed with a gain in the quarter of $26.2 million.

Approximately 75% of the closed units have been placed into the rental program as of today.

Realizing that the residents hotel brand for the Signature, of course, is only five months old, demand for the product has been very strong and customer feedback has been impressive.

With regards to Tower 2, we have received our certificate of occupancy, and closings began yesterday, November 1.

We expect to recognize approximately $40 to $45 million of the $76 million estimated total gain in Q4, with the balance being recognized in Q1 of '07.

Tower 3 is 84% sold and expected to be completed in April of '07.

The total estimated gain on Tower 3 is going to be approximately $87 million.

With regard to the convention market at the Grand, demand remains very strong, with ADR up approximately 2.8% in Q3 and expected to be up approximately 10% in Q4.

Mandalay Bay, again the quarter, EBITDA of $60 million versus $62.8 million in Q3 the prior year.

It was a strong quarter despite the fact the table game hold percentage was 500 basis points lower than the prior year, as Jim alluded to.

The impact of this was decreased hold percentage of approximately $6 million in EBITDA.

The property had the best slot revenue quarter in its history, and had record Q3 results in rooms, food, and beverage.

With regard to the convention market at Mandalay, demand also remained strong, with ADR down slightly, 3.7% in Q3, but the convention room nights were up an impressive 28.8%.

For Q4, we're expecting ADR to increase approximately 10% over Q4 prior year, similar to the Grand.

At Luxor, it had its best third quarter in the property's history with EBITDA of $37.5 million versus $33.7 million in Q3 of prior year.

The results are due to strong occupancy of 99%, and aggressive expense control.

At Excalibur, Q3 EBITDA of $33.3 million versus $29 million in Q3 prior year.

This was the best third quarter in the property's history and was driven by strong results across all departments.

In Detroit, the quarter continued to be very strong, with EBITDA of $38.4 million after preopening versus $36.8 million in Q3 prior year.

The current quarter EBITDA was negatively impacted in the amount of $2.1 million due to the increased gaming tax of 200 basis points that went into effect at January 1, '06.

Slot revenue for the quarter was up an impressive 11% over Q3 prior year and was the best quarter in the property's history.

In addition to the strengthening results, construction on the permanent facility continues to progress smoothly and ahead of schedule with an expected opening date in Q4 2007.

And on that, I will turn it back over to Jim Murren.

Well, thanks, John.

We're going to drill into the quarter a little bit more in terms of some of the financial data.

Interest expense in the quarter was consistent with our guidance.

Gross interest was $231 million, cap interest $37, for net interest expense of $194 million.

That's on target with our guidance.

Corporate expense was actually a little below guidance.

Corporate expense came in at $35 million.

Preopening and start-up expenses were $6 million.

That was primarily related to CityCenter, MGM Grand Macau, MGM Grand Detroit, and the Signature.

That's about the same as the year-ago number.

In the quarter we repurchased 3 million shares at a cost of $106 million.

For the year, so far, we have bought back 6.5 million shares for a cost of $247 million.

We have been in the market every quarter since the Mandalay merger, and we have repurchased 12 million shares since that time, for a total cost of $464 million.

We have 8 million shares left on our current repurchase program.

Capital expenditures in the quarter, we spent $610 million at our existing resorts and on our development initiatives.

Excluding Beau Rivage, the investment amount was $446 million.

That's higher than the guidance that we gave you.

We gave you guidance of 350 million, and that's totally due to the timing of CityCenter and Detroit.

We're ahead of schedule in terms of the spending on those projects.

From a standpoint of the rest, the rest was on the development projects like MGM Grand Detroit.

And, of course, we talked about CityCenter.

The remaining number was $102 million, that was on our existing resorts.

That's primarily over at Mandalay Bay and a few other projects underway that Bobby and John talked about.

At quarter end, we had availability on our credit facility of about $2.1 billion.

After the quarter, we actually amended our credit facility.

We got much better pricing, and we extended the maturity of our bank facility to 2011.

We're actually oversubscribed in that deal and it's a $7 billion bank deal.

And the pricing results in a net savings to us of around $15 million a year.

Our fixed to floating ratio at the end of the quarter is 63%.

Our leverage, 5.4 times.

Before I turn it over to the Q&A, I will give you some more guidance here as to the current quarter, as is our custom.

In our release, we gave guidance of around $0.40 to $0.45 a share.

So that guidance is on a GAAP continuing operations basis, so it excludes Laughlin and Primm.

We expect REVPAR will increase yet again in the current quarter, consistent with our recent trends.

That would be the 14th quarter in a row that we have had increases in REVPAR.

Property cash flow -- or property EBITDA will also, we believe, increase in the current quarter.

Also that obviously is being helped by Tower 2 at the Signature product, and that's against a very impressive fourth quarter of '05.

John talked about the timing of the Tower 2 profits.

We mentioned it also in the release.

We expect $0.09 to $0.10 a share or that means $40 to $45 million of profit in the current quarter with another $0.07 or $0.08 in the first quarter next year, or $30 to $35 million.

Our guidance includes stock option expense.

In the current quarter we think it will be about $0.03 a share.

And it also includes approximately $0.02 of pre opening and property transactions.

In terms of corporate expense, we expect in the current quarter it will be in the $35 to $40 million range, and that includes stock option expense in there.

Interest expense will actually be slightly lower than the third quarter.

The new pricing on our credit facility helps there.

Gross interest, we're expecting to be in the $220 to $225 million range.

Cap interest around $40 million.

Depreciation, we're looking for depreciation in the current quarter of around $165 million.

That excludes Laughlin and Primm, which is around $7 or 8 million of depreciation between the two.

Our income rate, we're forecasting 36% in the current quarter.

Finally, as it relates to capital expenditures, we expect to spend in the current quarter between $450 to $500 million.

That excludes Beau Rivage.

We've been excluding Beau all along, as you know, because we believe that it's largely insured.

From a standpoint of drilling into that CapEx, about 50% of that spending is related to CityCenter and MGM Grand Detroit.

So that will bring the full-year spending in, excluding Beau, to about $1.5 billion.

As relates to Primm and Laughlin, Terry mentioned gross transaction, we're happy about the way this has moved forward.

We are very pleased with the buyer groups in both respects.

And look forward to a close of both of those transactions by midyear next year, and we'll book a nice tax gain on that.

In fact, that will be clear when you see the Q, which I think we're reporting -- we're actually filing next week.

So with that, we have exactly 29 minutes to get to your questions.

And I will turn it over to Paige.

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

Hi, guys. 9 times multiple, nice pricing.

A couple questions.

On the residences what are you getting average per square foot?

For -- you mean the -- are you talking about the --?

The Signature, the sales.

You mean for the most recent tower, right?

The sales per square foot in Tower C have averaged about $1,067 a square foot.

The first tower, Larry, was $788.

The second tower was $941.

Exactly the same units.

So, again, everything is the same, Tower A, Tower B, Tower C are all look-alikes, 576 units.

And that's the growth in the average per square foot.

Great.

You gave what the bed luck was at the Mandalay.

Could you give what the good luck was at the Mirage?

Well, we're not going to get into property by property hold percentages, but I think John did say that Mandalay was burdened by, what did you say, $6 million or so?

It was on the other side, a little bit better than twice that at the Mirage, right, Bobby?

That's right, about 14 at the Mirage.

When you compare it to the year before they were actually off about 7 in hold percentage.

All right, great.

As far as, Jimmy has alluded before about two things.

One, you might look to expand Circus Circus and Excalibur and go after that middle market customer that seems to be more and more ignored.

Is that still in the works?

Well, I'm looking at Terry.

To see if -- he decided you're expanding Circus, are you expanding Circus?

That's the first I've heard about it.

That's the first I've heard about it.

But we did say we might buy a higher grade of pink paint.

We're actually -- the view on both of those properties, of course, is that their competitors are largely going away.

In fact, I think -- was it yesterday the Star Dust closed?

And so there's great market potential in both those properties.

In fact, we think terrific potential.

So, we are looking at a variety of ways of improving them.

I think that's -- I think what you're referring to.

And some of those projects are already underway and there will be more to come.

All right.

And then the last thing, Macau, you had alluded before that you might have two more sites in the joint venture that you're working on.

Any further progress on that?

With our partner we're seeking additional sites in Macau.

Frankly, in Macau and [Kotai.] And the third opportunity would be on the reclaimed land.

I think on the reclaimed opportunities, that's going to probably be a couple years before the government is interested in providing any more reclaimed land to any other projects.

So in the interim, we're going to have to focus on land that is currently either already in place or been reclaimed, if you will.

We don't have anything more to report on it but we're actively searching.

Thanks, guys.

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

Thanks.

Two quick questions.

Can you talk about the sustainability of these great results down in Biloxi and perhaps a little color on how October is looking?

I don't want to get in too much detail but if that's possible.

And then the second question is, you talked about the improved slot win, for example, in Vegas as a prime mover.

What -- I'm trying to drill down a little further into just the mood or the strength of the customer in the third quarter versus the second quarter.

Did you notice any discernible difference and can you put your finger on the source of that?

I'll turn it to Bobby on the first question.

As it relates to Mississippi in particular, Beau Rivage, of course, that market, there have been a lot of developments that had some delays in that market.

So, Beau Rivage ought to benefit from the lack of first-class gaming facilities there for some time to come.

When business was interrupted in '05, Beau Rivage was on a record pace for about $86 million in cash flow.

In fact, that's the nature of our business interruption claims.

We expect in this interrupted market now with the reopening to do at least as well as we did before the storm, and maybe better.

As it it relates to Tunica, Tunica, obviously, is a market that's got great potential.

We had some very strong competitors, notably our neighbor the Horseshoe.

But we have new management and we have increased improvements to the facility itself.

So, I would expect in that Tunica you could expect those numbers to continue to improve and we'll have to wait and see.

His other question was on slots versus like Q2 versus Q3.

It really wasn't slots per say.

It was just the overall tone of your customer confidence, or can you put your finger on any difference between the second quarter and the third?

I think just historically when you look at it, in that regard, Harry, you have the summer customer is specifically not as strong as the third quarter customer.

You look at typically find lower room rates, and, therefore, not the same quality customers you will.

So even just looking at slots as a barometer, that particular point, you typically will find your slot numbers stronger historically in the third quarter versus the second.

Because of that better quality customer we typically find in the third quarter.

And I think also, John, I think we mentioned on our last call that we had seen a little bit of softness kind of mid-week at some of our more value-oriented properties, at least on the strip.

That has improved.

We had a tremendous Labor Day, and the tone of the business in general has improved kind of consecutively throughout the third quarter and into the fourth quarter.

So, if I'm getting to your question correctly, in terms of the tone of the customer, certainly we see that midweek improving, firming up across the range of our properties.

The high end obviously is very strong and we do very well in that part of the segment.

But the middle market and the economy side has improved as well.

And anecdotally that may well be somewhat directed by the falling gasoline prices for people because that market is more of a drive-in market than a fly-in markets.

But that's anecdotal.

That's what I was after.

Thanks a lot.

Your next question comes from the line of Joe Greff with Bear Stearns.

Jim, what should we model for net proceeds for the Nevada sales?

Well, first off it's Nevada, not Nevada.

When you move out here you have to say Nevada, Joe.

I'm sorry, that's my New York accent.

We'll have that in the Q next week.

You'll see what the carrying value is of both Primm and of Laughlin.

So you will be able to figure that out and so I don't want to front-run that.

But it's a nice gain in both cases.

Okay.

And then can you give us a sense of 2007 capital spending?

And then just one final question.

With respect to the profits from the Signature towers, if I'm doing my math right, it's about $120 million next year between the remaining profits in Tower 2 and Tower 3?

Yes, everyone's shaking -- they're saying yes on tower -- between the profits between the towers.

In terms of CapEx, that will be in -- the next quarter we'll talk about a variety of things that will relate to 2007, including CapEx.

So, we're not ready to give that you number yet.

Okay.

And then one other final CapEx question.

With respect to what you spent in Beau Rivage this year, what was that total amount?

Hold on one sec.

We will get you that.

It's about $400 million this year.

Great.

Thanks, guys.

Your next question comes from the line of Robin Farley with UBS.

Thanks.

Can you talk about what sales per square foot you're targeting for the CityCenter condos?

And I guess you've got a couple different price points there.

Could you give us a little color on the square footage and the details for you're targeting at each of them?

For CityCenter.

We actually have, in terms of the overall square foot, you can kind of figure it out through the Q. Because we gave the total net sellable square footage of residential in CityCenter and what we expect our proceeds to be.

So I think the net available was 2.3 million square feet, and we're expecting, Bobby, around $2.5 billion innet sales.

So, in terms of the product by product, as you know, Robin, there are many different products.

You have straight condominium towers, and at a variety of price points.

And then you have the hotel-condominium tower, as well.

So, we haven't disclosed yet what the pricing will be per flavor.

Robin, the net per square foot after sales costs is $1,095.

So not too different from what you're getting in Tower 3 basically?

That's correct.

Great.

And then you were commenting on seeing some improvement in more value-oriented properties.

Is it fair to say then that construction on I-15 hasn't been hurting your drive-in traffic?

We were worried about that a little bit early on, but -- I'll turn it over to John -- but we certainly haven't seen a material impact on that at all on the strip, and I don't think anywhere.

Have we, John?

No, I think people have figured out a work-around in that regard, and it doesn't seem to be having a significant impact to date.

Great.

And then just last the question is, are you involved in anything in Japan in terms of pursuing opportunities there that you can give us color on?

Well, we're looking at a number of different areas in the Far East, and certainly Japan is one of them.

We understand that there may well be a Bill introduced, I think on January 28 in the diet and that it probably should move forward.

That's the current understanding.

But we have to wait and see, and we are evaluating different opportunities.

It is difficult to ascertain where those opportunities will be because it has yet to be defined specifically, even if it's approved as a constitutional change in Japan where, the locations will be, how many there will be.

And that is to be seen and we are following it very closely.

Along with following other potential opportunities in other parts of the Far East especially.

Great.

Thank you.

Your next question comes from the line of David Anders with Merrill Lynch.

Great.

Thanks.

Hi, Terry, could you maybe comment a little bit, or maybe one of you operating guys could talk about, several quarters ago was a domestic high roller was very strong it seemed.

And now the baccarat player stayed through the summer, which is a little bit of a surprise to me.

Could you comment on kind of trends in domestic high rollers, as well as the Asian high rollers?

Sure.

Well at lot of those trends, David, there are a lot more non-Far East high rollers who are domestic, or national customers who are migrating into the baccarat business.

Baccarat is no longer merely an international, and more specifically, a Far Eastern phenomena.

And we have seen that market continue to be very strong.

And I suspect it's because the economy is generally strong in the United States.

The types of people who are high-end casino players nationally are people whose businesses are doing well.

And we see that as a very strong market and a growing market.

Great.

Thank you.

Your next question comes from the line of Celeste Brown with Morgan Stanley.

Do you expect a slowdown in trends in the fourth quarter over the third quarter, just in terms of growth?

It appears that at the consolidated property level you're expecting lower growth, just based on your guidance.

Well, we -- I'll take that, and then maybe anyone else can jump in.

The fourth quarter, of course, is so heavily weighted to the end of the quarter, it always is.

So we -- there was a time when we didn't give fourth quarter guidance because of the nature of our business.

We have so much play in December.

So, we think it the's prudent to give what we think today is our best guess.

The forward-looking indicators are excellent, in terms of convention bookings, in terms of forward-looking room sales, in terms of the events that we're having at the Grand Garden and Mandalay.

The things that stimulate customer activity in the casino.

So at this point, I think it's fair to say we expect to have an up quarter on a property standpoint and we'll see.

Okay.

Great.

And then would you mind just giving us the breakout of what you've spent on CityCenter and Detroit separately thus far?

For this year?

Well, I guess that's all been through third quarter this year, on a CapEx basis.

Sure.

Year to date, CityCenter, we've spent $429 million.

And MGM Grand Detroit we've spent $210 million.

That's through the end of the third quarter.

Okay.

Thank you.

Your next question comes from the line of Dennis Forst with Keybanc Capital.

Good morning.

I had a couple of questions.

First, on strip win in general, I kind of think of your properties as a proxy for the strip, guys.

But the Nevada numbers showed double-digit growth in both July and August.

Unless September fell off a table, which I'm sure it didn't, it kind of doesn't foot with your gaming win up 5%, 6% on the strip.

Unless I'm not doing the math right.

And, in fact, yesterday Las Vegas Sam said that their gaming win was down slightly for the September quarter.

So, how is the strip number running up double digits?

Well, we're trying to -- we're talking about that as you're talking, Dennis to make sure.

First off, I like the fact that we're the proxy for the strip.

We typically do better than the strip, though, so don't sell us short, relative to the strip averages.

But in this particular case what would you say, John?

I think what it is, without doing any research early on, is the numbers that you see reported by the State are on a cash basis.

The numbers, of course, that we report are accrual basis.

And there's wide swings in that, as you can imagine, when you look at the table game side in particular.

When you only pay gaming tax on your cash basis wins, that creates some tremendous volatility in those -- when you're trying to compare books to what's reported at the State level.

Okay.

I'll try and understand that at a later time.

John, I wanted to ask you about room totals at the MGM.

In the data with the occupancy numbers and the ADR's, does that incorporate the 5,000 MGM Grand rooms, or is that now including the Signature rooms as part of the rental base?

No, that information is just strictly for the MGM Grand legacy rooms.

Okay.

And where are the additional room revenues that you get, or the partnership numbers that you get from Signature?

Is that in the unaffiliated -- or whatever that line item is called?

It's just in "other."

"Other revenue" Dennis.

Other revenue at the property?

No, at the corporation.

So the room revenue share you get from Signature is not included at the MGM Grand level at all?

All right.

I misspoke.

They're yelling at me, Dennis.

There's other revenue at the property.

Okay, at property.

Got it.

And then lastly, what's a fair number for annual maintenance CapEx for the Company?

How do you define maintenance?

The way we do, which is actually improving the properties?

Sure.

I'd say it's fair, like $500 million.

$500 million a year approximately.

Great.

I apologize, let me ask Terry a question.

Just on, I think it was on David's question about high-end play, and migrating to baccarat.

Why do you suppose domestic players are actually migrating to baccarat?

Must be our world economy.

I don't know.

It's just -- I think it's more interesting to a lot of people, people of higher net worth.

They are probably more traveled and it's just happening.

I wish I could tell you specifically why.

So are they moving away from the other table games?

No, what you're seeing -- I think that's true in that respect.

But you also see migration of the Far Eastern people to blackjack, also, which is a reasonably new phenomenon.

Interesting.

Thanks.

Your next question comes from the line of Jay Cogan with Bank of America Securities.

I've got a few questions for you as well.

First, just back to the guidance, Jim, I remember it was awhile ago when the Company used to generate I think it was like 40% of the gaming revenues, maybe a 25% of your total revenues, in the fourth quarter in that last week or.

I think that was before Mandalay.

Can you give us an update so we have, again, just some sense of how important that week or so is for you?

I don't have the percentage in front of me, Jay.

It is an important week.

But now post-Mandalay, over 50% our revenue is nongaming, as you know.

And so that will change a little bit quarter to quarter.

But I don't have a flavor for that exactly in terms of percentage.

I will tell you that it historically is a very important month, and we expect it to be a very good month.

Got it.

And as it relates to Mandalay as a whole, could you just give us an update as to maybe three or four of the major things that you're still working on?

If there are kind of incremental synergies from there that we should expect to start -- to see through the numbers in '07 and beyond?

Whether there will be some continued improvements on the slot side, additional CapEx, whatever it is where you see some opportunities at certain properties or broadly to kind of keep improving the operations in the next year?

Well, I'll take a stab at it, then I'll turn it the over to my partners here.

But if some of the major initiatives at the Mandalay properties include a major technology upgrade in general, which is the backbone, of course, for all of our slot business, but also in food and beverage, hotel, et cetera.

So that starts with upgrading the product on the floor, which we have been doing.

It starts with Players Club, which has been rolling out property by property on a very systematic basis.

And then it happens in the hotel as we roll out our hotel management system, so that we can improve our overall yielding of our rooms.

All those initiatives take time.

And, in fact, I think Luxor just went live yesterday.

And it will be by the end of next year, we'll be done with all those initiatives.

Also, from a standpoint of capital, if you were out here today you would see significant capital improvements at Monte Carlo, at Mandalay Bay, and soon at Luxor.

In fact, it's starting already at Luxor, Excalibur.

So the Mandalay properties are all going through significant upgrades, which we think will accrue to the benefit of earnings almost immediately.

The results at the Mirage are not -- should not be a mystery.

Yes, it held well but that really obscures the underlying business at the Mirage, which is tremendous.

And it's because of the upgrades to that property, making a tremendous impact on the marketplace.

Those kind of upgrades and improvements are underway at the other properties, Mandalay, Luxor, et cetera, and we expect to get a very high ROI on those.

And then on the other side, on the cost side, we're drilling into more cost savings, mostly on the procurement area, where we have a very strong procurement person in place.

And she's working with [Chris Nordley,] [Cory Sanders] and our property CFO's to extract better value, which will result in earnings.

So, it's on the revenue uplift side, and it's on the cost savings.

And the effects of it will be that we'll get a lot more profit, as you're starting to see, out of all of our properties, particularly the Mandalay properties.

And speaking of the Mirage, I know Bobby can remind me, I think you said slot volumes were only up a couple percent, despite the new show.

And I remember last year the property was down quite a bit because of the disruption.

So understanding the hold issues you talked about, how much farther does the Mirage still have to go as an opportunity to be upside for cash flow?

Well, of course, Mirage is really a powerful enterprise.

Everything on the floor, on the casino floor, is new, all the restaurants, of course, the addition of the nightclub and getting LOVE up and running.

So, Mirage ought to continue to improve.

It had a spectacular quarter of $70 million, but even if the didn't have any hold benefit it still would have been almost twice what it was last year.

It would have been in the $50 or $55 million range.

I think there's plenty up of upside in Mirage.

I think you're going to see solid results out of Mirate.

In fact, Mirage will probably make more money -- as close to as much money this year as did it its first year of operations.

So, that says a lot.

Great.

Thanks a lot.

That's very helpful.

Your next question comes from the line of Bill Lerner with Deutsche Bank.

Thanks.

The first one is on Nevada.

How's that?

Well, you're a local Bill now, so it's all right.

I got it it down.

So, two questions.

One, can you guys just reconcile your relative strength here in Vegas to what looks to be still kind of anemic volume growth into the market?

Maybe not in the last month or, so but year to date, excluding the last month, it's like up 0.5%.

Is this mix?

What's kind of going on there.

You talking about visitation to Las Vegas versus --?

Versus how well you guys are doing.

Well, we'd like to think that we continued to increase our competitive advantages.

I know that sounds kind of trite but it's happening.

We're building significant market share gains in all of our properties, and it's a bad quarter for us if we don't do better than the market.

And it's actually a bad day at the Board meeting if we don't.

So, I think that you should expect to see that from us.

You're out here, and everyone that comes out here knows there's a dramatic difference property by property on the strip.

Some properties are moving ahead, improving themselves, expanding their customers, and others are dormitories.

And it can't be more profound than it is right now.

And we think that trend is going to continue.

So, I think, we all believe here, that Las Vegas is a market that will continue to grow, maybe modestly, but grow on a very large base, 40 million visitors.

And we'll do better than that.

Okay.

Then one follow-up actually for Jim as well, I think.

It sounds like -- or I get the sense you guys have some cushion in the budget at CityCenter.

And I think you were even quoted as saying material costs are starting to go the other way, finally.

So as I think about it, do we get some amenities for free essentially at CityCenter now?

I wouldn't suspect that you'd be dropping the budget?

Well, we don't like cushion.

We like contingency.

That's a better word.

But clearly, we feel better and better about the cost outlook in general.

And as Bobby and his team continue to bid out and buy out CityCenter, we have more and more relative leverage in the marketplace.

And so that budget is the budget.

And it's going to be outstanding.

And the dynamic out here is changing to the benefit of people that are constructing now, that are underway.

And the other benefit is obviously, as many have noted, the number of new rooms that will come into this marketplace over the next half decade or so has slowed down to the benefit of the properties that are here.

And when you have 44,000 hotel rooms here, as we do, that's a good outlook.

Okay.

That's great, Jim, thanks a lot.

Your next question comes from the line of James Hardiman with FTN Midwest.

Couple questions.

I know you guys are short on time.

In terms of guidance for the fourth quarter, can you talk about what the Primm and Laughlin properties would have added?

Obviously, those are going to be in discontinued ops.

But just for the purposes of comparisons to last year's fourth quarter, how significant would that have been in the fourth quarter?

$0.01 or $0.02.

Okay.

And you sort of touched on this.

But just back to the margin, a pretty big improvement in the Mississippi region.

It looks like not only better than last year's numbers but probably the best margin number you've ever had there.

Can you break out what the margin was at the Beau Rivage versus the Gold Strike?

I guess I'm just trying to figure out which of the properties, it could be both of them, but which of these led to the bulk of the margin improvement there?

And if we can expect -- and if there was anything in the numbers that would temporarily inflate those that we should not expect going forward?

Well, the Beau Rivage margin was up significantly, but it also had the benefit of the grand opening, or the grand reopening of the hotel.

In the comparable year in '04, it had a 24% or 25% operating margin.

It was about 8 or 10 points higher than that for this period.

But that's all been normalized a bit.

The big improvement was really up in Tunica, where they had virtually no margin the year before, about 11%.

And they had a more normal margin of 22% in this quarter, as Holly does a better job of leveraging that asset in Tunica.

So, I think you will see the big improvements in Tunica and a more normalized margin than 25%, 30% range going forward in Biloxi.

Okay.

Great.

And just one last question to the higher construction costs.

Can you comment on sort of where you've seen labor costs go?

And I guess even availability of labor and what you've dome to maybe mitigate some of those costs?

Well, as it relates to CityCenter, we see a little bit of a flattening in materials and labor looking forward.

We have bought out about $600 million of the job for CityCenter, which is about 15% of the total construction component of $4.2 million.

So we see the margin -- we see the materials and labor stabilizing but CityCenter was very long on planning.

So, it was a project that has been in the works for over two years.

And so we had a long time to plan for the materials and labor required to design and construct CityCenter.

So, we have a pretty good understanding of the cost.

Other people's costs may even be higher than ours.

We don't know.

We put a lot of pressure on the construction market, obviously, because we soaked up a lot of the capacity to build buildings in Las Vegas in particular.

And just one follow-up on that, is that the Board of MGM approved a construction budge vet CityCenter, and it hasn't gone up since they approved that budget.

So, there hasn't been, for CityCenter, an increase in construction costs.

We don't expect one.

And we don't expect one.

One last question, operator.

Yes, sir.

Do we have one last question?

Yes, sir.

Our last question comes from the line of Matthew [Farkas] with CRC Asset Management.

Hi, guys.

Great quarter.

Could you maybe just spend two minutes talking about Atlantic City?

You've had a huge success with your partnership there with Boyd at Borgata.

And I know that property is expanding.

Do you see doing any other projects there?

Obviously, if you build it, people will come.

And you have proven that you can put a beautiful property there and it's going to be very successful.

Well, this is Terry Lanni.

And we have exactly 71.38 acres, I think, immediately adjacent to Borgata.

And Ken Rosevear, our President of Our Development Company, is taking a look at the opportunities there.

And we're looking and in the early stages of creating a mixed use development for that.

We're calling it CityCenter East, just as a working name but it will be mixed use.

It will be something that we're going to own and operate ourselves.

We have great partners in Boyd.

If we were to do a partnership it would be with them.

But we've made the decision that we want to go it alone on that particular site.

And we do think it's a premier site.

It's a perfect location immediately next to the very successful Borgata that you mentioned, as well as the very successful O'Hara's Marina.

So, we're very excited.

And it's certainly in our future.

And we're working on that and probably would have some plans after the first of the year to discuss with the appropriate people.

Thank you so much for taking my question.

Thank you.

And I think that will be about it for this call.

I want to thank you all on behalf of our Company here for participating.

And as always, if you have any follow-up questions, please don't hesitate to call.

Thank you very much.

Thank you.

This does conclude the MGM Mirage third quarter conference call.

You may now disconnect.