美高梅國際酒店集團 (MGM) 2008 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, Jim Murren, President and Chief Operating Officer, Bobby Baldwin, Chief Design and Construction Officer of MGM MIRAGE and President and CEO of CityCenter, Dan D'Arrigo, Executive Vice President and Chief Financial Officer, Aldo Manzini, Executive Vice President and Chief Administrative Officer, and Bob Selwood, Executive Vice President and Chief Accounting Officer.

Participants are in a listen-only mode.

(Operator Instructions).

I would now like to turn the call over to Mr.

Dan D'Arrigo.

Thank you, Amanda, and good morning, everyone.

Welcome to MGM MIRAGE's third-quarter earnings call.

This call is being broadcasted live on the Internet, at www.MGMMIRAGE.com and at www.companyboardroom.com.

A replay of the call will be available on the Company's website.

This morning, we furnished our press release on Form 8-K to the SEC, and additional information was posted on our website, which gives significant detail behind the numbers included in our release this morning.

Before we get started, a few Safe Harbor disclosure comments.

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.

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 made in our filings with the SEC.

Now, I would like to turn it over to Terry Lanni for some introductory comments on our results.

Good morning, everyone.

I'd like to cover a couple of topics in my remarks today.

First, I'll provide some commentary on the impact of the global economic situation we're facing, and the impacts we're seeing currently in our industry and specifically in the Las Vegas marketplace.

Then, I would like to discuss our strategies, both as it relates to our operations as well as our financial position.

Arguably, we have entered into a global recession, and how long and how deep it will be is certainly uncertain.

Significant value has been lost in the markets and investor and customer confidence is rather low.

The global hospitality industry has certainly been impacted, and the gaming industry in Las Vegas are certainly not an exception.

We've always believed in the strength of Las Vegas and its market, and we believe it's a tremendous tourist and convention destination.

We firmly expect that the market will recover as the broader economy itself recovers.

But it's extremely difficult to forecast when that will be.

Year to date through June, visitor volume was down about 0.5%.

And then, in August, it was down -- excuse me, July, it was down 4.6% and in August, 4.3%.

The events that came to a head during September, including the credit crisis and the failure of various financial institutions, certainly impacted the broader consumer sector.

And we see this recession impacting our industry and our company into the fourth quarter and, frankly, into 2009.

We believe that our company and our seasoned management team are able and, frankly, very capable of managing through this downturn.

Now I would like to talk a little bit about our response to the current market conditions and explain what we are focused on.

There are basically three areas -- first, the customer, two, cost structure, and three, our financial position.

We continue to provide world-class service to our guests.

Part of this service is providing must-see entertainment.

Our resorts continue to draw a significant number of world-class events.

Our event calendar for the fourth quarter is extremely strong.

We recently hosted the Barrett-Jackson car show at Mandalay Bay, drawing tens of thousands of people to the property over a long weakened and setting a significant number of dollars in sales of cars.

Concerts in the fourth quarter include Madonna and Jimmy Buffett, with two shows by each performer, Oscar De La Hoya and Manny Pacquiao will be squaring off at the MGM Grand Garden Arena on December 6.

This Friday is the grand opening of Believe, our newest production show from Cirque du Soleil, starring Criss Angel.

And we recently announced that Disney award-winning The Lion King will open at the Mandalay Bay during May of 2009.

We have been diligently addressing our cost structure to maximize profitability.

This effort is across all corporate functions and across all of our resorts.

Jim is going to discuss shortly the initiatives and have further remarks on these matters.

We have postponed our Atlantic City project, but still believe Atlantic City is a key market for further development, when the economy and the credit markets permit.

In addition, we have postponed development activities on our joint venture project with Kerzner International and Istithmar planned for the North Las Vegas strip just north of Circus Circus.

We are diligently strengthening our balance sheet and addressing liquidity as Dan will lay out for you in his remarks.

I'd now like to turn this over to Jim Murren.

Good morning, everyone.

As you see in our third quarter, we reported earnings per share of $0.22 versus $0.62 in the prior year.

There are two major items that impacted the comparability there.

We had a write-down in the current quarter and we had a large gain in the previous third quarter.

Revenue was down 6% to $1.8 billion.

On a comparable basis, our consolidated EBITDA or cash flow was down 14%, property EBITDA was down 18%.

Terry mentioned July and August were certainly on pace, and we had a weakening in our business in September as a result of the economy and people staying home and watching TV.

We had pretty good market share gains throughout the quarter.

We don't have the most recent numbers, but through August, I can tell you that our ADR was down, here in Las Vegas, down 4.3%.

The market was down 7.7% in ADR.

Our occupancy through August was only down 1.5%.

Las Vegas was down 2.5%.

Our gaming market share also increased through August.

We don't have their September numbers yet.

But we believe that we continue to build market share and exceed the market in terms of occupancy and in RevPAR.

Our properties are all well-occupied, albeit at lower rates, and as you see, our strip RevPAR was down 10% in the third quarter.

Much of that was attributable to a weaker September.

We had -- and despite that, obviously down 10%, it's pretty consistent with our guidance way back in early August.

We said we would be down in the high single digits.

We -- we saw -- we talk about this every quarter.

In the -- reflective of our conference business, we saw pretty decent conference business in July and August, and a high degree of cancellations in September.

We've seen this before, many years, when we see something happening in the global arena.

People stay home.

Our cancellations went up in September, attrition rates were higher, and that impact has continued a little bit into October, although we see improvement in the balance of the quarter as it relates to the convention business.

We have been very aggressive on our cost cutting.

I think we have done some exceptional work in that arena, in what is obviously a very challenging economy right now.

Through the corporate and property level initiatives that are already in place, and more are taking shape every day, we have booked $225 million of annualized cost, largely permanent costs, costs that will be out of our system on a permanent basis.

We have several new initiatives under way, in fact, scores of them.

We expect to reduce costs by another $25 million to $27 million in the current quarter.

Those initiatives should yield another $150 million to $160 million of annualized savings in 2009.

We have been very focused in the following areas to achieve these results.

We have significantly flattened out our organization, reduced job categories, brought the senior management closer to the customer, consolidated back-of-the-house functions at many of our properties, whether it be purchasing at TI and MIRAGE or reservations company-wide.

We have made HR a corporate function, at consolidating and processing in the compensation.

We have also made major strides in purchasing in some significant high-dollar items.

We have been very aggressive in looking at our casino floors.

We have reduced slot participation fees pretty significantly.

We have been analyzing and renegotiating many contracts, IT maintenance contracts, and other maintenance contracts.

Significant dollar savings there.

We have been reducing inventory levels across the portfolio, both in corporate areas and at the properties.

We've made some groundbreaking strides in our environmental programs.

The green initiative has been not only the right thing to do, but we have saved quite a bit of money in that.

And we have curtailed spending through consultants and travel and otherwise.

We've got many other areas that we're looking at to further consolidate, as we're not giving up looking for opportunities to continue to cut costs.

I think you'll see us consolidating certain back-of-the-house functions that we have not yet addressed, whether it's in casino credit and collections, non-gaming accounting, and other purchasing departments.

Our gaming business, we believe, is very durable.

It's flexible.

It is very profitable, albeit at lower levels than it had been in the past year.

But we have been through this before.

We have been through recessions, global crises, Asian meltdowns, the S&L crisis, market crashes.

We have the best talent in this industry.

We have great ingenuity underway, resourcefulness.

We have really been stunned with the amount of ideas that people have come up with in order to manage this business through this period of time.

As Terry said that, we cannot predict when the economy is going to improve.

No one, I really think, can at this point in time.

But we can predict that we are going to be a better company and a survivor and a profitable company through this environment as we continue to manage our costs, build market share as is evident by what we have done all year, increase the competitive advantages of our properties, because they are in the best of class in every single category in which they operate, maximize our occupancies, and try to stimulate consumer spend.

And as we look into 2009 -- one final point as it relates to what we see going forward, though we did see significant cancellations, and you would have to have predicted that, after early Labor Day, we have seen the pace report for 2009 in our convention business remains up versus our pace of 2008.

In other words, when we did get cancellations, people rebooked either into '09 or into 2010.

We see particularly good activity in 2010, so though we cannot predict when we will see the recovery, we can say that the business partners that we have are booking in the future, reorienting their trips, and we're able to backfill a lot of that business through our tour and travel and our FIT business, albeit at lower rates.

So with that, I will turn it over to Bobby to talk about CityCenter.

Good morning, everyone.

All the buildings at CityCenter are on schedule to be opened late next year in 2009.

All eight of the GMPs, which represents the total work at CityCenter, have been signed and executed by the parties.

These contracts total $6.9 billion, the same total that we discussed in the last earnings call, and establish a guaranteed maximum price for the general contractor.

By its nature, this type of contract arrangement yields conservative cost figures by the general contractor.

As construction progresses, the costs amounts within the GMP are adjusted to reflect actual expenses and all unspent funds are returned to the owner.

In an effort to lower the cost of the project, we have analyzed areas of possible savings and developed a plan to achieve those savings.

The planned target savings of approximately $400 million, including $231 million in subcontractor trade costs, $144 million in contingency, and $21 million in contractors general conditions.

The $231 million targeted savings in the trade costs are included in the following categories -- electrical, $66 million, concrete, $38 million, HVAC, $23 million, and if -- we listed all the way down through millwork, tile and stone, plumbing, and so on to create this total.

Some -- from a materials cost perspective, the price of many commodities, as you already know, has softened significantly, with crude oil prices down 50%, copper and aluminum prices down more than 40% from their peaks back in July.

This, coupled with the softening of the local construction market and the increased ability of production capacity, has resulted in lower prices for construction and interior fit-out materials at CityCenter.

From a labor point of view, a similar trend in cost reduction applies.

When construction began at CityCenter, the presence of numerous large projects being built concurrently created a scarcity of labor in specific trades.

The current softer construction market conditions, and the canceling of several projects here in Las Vegas, has increased the supply of construction workers available to work on CityCenter.

This will allow us to minimize the amount of overtime work performed on-site.

We're actively pursuing other areas to help reduce costs.

Our global sourcing team continues to evaluate categories of construction and interior fit-out materials that can be sourced from lower-cost global suppliers.

These efforts continue to provide positive results in areas such as cabinets, doors, interior glass, stone and tile, and FF&E.

The construction of CityCenter has made great strides during the third quarter of this year as we move towards project completion in late 2009.

The following are key construction highlights by project.

Aria -- the Aria tower concrete structure was topped off in August.

Exterior curtain walls have installed up to the level of 57, with four floors remaining.

Interior finish installations are ongoing and guest-room furniture installations are underway.

Structural steel erection is complete in the Aria podium, theater, convention center.

As for any fireproofing, mechanical, electrical, plumbing, and drywall partitions, all this work continues in the podium.

At Vdara, the exterior curtain wall installation is substantially complete.

The building sign is being installed and the last Vdara tower crane will be removed from the building next month.

Interior finish installations are ongoing in the Vdara tower, and guest-room furniture installations are underway.

The Mandarin tower structure was topped off this month in October.

The exterior curtain wall has been installed up to level 39, interior finish installations are ongoing also in that tower, and the podium structural steel installation is complete, and interior construction is underway in the Mandarin podium.

The concrete structure for the Veer Towers West and East is complete to levels 34 and 28, respectively.

Exterior curtain wall installation also is close to the top on both of those Towers.

Interior framing has commenced in both towers and finishes installations are scheduled to begin next month.

The structural erection at Crystals is complete.

Concrete deck placements, [brate] fireproofing, mechanical system installations, and vertical transportation elements installations are currently underway.

The installation of exterior enclosure panels and roof paneling systems are ongoing, as well as the interior framing of the retail spaces in the public atrium areas.

At The Harmon, the Harmon structural concrete decks have been placed through level 22.

Exterior curtain wall installations were up to 14.

Podium structural steel has been erected, and has been completed, and metal deck and concrete installations are ongoing.

The installation of the automatic people-mover rail guideways is complete and the train cars are in fabrication.

The structural steel erection of both Bellagio and Monte Carlo stations are complete and platform canopy installations will begin next month.

There are currently 12 large tower cranes on site and approximately 8,000 construction workers actively involved in the construction of CityCenter.

Peak construction is expected to be reached later this year, probably by December, with 9,000 workers on the site.

The schedule is Vdara to open August 1, 2009.

Mandarin, Veer Towers, The Harmon, and Crystals on December 3rd of next year, and Aria shortly thereafter on December 16.

As to the retail leasing efforts for Crystals, in the third quarter, we signed 12 additional leases, bringing the total number of executed leases to 32.

This represents about 40% of the total expected outlets at Crystals.

Major tenants include a multi-level flagship store for Louis Vuitton, Tiffany & Co., and [Zania].

The business terms have been confirmed and the leases are in the final stages for another 20 tenants.

As it relates to the residential programs at CityCenter in the third quarter, 41 units were sold, 17 of these sales were generated through our new sales office in Dubai.

We're expanding our Dubai sales office and building a permanent sales facility that will include a complete Vdara studio model in Dubai.

On the preopening update, because we're only about 13 months out, so we had to start dealing with preopening.

Construction of the new CityCenter employment center, located on Industrial Road behind the MIRAGE, is complete, and the building is being occupied by human resources staff.

This center is responsible for recruiting, processing, and training 12,000 new employees that will work at CityCenter.

We will begin accepting applications for CityCenter open positions in December 2008.

We expect a significant portion of these positions to be filled from our experienced and talented team in other MGM MIRAGE properties, especially in Las Vegas.

The Aria hotel management system is fully operational at this point.

To date, through the convention sales efforts, 110,000 convention room nights have been booked and 150,000 additional room nights are in the negotiation stage.

These reservations have been booked at an ADR which meets our expectations and reservations for the general public are expected to commence in February of next year.

And that's my report.

Dan?

As mentioned by Terry and outlined in our release, our focus is to maintain as much financial flexibility as possible to ensure the continued strength of our Company's balance sheet.

We have completed the amendment to our senior credit facility in late September, which will ensure our commitments to CityCenter are within our capital program.

As of September 30, the Company had approximately $1.2 billion of availability under its credit revolver.

In addition, we have strong relationships in the capital markets.

Periodically and recently, we have received reverse inquiries.

Under SEC disclosure rules, we're unable to discuss any specific transaction at this time.

Recently, we closed on $1.8 billion of CityCenter financing, which is an important first step in securing this project's optimal capital structure.

In addition, CityCenter has received additional commitments from Bank of China and China Construction Bank in excess of $500 million.

We and Dubai World continue to work with additional lenders to obtain additional financing of up to a total of $3 billion at the CityCenter level.

In conjunction with CityCenter's senior bank credit facility, MGM MIRAGE and Dubai World are each committed to funding $1.9 billion towards the project cost, less each partner's share of any additional financing secured by CityCenter.

As of September 30, $800 million has been funded by each partner.

In addition, each of MGM MIRAGE and Dubai World will provide a partial several completion guarantee of up to $600 million.

As Bobby mentioned, we're targeting significant cost savings that will reduce the amount of each partner's obligation.

Regarding MGM's capital spending, we anticipate spending approximately $180 million during the fourth quarter, which should bring our total for the year just over $800 million for 2008.

In 2009, we're currently evaluating our forecasted capital needs, but we're anticipating investing approximately $200 million, including all carryover projects, for the full year of 2009.

As we stated in the past, we have made significant investments in our resorts this year and over the past several years, and all of our resorts are in excellent shape.

By amending our credit facility, securing a portion of our CityCenter financing, and managing our property capital, we believe our actions have solidified our near-term liquidity and we intend to further access the capital markets to manage our long-term financial position.

Regarding our future operations outlook, given the uncertainty in the economy today, we expect to experience year-over-year decreases in RevPAR in the fourth quarter.

We note that December is typically an important month in the quarter for us, given the holiday period late in December, and as a practice, we have historically not provided specific guidance as it relates to the fourth quarter.

We do expect our cost-savings programs to be meaningful in the quarter, as Jim laid out earlier.

Some other items to assist your fourth quarter modeling, total stock compensation is estimated to be approximately $10 million in the fourth quarter.

Our corporate expense is projected around $35 million, which includes $5 million of estimated stock-compensation expense.

Our preopening expenses should be consistent with the third quarter.

And that consists primarily of our share of our CityCenter preopening costs.

Our gross interest expense will be approximately $205 million to $210 million, with capitalized interest of approximately $40 million in the fourth quarter.

This interest guidance includes the impact from our recent amendment in our credit facility amendment, as well as the suspension of capitalized interest on the Atlantic City development efforts.

Our depreciation is projected to be $200 million to $205 million in the fourth quarter, and in the fourth quarter, we will have some property transactions of note, but we recently sold and recorded a gain of $25 million in relation to the sale of a corporate aircraft in October.

We also expect to receive additional amounts related to the Monte Carlo fire insurance recoveries in the fourth quarter as well.

Our effective tax rate is estimated to be 37% in the fourth quarter.

At this time, that leaves us with about 30 minutes for question and answers.

So I would like to turn back over to you, Amanda, and we will be happy to answer anyone's questions.

(Operator Instructions).

Larry Klatzkin, Jefferies & Company.

As far as -- is capitalized interest for the third quarter, Dan, could we just get that number?

Sure.

Capitalized interest in Q3 -- hold on one second.

Do you have another question?

We'll answer that as we (multiple speakers).

Yes.

Right now, the bank covenants allow $1 billion of secured debt, is that correct?

You have no secured debt, and you can put up to $1 billion on the books if you want?

That's correct under the liens basket.

On Vdara, if, for some reason, you cannot -- not all the apartments close or you don't sell all the apartments, what are other options?

Are you able to isolate that out and sell that, or are there -- have you had interest expressed to you?

Can you run that separately as a hotel?

What options do you have on that?

I guess you have all of the above.

Vdara was built to be a hotel first and a condo hotel second, so that it had ultimate flexibility to either operate in either capacity or in both as a condo hotel.

So we had a great deal of flexibility as to how we could ultimately configure Vdara as it was originally intended for as a hotel, or a combination of the two.

And have you had any outside parties showing any interest in the property?

We've had several, and we're looking at all the possibilities, and there's a great deal of interest as a place to Vdara.

As far as -- as far as possible asset sales, I mean, you guys have sold a number of non-Vegas, noncritical assets over the last couple of years.

Would there be a willingness, if there was need, to let go of half of Chicago or Reno or some other things?

(multiple speakers)

We're pretty prudent people and we have responsibilities, public company, publicly traded, to represent our shareholders.

People come along, across the transom, and are interested.

We have had conversations and we will continue to have such conversations.

And then --

Just a circle back on your earlier question, the capitalized interest in the third quarter was approximately $42.5 million.

Okay, thank you very much.

As far as your JV in Atlantic City, is there an ability to take any dividends out if desired?

Borgata -- I assume you're referring to Borgata.

That is a decision we would have to sit down and discuss with our joint venture partner, Boyd Gaming, and there's always that availability in the marketplace to do that.

Thank you, guys.

Celeste Brown, Morgan Stanley.

So, just in taking the numbers Bobby gave, it sounds like you reduced the CityCenter budget by about $400 million.

Is that right?

Can we assume those costs are gone forever?

Yes, that's -- exactly -- well, I don't want to speak for Bobby, but that's what he said.

(multiple speakers) Go ahead, Bobby.

The point was that the total of the GMPs are $6.9 billion.

And we expect the cost for the total of the GMPs to be $400 million, maybe more, below the $6.9 billion.

In terms of the announcement you guys made this morning, if you can raise the capital -- or I guess the red, it's not quite an announcement -- if you can raise the capital that you're attempting to raise, do you feel that you're safe through the end of 2009, even in a worst-case, the way you look at things today?

As you know, Dan said it.

We can't comment under SEC rules about anything that I think you're referring to.

But we have access, and always have, to capital markets of every type.

And we are very confident that we have the ability to manage this business and manage our balance sheet through the economic storm that we're in.

There has been a lot of talk about condos in general, in Vegas and throughout the US, in terms of buyers being able to get financing.

Have you thought about creating a facility or working with some banks to create a facility to help support the buyers of the CityCenter condos, or is it too early to start thinking about that?

It's not too early.

We have been working on this for about seven months.

So we have many contingency plans to help to close these units about this time next year.

So we're watching the financial markets, but we are coordinating our efforts with other financial institutions as to what our options will be and what our buyers' options will be at that time.

Bobby really got out ahead of this.

Really at the beginning of the year, Bobby, you started talking about what we should do in the eventuality that the credit markets would deteriorate as it relates to mortgages, especially in the world of condo and condo hotel.

It's important to remember that our financing at CityCenter is not contingent at all upon selling a condominium.

Yet we believe that we will do that, and that will accrue to the benefit of the partners and to the bank group as we bring on more banks as well.

But that is an option and a path that we have been exploring all year.

And I believe that we're going to make some progress there.

Thanks, guys.

Bill Lerner, Deutsche Bank.

Just a couple of other ones.

Dan, you talked about -- I just want to clarify.

You talked about CapEx next year.

I think you said $200 million.

We have been using a negatively revised $375 million, I think, in maintenance CapEx numbers.

You're telling me you're going to spend $175 million less than that number?

Yes.

Our target for 2009 is $200 million.

200 for maintenance, okay.

And then Jim, you talked about, I think, what looks like $375 million in pretax cost savings, most of it permanent.

So, is that -- when does that, that run rate's set now, but is that a good number for the full-year '09?

It actually will be higher than that, point to point.

We started programs, if you recall, in the fourth quarter of '07, and then, when the economy started weakening in April, we got more aggressive on that front and we have been particularly focused on cost savings over the past couple of months.

The collective benefit of that, between the programs that were initiated in the fourth quarter of '07 through the programs that have been initiated this year, is a very large number.

It's over $450 million of Delta between the '07 cost structure of this company and what we believe to be the '09 cost structure.

So we can't predict the revenue outlook, obviously, but we can predict the fact that our cost structure, on a permanent basis, is going to be profoundly lower than it was in 2007.

And these are initiatives that are organic, fluid, and growing in number, and it has -- it will have a material impact on our margins.

It already has had a mitigating impact this year.

It will have a more profound impact in '09.

That's great.

So, if you could just -- correct me if I'm wrong, so as I think about liquidity and obviously, that's been an enormous focus for everyone as it relates to you guys.

You know, when I add this stuff up, you guys have found, between CityCenter's sort of budget savings and your targeting more in cost saves and maintenance CapEx, like $1 billion.

Is that -- am I am the ballpark?

You're in the ballpark and -- we believe that's a growing number.

We clearly have been conditioned by three major events and concerns that investors have.

I don't have to share them with you, but it's very obvious.

One is the economic backdrop of the US and global economy and its impact on the consumer.

And we are certainly part of that world, and we are battling to maximize our cash flows through that economy.

The second discount that people are giving currently is CityCenter.

Our ability to raise capital at CityCenter, our ability to perform, and our ability to -- under construction, and our ability to make money when it opens.

We're making daily progress on the financing side.

Dan mentioned that on the $1.8 billion, our last call, we had $1.65 billion of commitments.

Fast forward to now, that was $1.8 billion done with $500 million more of commitments, and more banks as recently as this week are initiating dialogues with us.

So we are more comfortable that we can add to that facility than we were even a month, month and a half ago.

In addition, I think people have lost sight of the fact that this Company at the parent level has many options to raise capital, which gets to the third issue that you mentioned, the liquidity issue.

This company will not allow itself to be in any type of financial jeopardy because we have too many options available to us in too many areas and we have too strong of a series of relationships with financial partners, whether they be banks, bond equity partners, and JV partners.

And we feel like we have the tools available to us to improve our liquidity in this very difficult time.

Last one.

Can you give us a sense for pricing of those 40 or 41 units in the third quarter at CityCenter?

I know they're across different buildings, but are they consistent with what we've seen since you started selling units?

They are consistent.

They are probably up about 3%.

They typically run on average, on a blended basis at CityCenter, about $1 million per apartment.

Thanks, guys.

To be clear there, Bobby, we haven't lowered prices, to my knowledge, at any product, have we?

No, we've actually increased mildly some of the products within the real estate group by about 3%.

I appreciate it.

Joseph Greff, JPMorgan.

Good morning, everyone.

Jim, on your comment about the '09 convention pace being up where it was this time last year for '08, is that a same-store or same-property number, or does that include the convention-related room nights for CityCenter?

It excludes CityCenter.

That's not -- doesn't come into play until 2010.

So on a same-store basis, we expect for the year to be up, and I'm looking at it on a monthly basis.

And it looks like, if you were going to say where the weakness is versus the strength, it looks like January is a little soft, but February and March, much stronger.

We look like we have a good second quarter in the -- 2009, in terms of bookings, additional bookings this year versus same time a year ago.

We have a particularly good September/October of next year, and if you were to add it all up, we expect to be up in '09 versus '08.

Specifically to properties, I don't typically give this but I will give you just a general flavor.

Looks like Bellagio will be up, this property is a rock star, obviously -- but Bellagio looks like it will be up in '09 versus '08.

MGM Grand also looks like it's going to be up significantly in '09.

Mandalay up slightly.

Looks like, currently, MIRAGE and Treasure Island will be down.

To give you just a flavor of what we see currently.

Great.

Dan, going back to your $200 million maintenance comment for next year, how long can you get away with just investing $200 million in maintenance before you have to play catch-up with the properties?

I think we've invested pretty significantly over the last 2.5 years in our properties, at each level, whether it's Bellagio here at the high end of the spectrum or even our value-oriented properties like Excalibur.

So I think the reality is is we will focus on that level for 2009.

It probably, you know, in one person's opinion, probably sets up a little bit heading into '10.

But we can definitely get away with one year, and probably look to kind of move that number up in '10 if we had that crystal ball today.

We've reorganized the Company effective August, I guess, 2007.

And as the Chief Design and Construction Officer, we're changing entirely how we do capital maintenance programs across all of our portfolio of properties.

We've consolidated various groups into one group that controls those expenditures, and we're going to be far more effective and efficient in our design and construction of capital maintenance and capital improvement projects going forward.

So we may spend a little more than $200 million in future years, but we're not going to be spending the kind of money we have in the past because the buildings are almost fully up-to-date, and we're going be much more efficient in our capital programs.

Maybe not to belabor the point, I think it's an important one, is that -- but clearly, if you look back at sales of the last eight years, and look at where the capital went, we put a significant amount of money into MGM Grand, into New York New York, and, of course, when we acquired the Mandalay properties, we put a very large amount of money into Mandalay Bay resort group in 2005, 2006, 2007, and even here into 2008.

The properties that are in the condition that they're in now require, really, probably $150 million to $200 million until we do room remodels and other major expansions to properties.

The maintenance level that Dan is giving you, it's not a bare-bones maintenance level.

We have the ability and the desire to maintain these properties in the excellent condition that they're in.

We have extremely new, a young slot corps, by the way, in most of our properties.

And we have an ability to cut corporate expense, capital expenditures, as well.

So the overall capital number projected for '09 is one that we feel provides the Company with the continued health, and we carry that into '10.

But I agree with Bobby, that as we get into 2010 and '11, that number will likely go up again.

One final question.

This was another quarter where we saw meaningful Bellagio outperformance relative to your other properties, moreso this quarter.

I know if I ask the question, you're going to say it's asset quality as a big driver of that.

But to what do you attribute the customer mix, the international growth?

If you can maybe talk about spend-per-visitor levels.

How much of it was the new -- the gaming room that, I guess, that came on board the end of last year?

And how sustainable is the Bellagio outperformance, and did you see a drop-off in October relative to September at that property in particular?

How many parts to that question, seven?

Don't ask me to repeat, I don't even know what I said.

Bellagio, as we've said before, is a very powerful product in terms of an asset because of its location and because of its design and layout, but more importantly, because of the sensational management that Bellagio employs and its deep, deep customer base as part of the MGM MIRAGE portfolio.

We had, in the quarter, we were up in gains from the quarter of 2007.

Slots were just a little bit off, just like almost all of our properties here in Las Vegas, but to a much lesser extent.

We believe Bellagio is sustainable.

We have seen a shift in the customers, in the customer spend on a general basis.

A lot of people are coming to Las Vegas, some people for the very first time, because I see them on the floor and I talk to them, and it's strange to see people who have never been to Las Vegas staying at Bellagio.

But there are many of those such people.

And some of our more important -- our other customers don't come as frequently during this period of time.

So we've had a little shift in the brand.

International business has been strong, as you know.

It's about double what it was historically in '05 and '06 in the last couple of years, and about one-third of our business.

So, the shifting of Bellagio has been considerable in terms of its customer base over the last three years, and I think that it's just a preferred product in Las Vegas by a variety of groups.

And I would add, if I could, value is, I think, a relative term.

In the rarefied area of Bellagio, it is the best property in its market, and it consistently is the profit leader and it clearly will be again so in the third quarter.

And it provides the superior service, quality, and relative value.

And I think that was the point I was trying to make earlier.

If you look across the portfolio of our properties, MGM and Mandalay are the conference convention properties of choice.

They underperformed in the quarter, because -- largely because of the stay-at-home mentality in September.

But that doesn't detract from what they're doing in the marketplace and the market share that they're picking up, relative to their respective competitors.

Luxor and New York New York have been under massive repositioning all year.

Pretty tough to get into New York New York this year and listen to yourself talk with the saw cutting going on on the floor, throughout the casino floor, as we've totally gutted and redone that property.

And Luxor has gone through a massive renovation.

And they are the preferred properties in their market segments.

Gasoline prices shifted a three-year low, I saw today.

And every single property that we own, we believe and have proven over the time, are the market leaders in their respective markets, both in terms of market segmentation here in Las Vegas, and obviously, we have the number-one property, the winner on the Gulf Coast, the number-one property in Detroit, the number-one property in Atlantic City.

And in these difficult times, I think it's very important to emphasize the fact that not all people are going to perform equally.

And if you have the right property, the right management, if you have invested in them well and you're creative and aggressive in terms of driving people to your properties, you can outperform the marketplace and be the market leader in terms of profitability.

That was evidenced again at Bellagio, but I believe that's a hallmark of our Company.

And I think that's going to help us in 2009.

Thank you.

Robin Farley, UBS.

I know, on Q4 RevPAR, you didn't want to give guidance because December is such a big part of it.

But would it be fair to assume that, given that the RevPAR declines in Q3 were heavily weighted towards September, that kind of so far in the quarter, maybe we would be seeing worse than 10% RevPAR decline.

And then, also, about Bellagio in particular, it's kind of amazing that the RevPAR was up.

I know you just talked about a lot of the reasons for that.

And I guess, are you seeing Bellagio in particular still with RevPAR trending up in Q4?

And then, I've got a CityCenter question as well.

Our RevPAR is lower than the third quarter.

And it's lower than being down 10%.

And it's just early in October, so we cannot predict the fourth quarter.

But it should be intuitively obvious to everybody that it would be.

So it's kind of a leading question, it has to be down more because the overall tone of business in October has only moderately improved from September, and September was the weakest month of the third quarter from a RevPAR perspective.

As it relates to Bellagio, we're not -- certainly not going to get into month-to-month property RevPAR comparisons, but we can also say there that it is the leader in our portfolio in terms of its RevPAR performance versus a year ago.

Great.

And then -- I had really been asking more year-over-year but I think that answers the question.

(multiple speakers)

Yes, well, that's what I mean.

In terms -- it is showing the best performance on a year-over-year basis of our portfolio.

I honestly don't know whether it's up slightly or down slightly in the month of October, but we don't track that on a property-by-property basis.

But it is the best performer of the portfolio.

Just to sort of finish the math, when you were talking earlier about CityCenter and reduced budget and increased cash flow (technical difficulty), so I wonder if you could -- just to get everybody totally comfortable with, with the -- I think at the last time you reported, you talked about $5 million left to spend and $3 billion you wanted to raise.

So can you just kind of give us a little more of the specifics of, at this point you said, I guess, $400 million less in the budget plus what you've spent at CityCenter in the last quarter.

And if you could just talk about the pieces of financing -- absent, I realize you can't comment on any news today, but just timing for the $500 million of the signed commitment letters, when does that become part of this facility?

And then, what you have remaining, again absent anything that you announced today in terms of financing and CapEx to spend there?

As it relates to the additional commitment letters, we're working with those institutions and going through all of the documentation.

As you can imagine, on a project this size, the documentation is quite voluminous to get kind of through.

So they are working on that, as we speak.

As it relates to CityCenter, as I think we laid out on our last call, the total cash construction costs and preopening costs to complete CityCenter was approximately $9.1 billion.

And that's before any of the targeted cost savings that Bobby laid out earlier, in his comments.

Through September, we've spent approximately $4 billion, and as we previously guided, when we said we would have -- you know, some of the financing in place, that we would have roughly about $5 billion of future funding at the CityCenter level.

And that's where we finished up as of September 30.

So the total spend thus far at CityCenter, approximately $4 billion.

We have roughly about $5.1 billion here to spend, to complete the project.

Right now, $1.8 billion of that, obviously, is coming from the financing that's in place, and more to come.

And in the meantime, the sponsors have agreed to fund any of the amounts required above the $1.8 million to finish the project.

$1.8 billion, I'm sorry.

Great.

Thank you.

Dennis Forst, KeyBanc Capital Markets.

First question is for Terry.

Given this worldwide recession we're seeing, have you adjusted your provision for doubtfuls?

And what do you see going forward?

We've talked about that a number of times.

We look at these on a quarterly basis and we think we're very properly reserved.

We have been, historically, we've always taken a look at this on a rather conservative basis, so there is no need for any significant changes in that regard.

What are the other conditions (multiple speakers)

It's been pretty consistent year over year (multiple speakers)

$6 million was it?

In the quarter.

In the quarter, yes.

$6 million in the quarter?

Yes, it was $7 million in Q3 of '08, $6 million in Q7 of -- third quarter of '07.

And secondly, can we flesh out a little bit of Macau?

I was surprised that it did $35 million in EBITDA, frankly.

Can we get from the $35 million of EBITDA to your $8 million of income, your share of that?

Depreciation.

Well, I mean, there's obviously depreciation, but that $8 million represents our share of the joint venture's operating income, and we've got some amortization on our books to record.

So that's how we get to the $8 million.

I was just looking at the previous quarter, where it was $23 million, and I think your 50% share was a loss of $4 million.

I think that's right, about $4 million or $5 million in the last quarter.

And what was depreciation in the quarter?

It was -- I think it was, like, $28 million in the first -- in the second quarter.

For Macau?

Yes.

I think you can pretty much get close to the math.

If the $8 million here represents our share of operating income, you can kind of get to the math of how that would work between our share depreciation at the joint venture level, and any amortization we have at (multiple speakers) --

So there's $19 million or $20 million of that, combined.

Right.

What was the $3 million of nonoperating items?

Isn't that part of the equation also?

It's our share of interest expense at Macau.

So that's between EBITDA and operating income, or that's after (multiple speakers)

No, that's between operating income and net income.

So that comes after that.

Correct.

It's reported below.

(multiple speakers)

Good enough.

Stock compensation expense in the third quarter, Dan?

About $9 million.

How much of that was in G&A -- or in corporate expense?

About $4 million to $5 million.

Great.

Thanks a lot.

Operator, we'll take one more question, and we've pretty much gotten to our allotted time of an hour.

So we will take one more question, please.

Jeff Logsdon, Bank of Montreal.

Terry, perhaps first question for you.

Can you talk about Macau and China in general, the SAR, PRC, and things that have been changing over the last month or two?

And then, secondly, maybe one for Bobby.

If you could give us maybe what you're thinking in terms of slot product around CityCenter, server-based gaming, participations, et cetera.

On the Macau situation, I was actually -- was just there last week.

And I returned late in the week, but visa restrictions are obviously having a significant effect on Macau.

When you look at the Macau picture, 90%-plus of all the revenues come from gaming.

So it's tough to spend much time looking at food, beverage, rooms, and entertainment.

And in that aspect, if you just -- anecdotally, as I walked around, I visited all the properties that I could.

And a number -- all the big ones.

And the traffic was significantly less than the last time when I was there, about three months earlier.

And they do have -- most of that business that comes in from the PRC comes from [Gansu] and Guangdong province.

That's where the visa restrictions are having the most effect.

I think the biggest negative, and I think it's -- I suspect from talking to government people there as well as government people from the People's Republic of China, even China and Beijing did not expect the reduction of the business as much as it was.

And what was fascinating to me, and I think to our people there, is that the movement from [Juhigh] over into Macau really wasn't as inhibited as the movement from Hong Kong to Macau.

And what they hadn't focused on is a lot of people from the PRC were going to Hong Kong on a visa, and that allowed them, without getting an additional visa, to go into Macau itself.

And when that was closed off, as it was about 45 days ago, the amount of traffic coming in on the ferries -- and that's all the ferries that come in from there, as well as the helicopters -- dropped dramatically.

And I suspect that the government of Beijing, and again I can't prognosticate, but I would suspect that they want to have a very stable Macau.

Some 87% of Macau's GDP comes directly from gaming, and that's obviously something that they need to keep moving in a reasonable fashion.

And I suspect we're going to see some changes going back and forth for the foreseeable future there, until they get the mix right.

But they're not going to close the borders off.

In my opinion, that would be a suicide for the SAR and that would not be in the best interest of the central government.

So we will deal with that, and we deal accordingly with it.

We try to build more business coming from the utilization of our marketing offices in the Far East, other parts of Asia and that business is growing, and I think others are doing the same thing.

We go into Singapore, Malaysia, Thailand, Korea, Taiwan, and Japan, and bring more customers in in that regard.

But it's not a perfect market and it's great opportunities, but there will be some ups and downs there as we move forward here until they get that balance correctly fixed.

Bobby, you're up.

As it relates to Aria, Bill Macbeth, the President and Chief Operating Officer of that resort, has been working for several months -- actually, for over a year with the various suppliers of slot machines and communication equipments, in particular IGT.

As to the use of silverplace gaming or any other technology, I'll give you a more complete update as I know more about that as Bill completes his design of the slot floor at Aria.

I think with that, Operator, that brings us to the conclusion of our call.

Thank you all for participating and should you have any other follow-up questions, please don't feel -- don't hesitate to call my office.

Thank you.

Thank you for participating in today's conference call.

You may now disconnect.