美高梅國際酒店集團 (MGM) 2009 Q4 法說會逐字稿

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

Joining the call from the company today are Jim Murren, Chairman and Chief Executive Officer, Bobby Baldwin, Chief Design and Construction Officer of MGM Mirage and President and CEO of CityCenter, and Dan D'Arrigo, Executive Vice President and Chief Financial Officer.

Participants are in a listen-only mode.

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

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

Dan D'Arrigo.

Thank you Regina and good morning everyone and welcome to our fourth quarter earnings call.

This call this morning is being broadcast live on the Internet at www.MGMMirage.com and at www.CompanyBoardroom.com.

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

In addition, we furnished our press release this morning on a Form 8-K to the SEC, and also as you noticed, this morning we also updated our format.

Where now all of the information we provide is contained within the press release and the related schedules and no longer are there separate tables posted but all the information is fully contained and consistent and even more information than what we've provided in the past - all contained within the earnings release based on recent comments and guidance from the SEC.

Before we get started, I'd like to read our Safe Harbor disclosure.

Any 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 Harbors amendment 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'd like to turn it over to Mr.

Jim Murren.

Thank you Dan, and good morning, everyone.

I'd like to focus this morning on the successful opening of CityCenter, of course, the of the Las Vegas market, how we're doing here at MGM Mirage and what we're doing to prepare for the growth we anticipate in the second half of this year and beyond.

Dan's going to talk about our financial outlook and our credit facility extension that's in the market right now, and Bobby, of course, is going to give an update on CityCenter.

So to start I just have to take a moment to reflect on the momentous event that happened last year in December when we opened up CityCenter.

This community, with its components of Crystals, Mandarin, Vadara and, of course, the centerpiece ARIA has been the culmination of a vision that we've had for five years.

That vision was to bring together some of the world's best architects, best designers, retailers, chefs, entertainers and, of course, employees to deliver a game changing experience to the Las Vegas market and many of you have been out here to see it and I think you'd agree that we've delivered on that promise.

Of course, the mere fact that we completed CityCenter during these extraordinary times is a testament to the hard work and determination of all of our employees, our joint venture partner, our banks and our investors who have supported us through the years and supported MGM as it has become a true leader in global hospitality.

So I have to just say that we're incredibly proud of what we have accomplished at CityCenter, delivering it on time and a fantastic new product and I know it's going to be around for many years to come and be enjoyed by millions and millions of people, and really, despite the economic turmoil that we've seen, we remained ever more confident that ARIA and CityCenter will be not only an extraordinarily profitable enterprise for our company and our partner, but it has obviously forever changed the dynamic here in Las Vegas and the competitiveness of our company.

So I'd like to say also I have to state the obvious that the last couple years have been tough.

You've been following us over the last couple years as we've navigated through just a tremendous time.

Banks, financial institutions, companies all major industries we've seen failures.

We've seen friends of ours, partners no longer in business, unemployment skyrocketed.

Consumers retrenched, and pricing has been very challenging, both in hospitality in general and certainly out here in Las Vegas, where there's been aggressive price discounting amongst many of our competitors as they're attempting to buy business.

I think that's an important distinction with us in the luxury properties, that we haven't been doing that, and we won't be doing that, and we've been able to maintain our rate integrity and our customers are accepting that.

They are going with quality.

We're not buying the business, in other words.

We have been earning it and our market share is improving.

We're seeing tangible signs the economy is healing, both nationally, but more to the point here in Las Vegas.

We have a mountain of data on this and it supports our belief that we've seen the worst of the downturn and that we are emerging now as a stronger company.

Why we feel that way, we look at some macros which we think are important to our industry.

Consumer confidence obviously is a good correlator to the gaming industry and, of course, the Ford index has been moving forward.

That's good for us.

GDP also is an important metric to look at on a macro basis and according to the Fed they're looking for some growth this year.

That would obviously help Las Vegas in general and us specifically but really to the point of what we see the data that we collect the signs are moving in the right direction here.

Passenger declines at McCarron have slowed and load factors have been building.

In fact, the airlines have been adding seats for the spring period and that's a positive change.

Auto traffic continues to grow and it's been, in fact, was up 2.5% last year.

We expect it to continue to grow here in 2010 and, in fact, overall visitation to Las Vegas is at -- I guess we're on a trend, four straight months of being up, and we expect visitation to be up this year.

We've said this on our last call.

We said that we have thought about 38 million people would come to Las Vegas.

It seemed aggressive to some when we said it back on the third quarter call.

It's an easier target to reach now that we've had a stronger finish to 2009, and we feel very comfortable that at least 38 million people are going to visit Las Vegas this year.

And also, on a gaming perspective, the Strip revenues are stabilizing.

In fact, they've been up in the last couple months, up 7% and baccarat, in particular, has been very strong.

Of course we're the biggest player in baccarat in the high end.

So from the MGM perspective, we believe we are well positioned to take advantage of this rebound.

We have we believe the best talent in the industry.

We have been building not only future business, but making sure that our current business is robust and is profitable as possible and we've been focused on the convention business quite a bit because this is an area where all of us in the industry and in hospitality have better visibility into the forward trends than in any other segment of our business and it's just very clear that the convention tone is improving.

We see convention business recovering.

It's recovering right now.

It will be better in the second half of 2010 and we think obviously much stronger still as we move into 2011.

So the goal is to keep as many of our old friends as possible and we are winning more business than we're losing but it's tough and find new friends.

An example of that would be the convention rooms that we've been booking.

In the fourth quarter of this past year, the one reported today, we booked over 440,000 convention room nights.

This is for future business not only this year, but in future years.

That, by the way, is excluding ARIA and that comes on top of, great third quarter we have and that 440,000 room nights is nearly double the number of room nights we booked in the fourth quarter 2007, and it's more than triple of what we booked in fourth quarter of 2008.

A lot of these bookings were repeat business but about half of them, half of the large block business, is brand-new business to our company, and we think that's a very positive trend going forward.

I think that really speaks to the power of Las Vegas as a value destination.

I know that's happening across the strip and that's great news for the market and I think it speaks to the power of MGM Mirage.

We are a destination of choice here in Las Vegas, and we have great product for people when they want to book conventions here.

This is so critical to us, because I'm going to share a couple numbers with you.

Our group bookings in 2010, our mix was only 11.3%.

In other words, our convention mix of our entire portfolio of properties here in 2009 was 11.3%.

It was 16% in 2007.

So we've dropped from 16% down to 11 basically at the end of last year.

We expect that we'll be back in the mid-teens next year, and we think we can achieve that 2007 level very quickly, and what does that do?

That mix shift allows us to obviously not occupy our rooms.

We can now occupy them at more profitable convention customers, and by doing that, we can yield up the rest of our portfolio of rooms.

That is really the operating leverage that this company has on the rooms side, improve our convention mix, restore it back to 2007 levels, and that's going to have a profound impact on our pricing going forward.

I have to say that we're not aggressively pricing this business and we don't have to.

We are going after convention business aggressively, but at rates that are well above the leisure rates that would be the alternative and with contracts that include nice escalators and the prices we're getting right now here for conventions that will be here in town in the second half of this year are the same kind of prices we were getting in the second half of 2004 or 2005 and the prices that we're booking today for business next year are actually very close to 2007 levels, which, of course, were our all time highs.

So the rate picture from convention side at least what we're booking right now is a positive one and certainly improved our mix pretty dramatically.

And what we learned about the convention planners right now is they're much more precise in their planning of conventions and how many rooms they actually book with us.

That has been leading to better yielding of our rooms, more precision in the way we can yield up our whole portfolio and it has also resulted in low attrition rates.

So the attrition rates that we were seeing in the bad old days of last year of over 40%, we're down into the 16% range right now in attrition and our normal's 12 or 13% and it just continues to improve.

On the casino side the star of the show, of course, is international marketing.

We actually had the best year ever last year believe it or not, in international marketing and I'm excluding ARIA , of course, on an apples to apples basis and that was driven mostly by our customers in Asia.

And we know we've been outperforming the Strip here in the baccarat numbers and we think we continue to do that and a great part of our optimism is the fact that a lot of our customers are first trip customers to us, and a lot of them are coming to see ARIA and really what better marketing tool has there ever been in Las Vegas but CityCenter and those customers are coming to visit.

They're staying in our portfolio properties.

They're staying at ARIA and they're sampling what we have to offer now in the synergy between CityCenter, ARIA as the anchor and our other luxury properties has been very profitable to us so far.

On the marketing front, Bill Hornbuckle, of course, our Chief Marketing Officer, Corey Sanders, Bobby Baldwin, the whole team, we continue to make great strides in this cross marketing of our portfolio and yielding our portfolio of properties more efficiently.

This is just better cooperation in our company, better coordination than ever in the history of this company and that's allowing us to capture additional revenue that we know in the past has gone elsewhere, and that's just wrong and we've been changing that.

We think that's going to be a driver of our revenue growth not only this year, but going forward and that driver of revenue combined with the operating leverage in our portfolio and the fact that we're just lasered in on our cost structure, in fact, our costs are still down year over year on payroll, we believe our margins will not only rise pretty significantly over the next few years, but we can get back to our peak level margins over the next few years.

So how is ARIA doing?

Bobby is going to get into it clearly, but I just have to say a few top points here, the reviews have been outrageously great.

The amount of earned media that we've received around the world has been spectacular.

There have been over a billion impressions worldwide of CityCenter and of ARIA .

Our PR team has done a tremendous job introducing ARIA and CityCenter to the world.

Volumes are ramping up.

Our call volumes, the rooms that we're booking are all improving and, of course, as people experience us, they love us and some things are just harder to explain than experience.

We know that we've set the bar at a different level here in Las Vegas for Las Vegas luxury.

We know that bar is not going to be raised by anyone any time soon, and we know that as this neighborhood of properties continues to gain awareness, that it's going to have a positive impact on the city as other great properties have in the past, and certainly we believe it's going to have a very positive impact on us, and really, if you think about it, for as little time as it's been open that for every high value customer, I mean every of our best gaming customers or best retail customers, for every customer that has seen ARIA , there are over 1,000 of them that haven't yet, and the opportunity for us going forward we think is just almost unlimited.

How are we doing with the luxury portfolio now that ARIA is open?

That's been a question before.

Well, the answer is a resounding great.

Bellagio is up in almost every metric.

Our luxury portfolio in general is doing well.

We are seeing great business coming in during important times.

Some anecdotes would be, for example, in New Year's, we had excluding ARIA , all of our strip properties saw baccarat drop increase pretty significantly and then when you include ARIA we about doubled our baccarat numbers.

During Super Bowl you look at our properties here in January.

We were up in rooms and occupancy in all of our strip properties if you exclude ARIA and, of course, RevPAR was also up during that Super Bowl weekend which was really a great sign.

In fact, year to date of all of our wholly owned properties all of them our occupancies actually up year over year which is really an encouraging sign for us after what we've been through and our room rates have been improving.

More to the point, in fact, this is realtime information, we're right in the middle of Chinese New Year's.

It's in full swing, and I can say without being too specific, though I know you'd like me to be, we have more people in town than ever before and the credit and front money that we have in town in our portfolio properties is up nicely, significantly versus just last year, and really when we have the type of product we have with five different luxury offerings in our company in an important time like Chinese New Year's where customers stay for many, many days, sometimes well over a week, having five different properties is a really good thing to have as people are moving around from property to property and we know we've gained market share here, even stripping out ARIA , we know we're up year over year, and with ARIA we're up a lot.

Dan's going to talk about the balance sheet, but I just want to make my point here is we've been working on this -- I don't think anything's been more important to all of our investors than how do we restructure the balance sheet of this company?

How do we extend out maturities?

How do we improve liquidity?

How do we create a stronger financial foundation for this company?

And recent evidence of that and this is just another link in the chain because we've done so much over the last couple years to improve the fortunes of our investors, but the recent link, of course, is the fact that we're out amending and extending our bank facility.

Dan's going to walk you through what that looks like, but I want to make it clear that we're very focused on this.

We've made great progress.

I'm very involved in it.

I know it's going to get done and I know it's going to have a profoundly positive impact on our capital structure.

I really think that that's critical as it's been an objective of the board to continue to derisk this company, derisk our balance sheet and provide ample runway to continue to work on other operating initiatives that we have, as our business is improving and as we continue to strengthen the company.

So to sum it up, the environment remains challenging.

We have said this before.

It's going to remain so for some period of time, but we see light at the end of the tunnel.

It's improving.

We've made great specific steps to benefit from the rebound in our business.

Our balance sheet picture is also improving.

We obviously have the best assets in every market.

We're continuing to build our market share here and in our other markets.

The operating leverage in our business, we saw it go the other way to our peril a couple years ago.

It's moving in the right direction right now and it's tremendous because our expense structure has never been better.

We have a game plan.

It's clearly defined.

We're executing against it.

We've been playing offense lately and the game plan is an offensive minded one and we're sticking to the game plan because it's working.

So

Thanks, Jim.

First I want to talk about two items that affected our results and our balance sheet at the end of the year.

First our fourth quarter results were impacted by non-cash impairment charge totaling $548 million or $0.73 per share net of tax.

This was as a result of our decision not to move forward in the near term with our prior planned development in Atlantic City and this non-cash impairment charge was related to our undeveloped land holdings in Atlantic City.

Also as part of our year-end process, the company adjusted its accrual related to our CityCenter completion guarantee obligations from $65 million as previously disclosed to $150 million under those guarantees.

This is based on our recent estimates of the final construction costs and is an accrual based on the low end of management's range of $150 million to $300 million which reflects our net guarantee obligations under those completion guarantees.

Now I'd like to move forward and discuss first our operating trends and update on our balance sheet and the progress we've made to date with our lenders and finally some help with your modeling and a discussion of our outlook going forward.

First let me start off by addressing our overall operating results as we outlined this morning in our release.

In the fourth quarter, we generated net revenues of $1.45 billion and adjusted property EBITDA of $307 million in the quarter.

You'll note in the release we presented our operating results on a same store basis which excluded Treasure Island.

The same is true in these remarks that I'll make as well.

As we discussed before in our past quarterly conference calls, our goal throughout 2009 was to show sequential improvement in our year-over-year changes in our business and we believe we've achieved that.

Our results in our net revenues, adjusted property EBITDA and our strip RevPAR continue to improve throughout the year.

Our net revenues were down 5% in the fourth quarter year over year, versus the 9% decline in the third quarter, while our adjusted property EBITDA was down 8% in the fourth quarter compared to down 12% in the third quarter, and our strip RevPAR continued to improve year over year down 23% in the third quarter to only down 16% in the fourth quarter.

Our table games volume was up 2.3% in the quarter, led by strong baccarat volume in our business and our hold was consistent year over year.

Our property EBITDA margins were a little over 21% in the fourth quarter, compared to 21.8% in the prior year fourth quarter and we look for continued margin improvement going forward given the significant leverage in our business model and expect improvement in the mix of our convention room nights in the second half of 2010.

Our regional markets continue to perform well and outpace our competitors.

Our combined Mississippi property EBITDA was up slightly over the prior year led by record results at Gold Strike Tunica.

Tunica's $45 million in annual adjusted property EBITDA was an all time record for this property and a tremendous compliment to George Cortez and the team in Tunica and Beau Rivage.

Our MGM Detroit property was up slightly over the prior year and continues to lead that market with roughly 40% market share.

Our income from unconsolidated affiliates in the quarter includes our operations from MGM Mirage Grand Macau which earned operating income of $22 million including depreciation expense of $24 million.

The company's 50% share of MGM Grand Macau's operating results was approximately $10 million and lower hold affected this property in the fourth quarter despite increased volumes both year over year and sequentially from the third quarter to the fourth quarter.

For the 15 day step period, our operating income from CityCenter is also included in our income from unconsolidated affiliate lines.

ARIA , the centerpiece of the CityCenter, earned operating income of $7 million in the quarter for that step period including depreciation expense of $9 million.

ARIA enjoyed strong high end volume and high end traffic overall and had the benefit of a good hold percentage for that stub period.

Borgata once again led the market in Atlantic City and produced strong results as well.

Moving over to our balance sheet, as Jim mentioned, we continue to work with our lending group on amending and extending our credit facility.

On February 8th, we announced the launch of a credit facility amendment and extension.

We have broad support from our lead lenders and in an effort to maximize participation in this transaction we have asked all of our lenders to provide their approval and consent by February 24th next week.

We expect to finalize this process shortly thereafter.

This transaction would significantly improve our liquidity and debt maturity profile.

We would maintain ample liquidity under the revolver to address our near term maturities and retain a number of tools which would provide us with further liquidity going forward.

This continues on a positive momentum we've been able to create over the past several quarters as it relates to our balance sheet and also we believe greatly improves our rating outlook going forward.

Some specifics related to the proposed amendment, this would allow us to issue the remaining amount of secured debt that would be allowed under our public indentures, would extend the maturity date from October, 2011 to February, 2014, a little over two years, would require the company to make a 20% paydown to extending lenders which based on final participation of extending lenders could be increased 25%.

Extending lenders would also be entitled to an increase in rate.

Currently LIBOR 400, we have a LIBOR of 200.

That rate would increase by 100 basis points to LIBOR 500 with the floor still being intact.

Extending lender consents are due next week and we look to wrap up this process shortly thereafter.

A couple of other items to note on our balance sheet.

I'll note that we had approximately $2.1 billion in cash and cash equivalents at year-end.

This included a drawdown of approximately $1.6 billion on our revolving credit facility in late December.

This amount was immediately repaid post year-end, and was done in order to increase our capacity for the issuance of potential secured senior secured notes under our public indentures.

At year-end, we had approximately $12.5 billion of net debt versus $13.5 billion of debt at the end of 2008.

As of today, we have approximately $1.1 billion of availability under our credit facility which reflects the recent payment just on Tuesday of approximately $297 million of bonds which matured this week.

As far as our bank covenant s are concerned we have a minimum trailing 12 month EBITDA covenant.

We are well in excess of that covenant at year-end, over $1.3 billion versus a $900 million covenant kept.

Now I'd like to give you a little bit of help with your modeling and talk about our outlook.

Our total stock compensation expense in the first quarter is estimated to be approximately $10 million.

Corporate expense increased in the fourth quarter of 2009 to $44 million compared to $26 million in the fourth quarter of 2008.

It was slightly higher than the guidance we gave as a result of some increased advisory and legal costs, some bonus accruals and severance accruals which accounted for roughly about $10 million in the fourth quarter of 2009 and in the first quarter we estimate our corporate expense to be approximately $30 million to $35 million including $4 million of stock compensation expense.

Our preopening expenses should be minimal in the first quarter as compared to the fourth quarter as CityCenter is now open and the bulk of fourth quarter preopening related to CityCenter.

Depreciation expense in the first quarter is estimated to be in the $ 160 million to $170 million range.

Our gross interest expense in the fourth quarter of 2009 was $263 million with capitalized interest representing about $43 million.

We estimate gross interest expense in a range from approximately $265 million to $275 million with no capital interest expense in the first quarter.

For the full year of 2009 our capital expenditures were less than $150 million.

We expect for 2010 for the full year that our CapEx will be slightly higher than $200 million due to some carry-over projects that are rolling over from 2009.

Looking ahead, we expect our room rates will remain soft in the first quarter due to a light convention calendar, but we expect a lower year-over-year percentage decline in RevPAR than what we saw in the fourth quarter of 2009.

We expect to continue to occupy our buildings at high levels and to price at a premium to the overall market here in Las Vegas.

We believe as the convention business continues to build and recover and heal, and with the leverage in our operating model, we have believe our RevPAR will turn positive beginning in the second half of 2010, and provide us with a significant lift in terms of margins and our operating leverage and cash flows.

And with that, I'd like to turn it over to Bobby Baldwin for

Thank you, Dan, and good morning, everyone.

Now that CityCenter is open we've begun the construction closeout process with the general contractors which will take us several months.

Due to the size and complexity of CityCenter, approximately 1,000 contracts need to be closed out at the contractor and subcontractor level.

Many of the highly dedicated and professional employees from MGM remain on project to complete this task.

All the various components of CityCenter opened on schedule throughout the first 16 days of December.

The overwhelming positive feedback received from our guests, media and other Las Vegas visitors far exceeded our expectations.

As I've experienced with other major resort openings, we are currently focusing on fine tuning the various facilities such as lighting, adding additional art and some changes to FF&E.

The President and Chief Executive Officer of ARIA Bill MacBeth and I are now in the process of taking the newly finished buildings and transitioning them to highly successful business enterprises.

CityCenter and ARIA in particular were designed to prosper in the highly competitive Las Vegas market and withstand the worst of economic times.

Our first goals include increasing occupancy, improving mix and finally maximizing rates.

ARIA has been very well received by our national and international clientele, rated gaming volumes have been strong for the first 60 days of operations.

ARIA 20s December occupancy was 68.2% with an ADR of $236.

Maintaining hotel room rate integrity has been one of our major objectives as we establish brand awareness and market position within the highly competitive Las Vegas luxury market.

Booking trends have continued to improve in both the transient and leisure segments each week since we've opened.

The Cirque du Soleil Viva Elvis show will celebrate its official grand opening tomorrow night.

On the residential front, two initiatives were announced in the fourth quarter to assist our residential owners.

We instituted a 30% price adjustment on all units in addition to providing a financing program.

Penny Mac has been retained to lead this effort and EVO 5-1 mortgage here in Las Vegas has been engaged to act as the loan originator.

We've received 400 plus loan applications to date as a result of this program.

The closing progress began with the Mandarin in late January and will continue for about six months.

Vadara's closings will begin in mid-March followed by Veer in mid-April.

Our residential sales and closing teams are working closely with each buyer in an orderly and efficient manner.

CityCenter's retail experience, Crystals, is continuing to complete the many tenant buildouts.

We opened in December with a star studded array of retail tenants.

This group occupied about 41% of our rentable area.

Crystals will be 56% by the end of the first quarter, and 73% by the end of the third quarter and approximately 85% by year's end.

That concludes my prepared remarks and I'll turn it back to you, Dan.

Thank you, Bobby.

Regina, we'll open it up for questions.

Our first question comes from the line of David Katz with Oppenheimer.

Hi.

Good morning.

Good morning, David.

A couple of quick ones.

Can you just talk a little bit more specifically about your strategies for thinking about the opposite ends of the strip.

As I look at the properties and I see Mandalay which did quite a bit lower than what we had and Circus Circus which is also quite a bit lower than what we had, on the thesis that obviously a lot of attention is being driven to CityCenter.

How do you plan to deal with that?

Well, maybe I'll start, David, and then anyone can jump in.

There are a variety of strategies that we are deploying right now.

One overarching one is that we're going to relaunch our loyalty marketing program in next quarter.

Our Players Club database has over 60 million names in it.

Bill Hornbuckle and the team have been working on this since he became the CMO back in August of last year and we've deployed technology.

We've hired partners in terms of database management and we're going to relaunch that program.

It will be far move effective and I think it will have an impact strip-wide as people can better understand the value of being part of the MGM system.

That will help the core properties particularly.

That's number one.

Number two, these are general points.

We can drill into them if you'd like, but number two is yielding the rooms more effectively.

Corey Sanders has been doing this also since August as the COO of Core Brands.

Circus is one of those properties and to be able to yield more effectively on the room side, be more thoughtful on casino marketing events, driving business throughout our portfolio, something we just never have done before and we think it's going to be critical.

It is clearly harder to do so as the center of gravity has clearly moved to the center of the strip, which, of course, accrues to the benefit of primarily us and primarily Bellagio, Monte Carlo, New York New York, MGM, the properties that are at center strip,it's harder for the properties that are to the north and to the south and we're aware of that, and we're working toward that goal and specifically Mandalay bay.

Mandalay Bay more than any property that we own was the victim of the recession, because the convention business is so important to Mandalay, I talked about the strip-wide mix of about 16% of our rooms, but in the case of Mandalay, it was oh 40% of the rooms.

That's business that we lost in 2008 and 2009.

That's business that we're winning back in 2010, 2011 and beyond.

So Mandalay's focus is to go out and restart, replenish its convention business, and as I said earlier, we're winning more business than we're losing there and that will have an impact on Mandalay's business.

It is still very tough out there, and we don't make any mistake about it, but we see great progress on the revenue side.

Meantime on the cost side as I said earlier, we haven't been in better shape in our company's history.

So we should see margin improvement as a result of that.

If you could, if I could just follow that up with two other quick ones, a couple of the topics that we're focused on and watching and waiting on are, one Atlantic City and what your strategy is there and second, Macau, with respect to the prospect of an IPO and my question while you may not be able to comment or give specific updates, the common thread between the two is, are you potentially monetizing things at a moment where you can see a trajectory of improvement and might it not be better to wait rather than to do those now?

And what are your sort of updated thoughts on sort of choosing a timing for those?

Well, in the case of New Jersey we did disclose our direction back I think it was a week ago, David, and we're working toward accomplishing that direction and I think we will, and a direction if accomplished the way we articulated last week would give us really ample time to dispose of that 50% interest if we choose to do so and so it wouldn't be, the point in time of say March of 2010.

It would be at a time of our choosing within a very broad period of time.

So I think that we've bought and sold assets before.

We know how to do that and we've negotiated something we believe is to the best interest of the shareholder.

So that would be my comment on New Jersey.

My comment in Macau is, well, we made a lot of money in January would be my first comment and our volume trends are improving as you saw what Dan mentioned in the fourth quarter even though we didn't hold so well and particularly in December but our volume is improving, our market share is improving and we think those trends are going to continue in Macau.

Our partner and we are very engaged in this and we think going public makes sense, and we have been always articulating the fact that we'd like to go public by midyear.

That could bleed into the third quarter but I guess that's still mid-year and we think that's a good idea and that will provide a lot of value to both partners and certainly value to us.

So our thinking is that we have many, many jobs ahead of us we need to delever rage the company.

We need to create certainty where there's uncertainty and that would be in the case of New Jersey.

We need to move forward in Macau and exploit the opportunities there and we need to maximize the benefit of what we currently own and I have to say that we're working on all those fronts and making progress.

Okay.

Thank you very much.

Thank you.

Our next question comes from the line of Larry Klatzkin with Chapdelaine.

Hey, guys.

Hi.

Couple thing here.

One, I know Boyd is the one that gives the main information on this, but I'm wondering if you guys could just give any for my purposes indication of Borgata, what it might have done.

Go ahead.

Larry, for our contribution from Borgata in the quarter, it was up year over year slightly in terms of our share of operating income and our income from unconsolidated affiliates, but we'll leave the actual Borgata results to our partners at Boyd.

All right.

That's fair.

In the US you didn't have any luck adjustment, correct?

In the US, no.

We were pretty normal year over year and right on top of last year.

Excellent.

Can you quantify at all the Macau luck?

Well, I think if you look at Macau, Larry, you look at the last six months of the year, our volumes continue to improve.

We did play a little bit unlucky in the fourth quarter, a little bit lucky in the third quarter, but if you look at the last six months, I think that's overall our luck was pretty normalized in the back half of the year.

Okay, good, good.

And then as far as CityCenter goes, are you 100% rooms open now?

Are you still ramping up?

How's that working?

100%, Larry, of the rooms are open at ARIA .

Okay.

When did you get to 100%?

We got the last floor about five weeks ago.

Okay.

And as far as the final budget goes, you said this $100 million to $150 million to $200 million reserve.

Does that mean the 150 is what you always needed for finishing the place if the condos don't sell.

So is that zero to 150 potential cost overage and you won't know till you finish and it could be zero?

Yes, Larry.

That's an estimate, based on the facts that we have right now in terms of that range.

Bobby and the team are continuing to work on, closing this project out.

That's our best estimate right now from a cost overrun standpoint.

That's pretty good.

And do you have to put the $150 million in if it takes six months to close the condos or how much time do you have to close the condo before you have to put some money in that you obviously would get back when the condos close?

We're always entitled to that first 244.

Whenever it goes in and whenever it closes in terms of the proceeds coming out.

So we're always entitled to that.

There isn't a time frame.

Okay.

But putting out the 244 do you have to put that out in the first quarter or first and second quarter?

Perhaps.

It will depend on the closeout process and how that plays out.

Okay.

But sounds like you're going to get most of it back.

Larry, that's it.

We can't have so many questions.

Okay, that's it.

Thanks a lot, guys.

Thank you.

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

Thanks.

I wonder if you could give us a little bit of color on casino receivables in Macau and in Vegas.

Yes.

Let's look at it, Robin.

I know our reserve number is in good shape.

Our reserves are pretty consistent with our last two year-ends just to give you a point of comparison.

We were about 29% reserved at the end of 2007, about 38% reserved at the end of 2008 and about 34% reserved at the end of 2009 and our collections have been strong overall throughout the year.

So we feel pretty comfortable with our estimate there's.

Do you have the actual dollar amounts?

Yes.

We're looking at the receivable right now.

It will be out in the K but we can give it to you probably.

Roughly on the casino side at the end of the year, Robin, about $261 million of casino receivables versus $244 million in 2008.

And I'm sorry, is that gross or net?

That's gross casino receivables at the end of the year for 2009 and 2008.

Okay.

And that's mostly going to be Vegas, right?

Correct.

Those are predominantly driven by Las Vegas.

Great.

And then just in terms of trying to think about RevPAR for the year, I know you talked about growth in the second half, near term challenging environment.

I don't know if you, kind of venture whether that leaves you positive or negative for the year and also I don't know if you can quantify a ballpark range of the group rates are?

I know room rates are up from last year in terms of what's on the books right now?

Well, maybe I'll start that, Dan.

You can look at your side or anyone can jump in on conventions.

Robin, we think that we are going to turn positive.

Here you're talking about the Las Vegas strip in terms of RevPAR and we do think we're going to turn positive in the second half.

We clearly think we're going to turn positive no later than the third quarter to be specific.

We haven't given up on the second quarter, by the way, in terms of turning positive.

It could even happen then, but we think we're going to turn positive in RevPAR in the third quarter of this year and that if our trends continue as we expected, we'll be no worse than flat for the year in terms of RevPAR and we could be up a little bit.

I think the way that trend would look, Robin, we'd be up slightly in the third quarter based on that trend and up a little bit better in the fourth quarter with the continued recovery of our convention business in the periods of October, November.

So in terms of convention rates, Robin, I'm looking at a graph here of 2008, 2009, 2010 and 2011 and in 2009, of course, was our worst year in term of rates.

2010 in every month beginning in April, the rates will be higher than they were in 2009 and the rooms on the books for 2011 are about what they were in 2008.

So we're getting back to 2008 levels as early as next year and it ranges from, $116 this year -- I'm sorry, last year to, $180 depending on the month, depending on the business, but the point I think is if you look at it on a monthly basis as I'm looking at a graph now is that our rates in 2010 turn positive versus 2009 in April and we'll be up versus 2009 in every month going forward this year versus last year and then our rates that we have on the books right now, these are the definite rates for 2011 are about what we had in 2008 and that would be up pretty significantly, $10, $20, $30 per room versus the 2010 levels.

It sounds like the group rates are turning positive more quickly than overall which is interesting just versus some color from some other folks in the market.

So that's very helpful.

Thanks.

You're welcome.

Our next question comes from the line of Joe Greff with JPMorgan.

Good morning everyone.

Morning.

On the convention side what percentage of 2010, 2011 bookings would be net new bookings to the Las Vegas strip market versus stealing from guys up the street or booking stuff that hasn't -- that maybe kind of canceled the last couple years?

And then just a clarification, Jim, you mentioned what the mix was in 2009, 11.3% of room nights related to group, 2716 and you mentioned next year going to midteens.

Did you mean 2011 or are we referring to this year?

Okay, Joe.

I'll try to tackle that in both cases.

One is half of the business that we've been booking, almost exactly half is new business to MGM Mirage in terms of convention.

So in general when we're talking about rooms that we've been booking on the convention block on a quarterly basis, about half of it's new to us.

Of that business maybe half of that is new to Las Vegas and there's no doubt that we've lost business to Wynn and Venetian and we've won business to Wynn and Venetian, not only existing business, but new business, but you all are very intellectually curious.

I think you could find out for yourselves.

Just talk to the ones that are booking the conventions.

Talk to Helms Brisco.

Talk to the actual companies that are coming, whether it's IBM, Microsoft, Pfizer.

You pick a major Fortune 500, 400, 300 company and ask them where they're going and I think you'll come to the conclusion that we have and that is that we're winning more business than we're losing.

So I would say that I know half our business is new to us, the ones who we're booking, and I would say a good percentage of that, maybe half of that is new to Las Vegas.

Las Vegas clearly our competitors and ourselves alike with the help of the LVCVA and others, we are a value destination in the convention world and we're one of the best at it and it's working.

So that's on the first point.

On the second point in terms of percentage of rooms, we're clearly going to be better than we were in 2009.

I would say that 11%, 11.3 exactly will hopefully be our all time low.

We'll be in the low teens this year and we think we're going to be in the midteens starting next year.

Great, thank you.

Thank you.

Our next question comes from the line of Anthony Powell with Barclays Capital.

Good morning, guys.

A couple quick questions.

First on the secured debt that you issue after you get your amendment what's the total amount that's left available there?

Under the basket roughly, Anthony, about 800 to 850 range.

Great.

And second in your regions you did a lot better in the EBITDA margins than we estimated and it's a lot better than some of the competitors in the region have done this quarter.

What do you think drove that?

You talking about the margins in regionals?

Yes like in Mississippi, Detroit.

Well, I think first off these are market leading assets.

Detroit is -- has done a great job in terms of its market share.

It's not going out and buying the business.

It's going out and winning the business and capturing it and our teams in all three of those properties has done a great job in going out and getting incremental market share and driving it to the bottom line and improving those margins.

I would just add there specifically a couple specific points.

In Detroit, the other two Detroit-based competitors, particularly one of them, has just been incredibly aggressively just buying business.

It's just not profitable business and we won't chase that and we haven't and you could see obviously we have a vastly superior asset there in Detroit and we're earning that business there.

We're certainly not buying it.

We have a great property presence there and a great marketing team, great team in general.

In Mississippi had a record between just a tremendous team.

The President was already cited there, but the other point is that those properties, those three are actually working very closely together.

We're cross marketing Detroit, Tunica, Biloxi very effectively and really for the first time and a lot of what we've learned there we are populating into our Las Vegas strip properties.

There's some great, great techniques, some great marketing programs that Lorenzo and George and their teams have developed to work together that we're actually populating throughout the strip properties and that weaves into our relaunch of our loyalty marketing program this coming few months.

Our next question comes from Janet Brashear with Sanford Bernstein.

Thank you.

I wondered given what you said about RevPAR being flat for the year and casino revenues picking up what you expect for 2010 EBITDA and what portion of that will be CityCenter.

Well, as you know, we don't give EBITDA forecasts, never have done that, but clearly, we expect our cash flows to improve if, in fact, RevPARs are improving over time.

We think that there's a correlation that has been obvious in our business, and again, we don't give CityCenter cash flow forecasts either.

What I think is quite clear about ARIA in particular and CityCenter and Bobby talked about it is that the call volumes and the rooms booked are going up every week.

I think Bobby, you have some numbers on that.

Yes, that's true, Jim.

Leisure and transient both are increasing.

We've only got the tracking, of course, for the first several weeks of operations, ending on 2-14, but leisure has increased nicely as well as transient.

So the trends are very positive.

ARIA is, of course, a brand-new business and it has to find its own business and it's doing that very quickly.

Bobby, if I could ask Vadara, how many rooms do you plan to open over the course of the year given your strategy earlier was to channel the sales to Veer and that might assume that any unsold units would be in Vadara.

What are you doing with those units?

Are you going to make them hotel rooms at some point, leave them dark?

We won't leave anything dark, I promise you that.

We have 845 rooms that are turned over to the hotel currently out of the 1,535 or so.

The other units are under contract to buyers, and until we conclude the closing process, which will be somewhere around the end of May for Vadara, we don't know which ones of those rooms will end up in hotel inventory.

Our next question comes from Susan Berliner with JPMorgan.

Hi, good morning.

Two questions.

One was I was wondering if you could update, I guess, your sources of liquidity as you see over the next two years in terms of options.

Well, you want me to tackle that, Dan?

Sure.

Tag team.

Tag team.

We have many available to us, certainly more today than we had a year ago and that's what we've been trying to do here, of course, is create more optionality for the company.

So the source of liquidity first and foremost is free cash flow.

We expect to be growing our free cash flows over the next several quarters, next several years and that is going to be obviously dedicated toward delever raging the company.

That is the goal of the company overall, number one.

Number two, there might be a disposition in Atlantic City.

That's a, so liquidity for our company and that would go toward debt reduction as well.

Number three, and these are in no particular chronological order.

I'm just giving you my basket.

Dan will have a few others probably is we do want to go public in Macau.

We think there's an opportunity to create liquidity in both partners for doing.

So four, CityCenter is a winner and will be growing in its cash flows.

It is an underleveraged joint venture today and as we continue to build its revenues, build its cash flows, improve its visibility, there are many corporate finance options related to CityCenter, leveraging it in a different way, recapitalize it, accruing benefits to its partners.

That's an obvious one.

We have access to any capital market that we choose to opportunistically.

The focus has been in the secured market obviously because that's a cheaper source of capital for us, but we look at all options there and really we're at a point in time where nothing is off the table, but we would prioritize what is in best interests of our stakeholders.

There was a time, a tough time not too long ago, where we had to consider selling operating assets at below market multiples at depressed cash flows.

I think those days are over and I feel like we have more options that accrued to the benefit of the overall organization as our properties continue to recover.

They're better off being with us than with somebody else and in the meantime we're able to access capital in other ways.

Okay.

And my second question was -- appreciate that -- I was wondering no one seems to be seeing any sort of cannibalization from CityCenter or identifying it.

I was wondering if you guys could, if you can't identify specifically the name, I guess the segments that you think are being hurt, the lower end or, whatever comments would be helpful.

Sure.

The citywide data lags ours, of course.

So we don't have what people are doing in January or February.

We know how we're doing, but we don't know how -- and we're a big part of this world here -- but we don't know how everyone is doing.

It's clear as I said, our occupancies in January were up strip-wide.

Now would they have been up more if CityCenter were not here?

We'll never know.

We do know that a lot of people are coming to Las Vegas to see this, this project that we have delivered, but we won't know that for quite some many months.

If I were to say where the focus of the investment community was last year in terms of impact of the opening of CityCenter in ARIA , it was Bellagio.

Most everyone on the call was concerned that Bellagio would be negatively impacted by virtue of the fact that a beautiful new property is right next-door and we were the lone wolf.

We said that we didn't think that was going to happen and so far, so good, we're right.

The mere existence of CityCenter has benefited Bellagio significantly.

The People Mover say, for example, between Bellagio and ARIA see over 10,000 people a day coming back and forth at the Bellagio stop and five to 10,000 people a day over at Monte Carlo.

The foot traffic into Bellagio has grown significantly which accrues to the benefit of slot handle, food coverers and any volume-related metric.

Occupancy and ADR is up.

Bellagio does not buy business.

Bellagio does not give food credits and muffins and anything else that they think they need to do to drive business to a luxury hotel.

It doesn't have to and it won't.

So from a standpoint of where we've seen an impact if we've seen one at all will clearly have to be in the mid market properties where some of our competitors have moved down the price range and have started to tackle customers that more likely have been going to some of our mid market properties.

It has not been at our luxury properties and we think that over time that as the market heals, the competitive nature of Las Vegas will improve a little bit and make no mistake.

We don't expect a rapid recovery here, but we too see progress and we do know that we at MGM Mirage here in Las Vegas, we're able to raise room rates looking forward more often now than we've had to lower them and we think that that trend is going to continue especially in the second half of this year and

Regina, we'll take one more question.

Our last question come from Chris Woronka with Deutsche Bank.

Hey.

Good morning, guys.

Was hoping we dew could drill down a little bit on the rates and -- we could drill down a little bit outlets rates and could you tell us directionally how much of a difference there is between the group rate and the transient rate, maybe how that's changed over the last couple years?

Well, I'll hit the group rate, the convention rate versus the leisure rate and that delta is about $60, isn't it?

Yes.

So really that's why -- and maybe we can look at the transient rates if you guys have it while I finish this point.

The reason why we have emphasized the convention side is that it's a business that we're growing not for ourselves, the business that has an impact on overall rate but it's very simple.

It's that if we can book these conventions, especially these multi-year deals with conferences and conventions groups that have escalators to the pricing but if we're booking them at the rates that we've already articulated to you that means we're displacing most likely a leisure traveler that is only willing to pay much less.

In fact, on average at about $60 less per room.

If we're booking a convention room for a particular month at a particular property at $160, there's no way we would be able to book it at that rate, to a leisure customer.

It would be under $100 in that case.

So there's great operating leverage to that and if we can improve our convention mix slightly.

Remember we are not a convention hotel company.

We are a company of many properties in many segments and it would be comparing an apple to an orange to compare us to some of our strip properties competitors.

If we can yield this portfolio up a little bit, it doesn't take much going from 11% of convention room nights to 15, 16% over the next couple years.

It doesn't take much and we do have the best sales team with the most experienced people that have been with us for the longest period of time and the lowest amount of turnover.

These people know what they're doing and they're energized.

They're excited about doing it.

We can have a profound impact on overall rate.

As relates to convention room rates and transients, it depends on the property.

It depends on the time.

It's pretty much about the same.

In some cases transient is higher, but overall, it allows us as we build our convention rooms, it allows us to improve the yielding of our transient rooms as well in terms of rate.

Okay, very good.

Thanks.

Thanks, Chris.

Well, thank you, everyone, for joining us today and for any follow-up questions we're available all day.

Thank you very much.

Ladies and gentlemen, this does conclude today's conference.

Thank you for participating.

You may now disconnect.