MGM Mirage Reports Record First Quarter Results - Saturday 29th of April 2006

LAS VEGAS – MGM Mirage (NYSE: MGM) today reported its first quarter 2006 financial results, highlighted by record first quarter revenues and earnings. Revenues were driven by continued operating strength at the Company's resorts. The Company also maintained its industry-leading margins and continued to benefit from the accretive acquisition of Mandalay Resort Group ("Mandalay").

Beginning with this earnings release, the Company is no longer presenting adjusted earnings or adjusted earnings per share (EPS). In addition, the Company is no longer adding back preopening expenses, restructuring costs or property transactions in the calculation of EBITDA(1). Details of items affecting earnings, operating income and EBITDA are included throughout this release and the accompanying tables.

The Company reported GAAP (generally accepted accounting principles) diluted earnings per share of $0.49 for the quarter, an increase of 29% over the $0.38 reported in the 2005 first quarter, representing the Company's best first quarter performance ever. The Company adopted Statement of Financial Accounting Standards (SFAS) 123® on January 1, 2006, resulting in $22 million of stock compensation expense in the current quarter, or $0.05 per diluted share, net of tax.

The following items were also deducted in calculating GAAP EPS; these items were previously excluded from the Company's calculation of adjusted EPS

In addition, Beau Rivage remains closed, and that resort contributed $15 million in operating income in the first quarter of 2005, or $0.03 per diluted share, net of tax.

"The first quarter was another strong operating quarter for MGM MIRAGE," said Terry Lanni, MGM MIRAGE's Chairman and CEO. "We continued to build on our foundation of world-class resorts, and we also made significant progress on meaningful development projects which we believe will leverage our strengths management, brands, financial discipline and lead to sustained growth for many years to come."

Net revenues increased 56% to $1.9 billion for the quarter. Same-store(2) net revenues were $1.2 billion for the quarter, up 4% over prior year and an all-time quarterly record for the Company. This revenue growth is impressive against a strong prior year increase in net revenues net revenues in the first quarter of 2005 increased 13%, and represented the Company's previous all-time record quarterly revenues. Same-store gaming revenues increased 2% and same-store non-gaming revenues increased 5%.

Same-store hotel revenues were up 7%, as the Company had 60,000 more available rooms and realized a 3% increase in same-store REVPAR (revenue per available room) at its Las Vegas Strip Resorts. This is the Company's eleventh consecutive quarter of year-over-year REVPAR growth.

The 3% increase in same-store Las Vegas Strip REVPAR comes on top of a 15% year-over-year increase in the 2005 quarter. The Company continues to implement its yield management strategies at Mandalay resorts with success, as combined occupancy at Mandalay's Las Vegas Strip resorts was 93% in the quarter versus 90% in 2005, while average rates were consistent with the prior year. The increased occupancy led to volume gains in other areas of these resorts.

Revenue growth generally carried through to the profit line, as the Company was able to maintain its margins, leading to increases in operating income, EBITDA and Property EBITDA(1). The Company's operating income increased 45% to $424 million, and the operating margin was 23% in the current quarter versus 24% in the 2005 quarter. Operating income was negatively impacted by the $22 million of stock compensation expense in the quarter and larger amounts of property transactions, preopening expenses and restructuring costs $30 million in 2006 versus $7 million in 2005. Excluding the impact of these items, operating margins were consistent between periods. EBITDA was $580 million, up 44%.

Property EBITDA was $629 million, and on a same-store basis Property EBITDA was $396 million, a 1% increase over the 2005 quarter. Property EBITDA was impacted by the larger amount of property transactions, preopening expenses and restructuring costs $30 million in 2006 versus $7 million in 2005. Excluding this difference, same-store Property EBITDA would have increased 4%. The Property EBITDA margin was 34%, slightly lower than prior year. Adjusting for the items noted above, the Property EBITDA margin was 36%, consistent with the 2005 quarter.

Detailed Discussion of Certain Charges

In the 2006 period, net property transactions of $24 million largely related to the write-off of the tram connecting Bellagio and Monte Carlo and the related tram station assets ($12 million at Bellagio and $10 million at Monte Carlo), in preparation for construction of Project CityCenter. Project CityCenter will feature a state-of-the-art people mover system that will ultimately re-connect Bellagio with Monte Carlo. Property transactions in 2005 totaled $4 million, largely consisting of demolition costs in connection with capital projects at The Mirage and MGM Grand Las Vegas.

Preopening and start-up expenses of $6 million in 2006 related primarily to Project CityCenter, MGM Grand Macau and The Signature at MGM Grand. Smaller amounts of preopening were also incurred in connection with the permanent MGM Grand casino in Detroit, the Hairspray production show at Luxor and the Company's share of preopening expenses related to the Borgata expansion. Preopening and start-up expenses were $3 million in the 2005 quarter, and related to several projects at MGM Grand Las Vegas, including The Signature at MGM Grand, and expenses related to the Bellagio expansion.

Earnings per share for the 2006 quarter include the impact of implementing SFAS 123®.

First quarter capital investments totaled $380 million, which included $74 million for Project CityCenter, $65 million for the permanent MGM Grand casino in Detroit, $119 million for rebuilding efforts at Beau Rivage and $32 million of additional investments in MGM Grand Macau. Remaining capital expenditures of $90 million included spending on the new theatre and new restaurants at The Mirage, new amenities at Mandalay Bay, and other routine capital expenditures.

During the first quarter, the Company repurchased one million shares of its common stock for $38 million. In early April, the Company issued $750 million of long-term, fixed rate debt at rates below 7%, which it used to reduce the outstanding balance of its senior credit facility.

"Our strategy of making targeted capital expenditures in our resorts continues to be validated by their outstanding financial performance," said Jim Murren, MGM MIRAGE President, CFO and Treasurer. "We will continue to strategically invest in high-return projects that generate increased operating income at our resorts. We will also be making continued investments in key domestic and international growth projects which will enhance our overall growth rate for years to come. Our strong cash flow and superior access to low-cost debt financing will allow us to maintain our financial strength even while growing the company significantly."

Outlook

"Our second quarter results will once again reflect operating strength across our portfolio of resorts, as we expect a mid- to high- single digit percentage increase in pro forma Property EBITDA. We expect a year-over-year increase in second quarter earnings, with GAAP diluted EPS expected to be approximately $0.50, versus a record second quarter performance of $0.48 per share in 2005," Mr. Murren said. The $0.50 per share estimate includes approximately $19 million, or $0.04 per share, net of tax, of stock compensation expense. The estimate has also been reduced by the following charges, which historically would have been excluded by the Company in its presentation of adjusted earnings guidance (EPS impact shown, net of tax, per diluted share):

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