MGM Resort International’s earnings remained in the red for the third quarter, but the casino operator continues to rebound from a bankruptcy scare in 2009.
Net loss for the third quarter narrowed to $20.3 million, or 4 cents per diluted share, from $22.3 million, or five cents per diluted in the year-ago quarter. Revenue increased one percent to $2.49 billion from $2.46 billion.
Excluding one-time items, MGM had a loss of 2 cents per diluted share, a performance that fell well short of the 6 cents in earnings analysts had expected.
Two major factors took a toll on the latest quarter: a decrease in gambling revenue, and an increase in some expenses.
“Casino revenue related to wholly owned domestic resorts decreased 4 percent compared to the prior year quarter,” the company noted in a press release.
Operating income for MGM grew 22.8 percent to $140 million, up from $114 million in the year before quarter.
The majority of expenses for the quarter were attributed to a 13.6 percent increase in corporate expenses and a 139 percent increase in what the company called “pre-opening and startup expenses.” The majority of the pre-opening expenses reflect costs of constructing the MGM Coati resort, which will open in 2016, the company said.
The Coati resort is coming at a time when revenues for the company’s holdings in China are plummeting. Revenue in the Asian region decreased 2 percent, as VIP table games dropped 19 percent. Revenue for other table games grew in China, coming in 34 percent higher than the year before.
Analysts expect MGM’s additional investments in China to pay off. “We expect MGM China, which currently contributes approximately 20 percent of the company’s cash flow, to eventually contribute more than 40 percent of cash flow,” said Adam Fleck of Morningstar in a research note.
Expanding in China, Fleck said, is one of the key reasons MGM Chairman and Chief Executive Officer Jim Murren has turned the company around. When Murran took the position in 2009MGM was on the brink of financial ruin caused by the global economic crisis and $13 billion in debt within the company.
“CEO Jim Murren has led perhaps the most remarkable turnaround in the history of the casino industry. Murren has focused on increasing returns on invested capital at existing properties, expanding in China, and using free cash flow to pay down debt. Under Murren, the company has shifted from a solvency story to a deleveraging story,” Fleck said.
The improving economy is also helping increase visitors to MGM properties, and permitting the company to raise its room rates. The company reported that its revenue per available room increased 6 percent during the quarter.
In the Midwest, MGM Resorts International owns MGM Grand Detroit and has a majority interest in Grand Victoria in Elgin, Ill.
In New York Stock Exchange trading Thursday, MGM shares rose 9 cents, or 0.39 percent, to close at $22.98.