Bodog Offers Odds on Breeders Cup

New York is used to crowning champions in October and on Saturday it will crown eight of them. The Breeders' Cup, the World Series of horse racing and one of the most popular betting events of the year, features a race card of the globe's finest thoroughbreds dueling for millions.

The Las Vegas-based casino company said its third-quarter net income and earnings per share dropped sharply compared with the same period a year ago, largely because of hurricane damage that forced the company's Beau Rivage casino in Biloxi, Miss., to close for all of September.

MGM Mirage, which operates 11 major Strip casinos, reported net income of $93.2 million, compared with $126.8 million a year ago, a 26.5 percent decrease. Earnings per share dropped to 31 cents from 45 cents.

MGM Mirage said it would have earned 38 cents a share removing one-time items and discontinued operations.

Analysts polled by Thomson First Call expected MGM Mirage to earn 41 cents a share in the quarter.

The earnings disappointed Wall Street, with shares in MGM Mirage tumbling 13.64 percent in trading on the New York Stock Exchange. Shares of MGM Mirage closed at $37.75, down $5.96, with more than 6.6 million shares traded, almost three times normal daily volume.

MGM Mirage President and Chief Financial Jim Murren said he was disappointed because analysts focused on just one aspect of the company's quarter and not the entire picture. The quarter marked the first full three months that MGM Mirage operated the properties acquired in its $7.9 billion buyout of Mandalay Resort Group.

"It's kind of interesting that we didn't get one question (on the conference call) about how we're operating with those properties," Murren said. "To me, that could have been the focus to the story. Appropriately a lot of attention was paid to Beau Rivage. Even though it represents just 4 percent of our earnings, it represented 50 percent of the questioning."

Murren said the drop in the stock price could have resulted from investor confusion over the company's bottom line.

"We like to say we're the disclosure leaders. We put a tremendous amount of information out there that could have been interpreted in many ways," Murren said. "Maybe we gave too many numbers. We gave actual numbers, same-store, pro forma and a lot of supplementary material."

He said some analysts didn't change their estimates to account for the hurricane's effect, so the average was out of date.

One gaming analyst said the results might be a one-time event.

"We think third-quarter results were slightly disappointing, particularly at some of the key properties, but it may be a throw-away quarter anyhow," Deutsche Bank gaming analyst Marc Falcone said in the note to investors. "Fourth-quarter guidance suggests normal demand trends, and we remind investors of the significant impact that New Year's can have on fourth-quarter results."

MGM Mirage's stock performance dragged down the shares of other Las Vegas-based casino operators, especially those that lost revenue from hurricane-damaged casinos in Mississippi and Louisiana. Harrah's Entertainment closed at $58.80, down $3.09, or 4.99 percent; Boyd Gaming Corp. was off $1.69 to close at $40.24, down 4.03 percent; and Pinnacle Entertainment fell to $18.54, off 42 cents, or 2.22 percent.

Harrah's and Boyd will announce third-quarter earnings Nov. 3.

MGM Mirage reported a 71.3 percent increase in revenue, from $1.15 billion a year ago to $1.97 billion in the quarter ended Sept. 30 -- mainly from the Mandalay properties the company purchased in April.

Still, MGM Mirage was hurt by the closure of the Beau Rivage, which reported operating income of $5 million during the two months it was open, a decrease of 72 percent from the $18 million reported a year ago.

The figure translated into a loss of 3 cents per share. In addition, the company said an increase in its bad-debt provision during the quarter led to another 3 cents per share decrease in earnings.

During its conference call with analysts and investors, MGM Mirage executives said the Beau Rivage will be closed for at least 12 to 16 months for repairs. Extensive damage from Hurricane Katrina's storm surge wiped out much of the property's main level, including the casino, restaurants and retail areas.

Murren said property damage insurance would cover much of the rebuilding costs and that business interruption insurance would make up the lost cash flow while the casino remains closed.

"We are confident of the Gulf Coast's future, and we are committed to rebuilding quickly," MGM Mirage Chairman Terry Lanni said in a statement. "Our goal is to ensure that Beau Rivage remains the premier destination resort on the Gulf Coast for many years to come."

The company said it would pay the wages and benefits for the Beau Rivage's 3,400 employees into December. Meanwhile, 111 workers left the Gulf Coast and transferred into positions at MGM Mirage properties in Las Vegas.

While the overall company earnings were down, results from MGM Mirage's substantial Las Vegas holdings were a positive sign.

Revenue from its Strip resorts was $1.45 billion, an 84.7 percent increase from $785 million a year ago. Cash flow from the Strip properties, defined as earnings before interest, taxes, depreciation and amortization, was $434.5 million in the quarter, a 76.3 percent increase from $246.4 million last year.

Subtracting results from the Mandalay casinos, MGM Mirage said its revenue still rose 10 percent.

Company executives said Mandalay Bay had its highest third quarter in history, with large increases in room occupancy and hotel revenue, gaming revenue and convention business. MGM Grand also increased its hotel revenue during the quarter.

Company executives said both properties, which have large convention centers, are expected to pick up some convention business that is leaving New Orleans.