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LAS VEGAS, Nevada -- A $1 billion cash infusion from its joint venture partner gave MGM Mirage's fourth-quarter earnings a boost.
The casino operations giant completed the sale of half of its massive under-construction CityCenter development to Dubai World during the quarter that ended Dec. 31. That helped the company's net income climb to $872.2 million, or $2.85 a share, up significantly from $201.6 million, or 69 cents a share, a year ago.
MGM Mirage reported earnings Thursday, almost two weeks after the company gave investors an early preview of the fourth-quarter results because of a since-concluded stock-repurchase program.
"Our overall business remained solid and we continue to look for opportunities to maximize both customer volume and operating margins," MGM Mirage President Jim Murren said in a statement.
The cash infusion from Dubai World, the investment arm of the Persian Gulf state of Dubai, was worth $2.23 per share. Still, when the figure is backed out, MGM Mirage would have reported earnings per share of 62 cents. Analysts polled by Thomson Financial expected net income of 55 cents per share.
MGM Mirage told investors the company benefitted from a strong quarter at the gambling tables. Overall gaming revenues increased 2 percent, helped by a 17 percent increase in baccarat volume and a 3 percent increase in slot machine revenues.
The company said its overall quarterly revenues increased 5.6 percent to $1.9 billion, from $1.8 billion a year ago. MGM Mirage said its revenues for all of 2007 were almost $7.7 billion, compared with $7.2 billion in 2006.
Dubai World owns almost 20 million shares of MGM Mirage, which equates to 6.7 percent of the company. Dubai World will own 9.4 percent of the gaming company when it completes a pending stock purchase. Tracinda Corp., the investment arm of billionaire Kirk Kerkorian, remains the company's major stockholder with roughly 54 percent of MGM Mirage.
Following a conference call with analysts and investors, MGM Mirage Chief Financial Officer Dan D'Arrigo said the nation's current economic slowdown and other factors could slow revenue growth at the company for at least the first half of 2008. Wall Street seemed to agree.
Deutsche Bank gaming analyst Bill Lerner, in a note to investors, said MGM Mirage is experiencing softness in the value- and middle-market customer segments.
Oppenheimer gaming analyst David Katz expected a varied performance at the company's 10 Strip resorts during the quarter.
"A key issue, in our view, is the mixed bag of results across the properties in Las Vegas, with MGM Grand and Mandalay Bay performing well, offset by weakness at Bellagio and the degree to which management is able to manage demand across the portfolio," Katz said in an investors note.
Meanwhile, MGM Mirage is proceeding with its development plans.
Murren, in an interview this month, said the company plans to spend $1 billion upgrading noncasino areas at several of its Strip resorts.
D'Arrigo said MGM Mirage is moving ahead with development plans for a $4 billion to $5 billion resort project on the northern end of the Strip, a joint venture between MGM Mirage, Kerzner Holdings International and Dubai World. Development plans are under way on the $5 billion MGM Grand Atlantic City.
"We still have 160 acres of developable land in Las Vegas, so we have plenty of opportunity to expand," D'Arrigo said.
He said CityCenter, the nation's largest privately funded development project ever, is still completing its construction costs. MGM Mirage estimates CityCenter will cost between $8.1 billion and $8.4 billion.
"I don't think CityCenter is any different than any large development around the world," D'Arrigo said. "There is a incredible competition with China and the Middle East for building materials. We're also factoring in the labor costs going forward."
CityCenter has 5,600 construction workers and is expected to have 7,000 construction employees by summer. The project is expected to open in 2009 and includes a 4,000-room hotel-casino, residential offerings, boutique hotels and a retail, dining and entertainment complex.
Through the fourth quarter, CityCenter had sold 1,336 units of the 2,647 available residences, totaling more than $1.67 billion in sales.
Shares of MGM Mirage, traded on the New York Stock Exchange, closed at $64.34, down 25 cents, or 0.39 percent.
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