MGM's Mandalay Bet Paying Off

Revenue rises 60% to $1.72 billion in the second quarter.
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Updated from 11:54 a.m. EDT

Earnings jumped 35% at

MGM Mirage

(MGM) - Get Report

in the second quarter, as the casino operator benefited from its acquisition of the Mandalay Resort Group and strong Las Vegas visitation.

Net income was $141.2 million, or 48 cents a share, up from $104.7 million, or 36 cents a share, a year earlier.

Excluding special items, MGM Mirage earned 46 cents a share, the company's highest adjusted quarterly EPS ever. A year before, adjusted EPS was 37 cents. The latest quarter's result beat the 44-cent analyst estimate from Thomson First Call.

MGM Mirage said its April 25 acquisition of Mandalay had an "immediate positive impact" on earnings. Shares traded lower early in Thursday's session but started a strong rally just as company executives were kicking off their earnings conference call at 11 a.m. EDT. The stock closed up $2.18, or 5%, at $46.08, after hitting a 52-week high of $46.77 during trading.

Revenue surged 60% to $1.72 billion from $1.07 billion a year before. The analyst consensus was for $1.59 billion. Revenue increased 11% to $1.2 billion at "same-store" casinos -- properties the company owned at least a year. This metric excludes the Mandalay resorts.

"We are very pleased with the early results from the Mandalay resorts and the continued positive momentum across all of our operations," said Terry Lanni, the company's chairman and CEO, in a news release. "We continue to work on integration initiatives and growth plans for our resorts, all with the intent of continuing the revenue and profit growth trends we've experienced over the past several quarters."

In the earnings release, Jim Murren, MGM Mirage's CFO said the company is "rapidly realizing" the benefits of integrating Mandalay's resorts into its portfolio and is on track to realize $100 million a year worth of merger-related benefits.

Fun-seekers continued to flock to the company's Las Vegas resorts, boosting hotel revenue. Revenue per available room, a key measure also known as revpar, increased 15% at Las Vegas Strip resorts on a same-store basis, marking the sixth straight quarter of double-digit revpar growth.

Meanwhile, same-store table games volume, including baccarat, increased 3%, while slot revenue gained 7%.

Casino revenue increased 39% in the 2005 quarter, and 4% on a same-store basis. One negative was a 100-basis-point drop in table games' hold percentage from a year before. The hold percentage was within the company's normal range of 18% to 22%, however, executives said during the conference call.

Slot machine revenue jumped 30% at the company's Bellagio resort, primarily because of the resort's Spa Tower expansion in December, which added 928 rooms.

Noncasino revenue increased 83%, and 19% on a same-store basis.

Executives said they're initiating strategies to boost occupancy at the newly acquired Mandalay resorts without pressuring room rates. They also plan to update slot machines at some of the acquired properties.

Looking ahead, MGM Mirage expects same-store Las Vegas Strip revpar growth of about 8% in the third quarter. The company also characterized the current Thomson First Call profit consensus of 42 cents a share for the third quarter as "reasonable."