MGM Mirage (NYSE:MGG) has been busy lately. The world's second-largest gaming company has reduced debt by $139 million, completed a stock buyback of 2.9 million shares, closed the sale of the struggling Golden Nugget Resort for $219 million, and suffered a baffling power loss at the Bellagio over a busy Easter weekend (which is expected to shave a penny off of earnings per share).

MGM Mirage took all this in stride, though, posting record first-quarter earnings of $105.8 million, or $0.70 per share, crushing estimates of $0.47. Revenues jumped 12% to $1.07 billion.

The company is back on track after a disappointing 2003, which saw net declines in both revenues and income. A resurgence of visitors to core properties such as the Bellagio, New York-New York, Treasure Island, and the flagship MGM Grand (the world's largest hotel) has business booming. Casino revenues, hotel revenues, and food and beverage revenues rose 13%, 10%, and 16%, respectively.

Steady business travel and renewed pricing power lifted revenue per available room (RevPAR) by 9% to $124, leading to the most profitable quarter in the company's history. The company also spent $174 million on renovations, reflective of a steadfast commitment to serving the high-end gaming enthusiast.

The balance sheet, though, is still a concern, despite MGM Mirage having directed substantial cash flows to debt reduction. Admittedly, the gaming industry in general is highly leveraged, but MGM's debt-to-equity ratio hovers around 2.0, and total long-term debt exceeds $5.5 billion, versus Harrah's Entertainment's (NYSE:HET) $3.7 billion and Caesars' (NYSE:CZR) $1.55 billion. Furthermore, MGM Mirage's debt has been downgraded to junk status, possibly limiting future expansion plans.

For better or worse, MGM Mirage's fortunes are tied to the health of the Las Vegas strip. The company does operate a handful of successful properties in other markets, such as the Beau Rivage in Mississippi and Borgata in Atlantic City, but more than 75% of revenues are derived from Las Vegas. This dependence renders MGM Mirage more susceptible to economic contractions, recent Nevada tax hikes, and a slowdown in air travel to the geographically isolated gaming mecca.

On the other hand, the company has arguably assembled the most enviable portfolio of luxury resorts on the strip, and is better positioned for a thriving Las Vegas market than competitors. The recent success seen in the first quarter is a testament to management's execution and, hopefully, a firm foundation for future sustainable profitability.

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Fool contributor Nathan Slaughter will miss the Treasure Island pirate duel. He owns none of the shares mentioned.