Las Vegas Strip heavyweight MGM Mirage (NYSE:MGM) reported fourth-quarter earnings on Wednesday. And don't get me wrong -- MGM Mirage had a fantastic quarter. But here's the problem with financial reporting these days: I defy you to find a single article covering this earnings report whose opening point isn't that "earnings more than doubled."
Because while net income was $0.69 per diluted share -- compared with $0.33 per share last year -- the fourth quarter wasn't really "twice as good" as last year, despite how the financial press wants to make it sound.
MGM Mirage enjoyed an $86 million benefit from Hurricane Katrina insurance recoveries in the fourth quarter related to the Beau Rivage in Biloxi, which -- net of a $5 million writedown related to corporate assets and another $0.02 per share in pre-opening expenses -- amounted to a $0.15-per-share gain in net income. Another $0.15-per-share gain came from closings of units of Tower 2 of The Signature at MGM Grand, the company's condo hotel on the Strip.
In other words, the bulk of the "double" isn't on comparable terms. The results are skewed.
Otherwise, MGM Mirage's fourth-quarter results were still pretty good. Net revenue increased 11% to $1.85 billion for the quarter, though nearly half of the increase came from the Beau Rivage, which was closed during last year's comparable quarter -- it reopened in August 2006. Overall RevPAR on the Las Vegas Strip increased another 8% to $140, following an 8% rise last year as well.
Meanwhile, earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 38% to $740 million, but on a comparable basis -- excluding Beau Rivage, the insurance recoveries, profits from The Signature, stock-option expenses, and pre-opening expenses -- overall property EBITDA was up just 6%.
Now, obviously, we can't ignore the fact that sales from The Signature contributed $0.15 per share in profit -- especially since we are going to be seeing a lot more of those contributions regularly in the future, with Tower 3, City Center, and other projects along the way. But the point here is that for the sake of gauging performance, it does the individual investor absolutely no good to have the financial press talking about how earnings "more than doubled" when the only thing that will do is mislead the reader as to how well the business is actually performing.
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Fool contributor Jeff Hwang owns shares of Ameristar Casinos and International Game Technology. The Motley Fool has a disclosure policy.
