MGM Resorts International 10-Q for FY2021 Q1
MGM Resorts International (MGM)
About this 10-Q
MGM Resorts International filed this 10-Q on May 3, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).
Headline figures
Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.65B
- down 26.9% from $2.25B a year earlier
- Net loss
- $331.83M
- compared with net income of $806.87M a year earlier
- Diluted EPS
- -$0.69
- compared with $1.64 a year earlier
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
(I.R.S. Employer |
(Address of principal executive offices)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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New York Stock Exchange ( |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class |
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Outstanding at April 29, 2021 |
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Common Stock, $0.01 par value |
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MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
FORM 10-Q
I N D E X
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Page |
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PART I. |
1 |
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Item 1. |
1 |
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Consolidated Balance Sheets at March 31, 2021 and December 31, 2020 |
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Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and March 31, 2020 |
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3 |
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Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and March 31, 2020 |
4 |
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5 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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36 |
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Item 4. |
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PART II. |
37 |
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Item 1. |
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Item 1A. |
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37 |
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Item 2. |
37 |
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Item 6. |
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38 |
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Part I. FINANCIAL INFORMATION
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Item 1. |
Financial Statements |
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
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March 31, |
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December 31, |
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2021 |
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2020 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Income tax receivable |
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Prepaid expenses and other |
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Total current assets |
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Property and equipment, net |
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Other assets |
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Investments in and advances to unconsolidated affiliates |
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Goodwill |
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Other intangible assets, net |
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Operating lease right-of-use assets, net |
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Other long-term assets, net |
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Total other assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable |
$ |
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$ |
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Construction payable |
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Accrued interest on long-term debt |
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Other accrued liabilities |
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Total current liabilities |
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Deferred income taxes, net |
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Long-term debt, net |
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Operating lease liabilities |
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Other long-term obligations |
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Commitments and contingencies (Note 7) |
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Redeemable noncontrolling interests |
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Stockholders' equity |
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Common stock, $ |
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Capital in excess of par value |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
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( |
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Total MGM Resorts International stockholders' equity |
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Noncontrolling interests |
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Total stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements. |
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1
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Three Months Ended |
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March 31, |
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2021 |
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2020 |
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Revenues |
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Casino |
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$ |
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$ |
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Rooms |
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Food and beverage |
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Entertainment, retail and other |
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Reimbursed costs |
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Expenses |
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Casino |
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Rooms |
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Food and beverage |
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Entertainment, retail and other |
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Reimbursed costs |
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General and administrative |
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Corporate expense |
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Preopening and start-up expenses |
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Property transactions, net |
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Gain on REIT transactions, net |
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( |
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Depreciation and amortization |
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Income (loss) from unconsolidated affiliates |
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Operating income (loss) |
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Non-operating income (expense) |
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Interest expense, net of amounts capitalized |
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Non-operating items from unconsolidated affiliates |
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( |
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Other, net |
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( |
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( |
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Income (loss) before income taxes |
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( |
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Benefit (provision) for income taxes |
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( |
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Net income (loss) |
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( |
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Less: Net loss attributable to noncontrolling interests |
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Net income (loss) attributable to MGM Resorts International |
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$ |
( |
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$ |
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Earnings (loss) per share |
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Basic |
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$ |
( |
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$ |
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Diluted |
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$ |
( |
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$ |
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Weighted average common shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
2
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
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Three Months Ended |
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March 31, |
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2021 |
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2020 |
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Net income (loss) |
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$ |
( |
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$ |
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Other comprehensive income (loss), net of tax: |
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Foreign currency translation adjustment |
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( |
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Unrealized gain (loss) on cash flow hedges |
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( |
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Other comprehensive income (loss) |
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( |
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Comprehensive income (loss) |
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( |
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Less: Comprehensive loss attributable to noncontrolling interests |
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Comprehensive income (loss) attributable to MGM Resorts International |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
3
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three Months Ended |
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March 31, |
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2021 |
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2020 |
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Cash flows from operating activities |
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Net income (loss) |
$ |
( |
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$ |
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Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Depreciation and amortization |
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Amortization of debt discounts, premiums and issuance costs |
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Loss on early retirement of debt |
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Provision for credit losses |
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Stock-based compensation |
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Property transactions, net |
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Gain on REIT transaction, net |
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( |
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Noncash lease expense |
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Loss (income) from unconsolidated affiliates |
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( |
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Distributions from unconsolidated affiliates |
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Deferred income taxes |
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( |
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Change in operating assets and liabilities: |
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Accounts receivable |
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( |
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Inventories |
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( |
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Income taxes receivable and payable, net |
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( |
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Prepaid expenses and other |
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( |
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( |
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Accounts payable and accrued liabilities |
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( |
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( |
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Other |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities |
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Capital expenditures, net of construction payable |
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( |
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( |
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Dispositions of property and equipment |
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Proceeds from Mandalay Bay and MGM Grand Las Vegas transaction |
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Investments in unconsolidated affiliates |
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( |
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( |
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Distributions from unconsolidated affiliates |
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Other |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities |
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Net borrowings under bank credit facilities – maturities of 90 days or less |
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Issuance of long-term debt |
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Retirement of senior notes |
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( |
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Debt issuance costs |
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( |
) |
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( |
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Proceeds from issuance of bridge loan facility |
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Issuance of MGM Growth Properties Class A shares, net |
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Dividends paid to common shareholders |
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( |
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( |
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Distributions to noncontrolling interest owners |
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( |
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( |
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Purchases of common stock |
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( |
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( |
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Other |
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( |
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( |
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Net cash provided by financing activities |
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Effect of exchange rate on cash |
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( |
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Cash and cash equivalents |
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Net increase for the period |
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Balance, beginning of period |
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Balance, end of period |
$ |
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$ |
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Supplemental cash flow disclosures |
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Interest paid, net of amounts capitalized |
$ |
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$ |
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Federal, state and foreign income taxes paid (refunds received), net |
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( |
) |
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Non-cash investing and financing activities |
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Investment in MGP BREIT Venture |
$ |
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$ |
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MGP BREIT Venture assumption of bridge loan facility |
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The accompanying notes are an integral part of these consolidated financial statements.
4
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MGM RESORTS INTERNATIONAL AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY |
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(In thousands) |
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(Unaudited) |
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Total |
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Accumulated |
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MGM Resorts |
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Common Stock |
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Capital in |
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Other |
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International |
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Non- |
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Total |
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Par |
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Excess of |
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Retained |
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Comprehensive |
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Stockholders' |
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Controlling |
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Stockholders' |
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Shares |
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Value |
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Par Value |
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Earnings |
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Loss |
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Equity |
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Interests |
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Equity |
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Balances, January 1, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Net loss |
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( |
) |
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( |
) |
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( |
) |
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( |
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Currency translation adjustment |
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( |
) |
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( |
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( |
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( |
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Cash flow hedges |
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Stock-based compensation |
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Issuance of common stock pursuant to stock-based compensation awards |
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( |
) |
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( |
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|
( |
) |
|
Cash distributions to noncontrolling interest owners |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Dividends declared and paid to common shareholders ($ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
MGP dividend payable to Class A shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Adjustment of redeemable noncontrolling interest to redemption value |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
MGP Class A share issuance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of Operating Partnership units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balances, March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements. |
|
|||||||||||||||||||||||||||||||
5
|
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES |
|
|||||||||||||||||||||||||||||||
|
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY |
|
|||||||||||||||||||||||||||||||
|
(In thousands) |
|
|||||||||||||||||||||||||||||||
|
(Unaudited) |
|
|||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
MGM Resorts |
|
|
|
|
|
|
|
|
|
||
|
|
|
Common Stock |
|
|
Capital in |
|
|
|
|
|
|
Other |
|
|
International |
|
|
Non- |
|
|
Total |
|
||||||||||
|
|
|
|
|
|
|
Par |
|
|
Excess of |
|
|
Retained |
|
|
Comprehensive |
|
|
Stockholders' |
|
|
Controlling |
|
|
Stockholders' |
|
|||||||
|
|
|
Shares |
|
|
Value |
|
|
Par Value |
|
|
Earnings |
|
|
Loss |
|
|
Equity |
|
|
Interests |
|
|
Equity |
|
||||||||
|
Balances, January 1, 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock pursuant to stock-based compensation awards |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Cash distributions to noncontrolling interest owners |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Dividends declared and paid to common shareholders ($ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
MGP dividend payable to Class A shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Issuance of restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Adjustment of redeemable noncontrolling interest to redemption value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MGP Class A share issuances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MGP BREIT Venture transaction |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balances, March 31, 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements. |
|
|||||||||||||||||||||||||||||||
6
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 — ORGANIZATION
Organization. MGM Resorts International (together with its consolidated subsidiaries, unless otherwise indicated or unless the context requires otherwise, the “Company”) is a Delaware corporation that acts largely as a holding company and, through subsidiaries, owns and operates casino resorts.
As of March 31, 2021, the Company owns and operates the following integrated casino, hotel and entertainment resorts in Las Vegas, Nevada: Bellagio, MGM Grand Las Vegas, The Mirage, Mandalay Bay, Luxor, New York-New York, Park MGM and Excalibur. Operations at MGM Grand Las Vegas include management of The Signature at MGM Grand Las Vegas. The Company owns, along with local investors, and operates MGM Grand Detroit in Detroit, Michigan, MGM National Harbor in Prince George’s County, Maryland, and MGM Springfield in Springfield, Massachusetts. The Company also owns and operates Borgata located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey, Empire City in Yonkers, New York, MGM Northfield Park in Northfield Park, Ohio, and the following resorts in Mississippi: Beau Rivage in Biloxi and Gold Strike in Tunica. Additionally, the Company owns and operates The Park, a dining and entertainment district located between New York-New York and Park MGM, Shadow Creek, an exclusive world-class golf course located approximately ten miles north of its Las Vegas Strip Resorts, and Fallen Oak golf course in Saucier, Mississippi.
MGM Growth Properties LLC (“MGP”), a consolidated subsidiary of the Company, is organized as an umbrella partnership REIT (commonly referred to as an UPREIT) structure in which substantially all of its assets are owned by and substantially all of its businesses are conducted through MGM Growth Properties Operating Partnership LP (the “Operating Partnership”). MGP has two classes of authorized and outstanding voting common shares (collectively, the “shares”): Class A shares and a single Class B share. The Company owns MGP’s Class B share, which does not provide its holder any rights to profits or losses or any rights to receive distributions from operations of MGP or upon liquidation or winding up of MGP. MGP’s Class A shareholders are entitled to
Pursuant to a master lease agreement between a subsidiary of the Company and a subsidiary of the Operating Partnership, the Company leases the real estate assets of The Mirage, Luxor, New York-New York, Park MGM, Excalibur, The Park, Gold Strike Tunica, MGM Grand Detroit, Beau Rivage, Borgata, Empire City, MGM National Harbor, and MGM Northfield Park. Pursuant to a lease agreement between a subsidiary of the Company and a venture that is
The Company has an approximate
The Company owns
The Company owns
The Company has
7
Financial Impact of COVID-19. The spread of the novel 2019 coronavirus (“COVID-19”) and developments surrounding the global pandemic have had, and we expect will continue to have, a significant impact on our business, financial condition, results of operations and cash flows in 2021 and potentially thereafter. In March 2020, all of the Company’s domestic properties were temporarily closed pursuant to state and local government restrictions imposed as a result of COVID-19. Throughout the second and third quarters of 2020, all of the Company’s properties that were temporarily closed re-opened to the public, but continue to operate without certain amenities and subject to certain occupancy limitations, with restrictions varying by jurisdiction and with further temporary re-closures and re-openings occurring for the Company’s properties or portions thereof into the first quarter of 2021. Upon re-opening of the properties, the Company implemented certain measures to mitigate the spread of COVID-19, including limitations on the number of gaming tables allowed to operate and on the number of seats at each table game, as well as slot machine spacing, temperature checks, mask protection, limitations on restaurant capacity, entertainment events and conventions as well as other measures to enforce social distancing. In the latter part of the first quarter of 2021, certain jurisdictions have loosened prior operating restrictions, including increased capacity limits applicable to restaurants and conventions as well as allowing limited entertainment events to resume, subject to continued COVID-19 safety measures.
Although we are continuing to see reduced operating restrictions at our properties, such properties may be subject to temporary, complete, or partial shutdowns in the future. At this time, the Company cannot predict whether the jurisdictions in which its properties are located, states or federal governments will adopt similar or more restrictive measures in the future than in the past, including stay-at-home orders. While business volumes have improved since operating restrictions loosened in the first quarter of 2021, our properties continued to generate revenues that are significantly lower than historical results.
The Company has seen and continues to expect to see weakened demand at its properties relative to pre-pandemic business volumes as a result of continued domestic and international travel restrictions or warnings, restrictions on amenity use, such as gaming, restaurant and pool capacity limitations, consumer fears and reduced consumer discretionary spending, general economic uncertainty, and increased rates of unemployment. In light of the foregoing, the Company is unable to determine when its properties will return to pre-pandemic demand or pricing.
In Macau, following a temporary closure of our properties on February 5, 2020, operations resumed on February 20, 2020, subject to certain health safeguards, such as limiting the number of gaming tables allowed to operate and the number of seats available at each table game, slot machine spacing, reduced operating hours at a number of restaurants and bars, temperature checks, and mask protection. Although the issuance of tourist visas (including the individual visit scheme) for residents of Zhuhai, Guangdong Province and all other provinces in mainland China to travel to Macau resumed on August 12, 2020, August 26, 2020 and September 23, 2020, respectively, several travel and entry restrictions in Macau, Hong Kong and mainland China remain in place (including the temporary suspension of ferry services from Hong Kong to Macau, a negative nucleic acid test result, and mandatory quarantine requirements for visitors from Hong Kong and Taiwan, and bans on entry or enhanced quarantine requirements on other visitors into Macau), which have significantly impacted visitation to the Company’s Macau properties.
NOTE 2 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation. As permitted by the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the Company’s 2020 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim financial statements. The results for such periods are not necessarily indicative of the results to be expected for the full year.
Principles of consolidation. The Company evaluates entities for which control is achieved through means other than voting rights to determine if it is the primary beneficiary of a variable interest entity (“VIE”). A VIE is an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. The Company consolidates its investment in a VIE when it determines that it is its primary beneficiary. For these VIEs, the Company records a noncontrolling interest in the consolidated balance sheets. The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis.
8
Management has determined that MGP is a VIE because the Class A equity investors as a group lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance. The Company has determined that it is the primary beneficiary of MGP and consolidates MGP because (i) its ownership of MGP’s single Class B share entitles it to a majority of the total voting power of MGP’s shares, and (ii) the exchangeable nature of the Operating Partnership units owned provide the Company the right to receive benefits from MGP that could potentially be significant to MGP. The Company has recorded MGP’s ownership interest in the Operating Partnership as noncontrolling interest in the Company’s consolidated financial statements. As of March 31, 2021, on a consolidated basis MGP had total assets of $
Management has determined that Bellagio BREIT Venture is a VIE because the equity holders as a group lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance. The Company has determined that it is not the primary beneficiary of Bellagio BREIT Venture and, accordingly, does not consolidate the venture, because the Company does not have power to direct the activities that could potentially be significant to the venture; BREIT, as the managing member, has such power. The Company has recorded its
For entities determined not to be a VIE, the Company consolidates such entities in which the Company owns
Reclassifications. Certain reclassifications have been made to conform the prior period presentation.
Fair value measurements. Fair value measurements affect the Company’s accounting and impairment assessments of its long-lived assets, investments in unconsolidated affiliates, cost method investments, assets acquired, and liabilities assumed in an acquisition, and goodwill and other intangible assets. Fair value measurements also affect the Company’s accounting for certain of its financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs. The Company used the following inputs in its fair value measurements:
|
|
• |
Level 1 and Level 2 inputs for its long-term debt fair value disclosures. See Note 4; and |
|
|
• |
Level 2 inputs when measuring the Operating Partnership’s fair value of its interest rate swaps. See Note 4. |
Revenue recognition. The Company’s revenue from contracts with customers consists of casino wagers transactions, hotel room sales, food and beverage transactions, entertainment shows, and retail transactions.
For casino wager transactions that include incentives earned by customers under the Company’s loyalty programs, the Company allocates a portion of net win based upon the standalone selling price of such incentive (less estimated breakage). This allocation is deferred and recognized as revenue when the customer redeems the incentive. When redeemed, revenue is recognized in the department that provides the goods or service. Redemption of loyalty incentives at third party outlets are deducted from the loyalty liability and amounts owed are paid to the third party, with any discount received recorded as other revenue. After allocating revenue to other goods and services provided as part of casino wager transactions, the Company records the residual amount to casino revenue.
9
Contract and Contract-Related Liabilities. There may be a difference between the timing of cash receipts from the customer and the recognition of revenue, resulting in a contract or contract-related liability. The Company generally has three types of liabilities related to contracts with customers: (1) outstanding chip liability, which represents the amounts owed in exchange for gaming chips held by a customer, (2) loyalty program obligations, which represents the deferred allocation of revenue relating to loyalty program incentives earned, as discussed above, and (3) customer advances and other, which is primarily funds deposited by customers before gaming play occurs (“casino front money”) and advance payments on goods and services yet to be provided such as advance ticket sales and deposits on rooms and convention space or for unpaid wagers. These liabilities are generally expected to be recognized as revenue within one year of being purchased, earned, or deposited and are recorded within “Other accrued liabilities” on the Company’s consolidated balance sheets.
The following table summarizes the activity related to contract and contract-related liabilities:
|
|
Outstanding Chip Liability |
|
|
Loyalty Program |
|
|
Customer Advances and Other |
|
|||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
|
Balance at January 1 |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Balance at March 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase / (decrease) |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
Revenue by source. The Company presents the revenue earned disaggregated by the type or nature of the good or service (casino, room, food and beverage, and entertainment, retail and other) and by relevant geographic region within Note 10.
Leases. Refer to Note 6 for discussion of leases under which the Company is a lessee. The Company is a lessor under certain other lease arrangements. Lease revenues earned by the Company from third parties are classified within the line item corresponding to the type or nature of the tenant’s good or service. During the three months ended March 31, 2021 and 2020 lease revenues from third-party tenants include $
NOTE 3 — INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Investments in and advances to unconsolidated affiliates consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
|
CityCenter Holdings, LLC – CityCenter ( |
$ |
|
|
|
$ |
|
|
|
MGP BREIT Venture ( |
|
|
|
|
|
|
|
|
BetMGM ( |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
The Company recorded its share of income (loss) from unconsolidated affiliates, including adjustments for basis differences, as follows:
|
|
|
Three Months Ended |
|
|||||
|
|
|
March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
||||||
|
Income (loss) from unconsolidated affiliates |
|
$ |
( |
) |
|
$ |
|
|
|
Non-operating items from unconsolidated affiliates |
|
|
( |
) |
|
|
( |
) |
|
|
|
$ |
( |
) |
|
$ |
|
|
10
The following table summarizes information related to the Company’s share of operating income (loss) from unconsolidated affiliates:
|
|
|
Three Months Ended |
|
|||||
|
|
|
March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
||||||
|
CityCenter |
|
$ |
( |
) |
|
$ |
|
|
|
MGP BREIT Venture |
|
|
|
|
|
|
|
|
|
BetMGM |
|
|
( |
) |
|
|
( |
) |
|
Other |
|
|
( |
) |
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
MGP BREIT Venture distributions. For the three months ended March 31, 2021 and 2020, the Operating Partnership received $
BetMGM contributions. For the three months ended March 31, 2021 and 2020, the Company contributed $
NOTE 4 — LONG-TERM DEBT
Long-term debt consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
|
Operating Partnership senior credit facility |
$ |
|
|
|
$ |
|
|
|
MGM China first revolving credit facility |
|
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Less: Premiums, discounts, and unamortized debt issuance costs, net |
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
|
$ |
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|
Debt due within one year of the March 31, 2021 balance sheet was classified as long-term as the Company had both the intent and ability to refinance current maturities on a long-term basis under its revolving credit facilities.
11
Senior credit facility. At March 31, 2021, the Company’s senior credit facility consisted of a $
In February 2021, the Company amended its credit facility to extend the covenant relief period provided under the previous amendment related to its financial maintenance covenants through the earlier of (x) the day immediately following the date the Company delivers to the administrative agent a compliance certificate with respect to the quarter ending June 30, 2022 and (y) the date the Company delivers to the administrative agent an irrevocable notice terminating the covenant relief period, and to adjust the required leverage and interest coverage levels for the covenant when it is reimposed at the end of the waiver period. In addition, in connection with the February 2021 amendment, the Company agreed to an increase of the liquidity test such that the Company’s borrower group (as defined in the credit agreement) is required to maintain a minimum liquidity level of not less than $
The Company’s senior credit facility contains customary representations and warranties, events of default and positive and negative covenants. The Company was in compliance with its applicable covenants at March 31, 2021.
Operating Partnership senior credit facility and bridge facility. At March 31, 2021, the Operating Partnership senior credit facility consisted of a $
The Operating Partnership is party to interest rate swaps to mitigate the effects of interest rate volatility inherent in its variable rate debt as well as forecasted debt issuances. As of March 31, 2021, the Operating Partnership has currently effective interest rate swap agreements on which it pays a weighted average fixed rate of
MGM China first revolving credit facility. At March 31, 2021, the MGM China first revolving credit facility consisted of a $
The MGM China first revolving credit facility contains customary representations and warranties, events of default, and positive, negative and financial covenants, including that MGM China maintains compliance with a maximum leverage ratio and a minimum interest coverage ratio. In February 2021, MGM China amended its credit agreement to provide for a waiver of its maximum leverage ratio and its minimum interest coverage ratio through the fourth quarter of 2022. MGM China was in compliance with its applicable MGM China first revolving credit facility covenants at March 31, 2021.
MGM China second revolving credit facility. At March 31, 2021, the MGM China second revolving credit facility consisted of a $
The MGM China second revolving credit facility contains customary representations and warranties, events of default, and positive, negative and financial covenants, including that MGM China maintains compliance with a maximum leverage ratio and a minimum interest coverage ratio beginning in the third quarter of 2021. In February 2021, MGM China amended its credit agreement to provide for a waiver of its maximum leverage ratio and its minimum interest coverage ratio through the fourth quarter of 2022. MGM China was in compliance with its applicable MGM China second revolving credit facility covenants at March 31, 2021.
MGM China senior notes. In March 2021, MGM China issued $
Fair value of long-term debt. The estimated fair value of the Company’s long-term debt was $
12
NOTE 5 — INCOME TAXES
For interim income tax reporting the Company estimates its annual effective tax rate and applies it to its year-to-date ordinary income. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. The Company’s effective income tax rate was a benefit of
The Company recognizes deferred income tax assets, net of applicable reserves, related to net operating losses, tax credit carryforwards and certain temporary differences. The Company recognizes future tax benefits to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.
The Company decreased its valuation allowance for its foreign tax credits (“FTCs”) by $
MGM Grand Paradise’s application for an extension of its annual fee arrangement with Macau covering distributions of gaming profits to be earned through June 26, 2022 is still pending. Until the extension is granted, the
During the three months ended March 31, 2021 one of the Company's subsidiaries, Marina District Development Company, LLC, closed an examination in the state of New Jersey for tax years 2015 through 2018 with no change in tax due. As a result of the audit closure, the Company reversed $
NOTE 6 — LEASES
The Company leases the land underlying certain of its properties, real estate, and various equipment under operating and, to a lesser extent, finance lease arrangements. The master lease agreement with MGP is eliminated in consolidation and, accordingly is not included within the disclosures below; refer to Note 11 for further discussion of the master lease with MGP.
Bellagio real estate assets. The Bellagio lease has an initial term of
Mandalay Bay and MGM Grand Las Vegas real estate assets. The Mandalay Bay and MGM Grand Las Vegas lease has an initial term of
13
Other information. Components of lease costs and other information related to the Company’s leases was as follows:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
|
2021 |
|
|
|
2020 |
|
|
|
(In thousands) |
|
|||||
|
Operating lease cost, primarily classified within "General and administrative"(1) |
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease costs |
|
|
|
|
|
|
|
|
Interest expense(2) |
$ |
( |
) |
|
$ |
( |
) |
|
Amortization expense |
|
|
|
|
|
|
|
|
Total finance lease costs |
$ |
|
|
|
$ |
|
|
|
(1) |
For the three months ended March 31, 2021 and 2020, operating lease cost includes $ |
|
(2) |
For the three months ended March 31, 2021 and 2020, interest expense includes the effect of COVID-19 related rent concessions received on certain finance leases, for which such effect was recognized as negative variable rent expense. |
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
|
Supplemental balance sheet information |
(In thousands) |
|
|||||
|
Operating leases |
|
|
|
|
|
|
|
|
Operating lease right-of-use assets, net(1) |
$ |
|
|
|
$ |
|
|
|
Operating lease liabilities - current, classified within "Other accrued liabilities" |
$ |
|
|
|
$ |
|
|
|
Operating lease liabilities - long-term(2) |
|
|
|
|
|
|
|
|
Total operating lease liabilities |
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Finance leases |
|
|
|
|
|
|
|
|
Finance lease right-of-use assets, net classified within "Property and equipment, net" |
$ |
|
|
|
$ |
|
|
|
Finance lease liabilities - current, classified within "Other accrued liabilities" |
$ |
|
|
|
$ |
|
|
|
Finance lease liabilities - long-term, classified within "Other long-term obligations" |
|
|
|
|
|
|
|
|
Total finance lease liabilities |
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term (years) |
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
|
|
Finance leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average discount rate (%) |
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
|
|
Finance leases |
|
|
|
|
|
|
|
|
(1) |
As of March 31, 2021 and December 31, 2020, operating lease right-of-use assets, net included $ |
|
(2) |
As of March 31, 2021 and December 31, 2020, operating lease liabilities – long-term included $ |
14
|
|
|
|
|||||
|
|
March 31, |
|
|||||
|
|
|
2021 |
|
|
|
2020 |
|
|
Cash paid for amounts included in the measurement of lease liabilities |
(In thousands) |
|
|||||
|
Operating cash outflows from operating leases |
$ |
|
|
|
$ |
|
|
|
Operating cash outflows from finance leases |
|
|
|
|
|
|
|
|
Financing cash outflows from finance leases(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROU assets obtained in exchange for new lease liabilities |
|
|
|
|
|
|
|
|
Operating leases |
$ |
|
|
|
$ |
|
|
|
Finance leases |
|
|
|
|
|
|
|
|
(1) |
Included within “Other” within the “Cash flows from financing activities” on the accompanying consolidated statements of cash flows. |
Maturities of lease liabilities were as follows:
|
|
Operating Leases |
|
|
Finance Leases |
|
||
|
Year ending December 31, 2021 |
(In thousands) |
|
|||||
|
2021 (excluding the three months ended March 31, 2021) |
$ |
|
|
|
$ |
|
|
|
2022 |
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
Total future minimum lease payments |
|
|
|
|
|
|
|
|
Less: Amount of lease payments representing interest |
|
( |
) |
|
|
( |
) |
|
Present value of future minimum lease payments |
|
|
|
|
|
|
|
|
Less: Current portion |
|
( |
) |
|
|
( |
) |
|
Long-term portion of lease liabilities |
$ |
|
|
|
$ |
|
|
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Litigation. The Company is a party to various legal proceedings, most of which relate to routine matters incidental to its business. Management does not believe that the outcome of such proceedings will have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Other guarantees. The Company and its subsidiaries are party to various guarantee contracts in the normal course of business, which are generally supported by letters of credit issued by financial institutions. The Company’s senior credit facility limits the amount of letters of credit that can be issued to $
MGM China bank guarantee. In connection with the extension of the expiration of the gaming subconcession to June 2022, MGM Grand Paradise provided a bank guarantee in an amount of approximately $
Bellagio BREIT Venture shortfall guarantee. The Company provides a shortfall guarantee of the $
15
MGP BREIT Venture shortfall guarantee. The Company provides a shortfall guarantee of the $
MGP BREIT Venture bad acts guarantee. The Operating Partnership provides a guarantee for the losses incurred by the lenders of the indebtedness of the MGP BREIT Venture arising out of certain bad acts by the Operating Partnership, its venture partner, or the venture, such as fraud or willful misconduct, based on the party’s percentage ownership of the MGP BREIT Venture. This guarantee is capped at
NOTE 8 — INCOME PER SHARE OF COMMON STOCK
The table below reconciles basic and diluted income per share of common stock. Diluted weighted-average common and common equivalent shares include adjustments for potential dilution of share-based awards outstanding under the Company’s stock compensation plan.
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
|
Numerator: |
|
|
|
|
|
|
|
|
Net income (loss) attributable to MGM Resorts International |
$ |
( |
) |
|
$ |
|
|
|
Adjustment related to redeemable noncontrolling interests |
|
( |
) |
|
|
|
|
|
Net income (loss) available to common stockholders – basic and diluted |
$ |
( |
) |
|
$ |
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding – basic |
|
|
|
|
|
|
|
|
Potential dilution from share-based awards |
|
|
|
|
|
|
|
|
Weighted-average common and common equivalent shares – diluted |
|
|
|
|
|
|
|
|
Antidilutive share-based awards excluded from the calculation of diluted earnings per share |
|
|
|
|
|
|
|
NOTE 9 — STOCKHOLDERS’ EQUITY
Noncontrolling interest ownership transactions
MGP Class A share issuance – March 2021. On March 15, 2021, MGP completed an offering of
Redemption of Operating Partnership units – March 2021. In March 2021, subsidiaries of the Company delivered a notice of redemption to MGP covering approximately
16
Other equity activity
MGM Resorts International dividends. On
MGM Resorts International stock repurchase program. In February 2020, upon substantial completion of the May 2018 $
During the three months ended March 31, 2021, the Company repurchased approximately
Subsequent to the quarter ended March 31, 2021, the Company repurchased
During the three months ended March 31, 2020, the Company repurchased approximately
Accumulated other comprehensive loss.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency Translation |
|
|
Cash Flow |
|
|
|
|
|
|
|
|
|
||
|
|
Adjustments |
|
|
Hedges |
|
|
Other |
|
|
Total |
|
||||
|
|
(In thousands) |
|
|||||||||||||
|
Balances, January 1, 2021 |
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
Other comprehensive income (loss) before reclassifications |
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive loss to interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax |
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other changes in accumulated other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MGP Class A share issuance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption of Operating Partnership units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Changes in accumulated other comprehensive income (loss): |
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss (income) attributable to noncontrolling interest |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Balances, March 31, 2021 |
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
NOTE 10 — SEGMENT INFORMATION
The Company’s management views each of its casino resorts as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate and their management and reporting structure. The Company has aggregated its operating segments into the following reportable segments: Las Vegas Strip Resorts, Regional Operations and MGM China.
Las Vegas Strip Resorts. Las Vegas Strip Resorts consists of the following casino resorts: Bellagio, MGM Grand Las Vegas (including The Signature), Mandalay Bay (including Delano and Four Seasons), The Mirage, Luxor, New York-New York (including The Park), Excalibur and Park MGM (including NoMad Las Vegas).
17
Regional Operations. Regional Operations consists of the following casino resorts: MGM Grand Detroit in Detroit, Michigan; Beau Rivage in Biloxi, Mississippi; Gold Strike Tunica in Tunica, Mississippi; Borgata in Atlantic City, New Jersey; MGM National Harbor in Prince George’s County, Maryland; MGM Springfield in Springfield, Massachusetts; Empire City in Yonkers, New York; and MGM Northfield Park in Northfield Park, Ohio.
MGM China. MGM China consists of MGM Macau and MGM Cotai.
The Company’s operations related to investments in unconsolidated affiliates and certain other corporate operations and management services have not been identified as separate reportable segments; therefore, these operations are included in “Corporate and other” in the following segment disclosures to reconcile to consolidated results.
Adjusted Property EBITDAR is the Company’s reportable segment GAAP measure, which management utilizes as the primary profit measure for its reportable segments and underlying operating segments. Adjusted Property EBITDAR is a measure defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, gain on REIT transactions, net, rent expense associated with triple-net operating and ground leases, income from unconsolidated affiliates related to investments in real estate ventures, and property transactions, net, and also excludes corporate expense and stock compensation expense, which are not allocated to each operating segment, and rent expense related to the master lease with MGP that eliminates in consolidation.
18
The following tables present the Company’s segment information:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
|
Net revenue |
|
|
|
|
|
|
|
|
Las Vegas Strip Resorts |
|
|
|
|
|
|
|
|
Casino |
$ |
|
|
|
$ |
|
|
|
Rooms |
|
|
|
|
|
|
|
|
Food and beverage |
|
|
|
|
|
|
|
|
Entertainment, retail and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regional Operations |
|
|
|
|
|
|
|
|
Casino |
|
|
|
|
|
|
|
|
Rooms |
|
|
|
|
|
|
|
|
Food and beverage |
|
|
|
|
|
|
|
|
Entertainment, retail and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MGM China |
|
|
|
|
|
|
|
|
Casino |
|
|
|
|
|
|
|
|
Rooms |
|
|
|
|
|
|
|
|
Food and beverage |
|
|
|
|
|
|
|
|
Entertainment, retail and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable segment net revenues |
|
|
|
|
|
|
|
|
Corporate and other |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Adjusted Property EBITDAR |
|
|
|
|
|
|
|
|
Las Vegas Strip Resorts |
$ |
|
|
|
$ |
|
|
|
Regional Operations |
|
|
|
|
|
|
|
|
MGM China |
|
|
|
|
|
( |
) |
|
Reportable segment Adjusted Property EBITDAR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income (expense) |
|
|
|
|
|
|
|
|
Corporate and other, net |
|
( |
) |
|
|
( |
) |
|
Preopening and start-up expenses |
|
( |
) |
|
|
( |
) |
|
Property transactions, net |
|
( |
) |
|
|
( |
) |
|
Gain on REIT transactions, net |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
( |
) |
|
|
( |
) |
|
CEO transition expense |
|
|
|
|
|
( |
) |
|
Triple-net operating lease and ground lease rent expense |
|
( |
) |
|
|
( |
) |
|
Income from unconsolidated affiliates related to real estate ventures |
|
|
|
|
|
|
|
|
Operating income (loss) |
|
( |
) |
|
|
|
|
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
Interest expense, net of amounts capitalized |
|
( |
) |
|
|
( |
) |
|
Non-operating items from unconsolidated affiliates |
|
( |
) |
|
|
( |
) |
|
Other, net |
|
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
( |
) |
|
Income (loss) before income taxes |
|
( |
) |
|
|
|
|
|
Benefit (provision) for income taxes |
|
|
|
|
|
( |
) |
|
Net income (loss) |
|
( |
) |
|
|
|
|
|
Less: Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
Net income (loss) attributable to MGM Resorts International |
$ |
( |
) |
|
$ |
|
|
19
NOTE 11 — RELATED PARTY TRANSACTIONS
MGP
As further described in Note 1, pursuant to the master lease with MGP, the Company leases the real estate assets of The Mirage, Luxor, New York-New York, Park MGM, Excalibur, The Park, Gold Strike Tunica, MGM Grand Detroit, Beau Rivage, Borgata, Empire City, MGM National Harbor and MGM Northfield Park from MGP.
The annual rent payments under the MGP master lease for the sixth lease year, which commenced on April 1, 2021, increased to $
In March 2021, the Company delivered a notice of redemption covering approximately
All intercompany transactions, including transactions under the MGP master lease, have been eliminated in the Company’s consolidation of MGP. The public ownership of MGP’s Class A shares is recognized as noncontrolling interests in the Company’s consolidated financial statements.
Bellagio BREIT Venture
The Company has a
MGP BREIT Venture
MGP has a
20
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
This management’s discussion and analysis of financial condition and results of operations contain forward-looking statements that involve risks and uncertainties. Please see “Cautionary Statement Concerning Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, the audited consolidated financial statements and notes for the fiscal year ended December 31, 2020, which were included in our Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods. MGM Resorts International together with its subsidiaries may be referred to as “we,” “us” or “our.” MGM China Holdings Limited together with its subsidiaries is referred to as “MGM China.” MGM Growth Properties LLC together with its subsidiaries is referred to as “MGP.”
Description of our business and key performance indicators
Our primary business is the ownership and operation of casino resorts which offer gaming, hotel, convention, dining, entertainment, retail and other resort amenities. We own or invest in several of the finest casino resorts in the world and we continually reinvest in our resorts to maintain our competitive advantage. Most of our revenue is cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. We rely heavily on the ability of our resorts to generate operating cash flow to fund capital expenditures, provide excess cash flow for future development, repay debt financings, and return capital to our shareholders. We make significant investments in our resorts through newly remodeled hotel rooms, restaurants, entertainment and nightlife offerings, as well as other new features and amenities.
Financial Impact of COVID-19
The spread of coronavirus disease 2019 (“COVID-19”) and developments surrounding the global pandemic have had, and we expect will continue to have, a significant impact on our business, financial condition, results of operations and cash flows in 2021 and potentially thereafter. In March 2020, all of our domestic properties were temporarily closed pursuant to state and local government restrictions imposed as a result of COVID-19. Throughout the second and third quarters of 2020 all of our properties that were temporarily closed re-opened to the public, but continue to operate without certain amenities and subject to certain occupancy limitations, with restrictions varying by jurisdiction and with further temporary re-closures and re-openings occurring for our properties or portions thereof into the first quarter of 2021. Upon re-opening of the properties, we implemented certain measures to mitigate the spread of COVID-19, including limitations on the number of gaming tables allowed to operate and on the number of seats at each table game, as well as slot machine spacing, temperature checks, mask protection, limitations on restaurant capacity, entertainment events and conventions as well as other measures to enforce social distancing. In the latter part of the first quarter of 2021, certain jurisdictions have loosened prior operating restrictions, including increased capacity limits applicable to restaurants and conventions as well as allowing limited entertainment events to resume, subject to continued COVID-19 safety measures.
Although we are continuing to see reduced operating restrictions at our properties, such properties may be subject to temporary, complete, or partial shutdowns in the future due to COVID-19 related concerns. At this time, we cannot predict whether the jurisdictions in which our properties are located, states or federal governments will adopt similar or more restrictive measures in the future than in the past, including stay-at-home orders. While business volumes have improved since operating restrictions loosened in the first quarter of 2021, our properties continued to generate revenues that are significantly lower than historical results.
We have seen and continue to expect to see weakened demand at our properties relative to pre-pandemic business volumes as a result of continued domestic and international travel restrictions or warnings, restrictions on amenity use, such as gaming, restaurant and pool capacity limitations, consumer fears and reduced consumer discretionary spending, general economic uncertainty, and increased rates of unemployment. In light of the foregoing, we are unable to determine when our properties will return to pre-pandemic demand or pricing.
In Macau, following a temporary closure of our properties on February 5, 2020, operations resumed on February 20, 2020, subject to certain health safeguards, such as limiting the number of gaming tables allowed to operate and the number of seats available at each table game, slot machine spacing, reduced operating hours at a number of restaurants and bars, temperature checks, and mask protection. Although the issuance of tourist visas (including the individual visit scheme “IVS”) for residents of Zhuhai, Guangdong Province and all other provinces in mainland China to travel to Macau resumed on August 12, 2020, August 26, 2020 and September 23, 2020, respectively, several travel and entry restrictions in Macau, Hong Kong and mainland China remain in place (including the temporary suspension of ferry services from Hong Kong to Macau, a negative nucleic acid test result, and mandatory quarantine requirements for visitors from Hong Kong and Taiwan, and bans on entry or enhanced quarantine requirements on other visitors into Macau), which have significantly impacted visitation to our Macau properties.
21
Other Developments
In March 2021, we delivered a notice of redemption to MGP covering approximately 37 million Operating Partnership units that we held which was satisfied with aggregate cash proceeds of approximately $1.2 billion. See Note 9 in the accompanying consolidated financial statements for information regarding this transaction, which eliminates in consolidation.
Key Performance Indicators
Key performance indicators related to gaming and hotel revenue are:
|
|
• |
Gaming revenue indicators: table games drop and slots handle (volume indicators); “win” or “hold” percentage, which is not fully controllable by us. Historically, our normal table games hold percentage at our Las Vegas Strip Resorts is in the range of 25.0% to 35.0% of table games drop for Baccarat and 19.0% to 23.0% for non-Baccarat however, reduced gaming volumes as a result of the COVID-19 pandemic could cause volatility in our hold percentages; and |
|
|
• |
Hotel revenue indicators – hotel occupancy (a volume indicator); average daily rate (“ADR,” a price indicator); and revenue per available room (“REVPAR,” a summary measure of hotel results, combining ADR and occupancy rate). Our calculation of ADR, which is the average price of occupied rooms per day, includes the impact of complimentary rooms. Complimentary room rates are determined based on standalone selling price. Because the mix of rooms provided on a complimentary basis, particularly to casino customers, includes a disproportionate suite component, the composite ADR including complimentary rooms is slightly higher than the ADR for cash rooms, reflecting the higher retail value of suites. Rooms that were out of service during the three months ended March 31, 2021 and 2020 as a result of property closures due to the COVID-19 pandemic were excluded from the available room count when calculating hotel occupancy and REVPAR. |
Additional key performance indicators at MGM China are:
|
|
• |
Gaming revenue indicators - MGM China utilizes “turnover,” which is the sum of nonnegotiable chip wagers won by MGM China calculated as nonnegotiable chips purchased plus nonnegotiable chips exchanged less nonnegotiable chips returned. Turnover provides a basis for measuring VIP casino win percentage. Historically, win for VIP gaming operations at MGM China is typically in the range of 2.6% to 3.3% of turnover however, reduced gaming volumes as a result of the COVID-19 pandemic could cause volatility in MGM China’s hold percentages. |
Results of Operations
Summary Financial Results
The temporary closure of our properties due to COVID-19 in the current and comparative period impacted our financial results. Dates of temporary closure are shown below:
|
Las Vegas Strip Resorts |
Closure Date |
|
Initial Re-opening date |
|
Bellagio |
March 17, 2020 |
|
June 4, 2020 |
|
MGM Grand Las Vegas |
March 17, 2020 |
|
June 4, 2020 |
|
New York-New York |
March 17, 2020 |
|
June 4, 2020 |
|
Excalibur |
March 17, 2020 |
|
June 11, 2020 |
|
Luxor |
March 17, 2020 |
|
June 25, 2020 |
|
Mandalay Bay(1) |
March 17, 2020 |
|
July 1, 2020 |
|
The Mirage(2) |
March 17, 2020 |
|
August 27, 2020 |
|
Park MGM(1) |
March 17, 2020 |
|
September 30, 2020 |
|
Regional Operations |
|
|
|
|
Gold Strike |
March 17, 2020 |
|
May 25, 2020 |
|
Beau Rivage |
March 17, 2020 |
|
June 1, 2020 |
|
MGM Northfield Park |
March 14, 2020 |
|
June 20, 2020 |
|
MGM National Harbor |
March 15, 2020 |
|
June 29, 2020 |
|
MGM Springfield(3) |
March 15, 2020 |
|
July 13, 2020 |
|
Borgata |
March 16, 2020 |
|
July 26, 2020 |
|
MGM Grand Detroit(4) |
March 16, 2020 |
|
August 7, 2020 |
|
Empire City |
March 14, 2020 |
|
September 21, 2020 |
|
(1) |
Park MGM and Mandalay Bay’s hotel tower operations were closed midweek starting November 9, 2020 and November 30, 2020, respectively, and full week hotel tower operations resumed on March 3, 2021. |
22
|
(2) |
The Mirage’s hotel tower operations were closed midweek beginning November 30, 2020. The entire property was closed midweek starting January 4, 2021, and re-opened on March 3, 2021. |
|
(3) |
MGM Springfield’s hotel was closed beginning November 2, 2020, and partial hotel operations resumed with midweek closures on March 5, 2021. |
|
(4) |
MGM Grand Detroit re-closed on November 17, 2020 and re-opened on December 23, 2020, with the hotel tower operations resuming February 9, 2021. |
The following table summarizes our consolidated financial results for the three months ended March 31, 2021 and 2020:
|
|
|
Three Months Ended |
|
|||||
|
|
|
March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
|
|
(In thousands) |
|
|||||
|
Net revenues |
|
$ |
1,647,747 |
|
|
$ |
2,252,817 |
|
|
Operating income (loss) |
|
|
(246,690 |
) |
|
|
1,250,845 |
|
|
Net income (loss) |
|
|
(335,938 |
) |
|
|
674,519 |
|
|
Net income (loss) attributable to MGM Resorts International |
|
|
(331,829 |
) |
|
|
806,869 |
|
Summary Operating Results
Consolidated net revenues decreased 27% for the three months ended March 31, 2021 compared to the prior year quarter due primarily to the impact of COVID-19. While the prior year period was negatively affected by property closures for a portion of the quarter at our Las Vegas Strip Resorts and Regional Operations, the current year quarter was negatively affected by midweek property and hotel closures, lower business volume and travel activity, and ongoing operational restrictions due to the pandemic, primarily at our Las Vegas Strip Resorts. At MGM China, the prior year quarter was negatively affected by property closures and was more significantly impacted by travel restrictions to Macau than in the current quarter. These factors resulted in a 52% decrease in net revenues at our Las Vegas Strip Resorts, a 2% decrease in net revenues at our Regional Operations, and a 9% increase in net revenues at MGM China.
Consolidated operating loss was $247 million for the three months ended March 31, 2021 compared to consolidated operating income of $1.3 billion in the prior year quarter, due primarily to the prior year quarter including a $1.5 billion gain related to the MGM Grand Las Vegas and Mandalay Bay real estate transaction, the impact of COVID-19 which caused a decrease in net revenues, discussed above, partially offset by a $28 million decrease in general and administrative expense, a $28 million decrease in depreciation and amortization, a $29 million decrease in property transactions, net, and a $66 million decrease in corporate expense. General and administrative expense decreased in the current quarter compared to the prior quarter due primarily to aggressive cost reduction efforts to reduce expenses at our domestic properties, which primarily related to decreases in payroll expense, utilities, and advertising expense, which was partially offset by a full quarter of rent expense for the Mandalay Bay and MGM Grand Las Vegas lease. Corporate expense decreased to $78 million in the first quarter of 2021 from $144 million in the prior year quarter due primarily to a decrease in payroll costs. Corporate expense in the prior year quarter included $44 million in CEO transition expense and $4 million in corporate initiatives costs. Included in the CEO transition expense is $20 million of stock compensation expense, of which approximately $13 million related to the modification and accelerated vesting of outstanding stock compensation awards. Property transactions, net in the prior year quarter included a $38 million other-than-temporary impairment charge on an equity method investment. Depreciation and amortization decreased compared to the prior year quarter due primarily to the sale of the MGM Grand Las Vegas and Mandalay Bay real estate assets in February 2020.
23
Net Revenues by Segment
The following table presents a detail by segment of net revenues:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
|
Las Vegas Strip Resorts |
|
|
|
|
|
|
|
|
Casino revenue |
$ |
232,094 |
|
|
$ |
274,673 |
|
|
Rooms |
|
144,329 |
|
|
|
362,864 |
|
|
Food and beverage |
|
90,419 |
|
|
|
288,763 |
|
|
Entertainment, retail and other |
|
78,122 |
|
|
|
207,506 |
|
|
|
|
544,964 |
|
|
|
1,133,806 |
|
|
Regional Operations |
|
|
|
|
|
|
|
|
Casino revenue |
|
596,655 |
|
|
|
536,630 |
|
|
Rooms |
|
40,579 |
|
|
|
55,879 |
|
|
Food and beverage |
|
50,364 |
|
|
|
95,092 |
|
|
Entertainment, retail and other |
|
23,753 |
|
|
|
38,059 |
|
|
|
|
711,351 |
|
|
|
725,660 |
|
|
MGM China |
|
|
|
|
|
|
|
|
Casino revenue |
|
261,604 |
|
|
|
240,414 |
|
|
Rooms |
|
13,512 |
|
|
|
15,209 |
|
|
Food and beverage |
|
16,629 |
|
|
|
12,780 |
|
|
Entertainment, retail and other |
|
4,609 |
|
|
|
3,484 |
|
|
|
|
296,354 |
|
|
|
271,887 |
|
|
Reportable segment net revenues |
|
1,552,669 |
|
|
|
2,131,353 |
|
|
Corporate and other |
|
95,078 |
|
|
|
121,464 |
|
|
|
$ |
1,647,747 |
|
|
$ |
2,252,817 |
|
Las Vegas Strip Resorts
Las Vegas Strip Resorts casino revenue decreased 16% for the three months ended March 31, 2021 compared to the prior year quarter due primarily to the lower business volume and travel activity due to the impact of COVID-19, which included continued operational restrictions related to the pandemic, as discussed above, resulting in decreases in table games win and slots win of 35% and 8%, respectively.
The following table shows key gaming statistics for our Las Vegas Strip Resorts:
|
|
Three Months Ended |
||
|
|
March 31, |
||
|
|
2021 |
|
2020 |
|
|
(Dollars in millions) |
||
|
Table Games Drop |
$529 |
|
$841 |
|
Table Games Win |
$127 |
|
$196 |
|
Table Games Win % |
24.1% |
|
23.2% |
|
Slots Handle |
$2,301 |
|
$2,457 |
|
Slots Win |
$212 |
|
$230 |
|
Slots Win % |
9.2% |
|
9.4% |
24
Las Vegas Strip Resorts rooms revenue decreased 60% for the three months ended March 31, 2021 compared to the prior year quarter due primarily to the continued impact of COVID-19, which included a decrease in REVPAR as a result of reduced business volume and travel related to the pandemic, as discussed above.
The following table shows key hotel statistics for our Las Vegas Strip Resorts:
|
|
Three Months Ended |
||
|
|
March 31, |
||
|
|
2021 |
|
2020 |
|
Occupancy(1) |
46% |
|
88% |
|
Average daily rate (ADR) |
$129 |
|
$183 |
|
Revenue per available room (REVPAR)(1) |
$60 |
|
$160 |
|
|
(1) |
Rooms that were out of service, including full and midweek closures, during the three months ended March 31, 2021 and 2020 due to the COVID-19 pandemic were excluded from the available room count when calculating hotel occupancy and REVPAR. |
Las Vegas Strip Resorts food and beverage revenue decreased 69% for the three months ended March 31, 2021 compared to the prior year quarter due primarily to the continued impact of COVID-19, which included reduced business volume and travel, midweek property and hotel closures at certain properties, and capacity and other operational restrictions related to the pandemic, as discussed above.
Las Vegas Strip Resorts entertainment, retail and other revenue decreased 62% for the three months ended March 31, 2021 compared to the prior year quarter due primarily to the continued impact of COVID-19, which included capacity and other operational restrictions related to the pandemic, as discussed above, including the closure of entertainment venues, such as certain theaters and nightclubs during the current year quarter, with limited capacity for entertainment venues that were open.
Regional Operations
Regional Operations casino revenue increased 11% for the three months ended March 31, 2021 compared to the prior year quarter due to an increase in table games win and slots win of 6% and 7%, respectively.
The following table shows key gaming statistics for our Regional Operations:
|
|
Three Months Ended |
||
|
|
March 31, |
||
|
|
2021 |
|
2020 |
|
|
(Dollars in millions) |
||
|
Table Games Drop |
$819 |
|
$844 |
|
Table Games Win |
$173 |
|
$164 |
|
Table Games Win % |
21.2% |
|
19.4% |
|
Slots Handle |
$5,384 |
|
$5,170 |
|
Slots Win |
$526 |
|
$494 |
|
Slots Win% |
9.8% |
|
9.6% |
Regional Operations rooms revenue decreased 27% for the three months ended March 31, 2021 compared to the prior year quarter due primarily to the impact of COVID-19, and a decrease in REVPAR as a result of reduced travel related to the pandemic as well as midweek hotel closures at certain properties, as discussed above.
Regional Operations food and beverage revenue decreased 47% for the three months ended March 31, 2021, compared to the prior year quarter due primarily to the impact of COVID-19, which included operational restrictions related to the pandemic as well as a result of reduced travel related to the pandemic as well as midweek hotel closures at certain properties, as discussed above.
Regional Operations entertainment, retail and other revenue decreased 38% for the three months ended March 31, 2021, compared to the prior year quarter due primarily to the impact of COVID-19, which included capacity and other operational restrictions, as discussed above, including the closure of certain entertainment venues, such as theaters.
25
MGM China
The following table shows key gaming statistics for MGM China:
|
|
Three Months Ended |
||
|
|
March 31, |
||
|
|
2021 |
|
2020 |
|
|
(Dollars in millions) |
||
|
VIP Table Games Turnover |
$2,373 |
|
$3,425 |
|
VIP Table Games Win |
$78 |
|
$109 |
|
VIP Table Games Win % |
3.3% |
|
3.2% |
|
Main Floor Table Games Drop |
$1,044 |
|
$777 |
|
Main Floor Table Games Win |
$230 |
|
$188 |
|
Main Floor Table Games Win % |
22.0% |
|
24.1% |
MGM China net revenues increased 9% for the three months ended March 31, 2021 compared to the prior year quarter as the prior year quarter was negatively affected by property closures and was more significantly impacted by travel restrictions to Macau than in the current quarter. VIP table games win decreased 28% and main floor table games win increased 23% compared to the prior year quarter.
Corporate and other
Corporate and other revenue includes revenues from other corporate operations, management services and reimbursed costs revenue primarily related to our CityCenter management agreement. Reimbursed costs revenue represents reimbursement of costs, primarily payroll-related, incurred by us in connection with the provision of management services and was $58 million and $98 million for the three months ended March 31, 2021 and 2020, respectively, which declined for the respective comparative periods due primarily to the property closures and other operational restrictions related to the pandemic. See below for additional discussion of our share of operating results from unconsolidated affiliates.
Adjusted Property EBITDAR and Adjusted EBITDAR
The following table presents Adjusted Property EBITDAR and Adjusted EBITDAR. Adjusted Property EBITDAR is our reportable segment GAAP measure, which we utilize as the primary profit measure for our reportable segments. See Note 10 – Segment Information in the accompanying consolidated financial statements and “Reportable Segment GAAP measure” below for additional information. Adjusted EBITDAR is a non-GAAP measure, discussed within “Non-GAAP measure” below.
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
|
Las Vegas Strip Resorts |
$ |
108,119 |
|
|
$ |
267,599 |
|
|
Regional Operations |
|
241,982 |
|
|
|
151,720 |
|
|
MGM China |
|
4,775 |
|
|
|
(21,990 |
) |
|
Corporate and other |
|
(136,991 |
) |
|
|
(102,237 |
) |
|
Adjusted EBITDAR |
$ |
217,885 |
|
|
|
|
|
Las Vegas Strip Resorts
Adjusted Property EBITDAR at our Las Vegas Strip Resorts decreased 60% and Adjusted Property EBITDAR margin decreased to 19.8% for the three months ended March 31, 2021 compared to 23.6% in the prior year quarter. Adjusted Property EBITDAR decreased compared to the prior year quarter due primarily to a decrease in casino and non-casino revenues resulting from the operational restrictions related to the pandemic, and a decrease in travel and business volume, partially offset by a decrease in operating expenses as a result of cost reduction efforts.
Regional Operations
Adjusted Property EBITDAR at our Regional Operations increased 59% and Adjusted Property EBITDAR margin increased to 34.0% for the three months ended March 31, 2021 compared to 20.9% in the prior year quarter. Adjusted Property EBITDAR increased due to an increase in casino revenues, discussed above, and realized benefits of the Company’s cost saving initiatives.
26
MGM China
MGM China’s Adjusted Property EBITDAR was $5 million for the three months ended March 31, 2021 compared to Adjusted Property EBITDAR loss of $22 million in the prior year quarter, as the prior year quarter was negatively affected by property closures and was more significantly impacted by travel restrictions to Macau than in the current quarter. License fee expense was $5 million in each of the current and prior year quarters.
Income (loss) from Unconsolidated Affiliates
The following table summarizes information related to our share of operating income (loss) from unconsolidated affiliates:
|
|
|
Three Months Ended |
|
|||||
|
|
|
March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
||||||
|
CityCenter |
|
$ |
(2,831 |
) |
|
$ |
20,666 |
|
|
MGP BREIT Venture |
|
|
38,962 |
|
|
|
19,950 |
|
|
BetMGM |
|
|
(59,236 |
) |
|
|
(10,677 |
) |
|
Other |
|
|
(2,474 |
) |
|
|
5,809 |
|
|
|
|
$ |
(25,579 |
) |
|
$ |
35,748 |
|
Our share of CityCenter’s operating loss, including certain basis difference adjustments, for the three months ended March 31, 2021 was $2.8 million compared to our share of operating income of $21 million in the prior year quarter, primarily driven by the decrease in CityCenter’s casino and non-casino revenues as a result of the operational restrictions and reduced business volume and travel related to the pandemic.
Non-operating Results
Interest Expense
Gross interest expense was $196 million and $158 million for the three months ended March 31, 2021 and 2020, respectively. The increase in gross interest expense when compared to the prior year quarter is due primarily to the increase in average debt outstanding related to our senior notes, partially offset by a decrease in the weighted average interest rate related to our senior notes. See Note 4 to the accompanying consolidated financial statements for additional discussion on long-term debt and see “Liquidity and Capital Resources” for additional discussion on issuances and repayments of long-term debt and other sources and uses of cash.
Other, net
Other income, net was $32 million for the quarter ended March 31, 2021 compared to other expense, net of $124 million in the prior year quarter. The current quarter included a $35 million gain on unhedged interest rate swaps, a $6 million remeasurement loss on MGM China’s U.S. dollar-denominated senior notes and $5 million of interest income. The prior year quarter included a $109 million loss incurred on the early retirement of debt related to our senior notes and the termination of our revolving facility, as well as an $18 million loss incurred on the early retirement of debt related to the Operating Partnership’s repayment of its term loan A facility and its term loan B facility, partially offset by an $8 million remeasurement gain on MGM China’s U.S. dollar-denominated senior notes. Refer to Note 4 for further discussion of our long-term debt.
Income Taxes
Our effective tax rate was a benefit of 22.0% on loss before income taxes for the three months ended March 31, 2021, compared to a provision of 28.0% on income before income taxes in the prior year quarter. The effective rate for the three months ended March 31, 2021 was favorably impacted by a release of tax reserves in conjunction with the closure of the most recent New Jersey state audit for Marina District Development Company. The effective tax rate in the prior year quarter was driven primarily by tax expense recorded on the MGP BREIT Venture transaction and the unfavorable impact of adjustments to valuation allowances for Macau deferred tax assets and foreign tax credits.
The annual effective tax rate calculation for all periods is impacted by assumptions made regarding projected foreign tax credit usage and valuation allowance. See Note 5 in the accompanying consolidated financial statements for further discussion.
27
Reportable segment GAAP measure
“Adjusted Property EBITDAR” is our reportable segment GAAP measure, which we utilize as the primary profit measure for our reportable segments and underlying operating segments. Adjusted Property EBITDAR is a measure defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, gain on REIT transactions, net, rent expense associated with triple-net operating and ground leases, income from unconsolidated affiliates related to investments in real estate ventures, property transactions, net, and also excludes corporate expense and stock compensation expense, which are not allocated to each operating segment, and rent expense related to the master lease with MGP that eliminates in consolidation. We manage capital allocation, tax planning, stock compensation, and financing decisions at the corporate level. “Adjusted Property EBITDAR margin” is Adjusted Property EBITDAR divided by related segment net revenues.
Non-GAAP measure
“Adjusted EBITDAR” is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, gain on REIT transactions, net, CEO transition expense, rent expense associated with triple-net operating and ground leases, income from unconsolidated affiliates related to investments in real estate ventures, and property transactions, net.
Adjusted EBITDAR information is a valuation metric, should not be used as an operating metric, and is presented solely as a supplemental disclosure to reported GAAP measures because we believe this measure is widely used by analysts, lenders, financial institutions, and investors as a principal basis for the valuation of gaming companies. We believe that while items excluded from Adjusted EBITDAR may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends. Also, we believe excluded items may not relate specifically to current trends or be indicative of future results. For example, preopening and start-up expenses will be significantly different in periods when we are developing and constructing a major expansion project and will depend on where the current period lies within the development cycle, as well as the size and scope of the project(s). Property transactions, net includes normal recurring disposals, gains and losses on sales of assets related to specific assets within our resorts, but also includes gains or losses on sales of an entire operating resort or a group of resorts and impairment charges on entire asset groups or investments in unconsolidated affiliates, which may not be comparable period over period. However, as discussed herein, Adjusted EBITDAR should not be viewed as a measure of overall operating performance, considered in isolation, or as an alternative to net income, because this measure is not presented on a GAAP basis and exclude certain expenses, including the rent expense associated with our triple-net operating and ground leases, and are provided for the limited purposes discussed herein.
Adjusted EBITDAR should not be construed as an alternative to operating income or net income, as an indicator of our performance; or as an alternative to cash flows from operating activities, as a measure of liquidity; or as any other measure determined in accordance with GAAP. We have significant uses of cash flows, including capital expenditures, interest payments, taxes, real estate triple-net lease and ground lease payments, and debt principal repayments, which are not reflected in Adjusted EBITDAR. Also, other companies in the gaming and hospitality industries that report Adjusted EBITDAR information may calculate Adjusted EBITDAR in a different manner and such differences may be material.
28
The following table presents a reconciliation of net income (loss) attributable to MGM Resorts International to Adjusted EBITDAR:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
|
Net income (loss) attributable to MGM Resorts International |
$ |
(331,829 |
) |
|
$ |
806,869 |
|
|
Plus: Net loss attributable to noncontrolling interests |
|
(4,109 |
) |
|
|
(132,350 |
) |
|
Net income (loss) |
|
(335,938 |
) |
|
|
674,519 |
|
|
Provision (benefit) for income taxes |
|
(94,698 |
) |
|
|
262,304 |
|
|
Income (loss) before income taxes |
|
(430,636 |
) |
|
|
936,823 |
|
|
Non-operating (income) expense |
|
|
|
|
|
|
|
|
Interest expense, net of amounts capitalized |
|
195,295 |
|
|
|
157,137 |
|
|
Non-operating items from unconsolidated affiliates |
|
20,836 |
|
|
|
32,621 |
|
|
Other, net |
|
(32,185 |
) |
|
|
124,264 |
|
|
|
|
183,946 |
|
|
|
314,022 |
|
|
Operating income (loss) |
|
(246,690 |
) |
|
|
1,250,845 |
|
|
Preopening and start-up expenses |
|
5 |
|
|
|
122 |
|
|
Property transactions, net |
|
26,071 |
|
|
|
54,975 |
|
|
Gain on REIT transactions, net |
|
— |
|
|
|
(1,491,945 |
) |
|
Depreciation and amortization |
|
290,551 |
|
|
|
318,290 |
|
|
CEO transition expense |
|
— |
|
|
|
44,401 |
|
|
Triple-net operating lease and ground lease rent expense |
|
189,620 |
|
|
|
141,918 |
|
|
Income from unconsolidated affiliates related to real estate ventures |
|
(41,672 |
) |
|
|
(23,514 |
) |
|
Adjusted EBITDAR |
$ |
217,885 |
|
|
|
|
|
Guarantor Financial Information
As of March 31, 2021, all of our principal debt arrangements are guaranteed by each of our wholly owned material domestic subsidiaries that guarantee our senior credit facility. Our principal debt arrangements are not guaranteed by MGP, the Operating Partnership, MGM Grand Detroit, MGM National Harbor, Blue Tarp reDevelopment, LLC (the entity that owns and operates MGM Springfield), and each of their respective subsidiaries. Our foreign subsidiaries, including MGM China and its subsidiaries, are also not guarantors of our principal debt arrangements. In the event that any subsidiary is no longer a guarantor of our credit facility or any of our future capital markets indebtedness, that subsidiary will be released and relieved of its obligations to guarantee our existing senior notes. The indentures governing the senior notes further provide that in the event of a sale of all or substantially all of the assets of, or capital stock in a subsidiary guarantor then such subsidiary guarantor will be released and relieved of any obligations under its subsidiary guarantee.
The guarantees provided by the subsidiary guarantors rank senior in right of payment to any future subordinated debt of ours or such subsidiary guarantors, junior to any secured indebtedness to the extent of the value of the assets securing such debt and effectively subordinated to any indebtedness and other obligations of our subsidiaries that do not guarantee the senior notes. In addition, the obligations of each subsidiary guarantor under its guarantee is limited so as not to constitute a fraudulent conveyance under applicable law, which may eliminate the subsidiary guarantor’s obligations or reduce such obligations to an amount that effectively makes the subsidiary guarantee lack value.
29
The summarized financial information of us and our guarantor subsidiaries, on a combined basis, is presented below. Certain of our guarantor subsidiaries collectively own Operating Partnership units and each subsidiary accounts for its respective investment under the equity method within the summarized financial information presented below. These subsidiaries have also accounted for the MGP master lease as an operating lease, recording operating lease liabilities and operating ROU assets with the related rent expense of guarantor subsidiaries reflected within the summarized financial information.
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
|
Balance Sheet |
(In thousands) |
|
|||||
|
Current assets |
$ |
5,544,478 |
|
|
$ |
4,749,542 |
|
|
Investment in the MGP Operating Partnership |
|
1,017,170 |
|
|
|
1,617,055 |
|
|
Intercompany accounts due from non-guarantor subsidiaries |
|
18,768 |
|
|
|
16,622 |
|
|
MGP master lease right-of-use asset, net |
|
6,688,690 |
|
|
|
6,714,101 |
|
|
Other long-term assets |
|
12,201,256 |
|
|
|
12,318,912 |
|
|
MGP master lease operating lease liabilities – current |
|
158,479 |
|
|
|
153,415 |
|
|
Other current liabilities |
|
1,124,301 |
|
|
|
1,123,814 |
|
|
MGP master lease operating lease liabilities – noncurrent |
|
7,157,624 |
|
|
|
7,191,450 |
|
|
Other long-term liabilities |
|
15,814,152 |
|
|
|
15,827,794 |
|
|
|
|
Three Months Ended |
|
|
|
|
|
March 31, |
|
|
|
|
|
2021 |
|
|
|
Income Statement |
|
(In thousands) |
|
|
|
Net revenues |
|
$ |
1,013,466 |
|
|
MGP master lease rent expense |
|
|
(160,156 |
) |
|
Operating loss |
|
|
(285,778 |
) |
|
Loss from continuing operations |
|
|
(241,533 |
) |
|
Net loss |
|
|
(150,019 |
) |
|
Net loss attributable to MGM Resorts International |
|
|
(150,019 |
) |
Liquidity and Capital Resources
Cash Flows
Operating activities. Trends in our operating cash flows tend to follow trends in operating income, excluding non-cash charges, but can be affected by changes in working capital, the timing of significant interest payments, tax payments or refunds, and distributions from unconsolidated affiliates. Cash used in operating activities was $88 million in the three months ended March 31, 2021 compared to $423 million in the three months ended March 31, 2020. The decrease in cash used in operating activities over the prior year period is primarily due to the prior year period being negatively affected by a change in working capital related to gaming and non-gaming deposits, gaming taxes and other gaming liabilities, and payroll related liabilities as a result of the COVID-19 pandemic, as well as a current year quarter decrease in cash paid for interest. Operating cash flows at our properties decreased compared to the prior year period as a result of the decrease at our Las Vegas Strip resorts, as discussed above.
Investing activities. Our investing cash flows can fluctuate significantly from year to year depending on our decisions with respect to strategic capital investments in new or existing resorts, business acquisitions or dispositions, and the timing of maintenance capital expenditures to maintain the quality of our resorts. Capital expenditures related to regular investments in our existing resorts can also vary depending on timing of larger remodel projects related to our public spaces and hotel rooms.
Cash used in investing activities was $155 million in the three months ended March 31, 2021 compared to cash provided by investing activities of $2.4 billion in the three months ended March 31, 2020. In the three months ended March 31, 2021, we made $79 million in capital expenditures, as further discussed below, and contributed $75 million to our unconsolidated affiliate BetMGM LLC (“BetMGM”). In comparison, in the prior year quarter we received $2.5 billion in net cash proceeds from the sale of the real estate of Mandalay Bay and MGM Grand Las Vegas, which was partially offset by $73 million in capital expenditures and a $20 million investment made in our unconsolidated affiliate BetMGM.
30
Capital Expenditures
We made capital expenditures of $79 million in the three months ended March 31, 2021, of which $30 million related to MGM China. Capital expenditures at MGM China included $23 million primarily related to construction of the south tower project at MGM Cotai and $7 million related to projects at MGM Macau. Capital expenditures at our Las Vegas Strip Resorts, Regional Operations and corporate entities of $49 million primarily relate to expenditures in information technology and room remodels.
We made capital expenditures of $73 million in the three months ended March 31, 2020, of which $42 million related to MGM China. Capital expenditures at MGM China included $39 million related to projects at MGM Cotai and $3 million related to projects at MGM Macau. Capital expenditures at our Las Vegas Strip Resorts, Regional Operations and corporate entities of $31 million included expenditures relating to information technology, and various room, restaurant, and entertainment venue remodels.
Financing activities. Cash provided by financing activities was $1.3 billion in the three months ended March 31, 2021 compared to $1.7 billion in the three months ended March 31, 2020. In the three months ended March 31, 2021, we had net borrowings of debt of $876 million, as further discussed below, received net proceeds of $676 million from the issuance of MGP’s Class A shares, distributed $76 million to noncontrolling interest owners, and we repurchased $119 million of our common stock. In comparison, in the prior year period, we had net proceeds from the incurrence of a bridge loan facility of $1.3 billion, net proceeds of $525 million from MGP’s Class A share issuances, net borrowings of debt of $443 million as further discussed below, and we repurchased $354 million of our common stock.
Borrowings and Repayments of Long-term Debt
During the three months ended March 31, 2021, we had net borrowings of debt of $876 million which consisted of MGM China’s issuance of $750 million in aggregate principal amount of 4.75% senior notes due 2027 at an issue price of 99.97% and $133 million of net borrowings on MGM China’s first revolving credit facility, partially offset by the Operating Partnership’s repayment of $9 million on its revolving credit facility. The net proceeds from MGM China’s 4.75% senior notes due 2027 issuance were used to partially repay amounts outstanding under the MGM China first revolving credit facility in April 2021, subsequent to March 31, 2021, and for general corporate purposes.
During the three months ended March 31, 2020, we had net borrowings of $443 million which consisted of $1.5 billion of borrowings on our senior credit facility, $1.35 billion of borrowings on the Operating Partnership's senior credit facility, and $158 million of net borrowings on MGM China’s first revolving credit facility, partially offset by the repayment of $399 million of the Operating Partnership’s term loan A facility and $1.3 billion of the Operating Partnership’s term loan B facility, and the purchase of $750 million in aggregate amount of our senior notes through our cash tender offers.
Dividends, Distributions to Noncontrolling Interest Owners and Share Repurchases
During the three months ended March 31, 2021, we repurchased and retired $119 million of our common stock pursuant to our May 2018 $2.0 billion and February 2020 $3.0 billion stock repurchase plans. As a result of those repurchases, we completed our May 2018 $2.0 billion stock repurchase program, and the remaining availability under the February 2020 $3.0 billion stock repurchase program was $2.9 billion as of March 31, 2021. During the three months ended March 31, 2020, we repurchased and retired $354 million of our common stock pursuant to our May 2018 $2.0 billion stock repurchase plan.
In March 2021, we paid a dividend of $0.0025 per share, totaling $1 million, paid during the three months ended March 31, 2021, compared to a dividend of $0.15 per share, totaling $74 million, paid during the three months ended March 31, 2020.
The Operating Partnership paid the following distributions to its partnership unit holders during the three months ended March 31, 2021 and 2020:
|
|
• |
$136 million of distributions paid in January 2021, of which we received $72 million and MGP received $64 million, which MGP concurrently paid as a dividend to its Class A shareholders; and |
|
|
• |
$147 million of distributions paid in January 2020, of which we received $94 million and MGP received $53 million, which MGP concurrently paid as a dividend to its Class A shareholders. |
31
Other Factors Affecting Liquidity and Anticipated Uses of Cash
We require a certain amount of cash on hand to operate our resorts. In addition to required cash on hand for operations, we utilize corporate cash management procedures to minimize the amount of cash held on hand or in banks. Funds are swept from the accounts at most of our domestic resorts daily into central bank accounts, and excess funds are invested overnight or are used to repay amounts drawn under our revolving credit facility. In addition, from time to time we may use excess funds to repurchase our outstanding debt and equity securities subject to limitations in our revolving credit facility and Delaware law, as applicable. We have significant outstanding debt, interest payments, rent payments, and contractual obligations in addition to planned capital expenditures.
As previously discussed, the spread of COVID-19 and developments surrounding the global pandemic have had, and we expect will continue to have, a significant impact on our business, financial condition, results of operations, and cash flows. During this time, we have remained committed to managing our expenses to strengthen our liquidity position. As of March 31, 2021, we had cash and cash equivalents of $6.2 billion, of which MGM China held $1.1 billion and the Operating Partnership held $143 million. In addition to our cash and cash equivalent balance, we currently have significant real estate assets and other holdings: we own MGM Springfield, a 50% interest in CityCenter in Las Vegas, an approximate 56% interest in MGM China, and a 42.1% economic interest in MGP.
At March 31, 2021, we had $13.4 billion in principal amount of indebtedness, including $1 million outstanding under the $1.35 billion Operating Partnership revolving credit facility, and $903 million outstanding under the $1.25 billion MGM China first revolving credit facility. No amounts were drawn on our $1.5 billion revolving credit facility or the $400 million MGM China second revolving credit facility. We have no debt maturing prior to 2022.
Subsequent to the quarter ended March 31, 2021, we repurchased approximately 1 million shares of our common stock at an average price of $39.10 per share for an aggregate amount of $56 million. Repurchased shares will be retired.
We have planned capital expenditures expected over the remainder of the year of approximately $340 million to $360 million domestically and approximately $80 million to $90 million at MGM China. As of March 31, 2021, our expected cash interest payments over the next twelve months are approximately $345 million to $350 million, excluding MGP and MGM China, and approximately $735 million to $740 million on a consolidated basis. We are also currently required to make annual rent payments of $843 million under the master lease with MGP, annual rent payments of $250 million under the lease with Bellagio BREIT Venture, and annual rent payments of $298 million under the lease with MGP BREIT Venture, which leases are also subject to annual escalators.
In February 2021, we amended our credit facility to extend the covenant relief period provided under the previous amendment related to our financial maintenance covenants through the earlier of (x) the day immediately following the date we deliver to the administrative agent a compliance certificate with respect to the quarter ending June 30, 2022 and (y) the date we deliver to the administrative agent an irrevocable notice terminating the covenant relief period, and to adjust the required leverage and interest coverage levels for the covenant when it is reimposed at the end of the waiver period. In addition, in connection with the February 2021 amendment, we agreed to an increase of the liquidity test such that our borrower group (as defined in the credit agreement) is required to maintain a minimum liquidity level of not less than $1.0 billion (including unrestricted cash, cash equivalents and availability under the revolving credit facility), tested at the end of each month during the covenant relief period.
Additionally, due to the continued impact of the COVID-19 pandemic, in February 2021, MGM China further amended each of its first revolving credit facility and its second revolving credit facility to provide for waivers of the maximum leverage ratio and minimum interest coverage ratio through the fourth quarter of 2022.
In April 2021, the Operating Partnership paid $131 million of distributions to its partnership unit holders, of which we received $55 million and MGP received $76 million, which MGP concurrently paid as a dividend to its Class A shareholders.
On April 28, 2021, our Board of Directors approved a quarterly dividend of $0.0025 per share. The dividend will be payable on June 15, 2021 to holders of record on June 10, 2021. Future determinations regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our results of operations, financial condition, and other factors that our Board of Directors may deem relevant.
As previously discussed, the COVID-19 pandemic has caused, and is continuing to cause, significant economic disruption both globally and in the United States, and continues to impact our business, financial condition and results of operations. As widespread vaccine distribution continues and operational restrictions have lessened, we have seen economic recovery in some of the market segments in which we operate, as shown in our summary operating results. However, some areas continue to experience renewed outbreaks and surges in infection rates. As a result, our business segments continue to face many uncertainties and our operations remain vulnerable to reversal of these trends or other continuing negative effects caused by the pandemic. We cannot predict the degree, or duration, to which our operations will be affected by the COVID-19 outbreak, and the effects could be material. We continue to monitor the evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to further adjust our operating plan, including the implementation or extension of new or existing restrictions, which may include the reinstatement of stay-at-home orders in the jurisdictions in which we operate or additional restrictions on travel and/or our business operations. Because the situation is ongoing, and because the duration and severity remain unclear, it is difficult to forecast any impacts on our future results.
32
Critical Accounting Policies and Estimates
A complete discussion of our critical accounting policies and estimates is included in our Form 10-K for the fiscal year ended December 31, 2020. There have been no significant changes in our critical accounting policies and estimates since year end.
Market Risk
In addition to the inherent risks associated with our normal operations, we are also exposed to additional market risks. Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. Our primary exposure to market risk is interest rate risk associated with our variable rate long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed rate borrowings and short-term borrowings under our bank credit facilities and by utilizing interest rate swap agreements that provide for a fixed interest payment on the Operating Partnership’s credit facility. A change in interest rates generally does not have an impact upon our future earnings and cash flow for fixed-rate debt instruments. As fixed-rate debt matures, however, and if additional debt is acquired to fund the debt repayment, future earnings and cash flow may be affected by changes in interest rates. This effect would be realized in the periods subsequent to the periods when the debt matures. We do not hold or issue financial instruments for trading purposes and do not enter into derivative transactions that would be considered speculative positions.
As of March 31, 2021, variable rate borrowings represented approximately 7% of our total borrowings after giving effect on the Operating Partnership’s borrowings for the currently effective interest rate swap agreements on which the Operating Partnership pays a weighted average of 1.821% on a total notional amount of $1.9 billion. Additionally, the Operating Partnership has $900 million of notional amount of forward starting swaps that are not currently effective. The following table provides additional information about our gross long-term debt subject to changes in interest rates excluding the effect of the Operating Partnership interest rate swaps discussed above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
|
|
Debt maturing in |
|
|
March 31, |
|
||||||||||||||||||||||||||
|
|
2021 |
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
Thereafter |
|
|
Total |
|
|
2021 |
|
||||||||
|
|
(In millions) |
|
|||||||||||||||||||||||||||||
|
Fixed-rate |
$ |
— |
|
|
$ |
1,000 |
|
|
$ |
1,250 |
|
|
$ |
1,800 |
|
|
$ |
2,725 |
|
|
$ |
5,675 |
|
|
$ |
12,450 |
|
|
$ |
13,077 |
|
|
Average interest rate |
N/A |
|
|
|
7.8 |
% |
|
|
6.0 |
% |
|
|
5.5 |
% |
|
|
5.6 |
% |
|
|
5.0 |
% |
|
|
5.5 |
% |
|
|
|
|
|
|
Variable rate |
$ |
— |
|
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
903 |
|
|
$ |
– |
|
|
$ |
— |
|
|
$ |
904 |
|
|
$ |
904 |
|
|
Average interest rate |
N/A |
|
|
N/A |
|
|
|
4.0 |
% |
|
|
2.9 |
% |
|
N/A |
|
|
N/A |
|
|
|
2.9 |
% |
|
|
|
|
||||
In addition to the risk associated with our variable interest rate debt, we are also exposed to risks related to changes in foreign currency exchange rates, mainly related to MGM China and to our operations at MGM Macau and MGM Cotai. While recent fluctuations in exchange rates have not been significant, potential changes in policy by governments or fluctuations in the economies of the United States, China, Macau or Hong Kong could cause variability in these exchange rates. We cannot assure you that the Hong Kong dollar will continue to be pegged to the U.S. dollar or the current peg rate for the Hong Kong dollar will remain at the same level. The possible changes to the peg of the Hong Kong dollar may result in severe fluctuations in the exchange rate thereof. For U.S. dollar denominated debt incurred by MGM China, fluctuations in the exchange rates of the Hong Kong dollar in relation to the U.S. dollar could have adverse effects on our financial position and results of operations. As of March 31, 2021, a 1% weakening of the Hong Kong dollar (the functional currency of MGM China) to the U.S. dollar would result in a foreign currency transaction loss of $28 million.
Cautionary Statement Concerning Forward-Looking Statements
This Form 10-Q contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “will,” “may” and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make regarding the impact of COVID-19 on our business, our ability to reduce expenses and otherwise maintain our liquidity position during the pandemic, our ability to generate significant cash flow, execute on ongoing and future strategic initiatives, including the development of an integrated resort in Japan and investments we make in online sports betting and iGaming, amounts we will spend on capital expenditures and investments, our expectations with respect to future share repurchases and cash dividends on our common stock, dividends and distributions we will receive from MGM China, the Operating Partnership or CityCenter, our ability to achieve the benefits of our cost savings initiatives, and amounts projected to be realized as deferred tax assets. The foregoing is not a complete list of all forward-looking statements we make.
33
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Therefore, we caution you against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, regional, national or global political, economic, business, competitive, market, and regulatory conditions and the following:
|
|
• |
the global COVID-19 pandemic has continued to materially impact our business, financial results and liquidity, and such impact could worsen and last for an unknown period of time; |
|
|
• |
although all of our properties are open to the public, they are operating without certain amenities and subject to certain occupancy limitations, and we are unable to predict the length of time it will take for our properties to return to normal operations or if such properties will be required to close again due to the COVID-19 pandemic; |
|
|
• |
we have undertaken aggressive actions to reduce costs and improve efficiencies to mitigate losses as a result of the COVID-19 pandemic, which could negatively impact guest loyalty and our ability to attract and retain employees; |
|
|
• |
our substantial indebtedness and significant financial commitments, including the fixed component of our rent payments to MGP, rent payments to the Bellagio BREIT Venture and to the MGP BREIT Venture, and guarantees we provide of the indebtedness of the Bellagio BREIT Venture and the MGP BREIT Venture could adversely affect our development options and financial results and impact our ability to satisfy our obligations; |
|
|
• |
current and future economic, capital and credit market conditions could adversely affect our ability to service our substantial indebtedness and significant financial commitments, including the fixed components of our rent payments, and to make planned expenditures; |
|
|
• |
restrictions and limitations in the agreements governing our senior credit facility and other senior indebtedness could significantly affect our ability to operate our business, as well as significantly affect our liquidity; |
|
|
• |
the fact that we are required to pay a significant portion of our cash flows as rent, which could adversely affect our ability to fund our operations and growth, service our indebtedness and limit our ability to react to competitive and economic changes; |
|
|
• |
significant competition we face with respect to destination travel locations generally and with respect to our peers in the industries in which we compete; |
|
|
• |
the fact that our businesses are subject to extensive regulation and the cost of compliance or failure to comply with such regulations could adversely affect our business; |
|
|
• |
the impact on our business of economic and market conditions in the jurisdictions in which we operate and in the locations in which our customers reside; |
|
|
• |
the possibility that we may not realize all of the anticipated benefits of our cost savings initiatives, including our MGM 2020 Plan, or our asset light strategy; |
|
|
• |
the fact that our ability to pay ongoing regular dividends is subject to the discretion of our board of directors and certain other limitations; |
|
|
• |
nearly all of our domestic gaming facilities are leased and could experience risks associated with leased property, including risks relating to lease termination, lease extensions, charges and our relationship with the lessor, which could have a material adverse effect on our business, financial position or results of operations; |
|
|
• |
financial, operational, regulatory or other potential challenges that may arise with respect to MGP, as the lessor for a significant portion of our properties, may adversely impair our operations; |
34
|
|
• |
the fact that MGP has adopted a policy under which certain transactions with us, including transactions involving consideration in excess of $25 million, must be approved in accordance with certain specified procedures; |
|
|
• |
restrictions on our ability to have any interest or involvement in gaming businesses in China, Macau, Hong Kong and Taiwan, other than through MGM China; |
|
|
• |
the ability of the Macau government to terminate MGM Grand Paradise’s subconcession under certain circumstances without compensating MGM Grand Paradise, exercise its redemption right with respect to the subconcession, or refuse to grant MGM Grand Paradise an extension of the subconcession in 2022; |
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|
• |
the dependence of MGM Grand Paradise upon gaming promoters for a significant portion of gaming revenues in Macau; |
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|
• |
changes to fiscal and tax policies; |
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|
• |
our ability to recognize our foreign tax credit deferred tax asset and the variability of the valuation allowance we may apply against such deferred tax asset; |
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• |
extreme weather conditions or climate change may cause property damage or interrupt business; |
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• |
the concentration of a significant number of our major gaming resorts on the Las Vegas Strip; |
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• |
the fact that we extend credit to a large portion of our customers and we may not be able to collect such gaming receivables; |
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• |
the potential occurrence of impairments to goodwill, indefinite-lived intangible assets or long-lived assets which could negatively affect future profits; |
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• |
the susceptibility of leisure and business travel, especially travel by air, to global geopolitical events, such as terrorist attacks, other acts of violence, acts of war or hostility or outbreaks of infectious disease (including the COVID-19 pandemic); |
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• |
the fact that co-investing in properties, including our investment in CityCenter, decreases our ability to manage risk; |
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• |
the fact that future construction, development, or expansion projects will be subject to significant development and construction risks; |
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• |
the fact that our insurance coverage may not be adequate to cover all possible losses that our properties could suffer, our insurance costs may increase and we may not be able to obtain similar insurance coverage in the future; |
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• |
the fact that a failure to protect our trademarks could have a negative impact on the value of our brand names and adversely affect our business; |
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• |
the risks associated with doing business outside of the United States and the impact of any potential violations of the Foreign Corrupt Practices Act or other similar anti-corruption laws; |
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• |
risks related to pending claims that have been, or future claims that may be brought against us; |
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• |
the fact that a significant portion of our labor force is covered by collective bargaining agreements; |
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• |
the sensitivity of our business to energy prices and a rise in energy prices could harm our operating results; |
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• |
the potential that failure to maintain the integrity of our computer systems and internal customer information could result in damage to our reputation and/or subject us to fines, payment of damages, lawsuits or other restrictions on our use or transfer of data; |
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• |
the potential reputational harm as a result of increased scrutiny related to our corporate social responsibility efforts; |
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• |
the potential failure of future efforts to expand through investments in other businesses and properties or through alliances or acquisitions, or to divest some of our properties and other assets; |
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• |
increases in gaming taxes and fees in the jurisdictions in which we operate; and |
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• |
the potential for conflicts of interest to arise because certain of our directors and officers are also directors of MGM China. |
35
Any forward-looking statement made by us in this Form 10-Q speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. If we update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.
You should also be aware that while we from time to time communicate with securities analysts, we do not disclose to them any material non-public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility and are not endorsed by us.
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Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
We incorporate by reference the information appearing under “Market Risk” in Part I, Item 2 of this Form 10-Q.
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Item 4. |
Controls and Procedures |
Disclosure Controls and Procedures
Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”)) were effective as of March 31, 2021 to provide reasonable assurance that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and regulations and to provide that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures. This conclusion is based on an evaluation as required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act conducted under the supervision and participation of the principal executive officer and principal financial officer along with company management.
Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2021, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
36
Part II. OTHER INFORMATION
|
Item 1. |
Legal Proceedings |
See discussion of legal proceedings in Note 7 – Commitments and Contingencies in the accompanying consolidated financial statements.
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Item 1A. |
Risk Factors |
A description of certain factors that may affect our future results and risk factors is set forth in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to those factors previously disclosed in our 2020 Annual Report on Form 10-K.
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
The following table provides information about share repurchases made by the Company of its common stock during the quarter ended March 31, 2021:
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Total Number |
|
|
Dollar Value of |
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||
|
|
Total |
|
|
|
|
|
|
of Shares |
|
|
Shares that May |
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|||
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|
Number of |
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|
Average |
|
|
Purchased as |
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|
Yet be Purchased |
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||||
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|
Shares |
|
|
Price Paid |
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|
Part of a Publicly |
|
|
Under the Programs |
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||||
|
Period |
Purchased |
|
|
per Share |
|
|
Announced Program |
|
|
(In thousands) |
|
||||
|
January 1, 2021 — January 31, 2021 |
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
3,003,776 |
|
|
February 1, 2021 — February 28, 2021 |
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
3,003,776 |
|
|
March 1, 2021 — March 31, 2021 |
|
3,149,622 |
|
|
$ |
37.87 |
|
|
|
3,149,622 |
|
|
$ |
2,884,506 |
|
In February 2020, upon substantial completion of the $2.0 billion stock repurchase program, the Company’s Board of Directors authorized a $3.0 billion stock repurchase program. Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated agreements. Repurchases of common stock may also be made under a Rule 10b5-1 plan, which would permit common stock to be purchased when the Company might otherwise be precluded from doing so under insider trading laws. The timing, volume and nature of stock repurchases will be at the sole discretion of management, dependent on market conditions, applicable securities laws, and other factors, and may be suspended or discontinued at any time. All shares repurchased by the Company during the quarter ended March 31, 2021 were purchased pursuant to the Company’s publicly announced stock repurchase programs and have been retired, and during the quarter ended March 31, 2021, the previously announced $2.0 billion stock repurchase program was completed.
37
|
Item 6. |
Exhibits |
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4.1 |
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10.1 |
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10.2 |
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10.3 |
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10.4 |
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|
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|
10.5 |
Form of Omnibus Amendment to Relative Performance Share Unit Agreements |
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|
22 |
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|
|
|
|
31.1 |
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|
31.2 |
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|
32.1 |
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350. |
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32.2 |
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350. |
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|
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|
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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|
101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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|
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
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|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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|
104 |
The cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, has been formatted in Inline XBRL. |
In accordance with Rule 402 of Regulation S-T, the XBRL information included in Exhibit 101 and Exhibit 104 to this Form 10-Q shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
MGM Resorts International
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|
|
Date: May 3, 2021 |
By: |
/s/ WILLIAM J. HORNBUCKLE |
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|
|
William J. Hornbuckle |
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|
|
Chief Executive Officer and President (Principal Executive Officer) |
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|
|
Date: May 3, 2021 |
|
/s/ JONATHAN S. HALKYARD |
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|
|
Jonathan S. Halkyard |
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|
|
Chief Financial Officer and Treasurer (Principal Financial Officer) |
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|
|
|
39