Company Results

MGM Resorts International Second Quarter Consolidated Adjusted EBITDA Increased 8%

Consolidated net revenue was $2.6 billion, a 4% increase over the prior year second quarter

MGM Resorts International

MGM Resorts International (NYSE: MGM) reported financial results for the quarter ended June 30, 2014.  Diluted earnings per share for the second quarter of 2014 was $0.21 compared to diluted loss per share of $0.19 in the prior year second quarter. 

"I am pleased to report another solid quarter of growth at MGM Resorts," said Jim Murren, Chairman and CEO.  "Our domestic business was very strong with 12% EBITDA growth in Las Vegas driven by strong performance in both our room and casino segments.  CityCenter resort operations continue to improve while in Macau we grew cash flow and margins due to a higher contribution of revenues from our main floor business.  These results clearly reflect the success of our investments and strategies in our existing properties, while we are building MGM Cotai and beginning construction on MGM National Harbor."

Key results for the second quarter of 2014 include the following:

  • Consolidated net revenue was $2.6 billion, a 4% increase over the prior year second quarter;
  • Casino revenue at the Company's wholly owned domestic resorts increased 6% compared to the prior year quarter;
  • Rooms revenue at wholly owned domestic resorts increased 6% with a 6% increase in REVPAR(1) at the Company's Las Vegas Strip resorts compared to the prior year quarter;
  • Adjusted Property EBITDA(2) was $643 million, an 8% increase compared to the prior year quarter;
  • The Company's wholly owned domestic resorts earned Adjusted Property EBITDA of $414 million, a 10% increase compared to the prior year quarter;
  • MGM China's Adjusted EBITDA was $210 million, a 3% increase compared to the prior year quarter, including $14 million of branding fee expense in the current quarter; and
  • CityCenter earned Adjusted EBITDA related to resort operations of $81 million, a 20% increase over the prior year quarter.

Certain Items Affecting Second Quarter Results

The following table lists items that affect the comparability of the current and prior year quarterly results (approximate EPS impact shown, net of tax, per share; negative amounts represent charges to income):

Three months ended June 30,                                                          

2014

2013

Preopening and start-up expenses

$     (0.01)

$        —

Property transactions, net:

     Investment in Grand Victoria impairment         

(0.04)

(0.05)

     Corporate buildings impairment       

(0.06)

     Other property transactions, net       

(0.01)

(0.01)

IRS audit settlement       

0.06

 

The current year second quarter and prior year second quarter results were affected by non-cash impairment charges of $29 millionand $37 million, respectively, related to the Company's joint venture investment in Grand Victoria. In addition, the Company recorded an impairment charge of $45 million in the prior year second quarter related to corporate buildings located on the land underlying the Company's planned Las Vegas arena project, which were removed from service in 2014.

The current year second quarter income tax provision was affected by a $31 million benefit resulting from the settlement of the Company's 2005-2009 IRS audits during the quarter.  In addition to the items in the table above, the current year second quarter income tax provision was favorably impacted by a net benefit recorded for foreign tax credits generated by MGM China, while the prior year second quarter income tax provision was unfavorably impacted by a valuation allowance provided on U.S. deferred tax assets.

Wholly Owned Domestic Resorts

Casino revenue related to wholly owned domestic resorts increased 6% compared to the prior year quarter due to an increase in both table games volume and hold percentage. Table games hold percentage in the second quarter of 2014 was 21.3% compared to 18.1% in the prior year quarter. Slots revenue decreased 1% compared to the prior year quarter.

Rooms revenue increased 6% with Las Vegas Strip REVPAR up 6%.  The following table shows key hotel statistics for the Company's Las Vegas Strip resorts:

Three months ended June 30,

2014

2013

Occupancy %

96%

95%

Average Daily Rate (ADR)

$   141

$  134

Revenue per Available Room (REVPAR)

$   135

$  127

 

Food and beverage revenue increased 5% as a result of increased convention and banquet business and the opening of several new outlets. Operating income for the Company's wholly owned domestic resorts increased 23% for the second quarter of 2014 compared to the prior year quarter due to a 7% increase in net revenues and improved operating margins.

MGM China

On August 5, 2014, MGM China's Board of Directors announced a dividend of $136 million, which will be paid to shareholders of record as of August 25, 2014 and distributed on or about September 1, 2014.  MGM Resorts International will receive $69 million, representing its 51% share of the dividend.

Key second quarter results for MGM China include the following:

  • MGM China earned net revenue of $828 million, a 1% decrease compared to the prior year quarter;
  • Main floor table games revenue increased 41% compared to the prior year quarter;
  • VIP table games revenue decreased 18% due to a decrease in VIP table games turnover of 10% compared to the prior year quarter and lower hold percentage of 2.7% in the current year quarter compared to 2.9% in the prior year quarter;
  • MGM China's Adjusted EBITDA was $210 million, a 3% increase compared to the prior year quarter, including $14 million of branding fee expense in the current quarter;
  • MGM China's Adjusted EBITDA margin increased by 90 basis points compared to the prior year quarter; and
  • Operating income was $134 million compared to $126 million in the prior year quarter.

Income from Unconsolidated Affiliates

The following table summarizes information related to the Company's share of income from unconsolidated affiliates:

Three months ended June 30,

2014

2013

(In thousands)

CityCenter

$ (1,055)

$ 861

Other

6,923

5,821

$ 5,868

$ 6,682

 

Results for CityCenter Holdings, LLC for the second quarter of 2014 include the following (see schedules accompanying this release for further detail on CityCenter's second quarter results):

  • Net revenue from resort operations increased by 9% to $304 million compared to $280 million in the prior year quarter;
  • Adjusted EBITDA from resort operations was $81 million, an increase of 20% compared to the prior year quarter;
  • Aria's table games hold percentage was 23.4% compared to 20.8% in the prior year quarter;
  • Aria's occupancy percentage was 94% and its ADR was $217, resulting in REVPAR of $205, a 6% increase compared to the prior year quarter;
  • Vdara reported record REVPAR of $166, an increase of 10% compared to the prior year quarter;
  • Crystals reported Adjusted EBITDA of $11 million, an increase of 12% from the prior year quarter; and
  • Property transactions, net was $16 million compared to $10 million in the prior year quarter.

Financial Position

"Over the next year we expect free cash flow growth, dividends from MGM China and the anticipated conversion of $1.45 billion of outstanding convertible notes to dramatically improve our balance sheet," said Dan D'Arrigo, Executive Vice President, CFO and Treasurer.  "In July, we capitalized on CityCenter's improved credit profile with under 5x leverage to reduce the annual interest rate on its senior credit facility by 75 basis points.  We believe CityCenter is positioned to generate significant free cash flow going forward."

The Company's cash balance at June 30, 2014 was $1.4 billion, which included $658 million at MGM China.  At June 30, 2014 the Company had $2.8 billion of borrowings outstanding under its $4.0 billion senior secured credit facility and $554 million outstanding under the $2.0 billion MGM China credit facility.

1          REVPAR is hotel revenue per available room. 

2          "Adjusted EBITDA" is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses and property transactions, net.  "Adjusted Property EBITDA" is Adjusted EBITDA before corporate expense and stock compensation expense related to the MGM Resorts stock option plan, which is not allocated to each property. MGM China recognizes stock compensation expense related to its stock compensation plan which is included in the calculation of Adjusted EBITDA for MGM China.  Adjusted EBITDA information is presented solely as a supplemental disclosure to reported GAAP measures because management believes these measures are 1) widely used measures of operating performance in the gaming industry, and 2) a principal basis for valuation of gaming companies. 

Management believes that while items excluded from Adjusted EBITDA and Adjusted Property EBITDA may be recurring in nature and should not be disregarded in evaluation of the Company's earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods being presented. Also, management believes excluded items may not relate specifically to current operating trends or be indicative of future results. For example, preopening and start-up expenses will be significantly different in periods when the Company is 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 the Company's 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.

In addition, capital allocation, tax planning, financing and stock compensation awards are all managed at the corporate level. Therefore, management uses Adjusted Property EBITDA as the primary measure of the Company's operating resorts' performance.

Reconciliations of GAAP net income (loss) to Adjusted EBITDA and GAAP operating income (loss) to Adjusted Property EBITDA are included in the financial schedules in this release.

About MGM Resorts International

MGM Resorts International (NYSE: MGM) is one of the world's leading global hospitality companies, operating a portfolio of destination resort brands including Bellagio, MGM Grand, Mandalay Bay and The Mirage. The Company also owns 51% of MGM China Holdings Limited, which owns the MGM Macau resort and casino and is in the process of developing a gaming resort in Cotai, and 50% of CityCenter in Las Vegas, which features ARIA resort and casino. 

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

2014

2013

2014

2013

Revenues:

Casino

$

1,475,165

$

1,443,157

$

3,058,597

$

2,844,577

Rooms

463,151

437,710

915,537

838,960

Food and beverage

412,723

394,247

796,115

754,129

Entertainment

138,735

121,001

272,512

234,855

Retail

50,811

52,748

95,427

97,455

Other

134,068

127,914

259,495

251,740

Reimbursed costs

95,745

92,741

190,720

182,977

2,770,398

2,669,518

5,588,403

5,204,693

Less: Promotional allowances

(189,365)

(188,253)

(376,972)

(371,280)

2,581,033

2,481,265

5,211,431

4,833,413

Expenses:

Casino

916,817

916,807

1,907,651

1,792,053

Rooms

142,413

134,001

276,651

261,710

Food and beverage

241,124

225,696

461,182

430,436

Entertainment

104,761

89,940

203,698

173,665

Retail

26,055

27,865

49,531

53,831

Other

92,077

92,819

179,654

178,792

Reimbursed costs

95,745

92,741

190,720

182,977

General and administrative

327,484

314,324

646,730

618,225

Corporate expense

54,439

52,364

107,790

98,988

Preopening and start-up expenses 

9,759

3,506

15,395

5,652

Property transactions, net

33,170

88,131

33,728

96,622

Depreciation and amortization

203,070

218,151

410,725

430,069

2,246,914

2,256,345

4,483,455

4,323,020

Income from unconsolidated affiliates

5,868

6,682

24,644

23,026

Operating income 

339,987

231,602

752,620

533,419

Non-operating income (expense):

Interest expense, net of amounts capitalized

(203,936)

(214,500)

(413,323)

(439,947)

Non-operating items from unconsolidated affiliates

(14,578)

(38,864)

(28,301)

(60,943)

Other, net

(309)

(4,951)

(1,743)

(6,233)

(218,823)

(258,315)

(443,367)

(507,123)

Income (loss) before income taxes

121,164

(26,713)

309,253

26,296

Benefit (provision) for income taxes

52,540

(3,865)

56,059

(34,296)

Net income (loss)

173,704

(30,578)

365,312

(8,000)

Less: Net income attributable to noncontrolling interests

(68,160)

(62,380)

(151,608)

(78,412)

Net income (loss) attributable to MGM Resorts International

$

105,544

$

(92,958)

$

213,704

$

(86,412)

Per share of common stock:

Basic:

Net income (loss) attributable to MGM Resorts International

$

0.22

$

(0.19)

$

0.44

$

(0.18)

Weighted average shares outstanding

490,786

489,484

490,692

489,388

Diluted:

Net income (loss) attributable to MGM Resorts International

$

0.21

$

(0.19)

$

0.42

$

(0.18)

Weighted average shares outstanding

513,371

489,484

513,287

489,388

 

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

June 30,

December 31,

2014

2013

      ASSETS

Current assets:

Cash and cash equivalents

$

1,365,137

$

1,803,669

Accounts receivable, net

473,922

488,217

Inventories

102,524

107,907

Deferred income taxes, net

-

80,989

Prepaid expenses and other

224,732

238,657

Total current assets

2,166,315

2,719,439

Property and equipment, net

14,113,722

14,055,212

Other assets:

Investments in and advances to unconsolidated affiliates

1,420,924

1,374,836

Goodwill 

2,898,861

2,897,442

Other intangible assets, net

4,396,436

4,511,861

Other long-term assets, net

576,045

551,395

Total other assets

9,292,266

9,335,534

$

25,572,303

$

26,110,185

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

253,475

$

241,192

Income taxes payable

32,817

14,813

Current portion of long-term debt

317,194

-

Deferred income taxes, net

1,522

-

Accrued interest on long-term debt

191,141

188,522

Other accrued liabilities

1,764,167

1,770,801

Total current liabilities

2,560,316

2,215,328

Deferred income taxes 

2,356,998

2,430,414

Long-term debt

12,606,520

13,447,230

Other long-term obligations

106,941

141,590

Stockholders' equity:

Common stock, $.01 par value: authorized 1,000,000,000 shares,

   issued and outstanding 490,712,807 and 490,360,628 shares 

4,907

4,904

Capital in excess of par value

4,166,365

4,156,680

Retained earnings 

270,796

57,092

Accumulated other comprehensive income 

15,235

12,503

Total MGM Resorts International stockholders' equity

4,457,303

4,231,179

Noncontrolling interests

3,484,225

3,644,444

Total stockholders' equity

7,941,528

7,875,623

$

25,572,303

$

26,110,185

 

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

SUPPLEMENTAL DATA - NET REVENUES

(In thousands)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

2014

2013

2014

2013

Bellagio

$

332,213

$

303,111

$

652,069

$

603,831

MGM Grand Las Vegas

271,675

255,426

533,339

514,316

Mandalay Bay

233,506

205,306

452,890

380,819

The Mirage 

146,670

142,383

294,918

286,936

Luxor

91,067

83,383

174,760

161,172

New York-New York 

71,865

69,070

144,833

138,338

Excalibur

72,125

69,967

139,698

131,776

Monte Carlo

72,332

68,891

140,943

135,391

Circus Circus Las Vegas

53,942

51,270

102,667

97,183

MGM Grand Detroit

136,350

132,593

269,498

273,461

Beau Rivage

87,588

85,959

170,014

166,869

Gold Strike Tunica

39,500

36,400

76,419

73,442

Other resort operations

30,437

32,237

57,456

61,650

  Wholly owned domestic resorts

1,639,270

1,535,996

3,209,504

3,025,184

MGM China

827,928

835,149

1,769,376

1,582,706

Management and other operations

113,835

110,120

232,551

225,523

$

2,581,033

$

2,481,265

$

5,211,431

$

4,833,413

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

SUPPLEMENTAL DATA - ADJUSTED PROPERTY EBITDA

(In thousands)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

2014

2013

2014

2013

Bellagio

$

115,619

$

99,522

$

220,768

$

189,101

MGM Grand Las Vegas

54,371

49,635

116,604

111,640

Mandalay Bay

53,003

49,358

109,003

88,772

The Mirage 

28,910

24,528

64,329

54,689

Luxor

21,322

18,288

39,300

33,862

New York-New York 

24,478

23,672

50,105

47,072

Excalibur

20,706

19,771

39,596

34,880

Monte Carlo

19,999

19,883

39,894

37,369

Circus Circus Las Vegas

7,213

5,296

12,522

9,853

MGM Grand Detroit

39,653

38,662

73,019

78,315

Beau Rivage

18,489

16,466

33,130

30,339

Gold Strike Tunica

10,185

8,518

19,752

18,505

Other resort operations

450

2,004

(778)

2,243

  Wholly owned domestic resorts

414,398

375,603

817,244

736,640

MGM China

210,488

204,815

451,213

385,270

CityCenter (50%)(1)

(1,055)

861

12,991

12,556

Other unconsolidated resorts(1)

6,923

5,821

11,653

10,470

Management and other operations

12,102

9,060

31,954

24,821

$

642,856

$

596,160

$

1,325,055

$

1,169,757

(1) Represents the Company's share of operating income (loss), adjusted for the effect of certain basis differences. 

 

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

RECONCILIATION OF OPERATING INCOME (LOSS) TO ADJUSTED PROPERTY EBITDA AND ADJUSTED EBITDA

(In thousands)

(Unaudited)

Three Months Ended June 30, 2014

Operating

income (loss)

Preopening and

start-up

expenses

Property 

transactions, net

Depreciation and

amortization

Adjusted EBITDA

Bellagio

$

94,027

$

-

$

594

$

20,998

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