Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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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, 2019, which were included in our Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 27, 2020. 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, results of operations and financial condition. In March 2020, all of our domestic properties were temporarily closed pursuant to state and local government requirements as a result of COVID-19. Throughout the second and third quarter of 2020 all of our properties that were temporarily closed re-opened to the public but are operating without certain amenities and subject to certain occupancy limitations. Accordingly, although our properties have re-opened, they are generating revenues that are significantly lower than historical results. In addition, our properties may be subject to temporary, complete, or partial shutdowns in the future due to COVID-19 related concerns. We have also implemented certain measures to mitigate the spread of COVID-19, including limits 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. Our properties in Macau resumed operations on February 20, 2020 after a 15-day closure period and, effective July 15, 2020, travelers from Macau to Guangdong province are exempted from a 14-day medical observation if they test negative for COVID-19 within seven days prior to the departure and obtain appropriate health declarations from the Macau and Guangdong government health agencies; however, the properties are still subject to social distancing measures, including limitations on the number of tables allowed to operate, the number of seats available at each table and slot machine spacing, and effective July 15, 2020 guests entering casinos are required to provide negative COVID-19 test results and the appropriate health declaration from the Macau government health agency. The individual visit scheme (“IVS”) that permits mainland Chinese residents to travel from Guangdong to Macau resumed on August 26, 2020 and approval for travel from other provinces resumed on September 23, 2020. However, 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 and bans on entry or quarantine requirements for visitors that have been to certain countries as well as Hong Kong or Taiwan in the 14 days prior to arriving in Macau), which may significantly impact visitation to our Macau properties.
While we have engaged in aggressive cost reduction efforts to minimize cash outflows while our properties were closed, and have continued to engage in such efforts as the properties have re-opened, we still face significant fixed and variable expenses. Our efforts include:
|
•
|
reducing or deferring at least 50% of planned domestic capital expenditures in 2020;
|
|
•
|
reducing employee costs, including through hiring freezes, headcount reductions and substantial furloughs of employees (which have resulted in a number of employees being separated from us) and cancellation of merit pay increases;
|
|
•
|
initiating a program where certain senior executives and directors voluntarily elected to receive all or a portion of their remaining base salary during 2020 in the form of restricted stock units in lieu of cash; and
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25
|
•
|
starting with our dividend for the second quarter of 2020, our Board approved a nominal annual dividend of $0.01 per share.
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On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees. Based on a preliminary analysis of the CARES Act, the benefits we expect to recognize include:
|
•
|
refund of federal income taxes due to a five-year carryback of net operating loss incurred in 2020 when our 2020 tax return is filed, which we estimate will result in a $150 million to $175 million refund that we expect to receive in the second or third quarter of 2021;
|
|
•
|
relaxation of interest expense deduction limitation for income tax purposes, which is included in the estimate above;
|
|
•
|
reduction of employer Federal Insurance Contributions Act (“FICA”) taxes equal to 50 percent of wages paid and health care coverage provided to furloughed employees during 2020, which we estimate will result in permanent savings of approximately $115 million to $120 million, and of which $27 million and $113 million was recorded in the three and nine months ended September 30, 2020, respectively; and
|
|
•
|
deferral of all employer FICA taxes from the date of enactment through December 31, 2020, 50 percent payable by December 2021 and the remainder payable by December 2022, which we estimate will result in a deferral of approximately $50 million to $60 million.
|
We intend to continue to review and consider any available potential benefits under the CARES Act for which we qualify, including those described above. We cannot predict the manner in which such benefits or any of the other benefits described herein will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all. If the U.S. government or any other governmental authority agrees to provide such aid under the CARES Act or any other crisis relief assistance it may impose certain requirements on the recipients of the aid, including restrictions on executive officer compensation, dividends, prepayment of debt, limitations on debt and other similar restrictions that will apply for a period of time after the aid is repaid or redeemed in full.
In addition, we have seen and continue to expect to see weakened demand at our properties 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, or if our properties will remain re-opened, but the impact of COVID-19 will have a material impact on our consolidated results of operations during 2020 and potentially thereafter.
Other Developments
On February 14, 2020, we completed a series of transactions (collectively the “MGP BREIT Venture Transaction”) pursuant to which the real estate assets of MGM Grand Las Vegas and Mandalay Bay (including Mandalay Place) were contributed to a newly formed venture (“MGP BREIT Venture”), owned 50.1% by the Operating Partnership and 49.9% by a subsidiary of Blackstone Real Estate Income Trust, Inc. (“BREIT”). In exchange for the contribution of the real estate assets, MGM and MGP received total consideration of $4.6 billion, which was comprised of $2.5 billion of cash, $1.3 billion of the Operating Partnership’s secured indebtedness assumed by MGP BREIT Venture, and the Operating Partnership’s 50.1% equity interest in the MGP BREIT Venture. In addition, the Operating Partnership issued approximately 3 million Operating Partnership units to us representing 5% of the equity value of MGP BREIT Venture. In connection with the transactions, we provided a shortfall guaranty of the principal amount of indebtedness of the MGP BREIT Venture (and any interest accrued and unpaid thereon). On the closing date, BREIT also purchased approximately 5 million MGP Class A shares for $150 million.
In connection with the transactions, MGP BREIT Venture entered into a lease with us for the real estate assets of Mandalay Bay and MGM Grand Las Vegas. The lease provides for a term of thirty years with two ten-year renewal options and has an initial annual base rent of $292 million, escalating annually at a rate of 2% per annum for the first fifteen years and thereafter equal to the greater of 2% and the CPI increase during the prior year subject to a cap of 3%. In addition, the lease requires us to spend 3.5% of net revenues over a rolling five-year period at the properties on capital expenditures and for us to comply with certain financial covenants, which, if not met, will require us to maintain cash security or provide one or more letters of credit in favor of the landlord in an amount equal to the rent for the succeeding one-year period.
26
In connection with the MGP BREIT Venture Transaction, the existing master lease with MGP was modified to remove the Mandalay Bay property and the annual rent under the MGP master lease was reduced by $133 million.
Also, on January 14, 2020, we, the Operating Partnership, and MGP entered into an agreement for the Operating Partnership to waive its right following the closing of the MGP BREIT Venture Transaction to issue MGP Class A shares, in lieu of cash, to us in connection with us exercising our right to require the Operating Partnership to redeem the Operating Partnership units we hold, at a price per unit equal to a 3% discount to the ten day average closing price prior to the date of the notice of redemption. The waiver was effective upon closing of the transaction on February 14, 2020 and terminates on the earlier of February 14, 2022 or us receiving cash proceeds of $1.4 billion as consideration for the redemption of the Operating Partnership units that we hold. On May 18, 2020, the Operating Partnership redeemed approximately 30 million Operating Partnership units that we held for $700 million.
Key Performance Indicators
Key performance indicators related to gaming and hotel revenue are:
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•
|
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
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|
•
|
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 and nine months ended September 30, 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.
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Additional key performance indicators at MGM China are:
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•
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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.
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Results of Operations
Summary Financial Results
The following table summarizes our consolidated financial results for the three and nine months ended September 30, 2020 and 2019:
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
September 30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
(In thousands)
|
|
Net revenues
|
$
|
1,125,920
|
|
|
$
|
3,314,382
|
|
|
$
|
3,668,546
|
|
|
$
|
9,714,536
|
|
Operating income (loss)
|
|
(495,182
|
)
|
|
|
238,381
|
|
|
|
(278,866
|
)
|
|
|
980,126
|
|
Net income (loss)
|
|
(601,971
|
)
|
|
|
6,104
|
|
|
|
(863,939
|
)
|
|
|
148,430
|
|
Net income (loss) attributable to MGM Resorts International
|
|
(534,731
|
)
|
|
|
(37,133
|
)
|
|
|
(585,119
|
)
|
|
|
37,569
|
|
27
Summary Operating Results
During the three and nine months ended September 30, 2020 we re-opened all of our domestic properties on the dates shown below:
Las Vegas Strip Resorts
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|
Bellagio
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June 4, 2020
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MGM Grand Las Vegas
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June 4, 2020
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New York-New York
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June 4, 2020
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Excalibur
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June 11, 2020
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Luxor
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June 25, 2020
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Mandalay Bay
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July 1, 2020
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The Mirage
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August 27, 2020
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Park MGM
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September 30, 2020
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Regional Operations
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|
Gold Strike
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May 25, 2020
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Beau Rivage
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June 1, 2020
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MGM Northfield Park
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June 20, 2020
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MGM National Harbor
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June 29, 2020
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MGM Springfield
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July 13, 2020
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Borgata
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July 26, 2020
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MGM Grand Detroit
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August 7, 2020
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Empire City
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September 21, 2020
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Consolidated net revenues decreased 66% for the three months ended September 30, 2020 compared to the prior year quarter due primarily to the impact of COVID-19, which included a partial quarter of operations at certain of our domestic properties, travel restrictions to Macau, including the suspension of the IVS for part of the quarter, restrictions on the number of table games allowed to operate in certain jurisdictions, and restrictions on the number of seats available at each table at both of our domestic and Macau properties, and other social distancing restrictions in place at our properties, including the number of slot machines available for use, property capacity restrictions, and venue/amenity limitations, as discussed above, which resulted in a 94% decrease in net revenues at MGM China, a 68% decrease in net revenues at our Las Vegas Strip Resorts, and a 40% decrease in net revenues at our Regional Operations.
Consolidated operating loss was $495 million for the three months ended September 30, 2020 compared to consolidated operating income of $238 million in the prior year quarter, primarily driven by a decrease in net revenues discussed above and a $49 million increase in general and administrative expense, partially offset by a decrease in operating expenses as a result of cost reduction efforts during property closures, as discussed below, a $246 million decrease in property transactions, net, a $38 million decrease in corporate expense, discussed below, as well as a $28 million decrease in depreciation and amortization. General and administrative expense increased in the current quarter compared to the prior year quarter due primarily to $181 million of rent expense associated with the Bellagio lease and the Mandalay Bay and MGM Grand Las Vegas lease recognized during the current quarter, partially offset by aggressive efforts to reduce expenses at our domestic resorts during property closures which primarily included a decrease in payroll expense, utilities, and advertising expense. Property transactions, net decreased in the current quarter due primarily to a $219 million non-cash impairment charge related to the long-lived assets of Circus Circus Las Vegas and the adjacent land included in the prior year quarter. The decrease in corporate expense compared to the prior year quarter is due primarily to reductions in other initiative costs. Corporate expense in the current quarter included $2 million in corporate initiatives costs compared to $15 million in costs to implement the MGM 2020 Plan, Real Estate Committee costs, and finance modernization costs in the prior year quarter. 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 and the sale of the Bellagio real estate assets in November 2019.
28
Consolidated net revenues decreased 62% for the nine months ended September 30, 2020 compared to the prior year period due primarily to the temporary suspension of our domestic and Macau casino operations, travel restrictions to Macau and other operational restrictions, as discussed above, which resulted in a 84% decrease in net revenues at MGM China, a 60% decrease in net revenues at our Las Vegas Strip Resorts, and a 48% decrease in net revenues at our Regional Operations.
Consolidated operating loss was $279 million for the nine months ended September 30, 2020 compared to operating income of $980 million in the prior year period, due primarily to the impact of COVID-19, which included a decrease in net revenues discussed above, a $47 million increase in general and administrative expense, incurrence of $20 million of restructuring costs, a portion of which was recorded to corporate expense, discussed below, partially offset by a decrease in operating expenses as a result of cost reduction efforts during property closures, as discussed below, a $179 million decrease in property transactions, net, a $61 million decrease in depreciation and amortization, and a $1.5 billion gain related to the MGP BREIT Venture Transaction. General and administrative expense increased in the current year period compared to the prior year period due primarily to $497 million of rent expense associated with the Bellagio lease and the Mandalay Bay and MGM Grand Las Vegas lease, largely offset by aggressive efforts to reduce expenses at our domestic resorts during property closures, which primarily related to decreases in payroll expense, utilities, and advertising expense. In addition, the prior year period included $71 million in restructuring costs related to severance and accelerated stock compensation expense associated with the MGM 2020 Plan. Corporate expense in the current year period included $49 million of October 1 litigation settlement expense, $44 million of CEO transition expense, $5 million of restructuring costs, and $15 million of 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. Corporate expense in the prior year period included $20 million of Empire City acquisition costs, primarily related to transfer taxes and advisory fees, $28 million of costs incurred to implement the MGM 2020 Plan, and $10 million of finance modernization initiative costs. Property transactions, net decreased in the current period compared to the prior year period. As it relates to the decrease in property transactions, net, the current year period included a $64 million other-than-temporary non-cash impairment charge on an equity method investment and the prior year period included a $219 million non-cash impairment charge related to the long-lived assets of Circus Circus Las Vegas and the adjacent land. Depreciation and amortization decreased compared to the prior year period due primarily to the sale of the MGM Grand Las Vegas and Mandalay Bay real estate assets in February 2020 and the sale of the Bellagio real estate assets in November 2019.
29
Net Revenues by Segment
The following table presents a detail by segment of net revenues:
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
September 30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
(In thousands)
|
|
Las Vegas Strip Resorts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table games win
|
$
|
107,860
|
|
|
$
|
203,882
|
|
|
$
|
351,889
|
|
|
$
|
606,333
|
|
Slots win
|
|
182,788
|
|
|
|
308,780
|
|
|
|
461,784
|
|
|
|
882,058
|
|
Other
|
|
3,800
|
|
|
|
14,573
|
|
|
|
18,862
|
|
|
|
48,866
|
|
Less: Incentives
|
|
(105,090
|
)
|
|
|
(190,973
|
)
|
|
|
(305,476
|
)
|
|
|
(568,108
|
)
|
Casino revenue
|
|
189,358
|
|
|
|
336,262
|
|
|
|
527,059
|
|
|
|
969,149
|
|
Rooms
|
|
137,869
|
|
|
|
469,145
|
|
|
|
526,838
|
|
|
|
1,407,733
|
|
Food and beverage
|
|
81,429
|
|
|
|
401,362
|
|
|
|
391,218
|
|
|
|
1,156,657
|
|
Entertainment, retail and other
|
|
72,762
|
|
|
|
300,679
|
|
|
|
320,920
|
|
|
|
868,441
|
|
Non-casino revenue
|
|
292,060
|
|
|
|
1,171,186
|
|
|
|
1,238,976
|
|
|
|
3,432,831
|
|
|
|
481,418
|
|
|
|
1,507,448
|
|
|
|
1,766,035
|
|
|
|
4,401,980
|
|
Regional Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table games win
|
|
155,175
|
|
|
|
219,542
|
|
|
|
332,114
|
|
|
|
620,788
|
|
Slots win
|
|
426,264
|
|
|
|
627,325
|
|
|
|
968,924
|
|
|
|
1,757,386
|
|
Other
|
|
39,399
|
|
|
|
81,766
|
|
|
|
167,920
|
|
|
|
226,231
|
|
Less: Incentives
|
|
(156,049
|
)
|
|
|
(267,885
|
)
|
|
|
(390,362
|
)
|
|
|
(715,553
|
)
|
Casino revenue
|
|
464,789
|
|
|
|
660,748
|
|
|
|
1,078,596
|
|
|
|
1,888,852
|
|
Rooms
|
|
34,782
|
|
|
|
90,197
|
|
|
|
94,842
|
|
|
|
243,449
|
|
Food and beverage
|
|
38,646
|
|
|
|
126,625
|
|
|
|
138,052
|
|
|
|
368,374
|
|
Entertainment, retail and other
|
|
18,609
|
|
|
|
57,448
|
|
|
|
60,260
|
|
|
|
149,241
|
|
Non-casino revenue
|
|
92,037
|
|
|
|
274,270
|
|
|
|
293,154
|
|
|
|
761,064
|
|
|
|
556,826
|
|
|
|
935,018
|
|
|
|
1,371,750
|
|
|
|
2,649,916
|
|
MGM China
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VIP table games win
|
|
17,388
|
|
|
|
317,824
|
|
|
|
137,693
|
|
|
|
947,414
|
|
Main floor table games win
|
|
24,840
|
|
|
|
500,411
|
|
|
|
223,961
|
|
|
|
1,402,575
|
|
Slots win
|
|
7,653
|
|
|
|
73,102
|
|
|
|
42,727
|
|
|
|
212,984
|
|
Less: Commissions and incentives
|
|
(14,584
|
)
|
|
|
(228,499
|
)
|
|
|
(105,386
|
)
|
|
|
(603,391
|
)
|
Casino revenue
|
|
35,297
|
|
|
|
662,838
|
|
|
|
298,995
|
|
|
|
1,959,582
|
|
Rooms
|
|
2,800
|
|
|
|
36,294
|
|
|
|
19,344
|
|
|
|
105,171
|
|
Food and beverage
|
|
6,240
|
|
|
|
32,214
|
|
|
|
23,451
|
|
|
|
93,836
|
|
Entertainment, retail and other
|
|
2,530
|
|
|
|
6,409
|
|
|
|
10,162
|
|
|
|
19,459
|
|
Non-casino revenue
|
|
11,570
|
|
|
|
74,917
|
|
|
|
52,957
|
|
|
|
218,466
|
|
|
|
46,867
|
|
|
|
737,755
|
|
|
|
351,952
|
|
|
|
2,178,048
|
|
Reportable segment net revenues
|
|
1,085,111
|
|
|
|
3,180,221
|
|
|
|
3,489,737
|
|
|
|
9,229,944
|
|
Corporate and other
|
|
40,809
|
|
|
|
134,161
|
|
|
|
178,809
|
|
|
|
484,592
|
|
|
$
|
1,125,920
|
|
|
$
|
3,314,382
|
|
|
$
|
3,668,546
|
|
|
$
|
9,714,536
|
|
30
Las Vegas Strip Resorts
Las Vegas Strip Resorts casino revenue decreased 44% for the three months ended September 30, 2020 compared to the prior year quarter due primarily to a partial quarter of operations at Park MGM and The Mirage, and operational restrictions related to the pandemic, as discussed above, which resulted in decreases in table games win and slots win of 47% and 41%, respectively.
Las Vegas Strip Resorts casino revenue decreased 46% for the nine months ended September 30, 2020 compared to the prior year period due primarily to the temporary closure of properties, and operational restrictions related to the pandemic, as discussed above, which resulted in decreases in table games win and slots win of 42% and 48%, respectively.
The following table shows key gaming statistics for our Las Vegas Strip Resorts:
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(Dollars in millions)
|
Table Games Drop
|
$498
|
|
$842
|
|
$1,489
|
|
$2,661
|
Table Games Win %
|
21.6%
|
|
24.2%
|
|
23.6%
|
|
22.8%
|
Slots Handle
|
$1,944
|
|
$3,280
|
|
$4,925
|
|
$9,458
|
Slots Hold %
|
9.4%
|
|
9.4%
|
|
9.4%
|
|
9.3%
|
Las Vegas Strip Resorts rooms revenue decreased 71% for the three months ended September 30, 2020 compared to the prior year quarter due primarily to a partial quarter of operations at Park MGM and The Mirage and a decrease in REVPAR due primarily to a decrease in occupancy as a result of operational restrictions related to the pandemic, as discussed above.
Las Vegas Strip Resorts rooms revenue decreased 63% for the nine months ended September 30, 2020 compared to the prior year period due primarily to the temporary closure of our properties and a decrease in REVPAR due primarily to a decrease in occupancy as a result of operational restrictions related to the pandemic, as discussed above.
The following table shows key hotel statistics for our Las Vegas Strip Resorts:
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Occupancy
|
44%
|
|
92%
|
|
64%
|
|
92%
|
Average Daily Rate (ADR)(1)
|
$139
|
|
$164
|
|
$168
|
|
$167
|
Revenue per Available Room (REVPAR)(1)
|
$61
|
|
$152
|
|
$107
|
|
$154
|
(1)
|
Rooms that were out of service during the three and nine months ended September 30, 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.
|
Las Vegas Strip Resorts food and beverage revenue decreased 80% for the three months ended September 30, 2020 compared to the prior year quarter due primarily to a partial quarter of operations at Park MGM and The Mirage, and capacity and other operational restrictions related to the pandemic, as discussed above.
Las Vegas Strip Resorts food and beverage revenue decreased 66% for the nine months ended September 30, 2020 compared to the prior year period due primarily to the temporary closure of our properties and capacity and other operational restrictions related to the pandemic, as discussed above.
Las Vegas Strip Resorts entertainment, retail and other revenue decreased 76% for the three months ended September 30, 2020 compared to the prior year quarter due primarily to a partial quarter of operations at Park MGM and The Mirage, capacity and other operational restrictions related to the pandemic, as discussed above, including the closure of entertainment venues, such as theaters and nightclubs.
Las Vegas Strip Resorts entertainment, retail and other revenue decreased 63% for the nine months ended September 30, 2020 compared to the prior year period due primarily to the temporary closure of our properties and capacity and other operational restrictions related to the pandemic, as discussed above.
31
Regional Operations
Regional Operations casino revenue decreased 30% for the three months ended September 30, 2020 compared to the prior year quarter due primarily to a partial quarter of operations at MGM Springfield, Borgata, MGM Grand Detroit, and Empire City, which resulted in decreases in table games win and slots win of 29% and 32%, respectively.
Regional Operations casino revenue decreased 43% for the nine months ended September 30, 2020 compared to the prior year period due primarily to the temporary closure of our properties and other operational restrictions related to the pandemic, which resulted in decreases in table games win and slots win of 47% and 45%, respectively.
The following table shows key gaming statistics for our Regional Operations:
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(Dollars in millions)
|
Table Games Drop
|
$739
|
|
$1,122
|
|
$1,641
|
|
$3,158
|
Table Games Win %
|
21.0%
|
|
19.6%
|
|
20.2%
|
|
19.7%
|
Slots Handle
|
$4,360
|
|
$6,666
|
|
$10,016
|
|
$18,717
|
Slots Hold %
|
9.8%
|
|
9.4%
|
|
9.7%
|
|
9.4%
|
Regional Operations rooms revenue decreased 61% for both the three and nine months ended September 30, 2020 compared to the prior year periods due primarily to the temporary closure of our properties and a decrease in REVPAR due primarily to a decrease in occupancy.
Regional Operations food and beverage revenue decreased 69% and 63% for the three and nine months ended September 30, 2020, compared to the prior year periods, respectively, due primarily to the temporary closure of our properties, and capacity and other operational restrictions, as discussed above.
Regional Operations entertainment, retail and other revenue decreased 68% and 60% for the three and nine months ended September 30, 2020, compared to the prior year periods, respectively, due primarily to the temporary closure of our properties, and capacity and other operational restrictions, as discussed above, including the closure of certain entertainment venues, such as theaters.
MGM China
The following table shows key gaming statistics for MGM China:
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30,
|
|
September 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(Dollars in millions)
|
VIP Table Games Turnover
|
$929
|
|
$8,646
|
|
$4,804
|
|
$29,619
|
VIP Table Games Win %
|
1.9%
|
|
3.7%
|
|
2.9%
|
|
3.2%
|
Main Floor Table Games Drop
|
$143
|
|
$2,117
|
|
$986
|
|
$6,147
|
Main Floor Table Games Win %
|
17.3%
|
|
23.6%
|
|
22.7%
|
|
22.8%
|
MGM China net revenues decreased 94% for the three months ended September 30, 2020 compared to the prior year quarter due primarily to travel restrictions to Macau, including the suspension of the IVS for part of the quarter, as well as other operational restrictions related to the pandemic, as discussed above. Both VIP table games win and main floor table games win decreased 95% compared to the prior year quarter.
MGM China net revenues decreased 84% for the nine months ended September 30, 2020 compared to the prior year period due primarily to the suspension of operations for a 15-day period in February, travel restrictions to Macau, including the suspension of the IVS for the majority of the current year period, as well as other operational restrictions related to the pandemic, as discussed above. VIP table games win decreased 85% and main floor table games win decreased 84% compared to the prior year period.
32
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. Corporate and other revenue for the nine months ended September 30, 2019 included $68 million in net revenues from MGP’s Northfield casino, which represents revenues prior to our acquisition of MGM Northfield Park’s operations from MGP on April 1, 2019. Reimbursed costs revenue represents reimbursement of costs, primarily payroll-related, incurred by us in connection with the provision of management services and was $32 million and $108 million for the three months ended September 30, 2020 and 2019, respectively and $147 million and $331 million for the nine months ended September 30, 2020 and 2019, respectively, which declined for the respective comparative periods due primarily to property closures and other operational restrictions further discussed below. 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
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
September 30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
(In thousands)
|
|
Las Vegas Strip Resorts
|
$
|
15,125
|
|
|
$
|
441,281
|
|
|
$
|
178,277
|
|
|
$
|
1,263,271
|
|
Regional Operations
|
|
145,734
|
|
|
|
269,125
|
|
|
|
185,369
|
|
|
|
741,710
|
|
MGM China
|
|
(96,446
|
)
|
|
|
183,989
|
|
|
|
(234,724
|
)
|
|
|
549,603
|
|
Corporate and other
|
|
(113,190
|
)
|
|
|
(72,707
|
)
|
|
|
(374,769
|
)
|
|
|
(220,844
|
)
|
Adjusted EBITDAR
|
$
|
(48,777
|
)
|
|
|
|
|
|
$
|
(245,847
|
)
|
|
|
|
|
Las Vegas Strip Resorts
Adjusted Property EBITDAR at our Las Vegas Strip Resorts decreased 97% and Adjusted Property EBITDAR margin decreased to 3.1% for the three months ended September 30, 2020 compared to 29.3% in the prior year quarter. Adjusted Property EBITDAR decreased compared to the prior year quarter due primarily to a decrease in gaming and non-gaming revenues resulting from the partial quarter of operations at The Mirage and Park MGM, and other operational restrictions related to the pandemic, partially offset by a decrease in operating expenses as a result of cost reduction efforts.
Adjusted Property EBITDAR at our Las Vegas Strip Resorts decreased 86% and Adjusted Property EBITDAR margin decreased to 10.1% for the nine months ended September 30, 2020 compared to 28.7% in the prior year period. Adjusted Property EBITDAR decreased compared to the prior year period due primarily to a decrease in gaming and non-gaming revenues resulting from the temporary closure of our properties, and other operational restrictions related to the pandemic, partially offset by a decrease in operating expenses as a result of cost reduction efforts.
Regional Operations
Adjusted Property EBITDAR at our Regional Operations decreased 46% and Adjusted Property EBITDAR margin decreased to 26.2% for the three months ended September 30, 2020 compared to 28.8% in the prior year quarter, due primarily to a partial quarter of operations at MGM Springfield, Borgata, MGM Grand Detroit, and Empire City.
Adjusted Property EBITDAR at our Regional Operations decreased 75% and Adjusted Property EBITDAR margin decreased to 13.5% for the nine months ended September 30, 2020 compared to 28.0% in the prior year period. Adjusted Property EBITDAR decreased compared to the prior year period due primarily to a decrease in gaming and non-gaming revenues resulting from the temporary closure of our properties and other operational restrictions related to the pandemic, partially offset by a decrease in operating expenses as a result of cost reduction efforts.
33
MGM China
MGM China’s Adjusted Property EBITDAR loss was $96 million for the three months ended September 30, 2020 compared to Adjusted Property EBITDAR of $184 million in the prior year quarter due primarily to travel restrictions to Macau, including the suspension of the IVS for part of the quarter, as well as other operational restrictions related to the pandemic. The current quarter included $1 million of license fee expense compared to $13 million in the prior year quarter.
MGM China’s Adjusted Property EBITDAR loss was $235 million for the nine months ended September 30, 2020 compared to Adjusted Property EBITDAR of $550 million in the prior year period due primarily to a decrease in casino revenues resulting from the temporary suspension of casino operations, and travel restrictions to Macau, including the suspension of the IVS for majority of the current year period, as well as other operational restrictions related to the pandemic. The current period included $6 million of license fee expense compared to $38 million in the prior year period.
Income (loss) from Unconsolidated Affiliates
The following table summarizes information related to our share of operating income (loss) from unconsolidated affiliates:
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
September 30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
(In thousands)
|
|
CityCenter
|
$
|
(6,041
|
)
|
|
$
|
39,317
|
|
|
$
|
(24,489
|
)
|
|
$
|
105,672
|
|
MGP BREIT Venture
|
|
38,976
|
|
|
|
—
|
|
|
|
97,787
|
|
|
|
—
|
|
Other
|
|
(12,300
|
)
|
|
|
(3,103
|
)
|
|
|
(25,268
|
)
|
|
|
(3,705
|
)
|
|
$
|
20,635
|
|
|
$
|
36,214
|
|
|
$
|
48,030
|
|
|
$
|
101,967
|
|
On March 17, 2020, CityCenter temporarily closed to the public as a result of the unprecedented public health crisis from the COVID-19 pandemic described above. Aria re-opened on July 1, 2020 and Vdara re-opened on July 16, 2020.
Our share of CityCenter’s operating loss, including certain basis difference adjustments, for the three months ended September 30, 2020 was $6 million compared to operating income of $39 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 related to the pandemic.
Our share of CityCenter’s operating loss, including certain basis difference adjustments, for the nine months ended September 30, 2020 was $24 million compared to operating income of $106 million in the prior year period, primarily driven by the decrease in CityCenter’s casino and non-casino revenues as a result of the temporary closure, and other operational restrictions related to the pandemic.
Non-operating Results
Interest Expense
Gross interest expense was $175 million and $216 million for the three months ended September 30, 2020 and 2019, respectively. Gross interest expense was $490 million and $652 million for the nine months ended September 30, 2020 and 2019, respectively. The decrease in gross interest expense when compared to the prior year periods is due primarily to the decrease in average debt outstanding under the credit facilities and senior notes due to early retirement of debt discussed below, partially offset by the May 2020 issuance of the $750 million 6.75% senior notes due 2025, the June 2020 issuance of the Operating Partnership’s $800 million 4.625% senior notes due 2025, and the June 2020 issuance of MGM China’s $500 million 5.25% senior notes due 2025. 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.
34
Other, net
Other income, net was $14 million for the quarter ended September 30, 2020 compared to other expense, net of $9 million in the prior year quarter. Other expenses, net for the nine months ended September 30, 2020 increased $48 million compared to the prior year period. The current year period 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, and a $3 million net loss on the Operating Partnership’s unhedged interest rate swaps, partially offset by an $8 million remeasurement gain on MGM China’s U.S. dollar-denominated senior notes, and a $20 million increase in interest income resulting from an increase in cash and cash equivalents. The prior year period included a $56 million loss incurred on the early retirement of debt related to our senior notes and MGM China’s term loan facility, partially offset by a $2 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 11.3% on loss before income taxes for the three months ended September 30, 2020, compared to a benefit of 620.8% on loss before income taxes in the prior year quarter. Our effective tax rate was a benefit of 8.9% on loss before income taxes for the nine months ended September 30, 2020, compared to a provision of 33.9% on income before income taxes in the prior year period. The high effective tax rate in the prior year quarter was primarily due to tax benefit recognized in such quarter on the $219 million non-cash impairment charge related to Circus Circus Las Vegas and adjacent land. The effective rate for the nine months ended September 30, 2020 was unfavorably impacted by tax expense recorded on the MGP BREIT Venture Transaction and adjustments to valuation allowances for Macau deferred tax assets and foreign tax credits, while the prior year period was unfavorably impacted by the remeasurement of Macau deferred taxes due to the extension of the subconcession agreement in Macau, the recording of deferred state taxes resulting from the Empire City acquisition and adjustments to our foreign tax credit valuation allowance, partially offset by Macau deferred tax benefit as well as tax benefit resulting from the Circus Circus Las Vegas and adjacent land.
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.
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, restructuring costs (which represents costs related to severance, accelerated stock compensation expense, and consulting fees directly related to the operating model component of the MGM 2020 Plan), 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, October 1 litigation settlement, restructuring costs (which represents costs related to severance, accelerated stock compensation expense, and consulting fees directly related to the operating model component of the MGM 2020 Plan), 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
35
may not be comparable period over period. In addition, we changed our non-GAAP measure, as a result of the Bellagio real estate transaction in the fourth quarter of 2019, to exclude rent expense associated with triple-net operating leases and ground leases. We believe excluding rent expense associated with triple-net operating leases and ground leases provides useful information to analysts, lenders, financial institutions, and investors when valuing us, as well as comparing our results to other gaming companies, without regard to differences in capital structure and leasing arrangements since the operations of other gaming companies may or may not include triple-net operating leases or ground leases. 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 generally accepted accounting principles. 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.
The following table presents a reconciliation of net income (loss) attributable to MGM Resorts International to Adjusted EBITDAR:
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
September 30,
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
(In thousands)
|
|
Net income (loss) attributable to MGM Resorts International
|
$
|
(534,731
|
)
|
|
$
|
(37,133
|
)
|
|
$
|
(585,119
|
)
|
|
$
|
37,569
|
|
Plus: Net income (loss) attributable to noncontrolling interests
|
|
(67,240
|
)
|
|
|
43,237
|
|
|
|
(278,820
|
)
|
|
|
110,861
|
|
Net income (loss)
|
|
(601,971
|
)
|
|
|
6,104
|
|
|
|
(863,939
|
)
|
|
|
148,430
|
|
Provision (benefit) for income taxes
|
|
(76,734
|
)
|
|
|
(7,276
|
)
|
|
|
(84,668
|
)
|
|
|
75,969
|
|
Income (loss) before income taxes
|
|
(678,705
|
)
|
|
|
(1,172
|
)
|
|
|
(948,607
|
)
|
|
|
224,399
|
|
Non-operating (income) expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amounts capitalized
|
|
173,808
|
|
|
|
215,503
|
|
|
|
487,701
|
|
|
|
647,452
|
|
Non-operating items from unconsolidated affiliates
|
|
23,604
|
|
|
|
14,669
|
|
|
|
79,986
|
|
|
|
54,311
|
|
Other, net
|
|
(13,889
|
)
|
|
|
9,381
|
|
|
|
102,054
|
|
|
|
53,964
|
|
|
|
183,523
|
|
|
|
239,553
|
|
|
|
669,741
|
|
|
|
755,727
|
|
Operating income (loss)
|
|
(495,182
|
)
|
|
|
238,381
|
|
|
|
(278,866
|
)
|
|
|
980,126
|
|
Preopening and start-up expenses
|
|
11
|
|
|
|
925
|
|
|
|
51
|
|
|
|
5,091
|
|
Property transactions, net
|
|
4,116
|
|
|
|
249,858
|
|
|
|
85,440
|
|
|
|
264,424
|
|
Gain on REIT transactions, net
|
|
—
|
|
|
|
—
|
|
|
|
(1,491,945
|
)
|
|
|
—
|
|
Depreciation and amortization
|
|
294,363
|
|
|
|
322,009
|
|
|
|
911,859
|
|
|
|
973,211
|
|
CEO transition expense
|
|
—
|
|
|
|
—
|
|
|
|
44,401
|
|
|
|
—
|
|
October 1 litigation settlement
|
|
—
|
|
|
|
—
|
|
|
|
49,000
|
|
|
|
—
|
|
Restructuring
|
|
—
|
|
|
|
2,491
|
|
|
|
19,882
|
|
|
|
86,579
|
|
Triple-net operating lease and ground lease rent expense
|
|
189,602
|
|
|
|
8,024
|
|
|
|
521,087
|
|
|
|
24,309
|
|
Income from unconsolidated affiliates related to real estate ventures
|
|
(41,687
|
)
|
|
|
—
|
|
|
|
(106,756
|
)
|
|
|
—
|
|
Adjusted EBITDAR
|
$
|
(48,777
|
)
|
|
|
|
|
|
$
|
(245,847
|
)
|
|
|
|
|
Guarantor Financial Information
As of September 30, 2020, 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, 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.
36
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 guaranty 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.
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.
|
September 30,
|
|
|
December 31,
|
|
|
2020
|
|
|
2019
|
|
Balance Sheet
|
(In thousand)
|
|
Current assets
|
$
|
4,847,259
|
|
|
$
|
3,013,995
|
|
Investment in the MGP Operating Partnership
|
|
1,954,300
|
|
|
|
2,738,897
|
|
Intercompany accounts due from non-guarantor subsidiaries
|
|
86,608
|
|
|
|
40,368
|
|
MGP master lease right-of-use asset, net
|
|
6,739,073
|
|
|
|
8,479,721
|
|
Other long-term assets
|
|
12,408,304
|
|
|
|
9,477,605
|
|
MGP master lease operating lease liabilities - current
|
|
148,427
|
|
|
|
165,656
|
|
Other current liabilities
|
|
1,919,084
|
|
|
|
2,278,445
|
|
MGP master lease operating lease liabilities - noncurrent
|
|
7,224,761
|
|
|
|
8,960,267
|
|
Other long-term liabilities
|
|
15,633,034
|
|
|
|
10,858,422
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2020
|
|
Income Statement
|
|
(In thousand)
|
|
Net revenues
|
|
$
|
2,672,499
|
|
MGP master lease rent expense
|
|
|
(484,987
|
)
|
Operating income
|
|
|
194,206
|
|
Loss from continuing operations
|
|
|
(61,203
|
)
|
Net income
|
|
|
40,134
|
|
Net income attributable to MGM Resorts International
|
|
|
40,134
|
|
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 $1.2 billion in the nine months ended September 30, 2020 compared to cash provided by operating activities of $1.4 billion in the nine months ended September 30, 2019. Operating cash flows were significantly negatively impacted by the temporary suspension of our operations, travel restrictions to Macau and other operational restrictions resulting from the COVID-19 pandemic, as discussed above, and triple-net operating lease rent payments, partially offset by an increase in distributions from unconsolidated affiliates primarily received from the MGP BREIT Venture and a decrease in cash paid for interest, as discussed in “Non-operating Results”. In addition to the decrease in our operating results across all properties, the current year period was negatively affected by a change in working capital primarily related to non-gaming deposits, gaming taxes and other gaming liabilities, and payroll related liabilities. The prior year period was also negatively affected by a change in working capital, primarily related to gaming deposits.
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.
37
Cash provided by investing activities was $2.3 billion in the nine months ended September 30, 2020 compared to cash used in investing activities of $1.0 billion in the nine months ended September 30, 2019. The change was due primarily to $2.5 billion in net cash proceeds from the sale of the real estate of Mandalay Bay and MGM Grand Las Vegas in the current year compared to an outflow of $536 million for the Empire City acquisition in the prior year and a decrease of $305 million in capital expenditures, partially offset by a $36 million decrease in distributions from unconsolidated affiliates. In the current year period, distributions from unconsolidated affiliates included $51 million related to our share of a distribution received from CityCenter. In the prior year period, distributions from unconsolidated affiliates included $90 million related to our share of a distribution received from CityCenter. The decrease in capital expenditures primarily reflects our efforts to reduce or defer planned domestic capital expenditures as we mitigate the impact of the COVID-19 pandemic on our liquidity and the substantial completion of our MGM Springfield development project, the rebranding at Park MGM, and the expansion of the convention center at MGM Grand Las Vegas in the prior year, as discussed in further detail below.
Capital Expenditures
We made capital expenditures of $178 million in the nine months ended September 30, 2020, of which $77 million related to MGM China. Capital expenditures at MGM China included $67 million primarily related to construction close-out and projects at MGM Cotai and $10 million related to projects at MGM Macau. Capital expenditures at our Las Vegas Strip Resorts, Regional Operations and corporate entities of $101 million included expenditures relating to information technology, health and safety initiatives, and various room, restaurant, and entertainment venue remodels.
We made capital expenditures of $483 million in the nine months ended September 30, 2019, of which $83 million related to MGM China. Capital expenditures at MGM China included $63 million related to projects at MGM Cotai and $20 million related to projects at MGM Macau. Capital expenditures at our Las Vegas Strip Resorts, Regional Operations and corporate entities of $400 million included $43 million related to the construction of MGM Springfield, $43 million related to the Park MGM rebranding project, as well as expenditures relating to information technology, the expansion of the convention center at MGM Grand Las Vegas and various room, restaurant, and entertainment venue remodels.
Financing activities. Cash provided by financing activities was $1.2 billion in the nine months ended September 30, 2020 compared to cash used in financing activities of $620 million in the nine months ended September 30, 2019. In the nine months ended September 30, 2020, we received net proceeds from the incurrence of the bridge loan facility in connection with the MGP BREIT Venture Transaction of $1.3 billion, net proceeds of $525 million from MGP’s Class A share issuances, net debt borrowings of $132 million, as further discussed below, repurchased $354 million of our common stock, distributed $220 million to noncontrolling interest owners, and paid $76 million in dividends to our shareholders. In comparison, in the prior year period, we repaid net debt of $221 million, had net proceeds from MGP’s issuance of Class A shares of $700 million, repurchased $639 million of our common stock, distributed $172 million to noncontrolling interest owners, and paid $205 million in dividends to our shareholders.
Borrowings and Repayments of Long-term Debt
During the nine months ended September 30, 2020, we had net proceeds from the incurrence of the bridge loan facility in connection with the MGP BREIT Venture Transaction of $1.3 billion and net debt borrowings of $132 million, which consisted of our net borrowings of $550 million on our senior credit facility, our issuance of $750 million of 6.75% senior notes, the Operating Partnership’s issuance of $800 million of 4.625% senior notes, and MGM China’s issuance of $500 million of 5.25% senior notes, partially offset by the tender of $750 million of our senior notes and corresponding $97 million of tender offer costs, the net repayment of $13 million on MGM China’s credit facility, and the net repayment of $1.6 billion on the Operating Partnership's senior credit facility consisting of the repayment of $1.3 billion of its term loan B facility in full using the proceeds of the $1.3 billion bridge loan facility, which was then assumed by the MGP BREIT Venture the repayment of its $399 million term loan A facility in full using the net proceeds from MGP’s settlement of forward equity agreements, offset by a net draw of $100 million on its revolving credit facility.
In March 2020, with certain of the proceeds from the MGP BREIT Venture Transaction, we completed cash tender offers for an aggregate amount of $750 million of our senior notes, comprised of $325 million principal amount of our outstanding 5.75% senior notes due 2025, $100 million principal amount of our outstanding 4.625% senior notes due 2026, and $325 million principal amount of our outstanding 5.5% senior notes due 2027.
In May 2020, we issued $750 million in aggregate principal amount of 6.750% senior notes due 2025. The proceeds were used to further increase our liquidity position.
In June 2020, the Operating Partnership issued $800 million in aggregate principal amount of 4.625% senior notes due 2025. The proceeds were used to repay borrowings on the Operating Partnership’s senior credit facility, which were used to fund the redemption of $700 million of Operating Partnership units by the Operating Partnership for cash.
38
In June 2020, MGM China issued $500 million in aggregate principal amount of 5.25% senior notes due 2025. The proceeds were used to partially repay amounts outstanding under the MGM China credit facility and for general corporate purposes.
During the nine months ended September 30, 2019, we repaid net debt of $221 million which consisted of the repayment of our $850 million 8.625% notes due 2019, the repayment of an aggregate $872 million of our senior notes pursuant to cash tender offers, $1.7 billion of net repayments on the previous MGM China senior secured credit facility, and $567 million of net repayments on the Operating Partnership’s senior credit facility, partially offset by our issuance of $1.0 billion of senior notes, the Operating Partnership’s issuance of $750 million of senior notes, MGM China’s issuance of $1.5 billion of senior notes, and $510 million of net borrowings on our senior credit facility. Additionally, in April 2019, we issued $1.0 billion in aggregate principal amount of 5.50% senior notes due 2027. We used the net proceeds from the offering to fund the purchase of $639 million in aggregate principal amount of our outstanding 6.75% senior notes due 2020 and $233 million in aggregate principal amount of our outstanding 5.25% senior notes due 2020 through our cash tender offers. In May 2019, MGM China issued $750 million in aggregate principal amount of 5.375% senior notes due 2024 and $750 million in aggregate principal amount of 5.875% senior notes due 2026 and used the proceeds to permanently repay approximately $1.0 billion on its term loan facility with the remainder used to pay down its revolving credit facility. In August 2019, MGM China entered into a new $1.25 billion senior unsecured revolving credit facility, on which it drew $776 million and used the proceeds to fully repay the borrowings outstanding under its previous senior secured credit facility. The proceeds from the Operating Partnership’s issuance of $750 million 5.75% senior notes due 2027 along with the proceeds from MGP’s Class A share issuance were primarily used to finance MGP’s acquisition of the real property associated with Empire City, finance the Park MGM transaction, and repay amounts drawn under the Operating Partnership’s revolving credit facility. The draws under our senior credit facility were primarily used to repay our senior notes due 2019, partially finance our acquisition of Empire City, pay dividends, and repurchase shares of our common stock. Additionally, we paid $63 million of debt issuance costs related to the issuance of the Operating Partnership’s senior notes, our senior notes, and MGM China’s senior notes.
Dividends, Distributions to Noncontrolling Interest Owners and Share Repurchases
During the nine months ended September 30, 2020, we repurchased and retired $354 million of our common stock pursuant to our current $2.0 billion stock repurchase plan. During the nine months ended September 30, 2019, we repurchased and retired $639 million of our common stock pursuant to our $2.0 billion stock repurchase plan. The remaining availability under our $2.0 billion stock repurchase program was approximately $4 million as of September 30, 2020, and the remaining availability under the $3.0 billion stock repurchase program was $3.0 billion as of September 30, 2020.
In March 2020, we paid a dividend of $0.15 per share, and in June 2020 and September 2020, we paid dividends of $0.0025 per share, totaling $76 million paid during the nine months ended September 30, 2020. In March 2019, June 2019 and September 2019, we paid dividends of $0.13 per share, totaling $205 million paid during the nine months ended September 30, 2019.
In June 2020, MGM China paid the final dividend for 2019 of $41 million, of which we received $23 million and noncontrolling interests received $18 million. In June 2019, MGM China paid the final dividend for 2018 of $16 million, of which we received $9 million and noncontrolling interests received $7 million. In August 2019, MGM China paid an interim dividend for 2019 of $46 million, of which we received $25 million and noncontrolling interests received $20 million.
The Operating Partnership paid the following distributions to its partnership unit holders during the nine months ended September 30, 2020 and 2019:
|
•
|
$454 million of distributions paid in 2020, of which we received $274 million and MGP received $180 million, which MGP concurrently paid as a dividend to its Class A shareholders; and
|
|
•
|
$395 million of distributions paid in 2019, of which we received $278 million and MGP received $117 million, which MGP concurrently paid as a dividend to its Class A shareholders.
|
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.
39
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, results of operations, and financial conditions. During this time, we have remained committed to managing our expenses to strengthen our liquidity position. As of September 30, 2020, we had cash and cash equivalents of $4.6 billion, of which MGM China held $396 million and the Operating Partnership held $655 million. In addition to our cash and cash equivalent balance, we 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 56.7% economic interest in MGP. We have also entered into an agreement with MGP to redeem for cash for up to $1.4 billion of MGP’s operating partnership units held by us, under which we have $700 million remaining.
At September 30, 2020, we had $11.5 billion in principal amount of indebtedness, including $550 million outstanding under our $1.5 billion revolving credit facility, $100 million outstanding under the $1.35 billion Operating Partnership revolving credit facility, and $654 million outstanding under the $1.25 billion MGM China revolving credit facility. No amounts were drawn on the $400 million MGM China second revolving credit facility. We have no debt maturing prior to 2022. Subsequent to September 30, 2020, in October 2020, we issued $750 million in aggregate principal amount of 4.75% senior notes due 2028. The proceeds will be used for general corporate purposes, which included repaying the $550 million outstanding under our senior credit facility in full.
We have planned capital expenditures expected over the remainder of the year of approximately $60 million to $70 million domestically and approximately $35 million to $45 million at MGM China. We also plan to invest approximately $145 million in our venture, BetMGM, LLC, over the next twelve months. As of September 30, 2020, our expected cash interest payments over the next twelve months are approximately $335 million to $340 million, excluding MGP and MGM China, and approximately $680 million to $690 million on a consolidated basis. We are also required as of September 30, 2020 to make annual rent payments of $828 million under the master lease with MGP, annual rent payments of $245 million under the lease with Bellagio BREIT Venture, and annual rent payments of $292 million under the lease with MGP BREIT Venture, which leases are also subject to annual escalators.
In April 2020, we amended our credit facility to provide us with certain relief from the effects of the COVID-19 pandemic. The amendment provides us a waiver of the financial maintenance covenants for the period beginning with the quarter ending June 30, 2020 through the earlier of (x) the date we deliver to the administrative agent a compliance certificate with respect to the quarter ending June 30, 2021 and (y) the date we deliver to the administrative agent an irrevocable notice terminating the covenant relief period (such period, the “covenant relief period”). In connection with the amendment, we pledged the Operating Partnership units held by loan parties to the lenders as collateral. We also agreed to certain limitations including, among other things, further restricting our ability to incur debt and liens, make restricted payments, make investments and prepay subordinated debt. In addition, in connection with the amendment, we agreed to a liquidity test that requires our borrower group (as defined in the credit agreement) to maintain a minimum liquidity level of not less than $600 million (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 April 2020, MGM China entered into an amendment to its credit agreement, which provided for a waiver of its maximum leverage ratio through the second quarter of 2021, and a waiver of its minimum interest coverage ratio beginning in the second quarter of 2020 through the second quarter of 2021. In October 2020, MGM China further 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 2021. Also, in October 2020, MGM China entered into an amendment of its second credit facility which provided for a waiver of its maximum leverage ratio and its minimum interest coverage ratio through the fourth quarter of 2021.
In October 2020, the Operating Partnership paid $148 million of distributions to its partnership unit holders, of which we received $84 million and MGP received $64 million, which MGP concurrently paid as a dividend to its Class A shareholders.
On October 29, 2020, our Board of Directors approved a quarterly dividend of $0.0025 per share. The dividend will be payable on December 15, 2020 to holders of record on December 10, 2020. 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 will continue to impact our business, financial condition and results of operations. 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. While we believe our strong liquidity position, valuable real estate assets and aggressive cost reduction initiatives will enable us to fund our current obligations for the foreseeable future, COVID-19 has resulted in significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future. We continue to monitor the rapidly 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.
40
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, 2019. There have been no significant changes in our critical accounting policies and estimates since year end.
In response to the COVID-19 pandemic and the corresponding significant economic and operational disruption discussed elsewhere, we considered whether circumstances triggered a quantitative review of our goodwill and indefinite-lived intangible assets. We considered the results of our 2019 impairment analysis in which we concluded, for those tested qualitatively, that it was more likely than not that the fair values of our reporting units and indefinite-lived intangibles exceeded their carrying values by a substantial margin and, for those tested quantitatively, that the fair value exceeded carrying value by a substantial margin. We also considered our current market capitalization which indicates a decline in fair values since the 2019 impairment analysis, however, the carrying values of our reporting units continue to be less than the corresponding implied fair values. As of September 30, 2020, we continue to conclude that it is more-likely-than-not that the fair values continue to exceed carrying values and, accordingly, an interim quantitative impairment review of our goodwill and indefinite-lived intangible assets was not triggered.
However, management makes significant judgments and estimates as part of these analyses. If our properties operations do not return to normal operations in the forecasted time period, or if such properties will be required to close again due to the COVID-19 pandemic, it could cause carrying values of the intangibles to exceed their fair values in future periods, potentially resulting in an impairment charge. In addition, the determination of multiples, capitalization rates and the discount rates used in the impairment tests are highly judgmental and dependent in large part on expectations of future market conditions.
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 September 30, 2020, variable rate borrowings represented approximately 10% 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
|
|
|
September 30,
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
Thereafter
|
|
|
Total
|
|
|
2020
|
|
|
(In millions)
|
|
Fixed-rate
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,000
|
|
|
$
|
1,250
|
|
|
$
|
1,800
|
|
|
$
|
6,151
|
|
|
$
|
10,201
|
|
|
$
|
10,556
|
|
Average interest rate
|
N/A
|
|
|
N/A
|
|
|
|
7.8
|
%
|
|
|
6.0
|
%
|
|
|
5.5
|
%
|
|
|
5.4
|
%
|
|
|
5.7
|
%
|
|
|
|
|
Variable rate
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100
|
|
|
$
|
654
|
|
|
$
|
550
|
|
|
$
|
1,304
|
|
|
$
|
1,304
|
|
Average interest rate
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
|
1.9
|
%
|
|
|
3.2
|
%
|
|
|
2.8
|
%
|
|
|
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 September 30, 2020, 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 $20 million.
41
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 and execute on ongoing and future strategic initiatives, including the development of an integrated resort in Japan and investments we make in 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 deliver on our MGM 2020 Plan, any benefits we expect to receive from the CARES Act, and amounts projected to be realized as deferred tax assets. The foregoing is not a complete list of all forward-looking statements we make.
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 materially impacted our business, financial results and liquidity, and such impact could worsen and last for an unknown period of time;
|
|
•
|
although our properties have re-opened 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 the re-opened 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;
|
|
•
|
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;
|
|
•
|
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;
|
|
•
|
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;
|
42
|
•
|
the possibility that we may not realize all of the anticipated benefits of our MGM 2020 Plan or our asset light strategy;
|
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the fact that our ability to pay ongoing regular dividends is subject to the discretion of our board of directors and certain other limitations;
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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;
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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;
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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;
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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;
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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.
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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.