MGM MGM Resorts International

LAS VEGAS, Aug. 3 /PRNewswire-FirstCall/ -- MGM Resorts International (NYSE: MGM) today announced its financial results for the second quarter of 2010. The Company recorded a second quarter diluted loss per share of $2.00 compared to a loss of $0.60 per share in the prior year second quarter. The current year results include a pre-tax non-cash charge of approximately $1.12 billion (or $1.64 per share, net of tax) relating to an impairment of the Company’s investment in the CityCenter joint venture and a pre-tax non-cash charge of approximately $29 million (or $0.04 per share, net of tax) representing the Company’s share of an impairment of CityCenter’s residential inventory.  The prior year results include non-cash impairment charges of $188 million (or $0.34 per share, net of tax), primarily related to the Company’s investment in a convertible note, and losses on the retirement of long-term debt of $58 million (an impact of $0.11 per share, net of tax).

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

Key results for the quarter included the following:

• Net revenue improved sequentially to $1.54 billion from $1.46 billion in the first quarter of 2010;
• Las Vegas Strip REVPAR(1) decreased 2%, an improvement compared to an 8% decrease in the first quarter of 2010, with Bellagio and MGM Grand reporting increases in REVPAR for the quarter;
• Adjusted Property EBITDA(2) attributable to wholly-owned operations was $305 million, up from $267 million in the first quarter; and
• CityCenter earned Adjusted EBITDA of $9 million in the second quarter, and was negatively affected by a low table games hold percentage at Aria.

“The Las Vegas operating environment remains difficult, but as we expected, we are seeing a gradual recovery.  Our Adjusted EBITDA improved compared to the first quarter, despite low hold percentages,” said Jim Murren, MGM Resorts International Chairman and CEO.  “CityCenter is seeing improved business activity.  Aria is gaining brand awareness, which led to a 17 percentage point sequential occupancy increase in the quarter and higher non-casino revenues.”

Detailed Discussion of Second Quarter Operating Results

Net revenue for the second quarter of 2010 was $1.54 billion. Excluding reimbursed costs revenue mainly related to the Company’s management of CityCenter, the Company earned net revenue of $1.45 billion, a decrease of 2% from the same period in 2009.  Reimbursed costs revenue represents reimbursement of payroll and other costs incurred by the Company in connection with the provision of management services.  

Total casino revenue decreased 6% compared to the prior year quarter, with slots revenue down approximately 3%.  The Company’s table games volume, excluding baccarat, decreased 7% in the quarter, but baccarat volume was up 10% compared to the prior year quarter.  The overall table games hold percentage was lower in the 2010 second quarter compared to the prior year quarter and near the low end of the Company’s normal 18% to 22% range.  Lower than normal table games hold percentage at the Company’s Las Vegas Strip resorts resulted in an impact to Adjusted EBITDA of approximately $20 million. Bellagio, The Mirage, and Mandalay Bay were affected by the lower table games hold, partially offset by MGM Grand which benefited from a higher than normal table games hold percentage. These factors led to an overall decrease in table games revenue of 11% for the quarter.

“M life, our new customer loyalty program, was introduced two weeks ago at Beau Rivage and the response has been outstanding,” said Mr. Murren.  “We are very excited about the opportunity M life presents to our Company, especially when coupled with the superior assets in our portfolio.”

Rooms revenue decreased 1% with Las Vegas Strip REVPAR down by 2%.  The following table shows key hotel statistics for the Company’s Las Vegas Strip resorts:

“We maintained strong occupancy and improved our convention mix over the prior year second quarter, leading to sequential improvement in Las Vegas Strip REVPAR,” said Mr. Murren.  “We expect continued progress in our business trends driven by strong forward convention bookings.”

Operating loss for the second quarter of 2010 was $1.0 billion (which included the $1.12 billion impairment of the Company’s investment in CityCenter and the Company’s $29 million share of the CityCenter residential impairment charge) compared to operating income of $131 million in the 2009 quarter.  Excluding the impairment charges related to CityCenter, the Company would have earned operating income of $102 million in the second quarter of 2010.

The Company reported Adjusted Property EBITDA attributable to wholly-owned operations of $305 million in the 2010 quarter, a decrease of 16% year-over-year.  Adjusted Property EBITDA, which includes the impact from unconsolidated affiliates, was $279 million in the 2010 quarter and was negatively impacted by $56 million in losses from CityCenter results.  The Company reported Adjusted EBITDA, which includes corporate expense, of $243 million in the 2010 quarter.

Income from Unconsolidated Affiliates

The Company reported a loss from unconsolidated affiliates of $26 million in the second quarter of 2010 compared to income of $4 million in the prior year second quarter. The loss in the second quarter of 2010 was attributable to the Company’s 50% share of the operating loss at CityCenter.

Results for CityCenter for the second quarter of 2010 included the following (see schedules accompanying this release for further detail on CityCenter Holdings, LLC second quarter and year-to-date 2010 results):

• CityCenter reported net revenues of $401 million in the second quarter, which included $218 million related to residential operations, of which $56 million related to forfeited residential deposits;
• CityCenter’s operating loss of $128 million in the second quarter of 2010 included an approximately $57 million non-cash impairment charge related to its residential inventory and a loss on sales of residential units of $17 million;
• Aria reported net revenue of $157 million and an Adjusted EBITDA loss of $17 million.  Aria’s results were negatively affected by a low table games hold percentage,  which reduced Adjusted EBITDA by approximately $24 million; and
• Aria’s occupancy percentage was 80% and average daily rates were $178, resulting in significant REVPAR improvements from the first quarter of 2010.

The Company recorded its share of CityCenter’s results, including adjustments for recognition of basis differences as follows ((expense)/income):

The operating loss related to CityCenter was partially offset by the Company’s share of operating income at MGM Macau, which earned operating income of $40 million in the second quarter of 2010, including depreciation expense of $21 million, a significant improvement compared to an operating loss of $8 million in the 2009 second quarter, which included depreciation expense of $22 million.

Financial Position

At June 30, 2010, the Company had approximately $13.3 billion of indebtedness (with a carrying value of $13.0 billion), including $3.2 billion of borrowings outstanding under its senior credit facility.  The Company has approximately $1.5 billion in available borrowing capacity under its revolver and approximately $570 million of invested cash available for future liquidity needs.  The Company repurchased $211 million principal amount of senior notes with near term maturities during the second quarter, resulting in cash interest savings of approximately $5 million.

“We have made tremendous progress in addressing our balance sheet and liquidity needs by amending and negotiating the extension of our credit facility, accessing the secured bond market, and in April successfully issuing $1.15 billion in convertible notes.  These transactions have provided over $2 billion of available liquidity,” said Dan D’Arrigo, MGM Resorts International Executive Vice President and CFO. “Additionally, our Macau bank refinancing was an overwhelming success. MGM Macau now has a solid long-term capital structure and our focus is on advancing our potential IPO transaction.”

Conference Call Details

MGM Resorts International will hold a conference call to discuss its second quarter results at 11:00 a.m. Eastern Daylight Time today. The call will be accessible via the Internet through www.mgmresorts.com and http://www.videonewswire.com/event.asp?id=70960 or by calling 1-800-526-8531 for Domestic callers and 1-706-758-3659 for International callers.  The conference call ID # is 87731569.  A replay of the call will be available through Tuesday, August 10, 2010. The replay may be accessed by dialing 1-800-642-1687 or 1-706-645-9291. The replay access code is 87731569. The call will also be archived at www.mgmresorts.com and at http://www.videonewswire.com/event.asp?id=70960.

(1)  REVPAR is hotel Revenue per Available Room.

(2)  “Adjusted EBITDA” is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, and property transactions, net.  “Adjusted Property EBITDA” is Adjusted EBITDA before corporate expense and stock compensation expense.  Adjusted EBITDA information is presented solely as a supplemental disclosure to reported GAAP measures because management believes these measures are 1) widely used measures of operating performance in the gaming industry, and 2) a principal basis for valuation of gaming companies. 

Management believes that while items excluded from Adjusted EBITDA and Adjusted Property EBITDA may be recurring in nature and should not be disregarded in evaluation of the Company’s earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods being presented. Also, management believes excluded items may not relate specifically to current operating trends or be indicative of future results. For example, pre-opening and start-up expenses will be significantly different in periods when the Company is developing and constructing a major expansion project and will depend on where the current period lies within the development cycle, as well as the size and scope of the project(s). Property transactions, net includes normal recurring disposals, gains and losses on sales of assets related to specific assets within our resorts, but also includes gains or losses on sales of an entire operating resort or a group of resorts and impairment charges on entire asset groups or investments in unconsolidated affiliates, which may not be comparable period over period.

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

Adjusted EBITDA or Adjusted Property EBITDA should not be construed as an alternative to operating income, as an indicator of the Company’s operating performance; or as an alternative to cash flows from operating activities, as a measure of liquidity; or net income as an indicator of the Company’s performance; or as any other measure determined in accordance with generally accepted accounting principles.  The Company has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in Adjusted EBITDA.  Also, other companies in the gaming and hospitality industries that report Adjusted EBITDA information may calculate Adjusted EBITDA in a different manner than the Company.  Reconciliations of Adjusted EBITDA to net income (loss) and of operating income to Adjusted Property EBITDA are included in the financial schedules accompanying this release.

MGM Resorts International (NYSE: MGM), one of the world's leading and most respected companies with significant holdings in gaming, hospitality and entertainment, owns and operates 15 properties located in Nevada, Mississippi and Michigan, and has 50% investments in four other properties in Nevada, Illinois and Macau.  The Company's 50% economic interest in Borgata Hotel Casino Spa in Atlantic City, which is held in trust, is currently offered for sale. CityCenter, an unprecedented urban resort destination on the Las Vegas Strip featuring its centerpiece ARIA Resort & Casino, is a joint venture between MGM Resorts International and Infinity World Development Corp, a subsidiary of Dubai World.  Other major holdings include Bellagio, MGM Grand, Mandalay Bay, The Mirage, Monte Carlo, New York-New York, Luxor, Excalibur, and Circus Circus.  MGM Hospitality has entered into management agreements for casino and non-casino resorts throughout the world.  MGM Resorts International supports responsible gaming and has implemented the American Gaming Association's Code of Conduct for Responsible Gaming at its properties. MGM Resorts International has received numerous awards and recognitions for its industry-leading Diversity Initiative, its community philanthropy programs and the Company’s commitment to sustainable development and operations.  For more information about MGM Resorts International, please visit the Company's Web site at http://www.mgmresorts.com.

Statements in this release which are not historical facts are “forward looking” statements and “safe harbor statements” within the meaning of Section 21E of the U.S. the Securities Exchange Act of 1934, as amended, and other related laws that involve risks and/or uncertainties, including risks and/or uncertainties as described in the company’s public filings with the Securities and Exchange Commission. We have based those forward-looking statements on management’s current expectations and assumptions and not on historical facts. Examples of these statements include, but are not limited to, statements regarding the Company’s expectations with regard to convention business in 2010 and 2011, and reporting the second quarter 2010 results described in this release. These forward-looking statements involve a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated in such forward-looking statements include effects of economic conditions and market conditions in the markets in which we operate and competition with other destination travel locations throughout the United States and the world.  In providing forward-looking statements, the Company is not undertaking any duty or obligation to update these statements publicly as a result of new information, future events or otherwise, except as required by law.