MGM MGM Resorts International

LAS VEGAS, Aug. 8, 2011 /PRNewswire/ -- MGM Resorts International (NYSE: MGM) today reported financial results for the second quarter ended June 30, 2011.  Diluted earnings per share attributable to MGM Resorts International was $6.22 per share compared to a loss of $2.00 per share in the prior year second quarter. The current year results include a gain of $3.5 billion (or $6.30 per share) as a result of acquiring a controlling interest in MGM China Holdings Limited (“MGM China”), which the Company began consolidating as of June 3, 2011. The prior year results include a 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.

Key results for the 2011 second quarter included the following:

• Consolidated net revenue for the second quarter was $1.8 billion, up 17% over the prior year; the current quarter included net revenue related to MGM China for the period of consolidation (June 3, 2011 through June 30, 2011) of $193 million;
• Net revenue attributable to the Company’s wholly owned domestic resorts segment was $1.5 billion, an increase of 4% compared to the prior year quarter. Rooms revenue increased 9% with a 10% increase in REVPAR(1) at the Company’s Las Vegas Strip resorts;
• Consolidated operating income for the second quarter of 2011 was $3.7 billion compared to a $1.0 billion operating loss in the second quarter of 2010, affected by the MGM China transaction gain in the current quarter and an impairment charge related to the Company’s investment in CityCenter in the prior year quarter;  
• Adjusted EBITDA(2) was $366 million in the 2011 quarter, a 51% increase compared to $243 million in the 2010 quarter, primarily due to strong performances at the Company’s Las Vegas resorts and MGM Macau;
• The Company’s wholly owned domestic resorts segment earned Adjusted Property EBITDA of $331 million, up 7% compared to $309 million in the prior year quarter, despite a lower table games hold percentage in the current quarter and an approximately $12 million impact related to the state mandated closure of Gold Strike Tunica in May 2011;
• MGM China reported Adjusted Property EBITDA of $170 million compared to $61 million in the prior year second quarter; and
• CityCenter Adjusted Property EBITDA for resort operations increased to $64 million and was positively affected by a higher than normal table games hold percentage.

“We have shown growth in year over year cash flows throughout the first half and expect those trends will continue. We believe the foundation of the Las Vegas recovery is solid and our business is building,” said Jim Murren, MGM Resorts International Chairman and CEO. “MGM Macau had another record quarter and the acquisition of a controlling interest in MGM China marks an important step in expanding our global operations and profitability.”

Certain Items Affecting Second Quarter Results

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

The Company recognized a tax benefit during the quarter despite having positive pre-tax income as no income taxes were provided on the MGM China gain.  

Wholly Owned Domestic Resorts

Casino revenue related to wholly owned domestic resorts increased 1% compared to the prior year quarter. The overall table games hold percentage in the second quarter of 2011 was below the low end of the Company’s normal range of 19% to 23%. The overall table games hold percentage in the second quarter of 2010 was near the low end of the Company’s normal range which affected Adjusted Property EBITDA by approximately $27 million when compared to the mid point of the Company’s normal range.  Slots revenue increased 4% compared to the prior year quarter, including an increase of 7% at the Company’s Las Vegas Strip resorts.

Rooms revenue increased 9% with Las Vegas Strip REVPAR up 10%.  The following table shows key hotel statistics for the Company’s Las Vegas Strip resorts:

Adjusted Property EBITDA was $331 million in the 2011 quarter, a 7% increase compared to $309 million in the 2010 quarter.  Operating income for the second quarter of 2011 was $194 million compared to $155 million in the second quarter of 2010.  

MGM China

As previously announced, MGM China completed its initial public offering of shares on The Stock Exchange of Hong Kong Limited on June 3, 2011 and the Company acquired an additional 1% interest in MGM China, which owns the MGM Macau resort and casino. This acquisition increased the Company’s ownership interest to 51% and, as a result, the Company began consolidating MGM China as of June 3, 2011. Prior to June 3, 2011 the results of MGM Macau were accounted for under the equity method of accounting.

The acquisition of the controlling interest was accounted for as a business combination and the Company recognized 100% of the assets, liabilities, and noncontrolling interests of MGM China at fair value at the date of acquisition. The fair value of the equity interests of MGM China was determined by the IPO transaction price and equaled approximately $7.5 billion. The fair value was allocated to the assets acquired and liabilities assumed in the transaction including identifiable intangible assets and goodwill. The carrying value of the Company’s equity method investment was significantly less than its share of the fair value of MGM China at the acquisition date, resulting in the Company recognizing a $3.5 billion gain on the acquisition in current earnings.

The schedules accompanying this release provide pro forma information for MGM China, presented for the three and six month periods ended June 30, 2011 and 2010, as if the acquisition of the Company’s controlling interest occurred as of the beginning of each period presented. On a pro forma basis the following are the key results for MGM China:

• MGM China earned net revenues of $668 million for the second quarter of 2011 compared to $307 million in the second quarter of 2010, primarily due to an increase in VIP table games turnover of 110% and a 21% increase in main floor table games drop. VIP table games hold percentage was slightly above our expected range of 2.7% to 3.0% ;
• Adjusted Property EBITDA increased to $170 million, a 177% increase compared to the second quarter of 2010 and included approximately $3 million of expenses related to the branding agreement between MGM China and an entity jointly owned by the Company and Ms. Pansy Ho; and
• Depreciation and amortization expense in both the current and prior year quarter includes amortization of approximately $75 million related to intangible assets recognized in the Company’s accounting for its acquisition and resulting consolidation.

Income (Loss) from Unconsolidated Affiliates

The Company reported income from unconsolidated affiliates of $32 million in the second quarter of 2011 compared to a loss of $26 million in the prior year period. The following table summarizes information related to the Company’s income (loss) from unconsolidated affiliates:

The Company’s share of CityCenter’s operating losses in both periods includes the effect of residential inventory impairment charges, which equaled $26 million and $29 million in the three months ending June 30, 2011 and 2010, respectively.

Results for CityCenter Holdings, LLC for the second quarter of 2011 include the following (see schedules accompanying this release for further detail on CityCenter’s second quarter results):

• Net revenue from resort operations increased 50% to $275 million compared to $183 million in the prior year quarter;
• Aria’s net revenue increased 48% to $233 million;
• Aria’s Adjusted Property EBITDA was $53 million.  Aria’s hold percentage was above the high end of its normal range in the current quarter which positively impacted Adjusted Property EBITDA by approximately $18 million;
• Aria’s occupancy percentage was 90% and its ADR was $202, resulting in REVPAR of $181, a 28% increase compared to the prior year second quarter;
• Vdara earned $5 million in Adjusted Property EBITDA;
• Crystals earned $6 million in Adjusted Property EBITDA; and
• CityCenter’s residential operations recognized impairment charges of $53 million related to its residential inventory during the second quarter.

Financial Position

At June 30, 2011, the Company had approximately $922 million of cash and cash equivalents, including $417 million of cash at MGM China.  At June 30, 2011, the Company had approximately $12.8 billion of indebtedness (with a carrying value of $12.6 billion) including $2.3 billion of borrowings outstanding under the MGM Resorts senior credit facility and $591 million of borrowings outstanding on the MGM Macau credit facility.  Available borrowing capacity under the MGM Resorts senior credit facility at June 30, 2011 was approximately $1.2 billion.

On June 17, 2011, the Company issued $300 million in aggregate principal of its 4.25% convertible senior notes due 2015 to an entity owned by Ms. Pansy Ho at a premium, with proceeds to the Company of approximately $311 million.

“As a result of our increasing cash flows during the first half of the year and the consolidation of MGM China, our balance sheet is significantly stronger,” said Dan D’Arrigo, MGM Resorts International Executive Vice President and CFO.  “We remain focused on maximizing free cash flow and investment opportunities to drive future growth and de-lever our balance sheet.”

Conference Call Details

MGM Resorts International will host a conference call at 4:30 p.m. Eastern Time today which will include a brief discussion of these results followed by a question and answer period. The call will be accessible via the Internet through www.mgmresorts.com under the investors section or by calling 1-800-526-8531 for Domestic callers and 1-706-758-3659 for International callers.  The conference call access code is 82287304.  A replay of the call will be available through Monday, August 15, 2011. The replay may be accessed by dialing 1-800-642-1687 or 1-706-645-9291. The replay access code is 82287304. The call will also be archived at www.mgmresorts.com.

(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, and the gain on the MGM China transaction.  “Adjusted Property EBITDA” is Adjusted EBITDA before corporate expense and stock compensation expense related to the MGM Resorts stock option plan, which is not allocated to each property. MGM China recognizes stock compensation expense related to its stock compensation plan which is included in the calculation of Adjusted Property EBITDA for MGM China.  Adjusted EBITDA information is presented solely as a supplemental disclosure to reported GAAP measures because management believes these measures are 1) widely used measures of operating performance in the gaming industry, and 2) a principal basis for valuation of gaming companies. 

Management believes that while items excluded from Adjusted EBITDA and Adjusted Property EBITDA may be recurring in nature and should not be disregarded in evaluation of the Company’s earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods being presented. Also, management believes excluded items may not relate specifically to current operating trends or be indicative of future results. For example, 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 the Company’s resorts, but also includes gains or losses on sales of an entire operating resort or a group of resorts and impairment charges on entire asset groups or investments in unconsolidated affiliates, which may not be comparable period over period.

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

MGM Resorts International (NYSE: MGM) is one of the world's leading global hospitality companies, operating a peerless portfolio of destination resort brands, including Bellagio, MGM Grand, Mandalay Bay and The Mirage. In addition to its 51% interest in MGM China Holdings Limited, which owns the MGM Macau resort and casino, the Company has significant holdings in gaming, hospitality and entertainment, owns and operates 15 properties located in Nevada, Mississippi and Michigan, and has 50% investments in three other properties in Nevada and Illinois. One of those investments is CityCenter, an unprecedented urban resort destination on the Las Vegas Strip featuring its centerpiece ARIA Resort & Casino. Leveraging MGM Resorts' unmatched amenities, the M life loyalty program delivers one-of-a-kind experiences, insider privileges and personalized rewards for guests at the Company's renowned properties nationwide. Through its hospitality management subsidiary, the Company holds a growing number of development and management agreements for casino and non-casino resort projects around the world. MGM Resorts International supports responsible gaming and has implemented the American Gaming Association's Code of Conduct for Responsible Gaming at its gaming properties. The Company has been honored with 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, visit the Company's Web site at 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. 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 future operating results, liquidity to pay future indebtedness and potential economic recoveries. 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.