LAS VEGAS -- MGM Resorts International (NYSE: MGM) today reported improved financial results for the fourth quarter ended December 31, 2011. Loss per share was $0.23 compared to a loss of $0.29 per share in the prior year fourth quarter. The current quarter results include MGM China Holdings, Limited (“MGM China”), which the Company began consolidating as of June 3, 2011.
View full earnings release complete with tables.
Key results for the fourth quarter of 2011 included the following:
- Consolidated net revenue was $2.3 billion; excluding MGM China, net revenue increased 7% compared to the prior year quarter;
- Rooms revenue at wholly owned domestic resorts increased 10% with a 13% increase in REVPAR(1) at the Company’s Las Vegas Strip resorts;
- Consolidated operating income was $91 million compared to $107 million in the fourth quarter of 2010;
- Adjusted Property EBITDA(2) was $482 million in the 2011 quarter compared to $294 million in the 2010 quarter;
- The Company’s wholly owned domestic resorts earned Adjusted Property EBITDA of $319 million, an 18% increase compared to the prior year quarter;
- MGM China’s Adjusted Property EBITDA was $174 million, a 23% increase compared to the prior year quarter; and
- CityCenter’s Adjusted Property EBITDA related to resort operations was $58 million, a 62% increase compared to the prior year quarter.
“2011 was a year in which we achieved many goals: operationally, strategically, and financially. Operationally, we enhanced our customer experience through targeted reinvestment in our properties and improved relationships through our M life customer loyalty program. Strategically, we acquired a majority interest in MGM China and began expanding our brand presence in key markets throughout the world, particularly Asia. Financially, our revenues and margins have improved year over year increasing our cash flow and strengthening our financial profile,” said Jim Murren, MGM Resorts International Chairman and CEO. “Going forward we expect to build off of these strategies to grow our company and maximize shareholder value.”
Certain Items Affecting Fourth Quarter Results
The current quarter tax adjustments include a net $44 million, or $0.09 per share, increase in income tax benefit resulting from a decrease in the Macau net deferred tax liability, partially offset by an increase in the Michigan net deferred tax liability. Tax adjustments in the prior year quarter include a $32 million, or $0.07 per share, reduction in the Company’s income tax benefit as a result of providing reserves for certain state-level deferred tax assets.
In the current quarter, the Company recorded an impairment charge of $62 million ($0.07 per share, net of tax) related to its investment in Borgata and an impairment charge of $23 million ($0.03 per share, net of tax) related to its investment in Silver Legacy.
Wholly Owned Domestic Resorts
Casino revenue related to wholly owned domestic resorts increased 8% compared to the prior year quarter. The overall table games hold percentage in the fourth quarter of 2011 was near the high end of the Company’s normal range of 19% to 23% and was near the low end of the Company’s range in the prior year quarter. Slots revenue increased 3% compared to the prior year quarter.
Rooms revenue increased 10% with Las Vegas Strip REVPAR up 13%. The following table shows key hotel statistics for the Company’s Las Vegas Strip resorts:
Operating income for the Company’s wholly owned domestic resorts for the fourth quarter of 2011 was $186 million, an increase of 36% compared to the fourth quarter of 2010.
MGM China
On February 22, 2012, MGM China’s Board of Directors announced a dividend of approximately $400 million, which will be paid to shareholders of record as of March 9, 2012 and distributed on or about March 20, 2012. MGM Resorts International will receive approximately $204 million, representing 51% of such dividend.
The schedules accompanying this release provide pro forma information for MGM China, presented for the three and twelve month periods ended December 31, 2011 and 2010, as if the acquisition of the Company’s controlling interest occurred as of January 1, 2010. The following are the key fourth quarter results for MGM China on a pro forma basis:
- MGM China earned net revenue of $719 million for the fourth quarter of 2011 compared to $570 million in the fourth quarter of 2010. The increase was driven by year-over-year increases in volume for VIP table games, main floor table games, and slots of 29%, 13% and 35%, respectively. VIP table games hold percentage was slightly above our expected range of 2.7% to 3.0% in the current and prior year periods; and
- Adjusted Property EBITDA increased 23% to $174 million.
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.
Income (Loss) from Unconsolidated Affiliates
Results for CityCenter Holdings, LLC for the fourth quarter of 2011 include the following (see schedules accompanying this release for further detail on CityCenter’s fourth quarter results):
- Net revenue from resort operations increased to $265 million compared to $231 million in the prior year quarter;
- Adjusted Property EBITDA from resort operations was $58 million, an increase of 62% compared to the prior year quarter;
- Aria’s table games hold percentage was approximately 240 basis points higher in the current year quarter compared to the prior year quarter; and
- Aria’s occupancy percentage was 82% and its ADR was $207, resulting in REVPAR of $169, a 10% increase compared to the prior year fourth quarter.
Full Year 2011 Results
Net revenue for 2011 was $7.8 billion, which included $1.5 billion of net revenue related to MGM China. Excluding MGM China, net revenue increased 4% for the year compared to 2010. Las Vegas Strip REVPAR increased 13% for the full year compared to 2010. Adjusted Property EBITDA from wholly owned domestic resorts increased 11% to $1.3 billion for 2011 compared to $1.2 billion in 2010. MGM China’s Adjusted Property EBITDA was $360 million for the period from June 3, 2011 through December 31, 2011.
MGM China reported record results for 2011 with net revenues of $2.6 billion and Adjusted EBITDA of $630 million, an increase of 66% and 76% year over year, respectively.
CityCenter reported year over year operating improvement with net revenue from resort operations of $1.1 billion and Adjusted Property EBITDA related to resort operations of $236 million.
Diluted earnings per share attributable to MGM Resorts International for 2011 was $5.62 compared to a loss per share of $3.19 in 2010.Financial Position
In December 2011, the Company borrowed an additional $778 million under its senior credit facility to increase its capacity for issuing additional secured indebtedness. As a result, the Company had a higher than normal cash balance at December 31, 2011 of $1.9 billion, which also included approximately $720 million of cash and cash equivalents related to MGM China.
At December 31, 2011, the Company had approximately $13.6 billion of indebtedness (with a carrying value of $13.5 billion), including $3.3 billion of borrowings outstanding under its senior credit facility. Giving effect to the repayment in January 2012 of the $778 million additional borrowing noted above, the Company would have had approximately $957 million of available borrowing capacity under its senior credit facility at December 31, 2011.
In January 2012, the Company issued $850 million of 8.625% senior unsecured notes due 2019, for net proceeds to the Company of approximately $836 million.
As previously announced, the Company is seeking amendments to its aggregate $3.5 billion senior credit facility to, among other things, extend the maturity of loans held by consenting lenders from February 21, 2014 to February 23, 2015. Lenders holding approximately 62% or $2.2 billion aggregate principal amount of the credit facility have elected to extend the maturity dates of their commitments. Extending lenders will receive a 20% reduction of their previous credit exposures, unless waived by such lenders. In addition, extending lenders’ loans will be subject to a pricing grid that decreases the LIBOR spread by as much as 250 basis points based upon collateral coverage levels and the LIBOR floor on extended loans would be reduced from 200 basis points to 100 basis points. The closing of the amendment is subject to customary closing conditions and is expected to occur by the end of this month.
“We remain committed to improving our balance sheet and maximizing free cash flow as evidenced by our recent bond issuances, the commitments to our senior credit facility amend and extend transaction, and today’s dividend announcement from MGM China,” said Dan D’Arrigo, MGM Resorts International Executive Vice President, CFO and Treasurer. “While we have made tremendous progress, we see further opportunities to lower our cost of capital and de-lever our balance sheet.”
Conference Call Details
MGM Resorts International will host a conference call at 11:00 a.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 1-877-355-2280 for domestic callers and 1-706-758-3659 for international callers. The conference call access code is 43802425. A replay of the call will be available through Wednesday, February 29, 2012. The replay may be accessed by dialing 1-855-859-2056 or 1-404-537-3406. The replay access code is 43802425. 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.
Reconciliations of GAAP net income (loss) to Adjusted EBITDA and GAAP operating income (Loss) to Adjusted Property EBITDA are included in the financial schedules in this release.
