Diluted earnings per share of $0.93 compared to $0.12 in the prior year quarter Net income attributable to MGM Resorts of $536 million, a 706% increase over the prior year quarter Domestic resorts Adjusted Property EBITDA up 31% on a same-store basis
LAS VEGAS, Nov. 7, 2016 — MGM Resorts International (NYSE: MGM) ("MGM Resorts" or the "Company") today reported financial results for the quarter ended September 30, 2016.
Key highlights include:
- Diluted earnings per share for the third quarter of 2016 of $0.93, including $0.60 related to a $430 million gain on Borgata acquisition and a $0.20 charge related to the NV Energy exit, compared to diluted earnings per share of $0.12 in the prior year quarter;
- Net revenues of $1.9 billion at the Company's domestic resorts, a 16% increase over the prior year quarter, and an 8% increase on a same-store basis, excluding contributions from Borgata which the Company began consolidating in August of 2016 and Circus Circus Reno, which the Company sold in 2015;
- 11% increase in REVPAR(1) over the prior year quarter at the Company's Las Vegas Strip resorts;
- Operating income of $301 million at the Company's domestic resorts, including the impact of $139 million of NV Energy exit expense;
- Net income attributable to MGM Resorts of $536 million, a 706% increase over the prior year quarter;
- Adjusted Property EBITDA(2) of $570 million at the Company's domestic resorts, a 39% increase over the prior year quarter and a 31% increase on a same-store basis;
- Profit Growth Plan contribution of approximately $73 million of year over year Adjusted Property EBITDA growth to domestic resorts and approximately $5 million of Adjusted EBITDA growth from the Company's 50% share of CityCenter's results;
- Same-store Adjusted Property EBITDA margin of 30.6% at the Company's domestic resorts, a 527 basis point increase compared to the prior year quarter;
- MGM China's net revenues decreased 6%, while operating income and Adjusted EBITDA increased 34% and 17%, respectively, compared to the prior year quarter, partially due to its focus on high-quality main-floor business; and
- CityCenter's net revenues and Adjusted EBITDA related to resorts operations increased 11% and 41%, respectively, compared to the prior year quarter.
"MGM Resorts produced a tremendously strong quarter, delivering the best net revenues and Adjusted Property EBITDA at our domestic resorts since 2007. These results demonstrate the broad based commitment and contributions of the MGM Resorts team in executing the Company's strategic plan and delivering value to our shareholders," said Jim Murren, Chairman & CEO of MGM Resorts. "We have executed on numerous opportunities this year, strengthening our organization, improving our balance sheet, and positioning the Company for growth. The complexity and scale of our organizational transformation is unprecedented in our industry and has manifested itself into our superior operating performance. Looking ahead, we remain focused on organic growth through a stronger, reinvigorated Company driven by our culture of continuous improvement and are committed to expanding our distinguished brand with the opening of MGM National Harbor and the Park Theater in Las Vegas next month."
Certain Items Affecting Third Quarter Results
The following table lists certain other items that affect the comparability of the current and prior year quarterly results (approximate EPS impact shown, net of tax, per share; negative amounts represent charges to income):
Three months ended September 30,
2016
2015
NV Energy exit expense
$
(0.18)
$
—
Preopening and start-up expenses
(0.03)
(0.02)
Gain on Borgata transaction
0.60
—
Income from unconsolidated affiliates:
CityCenter NV Energy exit expense
(0.02)
—
Non-operating expense:
Loss on retirement of long-term debt
(0.02)
—
The current quarter included income tax benefit of $169 million resulting from the reduction of valuation allowance on foreign tax credit carryovers and income tax expense of $36 million resulting from the remeasurement of Macau deferred tax liabilities, both the result of a change in assumption concerning renewal of the exemption from the Macau complementary tax on gaming profits.
Domestic Resorts
Casino revenue for the third quarter of 2016 increased 23% compared to the prior year quarter, due primarily to the acquisition of Borgata and an increase in both table games and slots revenue. Casino revenue increased 7% on a same-store basis compared to the prior year quarter. Same-store table games hold percentage in the third quarter of 2016 was 23.7% compared to 20.4% in the prior year quarter. Slots revenue increased 19% compared to the prior year quarter due primarily to the acquisition of Borgata, and increased 3% on a same- store basis compared to the prior year quarter.
Rooms revenue increased 14% compared to the prior year quarter. On a same-store basis, rooms revenue increased 11% compared to the prior year quarter. Las Vegas Strip REVPAR increased 11%. The following table shows key hotel statistics for the Company's Las Vegas Strip resorts:
Three months ended September 30,
2016
2015
Occupancy %
97
%
96
%
Average Daily Rate (ADR)
$
154
$
141
Revenue per Available Room (REVPAR)
$
149
$
135
The Company expects to achieve Las Vegas Strip REVPAR growth of 3% in the fourth quarter of 2016, compared to a 12% increase in the prior year's fourth quarter.
Mr. Murren continued, "We continue to see strength in the Las Vegas market and believe that the Company can drive growth across all room segments in the fourth quarter, despite a challenging comparison. Based on these current trends, we remain confident in our ability to further increase room revenues in 2017."
Operating income at the Company's domestic resorts was $301 million for the third quarter of 2016 compared to $290 million in the prior year quarter and included $139 million of NV Energy exit expense associated with the Company's strategic decision to exit the fully bundled sales system of NV Energy and $8 million in real estate transfer taxes recorded in connection with the Borgata transaction.
Domestic resorts Adjusted Property EBITDA increased 39% to $570 million in the third quarter of 2016 and was positively impacted by approximately $73 million of Adjusted Property EBITDA growth generated from the Company's Profit Growth Plan initiatives as well as $36 million of Adjusted Property EBITDA resulting from the Borgata transaction. Same-store Adjusted Property EBITDA increased 31% compared to the prior year quarter.
Corporate Expense
Corporate expense was $88 million in the third quarter of 2016, an increase of $14 million compared to the prior year quarter. The current quarter included $10 million of expense related to transaction costs incurred by MGM Growth Properties LLC ("MGP") in connection with the Borgata transaction, $5 million related to Profit Growth Plan implementation costs, and $11 million related to incremental performance-based compensation expense and costs associated with a litigation settlement. The prior year quarter included costs incurred to implement initiatives related to the Profit Growth Plan and costs associated with the Company's strategic review totaling $18 million.
MGM China
On September 1, 2016 the Company closed its acquisition of an additional 4.95% of the outstanding common shares of MGM China Holdings Limited ("MGM China") and now owns approximately 56% of MGM China's outstanding common shares.
Key third quarter results for MGM China include:
- Net revenues of $500 million, a 6% decrease compared to the prior year quarter;
- Main floor table games revenue increased 21% compared to the prior year quarter;
- VIP table games revenue decreased 26% due to a decrease in turnover of 14% compared to the prior year quarter, and hold percentage decreased to 3.0% in the current year quarter, compared to 3.7% in the prior year quarter;
- Operating income increased 34% to $84 million, compared to operating income of $63 million in the prior year quarter;
- Adjusted EBITDA increased 17% to $150 million, compared to $128 million in the prior year quarter, including $9 million of license fee expense in the current and prior year quarter; and
- Operating margin increased by 499 basis points compared to the prior year quarter to 16.9%, and Adjusted EBITDA margin increased by 575 basis points compared to the prior year quarter to 30% as a result of an increase in main floor table games mix and continuous efforts to reduce costs.
In August 2016, MGM China paid a $58 million interim dividend, of which $30 million was distributed to MGM Resorts.
Unconsolidated Affiliates
The following table summarizes information related to the Company's share of income from unconsolidated affiliates:
Three months ended September 30,
2016
2015
(In thousands)
Borgata (through July 31, 2016)
$
14,243
$
31,784
CityCenter
12,382
16,459
Other
5,952
9,107
$
32,577
$
57,350
Our share of CityCenter Holdings, LLC ("CityCenter") operating results for the third quarter of 2016, including certain basis difference adjustments, was $12 million, which included $13 million related to our share of NV Energy exit expense representing CityCenter's share of a charge associated with the Company's strategic decision to exit the fully bundled sales system of NV Energy.
Results for CityCenter for the third quarter of 2016 include the following (see schedules accompanying this release for further detail on CityCenter's third quarter results):
- Net revenues from resort operations were $308 million, an 11% increase compared to the prior year quarter;
- Operating income was $7 million in the current and prior year quarters and included $26 million of NV Energy exit expense in the current quarter as discussed above;
- Adjusted EBITDA from resort operations increased 41% to $93 million compared to the prior year quarter, and was positively affected by approximately $11 million of incremental Adjusted EBITDA attributable to Profit Growth Plan initiatives;
- Adjusted EBITDA at Aria increased 38% to $82 million compared to the prior year quarter;
- Aria's table games volume increased 5% and table games hold percentage was 25.4%, compared to 22.6% in the prior year quarter;
- REVPAR at Aria increased 7% to $221 compared to the prior year quarter; and
- REVPAR at Vdara increased 15% to $189 compared to the prior year quarter, and Adjusted EBITDA increased 50% to $10 million compared to the prior year quarter.
On August 1, 2016 the Company completed the previously announced acquisition of Boyd Gaming Corporation's interest in Borgata Hotel Casino and Spa ("Borgata"). The acquisition closed on August 1, 2016, at which time the entity operating Borgata became a consolidated subsidiary of the Company and the real estate assets associated with Borgata were sold to MGP. As a result the Company's indirect ownership percentage in MGM Growth Properties Operating Partnership LP (the "Operating Partnership") increased to 76.3%. Prior to the acquisition, the Company held a 50% interest in Borgata, which was accounted for under the equity method.
MGM Growth Properties
During the third quarter of 2016, the Company made rent payments to MGP in the amount of $154 million. On September 15, 2016, MGP's Board of Directors declared a quarterly dividend of $0.3875 per Class A share totaling $22 million, which was paid on October 14, 2016 to holders of record on September 30, 2016. The Company concurrently received a $72 million distribution attributable to its ownership of units in the Operating Partnership.
On August 12, 2016, the Operating Partnership issued $500 million of 4.50% senior unsecured notes due 2026. The net proceeds were used to refinance amounts outstanding under the Operating Partnership's revolving credit facility that were drawn in connection with the acquisition of Borgata with the remaining proceeds used for general corporate purposes. In addition, in October 2016, the Operating Partnership re-priced its term loan B facility at par. As a result of the re-pricing, the term loan B facility bears interest at LIBOR plus 2.75%, with a LIBOR floor of 0.75%, which represents a 50 basis point reduction compared to the prior rate of LIBOR plus 3.25%, with a LIBOR floor of 0.75%. The Operating Partnership will receive a further reduction in pricing to LIBOR plus 2.50%, with a LIBOR floor of 0.75% so long as it achieves minimum corporate family ratings of Ba3/BB-.
Financial Position
The Company's cash balance at September 30, 2016 was $1.4 billion, which included $430 million at MGM China and $340 million at MGP. At September 30, 2016, the Company had $250 million outstanding under its $1.5 billion senior secured credit facility, $2.1 billion outstanding under the $2.7 billion Operating Partnership senior credit facility, $1.8 billion outstanding under the $3 billion MGM China credit facility, and $425 million outstanding under the $525 million MGM National Harbor credit facility.
On August 19, 2016, the Company issued $500 million of 4.625% senior notes due 2026. The Company used the net proceeds from the offering, together with cash on hand, to redeem the $743 million 7.625% senior notes due 2017.
"We remain committed to strengthening our balance sheet and returning MGM Resorts to investment grade as we continue to maximize cash flow and grow the Company in a financially prudent manner," said Dan D'Arrigo, Executive Vice President and Chief Financial Officer of MGM Resorts. "We believe that our strategic actions in the third quarter are aligned with these goals including opportunistically enhancing our capital structure through the issuance of notes at historically low levels, acquiring the remaining interest in Borgata, and increasing our exposure in the largest gaming market in the world through the purchase of an additional stake in MGM China."
To view full financial release and corresponding tables please click the PDF icon or visit: http://mgmresorts.investorroom.com/2016-11-07-MGM-Resorts-International-Reports-Third-Quarter-Financial-And-Operating-Results
