LAS VEGAS, Aug. 4, 2016 — MGM Resorts International (NYSE: MGM) ("MGM Resorts" or the "Company") today reported financial results for the quarter ended June 30, 2016.
Key highlights include:
- Diluted earnings per share for the second quarter of 2016 was $0.83, including $0.57 related to a gain on CityCenter's sale of The Shops at Crystals ("Crystals"), compared to diluted earnings per share of $0.17 in the prior year quarter;
- Operating income was $769 million and included a $406 million gain related to the sale of Crystals;
- Adjusted Property EBITDA surpassed $500 million for the first time since 2008 at the Company's domestic resorts;
- Achieved highest domestic resorts Adjusted Property EBITDA margins since 2007 of 30.4%;
- Increased Profit Growth Plan target by 33% to $400 million;
- Profit Growth Plan contributed approximately $64 million of Adjusted Property EBITDA growth to domestic resorts and approximately $9 million of Adjusted EBITDA growth to the Company from its 50% share of CityCenter's results;
- Announced and closed the acquisition of Boyd Gaming Corporation's ("Boyd Gaming") interest in the Borgata Hotel Casino & Spa ("Borgata") and the subsequent sale of the real property to MGM Growth Properties LLC ("MGP"); and
- Announced plans to partner with Sydell Group in rebranding Monte Carlo Resort to Park MGM and NoMad Hotel.
"I am incredibly proud of the concerted effort of our talented executive teams and employees that produced our most profitable quarter in eight years at our domestic resorts," said Jim Murren, Chairman & CEO of MGM Resorts. "Our Profit Growth Plan drove our domestic resorts Adjusted Property EBITDA to grow an impressive 12% and Adjusted Property EBITDA margins to improve by over 350 basis points, despite a record-breaking May last year. With a solid foundation of operational excellence and the continued strength in the Las Vegas market, in which we are the clear leader, we believe that MGM Resorts is well-positioned to further improve our financial strength to deliver sustainable value to our shareholders."
Key operating results for the second quarter of 2016 include:
- Net revenues at the Company's domestic resorts decreased 1% compared to the prior year quarter, but increased 1% excluding Circus Circus Reno, Railroad Pass, and the Company's properties in Jean Nevada, which were sold during 2015;
- Rooms revenue at the Company's domestic resorts increased 2%, with a 3% increase in REVPAR(1) at the Company's Las Vegas Strip resorts, compared to the prior year quarter;
- Operating income at the Company's domestic resorts increased 16% to $390 million compared to the prior year quarter;
- The Company's domestic resorts earned Adjusted Property EBITDA(2) of $515 million, a 12% increase compared to the prior year quarter;
- Domestic resorts Adjusted Property EBITDA margin was 30.4%, a 354 basis point increase compared to the prior year quarter;
- MGM China's net revenues were $452 million, operating income was $51 million and Adjusted EBITDA was $119 million, a decrease of 19% , 11% and 10%, respectively, compared to the prior year quarter;
- CityCenter's net revenues related to resorts operations were $287 million compared to $295 million in the prior year quarter;
- CityCenter Adjusted EBITDA related to resort operations was $78 million, a 6% increase compared to the prior year quarter;
- CityCenter made distributions of $1.08 billion, of which MGM Resorts received its 50% share, or $540 million; and
- On August 4, 2016, MGM China's Board of Directors announced an interim dividend of $58 million, which will be paid to shareholders of record as of August 22, 2016 and distributed on or about August 30, 2016. MGM Resorts will receive $30 million, representing its 51% share of the dividend.
Certain Items Affecting Second 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 June 30,
2016
2015
Preopening and start-up expenses
$
(0.03)
$
(0.02)
Income from unconsolidated affiliates:
Gain on the sale of Crystals
0.57
—
Domestic Resorts
Casino revenue for the three months ended June 30, 2016 increased less than 1% compared to the same period in the prior year due to an increase in table games revenue excluding Circus Circus Reno, Railroad Pass, and the Company's properties in Jean Nevada, which were sold in 2015. Table games hold percentage in the second quarter of 2016 was 24.2% compared to 21.4% in the prior year quarter, while table games volume decreased 9% compared to the prior year quarter. Slots revenue decreased 1%, excluding the operations of resorts sold during 2015, compared to the prior year quarter. During the second quarter of 2015, the Company's revenues and operations were positively affected by the Mayweather vs. Pacquiao fight held on May 2, 2015 at the MGM Grand Garden Arena.
Rooms revenue increased 2%, with an increase in Las Vegas Strip REVPAR of 3%. The following table shows key hotel statistics for the Company's Las Vegas Strip resorts:
Three months ended June 30,
2016
2015
Occupancy %
95
%
96
%
Average Daily Rate (ADR)
$
156
$
150
Revenue per Available Room (REVPAR)
$
148
$
144
Operating income for the Company's domestic resorts increased 16% for the second quarter of 2016 compared to the prior year quarter. Domestic resorts Adjusted Property EBITDA was $515 million in the second quarter of 2016, a 12% increase compared to the prior year quarter, and was positively affected by approximately $64 million of incremental Adjusted Property EBITDA as a result of the Company's Profit Growth Plan initiatives.
Corporate Expense
Corporate expense was $82 million, an increase of $22 million compared to the prior year quarter. The current year quarter included $5 million of costs incurred to implement initiatives related to the Profit Growth Plan and $16 million of costs incurred in connection with the MGP transactions.
MGM China
On August 4, 2016, MGM China's Board of Directors announced an interim dividend of $58 million, which will be paid to shareholders of record as of August 22, 2016 and distributed on or about August 30, 2016. MGM Resorts will receive $30 million, representing its 51% share of the dividend.
Key second quarter results for MGM China include:
- Net revenues of $452 million, a 19% decrease compared to the prior year quarter;
- Main floor table games revenue decreased 3% compared to the prior year quarter;
- VIP table games revenue decreased 33% due to a decrease in turnover of 28% compared to the prior year quarter, and hold percentage decreased to 3.1% in the current year quarter, compared to 3.2% in the prior year quarter;
- Operating income of $51 million, compared to operating income of $58 million in the prior year quarter;
- Adjusted EBITDA of $119 million, a 10% decrease compared to the prior year quarter, including $8 million of license fee expense in the current year quarter and $10 million in the prior year quarter; and
- Operating margin increased by 104 basis points compared to the prior year quarter to 11.4%, and Adjusted EBITDA margin increased by 263 basis points compared to the prior year quarter to 26.4% as a result of an increase in main floor table games mix and continuous efforts to reduce costs.
MGM China paid the previously announced $46 million final 2015 dividend in June 2016, of which $23 million was received by MGM Resorts.
Unconsolidated Affiliates
The following table summarizes information related to the Company's share of income from unconsolidated affiliates:
Three months ended June 30,
2016
2015
(In thousands)
CityCenter
$
416,144
$
21,515
Borgata
27,376
15,767
Other
4,789
5,618
$
448,309
$
42,900
On April 14, 2016, CityCenter Holdings, LLC ("CityCenter") closed the sale of Crystals for approximately $1.1 billion. As a result, CityCenter reported a $411 million gain within discontinued operations for the second quarter of 2016. Further, MGM Resorts recorded a $406 million gain, which included $205 million representing its 50% share of the gain recorded by CityCenter and $201 million representing the reversal of certain basis differences.
CityCenter's results for the second quarter of 2016 included $20 million of accelerated depreciation associated with the April 2016 closure of the Zarkana theatre.
Results for CityCenter for the second quarter of 2016 include the following (see schedules accompanying this release for further detail on CityCenter's second quarter results):
- Net revenues from resort operations were $287 million, a 3% decrease compared to the prior year quarter;
- Operating loss was $0.4 million, which included $20 million of accelerated depreciation as discussed above compared to operating income of $16 million in the prior year;
- Adjusted EBITDA from resort operations of $78 million, an increase of 6% compared to the prior year quarter; this was positively affected by approximately $18 million of incremental Adjusted EBITDA attributable to Profit Growth Plan initiatives;
- Adjusted EBITDA at Aria of $68 million increased by 7% compared to the prior year quarter;
- Aria's table games volume decreased 22% and table games hold percentage was 19.5%, compared to 21.5% in the prior year quarter;
- REVPAR at Aria of $228, a 3% increase compared to the prior year quarter; and
- REVPAR at Vdara of $190, a 6% increase compared to the prior year quarter, and a 2% increase in Adjusted EBITDA compared to the prior year quarter.
The Company's income from unconsolidated affiliates related to Borgata for the second quarter of 2016 increased 74%, compared to the prior year quarter, due to higher casino revenue as well as lower property tax expense due to the application of credits from a prior tax court judgment to Borgata's second quarter property tax payment.
In May 2016, the Company entered into a definitive agreement to acquire Boyd Gaming's interest in Borgata. Further, the Company and MGP, a subsidiary of the Company, entered into a definitive agreement whereby, following the completion of the acquisition of Boyd Gaming's interest, MGP acquired Borgata's real property from the Company and leased back the real property to a subsidiary of the Company (together, the "Transactions"). In connection with MGP's acquisition of Borgata's real property, the Company's ownership in MGM Growth Properties Operating Partnership LP (the "Operating Partnership") increased to 76.3%.
The Transactions closed on August 1, 2016, at which time the Borgata became a consolidated subsidiary of the Company. The Company expects to record an approximately $400 million gain as a result of its consolidation of Borgata. Cash proceeds paid to Boyd Gaming for its interest were $589 million, after customary working capital adjustments and consideration of Borgata's outstanding debt of approximately $575 million, which was repaid using a combination of excess cash and a $295 million draw on MGP's credit facility.
MGM Growth Properties
During the second quarter of 2016, the Company made rent payments to MGP in the amount of $101 million. On June 16, 2016, MGP's Board of Directors declared a pro-rated quarterly dividend of $0.2632 per Class A common share totaling $15 million, which was paid on July 15, 2016 to holders of record on June 30, 2016. The Company concurrently received a $42 million distribution attributable to its ownership of Operating Partnership units.
Financial Position
The Company's cash balance at June 30, 2016 was $2.5 billion, which included $447 million at MGM China and $338 million at MGP. At June 30, 2016, the Company had $250 million outstanding under its $1.5 billion senior secured credit facility, $2.1 billion outstanding under the $2.74 billion MGP senior credit facility, $1.7 billion outstanding under the $3 billion MGM China credit facility, and $350 million outstanding under the $525 million MGM National Harbor credit facility.
"Our strong operating results and the strategic initiatives we have successfully completed this year including the initial public offering of MGM Growth Properties, the acquisition and subsequent sale of the real property of Borgata, and the sale of Crystals and its related CityCenter distribution, have significantly strengthened our financial position," said Dan D'Arrigo, Executive Vice President and CFO of MGM Resorts International. "We remain focused on maximizing our free cash flow, which we believe will allow us to achieve our goal of becoming investment grade."
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