MGM RESORTS INTERNATIONAL This management's discussion and analysis of financial condition and results of operations includes discussion as of and for the year endedDecember 31, 2021 compared toDecember 31, 2020 . Discussion of our financial condition and results of operations as of and for the year endedDecember 31, 2020 compared toDecember 31, 2019 can be found in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 , filed with theSecurities and Exchange Commission ("SEC") onFebruary 26, 2021 .
Description of our business and key performance indicators
Our primary business is the operation of casino resorts, which offer gaming, hotel, convention, dining, entertainment, retail and other resort amenities. We operate several of the finest casino resorts in the world and we continually reinvest in our resorts to maintain our competitive advantage. Most of our revenue is cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. We rely on the ability of our resorts to generate operating cash flow to fund capital expenditures, provide excess cash flow for future development, repay debt financings, and return capital to our shareholders. We make significant investments in our resorts through newly remodeled hotel rooms, restaurants, entertainment and nightlife offerings, as well as other new features and amenities. Our results of operations are affected by decisions we make related to our capital allocation, our access to capital and our cost of capital. While we continue to be focused on improving our financial position and returning capital to shareholders, we are also dedicated to capitalizing on strategic development or initiatives. Our results of operations do not tend to be seasonal in nature, though a variety of factors may affect the results of any interim period, including the timing of major conventions, Far East baccarat volumes, the amount and timing of marketing and special events for our high-end gaming customers, and the level of play during major holidays, including New Year andLunar New Year . While our results do not depend on key individual customers, a significant portion of our operating income is generated from high-end gaming customers, which can cause variability in our results. In addition, our success in marketing to customer groups such as convention customers and the financial health of customer segments such as business travelers or high-end gaming customers from a specific country or region can affect our results.
Financial Impact of COVID-19
The spread of COVID-19 and developments surrounding the global pandemic have had a significant impact on our business, financial condition, results of operations and cash flows in 2020 and 2021 and may continue to impact our business in 2022 and thereafter. InMarch 2020 , all of our domestic properties were temporarily closed pursuant to state and local government restrictions imposed as a result of COVID-19. Throughout the second and third quarters of 2020, all of our properties that were temporarily closed re-opened to the public, with temporary re-closures and re-openings occurring for certain of our properties or portions thereof into the first quarter of 2021. Upon re-opening, the properties continued to operate without certain amenities and subject to certain occupancy limitations, with restrictions varying by jurisdiction. Beginning in the latter part of the first quarter of 2021 and continuing into the second quarter of 2021, our domestic jurisdictions eased and removed prior operating restrictions, including capacity and occupancy limits, as well as social distancing policies. Although all of our properties have re-opened, in light of the unpredictable nature of the pandemic, including the emergence and spread of COVID-19 variants, the properties may be subject to new operating restrictions and/or temporary, complete, or partial shutdowns in the future. At this time, we cannot predict whether jurisdictions, states or the federal government will adopt similar or more restrictive measures in the future than in the past, including stay-at-home orders or the temporary closure of all or a portion of our properties as a result of the pandemic. InMacau , following a temporary closure of our properties onFebruary 5, 2020 , operations resumed onFebruary 20, 2020 , subject to certain health safeguards, such as limiting the number of seats available at each table game, slot machine spacing, reduced operating hours at a number of restaurants and bars, temperature checks, and mask protection. Although the issuance of tourist visas (including the individual visit scheme) for residents of Zhuhai,Guangdong Province and all other provinces in mainlandChina to travel toMacau resumed onAugust 12, 2020 ,August 26, 2020 andSeptember 23, 2020 , respectively, several travel and entry restrictions inMacau ,Hong Kong and mainlandChina remain in place (including the temporary suspension of ferry services betweenHong Kong andMacau , the negative nucleic acid test result certificate, and mandatory quarantine requirements for returning residents, for visitors fromHong Kong ,Taiwan , and 37 -------------------------------------------------------------------------------- mainlandChina , and bans on entry on other visitors), which significantly impacted visitation to ourMacau properties. In the third and fourth quarters of 2021, local COVID-19 cases were identified inMacau . Upon such occurrences, a state of immediate prevention was declared and mass mandatory nucleic acid testing was imposed inMacau , the validity period of negative test results for re-entry into mainlandChina was shortened and quarantine requirements were imposed, certain events were cancelled or suspended, and in some instances, certain entertainment and leisure facilities were closed throughoutMacau . Although gaming and hotel operations have remained open during these states of immediate prevention, such measures have had a negative effect on our operations and it is uncertain whether further closures, including the closure of our properties, or travel restrictions toMacau will be implemented if additional local COVID-19 cases are identified. The Las Vegas Strip segment results of operations are heavily impacted by visitor volume and trends. During the year endedDecember 31, 2021 ,Las Vegas visitor volume increased 69% compared to the prior year period according to information published by theLas Vegas Convention and Visitors Authority . TheLas Vegas market has had the addition of new sporting events and venues, the expansion of convention centers, as well as music and entertainment events, which have positively impacted visitation, along with the easing of COVID-19 related restrictions, as discussed above. TheMGM China segment results of operations also are heavily impacted by visitor volume and trends. During the year endedDecember 31, 2021 ,Macau visitor arrivals increased 31% compared to the prior year period according to statistics published by the Statistics and Census Service of the Macau Government, as the prior year period was more negatively affected by travel and entry restrictions inMacau than in the current year period. For a discussion of the risks to our business resulting from COVID-19, please see "Item 1A. Risk Factors - Risks Related to Our Business, Industry, and Market Conditions." Other Developments As ofDecember 31, 2021 , we lease the real estate assets of The Mirage, Luxor,New York-New York , Park MGM, Excalibur, The Park, Gold Strike Tunica,MGM Grand Detroit , Beau Rivage, Borgata, Empire City,MGM National Harbor ,MGM Northfield Park , andMGM Springfield pursuant to a master lease agreement with MGP. See Note 1 in the accompanying consolidated financial statements for information regarding MGP and theOperating Partnership , which we consolidate in our financial statements. All intercompany transactions, including transactions under the master lease with MGP, have been eliminated in consolidation. As further discussed below, we lease the real estate assets of Bellagio pursuant to a lease agreement with Bellagio BREIT Venture, the real estate assets ofMandalay Bay andMGM Grand Las Vegas pursuant to a lease agreement with MGP BREIT Venture, and the real estate assets of Aria (including Vdara) pursuant to a lease agreement with a fund managed byBlackstone , as further discussed below. InApril 2019 , we acquired the membership interests ofNorthfield Park Associates, LLC ("Northfield"), anOhio limited liability company that owned the real estate assets and operations of theHard Rock Rocksino Northfield Park , from MGP and MGP retained the real estate assets. We then rebranded the property toMGM Northfield Park , and added it to the master lease between us and MGP. See Note 18 in the accompanying financial statements for information regarding this acquisition. Also, inJanuary 2019 , we acquired the real property and operations associated with Empire City inYonkers, New York for consideration of approximately$865 million . Subsequently, MGP acquired the developed real property associated with Empire City from us and Empire City was added to the master lease between us and MGP. In addition, pursuant to the master lease amendment, we agreed to provide MGP a right of first offer with respect to certain undeveloped land adjacent to the property to the extent that we develop additional gaming facilities and choose to sell or transfer such property in the future. See Note 4 and Note 18 in the accompanying consolidated financial statements for information regarding this acquisition. InMarch 2019 , we entered into an amendment to the master lease between us and MGP with respect to improvements made by us related to the rebranding of the Park MGM and NoMad Las Vegas. See Note 18 in the accompanying financial statements for information regarding this transaction with MGP, which is eliminated in consolidation.
In
38
--------------------------------------------------------------------------------
and, thereafter, an escalator equal to the greater of 2% and the CPI increase
during the prior year, subject to a cap of 3% during the 11th through 20th years
and 4% thereafter. In addition, the lease obligates us to spend a specified
percentage of net revenues at the property on capital expenditures and that we
comply with certain financial covenants, which, if not met, would require us to
maintain cash security or provide one or more letters of credit in favor of the
landlord in an amount equal to rent for the succeeding 2-year period. In
exchange for the contribution of the real estate assets, we received total
consideration of $4.25 billion , which consisted of a 5% equity interest in the
venture and cash of approximately $4.2 billion . We also provide a shortfall
guarantee of the principal amount of indebtedness of Bellagio BREIT Venture (and
any interest accrued and unpaid thereon). As a result of the sale, we recorded a
gain of approximately $2.7 billion . See Note 1, Note 11, and Note 12 in the
accompanying consolidated financial statements for information regarding this
transaction, lease agreement, and shortfall guarantee, respectively.
In December 2019 , we sold Circus Circus Las Vegas and adjacent land for $825
million , which consisted of $663 million paid in cash and a secured note due
2024 with a face value of $163 million and fair value of $134 million . In
connection with our review of the carrying value of assets to be sold due to the
offer for sale received during the third quarter of 2019, we recorded a non-cash
impairment charge of $219 million . Upon completion of the sale in the fourth
quarter, we recorded a loss of $2 million . See Note 1 and Note 16 in the
accompanying consolidated financial statements for information regarding this
transaction.
In February 2020 , we completed the MGP BREIT Venture Transaction pursuant to
which the real estate assets of MGM Grand Las Vegas and Mandalay Bay (including
Mandalay Place ) were contributed to MGP BREIT Venture, owned 50.1% by the
Operating Partnership and 49.9% by a subsidiary of BREIT. In exchange for the
contribution of the real estate assets, MGM and MGP received total consideration
of $4.6 billion , which was comprised of $2.5 billion of cash, $1.3 billion of
the Operating Partnership's secured indebtedness assumed by MGP BREIT Venture,
and the Operating Partnership's 50.1% equity interest in MGP BREIT Venture. In
addition, the Operating Partnership issued approximately 3 million Operating
Partnership units to us representing 5% of the equity value of MGP BREIT
Venture. We also provide a shortfall guarantee of the principal amount of
indebtedness of MGP BREIT Venture (and any interest accrued and unpaid thereon).
On the closing date, BREIT also purchased approximately 5 million MGP Class A
shares for $150 million . See Note 1, Note 11, and Note 12 in the accompanying
consolidated financial statements for information regarding this transaction,
lease agreement, and shortfall guarantee, respectively.
In connection with the MGP BREIT Venture Transaction, MGP BREIT Venture entered
into a lease with us for the real estate assets of Mandalay Bay and MGM Grand
Las Vegas . The lease has an initial term of 30 years with two 10-year renewal
periods, exercisable at our option. The initial term of the lease provides for
an initial annual rent of $292 million with a fixed 2% escalator for the first
15 years and, thereafter, an escalator equal to the greater of 2% and the CPI
increase during the prior year, subject to a cap of 3%. In addition, the lease
obligates us to spend a specified percentage of net revenues at the properties
on capital expenditures and that we comply with certain financial covenants,
which, if not met, would require us to maintain cash security or provide one or
more letters of credit in favor of the landlord in an amount equal to the rent
for the succeeding 1-year period. See Note 11 in the accompanying financial
statements for information regarding this lease agreement.
In connection with the MGP BREIT Venture Transaction, the master lease with MGP
was modified to remove the Mandalay Bay property and the annual cash rent under
the MGP master lease was reduced by $133 million , as further discussed in Note
18.
Also, in January 2020 , we, the Operating Partnership , and MGP entered into an
agreement for the Operating Partnership to waive its right following the closing
of the MGP BREIT Venture Transaction to issue MGP Class A shares, in lieu of
cash, to us in connection with us exercising our right to require the Operating
Partnership to redeem the Operating Partnership units we hold, at a price per
unit equal to a 3% discount to the ten day average closing price prior to the
date of the notice of redemption. The waiver was effective upon closing of the
transaction on February 14, 2020 and was scheduled to terminate on the earlier
of February 14, 2022 or upon our receipt of cash proceeds of $1.4 billion as
consideration for the redemption of our Operating Partnership units. On May 18,
2020 the Operating Partnership redeemed approximately 30 million Operating
Partnership units that we held for $700 million , or $23.10 per unit, and on
December 2, 2020 , the Operating Partnership redeemed approximately 24 million
Operating Partnership units that we held for the remaining $700 million , or
$29.78 per unit. As a result, the waiver terminated in accordance with its
terms.
In March 2021 , we delivered a notice of redemption to MGP covering approximately
37 million Operating Partnership units that we held which was satisfied with
aggregate cash proceeds of approximately $1.2 billion , using cash on hand
together with the proceeds from MGP's issuance of Class A shares. See Note 13 in
the accompanying consolidated financial statements for information regarding
this transaction, which eliminates in consolidation.
39
--------------------------------------------------------------------------------
In August 2021 , we entered into an agreement with VICI and MGP whereby VICI will
acquire MGP. Pursuant to the agreement, MGP Class A shareholders will receive
1.366 shares of newly issued VICI stock in exchange for each MGP Class A share
outstanding and we will receive 1.366 units of the new VICI OP in exchange for
each Operating Partnership unit we hold. The fixed exchange ratio represents an
agreed upon price of $43 per share of MGP Class A share to the five-day volume
weighted average price of VICI stock as of the close of business on July 30,
2021 . In connection with the exchange, VICI OP will redeem the majority of our
VICI OP units for cash consideration of $4.4 billion , with us retaining an
approximate $370 million ownership interest in the VICI OP (based upon the close
price of VICI stock as of August 3, 2021 ). MGP's Class B share that we hold will
be cancelled. As part of the transaction, we will enter into an amended and
restated master lease with VICI. The new master lease will have an initial term
of 25 years, with three 10-year renewals, and initial annual rent of $860
million , escalating annually at a rate of 2% per annum for the first 10 years
and thereafter equal to the greater of 2% and the CPI increase during the prior
year subject to a cap of 3%. The transaction is expected to close in the first
half of 2022, subject to customary closing conditions, regulatory approvals, and
approval by VICI stockholders (which was obtained on October 29, 2021 ). See
"Item 1A. Risk Factors - Risks Related to Our Announced Transactions - The VICI
Transaction, The Cosmopolitan transaction, and The Mirage transaction each
remain subject to the satisfaction of certain closing conditions, including the
receipt of certain regulatory approvals, and any anticipated benefits from such
transactions may take longer to realize than expected or may not be realized at
all."
In September 2021 , we entered into an agreement to acquire the operations of The
Cosmopolitan for cash consideration of $1.625 billion , subject to customary
working capital adjustments. Additionally, we will enter into a lease agreement
for the real estate assets of The Cosmopolitan. The Cosmopolitan lease will have
an initial term of 30 years with three subsequent 10-year renewal periods,
exercisable at our option. The initial term of the lease provides for an initial
annual cash rent of $200 million with a fixed 2% escalator for the first 15
years, and thereafter, an escalator equal to the greater of 2% and the CPI
increase during the prior year, subject to a cap of 3%. Additionally, the lease
will require us to spend a specified percentage of net revenues over a rolling
5-year period at the property on capital expenditures and for us to comply with
certain financial covenants, which, if not met, would require us to maintain
cash security or one or more letters of credit in favor of the landlord in an
amount equal to rent for the succeeding 1-year period. The transaction is
expected to close in the first half of 2022, subject to regulatory approvals and
other customary closing conditions.
In September 2021 , we completed the acquisition of the 50% ownership interest in
CityCenter held by Infinity World for cash consideration of $2.125 billion . Upon
the closing of the transaction, we own 100% of CityCenter and accordingly no
longer account for our interest under the equity method of accounting, and we
now consolidate CityCenter in our financial statements. See Note 4 in the
accompanying consolidated financial statements for information regarding this
transaction.
In September 2021 , we sold the real estate assets of Aria (including Vdara) for
cash consideration of $3.89 billion and entered into a lease pursuant to which
we lease back the real property. The lease has an initial term of 30 years with
three 10-year renewal periods, exercisable at our option. The initial term of
the lease provides for an initial annual rent of $215 million with a fixed 2%
escalator for the first 15 years and, thereafter, an escalator equal to the
greater of 2% and the CPI increase during the prior year, subject to a cap of
3%. In addition, the lease obligates us to spend a specified percentage of net
revenues at the properties on capital expenditures and that we comply with
certain financial covenants, which, if not met, would require us to maintain
cash security or provide a letter of credit in favor of the landlord in an
amount equal to the rent for the succeeding 1-year period. See Note 11 in the
accompanying consolidated financial statements for information regarding this
lease.
In October 2021 , MGP acquired the real estate assets of MGM Springfield from us
and MGM Springfield was added to the MGP master lease between us and MGP through
which we lease back the real property. Transactions with MGP, including
transactions under the MGP master lease, have been eliminated in our
consolidation of MGP. Refer to Note 18 for further discussion of the master
lease with MGP.
In December 2021 , we entered into an agreement to sell the operations of The
Mirage to an affiliate of Hard Rock for cash consideration of $1.075 billion ,
subject to certain purchase price adjustments. Pursuant to the agreement, Hard
Rock is obligated to use its reasonable best efforts to obtain the requisite
antitrust and gaming regulatory approvals. The agreement may be terminated by
either party if the closing has not occurred on or before December 13, 2022 ,
which date may be extended by either party to March 13, 2023 under certain
circumstances. The agreement contemplates a reverse termination fee of $322.5
million that is payable by Hard Rock to us in the event that the parties are
unable to obtain antitrust or gaming regulatory approval. Upon closing, the
master lease between us and VICI (or MGP in the event that the VICI Transaction
is terminated) will be amended and restated to reflect a $90 million reduction
in annual cash rent. The transaction is expected to close during the second half
of 2022, subject to certain closing conditions, including, but not limited to,
the consummation or termination of the VICI Transaction and receipt of
regulatory approvals.
40
--------------------------------------------------------------------------------Key Performance Indicators
Key performance indicators related to gaming and hotel revenue are:
•Gaming revenue indicators: table games drop and slots handle (volume indicators); "win" or "hold" percentage, which is not fully controllable by us. Our normal table games hold percentage at ourLas Vegas Strip Resorts is in the range of 25.0% to 35.0% of table games drop for Baccarat and 19.0% to 23.0% for non-Baccarat; however, reduced gaming volumes as a result of the COVID-19 pandemic could cause volatility in our hold percentages; and •Hotel revenue indicators: hotel occupancy (a volume indicator); average daily rate ("ADR," a price indicator); and revenue per available room ("REVPAR," a summary measure of hotel results, combining ADR and occupancy rate). Our calculation of ADR, which is the average price of occupied rooms per day, includes the impact of complimentary rooms. Complimentary room rates are determined based on standalone selling price. Because the mix of rooms provided on a complimentary basis, particularly to casino customers, includes a disproportionate suite component, the composite ADR including complimentary rooms is slightly higher than the ADR for cash rooms, reflecting the higher retail value of suites. Rooms that were out of service during the years endedDecember 31, 2021 and 2020 as a result of closures due to the COVID-19 pandemic were excluded from the available room count when calculating hotel occupancy and REVPAR.
Additional key performance indicators at
•Gaming revenue indicators:MGM China utilizes "turnover," which is the sum of nonnegotiable chip wagers won byMGM China calculated as nonnegotiable chips purchased plus nonnegotiable chips exchanged less nonnegotiable chips returned. Turnover provides a basis for measuring VIP casino win percentage. Win for VIP gaming operations atMGM China is typically in the range of 2.6% to 3.3% of turnover; however, reduced gaming volumes as a result of the COVID-19 pandemic could cause volatility inMGM China's hold percentages.
Results of Operations
The following discussion is based on our consolidated financial statements for
the years ended
Summary Operating Results
The following table summarizes our operating results:
Year Ended December 31,
2021 2020 2019
(In thousands)
Net revenues $ 9,680,140 $ 5,162,082 $ 12,899,672
Operating income (loss) 2,278,699 (642,434) 3,940,215
Net income (loss) 1,208,389 (1,319,907) 2,214,380
Net income (loss) attributable to MGM Resorts
International 1,254,370 (1,032,724) 2,049,146
41--------------------------------------------------------------------------------
Our domestic properties were temporarily closed due to COVID-19 on the dates shown below:
Las Vegas Strip Resorts(1) Closure Date Initial Re-opening Date
Bellagio March 17, 2020 June 4, 2020
MGM Grand Las Vegas March 17, 2020 June 4, 2020
New York-New York March 17, 2020 June 4, 2020
Excalibur March 17, 2020 June 11, 2020
Luxor March 17, 2020 June 25, 2020
Mandalay Bay(2) March 17, 2020 July 1, 2020
The Mirage(3) March 17, 2020 August 27, 2020
Park MGM(2) March 17, 2020 September 30, 2020
Regional Operations
Gold Strike Tunica March 17, 2020 May 25, 2020
Beau Rivage March 17, 2020 June 1, 2020
MGM Northfield Park March 14, 2020 June 20, 2020
MGM National Harbor March 15, 2020 June 29, 2020
MGM Springfield(4) March 15, 2020 July 13, 2020
Borgata March 16, 2020 July 26, 2020
MGM Grand Detroit(5) March 16, 2020 August 7, 2020
Empire City March 14, 2020 September 21, 2020
(1) Aria was excluded from the table above, as it was not consolidated during 2020.
(2) Park MGM and
operations resumed on
The entire property was closed midweek starting
operations resumed with midweek closures on
resumed on
with the hotel tower operations resuming
Consolidated net revenues were$9.7 billion in 2021 compared to$5.2 billion in 2020, an increase of 88%. The current year benefited from the inclusion of the net revenues of Aria subsequent to consolidation inSeptember 2021 and the removal of mandated operational and capacity restrictions at our properties, as well as an increase in travel, while the prior year was negatively affected by temporary property closures at certain of ourLas Vegas Strip Resorts and Regional Operations for a portion of the year due to the pandemic. AtMGM China , the prior year was negatively affected by both property closures in the first quarter and was also more significantly impacted by travel and entry restrictions inMacau than in the current year. These factors resulted in a 111% increase in net revenues at ourLas Vegas Strip Resorts , a 72% increase in net revenues at our Regional Operations, and an 84% increase in net revenues atMGM China . Consolidated operating income was$2.3 billion for the year endedDecember 31, 2021 compared to a loss of$642 million in 2020, due primarily to the temporary property closures in the prior year as well as the inclusion of the operating income of Aria subsequent to consolidation inSeptember 2021 , as discussed above. The current year included a gain on consolidation ofCityCenter , net of$1.6 billion and the prior year included a$1.5 billion gain on REIT transactions, net and$26 million in restructuring costs. In addition, corporate expense decreased$37 million compared to the prior year. Corporate expense in the current year included$34 million in transaction costs, while the prior year included$44 million of CEO transition expense and$49 million ofOctober 1 litigation settlement expense. Included in the CEO transition expense is$20 million of stock compensation expense, of which approximately$13 million related to the modification and accelerated vesting of outstanding stock compensation awards. Property transactions, net in the current year included a gain of$29 million related to a reduction in the estimate of contingent consideration related to the Empire City acquisition, a gain of$76 million relating to the sale of art, and an other-than-temporary impairment charge of$22 million related to an investment in an unconsolidated affiliate. Property transactions, net in the prior year included a$64 million other-than-temporary non-cash impairment charge on an equity method investment and$17 million related to a loss on production show costs. Depreciation expense decreased$60 million compared to the prior year primarily as a result of certain assets 42 -------------------------------------------------------------------------------- becoming fully depreciated in the current year atMGM China , primarily atMGM Cotai . General and administrative expense increased$385 million compared to the prior year due primarily to the prior year reflecting the temporary property closures, the inclusion of rent expense for the Aria lease, which commenced inSeptember 2021 , and also due to a full period of rent expense for theMGM Grand Las Vegas andMandalay Bay lease in the current year, partially offset by realized benefits from our cost savings initiatives at our domestic properties.
Net Revenues by Segment
The following table presents a detail by segment of net revenues:
Year Ended December 31,
2021 2020 2019
(In thousands)
Las Vegas Strip Resorts
Casino $ 1,549,419 $ 728,254 $ 1,296,170
Rooms 1,402,712 662,813 1,863,521
Food and beverage 1,015,366 471,529 1,517,745
Entertainment, retail and other 769,688 383,189 1,153,615
4,737,185 2,245,785 5,831,051
Regional Operations
Casino 2,721,515 1,569,193 2,537,780
Rooms 220,828 130,945 316,753
Food and beverage 307,750 184,153 494,243
Entertainment, retail and other 142,270 82,880 201,008
3,392,363 1,967,171 3,549,784
MGM China
Casino 1,057,962 565,671 2,609,806
Rooms 66,498 36,624 142,306
Food and beverage 68,489 40,284 127,152
Entertainment, retail and other 17,812 14,124 26,158
1,210,761 656,703 2,905,422
Reportable segment net revenues 9,340,309 4,869,659 12,286,257
Corporate and other 339,831 292,423 613,415
$ 9,680,140 $ 5,162,082 $ 12,899,672
Las Vegas Strip Resorts
Las Vegas Strip Resorts casino revenue was $1.5 billion in 2021, compared to
$728 million in 2020, an increase of 113%, due primarily to the temporary
property closures for a portion of 2020 and removal of mandated operational and
capacity restrictions, as well as an increase in travel in the current year, and
the inclusion of the operating results of Aria subsequent to consolidation in
September 2021 .
43
--------------------------------------------------------------------------------
The following table shows key gaming statistics for our Las Vegas Strip Resorts :
Year Ended December 31,
2021 2020 2019
(Dollars in millions)
Table Games Drop $ 3,597 $ 2,001 $ 3,526
Table Games Win $ 885 $ 470 $ 789
Table Games Win % 24.6 % 23.5 % 22.4 %
Slots Handle $ 15,089 $ 6,904 $ 12,874
Slots Win $ 1,417 $ 649 $ 1,194
Slots Hold % 9.4 % 9.4 % 9.3 %
Las Vegas Strip Resorts rooms revenue was $1.4 billion in 2021, compared to $663
million in 2020, an increase of 112%, due primarily to the temporary property
closures for a portion of the prior year and removal of mandated operational and
capacity restrictions, as well as an increase in travel in the current year, and
the inclusion of the operating results of Aria subsequent to consolidation in
September 2021 .
The following table shows key hotel statistics for our Las Vegas Strip Resorts :
Year Ended December 31,
2021 2020 2019
Occupancy(1) 74 % 55 % 91 %
Average Daily Rate (ADR) $ 173 $ 161 $ 167
Revenue per Available Room (REVPAR)(1) $ 128 $ 88 $ 153
(1)Rooms that were out of service, including full and midweek closures, during
the years ended December 31, 2021 and 2020 due to the COVID-19 pandemic were
excluded from the available room count when calculating hotel occupancy and
REVPAR.
Las Vegas Strip Resorts food and beverage revenue was $1.0 billion in 2021,
compared to $472 million in 2020, an increase of 115%, due primarily to the
temporary closures at certain properties and operational and capacity
restrictions in the prior year and removal of those restrictions in the current
year as well as an increase in travel in the current year, and the inclusion of
the operating results of Aria subsequent to consolidation in September 2021 .
However, not all outlets were fully re-opened during the current year and the
properties did not benefit from the removal of mandated operational and capacity
restrictions as well as an increase in travel primarily until the latter part of
the second quarter of the current year.
Las Vegas Strip Resorts entertainment, retail and other revenue was $770 million
in 2021, compared to $383 million in 2020, an increase of 101%, due primarily to
the temporary property closures for a portion of the prior year and removal of
mandated operational and capacity restrictions as well as an increase in travel
in the current year, and the inclusion of the operating results of Aria
subsequent to consolidation in September 2021 . However, venue re-openings and
events did not primarily occur until beginning in the latter part of the second
quarter of the current year.
Regional Operations
Regional Operations casino revenue was $2.7 billion in 2021, compared to $1.6
billion in 2020, an increase of 73%, due primarily to the temporary property
closures in the prior year and removal of mandated operational and capacity
restrictions and, to a lesser extent, increase in travel in the current year.
44
--------------------------------------------------------------------------------
The following table shows key gaming statistics for our Regional Operations:
Year Ended December 31,
2021 2020 2019
(Dollars in millions)
Table Games Drop $ 3,980 $ 2,422 $ 4,226
Table Games Win $ 788 $ 488 $ 827
Table Games Win % 19.8 % 20.1 % 19.6 %
Slots Handle $ 25,566 $ 14,527 $ 25,031
Slots Win $ 2,462 $ 1,405 $ 2,363
Slots Hold % 9.6 % 9.7 % 9.4 %
Regional Operations rooms revenue was $221 million in 2021, compared to $131
million in 2020, an increase of 69%, due primarily to the temporary property
closures in the prior year and removal of mandated operational and capacity
restrictions and, to a lesser extent, increase in travel in the current year.
Regional Operations food and beverage revenue was $308 million in 2021, compared
to $184 million in 2020, an increase of 67%, due primarily to the temporary
property closures in the prior year and removal of mandated operational and
capacity restrictions beginning primarily in the second quarter of the current
year.
Regional Operations entertainment, retail and other revenue was $142 million in
2021, compared to $83 million in 2020, an increase of 72%, due primarily to
temporary property closures in the prior year and removal of mandated
operational and capacity restrictions beginning primarily in the second quarter
of the current year.
MGM China
The following table shows key gaming statistics for
Year Ended December 31,
2021 2020 2019
(Dollars in millions)
VIP Table Games Turnover $ 8,499 $ 7,015 $ 38,071
VIP Table Games Win $ 272 $ 213 $ 1,237
VIP Table Games Win % 3.2 % 3.0 % 3.2 %
Main Floor Table Games Drop $ 4,509 $ 2,037 $ 8,252
Main Floor Table Games Win $ 966 $ 467 $ 1,907
Main Floor Table Games Win % 21.4 % 22.9 % 23.1 %
MGM China net revenues were $1.2 billion in 2021, compared to $657 million in
2020, an increase of 84%. The prior year was negatively affected by both
property closures in February 2020 and was more significantly impacted by travel
and entry restrictions in Macau than in the current year.
Corporate and other
Corporate and other revenue includes revenues from other corporate operations, management services and reimbursed costs revenue primarily related to ourCityCenter management agreement (which was terminated upon the acquisition ofCityCenter inSeptember 2021 ). Reimbursed costs revenue represents reimbursement of costs, primarily payroll-related, incurred by us in connection with the provision of management services and was$226 million ,$245 million and$437 million for 2021, 2020 and 2019, respectively. Reimbursed costs revenue for the year endedDecember 31, 2021 decreased compared to the prior year due primarily to the termination of theCityCenter management agreement as discussed above. See below for additional discussion of our share of operating results from unconsolidated affiliates. 45 --------------------------------------------------------------------------------
Adjusted Property EBITDAR and Adjusted EBITDAR
The following table presents Adjusted Property EBITDAR and Adjusted EBITDAR.
Adjusted Property EBITDAR is our reportable segment generally accepted
accounting principles ("GAAP") measure, which we utilize as the primary profit
measure for our reportable segments. See Note 17 to the accompanying
consolidated financial statements and "Reportable Segment GAAP measure" below
for additional information.
Year Ended December 31,
2021 2020 2019
(In thousands)
Las Vegas Strip Resorts $ 1,738,211 $ 232,188 $ 1,643,122
Regional Operations 1,217,814 343,990 969,866
MGM China 25,367 (193,832) 734,729
Corporate and other (560,309) (530,843) (331,621)
Adjusted EBITDAR $ 2,421,083
Las Vegas Strip Resorts
Las Vegas Strip Resorts Adjusted Property EBITDAR was $1.7 billion in 2021
compared to $232 million in 2020. Las Vegas Strip Resorts Adjusted Property
EBITDAR margin increased to 36.7% in 2021 compared to 10.3% in 2020. The current
year benefited from the increase in revenues, as discussed above, as well as
realized benefits from our cost savings initiatives.
Regional Operations
Regional Operations Adjusted Property EBITDAR was$1.2 billion in 2021 compared to$344 million in 2020. Regional Operations Adjusted Property EBITDAR margin increased to 35.9% in 2021 compared to 17.5% in 2020 as the current year benefited from the increase in revenues, as discussed above, as well as realized benefits from our cost saving initiatives.
Operating Results - Details of Certain Charges
Property transactions, net consisted of the following:
Year Ended December 31,
2021 2020 2019
(In thousands) Loss related to sale of Circus Circus Las Vegas and adjacent land
$ - $ - $ 220,294
Other property transactions, net (67,736) 93,567 55,508
$ (67,736) $ 93,567 $ 275,802 See Note 16 to the accompanying consolidated financial statements for discussion of property transactions, net.
46
--------------------------------------------------------------------------------Operating Results - Income from Unconsolidated Affiliates
The following table summarizes information related to our share of operating income from unconsolidated affiliates:
Year Ended December 31,
2021 2020 2019
(In thousands)
CityCenter (through September 26, 2021) $ 128,127 $ (29,753) $ 128,421
MGP BREIT Venture 155,817 136,755 -
BetMGM (211,182) (61,663) (15,804)
Other 12,061 (2,401) 6,904
$ 84,823 $ 42,938 $ 119,521
In September 2021 , we completed the acquisition of the 50% ownership interest in
CityCenter held by Infinity World and now own 100% of the equity interest in
CityCenter . Accordingly, we no longer account for our interest in CityCenter
under the equity method of accounting, and we now consolidate CityCenter in our
financial statements.
In June 2021 , CityCenter closed the sale of its Harmon land for $80 million on
which it recorded a $30 million gain. We recorded a $50 million gain, which
included $15 million of our 50% share of the gain recorded by CityCenter and $35
million representing the reversal of certain basis differences in 2021.
Our share of CityCenter's operating income, including certain basis difference
adjustments, was $128 million for the current year period through September 26,
2021 compared to our share of CityCenter's operating loss of $30 million in
2020, due primarily to the temporary property closures in the prior year and
removal of mandated operational and capacity restrictions, an increase in travel
beginning primarily in the second quarter of the current year, and the gain
related to the sale of its Harmon land in the current year, as discussed above,
partially offset by a shorter comparative period in the current year given that,
as of September 2021 , we no longer account for our interest in CityCenter under
the equity method of accounting, as discussed above.
Non-operating Results
Interest expense. The following table summarizes information related to interest
expense, net:
Year Ended December 31,
2021 2020 2019
(In thousands)
Total interest incurred $ 800,156 $ 679,251 $ 853,007
Interest capitalized (563) (2,871) (5,075)
$ 799,593 $ 676,380 $ 847,932
Gross interest expense was $800 million in 2021 compared to $679 million in
2020. The increase in gross interest expense was due primarily to an increase in
average debt outstanding related to senior notes due to the issuances by us, the
Operating Partnership and MGM China in 2020 and 2021, partially offset by a
decrease in the weighted average interest rate of the senior notes. See Note 9
to the accompanying consolidated financial statements for additional discussion
on long-term debt and see "Liquidity and Capital Resources" for additional
discussion on issuances and repayments of long-term debt and other sources and
uses of cash.
Other, net. Other income, net was $66 million in 2021 compared to other expense,
net of $89 million in 2020. The current year included a $28 million net gain on
change in fair value of an equity instrument, a $39 million gain on the
Operating Partnership's unhedged interest rate swaps, and $22 million of
interest income, partially offset by $13 million of foreign currency
remeasurement losses primarily related to MGM China's U.S. dollar-denominated
senior notes. The prior year included a $109 million loss incurred on the early
retirement of debt related to our senior notes and the termination of our
revolving facility, as well as an $18 million loss incurred on the early
retirement of debt related to the Operating Partnership's repayment of its term
loan A facility and its term loan B facility, partially offset by $9 million of
foreign currency remeasurement gains primarily related to MGM China's U.S.
dollar-denominated senior notes, and $32 million in interest income.
47
--------------------------------------------------------------------------------
Income taxes. The following table summarizes information related to our income
taxes:
Year Ended December 31,
2021 2020 2019
(In thousands)
Income (loss) before income taxes $ 1,461,804 $ (1,511,479) $ 2,846,725
Benefit (provision) for income taxes (253,416) 191,572 (632,345)
Effective income tax rate 17.3 % 12.7 % 22.2 %
Federal, state and foreign income taxes paid, net of
refunds $ 43,018 $ 8,543 $ 28,493
Our effective rate for 2021 was favorably impacted by the permanent exclusion of
a portion of the gain on consolidation of CityCenter partially offset by the
unfavorable impact of losses in Macau that we could not benefit. The effective
rate for 2020 was unfavorably impacted by losses in Macau that we could not
benefit and adjustments to valuation allowances for Macau deferred tax assets
and foreign tax credits, partially offset by tax benefit resulting from carrying
back net operating losses to tax years with a higher tax rate than is currently
in effect.
Cash taxes paid increased in 2021 compared to 2020 primarily due to an increase
in federal income taxes paid resulting from increased
Reportable Segment GAAP measure
"Adjusted Property EBITDAR" is our reportable segment GAAP measure, which we utilize as the primary profit measure for our reportable segments and underlying operating segments. Adjusted Property EBITDAR is a measure defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, gain on REIT transactions, net, restructuring costs (which represents costs related to severance, accelerated stock compensation expense, and consulting fees directly related to the operating model component of theMGM 2020 Plan), rent expense associated with triple-net operating and ground leases, income from unconsolidated affiliates related to investments in real estate ventures, property transactions, net, and also excludes gain on consolidation ofCityCenter , net, gain related toCityCenter's sale of Harmon land recorded within income from unconsolidated affiliates and corporate expense (which includes CEO transition expense andOctober 1 litigation settlement) and stock compensation expense, which are not allocated to each operating segment, and rent expense related to the master lease with MGP that eliminates in consolidation. We manage capital allocation, tax planning, stock compensation, and financing decisions at the corporate level. "Adjusted Property EBITDAR margin" is Adjusted Property EBITDAR divided by related segment net revenues.
Non-GAAP Measure
"Adjusted EBITDAR" is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, property transactions, net, gain on REIT transactions, net, gain on consolidation ofCityCenter , net, CEO transition expense,October 1 litigation settlement, restructuring costs (which represents costs related to severance, accelerated stock compensation expense, and consulting fees directly related to the operating model component of theMGM 2020 Plan), rent expense associated with triple-net operating and ground leases, gain related toCityCenter's sale of Harmon land recorded within income from unconsolidated affiliates, and income from unconsolidated affiliates related to investments in real estate ventures. Adjusted EBITDAR information is a valuation metric, should not be used as an operating metric, and is presented solely as a supplemental disclosure to reported GAAP measures because we believe this measure is widely used by analysts, lenders, financial institutions, and investors as a principal basis for the valuation of gaming companies. We believe that while items excluded from Adjusted EBITDAR may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends. Also, we believe excluded items may not relate specifically to current trends or be indicative of future results. For example, preopening and start-up expenses will be significantly different in periods when we are 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. However, as discussed herein, Adjusted EBITDAR should not be viewed as a measure of overall operating performance, considered in isolation, or as an alternative to net income, because this measure is not 48 --------------------------------------------------------------------------------
presented on a GAAP basis and exclude certain expenses, including the rent expense associated with our triple-net operating and ground leases, and are provided for the limited purposes discussed herein.
Adjusted EBITDAR should not be construed as an alternative to operating income or net income, as an indicator of our performance; or as an alternative to cash flows from operating activities, as a measure of liquidity; or as any other measure determined in accordance with GAAP. We have significant uses of cash flows, including capital expenditures, interest payments, taxes, real estate triple-net lease and ground lease payments, and debt principal repayments, which are not reflected in Adjusted EBITDAR. Also, other companies in the gaming and hospitality industries that report Adjusted EBITDAR information may calculate Adjusted EBITDAR in a different manner and such differences may be material.
The following table presents a reconciliation of net income attributable to
Year Ended December 31,
2021 2020 2019
(In thousands)
Net income (loss) attributable to MGM Resorts
International $ 1,254,370
(45,981) (287,183) 165,234
Net income (loss) 1,208,389 (1,319,907) 2,214,380
Provision (benefit) for income taxes 253,415 (191,572) 632,345
Income (loss) before income taxes 1,461,804 (1,511,479) 2,846,725
Non-operating (income) expense
Interest expense, net of amounts capitalized 799,593 676,380 847,932
Non-operating items from unconsolidated affiliates 83,243 103,304 62,296
Other, net (65,941) 89,361 183,262
816,895 869,045 1,093,490
Operating income (loss) 2,278,699 (642,434) 3,940,215
Preopening and start-up expenses 5,094 84 7,175
Property transactions, net (67,736) 93,567 275,802
Gain on REIT transactions, net - (1,491,945) (2,677,996)
Gain on consolidation of CityCenter, net (1,562,329) - -
Depreciation and amortization 1,150,610 1,210,556 1,304,649
CEO transition expense - 44,401 -
October 1 litigation settlement - 49,000 -
Restructuring - 26,025 92,139
Triple-net operating lease and ground lease rent expense 833,158 710,683 74,656
Gain related to sale of Harmon land - unconsolidated affiliate
(49,755) - -
Income from unconsolidated affiliates related to real
estate ventures (166,658) (148,434) (544)
Adjusted EBITDAR $ 2,421,083 Guarantor Financial Information
As ofDecember 31, 2021 , all of our principal debt arrangements are guaranteed by each of our wholly owned material domestic subsidiaries that guarantee our senior credit facility. Our principal debt arrangements are not guaranteed by MGP, theOperating Partnership ,MGM Grand Detroit ,MGM National Harbor , Blue Tarp reDevelopment, LLC (the entity that operatesMGM Springfield ), and each of their respective subsidiaries. Our foreign subsidiaries, includingMGM China and its subsidiaries, are also not guarantors of our principal debt arrangements. In the event that any subsidiary is no longer a guarantor of our credit facility or any of our future capital markets indebtedness, that subsidiary will be released and relieved of its obligations to guarantee our existing senior notes. The indentures governing the senior notes further provide that in the event of a sale of all or substantially all of the assets of, or capital stock in a subsidiary guarantor then such subsidiary guarantor will be released and relieved of any obligations under its subsidiary guarantee. 49 -------------------------------------------------------------------------------- The guarantees provided by the subsidiary guarantors rank senior in right of payment to any future subordinated debt of ours or such subsidiary guarantors, junior to any secured indebtedness to the extent of the value of the assets securing such debt and effectively subordinated to any indebtedness and other obligations of our subsidiaries that do not guarantee the senior notes. In addition, the obligations of each subsidiary guarantor under its guarantee is limited so as not to constitute a fraudulent conveyance under applicable law, which may eliminate the subsidiary guarantor's obligations or reduce such obligations to an amount that effectively makes the subsidiary guarantee lack value. The summarized financial information of us and our guarantor subsidiaries, on a combined basis, is presented below. Certain of our guarantor subsidiaries collectively ownOperating Partnership units and each subsidiary accounts for its respective investment under the equity method within the summarized financial information presented below. These subsidiaries have also accounted for the MGP master lease as an operating lease, recording operating lease liabilities and operating ROU assets with the related rent expense of guarantor subsidiaries reflected within the summarized financial information. December 31, 2021 Balance Sheet (In thousands) Current assets$ 5,663,171 Investment in theMGP Operating Partnership
2,284,222
Intercompany accounts due from non-guarantor subsidiaries -
MGP master lease right-of-use asset, net 6,629,140
Other long-term assets 17,025,933
MGP master lease operating lease liabilities - current 154,287
Other current liabilities 2,752,185
Intercompany accounts due to non-guarantor subsidiaries 16,697
MGP master lease operating lease liabilities - noncurrent 7,083,505
Other long-term liabilities 18,472,138
Year Ended
December 31,
2021
Income Statement (In thousands)
Net revenues $ 6,841,788
MGP master lease rent expense (630,364)
Operating income 2,025,160
Income from continuing operations 1,963,979
Net income 1,702,096
Net income attributable to
Liquidity and Capital Resources
Cash Flows - Summary
Our cash flows consisted of the following:
Year Ended December 31,
2021 2020 2019
(In thousands)
Net cash provided by (used in) operating activities $ 1,373,423 $ (1,493,043) $ 1,810,401
Net cash provided by investing activities 1,543,645 2,159,304 3,519,434
Net cash provided by (used in) financing activities (2,814,095) 2,103,427 (4,529,594)
50--------------------------------------------------------------------------------
Cash Flows
Operating activities. Trends in our operating cash flows tend to follow trends in operating income, excluding non-cash charges, but can be affected by changes in working capital, the timing of significant interest payments, tax payments or refunds, and distributions from unconsolidated affiliates. Cash provided by operating activities was$1.4 billion in 2021 compared to cash used in operating activities of$1.5 billion in 2020. The change from the prior year was due primarily to the increase in Adjusted Property EBITDAR discussed within the results of operations section above, and due to the prior year being negatively affected by a change in working capital related to gaming and non-gaming deposits, gaming taxes and other gaming liabilities, and payroll related liabilities as a result of the COVID-19 pandemic, partially offset by an increase in triple-net lease rent payments and cash paid for interest and taxes. Investing activities. Our investing cash flows can fluctuate significantly from year to year depending on our decisions with respect to strategic capital investments in new or existing resorts, business acquisitions or dispositions, and the timing of maintenance capital expenditures to maintain the quality of our resorts. Capital expenditures related to regular investments in our existing resorts can also vary depending on timing of larger remodel projects related to our public spaces and hotel rooms. Cash provided by investing activities was$1.5 billion in 2021 compared to$2.2 billion in 2020. In 2021, we received$3.9 billion in net cash proceeds from the sale of the real estate of Aria (including Vdara), received$107 million in net proceeds from the sale of property and equipment, primarily related to the sale of art, which were partially offset by our payments of$1.8 billion to acquireCityCenter , net of cash acquired,$491 million in capital expenditures, as further discussed below, and contributions of$225 million to BetMGM. In comparison, in the prior year we received$2.5 billion in net cash proceeds from theMandalay Bay andMGM Grand Las Vegas real estate transaction, which were partially offset by$271 million in capital expenditures and$80 million in contributions to BetMGM. In the prior year period, distributions from unconsolidated affiliates included$51 million related to our share of a distribution paid byCityCenter .
Capital Expenditures
In 2021, we made capital expenditures of$491 million , of which$68 million related toMGM China . Capital expenditures atMGM China included$49 million primarily related to construction of theEmerald Tower project atMGM Cotai and$19 million related to projects atMGM Macau . Capital expenditures at ourLas Vegas Strip Resorts , Regional Operations and corporate entities of$423 million primarily relate to expenditures in information technology and room remodels. In 2020, we made capital expenditures of$271 million , of which$108 million related toMGM China . Capital expenditures atMGM China included$95 million primarily related to construction close-out and projects atMGM Cotai and$13 million related to projects atMGM Macau . Capital expenditures at ourLas Vegas Strip Resorts , Regional Operations and corporate entities of$162 million included expenditures relating to information technology, health and safety initiatives, and various room, restaurant, and entertainment venue remodels. Financing activities. Cash used in financing activities was$2.8 billion in 2021 compared to cash provided by financing activities of$2.1 billion in 2020. In 2021, we had net repayments of debt of$1.3 billion , as further discussed below, distributed$324 million to noncontrolling interest owners, and we repurchased$1.8 billion of our common stock, partially offset by net proceeds received of$793 million from the issuance of MGP's Class A shares. In comparison, in the prior year period, we received net proceeds from the incurrence of the bridge loan facility in connection with the MGP BREIT Venture Transaction of$1.3 billion , net proceeds of$525 million from MGP's Class A share issuances, net debt borrowings of$1.1 billion , as further discussed below, repurchased$354 million of our common stock, distributed$286 million to noncontrolling interest owners, and paid$78 million in dividends to our shareholders.
Borrowings and Repayments of Long-term Debt
In 2021, we had net repayments of debt of$1.3 billion , which consisted of the repayment of the$1.7 billion outstanding onCityCenter's credit facility in full, which was assumed in the acquisition, using cash on hand, and net repayments of$407 million onMGM China's first revolving credit facility. These repayments were partially offset byMGM China's March 2021 issuance of$750 million in aggregate principal amount of 4.75% senior notes due 2027 at an issue price of 99.97% and net draws of$40 million on theOperating Partnership's revolving credit facility, of which$35 million was used in connection with MGP's acquisition ofMGM Springfield with the remainder used to fund theOperating Partnership's and MGP's distribution and dividend payments. The net proceeds fromMGM China's 4.75% senior notes due 2027 issuance were used to partially repay amounts outstanding under theMGM China first revolving credit facility and for general corporate purposes. 51 -------------------------------------------------------------------------------- In 2020, we had net proceeds from the incurrence of the bridge loan facility in connection with the MGP BREIT Venture Transaction of$1.3 billion and net debt borrowings of$1.1 billion , which consisted of net borrowings onMGM China's credit facility of$103 million , our issuance of$750 million of 4.75% senior notes and$750 million of 6.75% senior notes, theOperating Partnership's issuance of$750 million of 3.875% senior notes and$800 million of 4.625% senior notes, andMGM China's issuance of$500 million of 5.25% senior notes, partially offset by the tender of$750 million of our senior notes and the corresponding$97 million of tender offer costs, and the net repayment of$1.7 billion on theOperating Partnership's senior credit facility consisting of the repayment of$1.3 billion of its term loan B facility in full using the proceeds of the$1.3 billion bridge loan facility, which was then assumed by MGP BREIT Venture, the repayment of its$399 million term loan A facility in full using the net proceeds from MGP's settlement of forward equity agreements, partially offset by a net draw of$10 million on its revolving credit facility. InMarch 2020 , with certain of the proceeds from the MGP BREIT Venture Transaction, we completed cash tender offers for an aggregate amount of$750 million of our senior notes, comprised of$325 million principal amount of our outstanding 5.75% senior notes due 2025,$100 million principal amount of our outstanding 4.625% senior notes due 2026, and$325 million principal amount of our outstanding 5.5% senior notes due 2027.
In
In
InJune 2020 ,MGM China issued$500 million in aggregate principal amount of 5.25% senior notes due 2025. The proceeds were used to partially repay amounts outstanding under theMGM China credit facility and for general corporate purposes.
In
InNovember 2020 , theOperating Partnership issued$750 million in aggregate principal amount of 3.875% senior notes due 2029. The proceeds were used for general corporate purposes, which included theDecember 2020 redemption of$700 million of theOperating Partnership units held by us.
Dividends, Distributions to Noncontrolling Interest Owners and Share Repurchases
In 2021, we repurchased and retired
InMarch 2021 ,June 2021 ,September 2021 , andDecember 2021 , we paid dividends of$0.0025 per share, totaling$5 million for 2021. InMarch 2020 , we paid a dividend of$0.15 per share, and inJune 2020 ,September 2020 andDecember 2020 , we paid dividends of$0.0025 per share, totaling$78 million for 2020.
In 2020,
•$545 million of distributions paid in 2021, of which we received$243 million and MGP received$302 million , which MGP concurrently paid as a dividend to its Class A shareholders; and •$602 million of distributions paid in 2020, of which we received$358 million and MGP received$244 million , which MGP concurrently paid as a dividend to its Class A shareholders.
Other Factors Affecting Liquidity and Anticipated Uses of Cash
As previously discussed, the spread of COVID-19 and developments surrounding the
global pandemic have had a significant impact on our business, financial
condition, results of operations, and cash flows in 2020 and 2021 and may
continue to impact our business in 2022 and thereafter. We require a certain
amount of cash on hand to operate our resorts.
52
--------------------------------------------------------------------------------
In addition to required cash on hand for operations, we utilize corporate cash
management procedures to minimize the amount of cash held on hand or in banks.
Funds are swept from the accounts at most of our domestic resorts daily into
central bank accounts, and excess funds are invested overnight or are used to
repay amounts drawn under our revolving credit facility. In addition, from time
to time we may use excess funds to repurchase our outstanding debt and equity
securities subject to limitations in our revolving credit facility and Delaware
law, as applicable. We have significant outstanding debt, interest payments,
rent payments, and contractual obligations in addition to planned capital
expenditures and commitments, including acquiring the operations of The
Cosmopolitan for cash consideration of $1.625 billion , as discussed further in
Note 1.
As of December 31, 2021 , we had cash and cash equivalents of $4.7 billion , of
which MGM China held $399 million and the Operating Partnership held $8 million .
In addition to our cash and cash equivalent balance, we have significant
holdings: a 41.5% economic interest in MGP (refer to Note 1 for discussion on
our agreement entered into in August 2021 regarding the VICI Transaction) and an
approximate 56% interest in MGM China .
At December 31, 2021 , we had $12.9 billion in principal amount of indebtedness,
including $360 million outstanding under the $1.25 billion MGM China first
revolving credit facility and $50 million outstanding under the $1.35 billion
Operating Partnership revolving credit facility. No amounts were drawn on our
$1.675 billion revolving credit facility or the $400 million MGM China second
revolving credit facility. We have $1.0 billion of debt maturing in the next
twelve months, which we expect to repay with cash on hand.
Due to the continued impact of the COVID-19 pandemic, in February 2021 , MGM
China further amended each of its first revolving credit facility and its second
revolving credit facility to provide for waivers of the maximum leverage ratio
and minimum interest coverage ratio through the fourth quarter of 2022. In
February 2022 , MGM China further amended each of its first revolving credit
facility and its second revolving credit facility to extend the financial
covenant waivers through maturity.
As of December 31, 2021 , our expected cash interest payments, excluding MGP and
MGM China , for 2022, 2023, and 2024 are approximately $300 million , $225
million , and $190 million , respectively, and our expected cash interest payments
on a consolidated basis, which includes MGP if the VICI Transaction does not
close and MGM China , for 2022, 2023, and 2024, are approximately $715 million ,
$625 million , and $585 million , respectively. We are also required as of
December 31, 2021 to make annual cash rent payments of $1.6 billion , in the
aggregate, under the triple-net lease agreements, which leases are also subject
to annual escalators and also require us to pay substantially all costs
associated with the lease, including real estate taxes, ground lease payments,
insurance, utilities and routine maintenance, in addition to the annual cash
rent.
We have planned capital expenditures in 2022 of approximately $775 million to
$815 million domestically and approximately $110 million to $130 million at MGM
China , which is inclusive of the capital expenditures required under the
triple-net lease agreements, each of which requires us to spend a specified
percentage of net revenues, at the respective properties, on capital
expenditures. We additionally have planned contributions to BetMGM in 2022 of
approximately $225 million .
We also expect to continue to repurchase shares pursuant to our February 2020
$3.0 billion share repurchase program. Subsequent to December 31, 2021 , we
repurchased approximately 15 million shares of our common stock at an average
price of $43.88 per share for an aggregate amount of $670 million . Repurchased
shares were retired.
In January 2022 , the Operating Partnership paid $141 million of distributions to
its partnership unit holders, of which we received $59 million and MGP received
$82 million , which MGP concurrently paid as a dividend to its Class A
shareholders.
On February 9, 2022 , our Board of Directors approved a quarterly dividend of
$0.0025 per share. The dividend will be payable on March 15, 2022 to holders of
record on March 10, 2022 . Future determinations regarding the declaration and
payment of dividends, if any, will be at the discretion of our board of
directors and will depend on then-existing conditions, including our results of
operations, financial condition, and other factors that our Board of Directors
may deem relevant.
As previously discussed, the COVID-19 pandemic has caused, and is continuing to
cause, significant economic disruption both globally and in the United States ,
and impacted our business, financial condition, results of operations and cash
flows in 2020 and 2021 and may continue to impact our business in 2022 and
thereafter. As widespread vaccine distribution continues and operational
restrictions have been removed, we have seen economic recovery in some of the
market segments in which we operate, as shown in our Summary Operating Results.
However, some areas continue to experience renewed outbreaks and surges in
infection rates. As a result, our business segments continue to face many
uncertainties and our operations remain vulnerable to reversal of these trends
or other continuing negative effects caused by
53
--------------------------------------------------------------------------------
the pandemic. We cannot predict the degree, or duration, to which our operations
will be affected by the COVID-19 pandemic, and the effects could be material. We
continue to monitor the evolving situation and guidance from international and
domestic authorities, including federal, state and local public health
authorities and may take additional actions based on their recommendations. In
these circumstances, there may be developments outside our control requiring us
to further adjust our operating plan, including the implementation or extension
of new or existing restrictions, which may include the reinstatement of
stay-at-home orders in the jurisdictions in which we operate or additional
restrictions on travel and/or our business operations. Because the situation is
ongoing, and because the duration and severity remain unclear, it is difficult
to forecast any impacts on our future results.
For additional information related to our long-term obligations, refer to the
maturities of long-term debt table in Note 9 and the lease liability maturity
table in Note 11.
Principal Debt Arrangements
See Note 9 to the accompanying consolidated financial statements for information
regarding our debt agreements as of
Critical Accounting Policies and Estimates
Management's discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements. To prepare our consolidated financial statements in accordance with accounting principles generally accepted inthe United States of America , we must make estimates and assumptions that affect the amounts reported in the consolidated financial statements. We regularly evaluate these estimates and assumptions, particularly in areas we consider to be critical accounting estimates, where the estimates and assumptions involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material effect on our financial condition or results of operations. However, by their nature, judgments are subject to an inherent degree of uncertainty and therefore actual results can differ from our estimates.
Loss Reserve for
Marker play represents a significant portion of the table games volume at certain of ourLas Vegas resorts. Our other casinos do not emphasize marker play to the same extent, although we offer markers to customers at those casinos as well.MGM China extends credit to certain in-house VIP gaming customers and, historically, to gaming promoters. We maintain strict controls over the issuance of markers and aggressively pursue collection from our customers who fail to pay their marker balances timely. These collection efforts are similar to those used by most large corporations when dealing with overdue customer accounts, including the mailing of statements and delinquency notices, personal contacts, the use of outside collection agencies and civil litigation. Markers are generally legally enforceable instruments inthe United States andMacau . Markers are not legally enforceable instruments in some foreign countries, butthe United States assets of foreign customers may be reached to satisfy judgments entered inthe United States . We consider the likelihood and difficulty of enforceability, among other factors, when we issue credit to customers at our domestic resorts who are not residents ofthe United States .MGM China performs background checks and investigates credit worthiness prior to issuing credit. Refer to Note 2 for further discussion of our casino receivables and those due from customers residing in foreign countries. We maintain a loss reserve for casino accounts at all of our operating casino resorts. The provision for doubtful accounts, an operating expense, increases the loss reserve. We regularly evaluate the loss reserve for casino accounts. At domestic resorts where marker play is not significant, the loss reserve is generally established by applying standard reserve percentages to aged account balances, which is supported by relevant historical analysis and any other known information such as the current economic conditions that could drive losses. At domestic resorts where marker play is significant, we apply standard reserve percentages to aged account balances under a specified dollar amount and specifically analyze the collectability of each account with a balance over the specified dollar amount, based on the age of the account, the customer's current and expected future financial condition, collection history and current and expected future economic conditions.MGM China specifically analyzes the collectability of casino receivables on an individual basis taking into account the age of the account, the financial condition and the collection history of the customer or, historically, the gaming promoter. In addition to enforceability issues, the collectability of unpaid markers given by foreign customers at our domestic resorts is affected by a number of factors, including changes in currency exchange rates and economic conditions in the customers' home countries. Because individual customer account balances can be significant, the loss reserve and the provision can change significantly between periods, as information about a certain customer becomes known or as changes in a region's economy occur. 54 -------------------------------------------------------------------------------- The following table shows key statistics related to our casino receivables, net of discounts: December 31, 2021 2020 (In thousands) Casino receivables$ 380,907 $ 260,998 Loss reserve for casino accounts receivable 117,539 107,723 Loss reserve as a percentage of casino accounts receivable 31 % 41 % Approximately$63 million and$54 million of casino receivables and$31 million and$18 million of the loss reserve for casino accounts receivable relate toMGM China atDecember 31, 2021 and 2020, respectively. The loss reserve as a percentage of casino accounts receivable decreased in the current year due to a decrease in specific reserves at our domestic resorts, as well as the inclusion of Aria in the current year, which had a lower loss reserve compared to our other domestic resorts due to the age of its outstanding receivables, partially offset by an increase in the loss reserve atMGM China primarily due to an increase in its specific reserves. AtDecember 31, 2021 , a 100 basis-point change in the loss reserve as a percentage of casino accounts receivable would change income before income taxes by$4 million .
Fixed Asset Capitalization and Depreciation Policies
Property and equipment are stated at cost. A significant amount of our property and equipment was acquired through business combinations and was therefore recognized at fair value at the acquisition date. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. When we construct assets, we capitalize direct costs of the project, including fees paid to architects and contractors, property taxes, and certain costs of our design and construction subsidiaries. In addition, interest cost associated with major development and construction projects is capitalized as part of the cost of the project. Interest is typically capitalized on amounts expended on the project using the weighted average cost of our outstanding borrowings. Capitalization of interest starts when construction activities begin and ceases when construction is substantially complete, or development activity is suspended for more than a brief period. We must make estimates and assumptions when accounting for capital expenditures. Whether an expenditure is considered a maintenance expense, or a capital asset is a matter of judgment. When constructing or purchasing assets, we must determine whether existing assets are being replaced or otherwise impaired, which also may be a matter of judgment. In addition, our depreciation expense is highly dependent on the assumptions we make about our assets' estimated useful lives. We determine the estimated useful lives based on our experience with similar assets, engineering studies, and our estimate of the usage of the asset. Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively.
Impairment of Long-lived Assets,
We evaluate our property and equipment and other long-lived assets for
impairment based on our classification as held for sale or to be held and used.
Several criteria must be met before an asset is classified as held for sale,
including that management with the appropriate authority commits to a plan to
sell the asset at a reasonable price in relation to its fair value and is
actively seeking a buyer. For assets classified as held for sale, we recognize
the asset at the lower of carrying value or fair market value less costs of
disposal, as estimated based on comparable asset sales, offers received, or a
discounted cash flow model. For assets to be held and used, we review for
impairment whenever indicators of impairment exist. We then compare the
estimated future cash flows of the asset, on an undiscounted basis, to the
carrying value of the asset. If the undiscounted cash flows exceed the carrying
value, no impairment is indicated. If the undiscounted cash flows do not exceed
the carrying value, then an impairment is recorded based on the fair value of
the asset. For operating assets, fair value is typically measured using a
discounted cash flow model whereby future cash flows are discounted using a
weighted average cost of capital, developed using a standard capital asset
pricing model, based on guideline companies in our industry. If an asset is
still under development, future cash flows include remaining construction costs.
All recognized impairment losses, whether for assets to be held for sale or
assets to be held and used, are recorded as operating expenses.
There are several estimates, assumptions and decisions in measuring impairments
of long-lived assets. First, management must determine the usage of the asset.
To the extent management decides that an asset will be sold, it is more likely
that an impairment may be recognized. Assets must be tested at the lowest level
for which identifiable cash flows exist. This means that some assets must be
grouped, and management has some discretion in the grouping of assets. Future
cash flow estimates are, by their nature, subjective and actual results may
differ materially from our estimates.
55
--------------------------------------------------------------------------------
On a quarterly basis, we review our major long-lived assets to determine if
events have occurred or circumstances exist that indicate a potential
impairment. Potential factors which could trigger an impairment include
underperformance compared to historical or projected operating results, negative
industry or economic factors, significant changes to our operating environment,
or changes in intended use of the asset group. We estimate future cash flows
using our internal budgets and probability weight cash flows in certain
circumstances to consider alternative outcomes associated with recoverability of
the asset group, including potential sale. Historically, undiscounted cash flows
of our significant operating asset groups have exceeded their carrying values by
a substantial margin. During 2019, we recorded a non-cash impairment charge
relating to the carrying value of Circus Circus Las Vegas and adjacent land.
Refer to Note 16 for further discussion.
We review indefinite-lived intangible assets at least annually and between
annual test dates in certain circumstances. We perform our annual impairment
test for indefinite-lived intangible assets in the fourth quarter of each fiscal
year. Indefinite-lived intangible assets consist primarily of license rights and
trademarks. For our 2021 annual impairment tests, we utilized the option to
perform a qualitative ("step zero") analysis for certain of our indefinite-lived
intangibles and concluded it was more likely than not that the fair values of
such intangibles exceeded their carrying values by a substantial margin. We
elected to perform a quantitative analysis for the MGM Northfield Park gaming
license in 2021 primarily using the discounted cash flow approach, for which the
fair value exceeded its carrying value by a substantial margin. As discussed
below, management makes significant judgments and estimates as part of these
analyses. If certain future operating results do not meet current expectations
it could cause carrying values of the intangibles to exceed their fair values in
future periods, potentially resulting in an impairment charge.
We review goodwill at least annually and between annual test dates in certain
circumstances. None of our reporting units incurred any goodwill impairment
charges in 2021. For our 2021 annual impairment tests, we utilized the option to
perform a step zero analysis for certain of our reporting units and concluded it
was more likely than not that the fair values of such reporting units exceeded
their carrying values by a substantial margin. As discussed below, management
makes significant judgments and estimates as part of these analyses. If future
operating results of our reporting units do not meet current expectations it
could cause carrying values of our reporting units to exceed their fair values
in future periods, potentially resulting in a goodwill impairment charge.
There are several estimates inherent in evaluating these assets for impairment.
In particular, future cash flow estimates are, by their nature, subjective and
actual results may differ materially from our estimates. In addition, the
determination of multiples, capitalization rates and the discount rates used in
the impairment tests are highly judgmental and dependent in large part on
expectations of future market conditions.
See Note 2 and Note 7 to the accompanying consolidated financial statements for further discussion of goodwill and other intangible assets.
Impairment of Investments in Unconsolidated Affiliates
See Note 2 to the accompanying consolidated financial statements for discussion of our evaluation of other-than-temporary impairment of investments in unconsolidated affiliates. During 2021 and 2020, we recorded$22 million and$64 million , respectively, in other-than-temporary impairment charges on equity method investments. Refer to Note 6 for further discussion. Our investments in unconsolidated affiliates had no material impairments in 2019.
Income Taxes
We are subject to income taxes in theU.S. federal jurisdiction, various state and local jurisdictions, and foreign jurisdictions, although the income taxes paid in foreign jurisdictions are not material. We recognize deferred tax assets and liabilities related to net operating losses, tax credit carryforwards and temporary differences with future tax consequences. We reduce the carrying amount of deferred tax assets by a valuation allowance if it is more likely than not such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on such "more-likely-than-not" realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the scheduled reversal of deferred tax liabilities, the duration of statutory carryforward periods, and tax planning strategies. We recorded a valuation allowance on the net deferred tax assets of our domestic jurisdictions of$2.7 billion as of bothDecember 31, 2021 and 2020, and a valuation allowance on certain net deferred tax assets of foreign jurisdictions of$149 million and$156 million as ofDecember 31, 2021 and 2020, respectively. We reassess the realization of deferred tax assets each reporting period. In the event we were to determine that it is more likely than not that we will be unable to 56 -------------------------------------------------------------------------------- realize all or part of our deferred tax assets in the future, we would increase the valuation allowance and recognize a corresponding charge to earnings or other comprehensive income in the period in which we make such a determination. Likewise, if we later determine that we are more likely than not to realize the deferred tax assets, we would reverse the applicable portion of the previously recognized valuation allowance. In order for us to realize our deferred tax assets, we must be able to generate sufficient taxable income in the jurisdictions in which the deferred tax assets are located. Furthermore, we are subject to routine corporate income tax audits in many of these jurisdictions. We believe that positions taken on our tax returns are fully supported, but tax authorities may challenge these positions, which may not be fully sustained on examination by the relevant tax authorities. Accordingly, our income tax provision includes amounts intended to satisfy assessments that may result from these challenges. Determining the income tax provision for these potential assessments and recording the related effects requires management judgments and estimates. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our income tax provision, net income and cash flows.
Refer to Note 10 in the accompanying consolidated financial statements for further discussion relating to income taxes.
© Edgar Online, source
