MGM RESORTS INTERNATIONAL This management's discussion and analysis of financial condition and results of operations contain forward-looking statements that involve risks and uncertainties. Please see "Cautionary Statement Concerning Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, the audited consolidated financial statements and notes for the fiscal year endedDecember 31, 2020 , which were included in our Form 10-K, filed with theSecurities and Exchange Commission ("SEC") onFebruary 26, 2021 . The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods.MGM Resorts International together with its subsidiaries may be referred to as "we," "us" or "our."MGM China Holdings Limited together with its subsidiaries is referred to as "MGM China ."MGM Growth Properties LLC together with its subsidiaries is referred to as "MGP."
Description of our business and key performance indicators
Our primary business is the ownership and operation of casino resorts which
offer gaming, hotel, convention, dining, entertainment, retail and other resort
amenities. We own or invest in 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
heavily 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.
Financial Impact of COVID-19
The spread of coronavirus disease 2019 ("COVID-19") and developments surrounding
the global pandemic have had, and we expect will continue to have, a significant
impact on our business, financial condition, results of operations and cash
flows in 2021 and potentially thereafter. In March 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, but continue to operate without certain amenities and subject to
certain occupancy limitations, with restrictions varying by jurisdiction and
with further temporary re-closures and re-openings occurring for our properties
or portions thereof into the first quarter of 2021. Upon re-opening of the
properties, we implemented certain measures to mitigate the spread of COVID-19,
including limitations on the number of gaming tables allowed to operate and on
the number of seats at each table game, as well as slot machine spacing,
temperature checks, mask protection, limitations on restaurant capacity,
entertainment events and conventions as well as other measures to enforce social
distancing. In the latter part of the first quarter of 2021, certain
jurisdictions have loosened prior operating restrictions, including increased
capacity limits applicable to restaurants and conventions as well as allowing
limited entertainment events to resume, subject to continued COVID-19 safety
measures.
Although we are continuing to see reduced operating restrictions at our
properties, such properties may be subject to temporary, complete, or partial
shutdowns in the future due to COVID-19 related concerns. At this time, we
cannot predict whether the jurisdictions in which our properties are located,
states or federal governments will adopt similar or more restrictive measures in
the future than in the past, including stay-at-home orders. While business
volumes have improved since operating restrictions loosened in the first quarter
of 2021, our properties continued to generate revenues that are significantly
lower than historical results.
We have seen and continue to expect to see weakened demand at our properties
relative to pre-pandemic business volumes as a result of continued domestic and
international travel restrictions or warnings, restrictions on amenity use, such
as gaming, restaurant and pool capacity limitations, consumer fears and reduced
consumer discretionary spending, general economic uncertainty, and increased
rates of unemployment. In light of the foregoing, we are unable to determine
when our properties will return to pre-pandemic demand or pricing.
In Macau , following a temporary closure of our properties on February 5, 2020 ,
operations resumed on February 20, 2020 , subject to certain health safeguards,
such as limiting the number of gaming tables allowed to operate and 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 "IVS") for residents of Zhuhai, Guangdong Province and all other
provinces in mainland China to travel to Macau resumed on August 12, 2020 ,
August 26, 2020 and September 23, 2020 , respectively, several travel and entry
restrictions in Macau , Hong Kong and mainland China remain in place (including
the temporary suspension of ferry services from Hong Kong to Macau , a negative
nucleic acid test result, and mandatory quarantine requirements for visitors
from Hong Kong and Taiwan , and bans on entry or enhanced quarantine requirements
on other visitors into Macau ), which have significantly impacted visitation to
our Macau properties.
21
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Other Developments InMarch 2021 , we delivered a notice of redemption to MGP covering approximately 37 millionOperating Partnership units that we held which was satisfied with aggregate cash proceeds of approximately$1.2 billion . See Note 9 in the accompanying consolidated financial statements for information regarding this transaction, which eliminates in consolidation. 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. Historically, our normal table games hold percentage at our
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); averagedaily 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 three months ended
of property 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 -
of nonnegotiable chip wagers won by
chips purchased plus nonnegotiable chips exchanged less nonnegotiable chips
returned. Turnover provides a basis for measuring VIP casino win
percentage. Historically, win for VIP gaming operations at
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 in
China's hold percentages. Results of Operations Summary Financial Results
The temporary closure of our properties due to COVID-19 in the current and comparative period impacted our financial results. Dates of temporary closure are shown below:
Las Vegas Strip Resorts 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(1) March 17, 2020 July 1, 2020 The Mirage(2) March 17, 2020 August 27, 2020 Park MGM(1) March 17, 2020 September 30, 2020 Regional Operations Gold Strike 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(3) March 15, 2020 July 13, 2020 Borgata March 16, 2020 July 26, 2020 MGM Grand Detroit(4) March 16, 2020 August 7, 2020 Empire City March 14, 2020 September 21, 2020
(1) Park MGM and
starting
hotel tower operations resumed on March 3, 2021 .
22
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(2) The Mirage's hotel tower operations were closed midweek beginning November
30, 2020. The entire property was closed midweek starting
and re-opened on
(3)
hotel operations resumed with midweek closures on
(4)
23, 2020, with the hotel tower operations resuming February 9, 2021 .
The following table summarizes our consolidated financial results for the three
months ended
Three Months Ended
March 31,
2021 2020
(In thousands)
Net revenues $ 1,647,747 $ 2,252,817
Operating income (loss) (246,690 ) 1,250,845
Net income (loss) (335,938 ) 674,519
Net income (loss) attributable to MGM Resorts
International (331,829 ) 806,869
Summary Operating Results
Consolidated net revenues decreased 27% for the three months ended March 31,
2021 compared to the prior year quarter due primarily to the impact of COVID-19.
While the prior year period was negatively affected by property closures for a
portion of the quarter at our Las Vegas Strip Resorts and Regional Operations,
the current year quarter was negatively affected by midweek property and hotel
closures, lower business volume and travel activity, and ongoing operational
restrictions due to the pandemic, primarily at our Las Vegas Strip Resorts . At
MGM China , the prior year quarter was negatively affected by property closures
and was more significantly impacted by travel restrictions to Macau than in the
current quarter. These factors resulted in a 52% decrease in net revenues at our
Las Vegas Strip Resorts , a 2% decrease in net revenues at our Regional
Operations, and a 9% increase in net revenues at MGM China .
Consolidated operating loss was $247 million for the three months ended March
31, 2021 compared to consolidated operating income of $1.3 billion in the prior
year quarter, due primarily to the prior year quarter including a $1.5 billion
gain related to the MGM Grand Las Vegas and Mandalay Bay real estate
transaction, the impact of COVID-19 which caused a decrease in net revenues,
discussed above, partially offset by a $28 million decrease in general and
administrative expense, a $28 million decrease in depreciation and amortization,
a $29 million decrease in property transactions, net, and a $66 million decrease
in corporate expense. General and administrative expense decreased in the
current quarter compared to the prior quarter due primarily to aggressive cost
reduction efforts to reduce expenses at our domestic properties, which primarily
related to decreases in payroll expense, utilities, and advertising expense,
which was partially offset by a full quarter of rent expense for the Mandalay
Bay and MGM Grand Las Vegas lease. Corporate expense decreased to $78 million in
the first quarter of 2021 from $144 million in the prior year quarter due
primarily to a decrease in payroll costs. Corporate expense in the prior year
quarter included $44 million in CEO transition expense and $4 million in
corporate initiatives costs. 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 prior year quarter
included a $38 million other-than-temporary impairment charge on an equity
method investment. Depreciation and amortization decreased compared to the prior
year quarter due primarily to the sale of the MGM Grand Las Vegas and Mandalay
Bay real estate assets in February 2020 .
23
--------------------------------------------------------------------------------Net Revenues by Segment
The following table presents a detail by segment of net revenues:
Three Months Ended
March 31,
2021 2020
(In thousands)
Las Vegas Strip Resorts
Casino revenue $ 232,094 $ 274,673
Rooms 144,329 362,864
Food and beverage 90,419 288,763Entertainment, retail and other 78,122 207,506
544,964 1,133,806
Regional Operations
Casino revenue 596,655 536,630
Rooms 40,579 55,879
Food and beverage 50,364 95,092Entertainment, retail and other 23,753 38,059
711,351 725,660
MGM China
Casino revenue 261,604 240,414
Rooms 13,512 15,209
Food and beverage 16,629 12,780
Entertainment, retail and other 4,609 3,484
296,354 271,887
Reportable segment net revenues 1,552,669 2,131,353
Corporate and other 95,078 121,464
$ 1,647,747 $ 2,252,817
Las Vegas Strip Resorts
Las Vegas Strip Resorts casino revenue decreased 16% for the three months ended
March 31, 2021 compared to the prior year quarter due primarily to the lower
business volume and travel activity due to the impact of COVID-19, which
included continued operational restrictions related to the pandemic, as
discussed above, resulting in decreases in table games win and slots win of 35%
and 8%, respectively.
The following table shows key gaming statistics for our Las Vegas Strip Resorts :
Three Months Ended
March 31,
2021 2020
(Dollars in millions)
Table Games Drop $529 $841
Table Games Win $127 $196
Table Games Win % 24.1% 23.2%
Slots Handle $2,301 $2,457
Slots Win $212 $230
Slots Win % 9.2% 9.4%
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--------------------------------------------------------------------------------Las Vegas Strip Resorts rooms revenue decreased 60% for the three months endedMarch 31, 2021 compared to the prior year quarter due primarily to the continued impact of COVID-19, which included a decrease in REVPAR as a result of reduced business volume and travel related to the pandemic, as discussed above. The following table shows key hotel statistics for ourLas Vegas Strip Resorts : Three Months Ended March 31, 2021 2020 Occupancy(1) 46% 88% Average daily rate (ADR)$129 $183
Revenue per available room (REVPAR)(1)
(1) Rooms that were out of service, including full and midweek closures, during
the three months ended
were excluded from the available room count when calculating hotel occupancy
and REVPAR.
Las Vegas Strip Resorts food and beverage revenue decreased 69% for the three
months ended March 31, 2021 compared to the prior year quarter due primarily to
the continued impact of COVID-19, which included reduced business volume and
travel, midweek property and hotel closures at certain properties, and capacity
and other operational restrictions related to the pandemic, as discussed above.
Las Vegas Strip Resorts entertainment, retail and other revenue decreased 62%
for the three months ended March 31, 2021 compared to the prior year quarter due
primarily to the continued impact of COVID-19, which included capacity and other
operational restrictions related to the pandemic, as discussed above, including
the closure of entertainment venues, such as certain theaters and nightclubs
during the current year quarter, with limited capacity for entertainment venues
that were open.
Regional Operations
Regional Operations casino revenue increased 11% for the three months ended
The following table shows key gaming statistics for our Regional Operations:
Three Months Ended
March 31,
2021 2020
(Dollars in millions)
Table Games Drop $819 $844
Table Games Win $173 $164
Table Games Win % 21.2% 19.4%
Slots Handle $5,384 $5,170
Slots Win $526 $494
Slots Win% 9.8% 9.6%
Regional Operations rooms revenue decreased 27% for the three months ended March
31, 2021 compared to the prior year quarter due primarily to the impact of
COVID-19, and a decrease in REVPAR as a result of reduced travel related to the
pandemic as well as midweek hotel closures at certain properties, as discussed
above.
Regional Operations food and beverage revenue decreased 47% for the three months
ended March 31, 2021 , compared to the prior year quarter due primarily to the
impact of COVID-19, which included operational restrictions related to the
pandemic as well as a result of reduced travel related to the pandemic as well
as midweek hotel closures at certain properties, as discussed above.
Regional Operations entertainment, retail and other revenue decreased 38% for
the three months ended March 31, 2021 , compared to the prior year quarter due
primarily to the impact of COVID-19, which included capacity and other
operational restrictions, as discussed above, including the closure of certain
entertainment venues, such as theaters.
25
--------------------------------------------------------------------------------MGM China
The following table shows key gaming statistics for
Three Months Ended
March 31,
2021 2020
(Dollars in millions)
VIP Table Games Turnover
$78 $109 VIP Table Games Win % 3.3% 3.2%
Main Floor Table Games Drop
MGM China net revenues increased 9% for the three months endedMarch 31, 2021 compared to the prior year quarter as the prior year quarter was negatively affected by property closures and was more significantly impacted by travel restrictions toMacau than in the current quarter. VIP table games win decreased 28% and main floor table games win increased 23% compared to the prior year quarter. 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. Reimbursed costs revenue represents reimbursement of costs, primarily payroll-related, incurred by us in connection with the provision of management services and was$58 million and$98 million for the three months endedMarch 31, 2021 and 2020, respectively, which declined for the respective comparative periods due primarily to the property closures and other operational restrictions related to the pandemic. See below for additional discussion of our share of operating results from unconsolidated affiliates.
Adjusted Property EBITDAR and Adjusted EBITDAR
The following table presents Adjusted Property EBITDAR and Adjusted EBITDAR.
Adjusted Property EBITDAR is our reportable segment GAAP measure, which we
utilize as the primary profit measure for our reportable segments. See Note 10 -
Segment Information in the accompanying consolidated financial statements and
"Reportable Segment GAAP measure" below for additional information. Adjusted
EBITDAR is a non-GAAP measure, discussed within "Non-GAAP measure" below.
Three Months Ended
March 31,
2021 2020
(In thousands)
Las Vegas Strip Resorts $ 108,119 $ 267,599
Regional Operations 241,982 151,720
MGM China 4,775 (21,990 )
Corporate and other (136,991 ) (102,237 )
Adjusted EBITDAR $ 217,885
Las Vegas Strip Resorts
Adjusted Property EBITDAR at our Las Vegas Strip Resorts decreased 60% and
Adjusted Property EBITDAR margin decreased to 19.8% for the three months ended
March 31, 2021 compared to 23.6% in the prior year quarter. Adjusted Property
EBITDAR decreased compared to the prior year quarter due primarily to a decrease
in casino and non-casino revenues resulting from the operational restrictions
related to the pandemic, and a decrease in travel and business volume, partially
offset by a decrease in operating expenses as a result of cost reduction
efforts.
Regional Operations
Adjusted Property EBITDAR at our Regional Operations increased 59% and Adjusted
Property EBITDAR margin increased to 34.0% for the three months ended March 31,
2021 compared to 20.9% in the prior year quarter. Adjusted Property EBITDAR
increased due to an increase in casino revenues, discussed above, and realized
benefits of the Company's cost saving initiatives.
26
--------------------------------------------------------------------------------MGM China MGM China's Adjusted Property EBITDAR was$5 million for the three months endedMarch 31, 2021 compared to Adjusted Property EBITDAR loss of$22 million in the prior year quarter, as the prior year quarter was negatively affected by property closures and was more significantly impacted by travel restrictions toMacau than in the current quarter. License fee expense was$5 million in each of the current and prior year quarters.
Income (loss) from Unconsolidated Affiliates
The following table summarizes information related to our share of operating income (loss) from unconsolidated affiliates:
Three Months Ended
March 31,
2021 2020
(In thousands)
CityCenter $ (2,831 ) $ 20,666
MGP BREIT Venture 38,962 19,950
BetMGM (59,236 ) (10,677 )
Other (2,474 ) 5,809
$ (25,579 ) $ 35,748
Our share of CityCenter's operating loss, including certain basis difference
adjustments, for the three months ended March 31, 2021 was $2.8 million compared
to our share of operating income of $21 million in the prior year quarter,
primarily driven by the decrease in CityCenter's casino and non-casino revenues
as a result of the operational restrictions and reduced business volume and
travel related to the pandemic.
Non-operating Results
Interest Expense
Gross interest expense was $196 million and $158 million for the three months
ended March 31, 2021 and 2020, respectively. The increase in gross interest
expense when compared to the prior year quarter is due primarily to the increase
in average debt outstanding related to our senior notes, partially offset by a
decrease in the weighted average interest rate related to our senior notes. See
Note 4 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 $32 million for the quarter ended March 31, 2021 compared
to other expense, net of $124 million in the prior year quarter. The current
quarter included a $35 million gain on unhedged interest rate swaps, a $6
million remeasurement loss on MGM China's U.S. dollar-denominated senior notes
and $5 million of interest income. The prior year quarter 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 an $8 million remeasurement gain on MGM China's
U.S. dollar-denominated senior notes. Refer to Note 4 for further discussion of
our long-term debt.
Income Taxes
Our effective tax rate was a benefit of 22.0% on loss before income taxes for
the three months ended March 31, 2021 , compared to a provision of 28.0% on
income before income taxes in the prior year quarter. The effective rate for the
three months ended March 31, 2021 was favorably impacted by a release of tax
reserves in conjunction with the closure of the most recent New Jersey state
audit for Marina District Development Company . The effective tax rate in the
prior year quarter was driven primarily by tax expense recorded on the MGP BREIT
Venture transaction and the unfavorable impact of adjustments to valuation
allowances for Macau deferred tax assets and foreign tax credits.
The annual effective tax rate calculation for all periods is impacted by assumptions made regarding projected foreign tax credit usage and valuation allowance. See Note 5 in the accompanying consolidated financial statements for further discussion.
27
--------------------------------------------------------------------------------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, 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 corporate expense 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, gain on REIT transactions, net, CEO transition expense, rent expense
associated with triple-net operating and ground leases, income from
unconsolidated affiliates related to investments in real estate ventures, and
property transactions, net.
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 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.
28
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The following table presents a reconciliation of net income (loss) attributable
to
Three Months Ended
March 31,
2021 2020
(In thousands)
Net income (loss) attributable to MGM Resorts
International $ (331,829 ) $ 806,869
Plus: Net loss attributable to noncontrolling interests (4,109 )
(132,350 ) Net income (loss) (335,938 )
674,519
Provision (benefit) for income taxes (94,698 )
262,304
Income (loss) before income taxes (430,636 )
936,823
Non-operating (income) expense Interest expense, net of amounts capitalized 195,295
157,137
Non-operating items from unconsolidated affiliates 20,836 32,621
Other, net (32,185 ) 124,264
183,946 314,022
Operating income (loss) (246,690 ) 1,250,845
Preopening and start-up expenses 5 122
Property transactions, net 26,071
54,975
Gain on REIT transactions, net - (1,491,945 ) Depreciation and amortization 290,551
318,290
CEO transition expense -
44,401
Triple-net operating lease and ground lease rent expense 189,620
141,918
Income from unconsolidated affiliates related to real estate ventures (41,672 ) (23,514 ) Adjusted EBITDAR$ 217,885
Guarantor Financial Information
As ofMarch 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 owns and 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. 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. 29
-------------------------------------------------------------------------------- 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. March 31, December 31, 2021 2020 Balance Sheet (In thousands) Current assets$ 5,544,478 $ 4,749,542 Investment in the MGP Operating Partnership 1,017,170
1,617,055
Intercompany accounts due from non-guarantor subsidiaries 18,768
16,622
MGP master lease right-of-use asset, net 6,688,690
6,714,101
Other long-term assets 12,201,256
12,318,912
MGP master lease operating lease liabilities - current 158,479
153,415
Other current liabilities 1,124,301
1,123,814
MGP master lease operating lease liabilities -
noncurrent 7,157,624 7,191,450
Other long-term liabilities 15,814,152 15,827,794
Three Months Ended
March 31,
2021
Income Statement (In thousands)
Net revenues $ 1,013,466
MGP master lease rent expense (160,156 )
Operating loss (285,778 )
Loss from continuing operations (241,533 )
Net loss (150,019 )
Net loss attributable to MGM Resorts International (150,019 )
Liquidity and Capital Resources
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 used in operating activities was$88 million in the three months endedMarch 31, 2021 compared to$423 million in the three months endedMarch 31, 2020 . The decrease in cash used in operating activities over the prior year period is primarily due to the prior year period 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, as well as a current year quarter decrease in cash paid for interest. Operating cash flows at our properties decreased compared to the prior year period as a result of the decrease at our Las Vegas Strip resorts, as discussed above. 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 used in investing activities was$155 million in the three months endedMarch 31, 2021 compared to cash provided by investing activities of$2.4 billion in the three months endedMarch 31, 2020 . In the three months endedMarch 31, 2021 , we made$79 million in capital expenditures, as further discussed below, and contributed$75 million to our unconsolidated affiliateBetMGM LLC ("BetMGM"). In comparison, in the prior year quarter we received$2.5 billion in net cash proceeds from the sale of the real estate ofMandalay Bay andMGM Grand Las Vegas , which was partially offset by$73 million in capital expenditures and a$20 million investment made in our unconsolidated affiliate BetMGM. 30 --------------------------------------------------------------------------------
Capital Expenditures We made capital expenditures of$79 million in the three months endedMarch 31, 2021 , of which$30 million related toMGM China . Capital expenditures atMGM China included$23 million primarily related to construction of the south tower project atMGM Cotai and$7 million related to projects atMGM Macau . Capital expenditures at ourLas Vegas Strip Resorts , Regional Operations and corporate entities of$49 million primarily relate to expenditures in information technology and room remodels. We made capital expenditures of$73 million in the three months endedMarch 31, 2020 , of which$42 million related toMGM China . Capital expenditures atMGM China included$39 million related to projects atMGM Cotai and$3 million related to projects atMGM Macau . Capital expenditures at ourLas Vegas Strip Resorts , Regional Operations and corporate entities of$31 million included expenditures relating to information technology, and various room, restaurant, and entertainment venue remodels. Financing activities. Cash provided by financing activities was$1.3 billion in the three months endedMarch 31, 2021 compared to$1.7 billion in the three months endedMarch 31, 2020 . In the three months endedMarch 31, 2021 , we had net borrowings of debt of$876 million , as further discussed below, received net proceeds of$676 million from the issuance of MGP's Class A shares, distributed$76 million to noncontrolling interest owners, and we repurchased$119 million of our common stock. In comparison, in the prior year period, we had net proceeds from the incurrence of a bridge loan facility of$1.3 billion , net proceeds of$525 million from MGP's Class A share issuances, net borrowings of debt of$443 million as further discussed below, and we repurchased$354 million of our common stock.
Borrowings and Repayments of Long-term Debt
During the three months endedMarch 31, 2021 , we had net borrowings of debt of$876 million which consisted ofMGM China's issuance of$750 million in aggregate principal amount of 4.75% senior notes due 2027 at an issue price of 99.97% and$133 million of net borrowings onMGM China's first revolving credit facility, partially offset by theOperating Partnership's repayment of$9 million on its revolving credit facility. 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 inApril 2021 , subsequent toMarch 31, 2021 , and for general corporate purposes. During the three months endedMarch 31, 2020 , we had net borrowings of$443 million which consisted of$1.5 billion of borrowings on our senior credit facility,$1.35 billion of borrowings on theOperating Partnership's senior credit facility, and$158 million of net borrowings onMGM China's first revolving credit facility, partially offset by the repayment of$399 million of theOperating Partnership's term loan A facility and$1.3 billion of theOperating Partnership's term loan B facility, and the purchase of$750 million in aggregate amount of our senior notes through our cash tender offers.
Dividends, Distributions to Noncontrolling Interest Owners and Share Repurchases
During the three months endedMarch 31, 2021 , we repurchased and retired$119 million of our common stock pursuant to ourMay 2018 $2.0 billion andFebruary 2020 $3.0 billion stock repurchase plans. As a result of those repurchases, we completed ourMay 2018 $2.0 billion stock repurchase program, and the remaining availability under theFebruary 2020 $3.0 billion stock repurchase program was$2.9 billion as ofMarch 31, 2021 . During the three months endedMarch 31, 2020 , we repurchased and retired$354 million of our common stock pursuant to ourMay 2018 $2.0 billion stock repurchase plan. InMarch 2021 , we paid a dividend of$0.0025 per share, totaling$1 million , paid during the three months endedMarch 31, 2021 , compared to a dividend of$0.15 per share, totaling$74 million , paid during the three months endedMarch 31, 2020 .
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dividend to its Class A shareholders; and
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dividend to its Class A shareholders.
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Other Factors Affecting Liquidity and Anticipated Uses of Cash
We require a certain amount of cash on hand to operate our resorts. 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 andDelaware law, as applicable. We have significant outstanding debt, interest payments, rent payments, and contractual obligations in addition to planned capital expenditures. As previously discussed, the spread of COVID-19 and developments surrounding the global pandemic have had, and we expect will continue to have, a significant impact on our business, financial condition, results of operations, and cash flows. During this time, we have remained committed to managing our expenses to strengthen our liquidity position. As ofMarch 31, 2021 , we had cash and cash equivalents of$6.2 billion , of whichMGM China held$1.1 billion and theOperating Partnership held$143 million . In addition to our cash and cash equivalent balance, we currently have significant real estate assets and other holdings: we ownMGM Springfield , a 50% interest inCityCenter inLas Vegas , an approximate 56% interest inMGM China , and a 42.1% economic interest in MGP. AtMarch 31, 2021 , we had$13.4 billion in principal amount of indebtedness, including$1 million outstanding under the$1.35 billion Operating Partnership revolving credit facility, and$903 million outstanding under the$1.25 billion MGM China first revolving credit facility. No amounts were drawn on our$1.5 billion revolving credit facility or the$400 million MGM China second revolving credit facility. We have no debt maturing prior to 2022. Subsequent to the quarter endedMarch 31, 2021 , we repurchased approximately 1 million shares of our common stock at an average price of$39.10 per share for an aggregate amount of$56 million . Repurchased shares will be retired. We have planned capital expenditures expected over the remainder of the year of approximately$340 million to$360 million domestically and approximately$80 million to$90 million atMGM China . As ofMarch 31, 2021 , our expected cash interest payments over the next twelve months are approximately$345 million to$350 million , excluding MGP andMGM China , and approximately$735 million to$740 million on a consolidated basis. We are also currently required to make annual rent payments of$843 million under the master lease with MGP, annual rent payments of$250 million under the lease with Bellagio BREIT Venture, and annual rent payments of$298 million under the lease with MGP BREIT Venture, which leases are also subject to annual escalators. InFebruary 2021 , we amended our credit facility to extend the covenant relief period provided under the previous amendment related to our financial maintenance covenants through the earlier of (x) the day immediately following the date we deliver to the administrative agent a compliance certificate with respect to the quarter endingJune 30, 2022 and (y) the date we deliver to the administrative agent an irrevocable notice terminating the covenant relief period, and to adjust the required leverage and interest coverage levels for the covenant when it is reimposed at the end of the waiver period. In addition, in connection with theFebruary 2021 amendment, we agreed to an increase of the liquidity test such that our borrower group (as defined in the credit agreement) is required to maintain a minimum liquidity level of not less than$1.0 billion (including unrestricted cash, cash equivalents and availability under the revolving credit facility), tested at the end of each month during the covenant relief period. Additionally, due to the continued impact of the COVID-19 pandemic, inFebruary 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. InApril 2021 , theOperating Partnership paid$131 million of distributions to its partnership unit holders, of which we received$55 million and MGP received$76 million , which MGP concurrently paid as a dividend to its Class A shareholders. OnApril 28, 2021 , our Board of Directors approved a quarterly dividend of$0.0025 per share. The dividend will be payable onJune 15, 2021 to holders of record onJune 10, 2021 . 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 inthe United States , and continues to impact our business, financial condition and results of operations. As widespread vaccine distribution continues and operational restrictions have lessened, 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 the pandemic. We cannot predict the degree, or duration, to which our operations will be affected by the COVID-19 outbreak, 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. 32
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Critical Accounting Policies and Estimates
A complete discussion of our critical accounting policies and estimates is
included in our Form 10-K for the fiscal year ended
Market Risk In addition to the inherent risks associated with our normal operations, we are also exposed to additional market risks. Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. Our primary exposure to market risk is interest rate risk associated with our variable rate long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed rate borrowings and short-term borrowings under our bank credit facilities and by utilizing interest rate swap agreements that provide for a fixed interest payment on theOperating Partnership's credit facility. A change in interest rates generally does not have an impact upon our future earnings and cash flow for fixed-rate debt instruments. As fixed-rate debt matures, however, and if additional debt is acquired to fund the debt repayment, future earnings and cash flow may be affected by changes in interest rates. This effect would be realized in the periods subsequent to the periods when the debt matures. We do not hold or issue financial instruments for trading purposes and do not enter into derivative transactions that would be considered speculative positions. As ofMarch 31, 2021 , variable rate borrowings represented approximately 7% of our total borrowings after giving effect on theOperating Partnership's borrowings for the currently effective interest rate swap agreements on which theOperating Partnership pays a weighted average of 1.821% on a total notional amount of$1.9 billion . Additionally, theOperating Partnership has$900 million of notional amount of forward starting swaps that are not currently effective. The following table provides additional information about our gross long-term debt subject to changes in interest rates excluding the effect of theOperating Partnership interest rate swaps discussed above: Fair Value Debt maturing in March 31, 2021 2022 2023 2024 2025 Thereafter Total 2021 (In millions) Fixed-rate $ -$ 1,000 $ 1,250 $ 1,800 $ 2,725 $ 5,675 $ 12,450 $ 13,077 Average interest rate N/A 7.8 % 6.0 % 5.5 % 5.6 % 5.0 % 5.5 % Variable rate $ - $ -$ 1 $ 903 $ - $ -$ 904 $ 904 Average interest rate N/A N/A 4.0 % 2.9 % N/A N/A 2.9 % In addition to the risk associated with our variable interest rate debt, we are also exposed to risks related to changes in foreign currency exchange rates, mainly related toMGM China and to our operations atMGM Macau andMGM Cotai . While recent fluctuations in exchange rates have not been significant, potential changes in policy by governments or fluctuations in the economies ofthe United States ,China ,Macau orHong Kong could cause variability in these exchange rates. We cannot assure you that theHong Kong dollar will continue to be pegged to theU.S. dollar or the current peg rate for theHong Kong dollar will remain at the same level. The possible changes to the peg of theHong Kong dollar may result in severe fluctuations in the exchange rate thereof. ForU.S. dollar denominated debt incurred byMGM China , fluctuations in the exchange rates of theHong Kong dollar in relation to theU.S. dollar could have adverse effects on our financial position and results of operations. As ofMarch 31, 2021 , a 1% weakening of theHong Kong dollar (the functional currency ofMGM China ) to theU.S. dollar would result in a foreign currency transaction loss of$28 million .
Cautionary Statement Concerning Forward-Looking Statements
This Form 10-Q contains "forward-looking statements" within the meaning of theU.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "will," "may" and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make regarding the impact of COVID-19 on our business, our ability to reduce expenses and otherwise maintain our liquidity position during the pandemic, our ability to generate significant cash flow, execute on ongoing and future strategic initiatives, including the development of an integrated resort inJapan and investments we make in online sports betting and iGaming, amounts we will spend on capital expenditures and investments, our expectations with respect to future share repurchases and cash dividends on our common stock, dividends and distributions we will receive fromMGM China , theOperating Partnership orCityCenter , our ability to achieve the benefits of our cost savings initiatives, and amounts projected to be realized as deferred tax assets. The foregoing is not a complete list of all forward-looking statements we make. 33 -------------------------------------------------------------------------------- Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Therefore, we caution you against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, regional, national or global political, economic, business, competitive, market, and regulatory conditions and the following:
• the global COVID-19 pandemic has continued to materially impact our
business, financial results and liquidity, and such impact could worsen and
last for an unknown period of time;
• although all of our properties are open to the public, they are operating
without certain amenities and subject to certain occupancy limitations, and
we are unable to predict the length of time it will take for our properties
to return to normal operations or if such properties will be required to
close again due to the COVID-19 pandemic;
• we have undertaken aggressive actions to reduce costs and improveefficiencies to mitigate losses as a result of the COVID-19 pandemic, which
could negatively impact guest loyalty and our ability to attract and retain
employees;
• our substantial indebtedness and significant financial commitments,
including the fixed component of our rent payments to MGP, rent payments to
the Bellagio BREIT Venture and to the MGP BREIT Venture, and guarantees we
provide of the indebtedness of the Bellagio BREIT Venture and the MGP BREIT
Venture could adversely affect our development options and financial
results and impact our ability to satisfy our obligations;
• current and future economic, capital and credit market conditions could
adversely affect our ability to service our substantial indebtedness and
significant financial commitments, including the fixed components of our
rent payments, and to make planned expenditures;
• restrictions and limitations in the agreements governing our senior credit
facility and other senior indebtedness could significantly affect our
ability to operate our business, as well as significantly affect our
liquidity;
• the fact that we are required to pay a significant portion of our cash
flows as rent, which could adversely affect our ability to fund our
operations and growth, service our indebtedness and limit our ability to
react to competitive and economic changes;
• significant competition we face with respect to destination travel
locations generally and with respect to our peers in the industries in
which we compete;
• the fact that our businesses are subject to extensive regulation and the
cost of compliance or failure to comply with such regulations could
adversely affect our business;
• the impact on our business of economic and market conditions in the
jurisdictions in which we operate and in the locations in which our
customers reside;
• the possibility that we may not realize all of the anticipated benefits of
our cost savings initiatives, including our MGM 2020 Plan, or our asset
light strategy;
• the fact that our ability to pay ongoing regular dividends is subject to
the discretion of our board of directors and certain other limitations;
• nearly all of our domestic gaming facilities are leased and could
experience risks associated with leased property, including risks relating
to lease termination, lease extensions, charges and our relationship with
the lessor, which could have a material adverse effect on our business,
financial position or results of operations;
• financial, operational, regulatory or other potential challenges that may
arise with respect to MGP, as the lessor for a significant portion of our
properties, may adversely impair our operations;
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• the fact that MGP has adopted a policy under which certain transactions
with us, including transactions involving consideration in excess of
million, must be approved in accordance with certain specified procedures;
• restrictions on our ability to have any interest or involvement in gaming
businesses in China , Macau , Hong Kong and Taiwan , other than through MGM
China ;
• the ability of the
subconcession under certain circumstances without compensating MGM Grand
Paradise, exercise its redemption right with respect to the subconcession,
or refuse to grant
2022;
• the dependence of MGM Grand Paradise upon gaming promoters for a
significant portion of gaming revenues in Macau ;
• changes to fiscal and tax policies;
• our ability to recognize our foreign tax credit deferred tax asset and the
variability of the valuation allowance we may apply against such deferred
tax asset;
• extreme weather conditions or climate change may cause property damage or
interrupt business;
• the concentration of a significant number of our major gaming resorts on
the Las Vegas Strip;
• the fact that we extend credit to a large portion of our customers and we
may not be able to collect such gaming receivables;
• the potential occurrence of impairments to goodwill, indefinite-lived
intangible assets or long-lived assets which could negatively affect future
profits;
• the susceptibility of leisure and business travel, especially travel by
air, to global geopolitical events, such as terrorist attacks, other acts
of violence, acts of war or hostility or outbreaks of infectious disease
(including the COVID-19 pandemic);
• the fact that co-investing in properties, including our investment in
CityCenter , decreases our ability to manage risk;
• the fact that future construction, development, or expansion projects will
be subject to significant development and construction risks;
• the fact that our insurance coverage may not be adequate to cover all
possible losses that our properties could suffer, our insurance costs may
increase and we may not be able to obtain similar insurance coverage in the
future;
• the fact that a failure to protect our trademarks could have a negative
impact on the value of our brand names and adversely affect our business;
• the risks associated with doing business outside of
the impact of any potential violations of the Foreign Corrupt Practices Act
or other similar anti-corruption laws;
• risks related to pending claims that have been, or future claims that may
be brought against us;
• the fact that a significant portion of our labor force is covered by
collective bargaining agreements;
• the sensitivity of our business to energy prices and a rise in energy
prices could harm our operating results;
• the potential that failure to maintain the integrity of our computer
systems and internal customer information could result in damage to our
reputation and/or subject us to fines, payment of damages, lawsuits or
other restrictions on our use or transfer of data;
• the potential reputational harm as a result of increased scrutiny related
to our corporate social responsibility efforts;
• the potential failure of future efforts to expand through investments in
other businesses and properties or through alliances or acquisitions, or to
divest some of our properties and other assets;
• increases in gaming taxes and fees in the jurisdictions in which we
operate; and
• the potential for conflicts of interest to arise because certain of our
directors and officers are also directors of MGM China .
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Any forward-looking statement made by us in this Form 10-Q speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. If we update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. You should also be aware that while we from time to time communicate with securities analysts, we do not disclose to them any material non-public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility and are not endorsed by us.
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