MGM Resorts International Reports Fourth Quarter And Full Year Financial Results

LAS VEGAS, Feb. 17, 2015 /PRNewswire/ -- MGM Resorts International (NYSE: MGM) today reported financial results for the quarter and year ended December 31, 2014. 

"MGM Resorts International reported its best fourth quarter EBITDA since the peak in 2007 and its best full year in six years at its wholly owned domestic resorts.  For the full year, CityCenter resort operations and MGM China each achieved record performances," said Jim Murren, Chairman & CEO of MGM Resorts International. "When I reflect on this year, I am extremely proud of the accomplishments of the MGM Resorts International team and believe that 2015 will be another great year. In fact, we are already off to a good start with strong January results in the U.S."

Key results for the fourth quarter of 2014 include the following:

• Net revenue at the Company's wholly owned domestic resorts increased 5% compared to the prior year quarter;
• Rooms revenue at wholly owned domestic resorts increased 6% compared to the prior year quarter;
• The Company's wholly owned domestic resorts earned Adjusted Property EBITDA⁽¹⁾ of $373 million, a 5% increase compared to the prior year quarter;
• MGM China's net revenue was $719 million and Adjusted EBITDA was $185 million, each a 22% decrease compared to the prior year quarter; and
• CityCenter earned Adjusted EBITDA related to resort operations of $78 million, a 16% decrease compared to the prior year quarter, due primarily to a decrease in table games hold percentage at Aria.

Fourth Quarter Consolidated Results
Diluted loss per share for the fourth quarter of 2014 was $­­­0.70 compared to diluted loss per share of $0.12 in the prior year fourth quarter.  The current year fourth quarter income tax provision was unfavorably impacted by a non-cash charge due to an increase in valuation allowance recorded against the Company's foreign tax credit deferred tax asset. The Company's income tax provision per diluted share was $0.67 for the quarter.  Absent the impact of the valuation allowance, a small tax benefit would have been recorded in the quarter.

The following table lists certain other items that affect the comparability of the current and prior year quarterly results (approximate EPS impact shown, net of tax, per share; negative amounts represent charges to income):

Wholly Owned Domestic Resorts
Casino revenue related to wholly owned domestic resorts increased 5% compared to the prior year quarter due to increases in both table games volume and hold percentage. Table games hold percentage in the fourth quarter of 2014 was 21.8% compared to 20.2% in the prior year quarter. Slots revenue increased 5% compared to the prior year quarter, due to slightly higher win along with a reduction in the Company's accrual for slot points based on a change in estimated point redemption.

Rooms revenue increased 6% with Las Vegas Strip REVPAR⁽²⁾ up 7%.  The following table shows key hotel statistics for the Company's Las Vegas Strip resorts:

Food and beverage revenue increased 6% as a result of increased convention and banquet business and the opening of several new outlets. Operating income for the Company's wholly owned domestic resorts increased 10% for the fourth quarter of 2014 compared to the prior year quarter.

MGM China
On February 17, 2015, as part of its regular dividend policy, MGM China's Board of Directors announced it will recommend a final dividend for 2014 of $120 million to MGM China shareholders subject to approval at the MGM China 2015 annual shareholders meeting. If approved, MGM Resorts International will receive $61 million, its 51% share of this dividend. In addition, MGM China's Board of Directors announced a special dividend of $400 million, which will be paid to shareholders of record as of March 10, 2015 and distributed on or about March 19, 2015.  MGM Resorts International will receive $204 million, its 51% share of the special dividend. 

Key fourth quarter results for MGM China include the following:

• MGM China earned net revenue of $719 million, a 22% decrease compared to the prior year quarter;
• Main floor table games revenue increased 19% compared to the prior year quarter. Main floor table games volume decreased 4% and hold percentage was 27.2% in the current year quarter compared to 22.2% in the prior year quarter;
• VIP table games revenue decreased 39% due to lower VIP table games turnover of 32% compared to the prior year quarter, as well as hold percentage of 2.6% in the current year quarter compared to 2.8% in the prior year quarter;
• MGM China's Adjusted EBITDA was $185 million, a 22% decrease compared to the prior year quarter;
• MGM China's Adjusted EBITDA margin increased by 10 basis points compared to the prior year quarter to 25.8% as a result of an increase in main floor table games mix; and
• Operating income was $109 million compared to $162 million in the prior year quarter.

Income (Loss) from Unconsolidated Affiliates
The following table summarizes information related to the Company's share of income from unconsolidated affiliates:

In September 2014, the Company was relicensed in the state of New Jersey.  As a result, the Company resumed accounting for its 50% interest in Borgata under the equity method and has adjusted its prior period financial statements retroactively as required by generally accepted accounting principles. 

Results for CityCenter Holdings, LLC ("CityCenter") for the fourth quarter of 2014 include the following (see schedules accompanying this release for further detail on CityCenter's fourth quarter results):

• Net revenue from resort operations decreased by 4% to $289 million compared to $301 million in the prior year quarter, due to lower table games hold and volume at Aria;
• Adjusted EBITDA from resort operations was $78 million, a decrease of 16% compared to the prior year quarter;
• Adjusted EBITDA at Aria decreased by 22% year over year driven primarily by a decrease in table games volume and hold;
• Aria's table games hold percentage was 21.5% compared to 26.0% in the prior year quarter;
• Aria's occupancy percentage was 91.1% and its ADR was $217, resulting in REVPAR of $198, a 9% increase compared to the prior year quarter;
• Vdara reported record fourth quarter EBITDA led by a 13% increase in REVPAR; and
• Crystals reported Adjusted EBITDA of $11 million, an increase of 2% from the prior year quarter.

CityCenter reported an operating loss of $58 million for the fourth quarter of 2014 compared to operating income of $26 million in the prior year quarter.  The lower fourth quarter result was due to decreased operating results at Aria as discussed above and a property transaction charge of $39 million.  The property transaction charge primarily relates to a settlement with an insurer participating in CityCenter's Owner Controlled Insurance Program in conjunction with the global settlement discussed below. In addition, the prior year quarter included $26 million of income related to property transactions, net, primarily related to a $33 million gain associated with the settlement of insurance claims for errors and omissions with respect to the original construction of CityCenter.

As previously announced, in December 2014, the Company and CityCenter entered into a settlement agreement with Perini Building Company, Inc. ("Perini"), general contractor for CityCenter, the remaining Perini subcontractors and relevant insurers to resolve all outstanding project lien claims and CityCenter's counterclaims relating to the Harmon Hotel and Spa. The settlement was subject to execution of a global settlement agreement among the parties described above, which was subsequently executed, and CityCenter's procurement of replacement general liability insurance covering construction of the CityCenter development (which was obtained in January 2015). The proceeds pursuant to such global settlement agreement, combined with certain prior Harmon-related insurance settlement proceeds, will result in a gain of approximately $160 million to be recorded by CityCenter during the first quarter of 2015.

Full Year 2014 Results
Consolidated net revenue for 2014 was $10.1 billion, a 3% increase over 2013, and Adjusted Property EBITDA increased 5% compared to the prior year to $2.5 billion. Net revenue from wholly owned domestic resorts was $6.3 billion, a 5% increase compared to the prior year.  Adjusted Property EBITDA from wholly owned domestic resorts increased 5% to $1.5 billion for 2014.

MGM China net revenue was $3.3 billion for 2014, a 1% decrease from 2013, and Adjusted EBITDA was a record $850 million compared to $814 million in the prior year. CityCenter reported net revenue from resort operations of a record $1.2 billion, a 3% increase compared to the prior year, and Adjusted EBITDA related to resort operations of $317 million compared to $316 million in the prior year.

Diluted loss per share attributable to the Company for 2014 was $0.31 compared to diluted loss per share of $0.35 in 2013. The following table lists items that affect the comparability of the current year and prior year annual results (approximate EPS impact shown, net of tax, per share; negative amounts represent charges to income):

The tax provision in 2014 increased $263 million compared to 2013 primarily as a result of an increase in valuation allowance recorded against the Company's foreign tax credit deferred tax asset in 2014 and realization of deferred tax assets in 2013 that were previously offset by valuation allowance, partially offset by tax expense recognized in 2013 as a result of re-measuring net deferred tax liabilities in Macau.

Financial Position
"As a result of a successful year and our continued focus on our balance sheet, we improved leverage and raised significant capital in 2014," said Dan D'Arrigo, Executive Vice President, CFO and Treasurer of MGM Resorts International. "We believe that our improved cash flows, the announced dividends from MGM China, $1.25 billion in capital raised in the fourth quarter, along with revolver availability provides us with adequate liquidity to fund our 2015 maturities and growth initiatives."

The Company's cash balance at December 31, 2014 was $2.3 billion, which included $546 million at MGM China.  At December 31, 2014, the Company had $2.7 billion of borrowings outstanding under its $3.9 billion senior secured credit facility and $553 million outstanding under the $2.0 billion MGM China credit facility.

Conference Call Details
MGM Resorts International will host a conference call at 11:00 a.m. Eastern Time today which will include a brief discussion of these results followed by a question and answer period. The call will be accessible via the Internet through www.mgmresorts.com under the Investors section or by calling 1-888-317-6003 for domestic callers and 1-412-317-6061 for international callers. The conference call access code is 8870181. A replay of the call will be available through Wednesday, February 25, 2015.  The replay may be accessed by dialing 1-877-344-7529 or 1-412-317-0088.  The replay access code is 10059516. The call will be archived at www.mgmresorts.com.

1    "Adjusted EBITDA" is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses and property transactions, net.  "Adjusted Property EBITDA" is Adjusted EBITDA before corporate expense and stock compensation expense related to the MGM Resorts stock option plan, which is not allocated to each property. MGM China recognizes stock compensation expense related to its stock compensation plan which is included in the calculation of Adjusted EBITDA for MGM China. Adjusted EBITDA information is presented solely as a supplemental disclosure to reported GAAP measures because management believes these measures are 1) widely used measures of operating performance in the gaming industry, and 2) a principal basis for valuation of gaming companies. 

Management believes that while items excluded from Adjusted EBITDA and Adjusted Property EBITDA may be recurring in nature and should not be disregarded in evaluation of the Company's earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods being presented. Also, management believes excluded items may not relate specifically to current operating trends or be indicative of future results. For example, preopening and start-up expenses will be significantly different in periods when the Company is developing and constructing a major expansion project and will depend on where the current period lies within the development cycle, as well as the size and scope of the project(s). Property transactions, net includes normal recurring disposals, gains and losses on sales of assets related to specific assets within the Company's resorts, but also includes gains or losses on sales of an entire operating resort or a group of resorts and impairment charges on entire asset groups or investments in unconsolidated affiliates, which may not be comparable period over period.

In addition, capital allocation, tax planning, financing and stock compensation awards are all managed at the corporate level. Therefore, management uses Adjusted Property EBITDA as the primary measure of the Company's operating resorts' performance.

Reconciliations of GAAP net income (loss) to Adjusted EBITDA and GAAP operating income (loss) to Adjusted Property EBITDA are included in the financial schedules in this release.

2    REVPAR is hotel revenue per available room.

About MGM Resorts International
MGM Resorts International (NYSE: MGM) is one of the world's leading global hospitality companies, operating a portfolio of destination resort brands including Bellagio, MGM Grand, Mandalay Bay and The Mirage. The Company is in the process of developing MGM National Harbor in Maryland and MGM Springfield in Massachusetts.  The Company also owns 51 percent of MGM China Holdings Limited, which owns the MGM Macau resort and casino and is developing a gaming resort in Cotai, and 50 percent of CityCenter in Las Vegas, which features ARIA Resort & Casino. For more information about MGM Resorts International, visit the Company's website at www.mgmresorts.com.

Statements in this release that are not historical facts are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and/or uncertainties, including those described in the Company's public filings with the Securities and Exchange Commission.  The Company has based forward-looking statements on management's current expectations and assumptions and not on historical facts. Examples of these statements include, but are not limited to, statements regarding future expected financial results, the Company's ability to fund its 2015 debt maturities and growth initiatives, the expected gains to CityCenter as a result of the settlement agreements, and amounts the Company expects to receive as a result of the MGM China dividends. These forward-looking statements involve a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated in such forward-looking statements include effects of economic conditions and market conditions in the markets in which the Company operates and competition with other destination travel locations throughout the United States and the world, the design, timing and costs of expansion projects, risks relating to international operations, permits, licenses, financings, approvals and other contingencies in connection with growth in new or existing jurisdictions and additional risks and uncertainties described in the Company's Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports).  In providing forward-looking statements, the Company is not undertaking any duty or obligation to update these statements publicly as a result of new information, future events or otherwise, except as required by law. If the Company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those other forward-looking statements.