MGM Resorts International Reports Third Quarter Financial Results

LAS VEGAS, Oct. 30, 2014 /PRNewswire/ -- MGM Resorts International (NYSE: MGM) today reported financial results for the quarter ended September 30, 2014.  Diluted loss per share for the third quarter of 2014 was $­­­0.04 compared to diluted loss per share of $0.05 in the prior year third quarter. 

"Our consolidated net revenues increased by 1% and EBITDA increased by 2% during the quarter.  In Las Vegas, the market continues to improve as our top line revenues grew 3%.  While we expected to have some negative impact to margins during the quarter as a result of the disruptions related to our investments in Delano at Mandalay Bay and the Strip frontage at Monte Carlo, we were also negatively affected by lower year over year table games hold and an increase in certain expenses.  Looking forward, we remain highly focused on increasing revenues and expanding margins while driving operating leverage in an improving market," said Jim Murren, Chairman and Chief Executive Officer of MGM Resorts International, "MGM China reported a 12% increase in EBITDA to $214 million and margin expansion of 330 basis points despite a difficult market.  The construction of MGM Cotai is progressing well and is on time, and on budget, for a fall 2016 opening."

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

• Consolidated net revenue was $2.5 billion, a 1% increase over the prior year quarter;
• Net revenue at the Company's wholly owned domestic resorts increased 2% compared to the prior year quarter;
• Rooms revenue at wholly owned domestic resorts increased 5% with a 6% increase in REVPAR⁽¹⁾ at the Company's Las Vegas Strip resorts compared to the prior year quarter;
• Adjusted Property EBITDA⁽²⁾ was $570 million, a 2% increase compared to the prior year quarter;
• The Company's wholly owned domestic resorts earned Adjusted Property EBITDA of $328 million, a 6% decrease compared to the prior year quarter, primarily due to a decrease in table games hold percentage at its Las Vegas Strip resorts which negatively affected Adjusted Property EBITDA by approximately $18 million;
• MGM China's Adjusted EBITDA was $214 million, a 12% increase compared to the prior year quarter, including $12 million of branding fee expense in the current quarter compared to $8 million in the prior year quarter; and
• CityCenter earned Adjusted EBITDA related to resort operations of $64 million, a 2% increase over the prior year quarter.

Certain Items Affecting Third Quarter Results

The following table lists 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):

Property transactions, net in the prior year quarter included a non-cash impairment charge of $20 million related to land holdings in Jean and Sloan, Nevada.

Wholly Owned Domestic Resorts

Casino revenue related to wholly owned domestic resorts decreased 4% compared to the prior year quarter due primarily to a decrease in table games hold percentage. Table games hold percentage in the third quarter of 2014 was 19.8% compared to 21.5% in the prior year quarter. Slots revenue decreased slightly at the Company's wholly owned domestic resorts compared to the prior year quarter but increased 1% at the Company's Las Vegas Strip resorts.

Rooms revenue increased 5% with Las Vegas Strip REVPAR up 6%.  The following table shows key hotel statistics for the Company's Las Vegas Strip resorts:

Food and beverage revenue increased 9% as a result of increased convention and banquet business and the opening of several new outlets. Adjusted Property EBITDA margin decreased to 20.8% from 22.6% in the prior year quarter and was negatively affected by a decrease in table games hold percentage, an increase in certain expenses and disruption from the Company's investments in Delano at Mandalay Bay and the new Strip frontage at Monte Carlo.

MGM China

Key third quarter results for MGM China include the following:

• MGM China earned net revenue of $794 million, a 2% decrease compared to the prior year quarter;
• VIP table games revenue decreased 19% due primarily to a decrease in VIP table games turnover of 19% compared to the prior year quarter, as well as a decrease in hold percentage to 2.7% in the current year quarter compared to 2.8% in the prior year quarter;
• Main floor table games revenue increased 34% compared to the prior year quarter.  Main floor table games volume increased 15% and hold percentage was 28.0% in the current year quarter compared to 24.0% in the prior year quarter;
• MGM China's Adjusted EBITDA was $214 million, a 12% increase compared to the prior year quarter, including $12 million of branding fee expense in the current quarter compared to $8 million in the prior year quarter;
• MGM China's Adjusted EBITDA margin increased by 330 basis points compared to the prior year quarter to 26.9%; and
• Operating income was $140 million compared to $114 million in the prior year quarter.

MGM China paid a $137 million dividend in September 2014, of which $70 million was distributed to MGM Resorts and $67 million was distributed to noncontrolling interests.

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 for the third quarter of 2014 include the following (see schedules accompanying this release for further detail on CityCenter's third quarter results):

• Net revenue from resort operations increased by 5% to $280 million compared to $268 million in the prior year quarter;
• Adjusted EBITDA from resort operations was $64 million, an increase of 2% compared to the prior year quarter;
• Aria's table games hold percentage was 21.7% compared to 22.5% in the prior year quarter;
• Aria's occupancy percentage was 94% and its ADR was $206, resulting in REVPAR of $194, a 10% increase compared to the prior year quarter;
• Vdara reported REVPAR of $153, an increase of 12% compared to the prior year quarter; and
• Crystals reported Adjusted EBITDA of $11 million, an increase of 8% from the prior year quarter.

Financial Position

"Since our last earnings release, we have made significant progress in achieving certain financial goals.  We were unanimously approved for a casino license in the state of New Jersey, and as a result received $83 million in cash from our previous trust arrangement," said Dan D'Arrigo, Executive Vice President, CFO and Treasurer of MGM Resorts International. "MGM Resorts along with AEG secured a $200 million bank facility to fund the development and construction of our new 20,000 seat arena which is underway on the Las Vegas Strip between New York-New York and Monte Carlo."

The Company's cash balance at September 30, 2014 was $1.3 billion, which included $540 million at MGM China.  At September 30, 2014 the Company had $2.8 billion of borrowings outstanding under its $4.0 billion senior secured credit facility and $552 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 6307991. A replay of the call will be available through Friday, November 7, 2014.  The replay may be accessed by dialing 1-877-344-7529 or 1-412-317-0088.  The replay access code is 10054034. The call will be archived at www.mgmresorts.com.

1      REVPAR is hotel revenue per available room.

2     "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.

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 also owns 51% of MGM China Holdings Limited, which owns the MGM Macau resort and casino and is in the process of developing a gaming resort in Cotai, and 50% of CityCenter in Las Vegas, which features ARIA resort and 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 the timing and costs of our development projects, including MGM Cotai, and the Company's ability to increase its revenues, margins and the operating leverage of its resort portfolio. 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.