filings.toolsItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statement Schedule:
| Schedule II — Valuation and Qualifying Accounts | 104 | |
|---|---|---|
The financial information included in the financial statement schedule should be read in conjunction with the consolidated financial statements. All other financial statement schedules have been omitted because they are not applicable, or the required information is included in the consolidated financial statements or the notes thereto.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of MGM Resorts International
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of MGM Resorts International and subsidiaries (the “Company”) as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2019, of the Company and our report dated February 27, 2020, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s change in accounting principle.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 27, 2020
REPORT OF INDEPENDENT REGISTE****RED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of MGM Resorts International
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of MGM Resorts International and subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive income (loss), cash flows and stockholders’ equity for each of the three years in the period ended December 31, 2019, and the related notes and the financial statement schedule of Valuation and Qualifying Accounts included in Item 15(a)(2), (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2020, expressed an unqualified opinion on the Company's internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 2 to the financial statements, effective January 1, 2019, the Company adopted FASB ASC Topic 842, Leases, using the modified retrospective approach.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Acquisition and Goodwill and Other Intangible Assets Valuation of Empire City – Refer to Notes 4 and 7 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of goodwill for impairment at the Empire City reporting unit (“Empire City”) involves the comparison of the fair value of the reporting unit to its carrying value. The Company determines the fair value of its reporting units using a combination of income-based and market-based approaches and incorporates assumptions it believes market participants would utilize. Under the income-based approach, the Company uses a discounted cash flow model to estimate the fair value of the reporting unit, which requires management to make subjective estimates and assumptions, particularly related to the forecast of future revenues and EBITDA, as well as in the selection of the company specific risk premium utilized in the calculation of the discount rate. The fair value of Empire City reporting unit exceeded its carrying value as of the measurement date and, therefore, no impairment was recognized.
The Company’s goodwill balance was $2.1 billion as of December 31, 2019, of which $256 million relates to the Empire City acquisition completed in January 2019. The sensitivity of operating results for Empire City to changes in the regulatory environment and competition required the application of a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the forecast of future revenues and EBITDA, as well as in determining the reasonableness of the selection of the company specific risk premium utilized in the calculation of the discount rate.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimate of the forecast of future revenues and EBITDA, as well as the company specific risk premium utilized in the discount rate included the following, among others:
| • | We tested the operating effectiveness of controls over management’s goodwill impairment evaluation, including the controls related to management’s forecast of future revenues and EBITDA, as well as the controls related to management’s selection of the company specific risk premium utilized in the calculation of the discount rate. |
|---|
| • | We evaluated management’s ability to accurately forecast future revenues and EBITDA and assessed the reasonableness of the forecasted future revenues and EBITDA by comparing the forecast to: |
|---|
| o | Historical revenues and EBITDA |
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| o | Forecast information included in analyst and industry reports |
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| o | Internal communications to management and the Board of Directors |
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| o | Subsequent forecasts, to evaluate for changes made by management since the annual measurement date through issuance of the financial statements. |
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| • | With the assistance of our fair value specialists, we evaluated the reasonableness of the company specific risk premium utilized in the discount rate by gaining an understanding of the estimated company specific risk premium, gathering and analyzing relevant facts and objective evidence provided by the Company, and gathering and analyzing additional facts and objective evidence obtained through independent research. |
|---|
/s/ DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 27, 2020
We have served as the Company's auditor since 2002.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 2,329,604 | $ | 1,526,762 | ||||
| Accounts receivable, net | 612,717 | 657,206 | ||||||
| Inventories | 102,888 | 110,831 | ||||||
| Income tax receivable | 27,167 | 28,431 | ||||||
| October 1 litigation insurance receivable | 735,000 | — | ||||||
| Prepaid expenses and other | 200,317 | 203,548 | ||||||
| Total current assets | 4,007,693 | 2,526,778 | ||||||
| Property and equipment, net | 18,285,955 | 20,729,888 | ||||||
| Other assets | ||||||||
| Investments in and advances to unconsolidated affiliates | 822,366 | 732,867 | ||||||
| Goodwill | 2,084,564 | 1,821,392 | ||||||
| Other intangible assets, net | 3,826,504 | 3,944,463 | ||||||
| Operating lease right-of-use assets, net | 4,392,481 | — | ||||||
| Other long-term assets, net | 456,793 | 455,318 | ||||||
| Total other assets | 11,582,708 | 6,954,040 | ||||||
| $ | 33,876,356 | $ | 30,210,706 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 235,437 | $ | 302,578 | ||||
| Construction payable | 74,734 | 311,793 | ||||||
| Current portion of long-term debt | — | 43,411 | ||||||
| Accrued interest on long-term debt | 122,250 | 140,046 | ||||||
| October 1 litigation liability | 735,000 | — | ||||||
| Other accrued liabilities | 2,024,002 | 2,151,054 | ||||||
| Total current liabilities | 3,191,423 | 2,948,882 | ||||||
| Deferred income taxes, net | 2,106,506 | 1,342,538 | ||||||
| Long-term debt, net | 11,168,904 | 15,088,005 | ||||||
| Operating lease liabilities | 4,277,970 | — | ||||||
| Other long-term obligations | 363,588 | 259,240 | ||||||
| Commitments and contingencies (Note 12) | ||||||||
| Redeemable noncontrolling interests | 105,046 | 102,250 | ||||||
| Stockholders' equity | ||||||||
| Common stock, $.01 par value: authorized 1,000,000,000 shares, issued and outstanding 503,147,632 and 527,479,528 shares | 5,031 | 5,275 | ||||||
| Capital in excess of par value | 3,531,099 | 4,092,085 | ||||||
| Retained earnings | 4,201,337 | 2,423,479 | ||||||
| Accumulated other comprehensive loss | (10,202 | ) | (8,556 | ) | ||||
| Total MGM Resorts International stockholders' equity | 7,727,265 | 6,512,283 | ||||||
| Noncontrolling interests | 4,935,654 | 3,957,508 | ||||||
| Total stockholders' equity | 12,662,919 | 10,469,791 | ||||||
| $ | 33,876,356 | $ | 30,210,706 |
The accompanying notes are an integral part of these consolidated financial statements.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| Revenues | ||||||||||||
| Casino | $ | 6,517,759 | $ | 5,753,150 | $ | 5,016,426 | ||||||
| Rooms | 2,322,579 | 2,212,573 | 2,152,741 | |||||||||
| Food and beverage | 2,145,247 | 1,959,021 | 1,871,969 | |||||||||
| Entertainment, retail and other | 1,477,200 | 1,412,860 | 1,354,301 | |||||||||
| Reimbursed costs | 436,887 | 425,492 | 402,042 | |||||||||
| 12,899,672 | 11,763,096 | 10,797,479 | ||||||||||
| Expenses | ||||||||||||
| Casino | 3,623,899 | 3,199,775 | 2,673,397 | |||||||||
| Rooms | 829,677 | 791,761 | 748,947 | |||||||||
| Food and beverage | 1,661,626 | 1,501,868 | 1,414,611 | |||||||||
| Entertainment, retail and other | 1,051,400 | 999,979 | 954,125 | |||||||||
| Reimbursed costs | 436,887 | 425,492 | 402,042 | |||||||||
| General and administrative | 2,101,217 | 1,764,638 | 1,559,575 | |||||||||
| Corporate expense | 464,642 | 419,204 | 356,872 | |||||||||
| NV Energy exit expense | — | — | (40,629 | ) | ||||||||
| Preopening and start-up expenses | 7,175 | 151,392 | 118,475 | |||||||||
| Property transactions, net | 275,802 | 9,147 | 50,279 | |||||||||
| Gain on Bellagio transaction | (2,677,996 | ) | — | — | ||||||||
| Depreciation and amortization | 1,304,649 | 1,178,044 | 993,480 | |||||||||
| 9,078,978 | 10,441,300 | 9,231,174 | ||||||||||
| Income from unconsolidated affiliates | 119,521 | 147,690 | 146,222 | |||||||||
| Operating income | 3,940,215 | 1,469,486 | 1,712,527 | |||||||||
| Non-operating income (expense) | ||||||||||||
| Interest expense, net of amounts capitalized | (847,932 | ) | (769,513 | ) | (668,745 | ) | ||||||
| Non-operating items from unconsolidated affiliates | (62,296 | ) | (47,827 | ) | (34,751 | ) | ||||||
| Other, net | (183,262 | ) | (18,140 | ) | (48,241 | ) | ||||||
| (1,093,490 | ) | (835,480 | ) | (751,737 | ) | |||||||
| Income before income taxes | 2,846,725 | 634,006 | 960,790 | |||||||||
| Benefit (provision) for income taxes | (632,345 | ) | (50,112 | ) | 1,127,394 | |||||||
| Net income | 2,214,380 | 583,894 | 2,088,184 | |||||||||
| Less: Net income attributable to noncontrolling interests | (165,234 | ) | (117,122 | ) | (136,132 | ) | ||||||
| Net income attributable to MGM Resorts International | $ | 2,049,146 | $ | 466,772 | $ | 1,952,052 | ||||||
| Earnings per share | ||||||||||||
| Basic | $ | 3.90 | $ | 0.82 | $ | 3.38 | ||||||
| Diluted | $ | 3.88 | $ | 0.81 | $ | 3.34 | ||||||
| Weighted average common shares outstanding | ||||||||||||
| Basic | 524,173 | 544,253 | 572,253 | |||||||||
| Diluted | 527,645 | 549,536 | 578,795 |
The accompanying notes are an integral part of these consolidated financial statements.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| Net income | $ | 2,214,380 | $ | 583,894 | $ | 2,088,184 | ||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||
| Foreign currency translation adjustment | 28,870 | (13,022 | ) | (43,188 | ) | |||||||
| Other comprehensive income (loss) related to cash flow hedges | (29,505 | ) | 3,576 | 7,995 | ||||||||
| Other comprehensive loss | (635 | ) | (9,446 | ) | (35,193 | ) | ||||||
| Comprehensive income | 2,213,745 | 574,448 | 2,052,991 | |||||||||
| Less: Comprehensive income attributable to noncontrolling interests | (168,447 | ) | (112,622 | ) | (119,700 | ) | ||||||
| Comprehensive income attributable to MGM Resorts International | $ | 2,045,298 | $ | 461,826 | $ | 1,933,291 |
The accompanying notes are an integral part of these consolidated financial statements.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net income | $ | 2,214,380 | $ | 583,894 | $ | 2,088,184 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 1,304,649 | 1,178,044 | 993,480 | |||||||||
| Amortization of debt discounts, premiums and issuance costs | 38,972 | 41,102 | 32,996 | |||||||||
| Loss on early retirement of debt | 198,151 | 3,619 | 45,696 | |||||||||
| Provision for doubtful accounts | 39,270 | 39,762 | 20,603 | |||||||||
| Stock-based compensation | 88,838 | 70,177 | 62,494 | |||||||||
| Property transactions, net | 275,802 | 9,147 | 50,279 | |||||||||
| Gain on Bellagio transaction | (2,677,996 | ) | — | — | ||||||||
| Noncash lease expense | 71,784 | — | — | |||||||||
| Income from unconsolidated affiliates | (57,225 | ) | (96,542 | ) | (111,471 | ) | ||||||
| Distributions from unconsolidated affiliates | 299 | 11,563 | 13,050 | |||||||||
| Deferred income taxes | 595,046 | 46,720 | (1,259,406 | ) | ||||||||
| Change in operating assets and liabilities: | ||||||||||||
| Accounts receivable | (726,610 | ) | (149,554 | ) | (17,972 | ) | ||||||
| Inventories | 6,522 | (7,860 | ) | (4,656 | ) | |||||||
| Income taxes receivable and payable, net | 1,259 | 14,120 | (53,204 | ) | ||||||||
| Prepaid expenses and other | 7,567 | (8,656 | ) | (54,739 | ) | |||||||
| Accounts payable and accrued liabilities | 465,602 | 21,508 | 422,258 | |||||||||
| Other | (35,909 | ) | (34,505 | ) | (21,181 | ) | ||||||
| Net cash provided by operating activities | 1,810,401 | 1,722,539 | 2,206,411 | |||||||||
| Cash flows from investing activities | ||||||||||||
| Capital expenditures, net of construction payable | (739,006 | ) | (1,486,843 | ) | (1,864,082 | ) | ||||||
| Dispositions of property and equipment | 2,578 | 25,612 | 718 | |||||||||
| Proceeds from Bellagio transaction | 4,151,499 | — | — | |||||||||
| Proceeds from sale of Circus Circus Las Vegas and adjacent land | 652,333 | — | — | |||||||||
| Proceeds from sale of business units and investment in unconsolidated affiliate | — | 163,616 | — | |||||||||
| Acquisition of Northfield, net of cash acquired | — | (1,034,534 | ) | — | ||||||||
| Acquisition of Empire City Casino, net of cash acquired | (535,681 | ) | — | — | ||||||||
| Investments in and advances to unconsolidated affiliates | (81,877 | ) | (56,295 | ) | (16,727 | ) | ||||||
| Distributions from unconsolidated affiliates | 100,700 | 322,631 | 301,211 | |||||||||
| Other | (31,112 | ) | (17,208 | ) | (1,712 | ) | ||||||
| Net cash provided by (used in) investing activities | 3,519,434 | (2,083,021 | ) | (1,580,592 | ) | |||||||
| Cash flows from financing activities | ||||||||||||
| Net borrowings (repayments) under bank credit facilities – maturities of 90 days or less | (3,634,049 | ) | 1,242,259 | 15,001 | ||||||||
| Issuance of long-term debt | 3,250,000 | 1,000,000 | 350,000 | |||||||||
| Retirement of senior notes and senior debentures | (3,764,167 | ) | (2,265 | ) | (502,669 | ) | ||||||
| Debt issuance costs | (63,391 | ) | (76,519 | ) | (9,977 | ) | ||||||
| Issuance of MGM Growth Properties Class A shares, net | 1,250,006 | — | 387,548 | |||||||||
| Dividends paid to common shareholders | (271,288 | ) | (260,592 | ) | (252,014 | ) | ||||||
| Distributions to noncontrolling interest owners | (223,303 | ) | (184,932 | ) | (170,402 | ) | ||||||
| Purchases of common stock | (1,031,534 | ) | (1,283,333 | ) | (327,500 | ) | ||||||
| Other | (41,868 | ) | (45,384 | ) | (58,765 | ) | ||||||
| Net cash provided by (used in) financing activities | (4,529,594 | ) | 389,234 | (568,778 | ) | |||||||
| Effect of exchange rate on cash | 2,601 | (1,985 | ) | (3,627 | ) | |||||||
| Cash and cash equivalents | ||||||||||||
| Net increase for the period | 802,842 | 26,767 | 53,414 | |||||||||
| Balance, beginning of period | 1,526,762 | 1,499,995 | 1,446,581 | |||||||||
| Balance, end of period | $ | 2,329,604 | $ | 1,526,762 | $ | 1,499,995 | ||||||
| Supplemental cash flow disclosures | ||||||||||||
| Interest paid, net of amounts capitalized | $ | 826,970 | $ | 723,609 | $ | 658,637 | ||||||
| Federal, state and foreign income taxes paid (refunds received), net | 28,493 | (10,100 | ) | 181,651 | ||||||||
| Non-cash investing and financing activities | ||||||||||||
| Note receivable related to sale of Circus Circus Las Vegas and adjacent land | $ | 133,689 | $ | — | $ | — | ||||||
| Investment in Bellagio BREIT Venture | 62,133 | — | — | |||||||||
| Increase in construction accounts payable | — | — | 204,466 |
The accompanying notes are an integral part of these consolidated financial statements.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years ended December 31, 2019, 2018 and 2017
(In thousands)
| Total | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Retained | Accumulated | MGM Resorts | ||||||||||||||||||||||||||||||
| Common Stock | Capital in | Earnings | Other | International | Non- | Total | ||||||||||||||||||||||||||
| Par | Excess of | (Accumulated | Comprehensive | Stockholders' | Controlling | Stockholders' | ||||||||||||||||||||||||||
| Shares | Value | Par Value | Deficit) | Income (Loss) | Equity | Interests | Equity | |||||||||||||||||||||||||
| Balances, January 1, 2017 | 574,124 | $ | 5,741 | $ | 5,653,575 | $ | 518,456 | $ | 15,053 | $ | 6,192,825 | $ | 3,749,132 | $ | 9,941,957 | |||||||||||||||||
| Net income | — | — | — | 1,952,052 | — | 1,952,052 | 128,320 | 2,080,372 | ||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | (23,995 | ) | (23,995 | ) | (19,193 | ) | (43,188 | ) | ||||||||||||||||||||
| Other comprehensive income - cash flow hedges | — | — | — | — | 5,234 | 5,234 | 2,761 | 7,995 | ||||||||||||||||||||||||
| Stock-based compensation | — | — | 57,531 | — | — | 57,531 | 4,991 | 62,522 | ||||||||||||||||||||||||
| Issuance of common stock pursuant to stock-based compensation awards | 2,152 | 22 | (33,802 | ) | — | — | (33,780 | ) | — | (33,780 | ) | |||||||||||||||||||||
| Cash distributions to noncontrolling interest owners | — | — | — | — | — | — | (147,685 | ) | (147,685 | ) | ||||||||||||||||||||||
| Dividends declared to common shareholders ($0.44 per share) | — | — | — | (252,014 | ) | — | (252,014 | ) | — | (252,014 | ) | |||||||||||||||||||||
| MGP dividend payable to Class A shareholders | — | — | — | — | — | — | (29,777 | ) | (29,777 | ) | ||||||||||||||||||||||
| Issuance of performance share units | — | — | 9,648 | — | — | 9,648 | 95 | 9,743 | ||||||||||||||||||||||||
| Repurchase of common stock | (10,000 | ) | (100 | ) | (327,400 | ) | — | — | (327,500 | ) | — | (327,500 | ) | |||||||||||||||||||
| MGP Class A share issuance | — | — | 35,029 | — | 109 | 35,138 | 326,484 | 361,622 | ||||||||||||||||||||||||
| Adjustment of redeemable non- controlling interest to redemption value | — | — | (18,280 | ) | — | — | (18,280 | ) | — | (18,280 | ) | |||||||||||||||||||||
| MGM National Harbor transaction | — | — | (12,486 | ) | — | (11 | ) | (12,497 | ) | 19,383 | 6,886 | |||||||||||||||||||||
| Other | — | — | (6,106 | ) | (1,195 | ) | — | (7,301 | ) | (448 | ) | (7,749 | ) | |||||||||||||||||||
| Balances, December 31, 2017 | 566,276 | 5,663 | 5,357,709 | 2,217,299 | (3,610 | ) | 7,577,061 | 4,034,063 | 11,611,124 | |||||||||||||||||||||||
| Net income | — | — | — | 466,772 | — | 466,772 | 108,114 | 574,886 | ||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | (7,422 | ) | (7,422 | ) | (5,600 | ) | (13,022 | ) | ||||||||||||||||||||
| Other comprehensive income - cash flow hedges | — | — | — | — | 2,476 | 2,476 | 1,100 | 3,576 | ||||||||||||||||||||||||
| Stock-based compensation | — | — | 65,072 | — | — | 65,072 | 5,124 | 70,196 | ||||||||||||||||||||||||
| Issuance of common stock pursuant to stock-based compensation awards | 2,280 | 23 | (32,225 | ) | — | — | (32,202 | ) | — | (32,202 | ) | |||||||||||||||||||||
| Cash distributions to noncontrolling interest owners | — | — | — | — | — | — | (147,321 | ) | (147,321 | ) | ||||||||||||||||||||||
| Dividends declared to common shareholders ($0.48 per share) | — | — | — | (260,592 | ) | — | (260,592 | ) | — | (260,592 | ) | |||||||||||||||||||||
| MGP dividend payable to Class A shareholders | — | — | — | — | — | — | (31,732 | ) | (31,732 | ) | ||||||||||||||||||||||
| Issuance of performance share units | — | — | 3,609 | — | — | 3,609 | 107 | 3,716 | ||||||||||||||||||||||||
| Repurchase of common stock | (41,076 | ) | (411 | ) | (1,282,922 | ) | — | — | (1,283,333 | ) | — | (1,283,333 | ) | |||||||||||||||||||
| Adjustment of redeemable non- controlling interest to redemption value | — | — | (21,326 | ) | — | — | (21,326 | ) | — | (21,326 | ) | |||||||||||||||||||||
| Other | — | — | 2,168 | — | — | 2,168 | (6,347 | ) | (4,179 | ) | ||||||||||||||||||||||
| Balances, December 31, 2018 | 527,480 | 5,275 | 4,092,085 | 2,423,479 | (8,556 | ) | 6,512,283 | 3,957,508 | 10,469,791 | |||||||||||||||||||||||
| Net income | — | — | — | 2,049,146 | — | 2,049,146 | 156,141 | 2,205,287 | ||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | 16,125 | 16,125 | 12,745 | 28,870 | ||||||||||||||||||||||||
| Other comprehensive loss - cash flow hedges | — | — | — | — | (19,973 | ) | (19,973 | ) | (9,532 | ) | (29,505 | ) | ||||||||||||||||||||
| Stock-based compensation | — | — | 83,897 | — | — | 83,897 | 4,941 | 88,838 | ||||||||||||||||||||||||
| Issuance of common stock pursuant to stock-based compensation awards | 2,150 | 20 | (25,985 | ) | — | — | (25,965 | ) | — | (25,965 | ) | |||||||||||||||||||||
| Cash distributions to noncontrolling interest owners | — | — | — | — | — | — | (181,816 | ) | (181,816 | ) | ||||||||||||||||||||||
| Dividends declared to common shareholders ($0.52 per share) | — | — | — | (271,288 | ) | — | (271,288 | ) | — | (271,288 | ) | |||||||||||||||||||||
| MGP dividend payable to Class A shareholders | — | — | — | — | — | — | (53,489 | ) | (53,489 | ) | ||||||||||||||||||||||
| Issuance of performance share units | — | — | 1,546 | — | — | 1,546 | — | 1,546 | ||||||||||||||||||||||||
| Repurchase of common stock | (35,854 | ) | (358 | ) | (1,031,176 | ) | — | — | (1,031,534 | ) | — | (1,031,534 | ) | |||||||||||||||||||
| Adjustment of redeemable non- controlling interest to redemption value | — | — | (2,714 | ) | — | — | (2,714 | ) | — | (2,714 | ) | |||||||||||||||||||||
| Empire City acquisition | 9,372 | 94 | 265,671 | — | — | 265,765 | — | 265,765 | ||||||||||||||||||||||||
| Empire City MGP transaction | — | — | (18,913 | ) | — | 195 | (18,718 | ) | 23,745 | 5,027 | ||||||||||||||||||||||
| MGP Class A share issuance | — | — | 150,464 | — | 1,512 | 151,976 | 1,049,582 | 1,201,558 | ||||||||||||||||||||||||
| Park MGM Transaction | — | — | (1,984 | ) | — | 16 | (1,968 | ) | 2,496 | 528 | ||||||||||||||||||||||
| Northfield OpCo transaction | — | — | 21,681 | — | (2 | ) | 21,679 | (27,439 | ) | (5,760 | ) | |||||||||||||||||||||
| Other | — | — | (3,473 | ) | — | 481 | (2,992 | ) | 772 | (2,220 | ) | |||||||||||||||||||||
| Balances, December 31, 2019 | 503,148 | $ | 5,031 | $ | 3,531,099 | $ | 4,201,337 | $ | (10,202 | ) | $ | 7,727,265 | $ | 4,935,654 | $ | 12,662,919 |
The accompanying notes are an integral part of these consolidated financial statements.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION
Organization. MGM Resorts International (together with its consolidated subsidiaries, unless otherwise indicated or unless the context requires otherwise, the “Company”) is a Delaware corporation that acts largely as a holding company and, through subsidiaries, owns and operates casino resorts.
As of December 31, 2019, the Company owns and operates the following integrated casino, hotel and entertainment resorts in Las Vegas, Nevada: Bellagio, MGM Grand Las Vegas, The Mirage, Mandalay Bay, Luxor, New York-New York, Park MGM, and Excalibur. Operations at MGM Grand Las Vegas include management of The Signature at MGM Grand Las Vegas. The Company owns and operates along with local investors, MGM Grand Detroit in Detroit, Michigan, MGM National Harbor in Prince George’s County, Maryland and MGM Springfield in Springfield, Massachusetts. The Company also owns and operates Borgata located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey, Empire City in Yonkers, New York, MGM Northfield Park in Northfield Park, Ohio, and the following resorts in Mississippi: Beau Rivage in Biloxi and Gold Strike in Tunica. Additionally, the Company owns and operates the Park, a dining and entertainment district located between New York-New York and Park MGM, Shadow Creek, an exclusive world-class golf course located approximately ten miles north of its Las Vegas Strip Resorts, Primm Valley Golf Club at the California/Nevada state line and Fallen Oak golf course in Saucier, Mississippi.
MGM Growth Properties LLC (“MGP”), a consolidated subsidiary of the Company, is organized as an umbrella partnership REIT (commonly referred to as an UPREIT) structure in which substantially all of its assets are owned by and substantially all of its businesses are conducted through MGM Growth Properties Operating Partnership LP (the “Operating Partnership”). MGP has two classes of authorized and outstanding voting common shares (collectively, the “shares”): Class A shares and a single Class B share. The Company owns MGP’s Class B share, which does not provide its holder any rights to profits or losses or any rights to receive distributions from operations of MGP or upon liquidation or winding up of MGP. MGP’s Class A shareholders are entitled to one vote per share, while the Company, as the owner of the Class B share, is entitled to an amount of votes representing a majority of the total voting power of MGP’s shares so long as the Company and its controlled affiliates’ (excluding MGP) aggregate beneficial ownership of the combined economic interests in MGP and the Operating Partnership does not fall below 30%. The Company and MGP each hold Operating Partnership units representing limited partner interests in the Operating Partnership. The general partner of the Operating Partnership is a wholly-owned subsidiary of MGP. The Operating Partnership units held by the Company are exchangeable into Class A shares of MGP on a one-to-one basis, or cash at the fair value of a Class A share. The determination of settlement method is at the option of MGP’s independent conflicts committee; refer to discussion below as to the agreement entered into in February 2020 which allows the Company to receive cash of up to $1.4 billion in exchange for its Operating Partnership units, should the Company elect to have its units redeemed for a 24 month period following the closing of the MGP BREIT Venture Transaction (as defined below). The Company and MGP’s ownership interest percentage in the Operating Partnership have varied based upon the transactions that MGP has completed, as discussed in Note 18. As of December 31, 2019, the Company owned 63.7% of the Operating Partnership units, and MGP held the remaining 36.3% ownership interest in the Operating Partnership.
Pursuant to a master lease agreement between a subsidiary of the Company and a subsidiary of the Operating Partnership, the Company leases the real estate assets of The Mirage, Mandalay Bay, Luxor, New York-New York, Park MGM, Excalibur, The Park, Gold Strike Tunica, MGM Grand Detroit, Beau Rivage, Borgata, Empire City, MGM National Harbor, and MGM Northfield Park. As discussed further below, pursuant to a lease agreement between a subsidiary of the Company and the venture with Blackstone Real Estate Income Trust, Inc. (“BREIT), the Company leases the real estate assets of Bellagio from the Bellagio BREIT Venture.
In July 2018, MGP acquired the membership interests of Northfield Park Associates, LLC (“Northfield”), a company that owned the real estate assets and operations of the Hard Rock Rocksino Northfield Park (“Northfield Acquisition”). In April 2019, the Company acquired the membership interests of Northfield from MGP and MGP retained the associated real estate assets. The Company then rebranded the property to MGM Northfield Park, which was then added to the existing master lease between the Company and MGP. Refer to Note 4 and Note 18 for additional information.
In January 2019, the Company acquired the real property and operations associated with the Empire City Casino's race track and casino ("Empire City"). Subsequently, MGP acquired the developed real property associated with Empire City from the Company and Empire City was added to the existing master lease between the Company and MGP. Refer to Note 4 and Note 18 for additional information.
In March 2019, the Company entered into an amendment to the existing master lease with respect to investments made by the Company related to improvements at Park MGM and NoMad Las Vegas. Refer to Note 18 for additional information on this transaction.
On November 15, 2019, the Company formed a venture (the “Bellagio BREIT Venture”) with a subsidiary of BREIT, which acquired the Bellagio real estate assets from the Company and entered into a lease agreement to lease the real estate assets back to the Company. As consideration for the real estate assets, the Company received total consideration of $4.25 billion, which consisted of a 5% equity interest in the venture and cash of approximately $4.2 billion. The Company recorded a gain of $2.7 billion related to sale of the Bellagio real estate assets, recorded as “Gain on Bellagio transaction,” which primarily reflects the difference between the carrying value of the real estate assets sold and the consideration received. The Company also provides a shortfall guarantee of the principal amount of indebtedness of the debt of the Bellagio BREIT Venture’s $3.01 billion of debt (and any interest accrued and unpaid thereon). Refer to Note 11 and Note 12 for additional information relating to the lease and guarantee, respectively.
In December 2019, the Company completed the sale of Circus Circus Las Vegas and adjacent land. See Note 16 for additional information related to this transaction.
On February 14, 2020, the Company completed a series of transactions (collectively 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 a newly formed entity (“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, the Company 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 the MGP BREIT Venture. In addition, the Operating Partnership issued approximately 3 million Operating Partnership units to the Company representing 5% of the equity value of MGP BREIT Venture. In connection with the transactions, the Company provided a shortfall guaranty of the principal amount of indebtedness of the 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.
In connection with the transactions, MGP BREIT Venture entered into a lease with the Company for the real estate assets of Mandalay Bay and MGM Grand Las Vegas. The lease provides for a term of thirty years with two ten-year renewal options and has an initial annual base rent of $292 million, escalating annually at a rate of 2% per annum for the first fifteen years and thereafter equal to the greater of 2% and the CPI increase during the prior year subject to a cap of 3%. In addition, the lease will require the Company to spend 3.5% of net revenues over a rolling five-year period at the properties on capital expenditures and for the Company to comply with certain financial covenants, which, if not met, will require the Company 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 one-year period.
In connection with the MGP BREIT Venture Transaction, the existing master lease with MGP was modified to remove the Mandalay Bay property and the annual rent under the MGP master lease was reduced by $133 million.
The real estate assets of Mandalay Bay and MGM Grand Las Vegas were classified as held and used in the consolidated balance sheets at December 31, 2019 as the held for sale criteria were not met as of the balance sheet date.
Also, on January 14, 2020, the Company, the Operating Partnership, and MGP entered into an agreement for the Operating Partnership to waive its right to issue MGP Class A shares, in lieu of cash, to the Company in connection with the Company exercising its right to require the Operating Partnership to redeem Operating Partnership units that the Company holds, at a price per unit equal to a 3% discount to the applicable cash amount as calculated in accordance with the operating agreement. The waiver terminates on the earlier of 24 months following the closing of the MGP BREIT Venture Transaction and the Company receiving cash proceeds of $1.4 billion as consideration for the redemption of the Company’s Operating Partnership units.
The Company has an approximate 56% controlling interest in MGM China Holdings Limited (together with its subsidiaries, “MGM China”), which owns MGM Grand Paradise, S.A. (“MGM Grand Paradise”). MGM Grand Paradise owns and operates the MGM Macau resort and casino and MGM Cotai, an integrated casino, hotel and entertainment resort located on the Cotai Strip in Macau, as well as the related gaming subconcession and land concessions.
In early 2020, the rapid spread of a respiratory illness caused by a novel coronavirus (Covid-19) identified as originating in Wuhan, Hubei Province, China led to certain actions taken by the Chinese government and other countries to attempt to mitigate the spread of the virus. Among the actions taken were the implementation of travel restrictions, such as the temporary suspension of China’s visa scheme that permits mainland Chinese to travel to Macau, the temporary suspension of all ferry service from Hong Kong to Macau, the suspension of casino operations in Macau for a 15-day period that commenced on February 5, 2020, and restrictions placed on inbound travel from mainland China to the U.S. Although operations at MGM Macau and MGM Cotai resumed on February 20, 2020, there are currently limits on the number of gaming tables allowed to operate and restrictions on the number of seats available at each table, and the temporary suspension of the visa scheme and ferry service to Macau remains in place. Due to the reduced travel to the Company's Macau properties as a result of these measures, the Company expects a decline in the operating results of its MGM
China operating segments. Additionally, to the extent that the virus impacts the willingness or ability of customers to travel to the Company’s properties in the United States (due to travel restrictions, or otherwise), the Company’s domestic results of operations could also be negatively impacted. The Company is continuing to evaluate the nature and extent of the impacts to its business, which could have a material effect on its consolidated operating results for the first quarter of 2020 and potentially thereafter. Given the uncertain nature of these circumstances, the related impact on results of operations, cash flows and financial condition cannot be reasonably estimated at this time.
The Company owns 50% of and manages CityCenter Holdings, LLC (“CityCenter”), located between Bellagio and Park MGM. The other 50% of CityCenter is owned by Infinity World Development Corp, a wholly owned subsidiary of Dubai World, a Dubai, United Arab Emirates government decree entity. CityCenter consists of Aria, an integrated casino, hotel and entertainment resort; and Vdara, a luxury condominium-hotel. See Note 6 and Note 18 for additional information related to CityCenter.
The Company has three reportable segments: Las Vegas Strip Resorts, Regional Operations and MGM China. See Note 17 for additional information about the Company’s segments.
NOTE 2 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation. For entities not determined to be a variable interest entity (“VIE”), the Company consolidates such entities in which the Company owns 100% of the equity. For entities in which the Company owns less than 100% of the equity interest, the Company consolidates the entity if it has the direct or indirect ability to control the entities’ activities based upon the terms of the respective entities’ ownership agreements, such as MGM China. For these entities, the Company records a noncontrolling interest in the consolidated balance sheets. The Company’s investments in unconsolidated affiliates which are 50% or less owned are accounted for under the equity method when the Company can exercise significant influence over or has joint control of the unconsolidated affiliate, such as CityCenter. All intercompany balances and transactions are eliminated in consolidation.
The Company evaluates entities for which control is achieved through means other than voting rights to determine if it is the primary beneficiary of a VIE. A VIE is an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. The Company consolidates its investment in a VIE when it determines that it is its primary beneficiary. For these VIEs, the Company records a noncontrolling interest in the consolidated balance sheets. The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis.
Management has determined that MGP is a VIE because the Class A equity investors as a group lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance. The Company has determined that it is the primary beneficiary of MGP and consolidates MGP because (i) its ownership of MGP’s single Class B share entitles it to a majority of the total voting power of MGP’s shares, and (ii) the exchangeable nature of the Operating Partnership units owned provide the Company the right to receive benefits from MGP that could potentially be significant to MGP. The Company has recorded MGP’s ownership interest in the Operating Partnership as noncontrolling interest in the Company’s consolidated financial statements. As of December 31, 2019, on a consolidated basis MGP had total assets of $11.9 billion, primarily related to its real estate investments, and total liabilities of $5.0 billion, primarily related to its indebtedness.
Management has determined that Bellagio BREIT Venture is a VIE because the equity holders as a group lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance. The Company has determined that it is not the primary beneficiary of Bellagio BREIT Venture and, accordingly, does not consolidate Bellagio BREIT Venture, because the Company does not have power to direct the activities that could potentially be significant to Bellagio BREIT Venture; BREIT, as the managing member, has such power. The Company has recorded its 5% ownership interest in Bellagio BREIT Venture as an investment in unconsolidated affiliates in the Company’s consolidated financial statements, for which such amount was $61 million as of December 31, 2019. The Company’s maximum exposure to loss as a result of its involvement with Bellagio BREIT Venture is equal to the carrying value of its investment, assuming no future capital funding requirements, plus the exposure to loss resulting from the Company’s guarantee of the debt of Bellagio BREIT Venture, as further discussed in Note 12.
Reclassifications. Certain reclassifications have been made to conform the prior period presentation.
Management’s use of estimates. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. These principles require the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair value measurements. Fair value measurements affect the Company’s accounting and impairment assessments of its long-lived assets, investments in unconsolidated affiliates, cost method investments, assets acquired, and liabilities assumed in an acquisition, and goodwill and other intangible assets. Fair value measurements also affect the Company’s accounting for certain of its financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs. The Company used the following inputs in its fair value measurements:
| • | Level 1 and Level 2 inputs for its long-term debt fair value disclosures. See Note 9; |
|---|
| • | Level 2 and Level 3 inputs when assessing the fair value of assets acquired and liabilities assumed during the Northfield and Empire City acquisition. See Note 4; |
|---|
| • | Level 2 and Level 3 inputs when assessing the fair value of the note receivable relating to the Circus Circus Las Vegas and adjacent land sale. See Note 16. |
|---|
Cash and cash equivalents. Cash and cash equivalents include investments and interest-bearing instruments with maturities of 90 days or less at the date of acquisition. Such investments are carried at cost, which approximates market value. Book overdraft balances resulting from the Company’s cash management program are recorded as “Accounts payable” or “Construction payable” as applicable.
Accounts receivable and credit risk. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of casino accounts receivable. The Company issues credit to approved casino customers and gaming promoters following background checks and investigations of creditworthiness. At December 31, 2019 and 2018, approximately 57% and 62%, respectively, of the Company’s gross casino accounts receivable were owed by customers from foreign countries, primarily within Asia. Business or economic conditions or other significant events in these countries could affect the collectability of such receivables.
Accounts receivable are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems the account to be uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful accounts is maintained to reduce the Company’s receivables to their net carrying amount, which approximates fair value. The allowance is estimated based on both a specific review of customer accounts as well as historical collection experience and current economic and business conditions. Management believes that as of December 31, 2019, no significant concentrations of credit risk existed for which an allowance had not already been recorded.
Inventories. Inventories consist primarily of food and beverage, retail merchandise and operating supplies, and are stated at the lower of cost or net realizable value. Cost is determined primarily using the average cost method for food and beverage and operating supplies. Cost for retail merchandise is determined using the cost method.
Property and equipment. Property and equipment are stated at cost. A significant amount of the Company’s property and equipment was acquired through business combinations and therefore recognized at fair value at the acquisition date. Gains or losses on dispositions of property and equipment are included in the determination of income or loss. Maintenance costs are expensed as incurred. As of December 31, 2019, and 2018, the Company had accrued $14 million and $47 million, respectively for property and equipment within “Accounts payable”.
Property and equipment are generally depreciated over the following estimated useful lives on a straight-line basis:
| Buildings and improvements | 15 to 40 years | |
|---|---|---|
| Land improvements | 10 to 20 years | |
| Furniture and fixtures | 3 to 20 years | |
| Equipment | 3 to 15 years |
The Company evaluates its property and equipment and other long-lived assets for impairment based on its 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 held for sale, the Company recognizes the asset at the lower of carrying value or fair market value less costs to sell, as estimated based on comparable asset sales, offers received, or a discounted cash flow model. For assets to be held and used, the Company reviews for impairment whenever indicators of impairment exist. The Company then compares 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 charge is recorded based on the fair value of the asset, typically measured using a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. All recognized impairment losses, whether for assets held for sale or assets to be held and used, are recorded as operating expenses. Refer to Note 16 for discussion on the impairment loss recorded on Circus Circus Las Vegas and adjacent land in 2019.
Capitalized interest. The interest cost associated with major development and construction projects is capitalized and included in the cost of the project. When no debt is incurred specifically for a project, interest is capitalized on amounts expended on the project using the weighted-average cost of the Company’s outstanding borrowings. Capitalization of interest ceases when the project is substantially complete, or development activity is suspended for more than a brief period.
Investments in and advances to unconsolidated affiliates. The Company has investments in unconsolidated affiliates accounted for under the equity method. Under the equity method, carrying value is adjusted for the Company’s share of the investees’ earnings and losses, amortization of certain basis differences, as well as capital contributions to and distributions from these companies. Distributions in excess of equity method earnings are recognized as a return of investment and recorded as investing cash inflows in the accompanying consolidated statements of cash flows. The Company classifies operating income and losses as well as gains and impairments related to its investments in unconsolidated affiliates as a component of operating income or loss and classifies non-operating income or losses related to its investments in unconsolidated affiliates as a component of non-operating income or loss, as the Company’s investments in such unconsolidated affiliates are an extension of the Company’s core business operations.
The Company evaluates its investments in unconsolidated affiliates for impairment whenever events or changes in circumstances indicate that the carrying value of its investment may have experienced an “other-than-temporary” decline in value. If such conditions exist, the Company compares the estimated fair value of the investment to its carrying value to determine if an impairment is indicated and determines whether the impairment is “other-than-temporary” based on its assessment of all relevant factors, including consideration of the Company’s intent and ability to retain its investment. The Company estimates fair value using a discounted cash flow analysis based on estimated future results of the investee and market indicators of terminal year capitalization rates, and a market approach that utilizes business enterprise value multiples based on a range of multiples from the Company’s peer group.
Goodwill and other intangible assets. Goodwill represents the excess of purchase price over fair market value of net assets acquired in business combinations. Goodwill and indefinite-lived intangible assets must be reviewed for impairment at least annually and between annual test dates in certain circumstances. The Company performs its annual impairment tests in the fourth quarter of each fiscal year. No impairments were indicated or recorded as a result of the annual impairment review for goodwill and indefinite-lived intangible assets in 2019, 2018 and 2017.
Accounting guidance provides entities the option to perform a qualitative assessment of goodwill and indefinite-lived intangible assets (commonly referred to as “step zero”) in order to determine whether further impairment testing is necessary. In performing the step zero analysis the Company considers macroeconomic conditions, industry and market considerations, current and forecasted financial performance, entity-specific events, and changes in the composition or carrying amount of net assets of reporting units for goodwill. In addition, the Company takes into consideration the amount of excess of fair value over carrying value determined in the last quantitative analysis that was performed, as well as the period of time that has passed since the last quantitative analysis. If the step zero analysis indicates that it is more likely than not that the fair value is less than its carrying amount, the entity would proceed to a quantitative analysis.
Under the quantitative analysis, goodwill for relevant reporting units is tested for impairment using a discounted cash flow analysis based on the estimated future results of the Company’s reporting units discounted using market discount rates and market indicators of terminal year capitalization rates, and a market approach that utilizes business enterprise value multiples based on a range of multiples from the Company’s peer group. If the fair value of the reporting unit is less than its carrying value, an impairment charge is recognized equal to the difference. Under the quantitative analysis, license rights are tested for impairment using a discounted cash flow approach, and trademarks are tested for impairment using the relief-from-royalty method. If the fair value of an indefinite-lived intangible asset is less than its carrying amount, an impairment loss is recognized equal to the difference.
Revenue recognition. The Company’s revenue from contracts with customers consists of casino wagers transactions, hotel room sales, food and beverage transactions, entertainment shows, and retail transactions.
The transaction price for a casino wager is the difference between gaming wins and losses (“net win”). In certain circumstances, the Company offers discounts on markers, which is estimated based upon historical business practice, and recorded as a reduction of casino revenue. Commissions rebated to gaming promoters and VIP players at MGM China are also recorded as a reduction of casino revenue. The Company accounts for casino revenue on a portfolio basis given the similar characteristics of wagers by recognizing net win per gaming day versus on an individual wager basis.
For casino wager transactions that include other goods and services provided by the Company to gaming patrons on a discretionary basis to incentivize gaming, the Company allocates revenue from the casino wager transaction to the good or service delivered based upon stand-alone selling price (“SSP”). Discretionary goods and services provided by the Company and supplied by third parties are recognized as an operating expense.
For casino wager transactions that include incentives earned by customers under the Company’s loyalty programs, the Company allocates a portion of net win based upon the SSP of such incentive (less estimated breakage). This allocation is deferred and recognized as revenue when the customer redeems the incentive. When redeemed, revenue is recognized in the department that provides the goods or service. Redemption of loyalty incentives at third party outlets are deducted from the loyalty liability and amounts owed are paid to the third party, with any discount received recorded as other revenue. Commissions and incentives provided to gaming customers were $2.5 billion, $2.3 billion and $2.1 billion for the years ended December 31, 2019, 2018 and 2017, respectively. After allocating revenue to other goods and services provided as part of casino wager transactions, the Company records the residual amount to casino revenue.
The transaction price of rooms, food and beverage, and retail contracts is the net amount collected from the customer for such goods and services. The transaction price for such contracts is recorded as revenue when the good or service is transferred to the customer over their stay at the hotel or when the delivery is made for the food & beverage and retail & other contracts. Sales and usage-based taxes are excluded from revenues. For some arrangements, the Company acts as an agent in that it arranges for another party to transfer goods and services, which primarily include certain of the Company’s entertainment shows as well as customer rooms arranged by online travel agents.
The Company also has other contracts that include multiple goods and services, such as packages that bundle food, beverage, or entertainment offerings with hotel stays and convention services. For such arrangements, the Company allocates revenue to each good or service based on its relative SSP. The Company primarily determines the SSP of rooms, food and beverage, entertainment, and retail goods and services based on the amount that the Company charges when sold separately in similar circumstances to similar customers.
Contract and Contract-Related Liabilities. There may be a difference between the timing of cash receipts from the customer and the recognition of revenue, resulting in a contract or contract-related liability. The Company generally has three types of liabilities related to contracts with customers: (1) outstanding chip liability, which represents the amounts owed in exchange for gaming chips held by a customer, (2) loyalty program obligations, which represents the deferred allocation of revenue relating to loyalty program incentives earned, as discussed above, and (3) customer advances and other, which is primarily funds deposited by customers before gaming play occurs (“casino front money”) and advance payments on goods and services yet to be provided such as advance ticket sales and deposits on rooms and convention space or for unpaid wagers. These liabilities are generally expected to be recognized as revenue within one year of being purchased, earned, or deposited and are recorded within “Other accrued liabilities” on the Company’s consolidated balance sheets.
The following table summarizes the activity related to contract and contract-related liabilities:
| Outstanding Chip Liability | Loyalty Program | Customer Advances and Other | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Balance at January 1 | $ | 323,811 | $ | 597,753 | $ | 113,293 | $ | 91,119 | $ | 667,285 | $ | 539,626 | |||||||||||
| Balance at December 31 | 314,570 | 323,811 | 126,966 | 113,293 | 481,095 | 667,285 | |||||||||||||||||
| Increase / (decrease) | $ | (9,241 | ) | $ | (273,942 | ) | $ | 13,673 | $ | 22,174 | $ | (186,190 | ) | $ | 127,659 |
Reimbursed cost. Costs reimbursed pursuant to management services are recognized as revenue in the period it incurs the costs as this reflects when the Company performs its related performance obligation and is entitled to reimbursement. Reimbursed costs relate primarily to the Company’s management of CityCenter.
Revenue by source. The Company presents the revenue earned disaggregated by the type or nature of the good or service (casino, room, food and beverage, and entertainment, retail and other) and by relevant geographic region within Note 17.
Leases. The Company determines if an arrangement is or contains a lease at inception or modification of the arrangement. An arrangement is or contains a lease if there are identified assets and the right to control the use of an identified asset is conveyed for a period of time in exchange for consideration. Control over the use of the identified asset means the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.
For leases with terms greater than twelve months, the right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The initial measurement of the operating lease ROU assets also includes any prepaid lease payments and are reduced by any previously accrued deferred rent. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company typically uses its incremental borrowing rate to discount the lease payments based on the information available at commencement date. Many of the Company’s leases include fixed rental escalation clauses that are factored into the determination of lease payments. Lease terms include options to extend or terminate the lease when it is reasonably certain that such option will be exercised. For operating leases, lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term. For finance leases, the ROU asset depreciates on a straight-line basis over the shorter of the lease term or useful life of the ROU asset and the lease liability accretes interest based on the interest method using the discount rate determined at lease commencement.
The Company is a lessor under certain of its lease arrangements. Lease revenues earned by the Company from third parties are classified within the line item corresponding to the type or nature of the tenant’s good or service. Lease revenues include $53 million, $51 million and $51 million recorded within food and beverage revenue for 2019, 2018 and 2017, respectively, and $89 million, $87 million and $79 million recorded within entertainment, retail, and other revenue for the same such periods, respectively. Lease revenues from the rental of hotel rooms are recorded as rooms revenues within the consolidated statements of operations.
Advertising. The Company expenses advertising costs as they are incurred. Advertising expense, which is generally included in general and administrative expenses, was $257 million, $305 million and $223 million for 2019, 2018 and 2017, respectively.
Corporate expense. Corporate expense represents unallocated payroll, aircraft costs, professional fees and various other expenses not directly related to the Company’s casino resort operations. In addition, corporate expense includes the costs associated with the Company’s evaluation and pursuit of new business opportunities, which are expensed as incurred.
Preopening and start-up expenses. Preopening and start-up costs, including organizational costs, are expensed as incurred. Costs classified as preopening and start-up expenses include payroll, outside services, advertising, and other expenses related to new or start-up operations.
Property transactions, net. The Company classifies transactions such as write-downs and impairments, demolition costs, and normal gains and losses on the sale of assets as “Property transactions, net.” See Note 16 for a detailed discussion of these amounts.
Redeemable noncontrolling interest. Certain noncontrolling interest parties have non-voting economic interests in MGM National Harbor which provide for annual preferred distributions by MGM National Harbor to the noncontrolling interest parties based on a percentage of its annual net gaming revenue (as defined in the MGM National Harbor operating agreement). Such distributions are accrued each quarter and are paid 90-days after the end of each fiscal year. Beginning on December 31, 2019, the noncontrolling interest parties each have the ability to require MGM National Harbor to purchase all or a portion of their interests for a purchase price based on a contractually agreed upon formula.
The Company has recorded the interests as “Redeemable noncontrolling interests” in the mezzanine section of the accompanying consolidated balance sheets and not stockholders’ equity because their redemption is not exclusively in the Company’s control. The interests were initially accounted for at fair value. Subsequently, the Company recognizes changes in the redemption value as they occur and adjusts the carrying amount of the redeemable noncontrolling interests to equal the maximum redemption value, provided such amount does not fall below the initial carrying value, at the end of each reporting period. The Company records any changes caused by such an adjustment in capital in excess of par value. Additionally, the carrying amount of the redeemable noncontrolling interests is adjusted for accrued annual preferred distributions, with changes caused by such adjustments recorded within net income (loss) attributable to noncontrolling interests.
Income per share of common stock. The table below reconciles basic and diluted income per share of common stock. Diluted net income attributable to common stockholders includes adjustments for redeemable noncontrolling interests and the potentially dilutive effect on the Company’s equity interests in MGP and MGM China due to shares outstanding under their respective stock compensation plans. Diluted weighted-average common and common equivalent shares include adjustments for potential dilution of share-based awards outstanding under the Company’s stock compensation plan.
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| Numerator: | (In thousands) | |||||||||||
| Net income attributable to MGM Resorts International | $ | 2,049,146 | $ | 466,772 | $ | 1,952,052 | ||||||
| Adjustment related to redeemable noncontrolling interests | (2,713 | ) | (21,326 | ) | (18,363 | ) | ||||||
| Net income available to common stockholders - basic | 2,046,433 | 445,446 | 1,933,689 | |||||||||
| Potentially dilutive effect due to MGP and MGM China stock compensation plans | (194 | ) | (206 | ) | (268 | ) | ||||||
| Net income attributable to common stockholders - diluted | $ | 2,046,239 | $ | 445,240 | $ | 1,933,421 | ||||||
| Denominator: | ||||||||||||
| Weighted-average common shares outstanding basic | 524,173 | 544,253 | 572,253 | |||||||||
| Potential dilution from share-based awards | 3,472 | 5,283 | 6,542 | |||||||||
| Weighted-average common and common equivalent shares - diluted | 527,645 | 549,536 | 578,795 | |||||||||
| Antidilutive share-based awards excluded from the calculation of diluted earnings per share | 1,617 | 2,668 | 2,601 |
Currency translation. The Company translates the financial statements of foreign subsidiaries that are not denominated in U.S. dollars. Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date. Income statement accounts are translated at the average rate of exchange prevailing during the period. Translation adjustments resulting from this process are recorded to other comprehensive income (loss). Gains or losses from foreign currency remeasurements are recorded to other non-operating income (expense).
Accumulated other comprehensive income (loss). Comprehensive income (loss) includes net income (loss) and all other non-stockholder changes in equity, or other comprehensive income (loss). Elements of the Company’s accumulated other comprehensive income (loss) are reported in the accompanying consolidated statements of stockholders’ equity. Amounts reported in accumulated other comprehensive income (loss) related to cash flow hedges will be reclassified to interest expense as interest payments are made on the corresponding variable-rate debt.
Recently issued accounting standards. In February 2016, the FASB issued ASC 842 “Leases (Topic 842)”, which replaces the existing guidance in Topic 840, “Leases”, (“ASC 842”). ASC 842 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. ASC 842 requires a dual approach for lessee accounting under which a lessee would classify and account for its lease agreements as either finance or operating. Both finance and operating leases will result in the lessee recognizing a ROU asset and a corresponding lease liability. For finance leases, the lessee will recognize interest expense associated with the lease liability and depreciation expense associated with the ROU asset; and for operating leases, the lessee will recognize straight-line lease expense. The Company adopted ASC 842 on January 1, 2019 utilizing the simplified transition method and accordingly did not recast comparative period financial information. The Company elected the basket of transition practical expedients which includes not needing to reassess: (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) direct costs for any existing leases. As a result of adoption, the Company recognized $656 million of operating ROU assets and $580 million of operating lease liabilities as of January 1, 2019.
Prior to the adoption of ASC 842 on January 1, 2019, the MGP master lease between subsidiaries of MGM and MGP was accounted for as a failed sale of the real estate assets due to the subsidiaries’ investments in the Operating Partnership, which constituted continuing involvement. As such, the real estate assets were reflected in the balance sheets of the applicable MGM subsidiaries as well as the associated finance lease liability. In connection with the adoption of ASC 842, the sale and leaseback of the real estate assets under the master lease now qualify as a passed sale and are determined to be operating leases. Accordingly, the real estate assets are now only reflected on the balance sheet of MGP and the MGM subsidiaries have recorded operating lease liabilities and operating ROU assets. The MGP master lease and its related accounting eliminates in consolidation.
In June 2016, the FASB issued ASC 326 “Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments” (“ASC 326”), which replaces the existing incurred loss model with a current expected credit loss (CECL) model that requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company would be required to use a forward-looking CECL model for accounts receivables, guarantees, and other financial instruments. The Company will adopt ASC 326 on January 1, 2020 and does not expect ASC 326 to have a material impact on its financial statements.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” (“ASU 2019-12”), which simplifies the accounting for income taxes and includes removal of certain exceptions to the general principles of ASC 740, Income Taxes, and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. ASU 2019-12 is effective for the Company beginning on January 1, 2021. Early adoption is permitted. The Company is currently assessing the impact ASU 2019-12 will have on its consolidated financial statements and footnote disclosures.
NOTE 3 — ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consisted of the following:
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
| Casino | $ | 394,163 | $ | 419,127 | ||||
| Hotel | 164,079 | 154,707 | ||||||
| Other | 149,036 | 174,147 | ||||||
| 707,278 | 747,981 | |||||||
| Less: Allowance for doubtful accounts | (94,561 | ) | (90,775 | ) | ||||
| $ | 612,717 | $ | 657,206 |
NOTE 4 — ACQUISITION
Empire City
On January 29, 2019, the Company acquired the real property and operations associated with Empire City for total consideration of approximately $865 million, plus customary working capital and other adjustments. The fair value of consideration paid included the issuance of approximately $266 million of the Company’s common stock, the incurrence of a new bridge facility, and the remaining balance in cash. If Empire City is awarded a license for live table games on or prior to December 31, 2022 and the Company accepts such license by December 31, 2024, the Company will pay additional consideration of $50 million. The acquisition expands the Company’s presence in the northeast region and greater New York City market. Subsequent to the Company’s acquisition, MGP acquired the developed real property associated with Empire City from the Company and Empire City was added to the existing master lease between the Company and MGP. See Note 18 for additional information.
The Company recognized 100% of the assets and liabilities of Empire City at fair value on the date of acquisition. Under the acquisition method, the fair value was allocated to the assets acquired and liabilities assumed in the transaction. The Company estimated fair value using both level 2 inputs, which are observable inputs for similar assets, and level 3 inputs, which are unobservable inputs. During the second quarter of 2019, the Company received updated information regarding facts and circumstances in existence as of the acquisition date that impacted the forecasted revenues and expenses utilized in the preliminary purchase price valuation. As a result, the Company recorded a measurement period adjustment that included a $76 million decrease to the racing and gaming license, a $17 million decrease to other intangible assets and a $20 million decrease to deferred income taxes, with the offset to goodwill.
The following table sets forth the purchase price allocation (in thousands):
| Fair value of assets acquired and liabilities assumed: | |||
| Property and equipment | $ | 645,733 | |
| Cash and cash equivalents | 63,197 | ||
| Racing and gaming license | 52,000 | ||
| Other intangible assets | 34,000 | ||
| Goodwill | 256,133 | ||
| Other assets | 24,420 | ||
| Deferred income taxes | (125,149 | ) | |
| Other liabilities | (85,690 | ) | |
| $ | 864,644 |
The Company recognized the identifiable intangible assets at fair value. The estimated fair values of the intangible assets were determined using methodologies under the income approach based on significant inputs that were not observable. The gaming license is an indefinite-lived intangible asset and the customer lists and trade name acquired, both of which comprise other intangible assets above, are amortized over their estimated useful lives of approximately four and five years, respectively. The goodwill is primarily attributable to the potential for a conversion to a full-scale gaming facility.
For the period from January 29, 2019 through December 31, 2019, Empire City’s net revenue was $193 million, operating income was $12 million and net income was $36 million. Pro forma results of operations for the acquisition have not been presented because it is not material to the consolidated results of operations.
Northfield
On July 6, 2018, MGP completed its acquisition of 100% of the membership interests of Northfield for a purchase price of approximately $1.1 billion (“Northfield Acquisition”). MGP funded the acquisition through a $200 million draw on the Operating Partnership’s term loan A and a $655 million draw under the Operating Partnership’s revolving credit facility, with the remainder of the purchase price paid with cash on hand. The acquisition expanded MGP’s real estate assets and diversified MGP’s geographic reach.
MGP recognized 100% of the assets and liabilities of Northfield at fair value at the date of the acquisition. Under the acquisition method, the fair value was allocated to the assets acquired and liabilities assumed in the transaction. The Company estimated fair value using both level 2 inputs, which are observable inputs for similar assets, and level 3 inputs, which are unobservable inputs.
The following table sets forth the purchase price allocation (in thousands):
| Fair value of assets acquired and liabilities assumed: | |||
|---|---|---|---|
| Property and equipment | $ | 792,807 | |
| Cash and cash equivalents | 35,831 | ||
| Racing and gaming license | 228,000 | ||
| Customer list | 25,000 | ||
| Goodwill | 17,915 | ||
| Other assets | 9,598 | ||
| Other liabilities | (38,786 | ) | |
| $ | 1,070,365 |
MGP recognized the identifiable intangible assets at fair value. The estimated fair values of the intangible assets were determined using methodologies under the income approach based on significant inputs that were not observable. The goodwill was primarily attributed to the synergies expected to arise after the acquisition.
In April 2019, the Company subsequently acquired the membership interests of Northfield from MGP, and MGP retained the associated real estate assets. MGM Northfield Park was then added to the existing master lease between the Company and MGP. Refer to Note 18 for additional information.
For the period from July 6, 2018 through December 31, 2018, Northfield’s net revenue was $133 million, operating income and net income were both $33 million. Pro forma results of operations for the acquisition have not been presented because it is not material to the consolidated results of operations.
NOTE 5 — PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following:
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
| Land | $ | 5,348,223 | $ | 6,923,769 | ||||
| Buildings, building improvements and land improvements | 15,291,801 | 16,437,695 | ||||||
| Furniture, fixtures and equipment | 5,924,439 | 6,064,330 | ||||||
| Construction in progress | 209,890 | 321,944 | ||||||
| 26,774,353 | 29,747,738 | |||||||
| Less: Accumulated depreciation | (8,581,835 | ) | (9,017,850 | ) | ||||
| Finance lease ROU assets, net | 93,437 | — | ||||||
| $ | 18,285,955 | $ | 20,729,888 |
NOTE 6 — INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Investments in and advances to unconsolidated affiliates consisted of the following:
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
| CityCenter Holdings, LLC – CityCenter (50%) | $ | 568,879 | $ | 589,965 | ||||
| Other | 253,487 | 142,902 | ||||||
| $ | 822,366 | $ | 732,867 |
The Company recorded its share of income from unconsolidated affiliates, including adjustments for basis differences, as follows:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
| Income from unconsolidated affiliates | $ | 119,521 | $ | 147,690 | $ | 146,222 | ||||||
| Preopening and start-up expenses | — | (3,321 | ) | — | ||||||||
| Non-operating items from unconsolidated affiliates | (62,296 | ) | (47,827 | ) | (34,751 | ) | ||||||
| $ | 57,225 | $ | 96,542 | $ | 111,471 |
The following table summarizes information related to the Company’s share of income from unconsolidated affiliates:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
| CityCenter | $ | 128,421 | $ | 138,383 | $ | 133,401 | ||||||
| Other | (8,900 | ) | 9,307 | 12,821 | ||||||||
| $ | 119,521 | $ | 147,690 | $ | 146,222 |
CityCenter
Mandarin Oriental sale. On August 30, 2018, CityCenter closed the sale of the Mandarin Oriental and adjacent retail parcels for approximately $214 million. During the year ended December 31, 2018, CityCenter recognized a loss on the sale of the Mandarin Oriental of $133 million and the Company recognized a $12 million gain on the sale related to the reversal of basis differences in excess of its share of the loss recorded by CityCenter, which is recorded within “Income from unconsolidated affiliates”.
CityCenter distributions. During the year ended December 31, 2019, CityCenter paid $180 million in dividends and distributions, of which the Company received its 50% share, or approximately $90 million. During the year ended December 31, 2018, CityCenter paid $625 million in dividends and distributions, of which the Company received its 50% share, or approximately $313 million. During the year ended December 31, 2017, CityCenter paid $600 million in dividends and distributions, of which the Company received its 50% share, or approximately $300 million.
Grand Victoria
Grand Victoria sale. On August 7, 2018, the Company, along with its joint venture partner, completed the sale of Grand Victoria, of which a subsidiary of the Company owned a 50% interest, for $328 million in cash. The Company recorded a gain of $45 million related to the sale, which is recorded within “Property transactions, net”.
Unconsolidated Affiliate Financial Information - CityCenter
Summarized balance sheet information is as follows:
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
| Current assets | $ | 405,918 | $ | 363,755 | ||||
| Property and other assets, net and other long-term assets | 5,982,059 | 6,167,853 | ||||||
| Current liabilities | 295,815 | 347,710 | ||||||
| Long-term debt and other long-term obligations | 1,782,411 | 1,763,290 |
Summarized results of operations are as follows:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
| Net revenues | $ | 1,294,861 | $ | 1,277,745 | $ | 1,227,733 | ||||||
| Operating income | 188,156 | 185,368 | 200,109 | |||||||||
| Income from continuing operations | 69,143 | 97,091 | 137,226 | |||||||||
| Net income (loss) | 69,143 | (37,911 | ) | 131,683 |
Basis Differences
The Company’s investments in unconsolidated affiliates do not equal the Company’s share of venture-level equity due to various basis differences. Basis differences related to depreciable assets are being amortized based on the useful lives of the related assets and liabilities, and basis differences related to non–depreciable assets, such as land and indefinite-lived intangible assets, are not being amortized. Differences between the Company’s share of venture-level equity and investment balances are as follows:
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
| Venture-level equity attributable to the Company | $ | 2,399,993 | $ | 2,347,103 | ||||
| Adjustment to CityCenter equity upon contribution of net assets by MGM Resorts International (1) | (509,382 | ) | (514,592 | ) | ||||
| CityCenter capitalized interest (2) | 177,898 | 186,830 | ||||||
| CityCenter completion guarantee (3) | 261,708 | 274,685 | ||||||
| CityCenter deferred gain (4) | (210,240 | ) | (212,276 | ) | ||||
| CityCenter capitalized interest on sponsor notes (5) | (34,755 | ) | (36,500 | ) | ||||
| Other-than-temporary impairments of CityCenter investment (6) | (1,304,317 | ) | (1,352,118 | ) | ||||
| Other adjustments | 41,461 | 39,735 | ||||||
| $ | 822,366 | $ | 732,867 |
| (1) | Primarily relates to land and fixed assets. |
|---|
| (2) | Relates to interest capitalized on the Company’s investment balance during development and construction stages. |
|---|
| (3) | Created by contributions to CityCenter under the completion guarantee recognized as equity contributions by CityCenter split between the members. |
|---|
| (4) | Relates to a deferred gain on assets contributed to CityCenter upon formation of CityCenter. |
|---|
| (5) | Relates to interest on the sponsor notes capitalized by CityCenter during development. Such sponsor notes were converted to equity in 2013. |
|---|
| (6) | The impairment of the Company’s CityCenter investment includes $352 million of impairments allocated to land as of December 31, 2019 and 2018. |
|---|
NOTE 7 — GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consisted of the following:
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
| Goodwill | $ | 2,084,564 | $ | 1,821,392 | ||||
| Indefinite-lived intangible assets: | ||||||||
| Detroit development rights | $ | 98,098 | $ | 98,098 | ||||
| MGM Northfield Park racing and gaming licenses | 228,000 | 228,000 | ||||||
| Trademarks, license rights and other | 352,212 | 312,022 | ||||||
| Total indefinite-lived intangible assets | 678,310 | 638,120 | ||||||
| Finite-lived intangible assets: | ||||||||
| MGM Grand Paradise gaming sub-concession | 4,519,558 | 4,468,766 | ||||||
| Less: Accumulated amortization | (1,514,772 | ) | (1,342,561 | ) | ||||
| 3,004,786 | 3,126,205 | |||||||
| MGM Macau land concession | — | 83,885 | ||||||
| Less: Accumulated amortization | — | (32,035 | ) | |||||
| — | 51,850 | |||||||
| Customer lists | 202,347 | 174,679 | ||||||
| Less: Accumulated amortization | (161,892 | ) | (151,465 | ) | ||||
| 40,455 | 23,214 | |||||||
| Finite-lived gaming licenses and other intangible assets | 141,327 | 136,127 | ||||||
| Less: Accumulated amortization | (38,374 | ) | (31,053 | ) | ||||
| 102,953 | 105,074 | |||||||
| Total finite-lived intangible assets, net | 3,148,194 | 3,306,343 | ||||||
| Total other intangible assets, net | $ | 3,826,504 | $ | 3,944,463 |
Goodwill. A summary of changes in the Company’s goodwill by reportable segment is as follows for 2019 and 2018:
| 2019 | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at January 1 | Acquisitions | Reclassifications | Currency exchange | Balance at December 31 | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Goodwill, net by segment: | ||||||||||||||||||||
| Las Vegas Strip Resorts | $ | 70,975 | $ | — | $ | (40,523 | ) | $ | — | $ | 30,452 | |||||||||
| Regional Operations | 386,892 | 256,133 | 58,438 | — | 701,463 | |||||||||||||||
| MGM China | 1,345,610 | — | — | 7,039 | 1,352,649 | |||||||||||||||
| Corporate and other | 17,915 | — | (17,915 | ) | — | — | ||||||||||||||
| $ | 1,821,392 | $ | 256,133 | $ | — | $ | 7,039 | $ | 2,084,564 |
| 2018 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at January 1 | Acquisitions | Currency exchange | Balance at December 31 | |||||||||||||||
| (In thousands) | ||||||||||||||||||
| Goodwill, net by segment: | ||||||||||||||||||
| Las Vegas Strip Resorts | $ | 70,975 | $ | — | $ | — | $ | 70,975 | ||||||||||
| Regional Operations | 386,892 | — | — | 386,892 | ||||||||||||||
| MGM China | 1,348,664 | — | (3,054 | ) | 1,345,610 | |||||||||||||
| Corporate and other | — | 17,915 | — | 17,915 | ||||||||||||||
| $ | 1,806,531 | $ | 17,915 | $ | (3,054 | ) | $ | 1,821,392 |
Goodwill was recognized related to the acquisition of Empire City in January 2019, which is included in Regional Operations. See Note 4 for discussion of the Empire City acquisition.
Goodwill was recognized by MGP, which was included within Corporate and other in 2018 and reclassed to Regional Operations in 2019, in connection with MGP’s acquisition of Northfield in 2018, and the Company’s acquisition of the membership interests of Northfield in 2019. See Note 4 for discussion of the Northfield Acquisition.
The presentation of the goodwill balance attributable to Gold Strike Tunica has been reclassified in 2019 from Las Vegas Strip Resorts to Regional Operations.
Indefinite-lived intangible assets. The Company’s indefinite-lived intangible assets consist primarily of development rights in Detroit, gaming and racing licenses for MGM Northfield Park, and trademarks and trade names, which is primarily related to Mandalay Bay, Luxor, Borgata, and Empire City.
MGM Grand Paradise gaming subconcession. Pursuant to the agreement dated June 19, 2004 between MGM Grand Paradise and Sociedade de Jogos de Macau, S.A. (“SJMSA”), a gaming sub-concession was acquired by MGM Grand Paradise for the right to operate casino games of chance and other casino games for a period of 15 years commencing on April 20, 2005. In March 2019, MGM Grand Paradise and SJMSA entered into a Sub-Concession Extension Contract (the “Extension Agreement”), pursuant to which the gaming sub-concession was extended to June 26, 2022, which coincides with the current expiration of all the other concessionaires and sub-concessionaires. MGM Grand Paradise paid the government of Macau approximately $25 million and paid SJMSA approximately $2 million as a contract premium for such extension. The Company cannot provide any assurance that the gaming sub-concession will be extended beyond the current terms; however, management believes that the gaming sub-concession will be extended, given that the Cotai land concession agreement with the government extends significantly beyond the gaming sub-concession. As such, as of December 31, 2019, the Company amortizes the gaming sub-concession intangible asset on a straight-line basis over the initial term of the Cotai land concession, ending in January 2038.
MGM Macau land concession. MGM Grand Paradise entered into a contract with the Macau government to use the land under MGM Macau commencing from April 6, 2006. The land use right has an initial term through April 6, 2031, subject to renewal for additional periods. Upon the adoption of ASC 842 on January 1, 2019, the below market component of the MGM Macau land concession, recognized prior to ASC 842 adoption as an intangible asset, is now reflected within the ROU operating asset recorded for the MGM Macau land concession.
Customer lists. The Company recognized intangible assets related to the Empire City customer list and the MGM Northfield Park customer list, which are amortized on a straight-line basis over the estimated useful life over four years, and seven years, respectively. The Company also recognized intangible assets related to MGM China’s and Borgata’s customer lists, which became fully amortized in 2016 and 2018, respectively.
Finite-lived gaming licenses. The license fee paid to the State of Maryland of $22 million is considered a finite-lived intangible asset that is amortized on a straight-line basis over a period of its initial term of 15 years, beginning in December 2016, when MGM National Harbor started operations. The license fee paid to the State of Massachusetts of $85 million is considered a finite-lived intangible asset that is amortized over a period of 15 years, beginning in August 2018, when MGM Springfield started operations.
Other. The Company’s other finite–lived intangible assets consist primarily of lease acquisition costs amortized over the life of the related leases, and certain license rights amortized over their contractual life.
Total amortization expense related to intangible assets was $192 million, $176 million and $173 million for 2019, 2018, and 2017, respectively. As of December 31, 2019, estimated future amortization is as follows:
| Years ending December 31, | (In thousands) | |||
| 2020 | $ | 193,886 | ||
| 2021 | 196,932 | |||
| 2022 | 190,840 | |||
| 2023 | 178,378 | |||
| 2024 | 175,866 | |||
| Thereafter | 2,212,292 | |||
| $ | 3,148,194 |
NOTE 8 — OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following:
| 2019 | 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| (In thousands) | ||||||||
| Contract and contract-related liabilities: | ||||||||
| Outstanding chip liability | $ | 314,570 | $ | 323,811 | ||||
| Loyalty program obligations | 126,966 | 113,293 | ||||||
| Casino front money | 176,827 | 342,941 | ||||||
| Advance deposits and ticket sales | 190,325 | 221,003 | ||||||
| Unpaid wagers and other | 113,943 | 103,341 | ||||||
| Other accrued liabilities: | ||||||||
| Payroll and related | 507,041 | 518,892 | ||||||
| Taxes, other than income taxes | 218,027 | 235,160 | ||||||
| MGP Dividend | 53,489 | 31,732 | ||||||
| Lease obligations - short-term (Refer to Note 11) | 95,448 | — | ||||||
| Other | 227,366 | 260,881 | ||||||
| $ | 2,024,002 | $ | 2,151,054 |
NOTE 9 — LONG-TERM DEBT
Long-term debt consisted of the following:
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
| Senior credit facility | $ | — | $ | 750,000 | ||||
| Operating Partnership senior credit facility | 1,703,750 | 2,819,125 | ||||||
| MGM China credit facility | 667,404 | 2,433,562 | ||||||
| $850 million 8.625% senior notes, due 2019 | — | 850,000 | ||||||
| $500 million 5.25% senior notes, due 2020 | — | 500,000 | ||||||
| $1,000 million 6.75% senior notes, due 2020 | — | 1,000,000 | ||||||
| $1,250 million 6.625% senior notes, due 2021 | — | 1,250,000 | ||||||
| $1,000 million 7.75% senior notes, due 2022 | 1,000,000 | 1,000,000 | ||||||
| $1,250 million 6% senior notes, due 2023 | 1,250,000 | 1,250,000 | ||||||
| $1,050 million 5.625% Operating Partnership senior notes, due 2024 | 1,050,000 | 1,050,000 | ||||||
| $750 million 5.375% MGM China senior notes, due 2024 | 750,000 | — | ||||||
| $1,000 million 5.75% senior notes, due 2025 | 1,000,000 | 1,000,000 | ||||||
| $750 million 5.875% MGM China senior notes, due 2026 | 750,000 | — | ||||||
| $500 million 4.50% Operating Partnership senior notes, due 2026 | 500,000 | 500,000 | ||||||
| $500 million 4.625% senior notes, due 2026 | 500,000 | 500,000 | ||||||
| $750 million 5.75% Operating Partnership senior notes, due 2027 | 750,000 | — | ||||||
| $1,000 million 5.5% senior notes, due 2027 | 1,000,000 | — | ||||||
| $350 million 4.50% Operating Partnership senior notes, due 2028 | 350,000 | 350,000 | ||||||
| $0.6 million 7% debentures, due 2036 | 552 | 552 | ||||||
| 11,271,706 | 15,253,239 | |||||||
| Less: Premiums, discounts, and unamortized debt issuance costs, net | (102,802 | ) | (121,823 | ) | ||||
| 11,168,904 | 15,131,416 | |||||||
| Less: Current portion | — | (43,411 | ) | |||||
| $ | 11,168,904 | $ | 15,088,005 |
Debt due within one year of the December 31, 2019 and 2018 balance sheet was classified as long-term as the Company had both the intent and ability to refinance current maturities on a long-term basis under its revolving senior credit facilities, with the exception that $43 million related to MGM China’s term loan amortization payments in excess of available borrowings under the previous MGM China revolving credit facility were classified as current as of December 31, 2018.
Interest expense, net consisted of the following:
| Year Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | |||||||||
| (In thousands) | |||||||||||
| Total interest incurred | $ | 853,007 | $ | 821,229 | $ | 779,855 | |||||
| Interest capitalized | (5,075 | ) | (51,716 | ) | (111,110 | ) | |||||
| $ | 847,932 | $ | 769,513 | $ | 668,745 |
Senior credit facility. At December 31, 2019, the Company’s senior credit facility consisted of a $1.5 billion revolving facility. The revolving facility bears interest of LIBOR plus 1.50% to 2.25% determined by reference to a total net leverage ratio pricing grid and will mature in December 2023. At December 31, 2019, no amounts were drawn on the revolving credit facility. In November 2019, the Company used a portion of the net proceeds of the Bellagio transaction to pay off all $750 million outstanding on the term loan A facility, which was subsequently extinguished, and fully paid down its revolving facility.
The senior credit facility contains representations and warranties, customary events of default, and positive, negative and financial covenants, including that the Company maintain compliance with a maximum total net leverage ratio, a maximum first lien net leverage ratio and a minimum interest coverage ratio.
As of December 31, 2019, the senior credit facility is secured by (i) a mortgage on the real properties comprising the MGM Grand Las Vegas, (ii) a pledge of substantially all existing and future personal property of the subsidiaries of the Company that own the MGM Grand Las Vegas; and (iii) a pledge of the equity or limited liability company interests of the entities that own the MGM Grand Las Vegas and the Bellagio. In connection with the MGP BREIT Venture Transaction, on February 14, 2020, we entered into a new unsecured credit agreement which provides that we will grant a security interest in our Operating Partnership units in the future to the extent our leverage ratio exceeds certain thresholds.
In connection with the MGP BREIT Venture Transaction, the Company entered into an unsecured credit agreement, comprised of a $1.5 billion unsecured revolving facility that matures in February 2025, and the revolving commitments under the prior credit agreement were terminated.
Operating Partnership senior credit facility. At December 31, 2019, the Operating Partnership’s senior secured credit facility consisted of a $399 million term loan A facility, a $1.3 billion term loan B facility, and a $1.35 billion revolving credit facility. The revolving and term loan A facilities bear interest of LIBOR plus 1.75% to 2.25% determined by reference to a total net leverage ratio pricing grid. The revolving and term loan A facilities will mature in June 2023. The term loan B facility bears interest of LIBOR plus 2.00% and will mature in March 2025.
The term loan facilities are subject to amortization of principal in equal quarterly installments of approximately $3 million and $5 million for the term loan A facility and term loan B facility, respectively, with the balances due at maturity. In November 2019, the Operating Partnership used the proceeds from its equity offering, discussed in Note 13, to prepay $65 million on the term loan A facility and $476 million on the term loan B facility, which reflects all scheduled amortization plus additional principal. At December 31, 2019, the interest rate on the term loan A facility was 3.55% and the interest rate on the term loan B facility was 3.80%. At December 31, 2019, no amounts were drawn on the revolving credit facility.
In connection with the MGP BREIT Venture Transaction, the Operating Partnership amended its senior secured credit facility to, among other things, allow for the transaction to occur, permit the incurrence by the Operating Partnership of a nonrecourse guarantee for debt of the MGP BREIT Venture, and permit incurrence of a bridge loan facility. As a result of the transaction and the amendment, the Operating Partnership repaid its $1.3 billion outstanding term loan B facility in full with the proceeds of a bridge facility, which was then assumed by the MGP BREIT Venture as partial consideration for the Operating Partnership’s contribution. Additionally, the Operating Partnership used the proceeds from the settlement of the forward equity issuances to pay off the balance of its term loan A facility in full.
The Operating Partnership credit facility contains customary representations and warranties, events of default and positive and negative covenants. The revolving credit facility and term loan A facility also require the Operating Partnership maintain compliance with a maximum senior secured net debt to adjusted total assets ratio, a maximum total net debt to adjusted assets ratio and a minimum interest coverage ratio. The Operating Partnership was in compliance with its credit facility covenants at December 31, 2019.
The Operating Partnership senior credit facility is guaranteed by each of the Operating Partnership’s existing and subsequently acquired direct and indirect wholly owned material domestic restricted subsidiaries, and secured by a first priority lien security interest on substantially all of the Operating Partnership’s and such restricted subsidiaries’ material assets, including mortgages on its real estate, excluding the real estate assets of MGM National Harbor and Empire City, and subject to other customary exclusions.
The Operating Partnership is party to interest rate swaps to mitigate the interest rate risk inherent in its senior credit facility. As of December 31, 2019, the Operating Partnership has effective interest rate swap agreements on which it pays a weighted average fixed rate of 1.821% on total notional amount of $1.9 billion. The Operating Partnership has an additional $900 million total notional amount of forward starting interest rate swaps that are not currently effective.
MGM China credit facility. At December 31, 2019, the MGM China credit facility consisted of a $1.25 billion unsecured revolving credit facility. In August 2019, MGM China entered into a new $1.25 billion senior unsecured revolving credit facility, on which it drew $776 million and used the proceeds to fully repay the borrowings outstanding under its previous secured credit facility. The new revolving credit facility matures in May 2024 and bears interest at a fluctuating rate per annum based on HIBOR plus 1.625% to 2.75%, as determined by MGM China’s leverage ratio. During 2019, MGM China also used the proceeds from its senior notes issuance, discussed below, to permanently repay $1.0 billion of the previous term loan facilities, with the remaining proceeds used to pay down outstanding borrowings under its previous revolving credit facility. At December 31, 2019, $667 million was outstanding on the revolving credit facility. At December 31, 2019, the interest rate on the revolving credit facility was 4.95%.
The MGM China credit facility contains customary representations and warranties, events of default, and positive, negative and financial covenants, including that MGM China maintains compliance with a maximum leverage ratio and a minimum interest coverage ratio. Due to the impact of the outbreak of the novel coronavirus, discussed in Note 1, MGM China entered into an amendment to its credit agreement on February 21, 2020 that provided for an increase of its maximum leverage ratio for the first quarter of 2020, a waiver of its maximum leverage ratio beginning in the second quarter of 2020 and extending through the first quarter of 2021, and a decrease of its minimum interest coverage ratio beginning in the second quarter of 2020 and extending through the first quarter of 2021. MGM China was in compliance with its credit facility covenants at December 31, 2019.
Bridge Facility. In connection with the Empire City transaction in January 2019, the Company borrowed $246 million under a bridge facility, which was subsequently assumed by the Operating Partnership. The Operating Partnership repaid the bridge facility with a combination of cash on hand and a draw on its revolving credit facility, which was subsequently repaid with proceeds from its offering of its 5.75% senior notes due 2027, discussed below.
Senior Notes. In December 2019, the Company used a portion of the net proceeds from the Bellagio transaction to redeem for cash all $267 million principal amount of its outstanding 5.250% senior notes due 2020, all $361 million principal amount of its outstanding 6.750% senior notes due 2020, and all $1.25 billion principal amount of its outstanding 6.625% senior notes due 2021. The Company incurred a $171 million loss on the early retirement of such notes recorded in “Other, net” in the consolidated statements of operations.
In April 2019, the Company issued $1.0 billion in aggregate principal amount of 5.50% senior notes due 2027. The Company primarily used the net proceeds from the offering to fund the purchase of $639 million in aggregate principal amount of its outstanding 6.75% senior notes due 2020 and $233 million in aggregate principal amount of its outstanding 5.25% senior notes due 2020 through cash tender offers.
In February 2019, the Company repaid its $850 million 8.625% senior notes due 2019.
In June 2018, the Company issued $1.0 billion in aggregate principal amount of 5.750% senior notes due 2025.
On February 18, 2020 the Company commenced cash tender offers to purchase up to $750 million in aggregate principal amount of its outstanding 5.750% senior notes due 2025, 4.625% senior notes due 2026, and 5.500% senior notes due 2027. Holders of notes that are tendered by March 2, 2020 will receive the tender offer consideration plus an early tender premium. The tender offers will expire on March 16, 2020, unless extended or earlier terminated by the Company.
Operating Partnership senior notes. In January 2019, the Operating Partnership issued $750 million in aggregate principal amount of 5.75% senior notes due 2027.
Each series of the Operating Partnership's senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior basis by all of the Operating Partnership’s subsidiaries that guarantee the Operating Partnership’s credit facilities, other than MGP Finance Co-Issuer, Inc., which is a co-issuer of the senior notes. The Operating Partnership may redeem all or part of the senior notes at a redemption price equal to 100% of the principal amount of the senior notes plus, to the extent the Operating Partnership is redeeming senior notes prior to the date that is three months prior to their maturity date, an applicable make whole premium, plus, in each case, accrued and unpaid interest. The indentures governing the senior notes contain customary covenants and events of default. These covenants are subject to a number of important exceptions and qualifications set forth in the applicable indentures governing the senior notes, including, with respect to the restricted payments covenants, the ability to make unlimited restricted payments to maintain the REIT status of MGP.
MGM China senior notes. In May 2019, MGM China issued $750 million in aggregate principal amount of 5.375% senior notes due 2024 and $750 million in aggregate principal amount of 5.875% senior notes due 2026. The Company primarily used the net proceeds from the offering to pay down outstanding borrowings under the MGM China credit facility, as discussed above. MGM China incurred a $16 million loss on the debt retirement recorded in “Other, net” in the consolidated statements of operations.
Maturities of long-term debt. The maturities of the principal amount of the Company’s long-term debt as of December 31, 2019 are as follows:
| Years ending December 31, | (In thousands) | |||||
|---|---|---|---|---|---|---|
| 2020 | $ | — | ||||
| 2021 | — | |||||
| 2022 | 1,000,000 | |||||
| 2023 | 1,649,125 | |||||
| 2024 | 2,467,404 | |||||
| Thereafter | 6,155,177 | |||||
| $ | 11,271,706 | |||||
Fair value of long-term debt. The estimated fair value of the Company’s long-term debt was $12.1 billion and $15.1 billion at December 31, 2019 and 2018, respectively. Fair value was estimated using quoted market prices for the Company’s senior notes and senior credit facilities.
NOTE 10 — INCOME TAXES
The Company recognizes deferred income tax assets, net of applicable reserves, related to net operating losses, tax credit carryforwards and certain temporary differences. The Company recognizes future tax benefits to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.
Income (loss) before income taxes for domestic and foreign operations consisted of the following:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
| Domestic operations | $ | 2,717,756 | $ | 660,832 | $ | 747,090 | ||||||
| Foreign operations | 128,969 | (26,826 | ) | 213,700 | ||||||||
| $ | 2,846,725 | $ | 634,006 | $ | 960,790 |
The benefit (provision) for income taxes attributable to income (loss) before income taxes is as follows:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| Federal: | (In thousands) | |||||||||||
| Current | $ | (4,928 | ) | $ | 11,991 | $ | (120,980 | ) | ||||
| Deferred (excluding separate components) | (537,993 | ) | (143,468 | ) | 204,713 | |||||||
| Deferred – change in enacted rates | — | — | 987,942 | |||||||||
| Deferred – valuation allowance | (20,175 | ) | (19,753 | ) | 101,443 | |||||||
| Other noncurrent | (5,745 | ) | 576 | 1,356 | ||||||||
| Benefit (provision) for federal income taxes | (568,841 | ) | (150,654 | ) | 1,174,474 | |||||||
| State: | ||||||||||||
| Current | (22,685 | ) | (12,564 | ) | (6,798 | ) | ||||||
| Deferred (excluding separate components) | (32,793 | ) | (12,731 | ) | (25,233 | ) | ||||||
| Deferred – operating loss carryforward | (5,241 | ) | (29,490 | ) | 44,242 | |||||||
| Deferred – valuation allowance | (191 | ) | 41,068 | (40,078 | ) | |||||||
| Other noncurrent | (1,401 | ) | (1,334 | ) | (3,876 | ) | ||||||
| Provision for state income taxes | (62,311 | ) | (15,051 | ) | (31,743 | ) | ||||||
| Foreign: | ||||||||||||
| Current | (2,454 | ) | (2,037 | ) | (470 | ) | ||||||
| Deferred (excluding separate components) | 44,374 | 63,827 | (40,653 | ) | ||||||||
| Deferred – operating loss carryforward | 32,915 | 30,574 | 4,688 | |||||||||
| Deferred – valuation allowance | (76,028 | ) | 23,229 | 21,098 | ||||||||
| Benefit (provision) for foreign income taxes | (1,193 | ) | 115,593 | (15,337 | ) | |||||||
| $ | (632,345 | ) | $ | (50,112 | ) | $ | 1,127,394 |
A reconciliation of the federal income tax statutory rate and the Company’s effective tax rate is as follows:
| Year Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | |||||||||
| Federal income tax statutory rate | 21.0 | % | 21.0 | % | 35.0 | % | |||||
| Change in enacted rates | — | — | (102.7 | ) | |||||||
| Non-controlling interest | (0.8 | ) | (2.4 | ) | (1.5 | ) | |||||
| Foreign jurisdiction income/losses taxed at other than U.S. statutory rate | (0.5 | ) | (9.5 | ) | (9.2 | ) | |||||
| Repatriation of foreign earnings | — | — | 35.4 | ||||||||
| Foreign tax credit | — | — | (70.3 | ) | |||||||
| Federal valuation allowance | 0.7 | 3.1 | (10.6 | ) | |||||||
| Macau dividend tax | — | (6.4 | ) | 4.2 | |||||||
| State taxes, net | 1.7 | 1.9 | 2.4 | ||||||||
| General business credits | (0.5 | ) | (2.9 | ) | (1.0 | ) | |||||
| Stock-based compensation | (0.1 | ) | (1.2 | ) | (2.1 | ) | |||||
| Non-deductible employee dining facility costs | 0.2 | 1.4 | — | ||||||||
| Permanent and other items | 0.5 | 2.9 | 3.1 | ||||||||
| 22.2 | % | 7.9 | % | (117.3 | )% |
The tax-effected components of the Company’s net deferred tax liability are as follows:
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||||
| Deferred tax assets – federal and state: | (In thousands) | |||||||
| Bad debt reserve | $ | 25,085 | $ | 23,497 | ||||
| Deferred compensation | 7,918 | 5,950 | ||||||
| Net operating loss carryforward | 19,265 | 23,406 | ||||||
| Accruals, reserves and other | 97,590 | 88,139 | ||||||
| Investments in unconsolidated affiliates | — | 83,130 | ||||||
| Stock-based compensation | 18,882 | 20,581 | ||||||
| Lease liabilities | 1,020,171 | — | ||||||
| Long-term debt | 2,022 | — | ||||||
| Tax credits | 2,600,142 | 2,926,996 | ||||||
| 3,791,075 | 3,171,699 | |||||||
| Less: Valuation allowance | (2,469,907 | ) | (2,449,582 | ) | ||||
| 1,321,168 | 722,117 | |||||||
| Deferred tax assets – foreign: | ||||||||
| Bad debt reserve | 1,682 | 1,372 | ||||||
| Net operating loss carryforward | 140,223 | 107,308 | ||||||
| Accruals, reserves and other | 13,112 | 18,603 | ||||||
| Property and equipment | 10,125 | 998 | ||||||
| Stock-based compensation | 6,487 | 5,409 | ||||||
| Lease liabilities | 1,213 | — | ||||||
| 172,842 | 133,690 | |||||||
| Less: Valuation allowance | (104,149 | ) | (28,121 | ) | ||||
| 68,693 | 105,569 | |||||||
| Total deferred tax assets | $ | 1,389,861 | $ | 827,686 | ||||
| Deferred tax liabilities – federal and state: | ||||||||
| Property and equipment | $ | (1,599,948 | ) | $ | (1,729,786 | ) | ||
| Investments in unconsolidated affiliates | (496,501 | ) | — | |||||
| ROU assets | (977,870 | ) | — | |||||
| Long-term debt | — | (3,141 | ) | |||||
| Intangibles | (112,380 | ) | (90,758 | ) | ||||
| (3,186,699 | ) | (1,823,685 | ) | |||||
| Deferred tax liabilities – foreign: | ||||||||
| Intangibles | (307,728 | ) | (346,539 | ) | ||||
| ROU Assets | (1,940 | ) | — | |||||
| (309,668 | ) | (346,539 | ) | |||||
| Total deferred tax liability | $ | (3,496,367 | ) | $ | (2,170,224 | ) | ||
| Net deferred tax liability | $ | (2,106,506 | ) | $ | (1,342,538 | ) |
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the U.S. Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code that are generally applicable to tax years beginning after December 31, 2017. The Company’s accounting for certain elements of the Tax Act was incomplete as of December 31, 2017. Consequently, the Company recorded non-cash income tax expense totaling $20 million during the measurement period in 2018, as it adjusted its valuation allowance on its foreign tax credit (FTC) carryovers to account for guidance clarifying the treatment of FTCs resulting from Global Intangible Low-Taxed Income (GILTI) and other provisions impacting FTC utilization. These measurement period adjustments increased the Company’s effective tax rate by 3% during the year ended December 31, 2018. In addition, the Company finalized its accounting for the tax treatment of indirect costs of providing certain employee fringe benefits subject to limitation under the Tax Act. This measurement period adjustment had an immaterial impact on the effective tax rate for the year ended December 31, 2018. The Company’s accounting for the impact of the Tax Act is complete.
The Company has made an accounting policy decision to treat taxes due, if any, on future inclusions in U.S. taxable income under the GILTI provisions as a current period expense when incurred. Accordingly, the Company has not provided a deferred tax liability for any GILTI taxes that may result in future periods.
The Company has recorded a valuation allowance of $2.47 billion on its FTC carryover of $2.6 billion as of December 31, 2019, resulting in an FTC net deferred tax asset of $133 million. The FTCs are attributable to the Macau Special Gaming Tax, which is 35% of gross gaming revenue in Macau. Because MGM Grand Paradise is presently exempt from the Macau 12% complementary tax on gaming profits, the Company believes that payment of the Macau Special Gaming Tax qualifies as a tax paid in lieu of an income tax that is creditable against U.S. taxes. While the Company generally does not expect to generate new FTC carryovers under the Tax Act, it will be able to utilize its existing FTC carryovers to the extent that it has active foreign source income during the 10-year FTC carryforward period. Such foreign source income includes the recapture, to the extent of U.S. taxable income, of overall domestic losses that totaled $87 million at December 31, 2019. The Company relies on future U.S. source operating income in assessing utilization of the overall domestic losses and, by extension, future FTC realization during the 10-year FTC carryover period. The FTC carryovers will expire if not utilized as follows: $319 million in 2022; $976 million in 2023; $773 million in 2024; $333 million in 2025; and $199 million in 2027.
The Company’s assessment of the realization of its FTC deferred tax asset is based on available evidence, including assumptions concerning future U.S. operating profits and foreign source income. As a result, significant judgment is required in assessing the possible need for a valuation allowance and changes to such assumptions could result in a material change in the valuation allowance with a corresponding impact on the provision for income taxes in the period including such change.
MGM Grand Paradise has been granted an exemption from the Macau 12% complementary tax on gaming profits through March 31, 2020. Absent this exemption, “Net income attributable to MGM Resorts International” would have decreased by $54 million and $43 million in 2019 and 2018, respectively, and diluted earnings per share would have decreased by $0.10 and $0.08 in 2019 and 2018, respectively.
Given the Extension Agreement entered into during the first quarter, MGM Grand Paradise has applied for an extension of the gaming profits complementary tax exemption to June 26, 2022 to run concurrent with its extended sub-concession. Competitors of MGM Grand Paradise have received additional extensions of their complementary tax exemptions through June 26, 2022, which runs concurrent with the end of the term of their gaming concessions. The Company believes MGM Grand Paradise should also be entitled to such extension in order to ensure non-discriminatory treatment among gaming concessionaires and sub-concessionaires, a requirement under Macanese law. Based upon these developments, the Company during the first quarter re-measured the net deferred tax liability of MGM Grand Paradise assuming that it will receive an additional extension of its complementary tax exemption through June 26, 2022. This change in assumption resulted in a net increase in deferred tax liabilities in the amount of $35 million, due to an increase in the valuation allowance on certain net operating loss deferred tax assets partially offset by a reduction in certain intangible deferred tax liabilities, and a corresponding increase in the provision for income taxes for the year ended December 31, 2019. The Company has assumed that MGM Grand Paradise will pay the Macau 12% complementary tax on gaming profits for all periods beyond June 26, 2022 and has factored that assumption into the measurement of Macau deferred tax assets and liabilities.
Non-gaming operations remain subject to the Macau complementary tax. MGM Grand Paradise had at December 31, 2019 a complementary tax net operating loss carryforward of $1.15 billion resulting from non-gaming operations that will expire if not utilized against non-gaming income in years 2020 through 2022.
MGM Grand Paradise’s exemption from the 12% complementary tax on gaming profits does not apply to dividend distributions of such profits to MGM China. However, MGM Grand Paradise has had an agreement with the Macau government to settle the 12% complementary tax that would otherwise be due by its shareholder, MGM China, on distributions of its gaming profits by paying a flat annual payment (“annual fee arrangement”) regardless of the amount of distributable dividends. On March 15, 2018, MGM Grand Paradise executed an extension of the annual fee arrangement, which covers the distributions of gaming profits earned for the period of January 1, 2017 through March 31, 2020. It requires annual payments of approximately $1 million for 2017 through 2019 and a payment of approximately $300,000 for the first quarter 2020. The Company reversed, during 2018, $41 million of deferred taxes previously recorded on 2017 earnings that were not covered by an annual fee arrangement prior to the extension, resulting in a reduction in provision for income taxes for the year ended December 31, 2018, partially offset by the 2017 annual payment amount. MGM Grand Paradise has applied for an extension of the annual fee arrangement to cover distributions of gaming profits to be earned through June 26, 2022.
The Company has net operating losses in certain of the states in which it operates that total $291 million as of December 31, 2019, which equates to deferred tax assets of $19 million after federal tax effect and before valuation allowance. These net operating loss carryforwards will expire if not utilized by 2030 through 2037. The Company has provided a valuation allowance of $3 million on certain of its state deferred tax assets, including the net operating losses described above.
In addition, there is a valuation allowance of $102 million on certain Macau deferred tax assets, and a valuation allowance of $3 million on Hong Kong net operating losses because the Company believes these assets do not meet the “more likely than not” criteria for recognition.
A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits is as follows:
| Year Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) | |||||||||||
| Gross unrecognized tax benefits at January 1 | $ | 24,464 | $ | 18,588 | $ | 14,026 | |||||
| Gross increases - prior period tax positions | 8,960 | 5,345 | — | ||||||||
| Gross decreases - prior period tax positions | (1,006 | ) | (957 | ) | (2,280 | ) | |||||
| Gross increases - current period tax positions | 880 | 1,488 | 6,842 | ||||||||
| Gross unrecognized tax benefits at December 31 | $ | 33,298 | $ | 24,464 | $ | 18,588 |
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $9 million and $13 million at December 31, 2019 and 2018, respectively.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense, which were not material as of December 31, 2019, 2018 or 2017. The Company does not anticipate that the total amounts of unrecognized tax benefits at December 31, 2019 will change materially within the next twelve months.
The Company files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and foreign jurisdictions, although the income taxes paid in foreign jurisdictions are not material. As of December 31, 2019, the IRS can no longer assess tax with respect to years ended prior to 2014; however, the IRS may adjust NOLs generated in such years that were utilized in 2014. The Company’s 2014 U.S. consolidated federal income tax return is currently under examination by the IRS.
As of December 31, 2019, other than adjustments resulting from the federal income tax audits discussed above, the various state and local tax jurisdictions in which the Company files tax returns can no longer assess tax with respect to years ended prior to 2014. However, such jurisdictions may adjust NOLs generated in such years that are utilized in subsequent years. The Company’s state income tax returns filed in Michigan for the tax years 2014 through 2017 are currently under examination and the Company was recently notified that the 2018 tax year will be included in the examination as well. In addition, the State of New Jersey recently opened an audit of one of the Company’s subsidiaries, Marina District Development Company, LLC, for the tax years 2015 through 2018. The examinations of the Company’s state income tax returns filed in Mississippi and New Jersey for the tax years 2014 through 2016 were completed during 2019 resulting in no material audit adjustments. No other state or local income tax returns are currently under examination.
NOTE 11 – LEASES
The Company leases the land underlying certain of its properties, real estate, and various equipment under operating and, to a lesser extent, finance lease arrangements. The master lease agreement with MGP is eliminated in consolidation and, accordingly is not included within the disclosures below; refer to Note 18 for further discussion of the master lease with MGP.
Land. The Company is a lessee of land underlying Borgata, MGM National Harbor, and Beau Rivage. The Company is obligated to make lease payments through the non-cancelable term of the ground leases, which is through 2066 for Beau Rivage, through 2070 for Borgata, and through 2082 for MGM National Harbor. Additionally, the Company has MGM Macau and MGM Cotai land concession contracts, each with an initial 25-year contract term ending in April 2031 and January 2038, respectively. The Company’s land leases are classified as operating leases.
Bellagio real estate assets. Pursuant to a lease agreement between a subsidiary of the Company and the Bellagio BREIT Venture, the Company leases the real estate assets of Bellagio from the Bellagio BREIT venture. The Bellagio lease has an initial term of 30 years with two subsequent ten-year renewal periods, exercisable at the Company’s option. The lease provides for initial annual rent of $245 million with a fixed 2% escalator for the first ten 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% during the 11th through 20th years and 4% thereafter. The Company does not consider the renewal options reasonably certain of being exercised and, accordingly, has determined the lease term to be 30 years. In consideration of such, Company determined that the expected lease term of 30 years to be less than 75% of the economic useful live of the real estate assets of Bellagio. Further, the Bellagio BREIT Venture provided its implicit rate to the Company, with which the Company determined that the present value of the future lease payments is less than 90% of the fair market value of the Bellagio real estate assets. Accordingly, in consideration of these lease classification tests as well as that the lease does not transfer ownership of the assets back to the Company at the end of the lease term or grant the Company a purchase option and the real estate assets have alternative uses at the end of the lease term, the Company classified Bellagio lease as an operating lease.
Mandalay Bay and MGM Grand Las Vegas real estate assets. In February 2020, the Company entered into a lease with MGP BREIT Venture for the real estate assets of Mandalay Bay and MGM Grand Las Vegas. Refer to Note 1 for further discussion. The Company is still assessing the accounting treatment for this subsequent event, including that of the lease agreement.
Other information. Components of lease costs and other information related to the Company’s leases was as follows for the year ended December 31, 2019:
| (In thousands) | ||||
|---|---|---|---|---|
| Operating lease expense cost, primarily classified within "General and administrative" | $ | 143,954 | ||
| Finance Lease Costs | ||||
| Interest expense | $ | 1,164 | ||
| Amortization expense | 13,341 | |||
| Total finance lease costs | $ | 14,505 |
| December 31, 2019 | ||||
|---|---|---|---|---|
| Supplemental balance sheet information | (In thousands) | |||
| Operating leases | ||||
| Operating lease right-of-use assets | $ | 4,392,481 | ||
| Operating lease liabilities - short-term, classified within "Other accrued liabilities" | $ | 67,473 | ||
| Operating lease liabilities - long-term | 4,277,970 | |||
| Total operating lease liabilities | $ | 4,345,443 | ||
| Finance leases | ||||
| Finance lease right-of-use assets, classified within "Property and equipment, net" | $ | 93,437 | ||
| Finance lease liabilities - short-term, classified within "Other accrued liabilities" | $ | 27,975 | ||
| Finance lease liabilities - long-term, classified within "Other long-term obligations" | 67,182 | |||
| Total finance lease liabilities | $ | 95,157 | ||
| Weighted-average remaining lease term (years) | ||||
| Operating leases | 31 | |||
| Finance leases | 4 | |||
| Weighted-average discount rate (%) | ||||
| Operating leases | 7 | |||
| Finance leases | 3 |
| Year Ended | ||||
|---|---|---|---|---|
| December 31, 2019 | ||||
| Cash paid for amounts included in the measurement of lease liabilities | (In thousands) | |||
| Operating cash outflows from operating leases | $ | 117,072 | ||
| Operating cash outflows from finance leases | 1,164 | |||
| Financing cash outflows from finance leases | 10,311 | |||
| ROU assets obtained in exchange for new lease liabilities | ||||
| Operating leases | $ | 3,814,115 | ||
| Finance leases | 84,934 |
Maturities of lease liabilities were as follows:
| Operating Leases | Finance Leases | ||||||
|---|---|---|---|---|---|---|---|
| Year ending December 31, | (In thousands) | ||||||
| 2020 | $ | 345,678 | $ | 30,361 | |||
| 2021 | 324,281 | 27,273 | |||||
| 2022 | 313,779 | 25,427 | |||||
| 2023 | 316,336 | 17,019 | |||||
| 2024 | 320,642 | — | |||||
| Thereafter | 10,066,850 | — | |||||
| Total future minimum lease payments | 11,687,566 | 100,080 | |||||
| Less: Amount of lease payments representing interest | (7,342,123 | ) | (4,923 | ) | |||
| Present value of future minimum lease payments | 4,345,443 | 95,157 | |||||
| Less: Current portion | (67,473 | ) | (27,975 | ) | |||
| Long-term lease obligations | $ | 4,277,970 | $ | 67,182 |
NOTE 12 – COMMITMENTS AND CONTINGENCIES
October 1 litigation. The Company and/or certain of its subsidiaries were named as defendants in a number of lawsuits related to the October 1, 2017 shooting in Las Vegas. The matters involve in large degree the same legal and factual issues, each case being filed on behalf of individuals who are seeking damages for emotional distress, physical injury, medical expenses, economic damages and/or wrongful death. Lawsuits were first filed in October 2017 and include actions originally filed in the District Court of Clark County, Nevada and in the Superior Court of Los Angeles County, California. In June 2018, the Company removed to federal court all actions that remained pending in California and Nevada state courts. The Company also initiated declaratory relief actions in federal courts in various districts against individuals who had sued or stated an intent to sue.
In connection with the mediation of these matters, the Company and law firms representing plaintiffs in the majority of pending matters and purporting to represent substantially all claimants known to the Company (collectively, the “Claimants”) have entered into a settlement agreement (the “Settlement Agreement”) whereby, subject to the satisfaction of certain monetary and non-monetary conditions, the Company’s insurance carriers will deposit funds into a settlement fund covering the plaintiffs and certain other cases that emerged or were filed prior to October 1, 2019. Pursuant to the terms of the Settlement Agreement, the Company expects that the total amount placed in the fund to be between $735 million and $800 million, subject to and depending on obtaining a minimum level of participation with escalators based on greater participation increasing the amount payable up to $800 million in the event of 100% participation by certain categories of claimants, as defined in the Settlement Agreement. The Company has $751 million of insurance coverage available to fund. Following the mediation a few additional lawsuits were filed against the Company and/or certain of its subsidiaries. While it is possible that these lawsuits may be resolved as part of the Settlement Agreement, no assurances can be made that they will be included. Although the Company continues to believe it is not legally responsible for the perpetrator’s criminal acts, in the interest of avoiding protracted litigation and the related impact on the community, the Company believed it was in the best interests of all parties involved to negotiate and enter into the Settlement Agreement. As a result of the foregoing, the Company believes that it is probable a loss will be incurred and, as of December 31, 2019, the Company accrued a liability of $735 million, which represents the low end of the range of probable loss. In addition, the Company recorded an insurance receivable of $735 million, which represents the entire amount of the liability recorded for the settlement of these cases. While the Company intends for substantially all claimants to be covered by the Settlement Agreement, it remains possible that certain claimants may not join the settlement. In addition, no assurances can be given that the significant conditions to the Settlement Agreement will be satisfied by the Claimants.
If the conditions in the Settlement Agreement are not satisfied and the mediation stay is lifted, the Company is currently unable to reliably predict the future developments in, outcome of, and economic costs and other consequences of any such litigation related to this matter. The Company will continue to investigate the factual and legal defenses, and evaluate these matters based on subsequent events, new information and future circumstances. The Company intends to defend against any such lawsuits and believes it ultimately should prevail, but litigation of this type is inherently unpredictable. Although there are significant procedural, factual and legal issues to be resolved that could significantly affect the Company’s belief as to the possibility of liability, the Company currently believes that it is reasonably possible that it could incur liability in connection with certain of these lawsuits. The foregoing determination was made in accordance with generally accepted accounting principles, as codified in ASC 450-20, and is not an admission of any liability on the part of the Company or any of its affiliates. Given that these cases would be in the early stages, and in light of the uncertainties surrounding them, the Company does not currently possess sufficient information to determine a range of reasonably possible liability. The insurance carriers have not expressed a reservation of rights or coverage defense that affects the Company’s evaluation of potential losses in connection with these claims. The Company’s general liability insurance coverage provides, as part of the contractual “duty to defend”, payment of legal fees and associated costs incurred to defend covered lawsuits that are filed arising from the October 1, 2017 shooting in Las Vegas. Payment of such fees and costs is in addition to (and not limited by) the limits of the insurance policies and does not erode the total liability coverage available.
Other litigation*.* The Company is a party to various legal proceedings, most of which relate to routine matters incidental to its business. Management does not believe that the outcome of such proceedings will have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Borgata property tax reimbursement agreement. In 2017, Borgata was reimbursed $72 million as settlement for property tax refunds in satisfaction of New Jersey Tax Court and Superior Court judgments of pending tax appeals. The Company recorded the amounts received as an offset to general and administrative expenses in the consolidated statements of operations. As required by the agreement to acquire Borgata from Boyd Gaming in August 2016, the Company paid Boyd Gaming half of the settlement amount received by the Company, net of fees and expenses, which was recorded in general and administrative expenses in the consolidated statements of operations.
Other guarantees. The Company and its subsidiaries are party to various guarantee contracts in the normal course of business, which are generally supported by letters of credit issued by financial institutions. The Company’s senior credit facility limits the amount of letters of credit that can be issued to $500 million and the Operating Partnership’s senior credit facility limits the amount to $75 million. At December 31, 2019, $11 million in letters of credit were outstanding under the Company’s senior credit facility. No letters of credit were outstanding under the Operating Partnership’s senior credit facility at December 31, 2019. The amount of available borrowings under each of the credit facilities is reduced by any outstanding letters of credit.
In connection with the Extension Agreement, MGM Grand Paradise provided a bank guarantee in an amount of approximately $102 million (when giving effect to foreign currency exchange rate fluctuations) to the government of Macau in May 2019 to warrant the fulfillment of labor debts upon the expiration of the Extension Agreement in June 2022.
Additionally, the Company provides a guarantee of the $3.01 billion principal amount of indebtedness (and any interest accrued and unpaid thereon) of Bellagio BREIT Venture, which matures in 2029. The terms of the guarantee provide that after the lenders have exhausted certain remedies to collect on the obligations under the indebtedness, the Company would then be responsible for any shortfall between the value of the collateral, which is the real estate assets of Bellagio owned by Bellagio BREIT Venture, and the debt obligation. This guarantee is accounted for under ASC 460 at fair value; such value is immaterial.
In connection with the MGP BREIT Venture Transaction, the Company provides a guarantee of the $3.0 billion principal amount of indebtedness (and any interest accrued and unpaid thereon) of MGP BREIT Venture, which has an initial term of twelve years, maturing in 2032, with an anticipated repayment date of March 2030. The terms of the guarantee provide that after the lenders have exhausted certain remedies to collect on the obligations under the indebtedness, the Company would then be responsible for any shortfall between the value of the collateral, which is the real estate assets of Mandalay Bay and MGM Grand Las Vegas, owned by MGP BREIT Venture, and the debt obligation. Refer to Note 1 for further discussion on this subsequent event.
NOTE 13 — STOCKHOLDERS’ EQUITY
Accumulated Other Comprehensive Income (Loss)
The following is a summary of the changes in the accumulated balance of other comprehensive income (loss) attributable to MGM Resorts International:
| Currency Translation Adjustments | Cash Flow Hedges | Other | Total | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) | ||||||||||||||||
| Balances, January 1, 2017 | $ | 12,545 | $ | 1,434 | $ | 1,074 | $ | 15,053 | ||||||||
| Other comprehensive income (loss) before reclassifications | (43,188 | ) | (1,221 | ) | 98 | (44,311 | ) | |||||||||
| Amounts reclassified from accumulated other comprehensive income to "Interest expense, net" | — | 9,216 | — | 9,216 | ||||||||||||
| Other comprehensive income (loss), net of tax | (43,188 | ) | 7,995 | 98 | (35,095 | ) | ||||||||||
| Other comprehensive (income) loss attributable to noncontrolling interest | 19,193 | (2,761 | ) | — | 16,432 | |||||||||||
| Balances, December 31, 2017 | (11,450 | ) | 6,668 | 1,172 | (3,610 | ) | ||||||||||
| Other comprehensive income (loss) before reclassifications | (13,022 | ) | 4,706 | — | (8,316 | ) | ||||||||||
| Amounts reclassified from accumulated other comprehensive loss to "Interest expense, net" | — | (1,130 | ) | — | (1,130 | ) | ||||||||||
| Other comprehensive income (loss), net of tax | (13,022 | ) | 3,576 | — | (9,446 | ) | ||||||||||
| Other comprehensive (income) loss attributable to noncontrolling interest | 5,600 | (1,100 | ) | — | 4,500 | |||||||||||
| Balances, December 31, 2018 | (18,872 | ) | 9,144 | 1,172 | (8,556 | ) | ||||||||||
| Other comprehensive income (loss) before reclassifications | 28,870 | (28,783 | ) | — | 87 | |||||||||||
| Amounts reclassified from accumulated other comprehensive loss to "Interest expense, net" | — | (5,599 | ) | — | (5,599 | ) | ||||||||||
| Amounts reclassified from accumulated other comprehensive loss related to de-designation of interest rate swaps to "Other, net" | — | 4,877 | — | 4,877 | ||||||||||||
| Other comprehensive income (loss), net of tax | 28,870 | (29,505 | ) | — | (635 | ) | ||||||||||
| Other changes in accumulated other comprehensive income (loss): | ||||||||||||||||
| Empire City MGP transaction | — | — | 195 | 195 | ||||||||||||
| MGP Class A share issuances | — | — | 1,512 | 1,512 | ||||||||||||
| Park MGM Transaction | — | — | 16 | 16 | ||||||||||||
| Northfield OpCo transaction | — | — | (2 | ) | (2 | ) | ||||||||||
| Other | — | — | 481 | 481 | ||||||||||||
| Changes in accumulated other comprehensive income (loss) | 28,870 | (29,505 | ) | 2,202 | 1,567 | |||||||||||
| Other comprehensive (income) loss attributable to noncontrolling interest | (12,745 | ) | 9,532 | — | (3,213 | ) | ||||||||||
| Balances, December 31, 2019 | $ | (2,747 | ) | $ | (10,829 | ) | $ | 3,374 | $ | (10,202 | ) |
Noncontrolling interest
The following is a summary of net income attributable to MGM Resorts International and transfers to noncontrolling interest, which shows the effects of changes in the Company’s ownership interest in a subsidiary on the equity attributable to the Company:
| For the Years Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
| Net income attributable to MGM Resorts International | $ | 2,049,146 | $ | 466,772 | $ | 1,952,052 | ||||||
| Transfers from/(to) noncontrolling interest: | ||||||||||||
| MGP Class A share issuances | 151,976 | — | 35,138 | |||||||||
| MGM National Harbor transaction | — | — | (12,497 | ) | ||||||||
| Empire City MGP transaction | (18,718 | ) | — | — | ||||||||
| Park MGM Transaction | (1,968 | ) | — | — | ||||||||
| Northfield OpCo transaction | 21,679 | — | — | |||||||||
| Other | (935 | ) | (5,667 | ) | (2,889 | ) | ||||||
| Net transfers from/(to) noncontrolling interest | 152,034 | (5,667 | ) | 19,752 | ||||||||
| Change from net income attributable to MGM Resorts International and transfers to noncontrolling interest | $ | 2,201,180 | $ | 461,105 | $ | 1,971,804 |
Noncontrolling interest ownership transactions
MGP Class A share issuance – September 2017. On September 11, 2017, MGP completed a public offering of 13.2 million of its Class A shares. In connection with the offering, the Operating Partnership issued 13.2 million Operating Partnership units to MGP. The Company has adjusted the carrying value of the noncontrolling interests as a result of MGP’s Class A share issuance to adjust for the change in noncontrolling interests ownership percentage of the Operating Partnership's net assets, with offsetting adjustments to capital in excess of par value and accumulated other comprehensive income. Subsequent to MGP’s issuance of the incremental shares, the Company indirectly owned 72.3% of partnership units in the Operating Partnership.
MGM National Harbor transaction. On October 15, 2017, MGP acquired the long-term leasehold interest and real property associated with MGM National Harbor from a subsidiary of the Company in exchange for cash of $463 million, the assumption of $425 million of indebtedness, which was immediately repaid by MGP on the closing date, and the issuance of 9.8 million Operating Partnership units to a subsidiary of the Company. The Company adjusted the carrying value of noncontrolling interests to adjust for the change in noncontrolling interests ownership percentage of the Operating Partnership’s net assets, including assets and liabilities transferred, with offsetting adjustments to capital in excess of par value and accumulated other comprehensive income. Subsequent to the MGM National Harbor transaction, the Company indirectly owned 73.4% of the partnership units in the Operating Partnership.
Empire City transaction. As further discussed in Note 18, in January 2019, MGP acquired the developed real property associated with Empire City from the Company for consideration that included the issuance of approximately 13 million Operating Partnership units to a subsidiary of the Company. The Company adjusted the carrying value of the noncontrolling interests for the change in noncontrolling interests ownership percentage of the Operating Partnership’s net assets, with offsetting adjustments to capital in excess of par value and accumulated other comprehensive income. Subsequent to the Empire City transaction, the Company indirectly owned 74.6% of the partnership units in the Operating Partnership.
MGP Class A share issuance – January 2019. On January 31, 2019, MGP completed an offering of approximately 20 million of its Class A shares. In connection with the offering, the Operating Partnership issued approximately 20 million Operating Partnership units to MGP. The Company has adjusted the carrying value of the noncontrolling interests as a result of MGP’s Class A share issuance to adjust for the change in noncontrolling interests ownership percentage of the Operating Partnership’s net assets, with offsetting adjustments to capital in excess of par value and accumulated other comprehensive income. Subsequent to the issuance, the Company indirectly owned 69.7% of the partnership units in the Operating Partnership.
Park MGM Lease Transaction. As further discussed in Note 18, in March 2019, the Company and MGP completed the Park MGM Lease Transaction (as defined in Note 18) for which consideration included the issuance of approximately 1 million Operating Partnership units to a subsidiary of the Company. The Company has adjusted the carrying value of the noncontrolling interests for the change in noncontrolling interests ownership percentage of the Operating Partnership’s net assets, with offsetting adjustments to capital in excess of par value and accumulated other comprehensive income. Subsequent to the issuance, the Company indirectly owned 69.8% of the partnership units in the Operating Partnership.
Northfield OpCo transaction. As further discussed in Note 18, in April 2019, the Company acquired the membership interests of Northfield from MGP for consideration of approximately 9 million Operating Partnership units that were ultimately redeemed by the Operating Partnership and MGP retained the real estate assets. The Company has adjusted the carrying value of the noncontrolling interests for the change in noncontrolling interests ownership percentage of the Operating Partnership’s net assets, with offsetting adjustments to capital in excess of par value and accumulated other comprehensive income. Subsequent to the Northfield OpCo transaction, the Company indirectly owned 68.8% of the partnership units in the Operating Partnership.
MGP Class A share issuance – November 2019. On November 22, 2019, MGP completed an offering of 30 million of its Class A shares. The Offering consisted of 18 million shares sold directly to the underwriters at closing and 12 million shares sold to forward purchasers under forward sale agreements. In connection with the offering, the Operating Partnership issued 18 million Operating Partnership units to MGP. The Company has adjusted the carrying value of the noncontrolling interests as a result of MGP’s Class A share issuance to adjust for the change in noncontrolling interests ownership percentage of the Operating Partnership’s net assets, with offsetting adjustments to capital in excess of par value and accumulated other comprehensive income. Subsequent to the issuance, the Company indirectly owned 63.7% of the partnership units in the Operating Partnership. In connection with any issuance of Class A shares by MGP under the forward sales agreements, additional Operating Partnership units will be issued to the Company by the Operating Partnership on a one-to-one basis with the number of Class A shares issued by MGP in such sales.
MGP Class A share issuances – At-the-Market (“ATM”) program. During the year ended December 31, 2019, MGP issued approximately 5 million Class A shares under its ATM program. In connection with the issuances, the Operating Partnership issued 5 million Operating Partnership units to MGP during the year ended December 31, 2019. The Company has adjusted the carrying value of the noncontrolling interests for the change in noncontrolling interests ownership percentage of the Operating Partnership’s net assets, with offsetting adjustments to capital in excess of par value and accumulated other comprehensive income. Subsequent to the collective issuances, and as of December 31, 2019, the Company indirectly owned 63.7% of the partnership units in the Operating Partnership.
Stock repurchase program
MGM Resorts International stock repurchase program. In May 2018, the Company’s Board of Directors authorized a $2.0 billion stock repurchase program and completed the previously announced $1.0 billion stock repurchase program. Additionally, on February 12, 2020, the Company announced that the Board of Directors adopted a $3.0 billion stock repurchase program. Under each stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated agreements. Repurchases of common stock may also be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The timing, volume and nature of stock repurchases will be at the sole discretion of management, dependent on market conditions, applicable securities laws, and other factors, and may be suspended or discontinued at any time.
During the year ended December 31, 2019, the Company repurchased approximately 36 million shares of its common stock at an average purchase price of $28.77 per share for an aggregate amount of $1.0 billion. Repurchased shares were retired. The remaining availability under the $2.0 billion stock repurchase program was approximately $357 million as of December 31, 2019.
Subsequent to the year ended December 31, 2019, the Company repurchased 11 million shares of its common stock at an average price of $32.57 per share for an aggregate amount of $354 million. Repurchased shares will be retired.
Additionally, subsequent to the year ended December 31, 2019, on February 13, 2020, the Company announced the commencement of a tender offer to acquire up to $1.25 million in aggregate purchase price of the Company’s issued and outstanding common stock through a modified “Dutch auction” tender offer at a price not greater than $34 nor less than $29 per share, in cash, less any applicable withholding taxes and without interest, upon the terms and subject to the conditions described in the offer to purchase dated February 13, 2020, and in the related letter of transmittal and other related materials. The tender offer is scheduled to expire on March 12, 2020, unless extended or terminated.
During the year ended December 31, 2018, the Company repurchased approximately 41 million shares of its common stock at an average purchase price of $31.25 per share for an aggregate amount of $1.3 billion. Repurchased shares were retired.
MGM Resorts International dividends. On February 12, 2020 the Company’s Board of Directors approved a quarterly dividend of $0.15 per share that will be payable on March 16, 2020 to holders of record on March 10, 2020.
NOTE 14 — STOCK-BASED COMPENSATION
MGM Resorts 2005 Omnibus Incentive Plan. The Company’s omnibus incentive plan, as amended (the “Omnibus Plan”), allows it to grant up to 45 million shares or share-based awards, such as stock options, stock appreciation rights (“SARs”), restricted stock units (“RSUs”), performance share units (“PSUs”) and other stock-based awards to eligible directors, officers and employees of the Company and its subsidiaries.
As of December 31, 2019, the Company had an aggregate of approximately 20 million shares of common stock available for grant as share-based awards under the Omnibus Plan. Additionally, as of December 31, 2019, the Company had approximately 4 million aggregate SARs outstanding and approximately 7 million aggregate RSUs and PSUs outstanding, including deferred share units and dividend equivalent units related to RSUs and PSUs.
Intrinsic value. The following table includes information related to the intrinsic value:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
| SARs exercised and RSUs and PSUs vested | $ | 86,843 | $ | 97,302 | $ | 100,264 | ||||||
| SARs outstanding | 45,197 | 21,563 | 112,604 | |||||||||
| SARs vested and expected to vest | 45,162 | 21,547 | 111,284 | |||||||||
| SARs exercisable | 41,432 | 19,745 | 78,865 |
As of December 31, 2019, there was a total of $116 million of unamortized compensation related to SARs, RSUs, and PSUs, which is expected to be recognized over a weighted-average period of 2.0 years.
MGM Growth Properties 2016 Omnibus Incentive Plan and MGM China Share Option Plan. The Company’s subsidiaries, MGP and MGM China, each adopted their own equity award plans for the issuance of share-based awards to each subsidiary’s eligible recipients.
Recognition of compensation cost. Compensation cost was recognized as follows:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| Compensation cost: | (In thousands) | |||||||||||
| Omnibus Plan | $ | 76,995 | $ | 57,735 | $ | 49,383 | ||||||
| MGM Growth Properties Omnibus Incentive Plan | 2,277 | 2,092 | 2,568 | |||||||||
| MGM China Share Option Plan | 9,566 | 10,369 | 10,571 | |||||||||
| Total compensation cost | 88,838 | 70,196 | 62,522 | |||||||||
| Less: Reimbursed costs and capitalized cost | (3,487 | ) | (1,710 | ) | (1,398 | ) | ||||||
| Compensation cost after reimbursed costs and capitalized cost | 85,351 | 68,486 | 61,124 | |||||||||
| Less: Related tax benefit | (16,752 | ) | (13,218 | ) | (18,650 | ) | ||||||
| Compensation cost, net of tax benefit | $ | 68,599 | $ | 55,268 | $ | 42,474 |
NOTE 15 — EMPLOYEE BENEFIT PLANS
Multiemployer benefit plans. The Company currently participates in multiemployer pension plans in which the risks of participating differs from single-employer plans in the following aspects:
| a) | Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers; |
|---|
| b) | If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; |
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| c) | If an entity chooses to stop participating in some of its multiemployer plans, the entity may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability; and |
|---|
| d) | If the plan is terminated by withdrawal of all employers and if the value of the nonforfeitable benefits exceeds plan assets and withdrawal liability payments, employers are required by law to make up the insufficient difference. |
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The Company’s participation in these plans is presented below.
| EIN/Pension | Pension Protection Act Zone Status (2) | FIP/RP | Contributions by the Company (in thousands)(4) | Surcharge | Expiration Dates of Collective Bargaining | |||||||||||||||||||
| Pension Fund(1) | Plan Number | 2018 | 2017 | Status (3) | 2019 | 2018 | 2017 | Imposed | Agreements | |||||||||||||||
| Southern Nevada Culinary and Bartenders Pension Plan | 88-6016617/001 | Green | Green | No | $ | 52,218 | $ | 47,825 | $ | 45,297 | No | 3/31/2021(5); 5/31/2023(5); 5/31/2024(5) | ||||||||||||
| The Legacy Plan of the UNITE HERE Retirement Fund (UHF)(6) | 82-0994119/001 | Red | Red | Yes | $ | 10,151 | $ | 9,794 | $ | 9,416 | Yes | 2/29/2020(7) | ||||||||||||
| (1) | The Company was listed in the plan's Form 5500 as providing more than 5% of the total contributions for the plan years 2018 and 2017 for the Southern Nevada Culinary and Bartenders Pension Plan and for the plan year 2018 for the UHF. At the date the financial statements were issued, Form 5500 was not available for the plan year 2019. |
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| (2) | The zone status is based on information that the Company received from the plan and is certified by the plan's actuary. Plans in the red zone are generally less than 65% funded (critical status) and plans in the green zone are at least 80% funded. |
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| (3) | Indicates plans for which a Financial Improvement Plan (FIP) or a Rehabilitation Plan (RP) is either pending or has been implemented. |
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| (4) | There have been no significant changes that affect the comparability of contributions. |
|---|
| (5) | The Company is party to twelve collective bargaining agreements (CBA) that require contributions with the Local Joint Executive Board of Las Vegas, which is made up of the Culinary Workers Union and Bartenders Union. The agreements between Aria, Bellagio, Mandalay Bay, and MGM Grand Las Vegas are the most significant because more than half of the Company’s employee participants in this plan are covered by those four agreements. |
|---|
| (6) | Effective January 1, 2018, the Pension Benefit Guaranty Corporation approved the spin-off of the UNITE HERE portion of the Legacy Plan of the National Retirement Fund (NRF) to the newly formed UHF. As a result of the spin-off, the pension liabilities as well as certain assets of the plan were transferred to the new plan. The terms of the UHF plan are identical to the NRF plan. |
|---|
| (7) | The Company intends to extend the agreement past the expiration date until a new agreement is executed. |
|---|
Multiemployer benefit plans other than pensions. Pursuant to its collective bargaining agreements referenced above, the Company also contributes to UNITE HERE Health (the “Health Fund”), which provides healthcare benefits to its active and retired members. The Company contributed $206 million, $191 million, and $183 million to the Health Fund in the years ended December 31, 2019, 2018, and 2017, respectively.
Self-insurance. The Company is self-insured for most health care benefits and workers compensation for its non-union employees. The liability for self-insurance was $95 million and $93 million at December 31, 2019 and 2018, respectively, which is included in “Other accrued liabilities” and “Other long-term obligations.”
NOTE 16 — PROPERTY TRANSACTIONS, NET
Property transactions, net consisted of the following:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
| Loss related to sale of Circus Circus Las Vegas and adjacent land | $ | 220,294 | $ | — | $ | — | ||||||
| Gain on sale of Grand Victoria | — | (44,703 | ) | — | ||||||||
| Other property transactions, net | 55,508 | 53,850 | 50,279 | |||||||||
| $ | 275,802 | $ | 9,147 | $ | 50,279 |
Circus Circus Las Vegas and adjacent land. In December 2019, the Company completed the previously announced sale of Circus Circus Las Vegas and the adjacent land for $825 million, which consisted of $662.5 million paid in cash and a secured note due 2024 with a face value of $162.5 million and fair value of $133.7 million. The note has a stated interest rate of 3% for the first two years, 4% for following two years, and 4.5% for the fifth year and is secured by the borrower with the land adjacent to Circus Circus Las Vegas as collateral with an effective interest rate of 7.31%. The interest on the note, which is comprised of the stated interest and the discount on the note, will amortize into interest income using the effective interest method over the length of the agreement.
During the third quarter of 2019, the Company recorded a non-cash impairment charge of $219 million, which reflects the amount by which the assets’ carrying value exceeds the assets’ fair value (expected selling price). We further recognized a loss of $2 million during the fourth quarter of 2019 primarily relating to selling costs. The assets and liabilities of Circus Circus Las Vegas and the adjacent land sold of $810 million and $14 million, respectively, primarily consisted of property and equipment, net of $785 million. Circus Circus Las Vegas is not classified as discontinued operations because the Company concluded that the sale is not a strategic shift that has a major effect on the Company’s operations or its financial results and it does not represent a major geographic segment or product line.
Grand Victoria investment sale. See Note 6 for additional information related to the sale of Grand Victoria investment in 2018.
Other. Other property transactions, net includes miscellaneous asset disposals and demolition costs in the periods presented in the above table, including a loss of $24 million related to MGM Cotai production show costs in 2018, and a loss of $20 million and $34 million related to the rebranding of the Monte Carlo Resort and Casino to Park MGM and NoMad Las Vegas in 2018 and 2017, respectively.
NOTE 17 — SEGMENT INFORMATION
The Company’s management views each of its casino resorts as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate, and their management and reporting structure. The Company has aggregated its operating segments into the following reportable segments: Las Vegas Strip Resorts, Regional Operations and MGM China.
Las Vegas Strip Resorts. Las Vegas Strip Resorts consists of the following casino resorts: Bellagio, MGM Grand Las Vegas (including The Signature), Mandalay Bay (including Delano and Four Seasons), The Mirage, Luxor, New York-New York (including the Park), Excalibur, Park MGM (including NoMad Las Vegas) and Circus Circus Las Vegas (until the sale of such property in December 2019).
Regional Operations. Regional Operations consists of the following casino resorts: MGM Grand Detroit in Detroit, Michigan; Beau Rivage in Biloxi, Mississippi; Gold Strike Tunica in Tunica, Mississippi; Borgata in Atlantic City, New Jersey; MGM National Harbor in Prince George’s County, Maryland; MGM Springfield in Springfield, Massachusetts; Empire City in Yonkers, New York (upon acquisition in January 2019); and MGM Northfield Park in Northfield Park, Ohio (upon MGM’s acquisition of the operations from MGP in April 2019).
MGM China. MGM China consists of MGM Macau and MGM Cotai.
The Company’s operations related to investments in unconsolidated affiliates, MGM Northfield Park (prior to April 1, 2019 as the operations were owned by MGP until that date), and certain other corporate operations and management services have not been identified as separate reportable segments; therefore, these operations are included in “Corporate and other” in the following segment disclosures to reconcile to consolidated results.
In 2019, the Company changed its segment measure of profit and loss from Adjusted Property EBITDA to Adjusted Property EBITDAR. As discussed in Note 2, prior to the adoption of ASC 842 on January 1, 2019, the master lease between subsidiaries of the Company and MGP was accounted for as a failed sale of the real estate assets due to the subsidiaries’ investments in the Operating Partnership, which constituted continuing involvement. As such, the real estate assets were reflected in the balance sheets of the applicable MGM subsidiaries as well as the associated finance lease liability. In connection with the adoption of ASC 842, the sale and leaseback of the real estate assets under the master lease now qualify as a passed sale and are determined to be operating leases. Accordingly, the real estate assets are now only reflected on the balance sheet of MGP and the MGM subsidiaries have recorded operating lease liabilities and operating ROU assets and also now record rent expense instead of depreciation and interest expense. The master lease and its related accounting eliminates in consolidation. Further, as a result of the Bellagio transaction in the fourth quarter of 2019, the Company records rent expense associated with the triple-net operating lease with Bellagio BREIT Venture. In order to present profit and loss of each reportable segment on a similar economic basis, the rent expense associated with the triple net operating leases and ground leases is added back within the financial information reviewed by the chief operating decision maker and as presented below, including recasting of prior year periods.
Adjusted Property EBITDAR is a measure defined as Adjusted EBITDAR before corporate expense and stock compensation expense, which are not allocated to each operating segment, and before rent expense related to the master lease with MGP that eliminates in consolidation. Adjusted 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 Bellagio transaction, restructuring costs (which represents costs related to severance, accelerated stock compensation expense, and consulting fees directly related to the operating model component of the MGM 2020 Plan), rent expense associated with triple net operating and ground leases, income from unconsolidated affiliates related to investments in REITs, NV Energy exit expense, and property transactions, net.
The following tables present the Company’s segment information:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
| Net Revenues | ||||||||||||
| Las Vegas Strip Resorts | ||||||||||||
| Casino | $ | 1,296,170 | $ | 1,407,733 | $ | 1,436,830 | ||||||
| Rooms | 1,863,521 | 1,776,029 | 1,778,869 | |||||||||
| Food and beverage | 1,517,745 | 1,402,378 | 1,410,496 | |||||||||
| Entertainment, retail and other | 1,153,615 | 1,130,532 | 1,119,928 | |||||||||
| 5,831,051 | 5,716,672 | 5,746,123 | ||||||||||
| Regional Operations | ||||||||||||
| Casino | 2,537,780 | 2,026,925 | 1,834,803 | |||||||||
| Rooms | 316,753 | 318,017 | 319,049 | |||||||||
| Food and beverage | 494,243 | 428,934 | 410,143 | |||||||||
| Entertainment, retail and other | 201,008 | 160,645 | 145,725 | |||||||||
| 3,549,784 | 2,934,521 | 2,709,720 | ||||||||||
| MGM China | ||||||||||||
| Casino | 2,609,806 | 2,195,144 | 1,741,635 | |||||||||
| Rooms | 142,306 | 118,527 | 54,824 | |||||||||
| Food and beverage | 127,152 | 114,862 | 51,330 | |||||||||
| Entertainment, retail and other | 26,158 | 21,424 | 10,371 | |||||||||
| 2,905,422 | 2,449,957 | 1,858,160 | ||||||||||
| Reportable segment net revenues | 12,286,257 | 11,101,150 | 10,314,003 | |||||||||
| Corporate and other | 613,415 | 661,946 | 483,476 | |||||||||
| $ | 12,899,672 | $ | 11,763,096 | $ | 10,797,479 | |||||||
| Adjusted Property EBITDAR | ||||||||||||
| Las Vegas Strip Resorts | $ | 1,643,122 | $ | 1,706,315 | $ | 1,781,390 | ||||||
| Regional Operations | 969,866 | 781,854 | 754,597 | |||||||||
| MGM China | 734,729 | 574,333 | 535,524 | |||||||||
| Reportable segment Adjusted Property EBITDAR | 3,347,717 | 3,062,502 | 3,071,511 | |||||||||
| Other operating income (expense) | ||||||||||||
| Corporate and other | (331,621 | ) | (224,800 | ) | (213,908 | ) | ||||||
| NV Energy exit expense | — | — | 40,629 | |||||||||
| Preopening and start-up expenses | (7,175 | ) | (151,392 | ) | (118,475 | ) | ||||||
| Property transactions, net | (275,802 | ) | (9,147 | ) | (50,279 | ) | ||||||
| Gain on Bellagio transaction | 2,677,996 | — | — | |||||||||
| Depreciation and amortization | (1,304,649 | ) | (1,178,044 | ) | (993,480 | ) | ||||||
| Restructuring | (92,139 | ) | — | — | ||||||||
| Triple net operating lease and ground lease rent expense | (74,656 | ) | (29,633 | ) | (23,471 | ) | ||||||
| Income from unconsolidated affiliates related to investments in REITs | 544 | — | — | |||||||||
| Operating income | 3,940,215 | 1,469,486 | 1,712,527 | |||||||||
| Non-operating income (expense) | ||||||||||||
| Interest expense, net of amounts capitalized | (847,932 | ) | (769,513 | ) | (668,745 | ) | ||||||
| Non-operating items from unconsolidated affiliates | (62,296 | ) | (47,827 | ) | (34,751 | ) | ||||||
| Other, net | (183,262 | ) | (18,140 | ) | (48,241 | ) | ||||||
| (1,093,490 | ) | (835,480 | ) | (751,737 | ) | |||||||
| Income before income taxes | 2,846,725 | 634,006 | 960,790 | |||||||||
| Benefit (provision) for income taxes | (632,345 | ) | (50,112 | ) | 1,127,394 | |||||||
| Net income | 2,214,380 | 583,894 | 2,088,184 | |||||||||
| Less: Net income attributable to noncontrolling interests | (165,234 | ) | (117,122 | ) | (136,132 | ) | ||||||
| Net income attributable to MGM Resorts International | $ | 2,049,146 | $ | 466,772 | $ | 1,952,052 |
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| Capital expenditures: | (In thousands) | |||||||||||
| Las Vegas Strip Resorts | $ | 285,863 | $ | 501,044 | $ | 419,983 | ||||||
| Regional Operations | 187,489 | 72,865 | 66,628 | |||||||||
| MGM China | 145,634 | 390,212 | 923,346 | |||||||||
| Reportable segment capital expenditures | 618,986 | 964,121 | 1,409,957 | |||||||||
| Corporate and other | 120,020 | 537,347 | 469,053 | |||||||||
| Eliminated in consolidation | — | (14,625 | ) | (14,928 | ) | |||||||
| $ | 739,006 | $ | 1,486,843 | $ | 1,864,082 |
Total assets are not allocated to segments for internal reporting presentations or when determining the allocation of resources and, accordingly, are not presented.
Long-lived assets, which includes property and equipment, net, operating and finance lease right-of-use assets, net, goodwill, and other intangibles, net, presented by geographic region in which the Company holds assets are presented below:
| December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2017 | ||||||||||
| Long-lived assets: | (In thousands) | |||||||||||
| United States | $ | 20,582,055 | $ | 18,228,939 | $ | 16,863,222 | ||||||
| China and all other foreign countries | 8,007,449 | 8,266,804 | 8,456,728 | |||||||||
| $ | 28,589,504 | $ | 26,495,743 | $ | 25,319,950 |
NOTE 18 — RELATED PARTY TRANSACTIONS
CityCenter
Management agreements. The Company and CityCenter have entered into agreements whereby the Company is responsible for management of the operations of CityCenter for a fee of 2% of revenue and 5% of EBITDA (as defined) for Aria and Vdara. The Company earned fees of $48 million, $47 million and $49 million for the years ended December 31, 2019, 2018 and 2017, respectively. The Company is being reimbursed for certain costs in performing its development and management services. During the years ended December 31, 2019, 2018 and 2017, the Company incurred $420 million, $409 million and $390 million, respectively, of costs reimbursable by CityCenter, primarily for employee compensation and certain allocated costs. As of December 31, 2019 and 2018, CityCenter owed the Company $66 million and $83 million, respectively, for management services and reimbursable costs recorded in “Accounts receivable, net” in the accompanying consolidated balance sheets.
MGM China
Ms. Ho, Pansy Catilina Chiu King (“Ms. Ho”) is a member of the Board of Directors of, and holds a minority ownership interest in, MGM China. Ms. Ho is also the managing director of Shun Tak Holdings Limited (together with its subsidiaries “Shun Tak”), a leading conglomerate in Hong Kong with core businesses in transportation, property, hospitality and investments. Shun Tak provides various services and products, including ferry tickets, travel products, rental of hotel rooms, laundry services and property cleaning services to MGM China. In addition, MGM China leases transportation equipment and office space from Shun Tak. MGM China incurred expenses relating to Shun Tak of $16 million, $17 million and $13 million for the years ended December 31, 2019, 2018 and 2017, respectively. In addition, Ms. Ho holds managing director positions with several other companies that provide travel and advertising services to MGM China, which totaled $6 million for the year ended December 31, 2019.
Grand Paradise Macau deferred cash payment. On September 1, 2016, the Company purchased 188.1 million common shares of its MGM China subsidiary from Grand Paradise Macau (“GPM”), an entity controlled by Ms. Ho. As part of the consideration for the purchase, the Company agreed to pay GPM or its nominee a deferred cash payment of $50 million, which will be paid in amounts equal to the ordinary dividends received on such shares, with a final lump sum payment due on the fifth anniversary of the closing date of the transaction if any portion of the deferred cash payment remains unpaid at that time. Such amount was paid to Expert Angles Limited, an entity controlled by Ms. Ho through November 2018 and subsequently controlled by an immediate family member of Ms. Ho. As of December 31, 2019 and 2018, the Company recorded a remaining liability on a discounted basis of $34 million and $36 million in “Other long-term obligations”, respectively.
MGM Branding and Development Holdings, Ltd. (together with its subsidiary MGM Development Services, Ltd., “MGM Branding and Development”), an entity included in the Company’s consolidated financial statements in which Ms. Ho indirectly holds a noncontrolling interest, is party to a brand license agreement and a development services agreement with MGM China, for which the related amounts are eliminated in consolidation. An entity owned by Ms. Ho received distributions of $20 million, $22 million and $15 million for the years ended December 31, 2019, 2018 and 2017, respectively, in connection with the ownership of a noncontrolling interest in MGM Branding and Development Holdings, Ltd.
MGP
As further described in Note 1, pursuant to the master lease with MGP, the Company leases the real estate assets of The Mirage, Mandalay Bay, Luxor, New York-New York, Park MGM, Excalibur, The Park, Gold Strike Tunica, MGM Grand Detroit, Beau Rivage, Borgata, Empire City, MGM National Harbor and MGM Northfield Park from MGP.
MGP master lease. The MGP master lease has an initial lease term of ten years that began on April 25, 2016 (other than with respect to MGM National Harbor, as described below) with the potential to extend the term for four additional five-year terms thereafter at the option of the Company. The MGP master lease provides that any extension of its term must apply to all of the real estate under the master lease at the time of the extension. The MGP master lease provides that the initial term with respect to MGM National Harbor ends on April 31, 2024. Thereafter, the initial term of the MGP master lease with respect to MGM National Harbor may be renewed at the option of the Company for an initial renewal period lasting until the earlier of the end of the then-current term of the master lease or the next renewal term (depending on whether the Company elects to renew the other properties under the master lease in connection with the expiration of the initial ten-year term). If, however, the Company chooses not to renew the lease with respect to MGM National Harbor after the initial MGM National Harbor term under the master lease, the Company would also lose the right to renew the MGP master lease with respect to the rest of the properties when the initial ten-year lease term ends related to the rest of the properties in 2026. The MGP master lease has a triple-net structure, which requires the Company to pay substantially all costs associated with the lease, including real estate taxes, insurance, utilities and routine maintenance, in addition to the base rent. Additionally, the master lease provides MGP with a right of first offer with respect to MGM Springfield and with respect to any further gaming development by the Company on the undeveloped land adjacent to Empire City, which MGP may exercise should the Company elect to sell either property in the future.
Rent under the MGP master lease consists of a “base rent” component and a “percentage rent” component. As of December 31, 2019, the base rent represents approximately 90% of the rent payments due and the percentage rent represents approximately 10% of the rent payments due under the MGP master lease. The MGP master lease also provides for fixed annual escalators of 2% on the base rent through the sixth lease year and the possibility for additional 2% increases thereafter subject to the Company meeting an adjusted net revenue to rent ratio, as well as potential increases in percentage rent in year six and every five years thereafter based on a percentage of average actual annual net revenue during the preceding five year period calculated in accordance with the terms under the master lease. The MGP master lease also contains customary events of default and financial covenants. The Company was in compliance with all applicable covenants as of December 31, 2019.
Subsequent to the Company completing its acquisition of Empire City in January 2019, MGP acquired the developed real property associated with Empire City from the Company for consideration of approximately $634 million, which included the assumption of debt of approximately $246 million, which was immediately repaid, and the remaining paid through the issuance of Operating Partnership units. The real estate assets of Empire City were then leased to the Company pursuant to an amendment to the MGP master lease, increasing the annual rent payment to MGP by $50 million, prorated for the remainder of the lease year. Consistent with the MGP master lease terms, 90% of this rent will be fixed and contractually grow at 2% per year until 2022. As disclosed above, the master lease provides MGP with a right of first offer with respect to certain undeveloped land adjacent to the property to the extent the Company develops additional gaming facilities, which MGP may exercise should the Company elect to sell this property in the future.
On March 7, 2019, the Company entered into an amendment to the existing MGP master lease with respect to investments made by the Company related to the Park MGM and NoMad Las Vegas property (the “Park MGM Lease Transaction”). In connection with the transaction, the Company received consideration of $638 million, of which approximately $606 million was paid in cash and the remaining paid through the issuance of Operating Partnership units. Additionally, the annual rent payment to MGP was increased by $50 million, prorated for the remainder of the lease year. Consistent with the master lease terms, 90% of this rent will be fixed and contractually grow at 2% per year until 2022.
Additionally, on April 1, 2019, the Company acquired the membership interests of Northfield from MGP, which held the operations of Northfield, for fair value of consideration of approximately $305 million consisting primarily of approximately 9 million Operating Partnership units that were ultimately redeemed by the Operating Partnership, and MGP retained the associated real estate assets. The Company then rebranded the property to MGM Northfield Park, which was then added to the existing MGP master lease with MGP, increasing the annual rent payment to MGP by $60 million. Consistent with the master lease terms, 90% of this rent will be fixed and contractually grow at 2% per year until 2022.
The annual rent payments under the MGP master lease for the fourth lease year, which commenced on April 1, 2019, increased to $946 million from $770 million at the start of the third lease year. The increase was a result of the $50 million in additional rent for each of the Park MGM Transaction and the addition of Empire City in the beginning of 2019, the $60 million of additional rent for MGM Northfield Park, which entered the Master Lease on April 1, 2019, as well as the third 2.0% fixed annual rent escalator that went into effect on April 1, 2019.
On February 14, 2020, the Company amended the MGP master lease to remove Mandalay Bay from such master lease and the rent under the MGP master lease was reduced by $133 million. Refer to Note 1 for further discussion.
All intercompany transactions, including transactions under the MGP master lease, have been eliminated in the Company’s consolidation of MGP. The public ownership of MGP’s Class A shares is recognized as non-controlling interests in the Company’s consolidated financial statements.
Bellagio BREIT Venture
The Company has a 5% ownership interest in the Bellagio BREIT Venture which owns the Bellagio real estate assets and leased back such assets to a subsidiary of the Company pursuant to a lease agreement. Refer to Note 11 for further information related to the Bellagio lease.
MGP BREIT Venture
On February 14, 2020, the Company entered into a lease with the MGP BREIT Venture, in which MGP has a 50.1% ownership interest. Refer to Note 1 for further discussion of this subsequent event.
NOTE 19 —CONDENSED CONSOLIDATING FINANCIAL INFORMATION
As of December 31, 2019, all of the Company’s principal debt arrangements are guaranteed by each of its material domestic subsidiaries, other than MGP and the Operating Partnership, MGM Grand Detroit, MGM National Harbor, MGM Springfield, and each of their respective subsidiaries. The Company’s international subsidiaries, including MGM China and its subsidiaries, are not guarantors of such indebtedness. Separate condensed financial statement information for the subsidiary guarantors and non-guarantors as of December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017, are presented below. Within the Condensed Consolidating Statements of Cash Flows, the Company has presented net changes in intercompany accounts as investing activities if the applicable entities have a net asset in intercompany accounts and as a financing activity if the applicable entities have a net intercompany liability balance.
Certain of the Company’s subsidiaries collectively own Operating Partnership units and each subsidiary accounts for its respective investment under the equity method within the condensed consolidating financial information presented below. Prior to the adoption of ASC 842 on January 1, 2019, for these subsidiaries, such investment constituted continuing involvement, and accordingly, the sale and leaseback of the real estate assets under the MGP master lease did not qualify for sale-leaseback accounting. The real estate assets were reflected in the balance sheets of the applicable MGM subsidiaries. In addition, such subsidiaries recognized finance liabilities within “Other long-term obligations” related to rent payments due under the MGP master lease and recognized the related interest expense component of such payments. These real estate assets were also reflected on the balance sheet of the MGP subsidiary that received such assets. The condensed consolidating financial information presented below therefore included the accounting for such activity within the respective columns presented and in the elimination column. In connection with the adoption of ASC 842, the sale and leaseback of the real estate assets under the MGP master lease now qualify as a passed sale and are determined to be operating leases. As such, the real estate assets, finance liabilities, and related interest expense component of rent payments are no longer reflected in the results of the applicable MGM subsidiaries. Instead, the real estate assets are now only reflected on the balance sheet of the MGP subsidiary that received such assets and the MGM subsidiaries have recorded operating lease liabilities and operating ROU assets with the related rent expense reflected within “general and administrative” expense within the condensed consolidating financial information.
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
| December 31, 2019 | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-Guarantor Subsidiaries | ||||||||||||||||||||||||
| Parent | Guarantor Subsidiaries | MGP | Other | Elimination | Consolidated | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Current assets | $ | 1,847,328 | $ | 1,166,667 | $ | 216,232 | $ | 790,285 | $ | (12,819 | ) | $ | 4,007,693 | |||||||||||
| Property and equipment, net | — | 2,972,291 | 10,827,972 | 4,497,664 | (11,972 | ) | 18,285,955 | |||||||||||||||||
| Investments in subsidiaries | 26,283,270 | 3,500,241 | — | — | (29,783,511 | ) | — | |||||||||||||||||
| Investments in the MGP Operating Partnership | — | 3,713,065 | — | 783,049 | (4,496,114 | ) | — | |||||||||||||||||
| Investments in and advances to unconsolidated affiliates | — | 782,820 | — | 14,546 | 25,000 | 822,366 | ||||||||||||||||||
| Intercompany accounts | — | 12,994,459 | — | — | (12,994,459 | ) | — | |||||||||||||||||
| Other non-current assets | 59,968 | 14,142,246 | 866,068 | 7,057,191 | (11,365,131 | ) | 10,760,342 | |||||||||||||||||
| $ | 28,190,566 | $ | 39,271,789 | $ | 11,910,272 | $ | 13,142,735 | $ | (58,639,006 | ) | $ | 33,876,356 | ||||||||||||
| Current liabilities | $ | 842,161 | $ | 1,601,959 | $ | 197,581 | $ | 845,471 | $ | (295,749 | ) | $ | 3,191,423 | |||||||||||
| Intercompany accounts | 12,956,091 | — | 774 | 37,594 | (12,994,459 | ) | — | |||||||||||||||||
| Deferred income taxes, net | 1,865,535 | — | 29,909 | 240,971 | (29,909 | ) | 2,106,506 | |||||||||||||||||
| Long-term debt, net | 4,713,521 | 569 | 4,307,354 | 2,147,460 | — | 11,168,904 | ||||||||||||||||||
| Other non-current liabilities | 85,993 | 13,151,072 | 476,642 | 2,339,166 | (11,411,315 | ) | 4,641,558 | |||||||||||||||||
| Total liabilities | 20,463,301 | 14,753,600 | 5,012,260 | 5,610,662 | (24,731,432 | ) | 21,108,391 | |||||||||||||||||
| Redeemable noncontrolling interests | — | — | — | 105,046 | — | 105,046 | ||||||||||||||||||
| MGM Resorts International stockholders' equity | 7,727,265 | 24,513,386 | 4,383,113 | 5,011,075 | (33,907,574 | ) | 7,727,265 | |||||||||||||||||
| Noncontrolling interests | — | 4,803 | 2,514,899 | 2,415,952 | — | 4,935,654 | ||||||||||||||||||
| Total stockholders' equity | 7,727,265 | 24,518,189 | 6,898,012 | 7,427,027 | (33,907,574 | ) | 12,662,919 | |||||||||||||||||
| $ | 28,190,566 | $ | 39,271,789 | $ | 11,910,272 | $ | 13,142,735 | $ | (58,639,006 | ) | $ | 33,876,356 |
| December 31, 2018 | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-Guarantor Subsidiaries | ||||||||||||||||||||||||
| Parent | Guarantor Subsidiaries | MGP | Other | Elimination | Consolidated | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Current assets | $ | 304,741 | $ | 1,244,864 | $ | 12,054 | $ | 972,820 | $ | (7,701 | ) | $ | 2,526,778 | |||||||||||
| Property and equipment, net | — | 13,585,370 | 10,506,129 | 6,392,014 | (9,753,625 | ) | 20,729,888 | |||||||||||||||||
| Investments in subsidiaries | 22,419,282 | 3,401,031 | — | — | (25,820,313 | ) | — | |||||||||||||||||
| Investments in the MGP Operating Partnership | — | 3,434,602 | — | 831,494 | (4,266,096 | ) | — | |||||||||||||||||
| Investments in and advances to unconsolidated affiliates | — | 678,748 | — | 29,119 | 25,000 | 732,867 | ||||||||||||||||||
| Intercompany accounts | — | 7,135,183 | — | — | (7,135,183 | ) | — | |||||||||||||||||
| Other non-current assets | 67,214 | 1,186,666 | 77,436 | 4,932,872 | (43,015 | ) | 6,221,173 | |||||||||||||||||
| Assets held for sale | — | — | 355,688 | — | (355,688 | ) | — | |||||||||||||||||
| $ | 22,791,237 | $ | 30,666,464 | $ | 10,951,307 | $ | 13,158,319 | $ | (47,356,621 | ) | $ | 30,210,706 | ||||||||||||
| Current liabilities | $ | 154,484 | $ | 1,646,481 | $ | 160,441 | $ | 1,224,752 | $ | (237,276 | ) | $ | 2,948,882 | |||||||||||
| Intercompany accounts | 6,932,325 | — | 227 | 202,631 | (7,135,183 | ) | — | |||||||||||||||||
| Deferred income taxes, net | 1,097,654 | — | 33,634 | 240,970 | (29,720 | ) | 1,342,538 | |||||||||||||||||
| Long-term debt, net | 8,055,472 | 570 | 4,666,949 | 2,365,014 | — | 15,088,005 | ||||||||||||||||||
| Other non-current liabilities | 39,019 | 7,210,948 | 215,613 | 2,247,584 | (9,453,924 | ) | 259,240 | |||||||||||||||||
| Liabilities related to assets held for sale | — | — | 28,937 | — | (28,937 | ) | — | |||||||||||||||||
| Total liabilities | 16,278,954 | 8,857,999 | 5,105,801 | 6,280,951 | (16,885,040 | ) | 19,638,665 | |||||||||||||||||
| Redeemable noncontrolling interests | — | — | — | 102,250 | — | 102,250 | ||||||||||||||||||
| MGM Resorts International stockholders' equity | 6,512,283 | 21,808,465 | 4,279,535 | 4,383,581 | (30,471,581 | ) | 6,512,283 | |||||||||||||||||
| Noncontrolling interests | — | — | 1,565,971 | 2,391,537 | — | 3,957,508 | ||||||||||||||||||
| Total stockholders' equity | 6,512,283 | 21,808,465 | 5,845,506 | 6,775,118 | (30,471,581 | ) | 10,469,791 | |||||||||||||||||
| $ | 22,791,237 | $ | 30,666,464 | $ | 10,951,307 | $ | 13,158,319 | $ | (47,356,621 | ) | $ | 30,210,706 |
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME INFORMATION
| Year Ended December 31, 2019 | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-Guarantor Subsidiaries | ||||||||||||||||||||||||
| Parent | Guarantor Subsidiaries | MGP | Other | Elimination | Consolidated | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Net revenues | $ | — | $ | 8,250,745 | $ | 881,078 | $ | 4,648,935 | $ | (881,086 | ) | $ | 12,899,672 | |||||||||||
| Equity in subsidiaries' earnings | 3,468,056 | 143,416 | — | — | (3,611,472 | ) | — | |||||||||||||||||
| Expenses | ||||||||||||||||||||||||
| Casino and hotel operations | 9,834 | 4,715,365 | — | 2,889,321 | (11,031 | ) | 7,603,489 | |||||||||||||||||
| General and administrative | 27,752 | 2,235,321 | 23,321 | 755,378 | (940,555 | ) | 2,101,217 | |||||||||||||||||
| Corporate expense | 180,288 | 236,175 | 27,041 | 21,138 | — | 464,642 | ||||||||||||||||||
| Preopening and start-up expenses | — | 5,168 | — | 2,007 | — | 7,175 | ||||||||||||||||||
| Property transactions, net | 7,530 | 255,081 | 10,844 | 2,347 | — | 275,802 | ||||||||||||||||||
| Gain on Bellagio transaction | — | (2,677,996 | ) | — | — | — | (2,677,996 | ) | ||||||||||||||||
| Depreciation and amortization | — | 431,222 | 294,705 | 578,722 | — | 1,304,649 | ||||||||||||||||||
| 225,404 | 5,200,336 | 355,911 | 4,248,913 | (951,586 | ) | 9,078,978 | ||||||||||||||||||
| Income (loss) from unconsolidated affiliates | — | 134,584 | — | (15,063 | ) | — | 119,521 | |||||||||||||||||
| Operating income | 3,242,652 | 3,328,409 | 525,167 | 384,959 | (3,540,972 | ) | 3,940,215 | |||||||||||||||||
| Interest expense, net of amounts capitalized | (472,066 | ) | (1,103 | ) | (249,944 | ) | (124,819 | ) | — | (847,932 | ) | |||||||||||||
| Other non-operating, net | (97,903 | ) | 254,509 | (8,276 | ) | (11,304 | ) | (382,584 | ) | (245,558 | ) | |||||||||||||
| Income from continuing operations before income taxes | 2,672,683 | 3,581,815 | 266,947 | 248,836 | (3,923,556 | ) | 2,846,725 | |||||||||||||||||
| Provision for income taxes | (623,537 | ) | (8 | ) | (7,598 | ) | (1,202 | ) | — | (632,345 | ) | |||||||||||||
| Income from continuing operations, net of tax | 2,049,146 | 3,581,807 | 259,349 | 247,634 | (3,923,556 | ) | 2,214,380 | |||||||||||||||||
| Income from discontinued operations, net of tax | — | — | 16,216 | — | (16,216 | ) | — | |||||||||||||||||
| Net income | 2,049,146 | 3,581,807 | 275,565 | 247,634 | (3,939,772 | ) | 2,214,380 | |||||||||||||||||
| Less: Net income attributable to noncontrolling interests | — | (8,995 | ) | (90,260 | ) | (65,979 | ) | — | (165,234 | ) | ||||||||||||||
| Net income attributable to MGM Resorts International | $ | 2,049,146 | $ | 3,572,812 | $ | 185,305 | $ | 181,655 | $ | (3,939,772 | ) | $ | 2,049,146 | |||||||||||
| Net income | $ | 2,049,146 | $ | 3,581,807 | $ | 275,565 | $ | 247,634 | $ | (3,939,772 | ) | $ | 2,214,380 | |||||||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||
| Foreign currency translation adjustment | 16,125 | 16,125 | — | 28,870 | (32,250 | ) | 28,870 | |||||||||||||||||
| Other comprehensive loss related to cash flow hedges | (19,973 | ) | — | (35,198 | ) | — | 25,666 | (29,505 | ) | |||||||||||||||
| Other comprehensive income (loss) | (3,848 | ) | 16,125 | (35,198 | ) | 28,870 | (6,584 | ) | (635 | ) | ||||||||||||||
| Comprehensive income | 2,045,298 | 3,597,932 | 240,367 | 276,504 | (3,946,356 | ) | 2,213,745 | |||||||||||||||||
| Less: Comprehensive income attributable to noncontrolling interests | — | — | (80,728 | ) | (87,719 | ) | — | (168,447 | ) | |||||||||||||||
| Comprehensive income attributable to MGM Resorts International | $ | 2,045,298 | $ | 3,597,932 | $ | 159,639 | $ | 188,785 | $ | (3,946,356 | ) | $ | 2,045,298 |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
| Year Ended December 31, 2019 | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-Guarantor Subsidiaries | ||||||||||||||||||||||||
| Parent | Guarantor Subsidiaries | MGP | Other | Elimination | Consolidated | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Cash flows from operating activities | ||||||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | (308,995 | ) | $ | 1,404,869 | $ | 100,706 | $ | 629,412 | $ | (15,591 | ) | $ | 1,810,401 | ||||||||||
| Cash flows from investing activities | ||||||||||||||||||||||||
| Capital expenditures, net of construction payable | — | (504,105 | ) | — | (234,913 | ) | 12 | (739,006 | ) | |||||||||||||||
| Dispositions of property and equipment | — | 2,425 | — | 153 | — | 2,578 | ||||||||||||||||||
| Proceeds from Bellagio transaction | — | 4,151,499 | — | — | — | 4,151,499 | ||||||||||||||||||
| Proceeds from sale of Circus Circus Las Vegas and adjacent land | — | 652,333 | — | — | — | 652,333 | ||||||||||||||||||
| Acquisition of Empire City Casino, net of cash acquired | — | (535,681 | ) | — | — | — | (535,681 | ) | ||||||||||||||||
| Investments in and advances to unconsolidated affiliates | — | (81,877 | ) | — | — | — | (81,877 | ) | ||||||||||||||||
| Distributions from unconsolidated affiliates | — | 100,700 | — | — | — | 100,700 | ||||||||||||||||||
| Intercompany accounts | — | (5,859,196 | ) | — | — | 5,859,196 | — | |||||||||||||||||
| Northfield OpCo transaction | — | (3,779 | ) | 3,779 | — | — | — | |||||||||||||||||
| Other | — | (4,500 | ) | — | (26,612 | ) | — | (31,112 | ) | |||||||||||||||
| Net cash provided by (used in) investing activities | — | (2,082,181 | ) | 3,779 | (261,372 | ) | 5,859,208 | 3,519,434 | ||||||||||||||||
| Cash flows from financing activities | ||||||||||||||||||||||||
| Net borrowings (repayments) under bank credit facilities - maturities of 90 days or less | (752,220 | ) | 245,950 | (1,361,325 | ) | (1,766,454 | ) | — | (3,634,049 | ) | ||||||||||||||
| Issuance of long-term debt | 1,000,000 | — | 750,000 | 1,500,000 | — | 3,250,000 | ||||||||||||||||||
| Retirement of senior notes and senior debentures | (3,764,167 | ) | — | — | — | — | (3,764,167 | ) | ||||||||||||||||
| Debt issuance costs | (14,080 | ) | — | (9,983 | ) | (39,328 | ) | — | (63,391 | ) | ||||||||||||||
| Issuance of MGM Growth Properties Class A shares, net | — | — | 1,250,006 | — | — | 1,250,006 | ||||||||||||||||||
| Dividends paid to common shareholders | (271,288 | ) | — | — | — | — | (271,288 | ) | ||||||||||||||||
| MGP dividends paid to consolidated subsidiaries | — | — | (371,759 | ) | — | 371,759 | — | |||||||||||||||||
| Distributions to noncontrolling interest owners | — | (4,907 | ) | (161,976 | ) | (56,420 | ) | — | (223,303 | ) | ||||||||||||||
| Purchases of common stock | (1,031,534 | ) | — | — | — | — | (1,031,534 | ) | ||||||||||||||||
| Intercompany accounts | 5,987,076 | 456,571 | — | (212,692 | ) | (6,230,955 | ) | — | ||||||||||||||||
| Other | (27,217 | ) | (47,686 | ) | (1,342 | ) | (3,523 | ) | 37,900 | (41,868 | ) | |||||||||||||
| Net cash provided by (used in) financing activities | 1,126,570 | 649,928 | 93,621 | (578,417 | ) | (5,821,296 | ) | (4,529,594 | ) | |||||||||||||||
| Effect of exchange rate on cash | — | — | — | 2,601 | — | 2,601 | ||||||||||||||||||
| Cash flows from discontinued operations, net | ||||||||||||||||||||||||
| Cash flows from operating activities | — | — | 15,591 | — | (15,591 | ) | — | |||||||||||||||||
| Cash flows used in investing activities | — | — | (12 | ) | — | 12 | — | |||||||||||||||||
| Cash flows used in financing activities | — | — | (37,900 | ) | — | 37,900 | — | |||||||||||||||||
| Net cash flows used in discontinued operations | — | — | (22,321 | ) | — | 22,321 | — | |||||||||||||||||
| Change in cash and cash equivalents classified as assets held for sale | — | — | (22,321 | ) | — | 22,321 | — | |||||||||||||||||
| Cash and cash equivalents | ||||||||||||||||||||||||
| Net increase (decrease) for the period | 817,575 | (27,384 | ) | 198,106 | (207,776 | ) | 22,321 | 802,842 | ||||||||||||||||
| Balance, beginning of period | 259,738 | 445,423 | 3,995 | 817,606 | — | 1,526,762 | ||||||||||||||||||
| Balance, end of period | $ | 1,077,313 | $ | 418,039 | $ | 202,101 | $ | 609,830 | $ | 22,321 | $ | 2,329,604 |
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME INFORMATION
| Year Ended December 31, 2018 | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-Guarantor Subsidiaries | |||||||||||||||||||||||||
| Parent | Guarantor Subsidiaries | MGP | Other | Elimination | Consolidated | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||
| Net revenues | $ | — | $ | 7,780,253 | $ | 869,495 | $ | 3,983,575 | $ | (870,227 | ) | $ | 11,763,096 | ||||||||||||
| Equity in subsidiaries' earnings | 1,221,538 | 116,676 | — | — | (1,338,214 | ) | — | ||||||||||||||||||
| Expenses | |||||||||||||||||||||||||
| Casino and hotel operations | 11,130 | 4,438,687 | — | 2,491,007 | (21,949 | ) | 6,918,875 | ||||||||||||||||||
| General and administrative | 9,945 | 1,241,329 | 93,739 | 495,015 | (75,390 | ) | 1,764,638 | ||||||||||||||||||
| Corporate expense | 156,503 | 216,318 | 48,675 | 21,317 | (23,609 | ) | 419,204 | ||||||||||||||||||
| Preopening and start-up expenses | — | 26,100 | — | 125,292 | — | 151,392 | |||||||||||||||||||
| Property transactions, net | — | (15,955 | ) | 20,319 | 25,033 | (20,250 | ) | 9,147 | |||||||||||||||||
| Depreciation and amortization | — | 628,961 | 266,622 | 543,606 | (261,145 | ) | 1,178,044 | ||||||||||||||||||
| 177,578 | 6,535,440 | 429,355 | 3,701,270 | (402,343 | ) | 10,441,300 | |||||||||||||||||||
| Income (loss) from unconsolidated affiliates | — | 148,866 | — | (1,176 | ) | — | 147,690 | ||||||||||||||||||
| Operating income | 1,043,960 | 1,510,355 | 440,140 | 281,129 | (1,806,098 | ) | 1,469,486 | ||||||||||||||||||
| Interest expense, net of amounts capitalized | (480,985 | ) | (510 | ) | (215,532 | ) | (72,486 | ) | — | (769,513 | ) | ||||||||||||||
| Other non-operating, net | 63,722 | (444,897 | ) | (4,690 | ) | (187,786 | ) | 507,684 | (65,967 | ) | |||||||||||||||
| Income before income taxes | 626,697 | 1,064,948 | 219,918 | 20,857 | (1,298,414 | ) | 634,006 | ||||||||||||||||||
| Benefit (provision) for income taxes | (159,925 | ) | — | (5,779 | ) | 115,592 | — | (50,112 | ) | ||||||||||||||||
| Income from continuing operations, net of tax | 466,772 | 1,064,948 | 214,139 | 136,449 | (1,298,414 | ) | 583,894 | ||||||||||||||||||
| Income from discontinued operations, net of tax | — | — | 30,563 | — | (30,563 | ) | — | ||||||||||||||||||
| Net income | 466,772 | 1,064,948 | 244,702 | 136,449 | (1,328,977 | ) | 583,894 | ||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | — | — | (67,065 | ) | (50,057 | ) | — | (117,122 | ) | ||||||||||||||||
| Net income attributable to MGM Resorts International | $ | 466,772 | $ | 1,064,948 | $ | 177,637 | $ | 86,392 | $ | (1,328,977 | ) | $ | 466,772 | ||||||||||||
| Net income | $ | 466,772 | $ | 1,064,948 | $ | 244,702 | $ | 136,449 | $ | (1,328,977 | ) | $ | 583,894 | ||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||||
| Foreign currency translation adjustment | (7,422 | ) | (7,422 | ) | — | (13,022 | ) | 14,844 | (13,022 | ) | |||||||||||||||
| Other comprehensive income related to cash flow hedges | 2,476 | — | 4,128 | — | (3,028 | ) | 3,576 | ||||||||||||||||||
| Other comprehensive income (loss) | (4,946 | ) | (7,422 | ) | 4,128 | (13,022 | ) | 11,816 | (9,446 | ) | |||||||||||||||
| Comprehensive income | 461,826 | 1,057,526 | 248,830 | 123,427 | (1,317,161 | ) | 574,448 | ||||||||||||||||||
| Less: Comprehensive income attributable to noncontrolling interests | — | — | (68,165 | ) | (44,457 | ) | — | (112,622 | ) | ||||||||||||||||
| Comprehensive income attributable to MGM Resorts International | $ | 461,826 | $ | 1,057,526 | $ | 180,665 | $ | 78,970 | $ | (1,317,161 | ) | $ | 461,826 |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
| Year Ended December 31, 2018 | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-Guarantor Subsidiaries | |||||||||||||||||||||||||||
| Parent | Guarantor Subsidiaries | MGP | Other | Elimination | Consolidated | ||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||
| Cash flows from operating activities | |||||||||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | (460,117 | ) | $ | 1,294,989 | $ | 556,801 | $ | 330,866 | $ | — | $ | 1,722,539 | ||||||||||||||
| Cash flows from investing activities | |||||||||||||||||||||||||||
| Capital expenditures, net of construction payable | — | (697,462 | ) | (192 | ) | (789,189 | ) | — | (1,486,843 | ) | |||||||||||||||||
| Dispositions of property and equipment | — | 25,507 | — | 105 | — | 25,612 | |||||||||||||||||||||
| Proceeds from sale of business units and investment in unconsolidated affiliate | — | 163,616 | — | — | — | 163,616 | |||||||||||||||||||||
| Acquisition of Northfield, net of cash acquired | — | 33,802 | (1,068,336 | ) | — | — | (1,034,534 | ) | |||||||||||||||||||
| Investments in and advances to unconsolidated affiliates | — | (56,295 | ) | — | — | — | (56,295 | ) | |||||||||||||||||||
| Distributions from unconsolidated affiliates | — | 322,631 | — | — | — | 322,631 | |||||||||||||||||||||
| Intercompany accounts | — | (1,136,764 | ) | — | — | 1,136,764 | — | ||||||||||||||||||||
| Other | — | (13,416 | ) | — | (3,792 | ) | — | (17,208 | ) | ||||||||||||||||||
| Net cash used in investing activities | — | (1,358,381 | ) | (1,068,528 | ) | (792,876 | ) | 1,136,764 | (2,083,021 | ) | |||||||||||||||||
| Cash flows from financing activities | |||||||||||||||||||||||||||
| Net borrowings under bank credit facilities - maturities of 90 days or less | 377,500 | — | 727,750 | 137,009 | — | 1,242,259 | |||||||||||||||||||||
| Issuance of long-term debt | 1,000,000 | — | — | — | — | 1,000,000 | |||||||||||||||||||||
| Retirement of senior notes and senior debentures | — | (2,265 | ) | — | — | — | (2,265 | ) | |||||||||||||||||||
| Debt issuance costs | (26,125 | ) | — | (17,490 | ) | (32,904 | ) | — | (76,519 | ) | |||||||||||||||||
| Dividends paid to common shareholders | (260,592 | ) | — | — | — | — | (260,592 | ) | |||||||||||||||||||
| MGP dividends paid to consolidated subsidiaries | — | — | (333,192 | ) | — | 333,192 | — | ||||||||||||||||||||
| Distributions to noncontrolling interest owners | — | — | (121,068 | ) | (63,864 | ) | — | (184,932 | ) | ||||||||||||||||||
| Purchases of common stock | (1,283,333 | ) | — | — | — | — | (1,283,333 | ) | |||||||||||||||||||
| Intercompany accounts | 917,760 | 207,015 | — | 345,181 | (1,469,956 | ) | — | ||||||||||||||||||||
| Other | (32,225 | ) | (6,979 | ) | — | (6,180 | ) | — | (45,384 | ) | |||||||||||||||||
| Net cash provided by financing activities | 692,985 | 197,771 | 256,000 | 379,242 | (1,136,764 | ) | 389,234 | ||||||||||||||||||||
| Effect of exchange rate on cash | — | — | — | (1,985 | ) | — | (1,985 | ) | |||||||||||||||||||
| Cash flows from discontinued operations, net | |||||||||||||||||||||||||||
| Cash flows from operating activities | — | — | 23,406 | — | (23,406 | ) | — | ||||||||||||||||||||
| Cash flows from investing activities | — | — | 32,416 | — | (32,416 | ) | — | ||||||||||||||||||||
| Cash flows from financing activities | — | — | — | — | — | — | |||||||||||||||||||||
| Net cash flows from discontinued operations | — | — | 55,822 | — | (55,822 | ) | — | ||||||||||||||||||||
| Change in cash and cash equivalents classified as assets held for sale | — | — | 55,822 | — | (55,822 | ) | — | ||||||||||||||||||||
| Cash and cash equivalents | |||||||||||||||||||||||||||
| Net increase (decrease) for the period | 232,868 | 134,379 | (255,727 | ) | (84,753 | ) | — | 26,767 | |||||||||||||||||||
| Balance, beginning of period | 26,870 | 311,044 | 259,722 | 902,359 | — | 1,499,995 | |||||||||||||||||||||
| Balance, end of period | $ | 259,738 | $ | 445,423 | $ | 3,995 | $ | 817,606 | $ | — | $ | 1,526,762 |
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME INFORMATION
| Year Ended December 31, 2017 | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-Guarantor Subsidiaries | ||||||||||||||||||||||||
| Parent | Guarantor Subsidiaries | MGP | Other | Elimination | Consolidated | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Net revenues | $ | — | $ | 7,649,990 | $ | 765,695 | $ | 3,151,304 | $ | (769,510 | ) | $ | 10,797,479 | |||||||||||
| Equity in subsidiaries' earnings | 1,391,725 | 156,081 | — | — | (1,547,806 | ) | — | |||||||||||||||||
| Expenses | ||||||||||||||||||||||||
| Casino and hotel operations | 10,784 | 4,262,212 | — | 1,923,942 | (3,816 | ) | 6,193,122 | |||||||||||||||||
| General and administrative | 8,742 | 1,180,989 | 84,348 | 369,844 | (84,348 | ) | 1,559,575 | |||||||||||||||||
| Corporate expense | 127,092 | 200,801 | 34,085 | (515 | ) | (4,591 | ) | 356,872 | ||||||||||||||||
| NV Energy exit expense | — | (40,629 | ) | — | — | — | (40,629 | ) | ||||||||||||||||
| Preopening and start-up expenses | — | 8,258 | — | 110,217 | — | 118,475 | ||||||||||||||||||
| Property transactions, net | — | 43,985 | 34,022 | 6,294 | (34,022 | ) | 50,279 | |||||||||||||||||
| Depreciation and amortization | — | 649,676 | 260,455 | 343,804 | (260,455 | ) | 993,480 | |||||||||||||||||
| 146,618 | 6,305,292 | 412,910 | 2,753,586 | (387,232 | ) | 9,231,174 | ||||||||||||||||||
| Income (loss) from unconsolidated affiliates | — | 147,234 | — | (1,012 | ) | — | 146,222 | |||||||||||||||||
| Operating income | 1,245,107 | 1,648,013 | 352,785 | 396,706 | (1,930,084 | ) | 1,712,527 | |||||||||||||||||
| Interest expense, net of amounts capitalized | (466,907 | ) | (982 | ) | (184,175 | ) | (16,681 | ) | — | (668,745 | ) | |||||||||||||
| Other non-operating, net | 26,215 | (402,602 | ) | 2,286 | (142,997 | ) | 434,106 | (82,992 | ) | |||||||||||||||
| Income before income taxes | 804,415 | 1,244,429 | 170,896 | 237,028 | (1,495,978 | ) | 960,790 | |||||||||||||||||
| Benefit (provision) for income taxes | 1,147,637 | — | (4,906 | ) | (15,337 | ) | — | 1,127,394 | ||||||||||||||||
| Net income | 1,952,052 | 1,244,429 | 165,990 | 221,691 | (1,495,978 | ) | 2,088,184 | |||||||||||||||||
| Less: Net income attributable to noncontrolling interests | — | — | (41,775 | ) | (94,357 | ) | — | (136,132 | ) | |||||||||||||||
| Net income attributable to MGM Resorts International | $ | 1,952,052 | $ | 1,244,429 | $ | 124,215 | $ | 127,334 | $ | (1,495,978 | ) | $ | 1,952,052 | |||||||||||
| Net income | $ | 1,952,052 | $ | 1,244,429 | $ | 165,990 | $ | 221,691 | $ | (1,495,978 | ) | $ | 2,088,184 | |||||||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||
| Foreign currency translation adjustment | (23,995 | ) | (23,995 | ) | — | (43,188 | ) | 47,990 | (43,188 | ) | ||||||||||||||
| Other comprehensive income related to cash flow hedges | 5,234 | — | 9,782 | — | (7,021 | ) | 7,995 | |||||||||||||||||
| Other comprehensive income (loss) | (18,761 | ) | (23,995 | ) | 9,782 | (43,188 | ) | 40,969 | (35,193 | ) | ||||||||||||||
| Comprehensive income | 1,933,291 | 1,220,434 | 175,772 | 178,503 | (1,455,009 | ) | 2,052,991 | |||||||||||||||||
| Less: Comprehensive income attributable to noncontrolling interests | — | — | (44,536 | ) | (75,164 | ) | — | (119,700 | ) | |||||||||||||||
| Comprehensive income attributable to MGM Resorts International | $ | 1,933,291 | $ | 1,220,434 | $ | 131,236 | $ | 103,339 | $ | (1,455,009 | ) | $ | 1,933,291 |
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
| Year Ended December 31, 2017 | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-Guarantor Subsidiaries | ||||||||||||||||||||||||
| Parent | Guarantor Subsidiaries | MGP | Other | Elimination | Consolidated | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Cash flows from operating activities | ||||||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | (584,252 | ) | $ | 1,152,083 | $ | 482,578 | $ | 1,156,002 | $ | — | $ | 2,206,411 | |||||||||||
| Cash flows from investing activities | ||||||||||||||||||||||||
| Capital expenditures, net of construction payable | — | (482,024 | ) | (488 | ) | (1,381,570 | ) | — | (1,864,082 | ) | ||||||||||||||
| Dispositions of property and equipment | — | 502 | — | 216 | — | 718 | ||||||||||||||||||
| Acquisition of National Harbor, net of cash acquired | — | — | (462,500 | ) | — | 462,500 | — | |||||||||||||||||
| Investments in and advances to unconsolidated affiliates | — | (16,727 | ) | — | — | — | (16,727 | ) | ||||||||||||||||
| Distributions from unconsolidated affiliates | — | 301,211 | — | — | — | 301,211 | ||||||||||||||||||
| Intercompany accounts | 462,500 | (1,186,942 | ) | — | — | 724,442 | — | |||||||||||||||||
| Other | — | (1,754 | ) | — | 42 | — | (1,712 | ) | ||||||||||||||||
| Net cash provided by (used in) investing activities | 462,500 | (1,385,734 | ) | (462,988 | ) | (1,381,312 | ) | 1,186,942 | (1,580,592 | ) | ||||||||||||||
| Cash flows from financing activities | ||||||||||||||||||||||||
| Net borrowings (repayments) under bank credit facilities - maturities of 90 days or less | 122,500 | — | (466,875 | ) | 359,376 | — | 15,001 | |||||||||||||||||
| Issuance of long-term debt | — | — | 350,000 | — | — | 350,000 | ||||||||||||||||||
| Retirement of senior notes and senior debentures | (502,669 | ) | — | — | — | — | (502,669 | ) | ||||||||||||||||
| Debt issuance costs | — | — | (5,598 | ) | (4,379 | ) | — | (9,977 | ) | |||||||||||||||
| Issuance of MGM Growth Properties Class A shares, net | — | — | 387,548 | — | — | 387,548 | ||||||||||||||||||
| Dividends paid to common shareholders | (252,014 | ) | — | — | — | — | (252,014 | ) | ||||||||||||||||
| MGP dividends paid to consolidated subsidiaries | — | — | (290,091 | ) | — | 290,091 | — | |||||||||||||||||
| Distributions to noncontrolling interest owners | — | — | (95,344 | ) | (75,058 | ) | — | (170,402 | ) | |||||||||||||||
| Purchases of common stock | (327,500 | ) | — | — | — | — | (327,500 | ) | ||||||||||||||||
| Intercompany accounts | 1,042,111 | 248,626 | — | 186,296 | (1,477,033 | ) | — | |||||||||||||||||
| Other | (33,801 | ) | (11,644 | ) | — | (13,320 | ) | — | (58,765 | ) | ||||||||||||||
| Net cash provided by (used in) financing activities | 48,627 | 236,982 | (120,360 | ) | 452,915 | (1,186,942 | ) | (568,778 | ) | |||||||||||||||
| Effect of exchange rate on cash | — | — | — | (3,627 | ) | — | (3,627 | ) | ||||||||||||||||
| Cash and cash equivalents | ||||||||||||||||||||||||
| Net increase (decrease) for the period | (73,125 | ) | 3,331 | (100,770 | ) | 223,978 | — | 53,414 | ||||||||||||||||
| Balance, beginning of period | 99,995 | 307,713 | 360,492 | 678,381 | — | 1,446,581 | ||||||||||||||||||
| Balance, end of period | $ | 26,870 | $ | 311,044 | $ | 259,722 | $ | 902,359 | $ | — | $ | 1,499,995 |
NOTE 20 — SELECTED QUARTERLY FINANCIAL RESULTS (UNAUDITED)
| Quarter | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| First | Second | Third | Fourth | Total | ||||||||||||||||
| 2019 | (In thousands, except per share data) | |||||||||||||||||||
| Net revenues | $ | 3,176,911 | $ | 3,223,243 | $ | 3,314,382 | $ | 3,185,136 | $ | 12,899,672 | ||||||||||
| Operating income | 370,260 | 371,485 | 238,381 | 2,960,089 | 3,940,215 | |||||||||||||||
| Net income | 66,157 | 76,169 | 6,104 | 2,065,950 | 2,214,380 | |||||||||||||||
| Net income (loss) attributable to MGM Resorts International | 31,297 | 43,405 | (37,133 | ) | 2,011,577 | 2,049,146 | ||||||||||||||
| Earnings (loss) per share - Basic | $ | 0.05 | $ | 0.08 | $ | (0.08 | ) | $ | 3.94 | $ | 3.90 | |||||||||
| Earnings (loss) per share - Diluted | $ | 0.05 | $ | 0.08 | $ | (0.08 | ) | $ | 3.91 | $ | 3.88 | |||||||||
| 2018 | ||||||||||||||||||||
| Net revenues | $ | 2,822,237 | $ | 2,858,695 | $ | 3,029,302 | $ | 3,052,862 | $ | 11,763,096 | ||||||||||
| Operating income | 359,757 | 363,075 | 410,903 | 335,751 | 1,469,486 | |||||||||||||||
| Net income | 266,301 | 140,423 | 171,410 | 5,760 | 583,894 | |||||||||||||||
| Net income (loss) attributable to MGM Resorts International | 223,444 | 123,777 | 142,878 | (23,327 | ) | 466,772 | ||||||||||||||
| Earnings (loss) per share - Basic | $ | 0.39 | $ | 0.21 | $ | 0.26 | $ | (0.06 | ) | $ | 0.82 | |||||||||
| Earnings (loss) per share - Diluted | $ | 0.38 | $ | 0.21 | $ | 0.26 | $ | (0.06 | ) | $ | 0.81 |
Because earnings per share amounts are calculated using the weighted average number of common and dilutive common equivalent shares outstanding during each quarter, the sum of the per share amounts for the four quarters does not equal the total earnings per share amounts for the year. The following sections list certain items affecting comparability of quarterly and year-to-date results and related impact on earnings (loss) per share - diluted. Additional information related to these items is included elsewhere in the notes to the accompanying financial statements.
Certain items affecting comparability for the year ended December 31, 2019 are as follows:
| • | First Quarter. None |
|---|
| • | Second Quarter. None |
|---|
| • | Third Quarter. The Company recorded a $219 million non-cash impairment charge ($0.33 per share in the quarter and $0.32 per share in the full year of 2019) related to the Circus Circus Las Vegas and adjacent land; and |
|---|
| • | Fourth Quarter. The Company recorded a $2.7 billion gain ($4.04 per share in the quarter and $3.95 per share in the full year of 2019) related to the sale and lease back of Bellagio. Additionally, the Company recorded loss on early retirement of debt of $142 million ($0.21 per share) in the quarter and $198 million ($0.28 per share) in the full year of 2019. |
|---|
Certain items affecting comparability for the year ended December 31, 2018 are as follows:
| • | First Quarter. The Company recorded a $72 million tax benefit ($0.13 per share in the quarter) related to a measurement period adjustment of the Tax Act; |
|---|
| • | Second Quarter. None; |
|---|
| • | Third Quarter. The Company recorded a $45 million gain ($0.07 per share in the quarter and $0.06 per share in the full year of 2018) related to the sale of Grand Victoria. Additionally, the Company recorded a $12 million gain ($0.02 per share in the quarter and full year of 2018) related to the sale of Mandarin Oriental; and |
|---|
| • | Fourth Quarter. The Company recorded business interruption insurance proceeds of $24 million ($0.04 per share in the quarter and $0.03 per share in the full year of 2018) primarily at Mandalay Bay. Additionally, the Company recorded a $92 million tax expense ($0.17 per share in the quarter) related to the Tax Act. |
|---|
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
| Balance at | Provision for | Write-offs, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Beginning of | Doubtful | Net of | Balance at | |||||||||||||
| Period | Accounts | Recoveries | End of Period | |||||||||||||
| Allowance for doubtful accounts: | ||||||||||||||||
| Year Ended December 31, 2019 | $ | 90,775 | $ | 39,270 | $ | (35,484 | ) | $ | 94,561 | |||||||
| Year Ended December 31, 2018 | 92,571 | 39,762 | (41,558 | ) | 90,775 | |||||||||||
| Year Ended December 31, 2017 | 97,920 | 20,603 | (25,952 | ) | 92,571 |
| Balance at | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Beginning of | Balance at | |||||||||||||||
| Period | Increase | Decrease | End of Period | |||||||||||||
| Deferred income tax valuation allowance: | ||||||||||||||||
| Year Ended December 31, 2019 | $ | 2,477,703 | $ | 96,353 | $ | — | $ | 2,574,056 | ||||||||
| Year Ended December 31, 2018 | 2,513,738 | — | (36,035 | ) | 2,477,703 | |||||||||||
| Year Ended December 31, 2017 | 2,583,274 | — | (69,536 | ) | 2,513,738 |
Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE