filings.toolsMGM Resorts International 10-Q 2022-09-30
Filed 2022-11-02. 7 sections, 238K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 001-10362
MGM Resorts International
(Exact name of registrant as specified in its charter)
| Delaware | 88-0215232 | ||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109
(Address of principal executive offices)
(702) 693-7120
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common stock (Par Value $0.01) | MGM | New York Stock Exchange (NYSE) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at October 31, 2022 | |||||||
| Common Stock, $0.01 par value | 384,020,296 shares |
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
FORM 10-Q
I N D E X
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
| September 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 5,295,434 | $ | 4,703,059 | |||||||
| Restricted cash | — | 500,000 | |||||||||
| Accounts receivable, net | 709,562 | 583,915 | |||||||||
| Inventories | 113,323 | 96,374 | |||||||||
| Income tax receivable | 233,496 | 273,862 | |||||||||
| Prepaid expenses and other | 406,579 | 258,972 | |||||||||
| Assets held for sale | 2,024,788 | — | |||||||||
| Total current assets | 8,783,182 | 6,416,182 | |||||||||
| Property and equipment, net | 5,089,296 | 14,435,493 | |||||||||
| Other assets | |||||||||||
| Investments in and advances to unconsolidated affiliates | 185,758 | 967,044 | |||||||||
| Goodwill | 4,945,188 | 3,480,997 | |||||||||
| Other intangible assets, net | 2,806,163 | 3,616,385 | |||||||||
| Operating lease right-of-use assets, net | 24,655,971 | 11,492,805 | |||||||||
| Other long-term assets, net | 864,664 | 490,210 | |||||||||
| Total other assets | 33,457,744 | 20,047,441 | |||||||||
| $ | 47,330,222 | $ | 40,899,116 | ||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | 403,756 | $ | 263,097 | |||||||
| Construction payable | 20,556 | 23,099 | |||||||||
| Current portion of long-term debt | 1,351,422 | 1,000,000 | |||||||||
| Accrued interest on long-term debt | 118,186 | 172,624 | |||||||||
| Other accrued liabilities | 2,047,544 | 1,983,444 | |||||||||
| Liabilities related to assets held for sale | 1,954,040 | — | |||||||||
| Total current liabilities | 5,895,504 | 3,442,264 | |||||||||
| Deferred income taxes, net | 2,847,302 | 2,439,364 | |||||||||
| Long-term debt, net | 7,209,837 | 11,770,797 | |||||||||
| Operating lease liabilities | 25,144,876 | 11,802,464 | |||||||||
| Other long-term obligations | 270,966 | 319,914 | |||||||||
| Commitments and contingencies (Note 10) | |||||||||||
| Redeemable noncontrolling interests | 137,054 | 147,547 | |||||||||
| Stockholders’ equity | |||||||||||
| Common stock, $0.01 par value: authorized 1,000,000,000 shares, issued and outstanding 388,760,930 and 453,803,759 shares | 3,888 | 4,538 | |||||||||
| Capital in excess of par value | — | 1,750,135 | |||||||||
| Retained earnings | 4,871,632 | 4,340,588 | |||||||||
| Accumulated other comprehensive loss | (33,830) | (24,616) | |||||||||
| Total MGM Resorts International stockholders’ equity | 4,841,690 | 6,070,645 | |||||||||
| Noncontrolling interests | 982,993 | 4,906,121 | |||||||||
| Total stockholders’ equity | 5,824,683 | 10,976,766 | |||||||||
| $ | 47,330,222 | $ | 40,899,116 |
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)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Casino | $ | 1,407,367 | $ | 1,400,337 | $ | 4,185,411 | $ | 3,835,094 | |||||||||||||||
| Rooms | 827,397 | 490,460 | 2,159,202 | 1,053,907 | |||||||||||||||||||
| Food and beverage | 722,982 | 416,478 | 1,893,592 | 876,556 | |||||||||||||||||||
| Entertainment, retail and other | 447,637 | 315,693 | 1,264,545 | 639,926 | |||||||||||||||||||
| Reimbursed costs | 10,689 | 84,571 | 32,519 | 217,765 | |||||||||||||||||||
| 3,416,072 | 2,707,539 | 9,535,269 | 6,623,248 | ||||||||||||||||||||
| Expenses | |||||||||||||||||||||||
| Casino | 653,601 | 640,041 | 1,950,132 | 1,808,849 | |||||||||||||||||||
| Rooms | 256,128 | 160,864 | 684,670 | 402,364 | |||||||||||||||||||
| Food and beverage | 528,966 | 301,963 | 1,377,749 | 651,349 | |||||||||||||||||||
| Entertainment, retail and other | 271,177 | 204,742 | 755,110 | 385,293 | |||||||||||||||||||
| Reimbursed costs | 10,689 | 84,571 | 32,519 | 217,765 | |||||||||||||||||||
| General and administrative | 1,212,474 | 623,275 | 3,018,076 | 1,759,891 | |||||||||||||||||||
| Corporate expense | 117,264 | 112,114 | 348,115 | 287,021 | |||||||||||||||||||
| Preopening and start-up expenses | 396 | 1,547 | 1,372 | 1,642 | |||||||||||||||||||
| Property transactions, net | (11,639) | 3,677 | 23,704 | 842 | |||||||||||||||||||
| Gain on REIT transactions, net | — | — | (2,277,747) | — | |||||||||||||||||||
| Gain on consolidation of CityCenter, net | — | (1,562,329) | — | (1,562,329) | |||||||||||||||||||
| Depreciation and amortization | 1,405,520 | 279,403 | 2,060,413 | 853,579 | |||||||||||||||||||
| 4,444,576 | 849,868 | 7,974,113 | 4,806,266 | ||||||||||||||||||||
| Income (loss) from unconsolidated affiliates | (17,467) | 35,111 | (119,888) | 92,870 | |||||||||||||||||||
| Operating income (loss) | (1,045,971) | 1,892,782 | 1,441,268 | 1,909,852 | |||||||||||||||||||
| Non-operating income (expense) | |||||||||||||||||||||||
| Interest expense, net of amounts capitalized | (125,172) | (200,049) | (457,822) | (598,116) | |||||||||||||||||||
| Non-operating items from unconsolidated affiliates | (995) | (23,421) | (22,248) | (67,473) | |||||||||||||||||||
| Other, net | (14,316) | (49,241) | (23,322) | 70,302 | |||||||||||||||||||
| (140,483) | (272,711) | (503,392) | (595,287) | ||||||||||||||||||||
| **Income (loss) before income t |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This management’s discussion and analysis of financial condition and results of operations contain forward-looking statements that involve risks and uncertainties. Please see “Cautionary Statement Concerning Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, the audited consolidated financial statements and notes for the fiscal year ended December 31, 2021, which were included in our Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods. MGM Resorts International together with its subsidiaries may be referred to as “we,” “us” or “our.” MGM China Holdings Limited together with its subsidiaries is referred to as “MGM China.” MGM Growth Properties LLC together with its subsidiaries is referred to as “MGP.”
Description of our business
Our primary business is the operation of casino resorts, which offer gaming, hotel, convention, dining, entertainment, retail and other resort amenities. We operate several of the finest casino resorts in the world and we continually reinvest in our resorts to maintain our competitive advantage. Most of our revenue is cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. We rely on the ability of our resorts to generate operating cash flow to fund capital expenditures, provide excess cash flow for future development, repay debt financings, and return capital to our shareholders. We make significant investments in our resorts through newly remodeled hotel rooms, restaurants, entertainment and nightlife offerings, as well as other new features and amenities. We also offer online gaming and sports betting through LeoVegas, our consolidated subsidiary, as well as through BetMGM, our unconsolidated affiliate.
Impact of COVID-19 - Update
As of September 30, 2022, all of our domestic properties were open and not subject to operating restrictions; however, travel and business volume were negatively affected in the early part of the first quarter of 2022 due to the spread of the omicron variant.
Macau is currently operating under a “dynamic zero” COVID-19 policy, as is mainland China. Our properties in Macau were open during the first half of 2022, however, gaming operations were temporarily suspended on July 11, 2022 due to an increase in the number of COVID-19 cases in Macau and resumed on July 23, 2022, subject to certain continuing health safeguards. On October 30, 2022, a COVID-19 case was identified as connected to MGM Cotai. All guests and staff were isolated until November 1, 2022 and all gaming, hotel, restaurant, and retail operations were suspended with limited operations expected to resume beginning November 3, 2022. More broadly, electronic applications for individual and group travel visas to Macau resumed on November 1, 2022, however, several travel and entry restrictions in Macau and mainland China remain in place, including COVID-19 testing and certain quarantine requirements, which have significantly impacted visitation to our Macau properties. Although gaming operations in Macau have resumed and certain restrictions on visa applications have been lifted, protective and operational measures have had a negative effect on MGM China’s operations. The extent and timing of further closures of MGM China’s properties, limitations of operations, or whether further travel restrictions to or from Macau will be implemented is uncertain if there is an increase or continued spread of COVID-19.
Other Developments
In April 2022, we completed the VICI Transaction in a stock-for-stock transaction. In connection with the transaction, VICI OP redeemed the majority of our VICI OP units for cash consideration of $4.4 billion, with us retaining an approximate 1% ownership interest in VICI OP. MGP’s Class B share that was previously held by us was cancelled. Accordingly, we no longer hold a controlling interest in MGP and deconsolidated MGP upon the closing of the transactions. In connection with the VICI Transaction, we entered into an amended and restated master lease with VICI. See Note 3 and Note 9 in the accompanying consolidated financial statements for discussion of the transaction and lease, respectively.
In May 2022, we acquired the operations of The Cosmopolitan for cash consideration of $1.625 billion, plus working capital adjustments for a total purchase price of approximately $1.7 billion. Additionally, we entered into a lease
agreement for the real estate assets of The Cosmopolitan. See Note 3 and Note 9 in the accompanying consolidated financial statements for discussion of the transaction and lease, respectively.
In June 2022, the Macau government enacted a new gaming law that provides for material changes to the legal form of gaming concessions in Macau, including discontinuing and prohibiting gaming subconcessions subsequent to their expiration, and also includes material changes to the rights and obligations provided for under the new gaming concessions to be awarded in the upcoming public tender, such as limiting the term of concessions to a maximum of 10 years.
As a result, we reassessed the useful life of the MGM Grand Paradise gaming subconcession intangible asset and reduced the useful life to align with the contractual term of the subconcession, which expires on December 31, 2022, thereby accelerating the recognition of amortization within our statements of operations. See Note 1 and Note 6 in the accompanying consolidated financial statements for further discussion.
Certain events relating to the loss, termination, rescission, revocation or modification of MGM Grand Paradise’s ability to game in Macau, where such events have a material adverse effect on the financial condition, business, properties, or results of operations of MGM China, taken as a whole, may result in a special put option triggering event under MGM China’s senior notes and in an event of default under MGM China’s revolving credit facilities. Management cannot provide any assurance that it will be able to obtain a gaming concession in the public tender; however, management submitted its bid on September 14, 2022, and believes that MGM Grand Paradise will be successful in obtaining a gaming concession. For a description of certain risks applicable to MGM Grand Paradise’s subconcession and related matters, refer to our Annual Report on Form 10-K for the year ended December 31, 2021 under the heading “Risk Factors– Risks Related to Our Macau Operations.”
In September 2022, we acquired LeoVegas through a tender offer at a cash price of SEK 61 per share, for a total fair value of equity interests acquired of approximately $556 million, inclusive of cash settlement of equity awards. See Note 3 in the accompanying consolidated financial statements for discussion of this transaction.
Pending Transactions
On December 13, 2021, we entered into an agreement to sell the operations of The Mirage to an affiliate of Hard Rock for cash consideration of $1.075 billion, subject to certain purchase price adjustments. Upon closing, the master lease between us and VICI will be amended to remove The Mirage and reflect a $90 million reduction in annual cash rent. See Note 3 in the accompanying consolidated financial statements for discussion of the transaction.
On June 9, 2022, we entered into an agreement to sell the operations of Gold Strike Tunica to CNE for cash consideration of $450 million, subject to certain purchase price adjustments. Upon closing, the master lease
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We incorporate by reference the information appearing under “Market Risk” in Part I, Item 2 of this Form 10-Q.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”)) were effective as of September 30, 2022 to provide reasonable assurance that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and regulations and to provide that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures. This conclusion is based on an evaluation as required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act conducted under the supervision and participation of the principal executive officer and principal financial officer along with company management.
Changes in Internal Control over Financial Reporting
In making our assessment of changes in internal controls over financial reporting as of September 30, 2022, we have excluded The Cosmopolitan from our assessment because it was acquired in the second quarter of 2022. The Cosmopolitan represented approximately 11% of our total assets at September 30, 2022 and approximately 9% and 5% of our total revenues for the three and nine months ended September 30, 2022, respectively. There were no other changes in our internal control over financial reporting during the quarter ended September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
See discussion of legal proceedings in Note 10 – Commitments and Contingencies in the accompanying consolidated financial statements.
Item 1A. Risk Factors
A description of certain factors that may affect our future results and risk factors is set forth in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to those factors previously disclosed in our 2021 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about share repurchases made by the Company of its common stock during the quarter ended September 30, 2022:
| Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program | Dollar Value of Shares that May Yet be Purchased Under the Program | ||||||||||||||||||||
| Period | (In thousands) | ||||||||||||||||||||||
| July 1, 2022 — July 31, 2022 | 5,317,032 | $ | 29.32 | 5,317,032 | $ | 978,316 | |||||||||||||||||
| August 1, 2022 — August 31, 2022 | 641,296 | $ | 34.31 | 641,296 | $ | 956,313 | |||||||||||||||||
| September 1, 2022 — September 30, 2022 | 4,044,806 | $ | 31.91 | 4,044,806 | $ | 827,257 |
The Company’s Board of Directors authorized a $2.0 billion stock repurchase plan in March 2022 and a $3.0 billion stock repurchase plan in February 2020, and, in connection with repurchases made during the nine months ended September 30, 2022, the February 2020 $3.0 billion stock repurchase plan was completed. Under the stock repurchase plans, 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 purchased 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. All shares repurchased by the Company during the quarter ended September 30, 2022 were purchased pursuant to the Company’s publicly announced stock repurchase plan and have been retired.
Item 6. Exhibits
| * | Management contract or compensatory plan or arrangement. |
Certain long-term debt instruments of our consolidated subsidiaries, under which the total amount of securities authorized does not exceed 10 percent of our consolidated assets, are not filed as exhibits to this Quarterly Report on Form 10-Q. We will furnish a copy of these agreements to the SEC upon request.
In accordance with Rule 402 of Regulation S-T, the XBRL information included in Exhibit 101 and Exhibit 104 to this Form 10-Q shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MGM Resorts International | ||||||||||||||
| Date: November 2, 2022 | By: | /s/ WILLIAM J. HORNBUCKLE | ||||||||||||
| William J. Hornbuckle | ||||||||||||||
| Chief Executive Officer and President (Principal Executive Officer) | ||||||||||||||
| Date: November 2, 2022 | /s/ JONATHAN S. HALKYARD | |||||||||||||
| Jonathan S. Halkyard | ||||||||||||||
| Chief Financial Officer and Treasurer (Principal Financial Officer) |