MGM RESORTS INTERNATIONAL This management's discussion and analysis of financial condition and results of operations contain forward-looking statements that involve risks and uncertainties. Please see "Cautionary Statement Concerning Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, the audited consolidated financial statements and notes for the fiscal year endedDecember 31, 2019 , which were included in our Form 10-K, filed with theSecurities and Exchange Commission ("SEC") onFebruary 27, 2020 . The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods.MGM Resorts International together with its subsidiaries may be referred to as "we," "us" or "our."MGM China Holdings Limited together with its subsidiaries is referred to as "MGM China ."MGM Growth Properties LLC together with its subsidiaries is referred to as "MGP."
Description of our business and key performance indicators
Our primary business is the ownership and operation of casino resorts which
offer gaming, hotel, convention, dining, entertainment, retail and other resort
amenities. We own or invest in several of the finest casino resorts in the world
and we continually reinvest in our resorts to maintain our competitive
advantage. Most of our revenue is cash-based, through customers wagering with
cash or paying for non-gaming services with cash or credit cards. We rely
heavily on the ability of our resorts to generate operating cash flow to fund
capital expenditures, provide excess cash flow for future development, repay
debt financings, and return capital to our shareholders. We make significant
investments in our resorts through newly remodeled hotel rooms, restaurants,
entertainment and nightlife offerings, as well as other new features and
amenities.
Financial Impact of COVID-19
The spread of coronavirus disease 2019 ("COVID-19") and developments surrounding
the global pandemic have had, and we expect will continue to have, a significant
impact on our business, results of operations and financial condition. In March
2020 , all of our domestic properties were temporarily closed pursuant to state
and local government requirements as a result of COVID-19. Throughout the second
and third quarter of 2020 all of our properties that were temporarily closed
re-opened to the public but are operating without certain amenities and subject
to certain occupancy limitations. Accordingly, although our properties have
re-opened, they are generating revenues that are significantly lower than
historical results. In addition, our properties may be subject to temporary,
complete, or partial shutdowns in the future due to COVID-19 related concerns.
We have also implemented certain measures to mitigate the spread of COVID-19,
including limits on the number of gaming tables allowed to operate and on the
number of seats at each table game, as well as slot machine spacing, temperature
checks, mask protection, limitations on restaurant capacity, entertainment
events and conventions as well as other measures to enforce social distancing.
Our properties in Macau resumed operations on February 20, 2020 after a 15-day
closure period and, effective July 15, 2020 , travelers from Macau to Guangdong
province are exempted from a 14-day medical observation if they test negative
for COVID-19 within seven days prior to the departure and obtain appropriate
health declarations from the Macau and Guangdong government health agencies;
however, the properties are still subject to social distancing measures,
including limitations on the number of tables allowed to operate, the number of
seats available at each table and slot machine spacing, and effective July 15,
2020 guests entering casinos are required to provide negative COVID-19 test
results and the appropriate health declaration from the Macau government health
agency. The individual visit scheme ("IVS") that permits mainland Chinese
residents to travel from Guangdong to Macau resumed on August 26, 2020 and
approval for travel from other provinces resumed on September 23, 2020 . However,
several travel and entry restrictions in Macau , Hong Kong and mainland China
remain in place (including the temporary suspension of ferry services from Hong
Kong to Macau and bans on entry or quarantine requirements for visitors that
have been to certain countries as well as Hong Kong or Taiwan in the 14 days
prior to arriving in Macau ), which may significantly impact visitation to our
Macau properties.
While we have engaged in aggressive cost reduction efforts to minimize cash
outflows while our properties were closed, and have continued to engage in such
efforts as the properties have re-opened, we still face significant fixed and
variable expenses. Our efforts include:
• reducing or deferring at least 50% of planned domestic capital expenditures
in 2020;
• reducing employee costs, including through hiring freezes, headcount
reductions and substantial furloughs of employees (which have resulted in a
number of employees being separated from us) and cancellation of merit pay
increases;
• initiating a program where certain senior executives and directors
voluntarily elected to receive all or a portion of their remaining base
salary during 2020 in the form of restricted stock units in lieu of cash;
and
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• starting with our dividend for the second quarter of 2020, our Board
approved a nominal annual dividend of $0.01 per share.
On March 27, 2020 , the Coronavirus Aid, Relief, and Economic Security Act (the
"CARES Act") was signed into law. The CARES Act provides opportunities for
additional liquidity, loan guarantees, and other government programs to support
companies affected by the COVID-19 pandemic and their employees. Based on a
preliminary analysis of the CARES Act, the benefits we expect to recognize
include:
• refund of federal income taxes due to a five-year carryback of net
operating loss incurred in 2020 when our 2020 tax return is filed, which we
estimate will result in a $150 million to $175 million refund that we
expect to receive in the second or third quarter of 2021;
• relaxation of interest expense deduction limitation for income tax
purposes, which is included in the estimate above;
• reduction of employer Federal Insurance Contributions Act ("FICA") taxes
equal to 50 percent of wages paid and health care coverage provided to
furloughed employees during 2020, which we estimate will result in
permanent savings of approximately $115 million to $120 million , and of
which $27 million and $113 million was recorded in the three and nine
months ended September 30, 2020 , respectively; and
• deferral of all employer FICA taxes from the date of enactment through
payable by
approximately $50 million to $60 million .
We intend to continue to review and consider any available potential benefits
under the CARES Act for which we qualify, including those described above. We
cannot predict the manner in which such benefits or any of the other benefits
described herein will be allocated or administered and we cannot assure you that
we will be able to access such benefits in a timely manner or at all. If the
U.S. government or any other governmental authority agrees to provide such aid
under the CARES Act or any other crisis relief assistance it may impose certain
requirements on the recipients of the aid, including restrictions on executive
officer compensation, dividends, prepayment of debt, limitations on debt and
other similar restrictions that will apply for a period of time after the aid is
repaid or redeemed in full.
In addition, we have seen and continue to expect to see weakened demand at our
properties as a result of continued domestic and international travel
restrictions or warnings, restrictions on amenity use, such as gaming,
restaurant and pool capacity limitations, consumer fears and reduced consumer
discretionary spending, general economic uncertainty, and increased rates of
unemployment. In light of the foregoing, we are unable to determine when our
properties will return to pre-pandemic demand or pricing, or if our properties
will remain re-opened, but the impact of COVID-19 will have a material impact on
our consolidated results of operations during 2020 and potentially thereafter.
Other Developments
On February 14, 2020 , we 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 venture ("MGP BREIT Venture"), owned 50.1% by the Operating
Partnership and 49.9% by a subsidiary of Blackstone Real Estate Income Trust,
Inc. ("BREIT"). In exchange for the contribution of the real estate assets, MGM
and MGP 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 us representing 5%
of the equity value of MGP BREIT Venture. In connection with the transactions,
we 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
us 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 requires us to spend 3.5% of net revenues over a rolling five-year
period at the properties on capital expenditures and for us to comply with
certain financial covenants, which, if not met, will require us 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.
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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 .
Also, on January 14, 2020 , we, the Operating Partnership , and MGP entered into
an agreement for the Operating Partnership to waive its right following the
closing of the MGP BREIT Venture Transaction to issue MGP Class A shares, in
lieu of cash, to us in connection with us exercising our right to require the
Operating Partnership to redeem the Operating Partnership units we hold, at a
price per unit equal to a 3% discount to the ten day average closing price prior
to the date of the notice of redemption. The waiver was effective upon closing
of the transaction on February 14, 2020 and terminates on the earlier of
February 14, 2022 or us receiving cash proceeds of $1.4 billion as consideration
for the redemption of the Operating Partnership units that we hold. On May 18,
2020 , the Operating Partnership redeemed approximately 30 million Operating
Partnership units that we held for $700 million .
Key Performance Indicators
Key performance indicators related to gaming and hotel revenue are:
• Gaming revenue indicators: table games drop and slots handle (volume
indicators); "win" or "hold" percentage, which is not fully controllable by
us. Historically, our normal table games hold percentage at our
Baccarat and 19.0% to 23.0% for non-Baccarat however, reduced gaming
volumes as a result of the COVID-19 pandemic could cause volatility in our
hold percentages; and
• Hotel revenue indicators - hotel occupancy (a volume indicator); averagedaily rate ("ADR," a price indicator); and revenue per available room
("REVPAR," a summary measure of hotel results, combining ADR and occupancy
rate). Our calculation of ADR, which is the average price of occupied rooms
per day, includes the impact of complimentary rooms. Complimentary room
rates are determined based on standalone selling price. Because the mix of
rooms provided on a complimentary basis, particularly to casino customers,
includes a disproportionate suite component, the composite ADR including
complimentary rooms is slightly higher than the ADR for cash rooms,
reflecting the higher retail value of suites. Rooms that were out of
service during the three and nine months ended September 30, 2020 as aresult of property closures due to the COVID-19 pandemic were excluded from
the available room count when calculating hotel occupancy and REVPAR.
Additional key performance indicators at
• Gaming revenue indicators -
of nonnegotiable chip wagers won by
chips purchased plus nonnegotiable chips exchanged less nonnegotiable chips
returned. Turnover provides a basis for measuring VIP casino win
percentage. Historically, win for VIP gaming operations at
typically in the range of 2.6% to 3.3% of turnover however, reduced gaming
volumes as a result of the COVID-19 pandemic could cause volatility in
China's hold percentages. Results of Operations Summary Financial Results
The following table summarizes our consolidated financial results for the three
and nine months ended
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
(In thousands)
Net revenues $ 1,125,920 $ 3,314,382 $ 3,668,546 $ 9,714,536
Operating income (loss) (495,182 ) 238,381 (278,866 ) 980,126
Net income (loss) (601,971 ) 6,104 (863,939 ) 148,430
Net income (loss) attributable to MGM
Resorts International (534,731 ) (37,133 ) (585,119 ) 37,569
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Summary Operating Results
During the three and nine months ended
Las Vegas Strip Resorts BellagioJune 4, 2020 MGM Grand Las Vegas June 4, 2020 New York-New York June 4, 2020 ExcaliburJune 11, 2020 LuxorJune 25, 2020 Mandalay Bay July 1, 2020 The MirageAugust 27, 2020 ParkMGM September 30, 2020 Regional Operations Gold StrikeMay 25, 2020 Beau RivageJune 1, 2020 MGM Northfield Park June 20, 2020 MGM National Harbor June 29, 2020 MGM Springfield July 13, 2020 BorgataJuly 26, 2020 MGM Grand Detroit August 7, 2020 Empire CitySeptember 21, 2020 Consolidated net revenues decreased 66% for the three months endedSeptember 30, 2020 compared to the prior year quarter due primarily to the impact of COVID-19, which included a partial quarter of operations at certain of our domestic properties, travel restrictions toMacau , including the suspension of the IVS for part of the quarter, restrictions on the number of table games allowed to operate in certain jurisdictions, and restrictions on the number of seats available at each table at both of our domestic andMacau properties, and other social distancing restrictions in place at our properties, including the number of slot machines available for use, property capacity restrictions, and venue/amenity limitations, as discussed above, which resulted in a 94% decrease in net revenues atMGM China , a 68% decrease in net revenues at ourLas Vegas Strip Resorts , and a 40% decrease in net revenues at our Regional Operations. Consolidated operating loss was$495 million for the three months endedSeptember 30, 2020 compared to consolidated operating income of$238 million in the prior year quarter, primarily driven by a decrease in net revenues discussed above and a$49 million increase in general and administrative expense, partially offset by a decrease in operating expenses as a result of cost reduction efforts during property closures, as discussed below, a$246 million decrease in property transactions, net, a$38 million decrease in corporate expense, discussed below, as well as a$28 million decrease in depreciation and amortization. General and administrative expense increased in the current quarter compared to the prior year quarter due primarily to$181 million of rent expense associated with the Bellagio lease and theMandalay Bay andMGM Grand Las Vegas lease recognized during the current quarter, partially offset by aggressive efforts to reduce expenses at our domestic resorts during property closures which primarily included a decrease in payroll expense, utilities, and advertising expense. Property transactions, net decreased in the current quarter due primarily to a$219 million non-cash impairment charge related to the long-lived assets of Circus Circus Las Vegas and the adjacent land included in the prior year quarter. The decrease in corporate expense compared to the prior year quarter is due primarily to reductions in other initiative costs. Corporate expense in the current quarter included$2 million in corporate initiatives costs compared to$15 million in costs to implement theMGM 2020 Plan, Real Estate Committee costs, and finance modernization costs in the prior year quarter. Depreciation and amortization decreased compared to the prior year quarter due primarily to the sale of theMGM Grand Las Vegas andMandalay Bay real estate assets inFebruary 2020 and the sale of the Bellagio real estate assets inNovember 2019 . 28
-------------------------------------------------------------------------------- Consolidated net revenues decreased 62% for the nine months endedSeptember 30, 2020 compared to the prior year period due primarily to the temporary suspension of our domestic andMacau casino operations, travel restrictions toMacau and other operational restrictions, as discussed above, which resulted in a 84% decrease in net revenues atMGM China , a 60% decrease in net revenues at ourLas Vegas Strip Resorts , and a 48% decrease in net revenues at our Regional Operations. Consolidated operating loss was$279 million for the nine months endedSeptember 30, 2020 compared to operating income of$980 million in the prior year period, due primarily to the impact of COVID-19, which included a decrease in net revenues discussed above, a$47 million increase in general and administrative expense, incurrence of$20 million of restructuring costs, a portion of which was recorded to corporate expense, discussed below, partially offset by a decrease in operating expenses as a result of cost reduction efforts during property closures, as discussed below, a$179 million decrease in property transactions, net, a$61 million decrease in depreciation and amortization, and a$1.5 billion gain related to the MGP BREIT Venture Transaction. General and administrative expense increased in the current year period compared to the prior year period due primarily to$497 million of rent expense associated with the Bellagio lease and theMandalay Bay andMGM Grand Las Vegas lease, largely offset by aggressive efforts to reduce expenses at our domestic resorts during property closures, which primarily related to decreases in payroll expense, utilities, and advertising expense. In addition, the prior year period included$71 million in restructuring costs related to severance and accelerated stock compensation expense associated with theMGM 2020 Plan. Corporate expense in the current year period included$49 million ofOctober 1 litigation settlement expense,$44 million of CEO transition expense,$5 million of restructuring costs, and$15 million of corporate initiatives costs. Included in the CEO transition expense is$20 million of stock compensation expense, of which approximately$13 million related to the modification and accelerated vesting of outstanding stock compensation awards. Corporate expense in the prior year period included$20 million of Empire City acquisition costs, primarily related to transfer taxes and advisory fees,$28 million of costs incurred to implement theMGM 2020 Plan, and$10 million of finance modernization initiative costs. Property transactions, net decreased in the current period compared to the prior year period. As it relates to the decrease in property transactions, net, the current year period included a$64 million other-than-temporary non-cash impairment charge on an equity method investment and the prior year period included a$219 million non-cash impairment charge related to the long-lived assets of Circus Circus Las Vegas and the adjacent land. Depreciation and amortization decreased compared to the prior year period due primarily to the sale of theMGM Grand Las Vegas andMandalay Bay real estate assets inFebruary 2020 and the sale of the Bellagio real estate assets inNovember 2019 . 29 --------------------------------------------------------------------------------
Net Revenues by Segment
The following table presents a detail by segment of net revenues:
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
(In thousands)
Las Vegas Strip Resorts
Table games win $ 107,860 $ 203,882 $ 351,889 $ 606,333
Slots win 182,788 308,780 461,784 882,058
Other 3,800 14,573 18,862 48,866
Less: Incentives (105,090 ) (190,973 ) (305,476 ) (568,108 )
Casino revenue 189,358 336,262 527,059 969,149
Rooms 137,869 469,145 526,838 1,407,733
Food and beverage 81,429 401,362 391,218 1,156,657
Entertainment, retail and other 72,762 300,679 320,920 868,441
Non-casino revenue 292,060 1,171,186 1,238,976 3,432,831
481,418 1,507,448 1,766,035 4,401,980
Regional Operations
Table games win 155,175 219,542 332,114 620,788
Slots win 426,264 627,325 968,924 1,757,386
Other 39,399 81,766 167,920 226,231
Less: Incentives (156,049 ) (267,885 ) (390,362 ) (715,553 )
Casino revenue 464,789 660,748 1,078,596 1,888,852
Rooms 34,782 90,197 94,842 243,449
Food and beverage 38,646 126,625 138,052 368,374
Entertainment, retail and other 18,609 57,448 60,260 149,241
Non-casino revenue 92,037 274,270 293,154 761,064
556,826 935,018 1,371,750 2,649,916
MGM China
VIP table games win 17,388 317,824 137,693 947,414
Main floor table games win 24,840 500,411 223,961 1,402,575
Slots win 7,653 73,102 42,727 212,984
Less: Commissions and incentives (14,584 ) (228,499 ) (105,386 ) (603,391 )
Casino revenue 35,297 662,838 298,995 1,959,582
Rooms 2,800 36,294 19,344 105,171
Food and beverage 6,240 32,214 23,451 93,836
Entertainment, retail and other 2,530 6,409 10,162 19,459
Non-casino revenue 11,570 74,917 52,957 218,466
46,867 737,755 351,952 2,178,048
Reportable segment net revenues 1,085,111 3,180,221 3,489,737 9,229,944
Corporate and other 40,809 134,161 178,809 484,592
$ 1,125,920 $ 3,314,382 $ 3,668,546 $ 9,714,536
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Las Vegas Strip Resorts Las Vegas Strip Resorts casino revenue decreased 44% for the three months endedSeptember 30, 2020 compared to the prior year quarter due primarily to a partial quarter of operations at Park MGM and The Mirage, and operational restrictions related to the pandemic, as discussed above, which resulted in decreases in table games win and slots win of 47% and 41%, respectively.Las Vegas Strip Resorts casino revenue decreased 46% for the nine months endedSeptember 30, 2020 compared to the prior year period due primarily to the temporary closure of properties, and operational restrictions related to the pandemic, as discussed above, which resulted in decreases in table games win and slots win of 42% and 48%, respectively. The following table shows key gaming statistics for ourLas Vegas Strip Resorts : Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in millions) Table Games Drop$498 $842 $1,489 $2,661 Table Games Win % 21.6% 24.2% 23.6% 22.8% Slots Handle$1,944 $3,280 $4,925 $9,458 Slots Hold % 9.4% 9.4% 9.4% 9.3%Las Vegas Strip Resorts rooms revenue decreased 71% for the three months endedSeptember 30, 2020 compared to the prior year quarter due primarily to a partial quarter of operations at Park MGM and The Mirage and a decrease in REVPAR due primarily to a decrease in occupancy as a result of operational restrictions related to the pandemic, as discussed above.Las Vegas Strip Resorts rooms revenue decreased 63% for the nine months endedSeptember 30, 2020 compared to the prior year period due primarily to the temporary closure of our properties and a decrease in REVPAR due primarily to a decrease in occupancy as a result of operational restrictions related to the pandemic, as discussed above. The following table shows key hotel statistics for ourLas Vegas Strip Resorts : Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Occupancy 44% 92% 64% 92% Average Daily Rate (ADR)(1)$139 $164 $168 $167
Revenue per
$154
(1) Rooms that were out of service during the three and nine months ended
pandemic were excluded from the available room count when calculating hotel
occupancy and REVPAR.
Las Vegas Strip Resorts food and beverage revenue decreased 80% for the three
months ended September 30, 2020 compared to the prior year quarter due primarily
to a partial quarter of operations at Park MGM and The Mirage, and capacity and
other operational restrictions related to the pandemic, as discussed above.
Las Vegas Strip Resorts food and beverage revenue decreased 66% for the nine
months ended September 30, 2020 compared to the prior year period due primarily
to the temporary closure of our properties and capacity and other operational
restrictions related to the pandemic, as discussed above.
Las Vegas Strip Resorts entertainment, retail and other revenue decreased 76%
for the three months ended September 30, 2020 compared to the prior year quarter
due primarily to a partial quarter of operations at Park MGM and The Mirage,
capacity and other operational restrictions related to the pandemic, as
discussed above, including the closure of entertainment venues, such as theaters
and nightclubs.
Las Vegas Strip Resorts entertainment, retail and other revenue decreased 63%
for the nine months ended September 30, 2020 compared to the prior year period
due primarily to the temporary closure of our properties and capacity and other
operational restrictions related to the pandemic, as discussed above.
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--------------------------------------------------------------------------------Regional Operations Regional Operations casino revenue decreased 30% for the three months endedSeptember 30, 2020 compared to the prior year quarter due primarily to a partial quarter of operations atMGM Springfield , Borgata,MGM Grand Detroit , and Empire City, which resulted in decreases in table games win and slots win of 29% and 32%, respectively. Regional Operations casino revenue decreased 43% for the nine months endedSeptember 30, 2020 compared to the prior year period due primarily to the temporary closure of our properties and other operational restrictions related to the pandemic, which resulted in decreases in table games win and slots win of 47% and 45%, respectively. The following table shows key gaming statistics for our Regional Operations: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in millions) Table Games Drop$739 $1,122 $1,641 $3,158 Table Games Win % 21.0% 19.6% 20.2% 19.7% Slots Handle$4,360 $6,666 $10,016 $18,717 Slots Hold % 9.8% 9.4% 9.7% 9.4%
Regional Operations rooms revenue decreased 61% for both the three and nine
months ended
Regional Operations food and beverage revenue decreased 69% and 63% for the
three and nine months ended
Regional Operations entertainment, retail and other revenue decreased 68% and 60% for the three and nine months endedSeptember 30, 2020 , compared to the prior year periods, respectively, due primarily to the temporary closure of our properties, and capacity and other operational restrictions, as discussed above, including the closure of certain entertainment venues, such as theaters.MGM China
The following table shows key gaming statistics for
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
(Dollars in millions)
VIP Table Games Turnover
1.9% 3.7% 2.9% 3.2%
Main Floor Table Games Drop
MGM China net revenues decreased 94% for the three months endedSeptember 30, 2020 compared to the prior year quarter due primarily to travel restrictions toMacau , including the suspension of the IVS for part of the quarter, as well as other operational restrictions related to the pandemic, as discussed above. Both VIP table games win and main floor table games win decreased 95% compared to the prior year quarter.MGM China net revenues decreased 84% for the nine months endedSeptember 30, 2020 compared to the prior year period due primarily to the suspension of operations for a 15-day period in February, travel restrictions toMacau , including the suspension of the IVS for the majority of the current year period, as well as other operational restrictions related to the pandemic, as discussed above. VIP table games win decreased 85% and main floor table games win decreased 84% compared to the prior year period. 32 --------------------------------------------------------------------------------
Corporate and other Corporate and other revenue includes revenues from other corporate operations, management services and reimbursed costs revenue primarily related to ourCityCenter management agreement. Corporate and other revenue for the nine months endedSeptember 30, 2019 included$68 million in net revenues from MGP'sNorthfield casino, which represents revenues prior to our acquisition ofMGM Northfield Park's operations from MGP onApril 1, 2019 . Reimbursed costs revenue represents reimbursement of costs, primarily payroll-related, incurred by us in connection with the provision of management services and was$32 million and$108 million for the three months endedSeptember 30, 2020 and 2019, respectively and$147 million and$331 million for the nine months endedSeptember 30, 2020 and 2019, respectively, which declined for the respective comparative periods due primarily to property closures and other operational restrictions further discussed below. See below for additional discussion of our share of operating results from unconsolidated affiliates.
Adjusted Property EBITDAR and Adjusted EBITDAR
The following table presents Adjusted Property EBITDAR and Adjusted EBITDAR.
Adjusted Property EBITDAR is our reportable segment GAAP measure, which we
utilize as the primary profit measure for our reportable segments. See Note 10 -
Segment Information in the accompanying consolidated financial statements and
"Reportable Segment GAAP measure" below for additional information. Adjusted
EBITDAR is a non-GAAP measure, discussed within "Non-GAAP measure" below.
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
(In thousands)
Las Vegas Strip Resorts $ 15,125 $ 441,281 $ 178,277 $ 1,263,271
Regional Operations 145,734 269,125 185,369 741,710
MGM China (96,446 ) 183,989 (234,724 ) 549,603
Corporate and other (113,190 ) (72,707 ) (374,769 ) (220,844 )
Adjusted EBITDAR $ (48,777 ) $ (245,847 )
Las Vegas Strip Resorts
Adjusted Property EBITDAR at our Las Vegas Strip Resorts decreased 97% and
Adjusted Property EBITDAR margin decreased to 3.1% for the three months ended
September 30, 2020 compared to 29.3% in the prior year quarter. Adjusted
Property EBITDAR decreased compared to the prior year quarter due primarily to a
decrease in gaming and non-gaming revenues resulting from the partial quarter of
operations at The Mirage and Park MGM, and other operational restrictions
related to the pandemic, partially offset by a decrease in operating expenses as
a result of cost reduction efforts.
Adjusted Property EBITDAR at our Las Vegas Strip Resorts decreased 86% and
Adjusted Property EBITDAR margin decreased to 10.1% for the nine months ended
September 30, 2020 compared to 28.7% in the prior year period. Adjusted Property
EBITDAR decreased compared to the prior year period due primarily to a decrease
in gaming and non-gaming revenues resulting from the temporary closure of our
properties, and other operational restrictions related to the pandemic,
partially offset by a decrease in operating expenses as a result of cost
reduction efforts.
Regional Operations
Adjusted Property EBITDAR at our Regional Operations decreased 46% and Adjusted
Property EBITDAR margin decreased to 26.2% for the three months ended September
30, 2020 compared to 28.8% in the prior year quarter, due primarily to a partial
quarter of operations at MGM Springfield , Borgata, MGM Grand Detroit , and Empire
City.
Adjusted Property EBITDAR at our Regional Operations decreased 75% and Adjusted
Property EBITDAR margin decreased to 13.5% for the nine months ended September
30, 2020 compared to 28.0% in the prior year period. Adjusted Property EBITDAR
decreased compared to the prior year period due primarily to a decrease in
gaming and non-gaming revenues resulting from the temporary closure of our
properties and other operational restrictions related to the pandemic, partially
offset by a decrease in operating expenses as a result of cost reduction
efforts.
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MGM China MGM China's Adjusted Property EBITDAR loss was$96 million for the three months endedSeptember 30, 2020 compared to Adjusted Property EBITDAR of$184 million in the prior year quarter due primarily to travel restrictions toMacau , including the suspension of the IVS for part of the quarter, as well as other operational restrictions related to the pandemic. The current quarter included$1 million of license fee expense compared to$13 million in the prior year quarter.MGM China's Adjusted Property EBITDAR loss was$235 million for the nine months endedSeptember 30, 2020 compared to Adjusted Property EBITDAR of$550 million in the prior year period due primarily to a decrease in casino revenues resulting from the temporary suspension of casino operations, and travel restrictions toMacau , including the suspension of the IVS for majority of the current year period, as well as other operational restrictions related to the pandemic. The current period included$6 million of license fee expense compared to$38 million in the prior year period.
Income (loss) from Unconsolidated Affiliates
The following table summarizes information related to our share of operating income (loss) from unconsolidated affiliates:
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
(In thousands)
- 97,787 -
Other (12,300 ) (3,103 ) (25,268 ) (3,705 )
$ 20,635 $ 36,214 $ 48,030 $ 101,967 On
Our share ofCityCenter's operating loss, including certain basis difference adjustments, for the three months endedSeptember 30, 2020 was$6 million compared to operating income of$39 million in the prior year quarter, primarily driven by the decrease inCityCenter's casino and non-casino revenues as a result of the operational restrictions related to the pandemic. Our share ofCityCenter's operating loss, including certain basis difference adjustments, for the nine months endedSeptember 30, 2020 was$24 million compared to operating income of$106 million in the prior year period, primarily driven by the decrease inCityCenter's casino and non-casino revenues as a result of the temporary closure, and other operational restrictions related to the pandemic. Non-operating Results Interest Expense Gross interest expense was$175 million and$216 million for the three months endedSeptember 30, 2020 and 2019, respectively. Gross interest expense was$490 million and$652 million for the nine months endedSeptember 30, 2020 and 2019, respectively. The decrease in gross interest expense when compared to the prior year periods is due primarily to the decrease in average debt outstanding under the credit facilities and senior notes due to early retirement of debt discussed below, partially offset by theMay 2020 issuance of the$750 million 6.75% senior notes due 2025, theJune 2020 issuance of theOperating Partnership's $800 million 4.625% senior notes due 2025, and theJune 2020 issuance ofMGM China's $500 million 5.25% senior notes due 2025. See Note 4 to the accompanying consolidated financial statements for additional discussion on long-term debt and see "Liquidity and Capital Resources" for additional discussion on issuances and repayments of long-term debt and other sources and uses of cash. 34 --------------------------------------------------------------------------------
Other, net Other income, net was$14 million for the quarter endedSeptember 30, 2020 compared to other expense, net of$9 million in the prior year quarter. Other expenses, net for the nine months endedSeptember 30, 2020 increased$48 million compared to the prior year period. The current year period included a$109 million loss incurred on the early retirement of debt related to our senior notes and the termination of our revolving facility, as well as an$18 million loss incurred on the early retirement of debt related to theOperating Partnership's repayment of its term loan A facility and its term loan B facility, and a$3 million net loss on theOperating Partnership's unhedged interest rate swaps, partially offset by an$8 million remeasurement gain onMGM China's U.S. dollar-denominated senior notes, and a$20 million increase in interest income resulting from an increase in cash and cash equivalents. The prior year period included a$56 million loss incurred on the early retirement of debt related to our senior notes andMGM China's term loan facility, partially offset by a$2 million remeasurement gain onMGM China's U.S. dollar-denominated senior notes. Refer to Note 4 for further discussion of our long-term debt. Income Taxes Our effective tax rate was a benefit of 11.3% on loss before income taxes for the three months endedSeptember 30, 2020 , compared to a benefit of 620.8% on loss before income taxes in the prior year quarter. Our effective tax rate was a benefit of 8.9% on loss before income taxes for the nine months endedSeptember 30, 2020 , compared to a provision of 33.9% on income before income taxes in the prior year period. The high effective tax rate in the prior year quarter was primarily due to tax benefit recognized in such quarter on the$219 million non-cash impairment charge related to Circus Circus Las Vegas and adjacent land. The effective rate for the nine months endedSeptember 30, 2020 was unfavorably impacted by tax expense recorded on the MGP BREIT Venture Transaction and adjustments to valuation allowances forMacau deferred tax assets and foreign tax credits, while the prior year period was unfavorably impacted by the remeasurement ofMacau deferred taxes due to the extension of the subconcession agreement inMacau , the recording of deferred state taxes resulting from the Empire City acquisition and adjustments to our foreign tax credit valuation allowance, partially offset byMacau deferred tax benefit as well as tax benefit resulting from the Circus Circus Las Vegas and adjacent land.
The annual effective tax rate calculation for all periods is impacted by assumptions made regarding projected foreign tax credit usage and valuation allowance. See Note 5 in the accompanying consolidated financial statements for further discussion.
Reportable segment GAAP measure
"Adjusted Property EBITDAR" is our reportable segment GAAP measure, which we utilize as the primary profit measure for our reportable segments and underlying operating segments. Adjusted Property EBITDAR is a measure defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, gain on REIT transactions, net, restructuring costs (which represents costs related to severance, accelerated stock compensation expense, and consulting fees directly related to the operating model component of theMGM 2020 Plan), rent expense associated with triple-net operating and ground leases, income from unconsolidated affiliates related to investments in real estate ventures, property transactions, net, and also excludes corporate expense and stock compensation expense, which are not allocated to each operating segment, and rent expense related to the master lease with MGP that eliminates in consolidation. We manage capital allocation, tax planning, stock compensation, and financing decisions at the corporate level. "Adjusted Property EBITDAR margin" is Adjusted Property EBITDAR divided by related segment net revenues.
Non-GAAP measure
"Adjusted EBITDAR" is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, gain on REIT transactions, net, CEO transition expense,October 1 litigation settlement, restructuring costs (which represents costs related to severance, accelerated stock compensation expense, and consulting fees directly related to the operating model component of theMGM 2020 Plan), rent expense associated with triple-net operating and ground leases, income from unconsolidated affiliates related to investments in real estate ventures, and property transactions, net. Adjusted EBITDAR information is a valuation metric, should not be used as an operating metric, and is presented solely as a supplemental disclosure to reported GAAP measures because we believe this measure is widely used by analysts, lenders, financial institutions, and investors as a principal basis for the valuation of gaming companies. We believe that while items excluded from Adjusted EBITDAR may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends. Also, we believe excluded items may not relate specifically to current trends or be indicative of future results. For example, preopening and start-up expenses will be significantly different in periods when we are developing and constructing a major expansion project and will depend on where the current period lies within the development cycle, as well as the size and scope of the project(s). Property transactions, net includes normal recurring disposals, gains and losses on sales of assets related to specific assets within our resorts, but also includes gains or losses on sales of an entire operating resort or a group of resorts and impairment charges on entire asset groups or investments in unconsolidated affiliates, which 35 -------------------------------------------------------------------------------- may not be comparable period over period. In addition, we changed our non-GAAP measure, as a result of the Bellagio real estate transaction in the fourth quarter of 2019, to exclude rent expense associated with triple-net operating leases and ground leases. We believe excluding rent expense associated with triple-net operating leases and ground leases provides useful information to analysts, lenders, financial institutions, and investors when valuing us, as well as comparing our results to other gaming companies, without regard to differences in capital structure and leasing arrangements since the operations of other gaming companies may or may not include triple-net operating leases or ground leases. However, as discussed herein, Adjusted EBITDAR should not be viewed as a measure of overall operating performance, considered in isolation, or as an alternative to net income, because this measure is not presented on a GAAP basis and exclude certain expenses, including the rent expense associated with our triple-net operating and ground leases, and are provided for the limited purposes discussed herein. Adjusted EBITDAR should not be construed as an alternative to operating income or net income, as an indicator of our performance; or as an alternative to cash flows from operating activities, as a measure of liquidity; or as any other measure determined in accordance with generally accepted accounting principles. We have significant uses of cash flows, including capital expenditures, interest payments, taxes, real estate triple-net lease and ground lease payments, and debt principal repayments, which are not reflected in Adjusted EBITDAR. Also, other companies in the gaming and hospitality industries that report Adjusted EBITDAR information may calculate Adjusted EBITDAR in a different manner and such differences may be material.
The following table presents a reconciliation of net income (loss) attributable
to
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
(In thousands)
Net income (loss) attributable to MGM
Resorts International $ (534,731 ) $ (37,133 ) $ (585,119 ) $ 37,569
Plus: Net income (loss) attributable to
noncontrolling interests (67,240 ) 43,237 (278,820 ) 110,861
Net income (loss) (601,971 ) 6,104 (863,939 ) 148,430
Provision (benefit) for income taxes (76,734 ) (7,276 ) (84,668 ) 75,969
Income (loss) before income taxes (678,705 ) (1,172 ) (948,607 ) 224,399
Non-operating (income) expense
Interest expense, net of amounts capitalized 173,808 215,503 487,701 647,452
Non-operating items from unconsolidated
affiliates 23,604 14,669 79,986 54,311
Other, net (13,889 ) 9,381 102,054 53,964
183,523 239,553 669,741 755,727
Operating income (loss) (495,182 ) 238,381 (278,866 ) 980,126
Preopening and start-up expenses 11 925 51 5,091
Property transactions, net 4,116 249,858 85,440 264,424
Gain on REIT transactions, net - - (1,491,945 ) -
Depreciation and amortization 294,363 322,009 911,859 973,211
CEO transition expense - - 44,401 -
October 1 litigation settlement - - 49,000 -
Restructuring - 2,491 19,882 86,579
Triple-net operating lease and ground lease
rent expense 189,602 8,024 521,087 24,309
Income from unconsolidated affiliates
related to real estate ventures (41,687 ) - (106,756 ) -
Adjusted EBITDAR $ (48,777 ) $ (245,847 ) Guarantor Financial Information
As ofSeptember 30, 2020 , all of our principal debt arrangements are guaranteed by each of our wholly owned material domestic subsidiaries that guarantee our senior credit facility. Our principal debt arrangements are not guaranteed by MGP, theOperating Partnership ,MGM Grand Detroit ,MGM National Harbor ,MGM Springfield , and each of their respective subsidiaries. Our foreign subsidiaries, includingMGM China and its subsidiaries, are also not guarantors of our principal debt arrangements. In the event that any subsidiary is no longer a guarantor of our credit facility or any of our future capital markets indebtedness, that subsidiary will be released and relieved of its obligations to guarantee our existing senior notes. The indentures governing the senior notes further provide that in the event of a sale of all or substantially all of the assets of, or capital stock in a subsidiary guarantor then such subsidiary guarantor will be released and relieved of any obligations under its subsidiary guarantee. 36
-------------------------------------------------------------------------------- The guarantees provided by the subsidiary guarantors rank senior in right of payment to any future subordinated debt of ours or such subsidiary guarantors, junior to any secured indebtedness to the extent of the value of the assets securing such debt and effectively subordinated to any indebtedness and other obligations of our subsidiaries that do not guaranty the senior notes. In addition, the obligations of each subsidiary guarantor under its guarantee is limited so as not to constitute a fraudulent conveyance under applicable law, which may eliminate the subsidiary guarantor's obligations or reduce such obligations to an amount that effectively makes the subsidiary guarantee lack value. The summarized financial information of us and our guarantor subsidiaries, on a combined basis, is presented below. Certain of our guarantor subsidiaries collectively ownOperating Partnership units and each subsidiary accounts for its respective investment under the equity method within the summarized financial information presented below. These subsidiaries have also accounted for the MGP master lease as an operating lease, recording operating lease liabilities and operating ROU assets with the related rent expense of guarantor subsidiaries reflected within the summarized financial information. September 30, December 31, 2020 2019 Balance Sheet (In thousand) Current assets$ 4,847,259 $ 3,013,995 Investment in the MGP Operating Partnership 1,954,300
2,738,897
Intercompany accounts due from non-guarantor subsidiaries 86,608
40,368
MGP master lease right-of-use asset, net 6,739,073
8,479,721
Other long-term assets 12,408,304
9,477,605
MGP master lease operating lease liabilities - current 148,427
165,656
Other current liabilities 1,919,084
2,278,445
MGP master lease operating lease liabilities -
noncurrent 7,224,761 8,960,267
Other long-term liabilities 15,633,034 10,858,422
Nine Months Ended
September 30,
2020
Income Statement (In thousand)
Net revenues $ 2,672,499
MGP master lease rent expense (484,987 )
Operating income 194,206
Loss from continuing operations (61,203 )
Net income 40,134
Net income attributable to MGM Resorts International 40,134
Liquidity and Capital Resources
Cash Flows Operating activities. Trends in our operating cash flows tend to follow trends in operating income, excluding non-cash charges, but can be affected by changes in working capital, the timing of significant interest payments, tax payments or refunds, and distributions from unconsolidated affiliates. Cash used in operating activities was$1.2 billion in the nine months endedSeptember 30, 2020 compared to cash provided by operating activities of$1.4 billion in the nine months endedSeptember 30, 2019 . Operating cash flows were significantly negatively impacted by the temporary suspension of our operations, travel restrictions toMacau and other operational restrictions resulting from the COVID-19 pandemic, as discussed above, and triple-net operating lease rent payments, partially offset by an increase in distributions from unconsolidated affiliates primarily received from the MGP BREIT Venture and a decrease in cash paid for interest, as discussed in "Non-operating Results". In addition to the decrease in our operating results across all properties, the current year period was negatively affected by a change in working capital primarily related to non-gaming deposits, gaming taxes and other gaming liabilities, and payroll related liabilities. The prior year period was also negatively affected by a change in working capital, primarily related to gaming deposits. Investing activities. Our investing cash flows can fluctuate significantly from year to year depending on our decisions with respect to strategic capital investments in new or existing resorts, business acquisitions or dispositions, and the timing of maintenance capital expenditures to maintain the quality of our resorts. Capital expenditures related to regular investments in our existing resorts can also vary depending on timing of larger remodel projects related to our public spaces and hotel rooms. 37 -------------------------------------------------------------------------------- Cash provided by investing activities was$2.3 billion in the nine months endedSeptember 30, 2020 compared to cash used in investing activities of$1.0 billion in the nine months endedSeptember 30, 2019 . The change was due primarily to$2.5 billion in net cash proceeds from the sale of the real estate ofMandalay Bay andMGM Grand Las Vegas in the current year compared to an outflow of$536 million for the Empire City acquisition in the prior year and a decrease of$305 million in capital expenditures, partially offset by a$36 million decrease in distributions from unconsolidated affiliates. In the current year period, distributions from unconsolidated affiliates included$51 million related to our share of a distribution received fromCityCenter . In the prior year period, distributions from unconsolidated affiliates included$90 million related to our share of a distribution received fromCityCenter . The decrease in capital expenditures primarily reflects our efforts to reduce or defer planned domestic capital expenditures as we mitigate the impact of the COVID-19 pandemic on our liquidity and the substantial completion of ourMGM Springfield development project, the rebranding at Park MGM, and the expansion of the convention center atMGM Grand Las Vegas in the prior year, as discussed in further detail below. Capital Expenditures We made capital expenditures of$178 million in the nine months endedSeptember 30, 2020 , of which$77 million related toMGM China . Capital expenditures atMGM China included$67 million primarily related to construction close-out and projects atMGM Cotai and$10 million related to projects atMGM Macau . Capital expenditures at ourLas Vegas Strip Resorts , Regional Operations and corporate entities of$101 million included expenditures relating to information technology, health and safety initiatives, and various room, restaurant, and entertainment venue remodels. We made capital expenditures of$483 million in the nine months endedSeptember 30, 2019 , of which$83 million related toMGM China . Capital expenditures atMGM China included$63 million related to projects atMGM Cotai and$20 million related to projects atMGM Macau . Capital expenditures at ourLas Vegas Strip Resorts , Regional Operations and corporate entities of$400 million included$43 million related to the construction ofMGM Springfield ,$43 million related to the Park MGM rebranding project, as well as expenditures relating to information technology, the expansion of the convention center atMGM Grand Las Vegas and various room, restaurant, and entertainment venue remodels. Financing activities. Cash provided by financing activities was$1.2 billion in the nine months endedSeptember 30, 2020 compared to cash used in financing activities of$620 million in the nine months endedSeptember 30, 2019 . In the nine months endedSeptember 30, 2020 , we received net proceeds from the incurrence of the bridge loan facility in connection with the MGP BREIT Venture Transaction of$1.3 billion , net proceeds of$525 million from MGP's Class A share issuances, net debt borrowings of$132 million , as further discussed below, repurchased$354 million of our common stock, distributed$220 million to noncontrolling interest owners, and paid$76 million in dividends to our shareholders. In comparison, in the prior year period, we repaid net debt of$221 million , had net proceeds from MGP's issuance of Class A shares of$700 million , repurchased$639 million of our common stock, distributed$172 million to noncontrolling interest owners, and paid$205 million in dividends to our shareholders.
Borrowings and Repayments of Long-term Debt
During the nine months endedSeptember 30, 2020 , we had net proceeds from the incurrence of the bridge loan facility in connection with the MGP BREIT Venture Transaction of$1.3 billion and net debt borrowings of$132 million , which consisted of our net borrowings of$550 million on our senior credit facility, our issuance of$750 million of 6.75% senior notes, theOperating Partnership's issuance of$800 million of 4.625% senior notes, andMGM China's issuance of$500 million of 5.25% senior notes, partially offset by the tender of$750 million of our senior notes and corresponding$97 million of tender offer costs, the net repayment of$13 million onMGM China's credit facility, and the net repayment of$1.6 billion on theOperating Partnership's senior credit facility consisting of the repayment of$1.3 billion of its term loan B facility in full using the proceeds of the$1.3 billion bridge loan facility, which was then assumed by the MGP BREIT Venture the repayment of its$399 million term loan A facility in full using the net proceeds from MGP's settlement of forward equity agreements, offset by a net draw of$100 million on its revolving credit facility. InMarch 2020 , with certain of the proceeds from the MGP BREIT Venture Transaction, we completed cash tender offers for an aggregate amount of$750 million of our senior notes, comprised of$325 million principal amount of our outstanding 5.75% senior notes due 2025,$100 million principal amount of our outstanding 4.625% senior notes due 2026, and$325 million principal amount of our outstanding 5.5% senior notes due 2027.
In
InJune 2020 , theOperating Partnership issued$800 million in aggregate principal amount of 4.625% senior notes due 2025. The proceeds were used to repay borrowings on theOperating Partnership's senior credit facility, which were used to fund the redemption of$700 million ofOperating Partnership units by theOperating Partnership for cash. 38 -------------------------------------------------------------------------------- InJune 2020 ,MGM China issued$500 million in aggregate principal amount of 5.25% senior notes due 2025. The proceeds were used to partially repay amounts outstanding under theMGM China credit facility and for general corporate purposes. During the nine months endedSeptember 30, 2019 , we repaid net debt of$221 million which consisted of the repayment of our$850 million 8.625% notes due 2019, the repayment of an aggregate$872 million of our senior notes pursuant to cash tender offers,$1.7 billion of net repayments on the previousMGM China senior secured credit facility, and$567 million of net repayments on theOperating Partnership's senior credit facility, partially offset by our issuance of$1.0 billion of senior notes, theOperating Partnership's issuance of$750 million of senior notes,MGM China's issuance of$1.5 billion of senior notes, and$510 million of net borrowings on our senior credit facility. Additionally, inApril 2019 , we issued$1.0 billion in aggregate principal amount of 5.50% senior notes due 2027. We used the net proceeds from the offering to fund the purchase of$639 million in aggregate principal amount of our outstanding 6.75% senior notes due 2020 and$233 million in aggregate principal amount of our outstanding 5.25% senior notes due 2020 through our cash tender offers. InMay 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 and used the proceeds to permanently repay approximately$1.0 billion on its term loan facility with the remainder used to pay down its revolving credit facility. InAugust 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 senior secured credit facility. The proceeds from theOperating Partnership's issuance of$750 million 5.75% senior notes due 2027 along with the proceeds from MGP's Class A share issuance were primarily used to finance MGP's acquisition of the real property associated with Empire City, finance the Park MGM transaction, and repay amounts drawn under theOperating Partnership's revolving credit facility. The draws under our senior credit facility were primarily used to repay our senior notes due 2019, partially finance our acquisition of Empire City, pay dividends, and repurchase shares of our common stock. Additionally, we paid$63 million of debt issuance costs related to the issuance of theOperating Partnership's senior notes, our senior notes, andMGM China's senior notes.
Dividends, Distributions to Noncontrolling Interest Owners and Share Repurchases
During the nine months endedSeptember 30, 2020 , we repurchased and retired$354 million of our common stock pursuant to our current$2.0 billion stock repurchase plan. During the nine months endedSeptember 30, 2019 , we repurchased and retired$639 million of our common stock pursuant to our$2.0 billion stock repurchase plan. The remaining availability under our$2.0 billion stock repurchase program was approximately$4 million as ofSeptember 30, 2020 , and the remaining availability under the$3.0 billion stock repurchase program was$3.0 billion as ofSeptember 30, 2020 . InMarch 2020 , we paid a dividend of$0.15 per share, and inJune 2020 andSeptember 2020 , we paid dividends of$0.0025 per share, totaling$76 million paid during the nine months endedSeptember 30, 2020 . InMarch 2019 ,June 2019 andSeptember 2019 , we paid dividends of$0.13 per share, totaling$205 million paid during the nine months endedSeptember 30, 2019 . InJune 2020 ,MGM China paid the final dividend for 2019 of$41 million , of which we received$23 million and noncontrolling interests received$18 million . InJune 2019 ,MGM China paid the final dividend for 2018 of$16 million , of which we received$9 million and noncontrolling interests received$7 million . InAugust 2019 ,MGM China paid an interim dividend for 2019 of$46 million , of which we received$25 million and noncontrolling interests received$20 million .
• $454 million of distributions paid in 2020, of which we received $274
million and MGP received $180 million , which MGP concurrently paid as a
dividend to its Class A shareholders; and
•
million and MGP received
dividend to its Class A shareholders.
Other Factors Affecting Liquidity and Anticipated Uses of Cash
We require a certain amount of cash on hand to operate our resorts. In addition to required cash on hand for operations, we utilize corporate cash management procedures to minimize the amount of cash held on hand or in banks. Funds are swept from the accounts at most of our domestic resorts daily into central bank accounts, and excess funds are invested overnight or are used to repay amounts drawn under our revolving credit facility. In addition, from time to time we may use excess funds to repurchase our outstanding debt and equity securities subject to limitations in our revolving credit facility andDelaware law, as applicable. We have significant outstanding debt, interest payments, rent payments, and contractual obligations in addition to planned capital expenditures. 39
-------------------------------------------------------------------------------- As previously discussed, the spread of COVID-19 and developments surrounding the global pandemic have had, and we expect will continue to have, a significant impact on our business, results of operations, and financial conditions. During this time, we have remained committed to managing our expenses to strengthen our liquidity position. As ofSeptember 30, 2020 , we had cash and cash equivalents of$4.6 billion , of whichMGM China held$396 million and theOperating Partnership held$655 million . In addition to our cash and cash equivalent balance, we have significant real estate assets and other holdings: we ownMGM Springfield , a 50% interest inCityCenter inLas Vegas , an approximate 56% interest inMGM China , and a 56.7% economic interest in MGP. We have also entered into an agreement with MGP to redeem for cash for up to$1.4 billion of MGP's operating partnership units held by us, under which we have$700 million remaining. AtSeptember 30, 2020 , we had$11.5 billion in principal amount of indebtedness, including$550 million outstanding under our$1.5 billion revolving credit facility,$100 million outstanding under the$1.35 billion Operating Partnership revolving credit facility, and$654 million outstanding under the$1.25 billion MGM China revolving credit facility. No amounts were drawn on the$400 million MGM China second revolving credit facility. We have no debt maturing prior to 2022. Subsequent toSeptember 30, 2020 , inOctober 2020 , we issued$750 million in aggregate principal amount of 4.75% senior notes due 2028. The proceeds will be used for general corporate purposes, which included repaying the$550 million outstanding under our senior credit facility in full. We have planned capital expenditures expected over the remainder of the year of approximately$60 million to$70 million domestically and approximately$35 million to$45 million atMGM China . We also plan to invest approximately$145 million in our venture,BetMGM, LLC , over the next twelve months. As ofSeptember 30, 2020 , our expected cash interest payments over the next twelve months are approximately$335 million to$340 million , excluding MGP andMGM China , and approximately$680 million to$690 million on a consolidated basis. We are also required as ofSeptember 30, 2020 to make annual rent payments of$828 million under the master lease with MGP, annual rent payments of$245 million under the lease with Bellagio BREIT Venture, and annual rent payments of$292 million under the lease with MGP BREIT Venture, which leases are also subject to annual escalators. InApril 2020 , we amended our credit facility to provide us with certain relief from the effects of the COVID-19 pandemic. The amendment provides us a waiver of the financial maintenance covenants for the period beginning with the quarter endingJune 30, 2020 through the earlier of (x) the date we deliver to the administrative agent a compliance certificate with respect to the quarter endingJune 30, 2021 and (y) the date we deliver to the administrative agent an irrevocable notice terminating the covenant relief period (such period, the "covenant relief period"). In connection with the amendment, we pledged theOperating Partnership units held by loan parties to the lenders as collateral. We also agreed to certain limitations including, among other things, further restricting our ability to incur debt and liens, make restricted payments, make investments and prepay subordinated debt. In addition, in connection with the amendment, we agreed to a liquidity test that requires our borrower group (as defined in the credit agreement) to maintain a minimum liquidity level of not less than$600 million (including unrestricted cash, cash equivalents and availability under the revolving credit facility), tested at the end of each month during the covenant relief period. Additionally, due to the continued impact of the COVID-19 pandemic, inApril 2020 ,MGM China entered into an amendment to its credit agreement, which provided for a waiver of its maximum leverage ratio through the second quarter of 2021, and a waiver of its minimum interest coverage ratio beginning in the second quarter of 2020 through the second quarter of 2021. InOctober 2020 ,MGM China further amended its credit agreement to provide for a waiver of its maximum leverage ratio and its minimum interest coverage ratio through the fourth quarter of 2021. Also, inOctober 2020 ,MGM China entered into an amendment of its second credit facility which provided for a waiver of its maximum leverage ratio and its minimum interest coverage ratio through the fourth quarter of 2021. InOctober 2020 , theOperating Partnership paid$148 million of distributions to its partnership unit holders, of which we received$84 million and MGP received$64 million , which MGP concurrently paid as a dividend to its Class A shareholders. OnOctober 29, 2020 , our Board of Directors approved a quarterly dividend of$0.0025 per share. The dividend will be payable onDecember 15, 2020 to holders of record onDecember 10, 2020 . Future determinations regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our results of operations, financial condition, and other factors that our Board of Directors may deem relevant. As previously discussed, the COVID-19 pandemic has caused, and is continuing to cause, significant economic disruption both globally and inthe United States , and will continue to impact our business, financial condition and results of operations. We cannot predict the degree, or duration, to which our operations will be affected by the COVID-19 outbreak, and the effects could be material. While we believe our strong liquidity position, valuable real estate assets and aggressive cost reduction initiatives will enable us to fund our current obligations for the foreseeable future, COVID-19 has resulted in significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future. We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to further adjust our operating plan, including the implementation or extension of new or existing restrictions, which may include the reinstatement of stay-at-home orders in the jurisdictions in which we operate or additional restrictions on travel and/or our business operations. Because the situation is ongoing, and because the duration and severity remain unclear, it is difficult to forecast any impacts on our future results. 40 --------------------------------------------------------------------------------
Critical Accounting Policies and Estimates
A complete discussion of our critical accounting policies and estimates is
included in our Form 10-K for the fiscal year ended
In response to the COVID-19 pandemic and the corresponding significant economic and operational disruption discussed elsewhere, we considered whether circumstances triggered a quantitative review of our goodwill and indefinite-lived intangible assets. We considered the results of our 2019 impairment analysis in which we concluded, for those tested qualitatively, that it was more likely than not that the fair values of our reporting units and indefinite-lived intangibles exceeded their carrying values by a substantial margin and, for those tested quantitatively, that the fair value exceeded carrying value by a substantial margin. We also considered our current market capitalization which indicates a decline in fair values since the 2019 impairment analysis, however, the carrying values of our reporting units continue to be less than the corresponding implied fair values. As ofSeptember 30, 2020 , we continue to conclude that it is more-likely-than-not that the fair values continue to exceed carrying values and, accordingly, an interim quantitative impairment review of our goodwill and indefinite-lived intangible assets was not triggered. However, management makes significant judgments and estimates as part of these analyses. If our properties operations do not return to normal operations in the forecasted time period, or if such properties will be required to close again due to the COVID-19 pandemic, it could cause carrying values of the intangibles to exceed their fair values in future periods, potentially resulting in an impairment charge. In addition, the determination of multiples, capitalization rates and the discount rates used in the impairment tests are highly judgmental and dependent in large part on expectations of future market conditions.
Market Risk
In addition to the inherent risks associated with our normal operations, we are also exposed to additional market risks. Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. Our primary exposure to market risk is interest rate risk associated with our variable rate long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed rate borrowings and short-term borrowings under our bank credit facilities and by utilizing interest rate swap agreements that provide for a fixed interest payment on theOperating Partnership's credit facility. A change in interest rates generally does not have an impact upon our future earnings and cash flow for fixed-rate debt instruments. As fixed-rate debt matures, however, and if additional debt is acquired to fund the debt repayment, future earnings and cash flow may be affected by changes in interest rates. This effect would be realized in the periods subsequent to the periods when the debt matures. We do not hold or issue financial instruments for trading purposes and do not enter into derivative transactions that would be considered speculative positions. As ofSeptember 30, 2020 , variable rate borrowings represented approximately 10% of our total borrowings after giving effect on theOperating Partnership's borrowings for the currently effective interest rate swap agreements on which theOperating Partnership pays a weighted average of 1.821% on a total notional amount of$1.9 billion . Additionally, theOperating Partnership has$900 million of notional amount of forward starting swaps that are not currently effective. The following table provides additional information about our gross long-term debt subject to changes in interest rates excluding the effect of theOperating Partnership interest rate swaps discussed above: Fair Value Debt maturing in September 30, 2020 2021 2022 2023 2024 Thereafter Total 2020 (In millions)
Fixed-rate $ - $ -
$ 6,151 $ 10,201 $ 10,556 Average interest rate N/A N/A 7.8 % 6.0 % 5.5 % 5.4 % 5.7 % Variable rate $ - $ - $ -$ 100 $ 654 $ 550 $ 1,304 $ 1,304 Average interest rate N/A N/A N/A 1.9 % 3.2 % 2.8 % 2.9 % In addition to the risk associated with our variable interest rate debt, we are also exposed to risks related to changes in foreign currency exchange rates, mainly related toMGM China and to our operations atMGM Macau andMGM Cotai . While recent fluctuations in exchange rates have not been significant, potential changes in policy by governments or fluctuations in the economies ofthe United States ,China ,Macau orHong Kong could cause variability in these exchange rates. We cannot assure you that theHong Kong dollar will continue to be pegged to theU.S. dollar or the current peg rate for theHong Kong dollar will remain at the same level. The possible changes to the peg of theHong Kong dollar may result in severe fluctuations in the exchange rate thereof. ForU.S. dollar denominated debt incurred byMGM China , fluctuations in the exchange rates of theHong Kong dollar in relation to theU.S. dollar could have adverse effects on our financial position and results of operations. As ofSeptember 30, 2020 , a 1% weakening of theHong Kong dollar (the functional currency ofMGM China ) to theU.S. dollar would result in a foreign currency transaction loss of$20 million . 41
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Cautionary Statement Concerning Forward-Looking Statements
This Form 10-Q contains "forward-looking statements" within the meaning of theU.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "will," "may" and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make regarding the impact of COVID-19 on our business, our ability to reduce expenses and otherwise maintain our liquidity position during the pandemic, our ability to generate significant cash flow and execute on ongoing and future strategic initiatives, including the development of an integrated resort inJapan and investments we make in sports betting and iGaming, amounts we will spend on capital expenditures and investments, our expectations with respect to future share repurchases and cash dividends on our common stock, dividends and distributions we will receive fromMGM China , theOperating Partnership orCityCenter , our ability to deliver on ourMGM 2020 Plan, any benefits we expect to receive from the CARES Act, and amounts projected to be realized as deferred tax assets. The foregoing is not a complete list of all forward-looking statements we make. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Therefore, we caution you against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, regional, national or global political, economic, business, competitive, market, and regulatory conditions and the following:
• the global COVID-19 pandemic has materially impacted our business,
financial results and liquidity, and such impact could worsen and last for
an unknown period of time;
• although our properties have re-opened to the public, they are operating
without certain amenities and subject to certain occupancy limitations, and
we are unable to predict the length of time it will take for the re-opened
properties to return to normal operations or if such properties will be
required to close again due to the COVID-19 pandemic;
• we have undertaken aggressive actions to reduce costs and improveefficiencies to mitigate losses as a result of the COVID-19 pandemic, which
could negatively impact guest loyalty and our ability to attract and retain
employees;
• current and future economic, capital and credit market conditions could
adversely affect our ability to service our substantial indebtedness and
significant financial commitments, including the fixed components of our
rent payments, and to make planned expenditures;
• our substantial indebtedness and significant financial commitments,
including the fixed component of our rent payments to MGP, rent payments to
the Bellagio BREIT Venture and to the MGP BREIT Venture, and guarantees we
provide of the indebtedness of the Bellagio BREIT Venture and the MGP BREIT
Venture could adversely affect our development options and financial
results and impact our ability to satisfy our obligations;
• restrictions and limitations in the agreements governing our senior credit
facility and other senior indebtedness could significantly affect our
ability to operate our business, as well as significantly affect our
liquidity;
• the fact that we are required to pay a significant portion of our cash
flows as rent, which could adversely affect our ability to fund our
operations and growth, service our indebtedness and limit our ability to
react to competitive and economic changes;
• significant competition we face with respect to destination travel
locations generally and with respect to our peers in the industries in
which we compete;
• the fact that our businesses are subject to extensive regulation and the
cost of compliance or failure to comply with such regulations could
adversely affect our business;
• the impact on our business of economic and market conditions in the
jurisdictions in which we operate and in the locations in which our
customers reside;
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• the possibility that we may not realize all of the anticipated benefits of
our
• the fact that our ability to pay ongoing regular dividends is subject to
the discretion of our board of directors and certain other limitations;
• nearly all of our domestic gaming facilities are leased and could
experience risks associated with leased property, including risks relating
to lease termination, lease extensions, charges and our relationship with
the lessor, which could have a material adverse effect on our business,
financial position or results of operations;
• financial, operational, regulatory or other potential challenges that may
arise with respect to MGP, as the lessor for a significant portion of our
properties, may adversely impair our operations;
• the fact that MGP has adopted a policy under which certain transactions
with us, including transactions involving consideration in excess of
million, must be approved in accordance with certain specified procedures;
• restrictions on our ability to have any interest or involvement in gaming
businesses in China , Macau , Hong Kong and Taiwan , other than through MGM
China ;
• the ability of the
subconcession under certain circumstances without compensating MGM Grand
Paradise, exercise its redemption right with respect to the subconcession,
or refuse to grant
2022;
• the dependence of MGM Grand Paradise upon gaming promoters for a
significant portion of gaming revenues in Macau ;
• changes to fiscal and tax policies;
• our ability to recognize our foreign tax credit deferred tax asset and the
variability of the valuation allowance we may apply against such deferred
tax asset;
• extreme weather conditions or climate change may cause property damage or
interrupt business;
• the concentration of a significant number of our major gaming resorts on
the Las Vegas Strip;
• the fact that we extend credit to a large portion of our customers and we
may not be able to collect such gaming receivables;
• the potential occurrence of impairments to goodwill, indefinite-lived
intangible assets or long-lived assets which could negatively affect future
profits;
• the susceptibility of leisure and business travel, especially travel by
air, to global geopolitical events, such as terrorist attacks, other acts
of violence, acts of war or hostility or outbreaks of infectious disease
(including the COVID-19 pandemic);
• the fact that co-investing in properties, including our investment in
CityCenter , decreases our ability to manage risk;
• the fact that future construction, development, or expansion projects will
be subject to significant development and construction risks;
• the fact that our insurance coverage may not be adequate to cover all
possible losses that our properties could suffer, our insurance costs may
increase and we may not be able to obtain similar insurance coverage in the
future;
• the fact that a failure to protect our trademarks could have a negative
impact on the value of our brand names and adversely affect our business;
• the risks associated with doing business outside of
the impact of any potential violations of the Foreign Corrupt Practices Act
or other similar anti-corruption laws;
• risks related to pending claims that have been, or future claims that may
be brought against us;
• the fact that a significant portion of our labor force is covered by
collective bargaining agreements;
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• the sensitivity of our business to energy prices and a rise in energy
prices could harm our operating results;
• the potential that failure to maintain the integrity of our computer
systems and internal customer information could result in damage to our
reputation and/or subject us to fines, payment of damages, lawsuits or
other restrictions on our use or transfer of data;
• the potential reputational harm as a result of increased scrutiny related
to our corporate social responsibility efforts;
• the potential failure of future efforts to expand through investments in
other businesses and properties or through alliances or acquisitions, or to
divest some of our properties and other assets;
• increases in gaming taxes and fees in the jurisdictions in which we
operate; and
• the potential for conflicts of interest to arise because certain of our
directors and officers are also directors of
Any forward-looking statement made by us in this Form 10-Q speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. If we update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. You should also be aware that while we from time to time communicate with securities analysts, we do not disclose to them any material non-public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility and are not endorsed by us.
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