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, 2020 , which were included in our Form 10-K, filed with theSecurities and Exchange Commission ("SEC") onFebruary 26, 2021 . 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 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 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 a significant impact on our business, financial
condition, results of operations and cash flows in 2020 and 2021 and may
potentially thereafter. In March 2020 , all of our domestic properties were
temporarily closed pursuant to state and local government restrictions imposed
as a result of COVID-19. Throughout the second and third quarters of 2020 all of
our properties that were temporarily closed re-opened to the public, but
continued to operate without certain amenities and subject to certain occupancy
limitations, with restrictions varying by jurisdiction and with further
temporary re-closures and re-openings occurring for our properties or portions
thereof into the first quarter of 2021. Upon re-opening of the properties, we
implemented certain measures to mitigate the spread of COVID-19, including
limitations 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.
Beginning in the latter part of the first quarter of 2021 and continuing into
the second quarter of 2021, our domestic jurisdictions eased and removed prior
operating restrictions, including capacity and occupancy limits as well as
social distancing policies. However, certain operations and amenities are
limited or constrained due to available staffing and/or mid-week visitation
levels, and in July 2021 , certain jurisdictions reinstated mask protection
guidelines as a result of the emergence and spread of certain COVID-19 variants.
Although all of our properties have re-opened, in light of the unpredictable
nature of the pandemic, including the emergence and spread of COVID-19 variants,
the properties may be subject to temporary, complete or partial shutdowns in the
future. At this time, we cannot predict whether jurisdictions, states or the
federal government will adopt similar or more restrictive measures in the future
than in the past, including stay-at-home orders or the temporary closure of all
or a portion of our properties.
In Macau , following a temporary closure of our properties on February 5, 2020 ,
operations resumed on February 20, 2020 , subject to certain health safeguards,
such as limiting the number of seats available at each table game, slot machine
spacing, reduced operating hours at a number of restaurants and bars,
temperature checks, and mask protection. Although the issuance of tourist visas
(including the individual visit scheme "IVS") for residents of Zhuhai, Guangdong
Province and all other provinces in mainland China to travel to Macau resumed on
August 12, 2020 , August 26, 2020 and September 23, 2020 , respectively, 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 , a negative nucleic acid test result, and mandatory quarantine
requirements for visitors from Hong Kong and Taiwan , and bans on entry or
enhanced quarantine
29
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requirements on other visitors into Macau ), which have significantly impacted
visitation to our Macau properties. In recent months, local COVID-19 cases were
identified in Macau . Upon such occurrences, a state of immediate prevention was
declared and mass mandatory nucleic acid testing was imposed in Macau , the
validity period of negative test results for re-entry into mainland China was
shortened and quarantine requirements were imposed, certain events were
cancelled or suspended, and in some instances certain entertainment and leisure
facilities were closed throughout Macau . Although gaming and hotel operations
have remained open during these states of immediate prevention, such measures
have had a negative effect on our operations and it is uncertain whether further
closures, including the closure of our properties, or travel restrictions to
Macau will be implemented if additional local COVID-19 cases are identified.
Other Developments
InMarch 2021 , we delivered a notice of redemption to MGP covering approximately 37 millionOperating Partnership units that we held which was satisfied with aggregate cash proceeds of approximately$1.2 billion . See Note 11 in the accompanying consolidated financial statements for information regarding this transaction, which eliminates in consolidation. InSeptember 2021 , we completed the acquisition of the 50% ownership interest inCityCenter Holdings, LLC ("CityCenter") held byInfinity World Development Corp ("Infinity World ") for cash consideration of$2.125 billion . Upon the closing of the transaction, we own 100% ofCityCenter and accordingly no longer account for our interest under the equity method of accounting, and we now consolidateCityCenter in our financial statements. See Note 3 in the accompanying consolidated financial statements for information regarding this transaction. InSeptember 2021 , we sold the real estate assets of Aria and Vdara for cash consideration of$3.89 billion and entered into a lease pursuant to which we lease back the real property. See Note 8 in the accompanying consolidated financial statements for information regarding this lease. InAugust 2021 , we entered into an agreement with VICI Properties, Inc. ("VICI") and MGP whereby VICI will acquire MGP. Pursuant to the agreement, MGP Class A shareholders will receive 1.366 shares of newly issued VICI stock in exchange for each MGP Class A share outstanding and we will receive 1.366 units of the new VICI operating partnership ("VICI OP") in exchange for eachOperating Partnership unit we hold. The fixed exchange ratio represents an agreed upon price of$43 per share of MGP Class A share to the five-day volume weighted average price of VICI stock as of the close of business onJuly 30, 2021 . In connection with the exchange, VICI OP will redeem the majority of our VICI OP units for cash consideration of$4.4 billion , with us retaining an approximate$370 million ownership interest in the VICI OP (based upon the close price of VICI stock as ofAugust 3, 2021 ). MGP's Class B share that we hold will be cancelled. As part of the transaction, we will enter into an amended and restated master lease with VICI. The new master lease will have an initial term of 25 years, with three ten-year renewals, and initial annual rent of$860 million , escalating annually at a rate of 2.0% per annum for the first ten years and thereafter equal to the greater of 2% and the CPI increase during the prior year subject to a cap of 3%. The transaction is expected to close in the first half of 2022, subject to customary closing conditions, regulatory approvals, and approval by VICI stockholders (which was obtained onOctober 29, 2021 ). See "Item 1A. Risk Factors - The VICI Transaction and The Cosmopolitan acquisition each remains subject to the satisfaction of certain closing conditions, including the receipt of certain regulatory approvals, and any anticipated benefits from such transactions may take longer to realize than expected or may not be realized at all." InSeptember 2021 , we entered into an agreement to acquire the operations of The Cosmopolitan ofLas Vegas ("The Cosmopolitan") for cash consideration of$1.625 billion , subject to customary working capital adjustments. Additionally, we will enter into a lease agreement for the real estate assets of The Cosmopolitan. The Cosmopolitan lease will have an initial term of 30 years with three subsequent ten-year renewal periods, exercisable at our option. The initial term of the lease provides for an initial annual cash rent of$200 million with a fixed 2% escalator for the first fifteen years, and thereafter, an escalator equal to the greater of 2% and the CPI increase during the prior year, subject to a cap of 3%. Additionally, the lease will require us to spend a specified percentage of net revenues over a rolling five-year period at the property on capital expenditures and for us to comply with certain financial covenants, which, if not met, would require us to maintain cash security or a letter of credit in favor of the landlord in an amount equal to rent for the succeeding one-year period. The transaction is expected to close in the first half of 2022, subject to regulatory approvals and other customary closing conditions. 30 -------------------------------------------------------------------------------- InOctober 2021 , MGP acquired the real estate assets ofMGM Springfield from us andMGM Springfield was added to the MGP master lease between us and MGP through which we lease back the real property. Refer to Note 13 for additional information.
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 ourLas Vegas Strip Resorts is in the range of 25.0% to 35.0% of table games drop for 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 (forLas Vegas Strip Resorts ) - hotel occupancy (a volume indicator); average daily 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 endedSeptember 30, 2021 and the three and nine months endedSeptember 30, 2020 as a result 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 -MGM China utilizes "turnover," which is the sum of nonnegotiable chip wagers won byMGM China calculated as nonnegotiable 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 atMGM China is 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 inMGM China's hold percentages. 31 --------------------------------------------------------------------------------
Results of Operations
Summary Financial Results
The temporary closure of our properties due to COVID-19 in the comparative periods impacted our financial results. Dates of temporary closure are shown below:
Bellagio March 17, 2020 June 4, 2020
MGM Grand Las Vegas March 17, 2020 June 4, 2020
New York-New York March 17, 2020 June 4, 2020
Excalibur March 17, 2020 June 11, 2020
Luxor March 17, 2020 June 25, 2020
Mandalay Bay(1) March 17, 2020 July 1, 2020
The Mirage(2) March 17, 2020 August 27, 2020
Park MGM(1) March 17, 2020 September30, 2020
Regional Operations
Gold Strike March 17, 2020 May 25, 2020
Beau Rivage March 17, 2020 June 1, 2020
MGM Northfield Park March 14, 2020 June 20, 2020
MGM National Harbor March 15, 2020 June 29, 2020
MGM Springfield(3) March 15, 2020 July 13, 2020
Borgata March 16, 2020 July 26, 2020
MGM Grand Detroit(4) March 16, 2020 August 7, 2020
Empire City March 14, 2020 September 21, 2020
(1)Park MGM and Mandalay Bay's hotel tower operations were closed midweek
starting November 9, 2020 and November 30, 2020 , respectively, and full week
hotel tower operations resumed on March 3, 2021 .
(2)The Mirage's hotel tower operations were closed midweek beginning November
30, 2020 . The entire property was closed midweek starting January 4, 2021 , and
re-opened on March 3, 2021 .
(3)MGM Springfield's hotel was re-closed beginning November 2, 2020 , and partial
hotel operations resumed with midweek closures on March 5, 2021 . Full hotel
operations have not yet resumed.
(4)MGM Grand Detroit re-closed on November 17, 2020 and re-opened on December
23, 2020 , with the hotel tower operations resuming February 9, 2021 .
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,
2021 2020 2021 2020
(In thousands)
Net revenues $ 2,707,539 $
1,125,920
1,892,782 (495,182) 1,909,852 (278,866)
Net income (loss) 1,337,936 (601,971) 1,092,302 (863,939)
Net income (loss) attributable to MGM Resorts
International 1,350,433 (534,731) 1,123,357 (585,119)
Summary Operating Results
Consolidated net revenues were$2.7 billion for the three months endedSeptember 30, 2021 compared to$1.1 billion in the prior year period, an increase of 140%. While the current year quarter benefited from the removal of mandated operational and capacity restrictions as well as an increase in travel, the prior year quarter was negatively affected by temporary property closures at certain of ourLas Vegas Strip Resorts and Regional Operations for a portion of 32 -------------------------------------------------------------------------------- the quarter due to the pandemic. AtMGM China , the prior year quarter was more significantly impacted by travel and entry restrictions inMacau than in the current quarter. These factors resulted in a 187% increase in net revenues at ourLas Vegas Strip Resorts , a 66% increase in net revenues at our Regional Operations, and a 517% increase in net revenues atMGM China . Consolidated operating income was$1.9 billion for the three months endedSeptember 30, 2021 compared to a loss of$495 million in the prior year period. The change was primarily driven by the temporary property closures in the prior year period discussed above and the current year quarter benefiting from the gain on consolidation ofCityCenter , net of$1.6 billion . Corporate expense increased$42 million compared to the prior year quarter due primarily to the impact of the pandemic on the prior year quarter. In addition, corporate expense in the current year quarter included$18 million of transaction costs. General and administrative expense increased$80 million in the current year quarter compared to the prior year quarter primarily due to the prior year quarter reflecting the temporary property closures due to the pandemic, partially offset by realized benefits from our cost savings initiatives at our domestic properties. Consolidated net revenues were$6.6 billion for the nine months endedSeptember 30, 2021 compared to$3.7 billion in the prior year period, an increase of 81%. While the prior year was negatively affected by temporary property closures for a portion of the year due to the pandemic, the current year period benefited from the removal of mandated operational and capacity restrictions as well as an increase in travel primarily within the second and third quarters. Additionally, atMGM China , the prior year period was negatively affected by both property closures in the first quarter and more significantly impacted by travel and entry restrictions inMacau than in the current year period. As a result, net revenues at ourLas Vegas Strip Resorts increased 66%, Regional Operations increased 82%, andMGM China increased 155%. Consolidated operating income was$1.9 billion for the nine months endedSeptember 30, 2021 compared to a loss of$279 million in the prior year period, primarily due to the temporary property closures in the prior year period discussed above. The current year period included a gain on consolidation ofCityCenter , net of$1.6 billion and the prior year period included a$1.5 billion gain on REIT transactions, net and$20 million of restructuring costs. In addition, corporate expense decreased$70 million compared to the prior year period. Corporate expense in the current year period included$26 million in transaction costs, while the prior year period included$44 million of CEO transition expense,$15 million of corporate initiatives costs, and$49 million ofOctober 1 litigation settlement expense. 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. Property transactions, net in the current year period included a gain of$29 million related to a reduction in the estimate of contingent consideration related to the Empire City acquisition. Property transactions, net in the prior year period included a$64 million other-than-temporary non-cash impairment charge on an equity method investment. Depreciation expense decreased$58 million compared to the prior year period due primarily to the sale of theMGM Grand Las Vegas andMandalay Bay real estate assets. General and administrative expense increased$168 million compared to the prior year period due primarily to the prior year period reflecting the temporary property closures and a full period of rent expense for theMGM Grand Las Vegas andMandalay Bay lease in the current year, partially offset by realized benefits from our cost savings initiatives at our domestic properties. 33 --------------------------------------------------------------------------------
Net Revenues by Segment
The following table presents a detail by segment of net revenues:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In thousands)Casino revenue$ 422,541 $ 189,358 $
1,008,108
Rooms 403,010 137,869
846,053 526,838
Food and beverage 308,522 81,429
614,572 391,218
Entertainment, retail and other 246,894 72,762 461,766 320,920
1,380,967 481,418 2,930,499 1,766,035
Regional Operations
Casino revenue 719,630 464,789 2,024,149 1,078,596
Rooms 70,766 34,782 160,269 94,842
Food and beverage 92,148 38,646 211,661 138,052
Entertainment, retail and other 42,579 18,609 96,677 60,260
925,123 556,826 2,492,756 1,371,750
MGM China
Casino revenue 252,445 35,297 784,984 298,995
Rooms 16,683 2,800 47,585 19,344
Food and beverage 15,808 6,240 50,323 23,451
Entertainment, retail and other 4,123 2,530 13,152 10,162
289,059 46,867 896,044 351,952
Reportable segment net revenues 2,595,149 1,085,111 6,319,299 3,489,737
Corporate and other 112,390 40,809 303,949 178,809
$ 2,707,539 $ 1,125,920 $ 6,623,248 $ 3,668,546
Las Vegas Strip Resorts
Las Vegas Strip Resorts casino revenue was $423 million for the three months
ended September 30, 2021 compared to $189 million in the prior year quarter, an
increase of 123%, and casino revenue was $1.0 billion for the nine months ended
September 30, 2021 compared to $527 million in the prior year period, an
increase of 91%, due primarily to the temporary property closures for a portion
of the prior year periods and removal of mandated operational and capacity
restrictions as well as an increase in travel primarily in the second and third
quarter of the current year.
The following table shows key gaming statistics for our Las Vegas Strip Resorts :
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(Dollars in millions)
Table Games Drop $ 917 $ 498 $ 2,223 $ 1,489
Table Games Win $ 251 $ 108 $ 552 $ 352
Table Games Win % 27.4 % 21.6 % 24.8 % 23.6 %
Slots Handle $ 3,863 $ 1,944 $ 9,804 $ 4,925
Slots Win $ 369 $ 183 $ 932 $ 462
Slots Win % 9.6 % 9.4 % 9.5 % 9.4 %
34--------------------------------------------------------------------------------Las Vegas Strip Resorts rooms revenue was$403 million for the three months endedSeptember 30, 2021 compared to$138 million in the prior year quarter, an increase of 192%, and rooms revenue was$846 million for the nine months endedSeptember 30, 2021 compared to$527 million in the prior year period, an increase of 61%, due to the temporary property closures for a portion of the prior year periods and removal of mandated operational and capacity restrictions as well as an increase in travel primarily in the second and third quarter of the current year. The following table shows key hotel statistics for ourLas Vegas Strip Resorts : Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Occupancy(1) 82 % 44 % 69 % 64 % Average daily rate (ADR)$ 181 $ 139 $ 158 $ 168 Revenue per available room (REVPAR)(1)$ 148 $ 61 $ 109 $ 107 (1)Rooms that were out of service, including full and midweek closures, during the nine months endedSeptember 30, 2021 and the three and nine months endedSeptember 30, 2020 due to the COVID-19 pandemic were excluded from the available room count when calculating hotel occupancy and REVPAR.Las Vegas Strip Resorts food and beverage revenue was$309 million for the three months endedSeptember 30, 2021 compared to$81 million in the prior year quarter, an increase of 279%, and food and beverage revenue was$615 million for the nine months endedSeptember 30, 2021 compared to$391 million in the prior year period, an increase of 57%, due primarily to the temporary closures at certain properties and operational restrictions in the prior year periods and removal of mandated operational and capacity restrictions as well as an increase in travel in the current year periods, however, not all outlets were fully reopened during the current year period and the properties did not benefit from the removal of mandated operational and capacity restrictions as well as an increase in travel primarily until the latter part of the second quarter of the current year.Las Vegas Strip Resorts entertainment, retail and other revenue was$247 million for the three months endedSeptember 30, 2021 compared to$73 million in the prior year quarter, an increase of 239%, and entertainment, retail and other revenue was$462 million for the nine months endedSeptember 30, 2021 compared to$321 million in the prior year period, an increase of 44%, due to the temporary property closures for a portion of the prior year periods and removal of mandated operational and capacity restrictions as well as an increase in travel in the current year periods, however, venue re-openings and events did not primarily occur until beginning in the latter part of the second quarter of the current year. Regional Operations Regional Operations casino revenue was$720 million for the three months endedSeptember 30, 2021 compared to$465 million in the prior year quarter, an increase of 55%, and casino revenue was$2.0 billion for the nine months endedSeptember 30, 2021 compared to$1.1 billion in the prior year period, an increase of 88%, due primarily to the temporary property closures in the prior year periods and removal of mandated operational and capacity restrictions and, to a lesser extent, increase in travel in the current year periods. 35 -------------------------------------------------------------------------------- The following table shows key gaming statistics for our Regional Operations: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (Dollars in millions) Table Games Drop$ 1,080 $ 739 $ 2,861 $ 1,641 Table Games Win$ 214 $ 155 $ 590 $ 332 Table Games Win % 19.8 % 21.0 % 20.6 % 20.2 % Slots Handle$ 6,900 $ 4,360 $ 18,797 $ 10,016 Slots Win$ 661 $ 426 $ 1,810 $ 969 Slots Win% 9.6 % 9.8 % 9.6 % 9.7 % Regional Operations rooms revenue was$71 million for the three months endedSeptember 30, 2021 compared to$35 million in the prior year quarter, an increase of 103%, and rooms revenue was$160 million for the nine months endedSeptember 30, 2021 compared to$95 million in the prior year period, an increase of 69%, due primarily to the temporary property closures in the prior year periods and removal of mandated operational and capacity restrictions and, to a lesser extent, increase in travel in the current year periods. Regional Operations food and beverage revenue was$92 million for the three months endedSeptember 30, 2021 compared to$39 million in the prior year quarter, an increase of 138%, and food and beverage revenue was$212 million for the nine months endedSeptember 30, 2021 compared to$138 million in the prior year period, an increase of 53%, due primarily to the temporary property closures in the prior year periods and removal of mandated operational and capacity restrictions primarily in the second and third quarter of the current year. Regional Operations entertainment, retail and other revenue was$43 million for the three months endedSeptember 30, 2021 compared to$19 million in the prior year quarter, an increase of 129%, and entertainment, retail and other revenue was$97 million for the nine months endedSeptember 30, 2021 compared to$60 million in the prior year period, an increase of 60%, due primarily to temporary property closures in the prior year periods and removal of mandated operational and capacity restrictions primarily in the second and third quarter of the current year.
The following table shows key gaming statistics for
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(Dollars in millions)
VIP Table Games Turnover
VIP Table Games Win $ 72 $ 17 $ 221 $ 138
VIP Table Games Win % 4.0 % 1.9 % 3.3 % 2.9 %
Main Floor Table Games Drop
Main Floor Table Games Win
Main Floor Table Games Win % 21.3 % 17.3 % 21.0 % 22.7 %
MGM China net revenues were$289 million for the three months endedSeptember 30, 2021 compared to$47 million in the prior year quarter, an increase of 517%, and net revenues were$896 million for the nine months endedSeptember 30, 2021 compared to$352 million in the prior year period, an increase of 155%. The prior year was negatively affected by both property closures inFebruary 2020 and was more significantly impacted by travel and entry restrictions inMacau than in the current year period. 36 --------------------------------------------------------------------------------
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 (which was terminated upon the acquisition ofCityCenter inSeptember 2021 ). Reimbursed costs revenue represents reimbursement of costs, primarily payroll-related, incurred by us in connection with the provision of management services and was$85 million and$32 million for the three months endedSeptember 30, 2021 and 2020, respectively, and$218 million and$147 million for the nine months endedSeptember 30, 2021 , respectively, which increased for the respective comparative periods due primarily to the property closures and other operational restrictions related to the pandemic in the prior year periods. 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 12 -
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,
2021 2020 2021 2020
(In thousands)
Las Vegas Strip Resorts $ 534,548 $ 15,125 $ 1,039,472 $ 178,277
Regional Operations 348,234 145,734 908,564 185,369
MGM China 6,996 (96,446) 20,352 (234,724)
Corporate and other (124,745) (113,190) (368,713) (374,769)
Adjusted EBITDAR $ 765,033 $ 1,599,675
Las Vegas Strip Resorts
Las Vegas Strip Resorts Adjusted Property EBITDAR was $535 million for the three
months ended September 30, 2021 compared to $15 million in the prior year
quarter. Las Vegas Strip Resorts Adjusted Property EBITDAR margin increased to
38.7% for three months ended September 30, 2021 compared to 3.1% in the prior
year quarter. The current year quarter benefited from the increase in revenues,
discussed above, as well as realized benefits from our cost savings initiatives.
Las Vegas Strip Resorts Adjusted Property EBITDAR was $1.0 billion for the nine
months ended September 30, 2021 compared to $178 million in the prior year
period, an increase of 483%. Las Vegas Strip Resorts Adjusted Property EBITDAR
margin increased to 35.5% for the nine months ended September 30, 2021 compared
to 10.1% in the prior year period as the current year period benefited from the
increase in revenues, discussed above, as well as realized benefits from our
cost savings initiatives.
Regional Operations
Regional Operations Adjusted Property EBITDAR was $348 million for the three
months ended September 30, 2021 compared to $146 million in the prior year
quarter. Regional Operations Adjusted Property EBITDAR margin increased to 37.6%
for three months ended September 30, 2021 compared to 26.2% in the prior year
quarter due to the increase in revenues, discussed above, as well as realized
benefits from our cost savings initiatives.
Regional Operations Adjusted Property EBITDAR was $909 million for the nine
months ended September 30, 2021 compared to $185 million in the prior year
period, an increase of 390%. Regional Operations Adjusted Property EBITDAR
margin increased to 36.4% for the nine months ended September 30, 2021 compared
to 13.5% in the prior year period as the current year benefited from the
increase in revenues, discussed above, as well as realized benefits from our
cost saving initiatives.
37
--------------------------------------------------------------------------------MGM China's Adjusted Property EBITDAR was$7 million for the three months endedSeptember 30, 2021 compared to a loss of$96 million in the prior year quarter, as the prior year quarter was more significantly impacted by travel and entry restrictions inMacau as well as other operational restrictions related to the pandemic than in the current quarter. License fee expense was$5 million in the current quarter and$1 million in the prior year quarter.MGM China's Adjusted Property EBITDAR was$20 million for the nine months endedSeptember 30, 2021 compared to a loss of$235 million in the prior year period. The increase was due primarily to the temporary property closures in the prior year period as well as being more significantly impacted by travel and entry restrictions inMacau and other operational restrictions related to the pandemic than in the current period. License fee expense was$16 million for the nine months endedSeptember 30, 2021 and$6 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,
2021 2020 2021 2020
(In thousands)
CityCenter (through September 26, 2021) $ 40,747 $ (6,041) $ 128,127 $ (24,489)
MGP BREIT Venture 38,959 38,976 116,876 97,787
BetMGM (49,060) (9,057) (154,275) (24,976)
Other 4,465 (3,243) 2,142 (292)
$ 35,111 $ 20,635 $ 92,870 $ 48,030
In September 2021 , we completed the acquisition of the 50% ownership interest in
CityCenter held by Infinity World and now own 100% of the equity interest in
CityCenter . Accordingly, we no longer account for our interest in CityCenter
under the equity method of accounting, and we now consolidate CityCenter in our
financial statements.
In June 2021 , CityCenter closed the sale of its Harmon land for $80 million on
which it recorded a $30 million gain. We recorded a $50 million gain, which
included $15 million of our 50% share of the gain recorded by CityCenter and $35
million representing the reversal of certain basis differences in the nine
months ending September 30, 2021 .
Our share of CityCenter's operating income, including certain basis difference
adjustments, was $41 million for the current quarter period through September
26, 2021 and CityCenter's operating loss was $6 million for the three months
ended September 30, 2020 due primarily to removal of mandated operational and
capacity restrictions as well as an increase in travel in the current year
quarter.
Our share of CityCenter's operating income, including certain basis difference
adjustments, was $128 million for the current year period through September 26,
2021 and CityCenter's operating loss was $24 million for the nine months ended
September 30, 2020 , due primarily to the gain related to the sale of its Harmon
land in the current year period, discussed above, and the temporary property
closures in the prior year period and removal of mandated operational and
capacity restrictions as well as an increase in travel primarily in the second
and third quarter of the current year.
Non-operating Results
Interest Expense
Gross interest expense was$200 million and$175 million for the three months endedSeptember 30, 2021 and 2020, respectively, and$599 million and$490 million for the nine months endedSeptember 30, 2021 and 2020, respectively. The increase in gross interest expense when compared to the respective prior year periods is due primarily to the increase in average debt outstanding related to senior notes due to the issuances by us, theOperating Partnership , andMGM China in 38 -------------------------------------------------------------------------------- 2020 and 2021, partially offset by a decrease in the weighted average interest rate of the senior notes. See Note 6 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.
Other, net
Other expense, net was
Other income, net was$70 million for the nine months endedSeptember 30, 2021 compared to other expense, net of$102 million in the prior year period. The current year period included a$39 million gain on investment which is related primarily to the change in measurement of an equity instrument that previously qualified for the measurement alternative under ASC 321, which was discontinued upon the entity having a readily determinable fair value as a result of becoming exchange traded, partially offset by a loss related to subsequent adjustments to fair value, a$33 million gain on theOperating Partnership's unhedged interest rate swaps, and$16 million of interest income, partially offset by$9 million of foreign currency remeasurement losses primarily related toMGM China's U.S. dollar-denominated senior notes. The prior 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$27 million of interest income. Refer to Note 6 for further discussion of our long-term debt.
Income Taxes
Our effective tax rate was a provision of 17.4% and 16.9% on income before income taxes for the three and nine months endedSeptember 30, 2021 , respectively, compared to a benefit of 11.3% and 8.9% on loss before income taxes for the three and nine months endedSeptember 30, 2020 , respectively. The effective rates for the current year quarter and year-to-date period were favorably impacted by tax expense recorded on the "Gain on consolidation ofCityCenter , net", at an approximately 12% effective rate due to the presence of goodwill. Both the current year quarter and prior year quarter were unfavorably impacted by losses inMacau that we could not benefit. The effective rate for the prior year-to-date period was unfavorably impacted by losses inMacau that we could not benefit and adjustments to valuation allowances forMacau deferred tax assets and foreign tax credits.
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, and property transactions, net, and also excludes gain on consolidation ofCityCenter , net, gain related toCityCenter's sale of Harmon land recorded within income from unconsolidated affiliates and corporate expense (which includes CEO transition expense andOctober 1 litigation settlement) 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, gain on consolidation ofCityCenter , 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), gain related toCityCenter's sale of Harmon land recorded within income from unconsolidated affiliates, 39 -------------------------------------------------------------------------------- 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 may not be comparable period over period. 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 GAAP. 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
40
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Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In thousands)
Net income (loss) attributable to MGM Resorts
International $ 1,350,433 $
(534,731)
Plus: Net loss attributable to noncontrolling interests (12,497) (67,240) (31,055) (278,820) Net income (loss) 1,337,936 (601,971) 1,092,302 (863,939) (Benefit) provision for income taxes 282,135 (76,734) 222,263 (84,668) Income (loss) before income taxes 1,620,071 (678,705) 1,314,565 (948,607)
Non-operating (income) expense:
Interest expense, net of amounts capitalized 200,049 173,808 598,116 487,701
Non-operating items from unconsolidated affiliates 23,421 23,604 67,473 79,986
Other, net 49,241 (13,889) (70,302) 102,054
272,711 183,523 595,287 669,741
Operating income (loss) 1,892,782 (495,182) 1,909,852 (278,866)
Preopening and start-up expenses 1,547 11 1,642 51
Property transactions, net 3,677 4,116 842 85,440
Gain on REIT transactions, net - - - (1,491,945)
Gain on consolidation of CityCenter, net (1,562,329) - (1,562,329) -
Depreciation and amortization 279,403 294,363 853,579 911,859
CEO transition expense - - - 44,401
October 1 litigation settlement - - - 49,000
Restructuring - - - 19,882
Triple net operating lease and ground lease rent
expense 191,622 189,602 570,851 521,087
Gain related to sale of Harmon land -
unconsolidated affiliate - - (49,755) -
Income from unconsolidated affiliates related to
real estate ventures (41,669) (41,687) (125,007) (106,756)
Adjusted EBITDAR $ 765,033 $ 1,599,675 Guarantor Financial Information
As ofSeptember 30, 2021 , 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 , Blue Tarp reDevelopment, LLC (the entity that owns and operatesMGM 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. 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 guarantee 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 41 -------------------------------------------------------------------------------- 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, 2021 2020 Balance Sheet (In thousands) Current assets$ 5,537,183 $ 4,749,542 Investment in the MGP Operating Partnership 2,179,895 1,617,055 Intercompany accounts due from non-guarantor subsidiaries - 16,622 MGP master lease right-of-use asset, net 6,649,036 6,714,101 Other long-term assets 11,738,841 12,318,912 MGP master lease operating lease liabilities - current 154,088 153,415 Other current liabilities 2,518,189 1,123,814 Intercompany accounts due to non-guarantor subsidiaries 55,258 -
MGP master lease operating lease liabilities - noncurrent 7,109,854
7,191,450
Other long-term liabilities 15,022,863 15,827,794
Nine Months Ended
September 30, 2021
Income Statement (In thousands)
Net revenues $ 4,524,050
MGP master lease rent expense (473,495)
Operating income 1,710,981
Income from continuing operations 1,703,413
Net income 1,467,456
Net income attributable to MGM Resorts International 1,467,456
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 provided by operating activities was$887 million in the nine months endedSeptember 30, 2021 compared to cash used in operating activities of$1.2 billion in the nine months endedSeptember 30, 2020 . The change from the prior year period was due primarily to the increase in Adjusted Property EBITDAR discussed within the results of operations section above and additionally due to the prior year period being negatively affected by a change in working capital related to gaming and non-gaming deposits, gaming taxes and other gaming liabilities, and payroll related liabilities as a result of the COVID-19 pandemic, partially offset by an increase in cash paid for interest. 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. Cash provided by investing activities was$1.7 billion in the nine months endedSeptember 30, 2021 compared to$2.3 billion in the nine months endedSeptember 30, 2020 . In the nine months endedSeptember 30, 2021 , we received$3.9 billion in net cash proceeds from the sale of the real estate of Aria and Vdara and received$32 million in proceeds from the sale of investments in unconsolidated affiliates, which were partially offset by our payments of$1.8 billion to acquireCityCenter , net of cash acquired,$322 million in capital expenditures, as further discussed below, and contributions of 42 --------------------------------------------------------------------------------$150 million to our unconsolidated affiliate,BetMGM, LLC ("BetMGM"). In comparison, in the prior year we received$2.5 billion in net cash proceeds from the sale of the real estate ofMandalay Bay andMGM Grand Las Vegas , which were partially offset by$178 million in capital expenditures and a$55 million investment made in BetMGM. In the prior year period, distributions from unconsolidated affiliates included$51 million related to our share of a distribution paid byCityCenter .
Capital Expenditures
We made capital expenditures of$322 million in the nine months endedSeptember 30, 2021 , of which$58 million related toMGM China . Capital expenditures atMGM China included$44 million primarily related to construction of the south tower project atMGM Cotai and$14 million related to projects atMGM Macau . Capital expenditures at ourLas Vegas Strip Resorts , Regional Operations and corporate entities of$264 million primarily relate to expenditures in information technology and room remodels. 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 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. Financing activities. Cash used in financing activities was$2.1 billion in the nine months endedSeptember 30, 2021 compared to cash provided by financing activities of$1.2 billion in the nine months endedSeptember 30, 2020 . In the nine months endedSeptember 30, 2021 , we had net repayments of debt of$1.5 billion , as further discussed below, distributed$240 million to noncontrolling interest owners, and we repurchased$1.0 billion of our common stock, partially offset by net proceeds received of$793 million from the issuance of MGP's Class A shares. In comparison, in the prior year period, we had net proceeds from the incurrence of a bridge loan facility of$1.3 billion in connection with theMandalay Bay and MGM Grand real estate transaction, 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.
Borrowings and Repayments of Long-term Debt
During the nine months endedSeptember 30, 2021 , we had net repayments of debt of$1.5 billion , which consisted of the repayment of the$1.7 billion outstanding onCityCenter's credit facility in full, which was assumed in the acquisition, using cash on hand, net repayments of$503 million onMGM China's first revolving credit facility, and repayments of$10 million on theOperating Partnership's revolving credit facility. These repayments were partially offset byMGM China's March 2021 issuance of$750 million in aggregate principal amount of 4.75% senior notes due 2027 at an issue price of 99.97%. The net proceeds fromMGM China's 4.75% senior notes due 2027 issuance were used to partially repay amounts outstanding under theMGM China first revolving credit facility and for general corporate purposes. 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 using the proceeds from 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. 43 --------------------------------------------------------------------------------
In
In
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 general corporate purposes.
Dividends, Distributions to Noncontrolling Interest Owners and Share Repurchases
During the nine months endedSeptember 30, 2021 , we repurchased and retired$1.0 billion of our common stock pursuant to ourMay 2018 $2.0 billion andFebruary 2020 $3.0 billion stock repurchase plans. As a result of those repurchases, we completed ourMay 2018 $2.0 billion stock repurchase program, and the remaining availability under theFebruary 2020 $3.0 billion stock repurchase program was$2.0 billion as ofSeptember 30, 2021 . During the nine months endedSeptember 30, 2020 , we repurchased and retired$354 million of our common stock pursuant to ourMay 2018 $2.0 billion stock repurchase plan. InMarch 2021 ,June 2021 , andSeptember 2021 we paid dividends of$0.0025 per share, totaling$4 million , paid during the nine months endedSeptember 30, 2021 . 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 .
•$406 million of distributions paid in 2021, of which we received$185 million and MGP received$221 million , which MGP concurrently paid as a dividend to its Class A shareholders; and •$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.
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 and commitments, including acquiring the operations of The Cosmopolitan for cash consideration of$1.625 billion , as discussed further in Note 1. As previously discussed, the spread of COVID-19 and developments surrounding the global pandemic have had a significant impact on our business, financial condition, results of operations, and cash flows. As ofSeptember 30, 2021 , we had cash and cash equivalents of$5.6 billion , of whichMGM China held$331 million and theOperating Partnership held$320 million . In addition to our cash and cash equivalent balance, we currently have significant real estate assets and other holdings: a 41.6% economic interest in MGP (refer to Note 1 for discussion on our agreement entered into inAugust 2021 regarding the VICI Transaction), and an approximate 56% interest inMGM China . AtSeptember 30, 2021 , we had$12.7 billion in principal amount of indebtedness, including$265 million outstanding under the$1.25 billion MGM China first revolving credit facility. No amounts were drawn on our$1.5 billion revolving credit facility, the$1.35 billion Operating Partnership revolving credit facility, or the$400 million MGM China second revolving credit facility. We have$1.0 billion of debt maturing in the next twelve months, which we expect to repay with cash on hand. 44 -------------------------------------------------------------------------------- Subsequent to the quarter endedSeptember 30, 2021 , we repurchased approximately 2 million shares of our common stock at an average price of$44.51 per share for an aggregate amount of$80 million . Repurchased shares will be retired. We have planned capital expenditures expected over the remainder of the year of approximately$180 million to$190 million domestically. Additionally, we have planned capital expenditures over the remainder of the year of approximately$20 million to$30 million atMGM China . As ofSeptember 30, 2021 , our expected cash interest payments over the next twelve months are approximately$295 million to$305 million , excluding MGP andMGM China , and approximately$710 million to$720 million on a consolidated basis. We are also required, as ofSeptember 30, 2021 , to make annual rent payments of$1.6 billion , in the aggregate, under the triple-net lease agreements, which leases are also subject to annual escalators. In addition, the Bellagio lease, theMandalay Bay andMGM Grand Las Vegas lease, and the Aria and Vdara lease each require us to spend a specified percentage of net revenues, at the respective properties, on capital expenditures. InFebruary 2021 , we amended our credit facility to extend the covenant relief period provided under the previous amendment related to our financial maintenance covenants through the earlier of (x) the day immediately following the date we deliver to the administrative agent a compliance certificate with respect to the quarter endingJune 30, 2022 and (y) the date we deliver to the administrative agent an irrevocable notice terminating the covenant relief period, and to adjust the required leverage and interest coverage levels for the covenant when it is reimposed at the end of the waiver period. In addition, in connection with theFebruary 2021 amendment, we agreed to an increase of the liquidity test such that our borrower group (as defined in the credit agreement) is required to maintain a minimum liquidity level of not less than$1.0 billion (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, inFebruary 2021 ,MGM China further amended each of its first revolving credit facility and its second revolving credit facility to provide for waivers of the maximum leverage ratio and minimum interest coverage ratio through the fourth quarter of 2022. InOctober 2021 , theOperating Partnership paid$139 million of distributions to its partnership unit holders, of which we received$58 million and MGP received$81 million , which MGP concurrently paid as a dividend to its Class A shareholders. OnNovember 3, 2021 , our Board of Directors approved a quarterly dividend of$0.0025 per share. The dividend will be payable onDecember 15, 2021 to holders of record onDecember 10, 2021 . 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 continues to impact our business, financial condition and results of operations. As widespread vaccine distribution continues and operational restrictions have been removed, we have seen economic recovery in some of the market segments in which we operate, as shown in our summary operating results. However, some areas continue to experience renewed outbreaks and surges in infection rates. As a result, our business segments continue to face many uncertainties and our operations remain vulnerable to reversal of these trends or other continuing negative effects caused by the pandemic. We cannot predict the degree, or duration, to which our operations will be affected by the COVID-19 pandemic, and the effects could be material. We continue to monitor the 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.
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
45
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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 the Operating 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 of September 30, 2021 , variable rate borrowings represented approximately 2%
of our total borrowings after giving effect on the Operating Partnership's
borrowings for the currently effective interest rate swap agreements on which
the Operating Partnership pays a weighted average of 1.783% on a total notional
amount of $700 million . Additionally, the Operating 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 the Operating
Partnership interest rate swaps discussed above:
Debt maturing in Fair Value
September 30,
2021 2022 2023 2024 2025 Thereafter Total 2021
(In millions)
Fixed-rate $ - $ 1,000 $ 1,250 $ 1,800 $ 2,725 $ 5,675 $ 12,450 $ 13,156
Average interest rate N/A 7.8 % 6.0 % 5.5 % 5.6 % 5.0 % 5.5 %
Variable rate $ - $ - $ - $ 265 $ - $ - $ 265 $ 265
Average interest rate N/A N/A N/A 2.8 % N/A N/A 2.8 %
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 to MGM China and to our operations at MGM Macau and MGM Cotai .
While recent fluctuations in exchange rates have not been significant, potential
changes in policy by governments or fluctuations in the economies of the United
States , China , Macau or Hong Kong could cause variability in these exchange
rates. We cannot assure you that the Hong Kong dollar will continue to be pegged
to the U.S. dollar or the current peg rate for the Hong Kong dollar will remain
at the same level. The possible changes to the peg of the Hong Kong dollar may
result in severe fluctuations in the exchange rate thereof. For U.S. dollar
denominated debt incurred by MGM China , fluctuations in the exchange rates of
the Hong Kong dollar in relation to the U.S. dollar could have adverse effects
on our financial position and results of operations. As of September 30, 2021 , a
1% weakening of the Hong Kong dollar (the functional currency of MGM China ) to
the U.S. dollar would result in a foreign currency transaction loss of $28
million .
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, execute on ongoing and future strategic initiatives, including the development of an integrated resort inJapan and investments we make in online sports betting and iGaming, the closing of the VICI Transaction and theMGM Springfield transaction, 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 or theOperating Partnership , our ability to achieve the benefits of our cost savings initiatives, and amounts projected to be realized as deferred tax assets. The foregoing is not a complete list of all forward-looking statements we make. 46 -------------------------------------------------------------------------------- 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 continued to materially impact our business, financial results and liquidity, and such impact could worsen and last for an unknown period of time; •although all of our properties are open to the public, we are unable to predict if such properties will be required to close again or be subject to operating and other restrictions due to the COVID-19 pandemic, including due to the spread of COVID-19 variants; •we undertook aggressive actions to reduce costs and improve efficiencies 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; •the VICI Transaction and The Cosmopolitan transaction each remain subject to the satisfaction of certain closing conditions, including the receipt of certain regulatory approvals, and any anticipated benefits from such transactions may take longer to realize than expected or may not be realized at all; •potential litigation instituted against us, our transaction counterparties, or our respective directors challenging the VICI Transaction may prevent such transaction from becoming effective within the expected timeframe or at all; •our substantial indebtedness and significant financial commitments, including the fixed component of our rent payments to MGP, rent payments under our triple-net leases, 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; •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; •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; •the possibility that we may not realize all of the anticipated benefits of our cost savings initiatives, including ourMGM 2020 Plan, or our asset light strategy; •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; 47 -------------------------------------------------------------------------------- •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$25 million , must be approved in accordance with certain specified procedures; •restrictions on our ability to have any interest or involvement in gaming businesses inChina ,Macau ,Hong Kong andTaiwan , other than throughMGM China ; •the ability of theMacau government to terminateMGM Grand Paradise's subconcession under certain circumstances without compensatingMGM Grand Paradise , exercise its redemption right with respect to the subconcession, or refuse to grantMGM Grand Paradise an extension of the subconcession in 2022; •the dependence ofMGM Grand Paradise upon gaming promoters for a significant portion of gaming revenues inMacau ; •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 BetMGM, 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 ofthe United States and 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; •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; 48
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•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 ofMGM China . 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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