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, 2021 , which were included in our Form 10-K, filed with theSecurities and Exchange Commission ("SEC") onFebruary 25, 2022 . The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods.MGM Resorts International together with its subsidiaries may be referred to as "we," "us" or "our."MGM China Holdings Limited together with its subsidiaries is referred to as "MGM China ."MGM Growth Properties LLC together with its subsidiaries is referred to as "MGP."
Description of our business
Our primary business is the operation of casino resorts, which offer gaming, hotel, convention, dining, entertainment, retail and other resort amenities. We operate several of the finest casino resorts in the world and we continually reinvest in our resorts to maintain our competitive advantage. Most of our revenue is cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. We rely on the ability of our resorts to generate operating cash flow to fund capital expenditures, provide excess cash flow for future development, repay debt financings, and return capital to our shareholders. We make significant investments in our resorts through newly remodeled hotel rooms, restaurants, entertainment and nightlife offerings, as well as other new features and amenities.
Impact of COVID-19 - Update
As ofJune 30, 2022 , all of our domestic properties were open and not subject to operating restrictions; however, travel and business volume were negatively affected in the early part of the first quarter of 2022 due to the spread of the omicron variant.Macau is currently operating under a "dynamic zero" COVID-19 policy, as isHong Kong and mainlandChina . Our properties inMacau were open during the first half of 2022, however, gaming operations were temporarily suspended onJuly 11, 2022 due to an increase in the number of COVID-19 cases inMacau and resumed onJuly 23, 2022 , subject to certain continuing health safeguards, with most restaurants and bars and certain retail outlets remaining closed. Several travel and entry restrictions inMacau ,Hong Kong and mainlandChina remain in place, including entry bans, visa limitations, COVID-19 testing, and certain quarantine requirements, which have significantly impacted visitation to ourMacau properties. Although gaming operations have resumed, protective and operational measures have had a negative effect onMGM China's operations. The extent and timing of a closure ofMGM China's properties, limitations of operations, or whether further travel restrictions to or fromMacau will be implemented is uncertain if there is an increase or continued spread of COVID-19.
Other Developments
InApril 2022 , we completed the VICI Transaction in a stock-for-stock transaction. In connection with the transaction, VICI OP redeemed the majority of our VICI OP units for cash consideration of$4.4 billion , with us retaining an approximate 1% ownership interest in VICI OP. MGP's Class B share that was previously held by us was cancelled. Accordingly, we no longer hold a controlling interest in MGP and deconsolidated MGP upon the closing of the transactions. In connection with the VICI Transaction, we entered into an amended and restated master lease with VICI. See Note 3 and Note 9 in the accompanying consolidated financial statements for discussion of the transaction and lease, respectively. InMay 2022 , we acquired the operations of The Cosmopolitan for cash consideration of$1.625 billion , plus working capital adjustments for a total purchase price of approximately$1.7 billion . Additionally, we entered into a lease agreement for the real estate assets of The Cosmopolitan. See Note 3 and Note 9 in the accompanying consolidated financial statements for discussion of the transaction and lease, respectively. InJune 2022 , theMacau government enacted a new gaming law that provides for material changes to the legal form of gaming concessions inMacau , including discontinuing and prohibiting gaming subconcessions subsequent to their 29 --------------------------------------------------------------------------------
expiration, and also includes material changes to the rights and obligations provided for under the new gaming concessions to be awarded in the upcoming public tender, such as limiting the term of concessions to a maximum of 10 years.
As a result, we reassessed the useful life of theMGM Grand Paradise gaming subconcession intangible asset and reduced the useful life to align with the contractual term of the subconcession, which expires onDecember 31, 2022 , thereby accelerating the recognition of amortization within our statements of operations. See Note 1 and Note 6 in the accompanying consolidated financial statements for further discussion. Certain events relating to the loss, termination, rescission, revocation or modification ofMGM Grand Paradise's ability to game inMacau , where such events have a material adverse effect on the financial condition, business, properties, or results of operations ofMGM China , taken as a whole, may result in a special put option triggering event underMGM China's senior notes and in an event of default underMGM China's revolving credit facilities. Management cannot provide any assurance that it will be able to obtain a gaming concession in the public tender; however, management believes thatMGM Grand Paradise will be successful in obtaining a gaming concession when the public tender is held. For a description of certain risks applicable toMGM Grand Paradise's subconcession and related matters, refer to our Annual Report on Form 10-K for the year endedDecember 31, 2021 under the heading "Risk Factors- Risks Related to Our Macau Operations." Pending Transactions OnDecember 13, 2021 , we entered into an agreement to sell the operations of The Mirage to an affiliate ofHard Rock for cash consideration of$1.075 billion , subject to certain purchase price adjustments. Upon closing, the master lease between us and VICI will be amended and restated to reflect a$90 million reduction in annual cash rent. See Note 3 in the accompanying consolidated financial statements for discussion of the transaction. OnMay 2, 2022 , we commenced a public offer to the shareholders of LeoVegas to tender 100% of the shares of LeoVegas at a price ofSEK 61 in cash per share, equivalent to a total tender offer value of approximatelySEK 6.0 billion (approximately$583 million , based on exchange rates atJune 30, 2022 ). See Note 1 in the accompanying consolidated financial statements for discussion of the transaction. During the three months endedJune 30, 2022 , we acquired equity interests in LeoVegas through the purchase of shares in the open market. OnJune 9, 2022 , we entered into an agreement to sell the operations of Gold Strike Tunica to CNE for cash consideration of$450 million , subject to certain purchase price adjustments. Upon closing, the master lease between us and VICI will be amended and restated to reflect a$40 million reduction in annual cash rent. See Note 3 in the accompanying consolidated financial statements for discussion of the transaction.
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. 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 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 six months endedJune 30, 2021 as a result of property closures due to the 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 30 -------------------------------------------------------------------------------- nonnegotiable chips returned. Turnover provides a basis for measuring VIP casino win percentage. 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 pandemic could cause volatility inMGM China's hold percentages.
Results of Operations
Summary Operating Results
Certain of our properties or portions thereof were temporarily closed due to COVID-19 during the comparative periods in 2021 as follows:
•Park MGM andMandalay Bay's hotel tower operations were closed midweek and full week hotel operations resumedMarch 3, 2021 . •The Mirage's hotel tower operations were closed midweek, with the entire property closed midweek startingJanuary 4, 2021 , and re-opened onMarch 3, 2021 . •MGM Springfield's hotel was closed and partial hotel operations resumed with midweek closures onMarch 5, 2021 . Full hotel operations resumed onDecember 13, 2021 . •MGM Grand Detroit's hotel tower operations were closed and resumed onFebruary 9, 2021 .
The following table summarizes our consolidated operating results:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(In thousands)
Net revenues $ 3,264,888 $
2,267,962
2,381,451 263,760 2,487,239 17,070
Net income (loss) 1,622,625 90,304 1,587,832 (245,634)
Net income (loss) attributable to MGM Resorts
International 1,783,937 104,753 1,765,921 (227,076)
Consolidated net revenues were $3.3 billion for the three months ended June 30,
2022 compared to $2.3 billion in the prior year quarter, an increase of 44%. The
current quarter benefited from the inclusion of the net revenues of Aria and The
Cosmopolitan as well as from comparative increases in business volume and travel
activity at our domestic resorts. At MGM China , the current and prior year
quarters were significantly impacted by travel and entry restrictions in Macau
with the current quarter being more negatively affected by restrictions related
to the increased spread of COVID-19. As a result, net revenues at our Las Vegas
Strip Resorts increased 113%, Regional Operations increased 12%, and MGM China
decreased 54% compared to the prior year quarter.
Consolidated operating income was $2.4 billion for the three months ended June
30, 2022 compared to $264 million in the prior year quarter. The current quarter
benefited from a $2.3 billion gain related to the VICI Transaction and the
increase in net revenues, as discussed above, partially offset by an increase in
rent expense recorded within general and administrative expense for the Aria,
VICI, and The Cosmopolitan leases, which commenced in September 2021 , April
2022 , and May 2022 , respectively, an increase in depreciation and amortization
expense, and a decrease in income from unconsolidated affiliates. Depreciation
and amortization expense increased $83 million compared to the prior year
quarter, due primarily to the change in useful life of the MGM Grand Paradise
gaming subconcession and the acquisition of Aria and The Cosmopolitan, partially
offset by a decrease resulting from the deconsolidation of MGP in April 2022 .
Additionally, property transactions, net included a gain of $25 million in the
current year quarter and a gain of $29 million in the prior year quarter, each
related to a reduction in the estimate of contingent consideration related to
the Empire City acquisition.
Consolidated net revenues were $6.1 billion for the six months ended June 30,
2022 compared to $3.9 billion in the prior year period, an increase of 56%. The
current year period benefited from the inclusion of Aria and The Cosmopolitan,
and was initially negatively affected by a decrease in business volume and
travel due to the spread of the omicron variant in the early part of the first
quarter of the current year period, however, business volumes subsequently
improved at our domestic resorts with a significant increase over the prior year
period, which was negatively affected by midweek property and hotel closures,
lower travel activity, and operational restrictions due to the pandemic. At MGM
China , the current and prior year period were significantly impacted by travel
and entry restrictions in Macau with the current year period being
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more negatively affected by restrictions related to the increasing spread of
COVID-19. As a result, net revenues at our Las Vegas Strip Resorts increased
145%, Regional Operations increased 18%, and MGM China decreased 32% compared to
the prior year period.
Consolidated operating income was $2.5 billion for the six months ended June 30,
2022 compared to $17 million in the prior year period. The current year period
benefited from a $2.3 billion gain related to the VICI Transaction and the
increase in net revenues, as discussed above, partially offset by an increase in
rent expense recorded within general and administrative expense for the Aria,
VICI, and The Cosmopolitan leases, which commenced in September 2021 , April
2022 , and May 2022 , respectively, an increase in depreciation and amortization
expense, and a decrease in income from unconsolidated affiliates. Depreciation
and amortization expense increased $81 million compared to the prior year
period, due primarily to the change in useful life of the MGM Grand Paradise
gaming subconcession and the acquisition of Aria and The Cosmopolitan, partially
offset by a decrease resulting from the deconsolidation of MGP in April 2022 .
Additionally, property transactions, net increased $38 million compared to the
prior year period primarily related to a $31 million non-cash impairment charge
related to land.
Net Revenues by Segment
The following table presents a detail by segment of net revenues:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(In thousands)Casino$ 498,524 $ 353,473 $
973,822
Rooms 696,008 298,714
1,181,296 443,043
Food and beverage 560,764 215,631
945,040 306,050
Entertainment, retail and other 381,880 136,750 699,910 214,872
2,137,176 1,004,568 3,800,068 1,549,532
Regional Operations
Casino 734,139 707,864 1,437,818 1,304,519
Rooms 70,912 48,924 127,026 89,503
Food and beverage 106,051 69,149 197,189 119,513
Entertainment, retail and other 48,567 30,345 88,465 54,098
959,669 856,282 1,850,498 1,567,633
MGM China
Casino 120,948 270,935 352,151 532,539
Rooms 7,812 17,389 23,483 30,902
Food and beverage 10,940 17,886 28,381 34,515
Entertainment, retail and other 3,312 4,421 7,372 9,029
143,012 310,631 411,387 606,985
Reportable segment net revenues 3,239,857 2,171,481 6,061,953 3,724,150
Corporate and other 25,031 96,481 57,244 191,559
$ 3,264,888 $ 2,267,962 $ 6,119,197 $ 3,915,709
Las Vegas Strip Resorts
Las Vegas Strip Resorts casino revenue was $499 million for the three months
ended June 30, 2022 compared to $353 million in the prior year quarter, an
increase of 41%, due primarily to the inclusion of Aria and The Cosmopolitan,
and increases in business volume and travel activity in the current year
quarter.
Las Vegas Strip Resorts casino revenue was $974 million for the six months ended
June 30, 2022 compared to $586 million in the prior year period, an increase of
66%, due primarily to the inclusion of Aria and The Cosmopolitan and was
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negatively affected by a decrease in business volume and travel due to the
spread of the omicron variant in the early part of the current year period;
however, business volumes subsequently improved with a significant increase over
the prior year period, which was negatively affected by midweek property and
hotel closures, lower travel activity, and operational restrictions due to the
pandemic.
The following table shows key gaming statistics for our Las Vegas Strip Resorts :
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(Dollars in millions)
Table Games Drop $ 1,429 $ 777 $ 2,631 $ 1,306
Table Games Win $ 330 $ 173 $ 626 $ 300
Table Games Win % 23.1 % 22.3 % 23.8 % 23.0 %
Slots Handle $ 5,344 $ 3,641 $ 9,951 $ 5,941
Slots Win $ 498 $ 351 $ 925 $ 563
Slots Win % 9.3 % 9.6 % 9.3 % 9.5 %
Las Vegas Strip Resorts rooms revenue was $696 million for the three months
ended June 30, 2022 compared to $299 million in the prior year quarter, an
increase of 133%. The current year quarter benefited from the inclusion of Aria
and The Cosmopolitan and an increase in REVPAR due to an increase in occupancy
and ADR as a result of an increase in business volume and travel activity in the
current year quarter.
Las Vegas Strip Resorts rooms revenue was $1.2 billion for the six months ended
June 30, 2022 compared to $443 million in the prior year period, an increase of
167%. The current year period benefited from the inclusion of Aria and The
Cosmopolitan and although operations were initially negatively affected by the
omicron variant in the early part of the period, REVPAR increased due to an
increase in occupancy and ADR as business volume and travel activity improved in
the current year period.
The following table shows key hotel statistics for our Las Vegas Strip Resorts :
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Occupancy(1) 92 % 77 % 85 % 62 %
Average daily rate (ADR) $ 225 $ 149 $ 213 $ 142
Revenue per available room (REVPAR)(1) $ 208 $ 115 (1)Rooms that were out of service, including midweek closures, during the six months endedJune 30, 2021 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$561 million for the three months endedJune 30, 2022 compared to$216 million in the prior year quarter, an increase of 160%, andLas Vegas Strip Resorts entertainment, retail and other revenues were$382 million for the three months endedJune 30, 2022 compared to$137 million in the prior year quarter, an increase of 179%, due primarily to the inclusion of Aria and The Cosmopolitan and an increase in business volume and travel activity in the current year quarter.Las Vegas Strip Resorts food and beverage revenue was$945 million for the six months endedJune 30, 2022 compared to$306 million in the prior year period, an increase of 209%, andLas Vegas Strip Resorts entertainment, retail and other revenues were$700 million for the six months endedJune 30, 2022 compared to$215 million in the prior year period, an increase of 226%, due primarily to the inclusion of Aria and The Cosmopolitan and was initially negatively affected by the omicron variant in the early part of the period; however, business volume and travel activity subsequently improved with a significant increase over the prior year period which was negatively impacted by temporary midweek property and hotel tower closures at certain properties, lower business and travel activity, and operational restrictions related to the pandemic. 33 --------------------------------------------------------------------------------
Regional Operations
Regional Operations casino revenue was$734 million for the three months endedJune 30, 2022 compared to$708 million in the prior year quarter, an increase of 4%, due primarily to table game win increasing 12% over the prior year quarter and slots win increasing 8% over the prior year quarter. Regional Operations casino revenue was$1.4 billion for the six months endedJune 30, 2022 compared to$1.3 billion in the prior year period, an increase of 10%, due primarily to table game win increasing 18% over the prior year period and slots win increasing 14% over the prior year period, respectively, as the prior year period was negatively affected by midweek hotel closures at certain properties and operational restrictions related to the pandemic primarily during the first quarter of 2021. The following table shows key gaming statistics for our Regional Operations: Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 (Dollars in millions) Table Games Drop$ 1,090 $ 972 $ 2,111 $ 1,791 Table Games Win$ 228 $ 203 $ 444 $ 376 Table Games Win % 20.9 % 20.9 % 21.0 % 21.0 % Slots Handle$ 7,102 $ 6,514 $ 13,764 $ 11,897 Slots Win$ 675 $ 622 $ 1,313 $ 1,149 Slots Win % 9.5 % 9.6 % 9.5 % 9.7 % Regional Operations rooms revenue was$71 million for the three months endedJune 30, 2022 compared to$49 million in the prior year quarter, an increase of 45%, due to increased business volume and travel activity over the prior year quarter. Regional Operations rooms revenue was$127 million for the six months endedJune 30, 2022 compared to$90 million in the prior year period, an increase of 42%, due to an increase in business volume and travel activity over the prior year period, which was negatively affected by midweek hotel closures at certain properties and operational restrictions related to the pandemic primarily during the first quarter of 2021. Regional Operations food and beverage revenue was$106 million for the three months endedJune 30, 2022 compared to$69 million in the prior year quarter, an increase of 53%, and Regional Operations entertainment, retail and other revenue was$49 million for the three months endedJune 30, 2022 compared to$30 million in the prior year quarter, an increase of 60%, due primarily to increased business volume compared to the prior quarter. Regional Operations food and beverage revenue was$197 million for the six months endedJune 30, 2022 compared to$120 million in the prior year period, an increase of 65% and Regional Operations entertainment, retail and other revenue was$88 million for the six months endedJune 30, 2022 compared to$54 million in the prior year period, an increase of 64%, due primarily to increased business volume and the prior year period being negatively affected by operational restrictions related to pandemic. 34 --------------------------------------------------------------------------------
The following table shows key gaming statistics for
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(Dollars in millions)
VIP Table Games Turnover $ 684 $ 2,590 $ 1,647 $ 4,963
VIP Table Games Win $ 24 $ 71 $ 47 $ 149
VIP Table Games Win % 3.5 % 2.7 % 2.8 % 3.0 %
Main Floor Table Games Drop $ 425 $ 1,258 $ 1,522 $ 2,302
Main Floor Table Games Win $ 105 $ 252 $ 345 $ 482
Main Floor Table Games Win % 24.8 % 20.1 % 22.6 % 21.0 %
MGM China net revenues were $143 million for the three months ended June 30,
2022 compared to $311 million in the prior year quarter, a decrease of 54% and
$411 million for the six months ended June 30, 2022 compared to $607 million in
the prior year period, a decrease of 32%, due to the current and prior year
period being significantly impacted by travel and entry restrictions in Macau
with the current year period being more negatively affected by restrictions
related to the increasing spread of COVID-19.
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$10 million and$75 million for the three months endedJune 30, 2022 and 2021, respectively, and$22 million and$133 million for the six months endedJune 30, 2022 and 2021, respectively, which decreased for the respective comparative periods due primarily to the termination of theCityCenter management agreement, as discussed above. 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 13
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 measures" below.
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(In thousands)
Las Vegas Strip Resorts $ 825,267 $ 396,805 $ 1,418,901 $ 504,924
Regional Operations 339,850 318,348 653,129 560,330
MGM China (52,091) 8,581 (77,747) 13,356
Corporate and other (193,292) (106,977) (404,145) (243,968)
Adjusted EBITDAR $ 919,734 $ 1,590,138
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Las Vegas Strip Resorts Adjusted Property EBITDAR was$825 million for the three months endedJune 30, 2022 compared to$397 million in the prior year quarter, an increase of 108%. Las Vegas Strip Resorts Adjusted Property EBITDAR margin decreased to 38.6% for the three months endedJune 30, 2022 compared to 39.5% in the prior year quarter due to an increase in contribution from lower margin non-gaming outlets and venues compared to the prior year quarter. Las Vegas Strip Resorts Adjusted Property EBITDAR was$1.4 billion for the six months endedJune 30, 2022 compared to$505 million in the prior year period, an increase of 181%. Las Vegas Strip Resorts Adjusted Property EBITDAR margin increased to 37.3% for the six months endedJune 30, 2022 compared to 32.6% in the prior year period as the current year period benefited from the increase in revenues and the realized benefits of cost savings initiatives, partially offset by an increase in contribution from lower-margin non-gaming outlets and venues primarily in the second quarter of the current year period.
Regional Operations
Regional Operations Adjusted Property EBITDAR was$340 million for the three months endedJune 30, 2022 compared to$318 million in the prior year quarter, an increase of 7%. Regional Operations Adjusted Property EBITDAR margin decreased to 35.4% for the three months endedJune 30, 2022 compared to 37.2% in the prior year quarter due primarily to an increase in contribution from lower margin non-gaming outlets and venues. Regional Operations Adjusted Property EBITDAR was$653 million for the six months endedJune 30, 2022 compared to$560 million in the prior year period, an increase of 17%. Regional Operations Adjusted Property EBITDAR margin decreased to 35.3% for the six months endedJune 30, 2022 compared to 35.7% in the prior year period due primarily to an increase in contribution from lower margin non-gaming outlets and venues.
MGM China Adjusted Property EBITDAR was a loss of$52 million for the three months endedJune 30, 2022 compared to Adjusted Property EBITDAR of$9 million in the prior year quarter. The decrease was due primarily to the decrease in revenues, discussed above. License fee expense was$3 million in the current quarter and$5 million in the prior year quarter.MGM China Adjusted Property EBITDAR was a loss of$78 million for the six months endedJune 30, 2022 compared to Adjusted Property EBITDAR of$13 million in the prior year period. The decrease was due primarily to the decrease in revenues, discussed above, and the current year period included an$18 million charge related to litigation reserves. License fee expense was$7 million and$11 million for the six months endedJune 30, 2022 and 2021, respectively. 36 --------------------------------------------------------------------------------
Supplemental Information - Same-store Results of Operations
The following table presents the financial results ofLas Vegas Strip Resorts on a same-store basis for the three and six months endedJune 30, 2022 and 2021. Same-Store Adjusted Property EBITDAR is a non-GAAP measure, discussed within "Non-GAAP measures" below. Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 (In thousands) Las Vegas Strip Resorts net revenues$ 2,137,176 $
1,004,568
(532,840) - (844,133) -
Las Vegas Strip Resorts Adjusted Property EBITDAR
(226,332) - (347,552) -
Las Vegas Strip Resorts Same-Store Adjusted
Property EBITDAR $ 598,935 $
396,805
(1)Excludes the net revenues and Adjusted Property EBITDAR of The Cosmopolitan and Aria.
Income (loss) from Unconsolidated Affiliates
The following table summarizes information related to our share of operating income (loss) from unconsolidated affiliates:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(In thousands)
CityCenter $ - $ 90,212 $ - $ 87,380
VICI BREIT Venture 12,116 38,954 51,051 77,917
BetMGM (71,229) (45,979) (163,223) (105,215)
Other 3,530 151 9,751 (2,323)
$ (55,583) $ 83,338 $ (102,421) $ 57,759 In
InSeptember 2021 , we completed the acquisition of the 50% ownership interest inCityCenter held byInfinity World and now own 100% of the equity interest inCityCenter . Accordingly, we no longer account for our interest inCityCenter under the equity method of accounting, and we now consolidateCityCenter in our financial statements. InApril 2022 , we completed the VICI Transaction pursuant to which the assets and liabilities of MGP were derecognized, which included theOperating Partnership's investment in VICI BREIT Venture. Accordingly, we no longer have an ownership interest in VICI BREIT Venture.
Non-operating Results
Interest Expense
Gross interest expense was$137 million and$203 million for the three months endedJune 30, 2022 and 2021, respectively, and$333 million and$399 million for the six months endedJune 30, 2022 and 2021, respectively. The decrease from the respective prior year periods is due primarily to a decrease in debt outstanding as a result of the derecognition of theOperating Partnership's senior notes in connection with the deconsolidation of MGP. See Note 7 to the accompanying consolidated financial statements for discussion on long-term debt and see "Liquidity and Capital Resources" for discussion on issuances and repayments of long-term debt and other sources and uses of cash. 37 --------------------------------------------------------------------------------
Other, net
Other expense, net was$43 million and$9 million for the three and six months endedJune 30, 2022 , respectively, and other income, net was$87 million and$120 million for the three and six months endedJune 30, 2021 , respectively. The prior year periods included an$86 million gain on investment which was related primarily to the change in measurement of an equity instrument that previously qualified for the measurement alternative under ASC 321, and which was discontinued upon the equity interest having a readily determinable fair value as a result of becoming exchange-traded.
Income Taxes
Our effective income tax rate was a provision of 26.1% and 25.3% on income
before income taxes for the three and six months ended
The effective rate for the three and six months endedJune 30, 2022 was driven primarily by tax expense recorded on the VICI Transaction and was unfavorably impacted by an increase in the valuation allowance forMacau deferred tax assets and by losses inMacau that we could not benefit, partially offset by the favorable impact of a decrease in state deferred tax liabilities as a result of the VICI Transaction. The effective rate for the three and six months endedJune 30, 2021 was unfavorably impacted by losses inMacau that we could not benefit, partially offset by the release of tax reserves in conjunction with the closure of aNew Jersey state income tax audit.
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, 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 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 eliminated 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 measures
"Same-Store Adjusted Property EBITDAR" is Adjusted Property EBITDAR further adjusted to exclude the Adjusted Property EBITDAR of acquired operating segments from the date of acquisition through the end of the reporting period. Accordingly, we have excluded the Adjusted Property EBITDAR of Aria for periods subsequent to its acquisition onSeptember 27, 2021 and The Cosmopolitan subsequent to its acquisition onMay 17, 2022 in Same-Store Adjusted Property EBITDAR for the periods indicated. Same-Store Adjusted Property EBITDAR is a non-GAAP measure and is presented solely as a supplemental disclosure to reported GAAP measures because management believes this measure is useful in providing meaningful period-to-period comparisons of the results of our operations for operating segments that were consolidated for the full period presented to assist users of the financial statements in reviewing operating performance over time. Same-Store Adjusted Property EBITDAR should not be viewed as a measure of overall operating performance, considered in isolation, or as an alternative to our reportable segment GAAP measure or net income, or as an alternative to any other measure determined in accordance with generally accepted accounting principles, because this measure is not presented on a GAAP basis, and is provided for the limited purposes discussed herein. In addition, Same-Store Adjusted Property EBITDAR may not be defined in the same manner by all companies and, as a result, may not be comparable to similarly titled non-GAAP financial measures of other companies, and such differences may be material. A reconciliation of our reportable segment Adjusted Property EBITDAR GAAP measure to Same-Store Adjusted Property EBITDAR is included herein. "Adjusted EBITDAR" is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, property transactions, net, gain on REIT transactions, net, rent expense associated with triple-net operating and ground leases, gain related toCityCenter's sale of Harmon land recorded within 38 --------------------------------------------------------------------------------
income from unconsolidated affiliates, and income from unconsolidated affiliates related to investments in real estate ventures.
Adjusted EBITDAR information is a non-GAAP measure that 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. In addition,
management excludes rent expense associated with triple-net operating leases and
ground leases. Management believes excluding rent expense associated with
triple-net operating leases and ground leases provides useful information to
analysts, lenders, financial institutions, and investors when valuing the
Company, as well as comparing the Company's 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, an
indicator of our performance, considered in isolation, or construed as an
alternative to operating income or net income, or as an alternative to cash
flows from operating activities, as a measure of liquidity, or as an alternative
to any other measure determined in accordance with generally accepted accounting
principles because this measure is not presented on a GAAP basis and excludes
certain expenses, including the rent expense associated with our triple-net
operating and ground leases, and is provided for the limited purposes discussed
herein. In addition, other companies in the gaming and hospitality industries
that report Adjusted EBITDAR may calculate Adjusted EBITDAR in a different
manner and such differences may be material. 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. A reconciliation of GAAP net income
(loss) to Adjusted EBITDAR is included herein.
39
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The following table presents a reconciliation of net income (loss) attributable
to
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(In thousands)
Net income (loss) attributable to MGM Resorts
International $ 1,783,937 $ 104,753 $ 1,765,921 $ (227,076)
Plus: Net loss attributable to noncontrolling
interests (161,312) (14,449) (178,089) (18,558)
Net income (loss) 1,622,625 90,304 1,587,832 (245,634)
Provision (benefit) for income taxes 572,839 34,826 536,498 (59,872)
Income (loss) before income taxes 2,195,464 125,130 2,124,330 (305,506)
Non-operating (income) expense:
Interest expense, net of amounts capitalized 136,559 202,772 332,650 398,067
Non-operating items from unconsolidated affiliates 6,120 23,216 21,253 44,052
Other, net 43,308 (87,358) 9,006 (119,543)
185,987 138,630 362,909 322,576
Operating income 2,381,451 263,760 2,487,239 17,070
Preopening and start-up expenses 542 90 976 95
Property transactions, net (19,395) (28,906) 35,343 (2,835)
Depreciation and amortization 366,255 283,625 654,893 574,176
Gain on REIT transactions, net (2,277,747) - (2,277,747) -
Triple-net operating lease and ground lease rent
expense 483,454 189,609 745,906 379,229
Gain related to sale of Harmon land -
unconsolidated affiliate - (49,755) - (49,755)
Income from unconsolidated affiliates related to
real estate ventures (14,826) (41,666) (56,472) (83,338)
Adjusted EBITDAR $ 919,734 $ 1,590,138 Guarantor Financial Information
As ofJune 30, 2022 , 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 byMGM 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. Prior to the VICI Transaction, certain of our guarantor subsidiaries collectively ownedOperating Partnership units and each subsidiary accounted for its respective investment under the equity method within the summarized financial information presented below. These subsidiaries 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. Additionally, assets held for sale and liabilities related to assets held for sale 40 --------------------------------------------------------------------------------
associated with The Mirage and Gold Strike Tunica are included within current assets and other current liabilities, respectively, within the summarized financial information.
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