MGM Resorts International reports recent developments and preliminary third quarter results (États-Unis)
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MGM Resorts International reports recent developments and preliminary third quarter results (États-Unis)
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Catégorie : Amérique du Nord et Antilles - États-Unis - Économie du secteur
- Chiffres et études
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Expects To Receive $125 Million From Macau Joint Venture; Receives Offer For 50% Interest In Borgata
MGM Resorts International (NYSE: MGM) today announced certain recent developments and its preliminary expectations of financial results for the third quarter of 2010. The operating results in this release reflect preliminary expectations of financial results for the third quarter of 2010, have not been reviewed by the Company's auditors, and are subject to change. The Company expects to report its full results for the quarter, and conduct a conference call to discuss its earnings, during the week of November 1, 2010.
Recent Developments
The Company expects to receive approximately $125 million from MGM Macau during October 2010, which represents a partial repayment of principal and accrued interest on the Company's interest and non-interest bearing notes to that entity.
The Company recently received an offer for its 50% economic interest in the Borgata Hotel Casino & Spa ("Borgata") based on an enterprise value of $1.35 billion for the entire asset. The Company's Board of Directors has authorized submission of this offer to Boyd Gaming Corporation, which owns the other 50% interest, in accordance with the right of first refusal provisions included in the joint venture agreement. Based on Borgata's September debt balances, the offer equates to slightly in excess of $250 million for the Company's 50% interest. This is less than the carrying value of the Company's investment in Borgata; therefore, the Company will record a pre-tax impairment charge of approximately $128 million in the third quarter of 2010. The consummation of any such transaction as a result of the offer is subject to negotiation of final documents, due diligence, and regulatory approval.
The Company expects its previously announced sale of short-term land leases and associated real property parcels underlying Borgata to close in the fourth quarter of 2010, with net proceeds to the Company's New Jersey trust account of approximately $71 million.
The Company's New Jersey trust account received a distribution of approximately $105 million from Borgata during the third quarter. The balance in the trust account was approximately $114 million at September 30, 2010. All amounts in the trust account, including the proceeds from the sale of the Company's Borgata interest and the underlying land parcels, will be distributed to the Company upon consummation of the sale of the Company's Borgata interest.
As of September 30, 2010, the Company recognized an increase of $232 million in its total net obligation under its CityCenter completion guarantee, and a corresponding increase in its investment in CityCenter. The increase primarily reflects revisions to prior estimates based on the Company's assessment of the most current information derived from the CityCenter close-out and litigation processes. This accrual does not reflect certain potential recoveries that CityCenter is pursuing as part of the litigation process. The Company reviewed its investment in CityCenter due to such increase and expects to record a pre-tax impairment charge of approximately $182 million in the third quarter.
Preliminary Earnings Results
The Company expects a third quarter diluted loss per share (EPS) of approximately $0.72 compared to a loss of $1.70 per share in the prior year third quarter. The current year results include expected pre-tax impairment charges totaling $357 million, or $0.51 per diluted share, net of tax, including the impairment charge related to the Company's investment in CityCenter, a pre-tax charge of $46 million related to impairment of CityCenter's residential real estate inventory, and the impairment charge related to the Company's Borgata investment. The prior year results include pre-tax impairment charges totaling $1.17 billion, or $1.72 loss per diluted share, net of tax, including a pre-tax impairment charge of $956 million related to the Company's investment in CityCenter and a pre-tax impairment charge of $203 million related to impairment of CityCenter's residential real estate under development.
The following table lists these and other items which affect the comparability of the current and prior year quarterly results (approximate EPS impact shown, net of tax, per diluted share; negative amounts represent charges to income):
Three months ended September 30, 2010 2009
Preopening and start-up expenses $ — $ (0.01)
Property transactions net:
Investment in CityCenter
impairment charge (0.27) (1.40)
Investment in Borgata
impairment charge (0.17) —
Other property transactions, net (0.01) (0.02)
Income (loss) from unconsolidated affiliates:
CityCenter residential inventory
impairment charge (0.07) (0.30)
CityCenter forfeited residential
deposits income 0.02 —
Borgata insurance proceeds — 0.02
Preliminary Operating Results
Net revenue for the third quarter of 2010 is expected to be approximately $1.56 billion. Excluding reimbursed costs revenue mainly related to the Company's management of CityCenter (approximately $89 million in the 2010 third quarter and $16 million in the 2009 third quarter), net revenue is expected to be approximately $1.47 billion, a decrease of 3% from 2009. Reimbursed costs revenue represents reimbursement of costs, primarily payroll-related, incurred by the Company in connection with the provision of management services.
Las Vegas Strip REVPAR(1) was $97 for the third quarter of 2010, a decrease of 2% from the third quarter of 2009, with occupancy of 93% and an average daily rate of $105. Bellagio and Mandalay Bay both recorded REVPAR increases in the third quarter.
Third quarter total casino revenue was approximately 9% lower than the prior year, with slots revenue down approximately 3% for the quarter. The Company's table games volume, excluding baccarat, was down 7% in the quarter, while baccarat volume was down 6% compared to the prior year quarter. The overall table games hold percentage was lower in 2010 than the prior year quarter; in the current year third quarter the hold percentage was above the midpoint of the Company's normal 18% to 22%, while in the 2009 quarter it was above the high end of the range.
Operating loss for the third quarter of 2010 is expected to be approximately $206 million which includes the CityCenter investment impairment, the Borgata impairment and the Company's share of the CityCenter residential impairment charge discussed further below. Prior year operating loss was $963 million and included an impairment charge related to the Company's investment in CityCenter and the Company's share of a CityCenter residential impairment charge.
Adjusted Property EBITDA(2) attributable to wholly-owned operations is expected to be approximately $314 million in the 2010 quarter, down 13% compared to the prior year.
Income from Unconsolidated Affiliates
The Company expects a loss from unconsolidated affiliates of $7 million in the third quarter of 2010 compared to a loss of $133 million in the prior year third quarter.
MGM Macau is expected to earn operating income of $61 million in the third quarter of 2010 – including depreciation expense of $22 million – compared to operating income of $50 million in the 2009 third quarter – which included depreciation expense of $23 million.
Expected results for CityCenter for the third quarter of 2010 include the following (see schedules accompanying this release for further detail on CityCenter Holdings, LLC's third quarter and year-to-date 2010 results):
• CityCenter expects net revenues of $413 million in the third quarter, including $166 million related to residential operations, of which $28 million related to forfeited residential deposits;
• Aria expects net revenue of $219 million and Adjusted EBITDA of $41 million. Aria's results were positively affected by a high table games hold percentage, which increased Adjusted EBITDA by approximately $26 million;
• Aria's occupancy percentage was 82% and its average daily rate was $175, resulting in REVPAR of $142; and
• CityCenter's recorded an approximately $93 million impairment charge related to its residential inventory due to an increase in estimated final costs of the residential components, and expects to record a $279 million impairment charge related to its Harmon Hotel & Spa component; the Harmon impairment did not affect the Company's loss from unconsolidated affiliates because the Company's 50% share of the impairment charge had been previously recognized by the Company in connection with prior impairments of its investment balance.
The Company recorded its share of CityCenter's results, including adjustments for recognition of basis differences as follows ((expense)/income):
Three months ended September 30, 2010 2009
(In thousands)
Preopening and start-up expenses $ —$ (10,671)
Income (loss) from
unconsolidated affiliates (46,420) (204,333)
Non-operating items from
unconsolidated affiliates (21,199) (758)
Financial Position
At September 30, 2010, the Company had approximately $12.9 billion of indebtedness (with a carrying value of $12.6 billion), including $3.4 billion of borrowings outstanding under its senior credit facility, with available borrowing capacity under the senior credit facility of approximately $1.3 billion.
(1) REVPAR is hotel Revenue per Available Room.
(2) "Adjusted EBITDA" is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, and property transactions, net. "Adjusted Property EBITDA" is Adjusted EBITDA before corporate expense and stock compensation expense. Adjusted EBITDA information is presented solely as a supplemental disclosure to reported GAAP measures because management believes these measures are 1) widely used measures of operating performance in the gaming industry, and 2) a principal basis for valuation of gaming companies.
Management believes that while items excluded from Adjusted EBITDA and Adjusted Property EBITDA may be recurring in nature and should not be disregarded in evaluation of the Company's earnings performance, it is useful to exclude such items when analyzing current results and trends compared to other periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods being presented.
Also, management believes excluded items may not relate specifically to current operating trends or be indicative of future results. For example, pre-opening and start-up expenses will be significantly different in periods when the Company is 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, capital allocation, tax planning, financing and stock compensation awards are all managed at the corporate level. Therefore, management uses Adjusted Property EBITDA as the primary measure of the Company's operating resorts' performance.
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