e10vq
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2010
OR
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 001-10362
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
88-0215232 |
|
|
|
(State or other jurisdiction of
|
|
(I.R.S. Employer Identification No.) |
incorporation or organization) |
|
|
3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109
(Address of principal executive offices Zip Code)
(702) 693-7120
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes þ No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act (Check one):
|
|
|
|
|
|
|
Large accelerated filer þ |
|
Accelerated filer o |
|
Non-accelerated filer o
(Do not check if a smaller reporting company) |
|
Smaller reporting company o |
Indicate
by check mark whether the Registrant is a shell company (as defined
in Rule 12b-2 of the Act): Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date:
|
|
|
Class
Common Stock, $.01 par value
|
|
Outstanding at May 3, 2010
441,274,025 shares |
MGM MIRAGE AND SUBSIDIARIES
FORM 10-Q
I N D E X
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
ASSETS
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
440,587 |
|
|
$ |
2,056,207 |
|
Accounts receivable, net |
|
|
563,101 |
|
|
|
368,474 |
|
Inventories |
|
|
96,367 |
|
|
|
101,809 |
|
Income tax receivable |
|
|
532,992 |
|
|
|
384,555 |
|
Deferred income taxes |
|
|
29,124 |
|
|
|
38,487 |
|
Prepaid expenses and other |
|
|
118,579 |
|
|
|
103,969 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,780,750 |
|
|
|
3,053,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
14,955,546 |
|
|
|
15,069,952 |
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
Investments in and advances to unconsolidated affiliates |
|
|
3,492,021 |
|
|
|
3,611,799 |
|
Goodwill |
|
|
86,353 |
|
|
|
86,353 |
|
Other intangible assets, net |
|
|
343,533 |
|
|
|
344,253 |
|
Deposits and other assets, net |
|
|
351,700 |
|
|
|
352,352 |
|
|
|
|
|
|
|
|
Total other assets |
|
|
4,273,607 |
|
|
|
4,394,757 |
|
|
|
|
|
|
|
|
|
|
$ |
21,009,903 |
|
|
$ |
22,518,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
117,986 |
|
|
$ |
155,796 |
|
Construction payable |
|
|
9,711 |
|
|
|
17,923 |
|
Current portion of long-term debt |
|
|
|
|
|
|
1,079,824 |
|
Accrued interest on long-term debt |
|
|
203,186 |
|
|
|
206,357 |
|
Other accrued liabilities |
|
|
834,947 |
|
|
|
923,701 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,165,830 |
|
|
|
2,383,601 |
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
3,115,419 |
|
|
|
3,031,303 |
|
Long-term debt |
|
|
12,694,671 |
|
|
|
12,976,037 |
|
Other long-term obligations |
|
|
253,245 |
|
|
|
256,837 |
|
|
Commitments and contingencies (Note 4) |
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
|
|
Common stock, $.01 par value: authorized 600,000,000 shares;
Issued and outstanding 441,260,482 and 441,222,251 shares |
|
|
4,413 |
|
|
|
4,412 |
|
Capital in excess of par value |
|
|
3,504,541 |
|
|
|
3,497,425 |
|
Retained earnings |
|
|
273,791 |
|
|
|
370,532 |
|
Accumulated other comprehensive loss |
|
|
(2,007 |
) |
|
|
(1,937 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
|
3,780,738 |
|
|
|
3,870,432 |
|
|
|
|
|
|
|
|
|
|
$ |
21,009,903 |
|
|
$ |
22,518,210 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
1
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Revenues |
|
|
|
|
|
|
|
|
Casino |
|
$ |
610,757 |
|
|
$ |
664,727 |
|
Rooms |
|
|
313,903 |
|
|
|
355,044 |
|
Food and beverage |
|
|
316,156 |
|
|
|
338,397 |
|
Entertainment |
|
|
116,682 |
|
|
|
118,057 |
|
Retail |
|
|
43,889 |
|
|
|
47,949 |
|
Other |
|
|
120,779 |
|
|
|
123,690 |
|
Reimbursed costs |
|
|
93,323 |
|
|
|
13,683 |
|
|
|
|
|
|
|
|
|
|
|
1,615,489 |
|
|
|
1,661,547 |
|
Less: Promotional allowances |
|
|
(158,097 |
) |
|
|
(162,752 |
) |
|
|
|
|
|
|
|
|
|
|
1,457,392 |
|
|
|
1,498,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Casino |
|
|
345,945 |
|
|
|
375,517 |
|
Rooms |
|
|
100,746 |
|
|
|
110,827 |
|
Food and beverage |
|
|
182,612 |
|
|
|
194,327 |
|
Entertainment |
|
|
90,996 |
|
|
|
87,742 |
|
Retail |
|
|
27,999 |
|
|
|
31,621 |
|
Other |
|
|
78,027 |
|
|
|
70,123 |
|
Reimbursed costs |
|
|
93,323 |
|
|
|
13,683 |
|
General and administrative |
|
|
276,054 |
|
|
|
261,240 |
|
Corporate expense |
|
|
24,878 |
|
|
|
24,361 |
|
Preopening and start-up expenses |
|
|
3,494 |
|
|
|
8,071 |
|
Property transactions, net |
|
|
689 |
|
|
|
(195,125 |
) |
Depreciation and amortization |
|
|
163,134 |
|
|
|
176,858 |
|
|
|
|
|
|
|
|
|
|
|
1,387,897 |
|
|
|
1,159,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from unconsolidated affiliates |
|
|
(80,918 |
) |
|
|
15,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(11,423 |
) |
|
|
355,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
Interest income |
|
|
766 |
|
|
|
4,382 |
|
Interest expense, net |
|
|
(264,175 |
) |
|
|
(171,636 |
) |
Non-operating items from unconsolidated affiliates |
|
|
(23,350 |
) |
|
|
(11,131 |
) |
Other, net |
|
|
141,089 |
|
|
|
(1,338 |
) |
|
|
|
|
|
|
|
|
|
|
(145,670 |
) |
|
|
(179,723 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(157,093 |
) |
|
|
175,376 |
|
Benefit (provision) for income taxes |
|
|
60,352 |
|
|
|
(70,177 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(96,741 |
) |
|
$ |
105,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share of common stock |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.22 |
) |
|
$ |
0.38 |
|
|
|
|
|
|
|
|
Diluted |
|
$ |
(0.22 |
) |
|
$ |
0.38 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
2
MGM MIRAGE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(96,741 |
) |
|
$ |
105,199 |
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
163,134 |
|
|
|
176,858 |
|
Amortization of debt discounts, premiums and issuance costs |
|
|
15,497 |
|
|
|
8,200 |
|
Gain on extinguishment of long-term debt |
|
|
(141,755 |
) |
|
|
|
|
Provision for doubtful accounts |
|
|
1,306 |
|
|
|
15,290 |
|
Stock-based compensation |
|
|
9,555 |
|
|
|
8,734 |
|
Business interruption insurance lost profits |
|
|
|
|
|
|
(15,115 |
) |
Property transactions, net |
|
|
689 |
|
|
|
(195,125 |
) |
Loss from unconsolidated affiliates |
|
|
107,762 |
|
|
|
3,463 |
|
Distributions from unconsolidated affiliates |
|
|
11,909 |
|
|
|
20,453 |
|
Deferred income taxes |
|
|
91,106 |
|
|
|
(90,794 |
) |
Change in current assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
21,187 |
|
|
|
(14,892 |
) |
Inventories |
|
|
5,442 |
|
|
|
5,552 |
|
Income taxes receivable and payable |
|
|
(152,102 |
) |
|
|
239,856 |
|
Prepaid expenses and other |
|
|
(14,610 |
) |
|
|
(33,021 |
) |
Accounts payable and accrued liabilities |
|
|
(83,667 |
) |
|
|
(94,607 |
) |
Business interruption insurance recoveries |
|
|
|
|
|
|
8,959 |
|
Other |
|
|
16,379 |
|
|
|
(14,747 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
(44,909 |
) |
|
|
134,263 |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Capital expenditures, net of construction payable |
|
|
(53,942 |
) |
|
|
(58,507 |
) |
Proceeds from sale of Treasure Island, net |
|
|
|
|
|
|
589,587 |
|
Advance to Infinity World |
|
|
|
|
|
|
(100,000 |
) |
Investments in and advances to unconsolidated affiliates |
|
|
(262,000 |
) |
|
|
(383,590 |
) |
Property damage insurance recoveries |
|
|
|
|
|
|
2,542 |
|
Other |
|
|
(292 |
) |
|
|
(3,807 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
(316,234 |
) |
|
|
46,225 |
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Net repayments under bank credit facilities maturities
of 90 days or less |
|
|
(1,275,177 |
) |
|
|
(3,490,000 |
) |
Borrowings under bank credit facilities maturities longer than 90 days |
|
|
1,942,524 |
|
|
|
6,606,892 |
|
Repayments under bank credit facilities maturities longer than 90 days |
|
|
(2,399,037 |
) |
|
|
(2,220,000 |
) |
Issuance of long-term debt |
|
|
845,000 |
|
|
|
|
|
Retirement of senior notes |
|
|
(296,956 |
) |
|
|
|
|
Debt issuance costs |
|
|
(70,654 |
) |
|
|
(21,895 |
) |
Issuance of common stock upon exercise of stock awards |
|
|
|
|
|
|
632 |
|
Other |
|
|
(177 |
) |
|
|
(334 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(1,254,477 |
) |
|
|
875,295 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
Net increase (decrease) for the period |
|
|
(1,615,620 |
) |
|
|
1,055,783 |
|
Change in cash related to assets held for sale |
|
|
|
|
|
|
14,154 |
|
Balance, beginning of period |
|
|
2,056,207 |
|
|
|
295,644 |
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
440,587 |
|
|
$ |
1,365,581 |
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures |
|
|
|
|
|
|
|
|
Interest paid, net of amounts capitalized |
|
$ |
251,849 |
|
|
$ |
174,984 |
|
Federal, state and foreign income taxes paid, net of refunds |
|
|
740 |
|
|
|
(79,219 |
) |
Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Note receivable related to sale of Treasure Island, net |
|
$ |
|
|
|
$ |
154,257 |
|
The accompanying notes are an integral part of these consolidated financial statements.
3
MGM MIRAGE AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION
Organization. MGM MIRAGE (the Company) is a Delaware corporation. As of March 31,
2010, approximately 37% of the outstanding shares of the Companys common stock were owned by
Tracinda Corporation, a Nevada corporation wholly owned by Kirk Kerkorian. Tracinda
Corporation has significant influence with respect to the election of directors and other
matters, but it does not have the power to solely determine these matters. MGM MIRAGE acts
largely as a holding company and, through wholly-owned subsidiaries, owns and/or operates
casino resorts.
The Company owns and operates the following casino resorts in Las Vegas, Nevada:
Bellagio, MGM Grand Las Vegas, The Mirage, Mandalay Bay, Luxor, New York-New York, Monte
Carlo, Excalibur, and Circus Circus Las Vegas. Operations at MGM Grand Las Vegas include
management of The Signature at MGM Grand Las Vegas, a condominium-hotel consisting of three
towers. Other Nevada operations include Circus Circus Reno, Gold Strike in Jean, and Railroad
Pass in Henderson. The Company and its local partners own and operate MGM Grand Detroit in
Detroit, Michigan. The Company also owns and operates two resorts in Mississippi: Beau Rivage
in Biloxi and Gold Strike Tunica. The Company also owns Shadow Creek, an exclusive
world-class golf course located approximately ten miles north of its Las Vegas Strip resorts,
Primm Valley Golf Club at the California/Nevada state line and Fallen Oak golf course in
Saucier, Mississippi. The Company completed the sale of Treasure Island casino resort in March
2009.
MGM MIRAGE Hospitality seeks to leverage the Companys management expertise and
well-recognized brands through strategic partnerships and international expansion
opportunities, both gaming and non-gaming, while focusing on international growth. The Company
has entered into management agreements for casino and non-casino resorts throughout the world
including developments located in the Peoples Republic of China, India, Egypt and the United
Arab Emirates.
The Company owns 50% of CityCenter, located between Bellagio and Monte Carlo. The other
50% of CityCenter is owned by Infinity World Development Corp (Infinity World), a
wholly-owned subsidiary of Dubai World, a Dubai, United Arab Emirates government degree
entity. CityCenter consists of Aria, a 4,000-room casino resort; Mandarin Oriental Las Vegas,
a 400-room non-gaming boutique hotel; Crystals, a 425,000 square foot retail district,
including shops, dining and entertainment venues; and Vdara, a 1,495-room luxury
condominium-hotel. In addition, CityCenter features residential units in the Residences at
Mandarin Oriental225 units and Veerapproximately 670 units. Aria, Vdara, Mandarin Oriental
and Crystals all opened in December 2009 and the residential units within CityCenter began the
closing process in early 2010. The Company receives a management fee of 2% of gross revenues
for the management of Aria and Vdara, and 5% of EBITDA (as defined in the agreements governing
the Companys management of Aria and Vdara). In addition, the Company receives an annual fee
of $3 million for the management of Crystals.
The Company has 50% interests in MGM Grand Macau, Grand Victoria and Silver Legacy. MGM
Grand Macau is a casino resort that opened in December 2007. Pansy Ho Chiu-King owns the other
50% of MGM Grand Macau. Grand Victoria is a riverboat in Elgin, Illinois. An affiliate of
Hyatt Gaming owns the other 50% of Grand Victoria and also operates the resort. Silver Legacy
is located in Reno, adjacent to Circus Circus Reno, and the other 50% is owned by Eldorado
LLC.
The Company also has a 50% economic interest in Borgata Hotel Casino Spa located on
Renaissance Pointe in the Marina area of Atlantic City, New Jersey; the Companys interest is
held in trust and currently offered for sale. Boyd Gaming Corporation owns the other 50% of
Borgata and also operates the resort. See Note 2 for further discussion of Borgata.
The Company owns additional land adjacent to Borgata, a portion of which consists of
common roads, landscaping and master plan improvements, and a portion of which was planned for
a wholly-owned development, MGM Grand Atlantic City. As part of the settlement discussed in
Note 2, the Company has agreed that an affiliate of the Company would withdraw its license
application for this development.
4
Financial statement impact of the Monte Carlo fire. The Company maintains insurance for
both property damage and business interruption relating to catastrophic events, such as the
rooftop fire at Monte Carlo in January 2008. Business interruption insurance covers lost
profits and other costs incurred during the closure period and up to six months following
re-opening.
Non-refundable insurance recoveries received in excess of the net book value of damaged
assets, clean-up and demolition costs, and post-event costs are recognized as income in the
period received or committed based on the Companys estimate of the total claim for property
damage and business interruption compared to the recoveries received at that time. Gains on
insurance recoveries related to business interruption are recorded within General and
administrative expenses and gains related to property damage are recorded within Property
transactions, net. Insurance recoveries related to business interruption are classified as
operating cash flows and recoveries related to property damage are classified as investing
cash flows in the statement of cash flows.
The Company settled its final claim with its insurance carriers related to the Monte
Carlo fire in the first quarter of 2009 for a total of $74 million. The pre-tax impact on the
Companys statements of operations for the period ending March 31, 2009 related to such
insurance recoveries included a $15 million reduction of General and administrative expense
and a $7 million offset to Property transactions, net.
Fair value measurement. Fair value measurements affect the Companys accounting and
impairment assessments of its long-lived assets, investments in unconsolidated affiliates,
goodwill, and other intangibles. Fair value measurements also affect the Companys accounting
for certain of its financial assets and liabilities. Fair value is defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date and is measured according to a hierarchy
that includes: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs,
which are observable inputs for similar assets; or Level 3 inputs, which are unobservable
inputs.
The
Company estimated fair value of its senior credit facility using Level 1 inputs
see Note 3 for further discussion. When assessing impairment of its investments in
unconsolidated affiliates, the Company estimates such fair value using a discounted cash flow
analysis utilizing Level 3 inputs, including market indicators of discount rates and
terminal year capitalization rates.
Reimbursed expenses. The Company recognizes costs reimbursed pursuant to management
services as revenue in the period it incurs the costs. Reimbursed costs relate mainly to the
Companys management of CityCenter and totaled $93 million
and $14 million for the first quarter of 2010 and
2009, respectively.
Recently issued accounting standards. Certain amendments to Accounting Standards
Codification (ASC) Topic 810, Consolidation, become effective for the Company beginning
January 1, 2010. Such amendments include changes to the quantitative approach to determine
the primary beneficiary of a variable interest entity (VIE). An enterprise must determine
if its variable interest or interests give it a controlling financial interest in a VIE by
evaluating whether 1) the enterprise has the power to direct activities of the VIE that have a
significant effect on economic performance, and 2) the enterprise has an obligation to absorb
losses or the right to receive benefits from the entity that could potentially be significant
to the VIE. The amendments to ASC 810 also require ongoing reassessments of whether an
enterprise is the primary beneficiary of a VIE. The adoption of these amendments did not have
a material effect on the Companys consolidated financial statements.
Basis of presentation. As permitted by the rules and regulations of the Securities and
Exchange Commission, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting principles have
been condensed or omitted. These consolidated financial statements should be read in
conjunction with the Companys 2009 annual consolidated financial statements and notes thereto
included in the Companys Annual Report on Form 10-K for the year ended December 31, 2009.
5
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments which include only normal recurring adjustments
necessary to present fairly the Companys financial position as of March 31, 2010 and the
results of its operations and cash flows for the three month periods ended March 31, 2010 and
2009. The results of operations for such periods are not necessarily indicative of the
results to be expected for the full year. Certain reclassifications, which have no effect on
previously reported net income, have been made to the 2009 financial statements to conform to
the 2010 presentation. The prior year reclassifications relate to the classification of
reimbursed costs as separate financial statement line items, while in past periods these costs
were recorded to Other revenues and expenses. The total amount reclassified to reimbursed
costs revenue and expense for the 2009 quarter was $14 million.
NOTE 2 INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Investments in and advances to unconsolidated affiliates consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
CityCenter Holdings, LLC CityCenter (50%) |
|
$ |
2,407,685 |
|
|
$ |
2,546,099 |
|
Marina District Development Company Borgata (50%) |
|
|
469,265 |
|
|
|
466,774 |
|
Elgin Riverboat ResortRiverboat Casino Grand Victoria (50%) |
|
|
293,684 |
|
|
|
296,248 |
|
MGM Grand Paradise Limited Macau (50%) |
|
|
278,662 |
|
|
|
258,465 |
|
Circus and Eldorado Joint Venture Silver Legacy (50%) |
|
|
26,829 |
|
|
|
28,345 |
|
Other |
|
|
15,896 |
|
|
|
15,868 |
|
|
|
|
|
|
|
|
|
|
$ |
3,492,021 |
|
|
$ |
3,611,799 |
|
|
|
|
|
|
|
|
The Company recorded its share of the results of operations of unconsolidated affiliates as follows:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Income (loss) from unconsolidated affiliates |
|
$ |
(80,918 |
) |
|
$ |
15,549 |
|
Preopening and start-up expenses |
|
|
(3,494 |
) |
|
|
(7,881 |
) |
Non-operating items from unconsolidated affiliates |
|
|
(23,350 |
) |
|
|
(11,131 |
) |
|
|
|
|
|
|
|
|
|
$ |
(107,762 |
) |
|
$ |
(3,463 |
) |
|
|
|
|
|
|
|
Included in income (loss) from unconsolidated affiliates for the three months ended March
31, 2010 is the Companys share of an impairment charge relating to completed CityCenter
residential inventory. Due to the completion of construction of the Mandarin Oriental
residential inventory, CityCenter was required to review such inventory for impairment as of
March 31, 2010. CityCenter management determined the fair value less costs to sell was below
its carrying value and as a result recorded an impairment charge. Fair value of the
residential inventory was determined using a discounted cash flow analysis based on
managements current expectations of future cash flows. The key inputs in the discounted cash
flow analysis included estimated sales prices of units currently under contract and new unit
sales, the absorption rate over the sell-out period, and the discount rate. This analysis
resulted in an impairment charge of approximately $171 million. The Company recognized 50% of
such impairment charge, resulting in a pre-tax charge of approximately $86 million.
As construction of additional residential inventory is completed, CityCenter will be
required to measure such inventory at the lower of a) its carrying value, or b) fair value
less costs to sell. It is reasonably possible that the fair value less cost to sell of the
residential inventory at completion will be below the inventorys carrying value, and that the
joint venture will be required to record additional impairment charges in future periods. The
Company would record 50% of any such impairment.
Borgata. In March 2010, the New Jersey Casino Control Commission (the CCC) approved the
Companys settlement agreement with the New Jersey Division of Gaming Enforcement (the DGE)
pursuant to which the Company placed its 50% ownership interest in the Borgata Hotel Casino &
Spa and related leased land in Atlantic City into a divestiture trust. Following the transfer
of these interests into trust, the Company ceased to be regulated by the CCC or the DGE,
except as otherwise provided by the trust agreement and the settlement agreement. Boyd Gaming
Corporations (Boyd) 50% interest is not affected by the settlement.
6
The terms of the settlement mandate the sale of the trust property within a 30-month
period. During the first 18 months, the Company has the right to direct the trustee to sell
the trust property, subject to approval of the CCC. If a sale is not concluded by that time,
the trustee is responsible for selling the trust property during the following 12-month
period. Prior to the consummation of the sale, the divestiture trust will retain any cash
flows received in respect of the trust property, but will pay property taxes and other costs
attributable to the trust property to the extent that minimum trust cash balances are
maintained. The Company is the sole economic beneficiary of the trust and will be permitted to
reapply for a New Jersey gaming license beginning 30 months after the completion of the sale
of the trust assets.
In connection with the settlement agreement discussed above, the Company entered into an
amendment to its joint venture agreement with Boyd to permit the transfer of its 50% ownership
interest into trust in connection with the Companys settlement agreement with the DGE. Boyd
would receive a priority partnership distribution of approximately $31 million (equal to the
excess prior capital contributions by Boyd) upon successful refinancing of the Borgata credit
facility. In addition, Boyd will receive a payment from the trust equal to the greater of $10
million or 3% of the proceeds from the sale of the Companys 50% interest in Borgata.
The Company discontinued the equity method of accounting for Borgata at the point the
assets were placed in the trust and accounts for its rights under the trust arrangement under
the cost method of accounting. Earnings and losses that relate to the investment that were
previously accrued remain as a part of the carrying amount of the investment. Distributions
received by the trust in subsequent periods that do not exceed the Companys share of earnings
will be recognized currently in earnings. However, distributions to the trust in subsequent
periods that exceed the Companys share of earnings for such periods will be applied to reduce
the carrying amount of its investment.
CityCenter. In accordance with the CityCenter joint venture agreement, as amended, and
the CityCenter bank credit facility, as amended, the Company has provided an unlimited
completion and cost overrun guarantee, secured by its interests in the assets of Circus Circus
Las Vegas and certain adjacent undeveloped land see Note 4 for further discussion. The
credit facility allows for the first $244 million of net residential sales proceeds to be used
to fund project costs which would otherwise be funded under the new completion guarantee. The
joint venture agreement provides that the first $494 million of available distributions must
be distributed on a priority basis to Infinity World, with the next $494 million of
distributions made to the Company, and distributions shared equally thereafter.
The Company evaluates its investments in unconsolidated affiliates for impairment when
events or changes in circumstances indicate that the carrying value of such investment may
have experienced an other-than-temporary decline in value. If such conditions exist, the
Company compares the estimated fair value of the investment to its carrying value to determine
if an impairment is indicated and determines whether such impairment is other-than-temporary
based on its assessment of all relevant factors. Estimated fair value is determined using a
discounted cash flow analysis based on estimated future results of the investee and market
indicators of terminal year capitalization rates. The Company evaluates whether or not
indicators of impairment exist related to its CityCenter investment each reporting period.
The Company does not believe circumstances exist as of March 31, 2010 that would cause the
Company to evaluate the CityCenter investment for impairment. However, actual results that
differ significantly from managements estimates, or significant changes in managements
estimates of future cash flows, could cause the Company to undertake such an assessment and
could result in an impairment since the calculation of fair value of the investment is
dependent largely on estimated cash flows.
Summarized balance sheet information for the CityCenter joint venture is provided below:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Current assets |
|
$ |
221,746 |
|
|
$ |
234,383 |
|
Property and other assets, net |
|
|
10,424,875 |
|
|
|
10,499,278 |
|
Current liabilities |
|
|
1,142,569 |
|
|
|
983,419 |
|
Long-term debt and other liabilities |
|
|
2,640,269 |
|
|
|
2,620,869 |
|
Equity |
|
|
6,863,783 |
|
|
|
7,129,373 |
|
7
Summary results of operations for the CityCenter joint venture is provided below:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Net revenues |
|
$ |
259,862 |
|
|
$ |
2,358 |
|
Operating expenses, except preopening expenses |
|
|
(509,069 |
) |
|
|
(4,507 |
) |
Preopening and start-up expenses |
|
|
(6,202 |
) |
|
|
(14,060 |
) |
|
|
|
|
|
|
|
Operating loss |
|
|
(255,409 |
) |
|
|
(16,209 |
) |
Other non-operating income (expense) |
|
|
(55,060 |
) |
|
|
(3,861 |
) |
|
|
|
|
|
|
|
Net loss |
|
$ |
(310,469 |
) |
|
$ |
(20,070 |
) |
|
|
|
|
|
|
|
NOTE 3 LONG-TERM DEBT
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Senior credit facility: |
|
|
|
|
|
|
|
|
Term loans, net |
|
$ |
2,550,615 |
|
|
$ |
2,119,037 |
|
Revolving loans |
|
|
1,050,112 |
|
|
|
3,392,806 |
|
$297 million 9.375% senior subordinated notes, repaid in 2010 |
|
|
|
|
|
|
298,135 |
|
$782 million 8.5% senior notes, due 2010, net |
|
|
781,806 |
|
|
|
781,689 |
|
$400 million 8.375% senior subordinated notes, due 2011 |
|
|
400,000 |
|
|
|
400,000 |
|
$128.7 million 6.375% senior notes, due 2011, net |
|
|
129,095 |
|
|
|
129,156 |
|
$544.7 million 6.75% senior notes, due 2012 |
|
|
544,650 |
|
|
|
544,650 |
|
$484.2 million 6.75% senior notes, due 2013 |
|
|
484,226 |
|
|
|
484,226 |
|
$150 million 7.625% senior subordinated debentures, due 2013, net |
|
|
152,988 |
|
|
|
153,190 |
|
$750 million 13% senior secured notes, due 2013, net |
|
|
709,247 |
|
|
|
707,144 |
|
$508.9 million 5.875% senior notes, due 2014, net |
|
|
507,690 |
|
|
|
507,613 |
|
$650 million 10.375% senior secured notes, due 2014, net |
|
|
634,211 |
|
|
|
633,463 |
|
$875 million 6.625% senior notes, due 2015, net |
|
|
878,129 |
|
|
|
878,253 |
|
$242.9 million 6.875% senior notes, due 2016 |
|
|
242,900 |
|
|
|
242,900 |
|
$732.7 million 7.5% senior notes, due 2016 |
|
|
732,749 |
|
|
|
732,749 |
|
$743 million 7.625% senior notes, due 2017 |
|
|
743,000 |
|
|
|
743,000 |
|
$850 million 11.125% senior secured notes, due 2017, net |
|
|
828,869 |
|
|
|
828,438 |
|
$475 million 11.375% senior notes, due 2018, net |
|
|
463,150 |
|
|
|
462,906 |
|
$845 million 9% senior secured notes, due 2020 |
|
|
845,000 |
|
|
|
|
|
Floating rate convertible senior debentures, due 2033 |
|
|
8,472 |
|
|
|
8,472 |
|
$0.6 million 7% debentures, due 2036, net |
|
|
573 |
|
|
|
573 |
|
$4.3 million 6.7% debentures, due 2096 |
|
|
4,265 |
|
|
|
4,265 |
|
Other notes |
|
|
2,924 |
|
|
|
3,196 |
|
|
|
|
|
|
|
|
|
|
|
12,694,671 |
|
|
|
14,055,861 |
|
Less: Current portion |
|
|
|
|
|
|
(1,079,824 |
) |
|
|
|
|
|
|
|
|
|
$ |
12,694,671 |
|
|
$ |
12,976,037 |
|
|
|
|
|
|
|
|
The Companys senior credit facility was amended and restated in March 2010, and consists
of approximately $2.7 billion in term loans (of which approximately $874 million must be
repaid by October 3, 2011) and a $2.0 billion revolver (of which approximately $302 million
must be repaid by October 3, 2011). As of March 31, 2010, long-term debt due within one year
of the balance sheet date is classified as long-term because the Company has both the intent
and ability to repay these amounts with available borrowings under the senior credit facility
due to additional availability provided in connection with the Companys April 2010
convertible senior note issuance discussed further below.
8
Under the restated senior credit facility, loans and revolving commitments aggregating
approximately $3.6 billion (the extending loans) may be extended to February 21, 2014,
provided that the non-extending loans are repaid and certain other conditions, including pro
forma availability of a minimum of $350 million under the revolver, are satisfied. The
restated loan agreement allows the Company to issue unsecured debt, equity-linked securities
and equity securities to refinance indebtedness maturing prior to October 3, 2011 and the $1.2
billion portion of the obligations owed to non-extending lenders. After the extension of the
senior credit facility, the Company may issue such securities to refinance indebtedness which
matures prior to February 21, 2014. In each case (a) indebtedness issued in amounts in excess
of $250 million over such interim maturities requires ratable prepayment of the credit
facilities in an amount equal to 50% of the net cash proceeds of such excess, and (b) equity
issued in amounts in excess of $500 million over such interim maturities require ratable
prepayment of the credit facilities in an amount equal to 50% of the net cash proceeds of such
excess.
The Company accounted for the modification related to the extending term loans as an
extinguishment of debt because the applicable cash flows under the extended term loans are
more than 10% different from the applicable cash flows under the previous loans. Therefore,
the extended term loans were recorded at fair value resulting in a $181 million gain and a
discount of $181 million to be amortized to interest expense over the term of the extended
term loans. Fair value of the term loans was based on estimates based on trading prices
immediately after the transaction. In addition, the Company wrote off $15 million of existing
debt issuance costs related to the previous term loans and $22 million of new debt issuance
costs incurred related to amounts paid to extending term loan lenders in connection with the
modification. The Company also wrote off $2 million of existing debt issuance costs related to
the reduction in capacity under the non-extending revolver portion of the senior credit
facility. In total, the Company recognized a net pre-tax gain on extinguishment of debt of
$142 million in Other, net non-operating income in the first quarter of 2010.
Interest on the senior credit facility is based on a LIBOR margin of 5.00% (or, in the
case of the non-extending loans, 4.00%), with a LIBOR floor of 2.00%, and a base rate margin
of 4.00% (or, in the case of the non-extending loans, 3.00%), with a base rate floor of 4.00%.
The weighted average interest rate on outstanding borrowings under the senior credit facility
at March 31, 2010 and December 31, 2009 was 6.7% and 6.0%, respectively.
Interest expense, net consisted of the following:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Total interest incurred |
|
$ |
264,175 |
|
|
$ |
239,830 |
|
Interest capitalized |
|
|
|
|
|
|
(68,194 |
) |
|
|
|
|
|
|
|
|
|
$ |
264,175 |
|
|
$ |
171,636 |
|
|
|
|
|
|
|
|
In February 2010, the Company repaid the $297 million of outstanding principal amount of
its 9.375% senior subordinated notes due 2010 at maturity.
In March 2010, the Company issued $845 million of 9.00% senior secured notes due 2020 for
net proceeds to the Company of $826 million. The notes are secured by the equity interests
and substantially all of the assets of MGM Grand Las Vegas and otherwise rank equally in right
of payment with the Companys existing and future senior indebtedness. Upon the issuance of
such notes, the holders of the Companys 13% senior notes due 2013 obtained an equal and
ratable lien in all collateral securing these notes. The Company used the net proceeds from
the issuance to permanently repay approximately $820 million of loans previously outstanding
under its credit facility.
In April 2010, the Company issued $1.15 billion of 4.25% convertible senior notes due
2015 for net proceeds to the Company of $1.12 billion. The notes are general unsecured
obligations of the Company and rank equally in right of payment with the Companys other
existing senior indebtedness. The Company used the net proceeds from issuance to temporarily
repay amounts outstanding under its senior credit facility. After application of such
proceeds, the Company had approximately $1.48 billion of availability under the revolving
portion of the senior credit facility, of which approximately $1.12 billion was restricted for
use to retire future debt maturities or permanently reduce commitments under the senior credit
facility, and approximately $900 million of excess cash in bank. The notes are convertible at
an initial conversion rate of approximately 53.83 shares of the Companys common stock per
$1,000 principal amount of the notes, representing an initial conversion price of
approximately $18.58 per share of the Companys common stock. In connection with the
offering, the Company entered into capped call transactions to reduce the potential dilution
of the Companys stock upon conversion of the notes. The capped call transactions have a cap
price equal to approximately $21.86. The Company paid approximately $81 million for the
capped call transactions, which will be reflected as a decrease in Capital in excess of par
value net of associated tax benefits.
9
At March 31, 2010, the Company was required under its senior credit facility to maintain
a minimum trailing annual EBITDA (as defined) of $1.0 billion. Additionally, the Company is
limited to $400 million of annual capital expenditures (as defined) during 2010. At March 31,
2010, the Company was in compliance with the minimum EBITDA and maximum capital expenditures
covenants.
The estimated fair value of the Companys long-term debt at March 31, 2010 was
approximately $11.2 billion, versus its book value of $12.7 billion. At December 31, 2009, the
estimated fair value of the Companys long-term debt was approximately $12.9 billion, versus
its book value of $14.1 billion. The estimated fair value of the Companys senior and senior
subordinated notes was based on quoted market prices; the fair value of the Companys senior
credit facility was determined using estimates based on recent trading prices.
NOTE 4
COMMITMENTS AND CONTINGENCIES
CityCenter completion guarantee. As discussed in Note 2, the Company entered into a
completion guarantee requiring an unlimited completion and cost overrun guarantee from the
Company, secured by its interests in the assets of Circus Circus Las Vegas and certain
adjacent undeveloped land. Also affecting the potential exposure under the completion
guarantee is the ability to utilize up to $244 million of net residential proceeds to fund
construction costs, though the timing of receipt of such proceeds is uncertain.
As of March 31, 2010, the Company has funded $262 million under the completion
guarantee. The Company has recorded a receivable from CityCenter of $217 million related to
these amounts, which is net of residential proceeds received and used by CityCenter on
construction expenditures. At March 31, 2010, the Company had a remaining estimated total net
obligation under the completion guarantee of $105 million which represents the $150 million
low end of its estimated range for its total net obligation less $45 million funded to date
that is not subject to be refunded to the Company through residential proceeds. The Company
believes that it is reasonably possible its total net obligation may be up to $300 million, which includes certain offsets to the amounts claimed by the Companys
general contractors.
CityCenter
construction litigation.
On or about March 24, 2010, Perini Building Company, Inc., general contractor for the CityCenter development project
(the Project), filed a lawsuit in the Eighth Judicial District Court for Clark County, State of Nevada,
Case No. A-10-612676, against MGM MIRAGE Design Group (a wholly-owned subsidiary of the Company which was the
original party to the Perini construction agreement) and certain direct or indirect subsidiaries of CityCenter Holdings,
LLC (the CityCenter Owners). Perini asserts that the Project was substantially completed, but the defendants
failed to pay Perini approximately $490 million allegedly due and owing under the construction agreement for labor,
equipment and materials expended on the Project. The complaint further charges the defendants with failure to provide
timely and complete design documents, late delivery to Perini of design changes, mismanagement of the change order process,
obstruction of Perini's ability to complete the Harmon Hotel & Spa component, and fraudulent inducement of Perini
to compromise significantly amounts due for its general conditions.
The complaint advances claims for breach of contract,
breach of the implied covenant of good faith and fair dealing, tortious breach of the implied covenant of good
faith and fair dealing, unjust enrichment and promissory estoppel, and fraud and intentional misrepresentation.
Perini seeks compensatory damages, punitive damages, attorneys fees and costs.
On or about April 29, 2010,
Perini served an amended complaint in this case which joins as defendants many owners
of CityCenter residential condominium units (the Condo Owner
Defendants), adds a count for foreclosure of
Perinis recorded master mechanics lien against the CityCenter property in the amount of $491,240,000,
and asserts the priority of this mechanics lien over the interests of the
CityCenter Owners, the Condo Owner Defendants and the Project lenders in the CityCenter property.
The Company and the
other defendants dispute Perinis allegations, and contend that the defendants are entitled to substantial
amounts from Perini, including offsets against amounts claimed to be owed to Perini and its subcontractors and
damages based on breach of their contractual and other duties to CityCenter, duplicative payment requests,
non-conforming work, lack of proof of alleged work performance,
defective work related to the Harmon Hotel &
Spa component, property damage and Perinis failure to perform its obligations to pay Project subcontractors and
to prevent filing of liens against the Project. The Company and the CityCenter Owner defendants intend to
vigorously assert and protect their interests in the lawsuit.
Other guarantees. The Company is party to various guarantee contracts in the normal
course of business, which are generally supported by letters of credit issued by financial
institutions. The Companys senior credit facility limits the amount of letters of credit
that can be issued to $250 million, and the amount of available borrowings under the senior
credit facility is reduced by any outstanding letters of credit. At March 31, 2010, the
Company had provided $37 million of total letters of credit. Though not subject to a letter
of credit, the Company has an agreement with the Nevada Gaming Control Board to maintain $113
million of cash at the corporate level to support normal bankroll requirements at the
Companys Nevada operations.
10
Other litigation. The Company is a party to various legal proceedings, most of which
relate to routine matters incidental to its business. Management does not believe that the
outcome of such proceedings will have a material adverse effect on the Companys financial
position or results of operations.
NOTE 5 INCOME PER SHARE OF COMMON STOCK
The weighted-average number of common and common equivalent shares used in the
calculation of basic and diluted earnings per share consisted of the following:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Weighted-average common shares outstanding
(used in the calculation of basic earnings per share) |
|
|
441,240 |
|
|
|
276,556 |
|
Potential dilution from share-based awards |
|
|
|
|
|
|
214 |
|
|
|
|
|
|
|
|
Weighted-average common and common equivalent shares
(used in the calculation of diluted earnings per share) |
|
|
441,240 |
|
|
|
276,770 |
|
|
|
|
|
|
|
|
The Company had a loss from continuing operations for the three months ended March 31,
2010. Therefore, approximately 28.0 million and 24.6 million shares underlying outstanding
share-based awards were excluded from the computation of diluted earnings per share for the
three months ended March 31, 2010 and 2009, respectively, because to include these awards
would be anti-dilutive.
NOTE 6 COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) consisted of the following:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Net income (loss) |
|
$ |
(96,741 |
) |
|
$ |
105,199 |
|
Valuation adjustment to M Resort note, net of taxes |
|
|
|
|
|
|
962 |
|
Currency translation adjustments |
|
|
|
|
|
|
629 |
|
Other |
|
|
(70 |
) |
|
|
165 |
|
|
|
|
|
|
|
|
|
|
$ |
(96,811 |
) |
|
$ |
106,955 |
|
|
|
|
|
|
|
|
NOTE 7 STOCK-BASED COMPENSATION
Activity under share-based payment plans. As of March 31, 2010, the Company had an
aggregate of approximately 14 million shares of common stock available for grant as
share-based awards under the Companys omnibus incentive plan. A summary of activity under
the Companys share-based payment plans for the three months ended March 31, 2010 is presented
below:
Stock options and stock appreciation rights (SARs)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
Shares |
|
|
Exercise |
|
|
|
(000s) |
|
|
Price |
|
Outstanding at January 1, 2010 |
|
|
28,211 |
|
|
$ |
23.17 |
|
Granted |
|
|
18 |
|
|
|
11.82 |
|
Exercised |
|
|
(2 |
) |
|
|
10.64 |
|
Forfeited or expired |
|
|
(1,192 |
) |
|
|
24.39 |
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2010 |
|
|
27,035 |
|
|
|
23.11 |
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2010 |
|
|
16,738 |
|
|
|
25.60 |
|
|
|
|
|
|
|
|
|
As of March 31, 2010, there was a total of $52 million of unamortized compensation
related to stock options and stock appreciation rights expected to vest, which is expected to
be recognized over a weighted-average period of 1.9 years.
11
Restricted stock units (RSUs)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
Shares |
|
|
Grant-Date |
|
|
|
(000s) |
|
|
Fair Value |
|
Nonvested at January 1, 2010 |
|
|
1,080 |
|
|
$ |
15.85 |
|
Granted |
|
|
|
|
|
|
|
|
Vested |
|
|
(54 |
) |
|
|
18.82 |
|
Forfeited |
|
|
(13 |
) |
|
|
16.13 |
|
|
|
|
|
|
|
|
|
Nonvested at March 31, 2010 |
|
|
1,013 |
|
|
|
15.69 |
|
|
|
|
|
|
|
|
|
As of March 31, 2010, there was a total of $49 million of unamortized compensation
related to RSUs which is expected to be recognized over a weighted-average period of 1.8
years.
The following table includes additional information related to stock options, SARs and
RSUs:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Intrinsic value of share-based awards exercised or RSUs vested |
|
$ |
596 |
|
|
$ |
169 |
|
Income tax benefit from share-based awards exercised or RSUs vested |
|
|
203 |
|
|
|
59 |
|
Proceeds from stock option exercises |
|
|
|
|
|
|
632 |
|
In 2009, the Company began to net settle stock option exercises, whereby shares of common
stock are issued equivalent to the intrinsic value of the option less applicable taxes.
Accordingly, the Company no longer receives proceeds from the exercise of stock options.
Recognition of compensation cost. Compensation cost was recognized as follows:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Compensation cost: |
|
|
|
|
|
|
|
|
Stock options and SARs |
|
$ |
5,797 |
|
|
$ |
5,347 |
|
RSUs |
|
|
5,162 |
|
|
|
5,099 |
|
|
|
|
|
|
|
|
Total compensation cost |
|
|
10,959 |
|
|
|
10,446 |
|
Less: CityCenter reimbursed cost |
|
|
(1,404 |
) |
|
|
(1,689 |
) |
Less: Compensation cost capitalized |
|
|
|
|
|
|
(23 |
) |
|
|
|
|
|
|
|
Compensation cost recognized as expense |
|
|
9,555 |
|
|
|
8,734 |
|
Less: Related tax benefit |
|
|
(3,325 |
) |
|
|
(3,018 |
) |
|
|
|
|
|
|
|
Compensation expense, net of tax benefit |
|
$ |
6,230 |
|
|
$ |
5,716 |
|
|
|
|
|
|
|
|
Compensation cost for stock options and SARs is based on the fair value of each award,
measured by applying the Black-Scholes model on the date of grant, using the following
weighted-average assumptions:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2010 |
|
|
2009 |
|
|
Expected volatility |
|
|
76 |
% |
|
|
74 |
% |
Expected term |
|
4.8 years |
|
|
4.7 years |
|
Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
Risk-free interest rate |
|
|
2.5 |
% |
|
|
1.6 |
% |
Forfeiture rate |
|
|
4.8 |
% |
|
|
3.4 |
% |
Weighted-average fair value of options and SARS granted |
|
$ |
7.29 |
|
|
$ |
9.46 |
|
Expected volatility is based in part on historical volatility and in part on implied
volatility based on traded options on the Companys stock. The expected term considers the
contractual term of the option as well as historical exercise and forfeiture behavior. The
risk-free interest rate is based on the rates in effect on the grant date for U.S. Treasury
instruments with maturities matching the relevant expected term of the award.
12
NOTE 8 PROPERTY TRANSACTIONS, NET
Net property transactions consisted of the following:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Write-downs and impairments |
|
$ |
744 |
|
|
$ |
2,028 |
|
Insurance recoveries (Monte Carlo fire) |
|
|
|
|
|
|
(7,186 |
) |
Gain on sale of Treasure Island |
|
|
|
|
|
|
(190,370 |
) |
Net (gains) losses on sale or disposal of fixed assets |
|
|
(55 |
) |
|
|
403 |
|
|
|
|
|
|
|
|
|
|
$ |
689 |
|
|
$ |
(195,125 |
) |
|
|
|
|
|
|
|
NOTE 9 CONSOLIDATING CONDENSED FINANCIAL INFORMATION
The Companys subsidiaries (excluding MGM Grand Detroit, LLC and certain minor
subsidiaries) have fully and unconditionally guaranteed, on a joint and several basis, payment
of the senior credit facility, the senior notes and the senior subordinated notes. Separate
condensed financial statement information for the subsidiary guarantors and non-guarantors as
of March 31, 2010 and December 31, 2009 and for the three month periods ended March 31, 2010
and 2009 is as follows:
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2010 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
752,015 |
|
|
$ |
937,047 |
|
|
$ |
91,688 |
|
|
$ |
|
|
|
$ |
1,780,750 |
|
Property and equipment, net |
|
|
|
|
|
|
14,286,117 |
|
|
|
681,401 |
|
|
|
(11,972 |
) |
|
|
14,955,546 |
|
Investments in subsidiaries |
|
|
17,868,275 |
|
|
|
479,699 |
|
|
|
|
|
|
|
(18,347,974 |
) |
|
|
|
|
Investments in and advances to
unconsolidated affiliates |
|
|
|
|
|
|
3,213,359 |
|
|
|
278,662 |
|
|
|
|
|
|
|
3,492,021 |
|
Other non-current assets |
|
|
171,572 |
|
|
|
485,633 |
|
|
|
124,381 |
|
|
|
|
|
|
|
781,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
18,791,862 |
|
|
$ |
19,401,855 |
|
|
$ |
1,176,132 |
|
|
$ |
(18,359,946 |
) |
|
$ |
21,009,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
316,271 |
|
|
$ |
815,178 |
|
|
$ |
34,381 |
|
|
$ |
|
|
|
$ |
1,165,830 |
|
Intercompany accounts |
|
|
(559,707 |
) |
|
|
485,709 |
|
|
|
73,998 |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
3,115,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,115,419 |
|
Long-term debt |
|
|
11,946,353 |
|
|
|
298,318 |
|
|
|
450,000 |
|
|
|
|
|
|
|
12,694,671 |
|
Other long-term obligations |
|
|
192,788 |
|
|
|
59,834 |
|
|
|
623 |
|
|
|
|
|
|
|
253,245 |
|
Stockholders equity |
|
|
3,780,738 |
|
|
|
17,742,816 |
|
|
|
617,130 |
|
|
|
(18,359,946 |
) |
|
|
3,780,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
18,791,862 |
|
|
$ |
19,401,855 |
|
|
$ |
1,176,132 |
|
|
$ |
(18,359,946 |
) |
|
$ |
21,009,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2009 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
2,143,019 |
|
|
$ |
810,991 |
|
|
$ |
99,491 |
|
|
$ |
|
|
|
$ |
3,053,501 |
|
Property and equipment, net |
|
|
|
|
|
|
14,391,733 |
|
|
|
690,191 |
|
|
|
(11,972 |
) |
|
|
15,069,952 |
|
Investments in subsidiaries |
|
|
17,927,664 |
|
|
|
447,336 |
|
|
|
|
|
|
|
(18,375,000 |
) |
|
|
|
|
Investments in and advances to
unconsolidated affiliates |
|
|
|
|
|
|
3,353,334 |
|
|
|
258,465 |
|
|
|
|
|
|
|
3,611,799 |
|
Other non-current assets |
|
|
152,205 |
|
|
|
507,500 |
|
|
|
123,253 |
|
|
|
|
|
|
|
782,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,222,888 |
|
|
$ |
19,510,894 |
|
|
$ |
1,171,400 |
|
|
$ |
(18,386,972 |
) |
|
$ |
22,518,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
344,707 |
|
|
$ |
926,780 |
|
|
$ |
32,290 |
|
|
$ |
|
|
|
$ |
1,303,777 |
|
Current portion of long-term debt |
|
|
1,079,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,079,824 |
|
Intercompany accounts |
|
|
(227,808 |
) |
|
|
120,603 |
|
|
|
107,205 |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
3,031,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,031,303 |
|
Long-term debt |
|
|
11,929,050 |
|
|
|
596,987 |
|
|
|
450,000 |
|
|
|
|
|
|
|
12,976,037 |
|
Other long-term obligations |
|
|
195,380 |
|
|
|
60,867 |
|
|
|
590 |
|
|
|
|
|
|
|
256,837 |
|
Stockholders equity |
|
|
3,870,432 |
|
|
|
17,805,657 |
|
|
|
581,315 |
|
|
|
(18,386,972 |
) |
|
|
3,870,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,222,888 |
|
|
$ |
19,510,894 |
|
|
$ |
1,171,400 |
|
|
$ |
(18,386,972 |
) |
|
$ |
22,518,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2010 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Net revenues |
|
$ |
|
|
|
$ |
1,311,022 |
|
|
$ |
146,370 |
|
|
$ |
|
|
|
$ |
1,457,392 |
|
Equity in subsidiaries earnings |
|
|
(43,224 |
) |
|
|
40,555 |
|
|
|
|
|
|
|
2,669 |
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations |
|
|
3,457 |
|
|
|
838,988 |
|
|
|
77,203 |
|
|
|
|
|
|
|
919,648 |
|
General and administrative |
|
|
2,449 |
|
|
|
247,242 |
|
|
|
26,363 |
|
|
|
|
|
|
|
276,054 |
|
Corporate expense |
|
|
3,649 |
|
|
|
22,106 |
|
|
|
(877 |
) |
|
|
|
|
|
|
24,878 |
|
Preopening and start-up expenses |
|
|
|
|
|
|
3,494 |
|
|
|
|
|
|
|
|
|
|
|
3,494 |
|
Property transactions, net |
|
|
|
|
|
|
689 |
|
|
|
|
|
|
|
|
|
|
|
689 |
|
Depreciation and amortization |
|
|
|
|
|
|
152,964 |
|
|
|
10,170 |
|
|
|
|
|
|
|
163,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,555 |
|
|
|
1,265,483 |
|
|
|
112,859 |
|
|
|
|
|
|
|
1,387,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from unconsolidated affiliates |
|
|
|
|
|
|
(104,131 |
) |
|
|
23,213 |
|
|
|
|
|
|
|
(80,918 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(52,779 |
) |
|
|
(18,037 |
) |
|
|
56,724 |
|
|
|
2,669 |
|
|
|
(11,423 |
) |
Interest income (expense), net |
|
|
(250,039 |
) |
|
|
(6,450 |
) |
|
|
(6,920 |
) |
|
|
|
|
|
|
(263,409 |
) |
Other, net |
|
|
151,557 |
|
|
|
(26,755 |
) |
|
|
(7,063 |
) |
|
|
|
|
|
|
117,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(151,261 |
) |
|
|
(51,242 |
) |
|
|
42,741 |
|
|
|
2,669 |
|
|
|
(157,093 |
) |
Benefit (provision) for income taxes |
|
|
54,520 |
|
|
|
7,138 |
|
|
|
(1,306 |
) |
|
|
|
|
|
|
60,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(96,741 |
) |
|
$ |
(44,104 |
) |
|
$ |
41,435 |
|
|
$ |
2,669 |
|
|
$ |
(96,741 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2009 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
|
|
|
$ |
1,355,077 |
|
|
$ |
143,718 |
|
|
$ |
|
|
|
$ |
1,498,795 |
|
Equity in subsidiaries earnings |
|
|
321,923 |
|
|
|
15,047 |
|
|
|
|
|
|
|
(336,970 |
) |
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations |
|
|
3,382 |
|
|
|
803,682 |
|
|
|
76,776 |
|
|
|
|
|
|
|
883,840 |
|
General and administrative |
|
|
1,866 |
|
|
|
235,766 |
|
|
|
23,608 |
|
|
|
|
|
|
|
261,240 |
|
Corporate expense |
|
|
6,385 |
|
|
|
17,964 |
|
|
|
12 |
|
|
|
|
|
|
|
24,361 |
|
Preopening and start-up expenses |
|
|
466 |
|
|
|
7,605 |
|
|
|
|
|
|
|
|
|
|
|
8,071 |
|
Property transactions, net |
|
|
|
|
|
|
(195,125 |
) |
|
|
|
|
|
|
|
|
|
|
(195,125 |
) |
Depreciation and amortization |
|
|
1,183 |
|
|
|
164,960 |
|
|
|
10,715 |
|
|
|
|
|
|
|
176,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,282 |
|
|
|
1,034,852 |
|
|
|
111,111 |
|
|
|
|
|
|
|
1,159,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from unconsolidated affiliates |
|
|
|
|
|
|
19,152 |
|
|
|
(3,603 |
) |
|
|
|
|
|
|
15,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
308,641 |
|
|
|
354,424 |
|
|
|
29,004 |
|
|
|
(336,970 |
) |
|
|
355,099 |
|
Interest income (expense), net |
|
|
(151,715 |
) |
|
|
(12,054 |
) |
|
|
(3,485 |
) |
|
|
|
|
|
|
(167,254 |
) |
Other, net |
|
|
12,944 |
|
|
|
(16,206 |
) |
|
|
(9,207 |
) |
|
|
|
|
|
|
(12,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
169,870 |
|
|
|
326,164 |
|
|
|
16,312 |
|
|
|
(336,970 |
) |
|
|
175,376 |
|
Provision for income taxes |
|
|
(64,671 |
) |
|
|
(4,241 |
) |
|
|
(1,265 |
) |
|
|
|
|
|
|
(70,177 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
105,199 |
|
|
$ |
321,923 |
|
|
$ |
15,047 |
|
|
$ |
(336,970 |
) |
|
$ |
105,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2010 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities |
|
$ |
(241,321 |
) |
|
$ |
173,855 |
|
|
$ |
22,557 |
|
|
$ |
|
|
|
$ |
(44,909 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures, net |
|
|
|
|
|
|
(52,928 |
) |
|
|
(1,014 |
) |
|
|
|
|
|
|
(53,942 |
) |
Investments in and advances to unconsolidated
affiliates |
|
|
|
|
|
|
(262,000 |
) |
|
|
|
|
|
|
|
|
|
|
(262,000 |
) |
Other |
|
|
|
|
|
|
(292 |
) |
|
|
|
|
|
|
|
|
|
|
(292 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in
investing activities |
|
|
|
|
|
|
(315,220 |
) |
|
|
(1,014 |
) |
|
|
|
|
|
|
(316,234 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments under bank credit
facilities maturities of 90 days or less |
|
|
(1,105,177 |
) |
|
|
|
|
|
|
(170,000 |
) |
|
|
|
|
|
|
(1,275,177 |
) |
Borrowings under bank credit facilities
maturities longer than 90 days |
|
|
1,492,524 |
|
|
|
|
|
|
|
450,000 |
|
|
|
|
|
|
|
1,942,524 |
|
Repayments under bank credit facilities
maturities longer than 90 days |
|
|
(2,119,037 |
) |
|
|
|
|
|
|
(280,000 |
) |
|
|
|
|
|
|
(2,399,037 |
) |
Issuance of long-term debt |
|
|
845,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
845,000 |
|
Retirement of senior notes |
|
|
|
|
|
|
(296,956 |
) |
|
|
|
|
|
|
|
|
|
|
(296,956 |
) |
Debt issuance costs |
|
|
(70,654 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,654 |
) |
Intercompany accounts |
|
|
(330,532 |
) |
|
|
363,798 |
|
|
|
(33,266 |
) |
|
|
|
|
|
|
|
|
Other |
|
|
(178 |
) |
|
|
17 |
|
|
|
(16 |
) |
|
|
|
|
|
|
(177 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
(1,288,054 |
) |
|
|
66,859 |
|
|
|
(33,282 |
) |
|
|
|
|
|
|
(1,254,477 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease for the period |
|
|
(1,529,375 |
) |
|
|
(74,506 |
) |
|
|
(11,739 |
) |
|
|
|
|
|
|
(1,615,620 |
) |
Balance, beginning of period |
|
|
1,718,616 |
|
|
|
263,386 |
|
|
|
74,205 |
|
|
|
|
|
|
|
2,056,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
189,241 |
|
|
$ |
188,880 |
|
|
$ |
62,466 |
|
|
$ |
|
|
|
$ |
440,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2009 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities |
|
$ |
(104,874 |
) |
|
$ |
208,090 |
|
|
$ |
31,047 |
|
|
$ |
|
|
|
$ |
134,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures, net |
|
|
|
|
|
|
(58,140 |
) |
|
|
(367 |
) |
|
|
|
|
|
|
(58,507 |
) |
Proceeds from sale of Treasure Island, net |
|
|
|
|
|
|
589,587 |
|
|
|
|
|
|
|
|
|
|
|
589,587 |
|
Advance to Infinity World |
|
|
|
|
|
|
(100,000 |
) |
|
|
|
|
|
|
|
|
|
|
(100,000 |
) |
Investments in and advances to unconsolidated
affiliates |
|
|
|
|
|
|
(383,590 |
) |
|
|
|
|
|
|
|
|
|
|
(383,590 |
) |
Property damage insurance recoveries |
|
|
|
|
|
|
2,542 |
|
|
|
|
|
|
|
|
|
|
|
2,542 |
|
Other |
|
|
|
|
|
|
(3,807 |
) |
|
|
|
|
|
|
|
|
|
|
(3,807 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities |
|
|
|
|
|
|
46,592 |
|
|
|
(367 |
) |
|
|
|
|
|
|
46,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net repayments under bank credit
facilities maturities of 90 days or less |
|
|
(3,276,400 |
) |
|
|
|
|
|
|
(213,600 |
) |
|
|
|
|
|
|
(3,490,000 |
) |
Borrowings under bank credit facilities
maturities longer than 90 days |
|
|
6,211,492 |
|
|
|
|
|
|
|
395,400 |
|
|
|
|
|
|
|
6,606,892 |
|
Repayments under bank credit facilities
maturities longer than 90 days |
|
|
(2,030,000 |
) |
|
|
|
|
|
|
(190,000 |
) |
|
|
|
|
|
|
(2,220,000 |
) |
Debt issuance costs |
|
|
(21,895 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,895 |
) |
Issuance of common stock upon exercise
of stock options |
|
|
632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
632 |
|
Intercompany accounts |
|
|
338,524 |
|
|
|
(363,028 |
) |
|
|
24,504 |
|
|
|
|
|
|
|
|
|
Other |
|
|
(334 |
) |
|
|
15 |
|
|
|
(15 |
) |
|
|
|
|
|
|
(334 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
1,222,019 |
|
|
|
(363,013 |
) |
|
|
16,289 |
|
|
|
|
|
|
|
875,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) for the period |
|
|
1,117,145 |
|
|
|
(108,331 |
) |
|
|
46,969 |
|
|
|
|
|
|
|
1,055,783 |
|
Change in cash related to assets held for sale |
|
|
|
|
|
|
14,154 |
|
|
|
|
|
|
|
|
|
|
|
14,154 |
|
Balance, beginning of period |
|
|
(2,444 |
) |
|
|
267,602 |
|
|
|
30,486 |
|
|
|
|
|
|
|
295,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
1,114,701 |
|
|
$ |
173,425 |
|
|
$ |
77,455 |
|
|
$ |
|
|
|
$ |
1,365,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
This managements discussion and analysis of financial condition and results of
operations (MD&A), contains forward-looking statements that involve risks and uncertainties.
Please see 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, and the audited combined financial statements and notes
for the fiscal year ended December 31, 2009, which were included in our Form 10-K, filed with
the SEC on February 26, 2010. The results of operations for the periods reflected herein are
not necessarily indicative of results that may be expected for future periods.
Executive Overview
General
Our primary business is the ownership and operation of casino resorts, which includes
offering gaming, hotel, dining, entertainment, retail and other resort amenities. Over half
of our net revenue is derived from non-gaming activities, a higher percentage than many of our
competitors, as our operating philosophy is to provide a complete resort experience for our
guests, including non-gaming amenities that allow us to charge premium prices based on their
quality. Our significant convention and meeting facilities allow us to maximize hotel
occupancy and customer volumes during off-peak times such as mid-week or during traditionally
slower leisure travel periods, which also leads to better labor utilization. We believe that
we own several of the premier casino resorts in the world and have continually reinvested in
our resorts to maintain our competitive advantage.
As a resort-based company, our operating results are highly dependent on the volume of
customers and demand for our hotel rooms and other amenities, which in turn impacts the prices
we can charge. We also generate a significant portion of our operating income from high-end
gaming customers, which can cause variability in our results. Key performance indicators
related to 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 win percentage is in the range of 18% to 22% of table games drop
and our normal slots win percentage is in the range of 7% to 8% of slots handle; and |
|
|
|
Hotel revenue indicators hotel occupancy (a volume indicator); average
daily rate (ADR, a price indicator); revenue per available room (REVPAR, a summary
measure of hotel results, combining ADR and occupancy rate). |
Most of our revenue is essentially cash-based, through customers wagering with cash or
paying for non-gaming services with cash or credit cards. Our resorts, like many in the
industry, generate significant operating cash flow. Our industry is capital intensive and we
rely heavily on the ability of our resorts to generate operating cash flow to repay debt
financing, fund maintenance capital expenditures and provide excess cash for future
development.
We generate a majority of our net revenues and operating income from our resorts in Las
Vegas, Nevada, which exposes us to certain risks outside of our control, such as increased
competition from new or expanded Las Vegas resorts, and from the expansion of gaming in
California. We are also exposed to risks related to tourism and the general economy,
including national and global economic conditions and terrorist attacks or other global
events.
Our results of operations do not tend to be seasonal in nature, although a variety of
factors may affect the results of any interim period, including the timing of major Las Vegas
conventions, the amount and timing of marketing and special events for our high-end
customers, and the level of play during major holidays, including New Years and Chinese New
Year. We market to different customer segments to manage our hotel occupancy, such as
targeting large conventions to ensure mid-week occupancy. Our results do not depend on key
individual customers, although our success in marketing to customer groups, such as
convention customers, or the financial health of customer segments, such as business
travelers or high-end gaming customers from a particular country or region, can affect our
results.
16
Impact of Current Economic Conditions and Credit Markets on Results of Operations
The state of the U.S. economy has negatively affected our results of operations over the
past several years and we expect to continue to be affected by certain aspects of the current
economic conditions, including, for example, high unemployment and the weak housing market in
2010. The decrease in liquidity in the credit markets which began in late 2007 and
accelerated in late 2008 also significantly affected our results of operations and financial
condition.
Uncertain economic conditions continue to affect our customers spending levels. Travel
and travel-related expenditures have been particularly affected as businesses and consumers
have altered their spending patterns which have led to decreases in visitor volumes and
customer spending. Businesses responded to the difficult economic conditions by reducing
travel budgets. This factor, along with perceptions surrounding certain types of business
travel, negatively affected convention attendance in Las Vegas in 2009 and 2010. Convention
and catering customers cancelled or postponed a significant number of events occurring during
2009 and early 2010. Other conditions currently or recently present in the economic
environment which tend to negatively affect our operating results include:
|
|
|
Weaknesses in employment and increases in unemployment; |
|
|
|
|
Weak consumer confidence; |
|
|
|
|
Weak housing market and significant declines in housing prices and
related home equity; and |
|
|
|
|
Decreases in airline capacity to Las Vegas. |
Because of these economic conditions, we have increasingly focused on managing costs and
continue to review all areas of operations for efficiencies. We continually manage staffing
levels across all our resorts and have reduced our salaried management positions.
In addition, we suspended Company contributions to our 401(k) plan and our nonqualified
deferred compensation plans in 2009; we rescinded cost of living increases for non-union
employees in 2009; and we reached an agreement with our primary union to defer the 2009
contractual pay increase. We paid discretionary bonuses for 2009 in February 2010 and we
provided general salary increases to certain salaried employees in 2010. However, company
matching contributions to our 401(k) plan and our nonqualified deferred compensation plans
will remain frozen until such time as we believe it is prudent to reinstate these benefits.
Our results of operations are also affected by decisions we make related to our capital
allocation, our access to capital, and our cost of capital all of which are affected by the
uncertain state of the global economy and the continued instability in the capital markets.
For example, we will incur higher interest costs in connection with the amendments to our
senior credit facility in 2009 and 2010. Also, our cost of debt has increased over the past
few years. These factors may affect our ability to access future capital and cause future
borrowings to carry higher interest rates.
Reimbursed Costs
Reimbursed costs revenue represents reimbursement of costs, primarily payroll-related,
incurred by us in connection with the provision of management services. We recognize costs
reimbursed pursuant to management services as revenue in the period we incur the costs.
Reimbursed costs related mainly to our management of CityCenter and totaled $93 million for
2010 and $14 million for 2009.
Borgata
In March 2010, the New Jersey Casino Control Commission (the CCC) approved our
settlement agreement with the New Jersey Division of Gaming Enforcement (the DGE) pursuant
to which we placed our 50% ownership interest in the Borgata Hotel Casino & Spa and related
leased land in Atlantic City into a divestiture trust. Following the transfer of these
interests into trust, we ceased to be regulated by the CCC or the DGE, except as otherwise
provided by the trust agreement and the settlement agreement. The Borgata is a 50-50 joint
venture with Boyd Gaming Corporation, whose interest is not affected by the settlement.
17
The terms of the settlement mandate the sale of the trust property within a 30-month
period. During the first 18 months, we have the right to direct the trustee to sell the trust
property, subject to approval of the CCC. If a sale is not concluded by that time, the trustee
is responsible for selling the trust property during the following 12-month period. Prior to
the consummation of the sale, the divestiture trust will retain any cash flows received in
respect of the trust property, but will pay property taxes and other costs attributable to the
trust property to the extent that minimum trust cash balances are maintained. We are the sole
economic beneficiary of the trust and will be permitted to reapply for a New Jersey gaming
license beginning 30 months after the completion of the sale.
In connection with the settlement agreement discussed above, we entered into an amendment
to our joint venture agreement with Boyd to permit the transfer of our 50% ownership interest
into trust in connection with our settlement agreement with the DGE. Boyd would receive a
priority partnership distribution of approximately $31 million (equal to the excess prior
capital contributions by Boyd) upon successful refinancing of the Borgata credit facility. In
addition, Boyd will receive a payment from the trust equal to the greater of $10 million or 3%
of the proceeds from the sale of our 50% interest in Borgata.
We discontinued the equity method of accounting for Borgata at the point the assets were
placed in the trust and account for our rights under the trust arrangement under the cost
method of accounting. Earnings and losses that relate to the investment that were previously
accrued remain as a part of the carrying amount of the investment. Distributions received by
the trust in subsequent periods that do not exceed our share of earnings are recognized
currently in earnings. However, distributions to the trust in subsequent periods that exceed
our share of earnings for such periods are applied to reduce the carrying amount of our
investment.
Senior Credit Facility
Our senior credit facility was amended and restated in March 2010, and consists of
approximately $2.7 billion in term loans (of which approximately $874 million must be repaid
by October 3, 2011) and a $2.0 billion revolver (of which approximately $302 million must be
repaid by October 3, 2011). Under the restated senior credit facility, loans and revolving
commitments aggregating approximately $3.6 billion (the extending loans) may be extended to
February 21, 2014, provided that the non-extending loans are repaid and certain other
conditions, including pro forma availability of a minimum of $350 million under the revolver,
are satisfied. The restated loan agreement allows us to issue unsecured debt, equity-linked
securities and equity securities to refinance indebtedness maturing prior to October 3, 2011
and the $1.2 billion portion of the obligations owed to non-extending lenders. After the
extension of the credit facility, we may issue such securities to refinance indebtedness which
matures prior to February 21, 2014. In each case (a) indebtedness issued in amounts in excess
of $250 million over such interim maturities requires ratable prepayment of the credit
facilities in an amount equal to 50% of the net cash proceeds of such excess, and (b) equity
issued in amounts in excess of $500 million over such interim maturities require ratable
prepayment of the credit facilities in an amount equal to 50% of the net cash proceeds of such
excess.
We accounted for the modification related to the extending term loans as an
extinguishment of debt because the applicable cash flows under the extended term loans are
more than 10% different from the applicable cash flows under the previous loans. Therefore,
the extended term loans were recorded at fair value resulting in a $181 million gain and a
discount of $181 million to be amortized to interest expense over the term of the extended
term loans. Fair value of the term loans was based on estimates based on trading prices
immediately after the transaction. In addition, we wrote-off $15 million of existing debt
issuance costs related to the previous term loans and $22 million of new debt issuance costs
incurred related to amounts paid to extending term loan lenders in connection with the
modification. We also wrote off $2 million of existing debt issuance costs related to the
reduction in capacity under the non-extending revolver portion of senior credit facility. In
total, we recognized a net pre-tax gain on extinguishment of debt of $142 million in Other,
net non-operating income in the first quarter of 2010.
Impairments
Due to the completion of construction of the Mandarin Oriental residential inventory,
CityCenter was required to review such inventory for impairment as of March 31, 2010.
CityCenter management determined the fair value less costs to sell was below its carrying
value and as a result recorded an impairment charge. Fair value of the residential inventory
was determined using a discounted cash flow analysis based on managements current
expectations of future cash flows. The key inputs in the discounted cash flow analysis
included estimated sales prices of units currently under contract and new unit sales, the
absorption rate over the sell-out period, and the discount rate. This analysis resulted in an
impairment charge of approximately $171 million. We recognized 50% of such impairment charge,
resulting in a pre-tax charge of approximately $86 million.
18
As additional residential inventory is completed, CityCenter will be required to measure
such inventory at the lower of a) its carrying value, or b) fair value less costs to sell. It
is reasonably possible that the fair value less cost to sell of the residential inventory at
completion will be below the inventorys carrying value, and that the joint venture will be
required to record additional impairment charges in future periods. We would record 50% of any
such impairment.
In addition, we evaluate our investments in unconsolidated affiliates for impairment when
events or changes in circumstances indicate that the carrying value of such investment may
have experienced an other-than-temporary decline in value. If such conditions exist, we
compare the estimated fair value of the investment to its carrying value to determine if an
impairment is indicated and determines whether such impairment is other-than-temporary based
on our assessment of all relevant factors. Estimated fair value is determined using a
discounted cash flow analysis based on estimated future results of the investee and market
indicators of terminal year capitalization rates. We evaluate whether or not indicators of
impairment exist related to our CityCenter investment each reporting period. We do not
believe circumstances exist as of March 31, 2010 that would cause us to evaluate the
CityCenter investment for impairment; however, actual results that differ significantly from
managements estimates, or significant changes in managements estimates of future cash flows,
could cause us to undertake such an assessment and could result in an impairment since the
calculation of fair value of the investment is dependent largely on estimated cash flows.
Insurance Proceeds
We reached final settlement agreements for the Monte Carlo Fire in early 2009. In total,
we received $74 million of proceeds from our insurance carriers. We recognized the $41
million of excess insurance recoveries in income in 2009 and 2008, with recoveries offsetting
a write-down of $4 million related to the net book value of damaged assets, demolition costs
of $7 million, and operating costs of $21 million. In the 2009 first quarter, $15 million and
$7 million of excess insurance recoveries were recognized as offsets to General and
administrative expense and Property transactions, net, respectively.
Results of Operations
The following discussion is based on our consolidated financial statements for the three
months ended March 2010 and 2009. Certain results referenced in this section are on a same
store basis excluding the results of Treasure Island, which we sold in March 2009.
Summary Financial Results
Our net revenue increased 2% compared to the prior year on a same store basis, which
included approximately $93 million of reimbursed costs revenue in the first quarter of 2010
versus $14 million in the first quarter of 2009. Excluding the reimbursed costs revenue, net
revenue decreased 4%. Revenues were negatively affected by a reduction in convention room
nights and continued decrease in discretionary spending due to the weakened economy. The
reduction in convention room nights caused us to shift hotel business to the leisure segment
at generally lower rates to maximize occupancy levels. Gaming and other sources of revenue
continued to be affected by lower visitor spending and reduced occupancy at our resorts during
the first quarter of 2010.
Operating loss for the first quarter of 2010 was $11 million compared to operating income
of $355 million in the first quarter of 2009. The 2010 results were negatively affected by
our share of a residential inventory write-down at CityCenter of approximately $86 million,
partially offset by $12 million of income related to our share of forfeited residential
deposits at CityCenter. The 2009 results include a pre-tax gain of $190 million on the
Treasure Island sale and $22 million of insurance recoveries related to the Monte Carlo fire.
On a comparable basis and excluding reimbursed costs, our operating margin in the first
quarter of 2010 decreased to 5% from 10% in the 2009 first quarter.
Operating Results Adjusted EBITDA
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 and Adjusted Property EBITDA information is
presented solely as a supplemental disclosure to reported GAAP measures because we believe
that these measures are 1) widely used measures of operating performance in the gaming
industry, and 2) a principal basis for valuation of gaming companies.
19
We believe that while items excluded from Adjusted EBITDA and Adjusted Property EBITDA
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
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, we believe excluded items may not relate specifically to current operating
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 dependent 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 and 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, we use Adjusted Property EBITDA as the
primary measure of our operating resorts performance.
Adjusted EBITDA or Adjusted Property EBITDA should not be construed as an alternative to
operating income or net income, as an indicator of our performance; or as an alternative to
cash flows from operating activities, as a measure of liquidity; or as any other measure
determined in accordance with generally accepted accounting principles. We have significant
uses of cash flows, including capital expenditures, interest payments, taxes and debt
principal repayments, which are not reflected in Adjusted EBITDA. Also, other companies in
the gaming and hospitality industries that report Adjusted EBITDA information may calculate
Adjusted EBITDA in a different manner.
Adjusted EBITDA decreased 53% in the 2010 first quarter on a same store basis compared
to 2009. Excluding the $86 million impact from the residential impairment charge recorded by
CityCenter, the $12 million of income related to forfeited residential deposits at CityCenter
in 2010, and Monte Carlo business interruption insurance recoveries in 2009, Adjusted EBITDA
decreased 28%.
Adjusted Property EBITDA for our wholly-owned resorts decreased 23% in 2010 on a same
store basis compared to 2009. Excluding the impact of the Monte Carlo insurance recoveries
in 2009, Adjusted Property EBITDA for our wholly-owned resorts decreased 19% in 2010.
Overall Adjusted Property EBITDA decreased 48% in 2010 on a same store basis compared to
2009, or 25% excluding the impact of the charges noted above, with a margin of 19% versus 24%
in 2009. These decreases were largely due to the factors discussed in Summary Financial
Results and Impact of Economic Conditions and Credit Markets on Our Results of Operations.
The following table presents a reconciliation of Adjusted EBITDA to net income (loss):
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Adjusted EBITDA |
|
$ |
155,894 |
|
|
$ |
344,903 |
|
Preopening and start-up expenses |
|
|
(3,494 |
) |
|
|
(8,071 |
) |
Property transactions, net |
|
|
(689 |
) |
|
|
195,125 |
|
Depreciation and amortization |
|
|
(163,134 |
) |
|
|
(176,858 |
) |
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(11,423 |
) |
|
|
355,099 |
|
|
|
|
|
|
|
|
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(264,175 |
) |
|
|
(171,636 |
) |
Other, net |
|
|
118,505 |
|
|
|
(8,087 |
) |
|
|
|
|
|
|
|
|
|
|
(145,670 |
) |
|
|
(179,723 |
) |
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(157,093 |
) |
|
|
175,376 |
|
Benefit (provision) for income taxes |
|
|
60,352 |
|
|
|
(70,177 |
) |
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(96,741 |
) |
|
$ |
105,199 |
|
|
|
|
|
|
|
|
20
The following tables present reconciliations of operating income (loss) to Adjusted
Property EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, 2010 |
|
|
|
|
|
|
|
Preopening |
|
|
Property |
|
|
Depreciation |
|
|
|
|
|
|
Operating |
|
|
and Start-up |
|
|
Transactions, |
|
|
and |
|
|
Adjusted |
|
|
|
Income (Loss) |
|
|
Expenses |
|
|
Net |
|
|
Amortization |
|
|
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Bellagio |
|
$ |
37,564 |
|
|
$ |
|
|
|
$ |
(112 |
) |
|
$ |
24,514 |
|
|
$ |
61,966 |
|
MGM Grand Las Vegas |
|
|
18,383 |
|
|
|
|
|
|
|
|
|
|
|
20,103 |
|
|
|
38,486 |
|
Mandalay Bay |
|
|
1,867 |
|
|
|
|
|
|
|
|
|
|
|
23,533 |
|
|
|
25,400 |
|
The Mirage |
|
|
9,819 |
|
|
|
|
|
|
|
|
|
|
|
15,606 |
|
|
|
25,425 |
|
Luxor |
|
|
1,437 |
|
|
|
|
|
|
|
|
|
|
|
11,326 |
|
|
|
12,763 |
|
New York-New York |
|
|
11,013 |
|
|
|
|
|
|
|
14 |
|
|
|
7,040 |
|
|
|
18,067 |
|
Excalibur |
|
|
8,238 |
|
|
|
|
|
|
|
784 |
|
|
|
5,845 |
|
|
|
14,867 |
|
Monte Carlo |
|
|
456 |
|
|
|
|
|
|
|
|
|
|
|
5,993 |
|
|
|
6,449 |
|
Circus Circus Las Vegas |
|
|
(3,646 |
) |
|
|
|
|
|
|
|
|
|
|
5,339 |
|
|
|
1,693 |
|
MGM Grand Detroit |
|
|
30,355 |
|
|
|
|
|
|
|
|
|
|
|
10,150 |
|
|
|
40,505 |
|
Beau Rivage |
|
|
4,414 |
|
|
|
|
|
|
|
3 |
|
|
|
12,286 |
|
|
|
16,703 |
|
Gold Strike Tunica |
|
|
6,429 |
|
|
|
|
|
|
|
|
|
|
|
3,632 |
|
|
|
10,061 |
|
Management operations |
|
|
(7,193 |
) |
|
|
|
|
|
|
|
|
|
|
3,331 |
|
|
|
(3,862 |
) |
Other operations |
|
|
(2,529 |
) |
|
|
|
|
|
|
|
|
|
|
1,441 |
|
|
|
(1,088 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-owned operations |
|
|
116,607 |
|
|
|
|
|
|
|
689 |
|
|
|
150,139 |
|
|
|
267,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CityCenter (50%) |
|
|
(122,105 |
) |
|
|
3,494 |
|
|
|
|
|
|
|
|
|
|
|
(118,611 |
) |
Macau (50%) |
|
|
23,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,099 |
|
Other unconsolidated resorts |
|
|
14,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,358 |
|
|
|
3,494 |
|
|
|
689 |
|
|
|
150,139 |
|
|
|
186,680 |
|
Stock compensation |
|
|
(9,555 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,555 |
) |
Corporate |
|
|
(34,226 |
) |
|
|
|
|
|
|
|
|
|
|
12,995 |
|
|
|
(21,231 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(11,423 |
) |
|
$ |
3,494 |
|
|
$ |
689 |
|
|
$ |
163,134 |
|
|
$ |
155,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, 2009 |
|
|
|
|
|
|
|
Preopening |
|
|
Property |
|
|
Depreciation |
|
|
|
|
|
|
Operating |
|
|
and Start-up |
|
|
Transactions, |
|
|
and |
|
|
Adjusted |
|
|
|
Income (Loss) |
|
|
Expenses |
|
|
Net |
|
|
Amortization |
|
|
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
Bellagio |
|
$ |
39,138 |
|
|
$ |
|
|
|
$ |
1,154 |
|
|
$ |
27,958 |
|
|
$ |
68,250 |
|
MGM Grand Las Vegas |
|
|
20,159 |
|
|
|
|
|
|
|
85 |
|
|
|
25,119 |
|
|
|
45,363 |
|
Mandalay Bay |
|
|
18,646 |
|
|
|
190 |
|
|
|
15 |
|
|
|
23,801 |
|
|
|
42,652 |
|
The Mirage |
|
|
13,054 |
|
|
|
|
|
|
|
239 |
|
|
|
16,572 |
|
|
|
29,865 |
|
Luxor |
|
|
8,477 |
|
|
|
|
|
|
|
277 |
|
|
|
10,600 |
|
|
|
19,354 |
|
Treasure Island |
|
|
12,730 |
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
12,729 |
|
New York-New York |
|
|
13,318 |
|
|
|
|
|
|
|
|
|
|
|
7,124 |
|
|
|
20,442 |
|
Excalibur |
|
|
10,748 |
|
|
|
|
|
|
|
(3 |
) |
|
|
5,991 |
|
|
|
16,736 |
|
Monte Carlo |
|
|
23,302 |
|
|
|
|
|
|
|
(7,189 |
) |
|
|
5,694 |
|
|
|
21,807 |
|
Circus Circus Las Vegas |
|
|
411 |
|
|
|
|
|
|
|
(4 |
) |
|
|
5,874 |
|
|
|
6,281 |
|
MGM Grand Detroit |
|
|
29,841 |
|
|
|
|
|
|
|
|
|
|
|
10,711 |
|
|
|
40,552 |
|
Beau Rivage |
|
|
5,426 |
|
|
|
|
|
|
|
|
|
|
|
12,143 |
|
|
|
17,569 |
|
Gold Strike Tunica |
|
|
9,200 |
|
|
|
|
|
|
|
|
|
|
|
4,645 |
|
|
|
13,845 |
|
Management operations |
|
|
2,271 |
|
|
|
|
|
|
|
|
|
|
|
2,593 |
|
|
|
4,864 |
|
Other operations |
|
|
(3,065 |
) |
|
|
|
|
|
|
|
|
|
|
1,548 |
|
|
|
(1,517 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-owned operations |
|
|
203,656 |
|
|
|
190 |
|
|
|
(5,427 |
) |
|
|
160,373 |
|
|
|
358,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CityCenter (50%) |
|
|
(8,104 |
) |
|
|
7,239 |
|
|
|
|
|
|
|
|
|
|
|
(865 |
) |
Macau (50%) |
|
|
(3,585 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,585 |
) |
Other unconsolidated resorts |
|
|
19,526 |
|
|
|
642 |
|
|
|
|
|
|
|
|
|
|
|
20,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
211,493 |
|
|
|
8,071 |
|
|
|
(5,427 |
) |
|
|
160,373 |
|
|
|
374,510 |
|
Stock compensation |
|
|
(8,734 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,734 |
) |
Corporate |
|
|
152,340 |
|
|
|
|
|
|
|
(189,698 |
) |
|
|
16,485 |
|
|
|
(20,873 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
355,099 |
|
|
$ |
8,071 |
|
|
$ |
(195,125 |
) |
|
$ |
176,858 |
|
|
$ |
344,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Operating
Results Detailed Revenue Information
The following table presents details of our net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
2010 |
|
|
Change |
|
|
2009 |
|
|
|
(In thousands) |
|
Casino revenue, net: |
|
|
|
|
|
|
|
|
|
|
|
|
Table games |
|
$ |
212,679 |
|
|
|
(13 |
%) |
|
$ |
243,973 |
|
Slots |
|
|
376,607 |
|
|
|
(5 |
%) |
|
|
397,333 |
|
Other |
|
|
21,471 |
|
|
|
(8 |
%) |
|
|
23,421 |
|
|
|
|
|
|
|
|
|
|
|
|
Casino revenue, net |
|
|
610,757 |
|
|
|
(8 |
%) |
|
|
664,727 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-casino revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
|
313,903 |
|
|
|
(12 |
%) |
|
|
355,044 |
|
Food and beverage |
|
|
316,156 |
|
|
|
(7 |
%) |
|
|
338,397 |
|
Entertainment, retail and other |
|
|
281,350 |
|
|
|
(3 |
%) |
|
|
289,696 |
|
Reimbursed costs |
|
|
93,323 |
|
|
NM |
|
|
|
13,683 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-casino revenue |
|
|
1,004,732 |
|
|
|
1 |
% |
|
|
996,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,615,489 |
|
|
|
(3 |
%) |
|
|
1,661,547 |
|
Less: Promotional allowances |
|
|
(158,097 |
) |
|
|
(3 |
%) |
|
|
(162,752 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,457,392 |
|
|
|
(3 |
%) |
|
$ |
1,498,795 |
|
|
|
|
|
|
|
|
|
|
|
|
Table games volume, excluding baccarat, decreased 4% on a same store basis compared
to the prior year; baccarat volume increased 17%. Table games hold percentages were near the
middle of our normal range in 2010 and near the high end in 2009. Slots revenue on a same
store basis decreased 4% on the Las Vegas Strip and increased 2% at our regional resorts.
On a same store basis, room revenues decreased 6% overall, with a 8% decrease in Las
Vegas Strip REVPAR. The following table shows key hotel statistics for our Las Vegas Strip
resorts:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2010 |
|
2009 |
|
|
Occupancy % |
|
|
85 |
% |
|
|
87 |
% |
Average Daily Rate (ADR) |
|
$ |
111 |
|
|
$ |
118 |
|
Revenue per Available Room (REVPAR) |
|
$ |
94 |
|
|
$ |
103 |
|
Operating
Results Details of Certain Charges
Preopening and start-up expenses were $3 million in the 2010 quarter versus $8 million in
2009. Both years primarily consist of our portion of CityCenters preopening expenses.
Property transactions, net consisted of the following:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Write-downs and impairments |
|
$ |
744 |
|
|
$ |
2,028 |
|
Insurance recoveries (Monte Carlo fire) |
|
|
|
|
|
|
(7,186 |
) |
Demolition costs |
|
|
|
|
|
|
|
|
Gain on sale of Treasure Island |
|
|
|
|
|
|
(190,370 |
) |
Net (gains) losses on sale or disposal of fixed assets |
|
|
(55 |
) |
|
|
403 |
|
|
|
|
|
|
|
|
|
|
$ |
689 |
|
|
$ |
(195,125 |
) |
|
|
|
|
|
|
|
Operating
Results Income from Unconsolidated Affiliates
Income from unconsolidated affiliates decreased to a loss of $81 million in the quarter
versus income of $16 million in 2009. The loss was attributable to our share of the net losses
at CityCenter, including our share of the residential inventory write-down at CityCenter of
approximately $86 million. The losses at CityCenter were partially offset by our share of
operating income at MGM Grand Macau, which earned operating income of $49 million in the first
quarter of 2010, including depreciation expense of $22 million, a significant increase
compared to an operating loss of $5 million in the 2009 first quarter, which included
depreciation expense of $21 million.
22
Non-operating Results
Net interest expense increased to $264 million in the 2010 first quarter from $172
million in the 2009 period. Gross interest expense increased by $24 million due to higher
borrowing rates under our senior credit facility and higher interest rates on public debt
issued in 2009. Capitalized interest was $68 million in 2009, mainly related to the
construction of CityCenter. CityCenter was substantially complete in December 2009, and we do
not have any other major construction projects ongoing. Therefore, we did not have any
capitalized interest in 2010. Also, as discussed in Executive Overview, we recorded a gain
on extinguishment of long-term debt of $142 million in the 2010 first quarter included in
non-operating Other, net in the first quarter of 2010.
Liquidity and Capital Resources
Cash
Flows Operating Activities
Cash used in operating activities was $45 million for the three months ended March 31,
2010, compared to cash provided by operating activities of $134 million in the prior year
period which benefited from $79 million of income tax refunds. At March 31, 2010, we held
cash and cash equivalents of $441 million.
Cash
Flows Investing Activities
During the first quarter of 2010, we paid $262 million related to our completion
guarantee for CityCenter, of which $217 million is payable to us from CityCenter out of
residential proceeds to be received and $45 million has reduced our completion guarantee
liability. During the first quarter of 2009, we received $590 million of net proceeds from
the sale of Treasure Island and funded $437 million to CityCenter, of which $100 million was
funded on behalf of Infinity World.
Cash
Flows Financing Activities
In the quarter ended March 31, 2010, excluding the $1.6 billion we repaid immediately
after year end on our senior credit facility, we borrowed net debt of $399 million, including
the issuance of $845 million of 9% senior secured notes due 2020 and the repayment of $297
million of 9.375% senior notes at maturity. In the quarter ended March 31, 2009, we borrowed
net debt of $897 million.
Other Factors Affecting Liquidity
Issuance of 4.25% Convertible Senior Notes Due 2015. In April 2010, we issued $1.15
billion of 4.25% convertible senior notes due 2015 for net proceeds to us of $1.12 billion.
The notes are general unsecured obligations of us and rank equally in right of payment with
our other existing senior indebtedness. We used the net proceeds from issuance to temporarily
repay amounts outstanding under our senior credit facility. After application of such
proceeds, we had approximately $1.48 billion of availability under the revolving portion of
the senior credit facility, of which approximately $1.12 billion was restricted for use to
retire future debt maturities or permanently reduce commitments under the senior credit
facility, and approximately $900 million of excess cash in bank. The notes are convertible at
an initial conversion rate of approximately 53.83 shares of our common stock per $1,000
principal amount of the notes, representing an initial conversion price of approximately
$18.58 per share of our common stock. In connection with the offering, we entered into capped
call transactions to reduce the potential dilution of our stock upon conversion of the notes.
The capped call transactions have a cap price equal to approximately $21.86. We paid
approximately $81 million for the capped call transactions.
Tax refund. In April 2010, we received a tax refund of approximately $380 million. Such
amount was used to repay outstanding borrowings under the revolving portion of our senior
credit facility.
Senior notes payable within one year. We have $782 million of principal of senior notes
due September 2010 and $400 million of principal of senior notes due February 2011.
Borgata settlement. As discussed in Executive Overview, we entered into a settlement
agreement with the DGE agreement under which we will sell our 50% ownership interest in
Borgata and related leased land in Atlantic City. Prior to the consummation of the sale, the
divestiture trust will retain any cash flows received in respect of the trust property, but
will pay property taxes and other costs attributable to the trust property to the extent that
minimum trust cash balances are maintained. We have received significant distributions from
Borgata in the past few years, and not receiving such distributions until the ultimate sale
could negatively affect our liquidity in interim periods.
23
CityCenter. In accordance with the CityCenter joint venture agreement, as amended, and
the CityCenter bank credit facility, as amended, we have provided an unlimited completion and
cost overrun guarantee, secured by our interests in the assets of Circus Circus Las Vegas and
certain adjacent undeveloped land see Note 4 for further discussion. The credit facility
agreement also allowed for the first $244 million of net residential sales proceeds to be used
to fund project costs which would otherwise be funded under the new completion guarantee. The
joint venture agreement, as amended, provides that the first $494 million of available
distributions must be distributed on a priority basis to Infinity World, with the next $494
million of distributions made to us, and distributions shared equally thereafter.
As of March 31, 2010, we have funded $262 million under the completion guarantee. We
have recorded a receivable from CityCenter of $217 million related to these amounts, which is
net of residential proceeds received and used by CityCenter on construction expenditures. At
March 31, 2010, we had a remaining estimated total net obligation under the completion
guarantee of $105 million which represents the $150 million low end of our estimated range
for our total net obligation less $45 million funded to date that is not subject to be
refunded to us through residential proceeds. We believe that it is
reasonably possible our total net obligation may be up to $300 million, which includes certain
offsets to the amounts claimed by our general contractors.
CityCenter
construction litigation. On or about March 24, 2010, Perini Building Company, Inc., general contractor for the
CityCenter development project (the Project), filed a lawsuit in the Eighth Judicial District Court
for Clark County, State of Nevada, Case No. A-10-612676, against MGM MIRAGE Design Group (a wholly-owned subsidiary
of MGM MIRAGE which was the original party to the Perini construction agreement) and certain direct or indirect
subsidiaries of CityCenter Holdings, LLC (the CityCenter
Owners). Perini asserts that the Project was substantially
completed, but the defendants failed to pay Perini approximately
$490 million allegedly due and owing under the construction agreement for labor, equipment and materials expended on
the Project. The complaint further charges the defendants with failure to provide timely and complete design documents,
late delivery to Perini of design changes, mismanagement of the
change order process, obstruction of Perinis ability
to complete the Harmon Hotel & Spa component, and fraudulent inducement of Perini to compromise significantly
amounts due for its general conditions. The complaint advances claims for breach of contract, breach of the
implied covenant of good faith and fair dealing, tortious breach of the implied covenant of good faith and fair dealing,
unjust enrichment and promissory estoppel, and fraud and intentional
misrepresentation. Perini seeks compensatory
damages, punitive damages, attorneys fees and costs.
On
or about April 29, 2010, Perini served an amended complaint in this case which joins as defendants many owners
of CityCenter residential condominium units (the Condo Owner
Defendants), adds a count for foreclosure
of Perinis recorded master mechanics lien against the CityCenter property in the amount of $491,240,000, and asserts
the priority of this mechanics lien over the interests of the CityCenter Owners, the Condo Owner Defendants
and the Project lenders in the CityCenter property.
MGM
MIRAGE and the other defendants dispute Perinis allegations, and contend that the defendants are
entitled to substantial amounts from Perini, including offsets against amounts claimed to be owed to Perini
and its subcontractors and damages based on breach of their
contractual and other duties to CityCenter, duplicative
payment requests, non-conforming work, lack of proof of alleged work performance, defective work related to the
Harmon Hotel & Spa component, property damage and Perinis failure to perform its obligations to pay Project
subcontractors and to prevent filing of liens against the Project. The Company and the CityCenter Owner defendants
intend to vigorously assert and protect their interests in the lawsuit.
Market Risk
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. 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.
24
As of March 31, 2010, long-term variable rate borrowings represented approximately 28% of
our total borrowings. Assuming a 100 basis-point increase in LIBOR over the 2% floor
specified in our senior credit facility, our annual interest cost would change by
approximately $38 million based on gross amounts outstanding at March 31, 2010. The following
table provides additional information about our long-term debt subject to changes in interest
rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
Debt maturing in, |
|
March 31, |
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
Thereafter |
|
Total |
|
2010 |
|
|
(In millions) |
Fixed rate |
|
$ |
783 |
|
|
$ |
530 |
|
|
$ |
545 |
|
|
$ |
1,346 |
|
|
$ |
1,142 |
|
|
$ |
4,748 |
|
|
$ |
9,094 |
|
|
$ |
7,962 |
|
Average interest rate |
|
|
8.5 |
% |
|
|
7.9 |
% |
|
|
6.8 |
% |
|
|
10.1 |
% |
|
|
8.4 |
% |
|
|
9.8 |
% |
|
|
9.2 |
% |
|
|
|
|
Variable rate |
|
$ |
|
|
|
$ |
1,032 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,569 |
|
|
$ |
|
|
|
$ |
3,601 |
|
|
$ |
3,260 |
|
Average interest rate |
|
|
N/A |
|
|
|
6.0 |
% |
|
|
N/A |
|
|
|
N/A |
|
|
|
7.0 |
% |
|
|
N/A |
|
|
|
6.7 |
% |
|
|
|
|
Forward-looking Statements
This Form 10-Q contains forward-looking statements within the meaning of the U.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, and similar references to future periods. Examples of forward-looking
statements include, but are not limited to, statements we make regarding our ability to
generate significant cash flow, amounts that we expect to receive in federal tax refunds,
amounts we will invest in capital expenditures, amounts we will pay under the CityCenter
completion guarantee, amounts we receive from the sale of residential units at CityCenter and
statements relating to future actions, business plans and prospects. The foregoing is not a
complete list of all forward-looking statements we make.
Forward-looking statements are based on our current expectations and assumptions
regarding our business, the economy and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent uncertainties, risks, and
changes in circumstances that are difficult to predict. Our actual results may differ
materially from those contemplated by the forward-looking statements. They are neither
statements of historical fact nor guarantees or assurances of future performance. Therefore,
we caution you not to put undue reliance on forward-looking statements. Important factors
that could cause actual results to differ materially from those in the forward-looking
statements include, among others, regional, national or global political, economic, business,
competitive, market, and regulatory conditions and the following:
|
|
|
our substantial indebtedness and significant financial commitments; |
|
|
|
|
restrictions in our senior credit facility and other senior indebtedness; |
|
|
|
|
competition with other destination travel locations throughout the United
States and the world; |
|
|
|
|
the fact that several of our businesses are subject to extensive
regulation; |
|
|
|
|
disruption due to extreme weather conditions; |
|
|
|
|
changes in energy prices; |
|
|
|
|
our concentration of gaming resorts on the Las Vegas Strip; |
|
|
|
|
leisure and business travel is susceptible to global geopolitical events,
such as terrorism or acts of war; |
|
|
|
|
investing through partnerships or joint ventures, including CityCenter
and MGM Grand Macau; |
|
|
|
|
disruptions in our plans for future construction; |
|
|
|
|
the outcome of any ongoing and future litigation; |
|
|
|
|
the fact that Tracinda Corporation owns a significant portion of our
stock and may have interests that differ from the interests of our other shareholders;
and |
|
|
|
|
a significant portion of our labor force is covered by collective
bargaining agreements. |
Any forward-looking statement made by us in this Form 10-Q speaks only as of the date on
which it is made. Other 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 or identify all such
factors. Consequently, you should not consider the following to be a complete discussion of
all potential risks or uncertainties. 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. You are advised, however, to consult any further
disclosures we make on related subjects in our Forms 10-K, 10-Q and 8-K reports and our other
filings with the Securities and Exchange Commission. This discussion is provided as permitted
by the Private Securities Litigation Reform Act of 1995.
25
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.
|
|
|
Item 3. |
|
Quantitative and Qualitative Disclosures about Market Risk |
We incorporate by reference the information appearing under Market Risk in Part I, Item
2 of this Form 10-Q.
|
|
|
Item 4. |
|
Controls and Procedures |
Our Chief Executive Officer (principal executive officer) and Chief Financial Officer
(principal financial officer) have concluded that our disclosure controls and procedures were
effective as of March 31, 2010 to provide reasonable assurance that information required to be
disclosed in the Companys reports under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange Commission rules
and regulations and to provide that such information is accumulated and communicated to
management to allow timely decisions regarding required disclosures. This conclusion is based
on an evaluation as required by Rule 13a- 15(e) under the Exchange Act conducted under the
supervision and participation of the principal executive officer and principal financial
officer along with company management.
During the quarter ended March 31, 2010, there were no changes in our internal control
over financial reporting that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Part II. OTHER INFORMATION
|
|
|
Item 1. |
|
Legal Proceedings |
For a complete description of the facts and circumstances surrounding material litigation
we are a party to, see our Annual Report on Form 10-K for the year ended December 31, 2009.
There have been no significant developments in any of the cases disclosed in our Form 10-K in
the three months ended March 31, 2010, except as follows:
CityCenter
construction litigation. On or about March 24, 2010, Perini Building Company, Inc., general contractor for the
CityCenter development project (the Project), filed a lawsuit in the Eighth Judicial District Court
for Clark County, State of Nevada, Case No. A-10-612676, against MGM MIRAGE Design Group (a wholly-owned subsidiary
of MGM MIRAGE which was the original party to the Perini construction agreement) and certain direct or indirect
subsidiaries of CityCenter Holdings, LLC (the CityCenter
Owners). Perini asserts that the Project was substantially
completed, but the defendants failed to pay Perini approximately
$490 million allegedly due and owing under the construction agreement for labor, equipment and materials expended on
the Project. The complaint further charges the defendants with failure to provide timely and complete design documents,
late delivery to Perini of design changes, mismanagement of the
change order process, obstruction of Perinis ability
to complete the Harmon Hotel & Spa component, and fraudulent inducement of Perini to compromise significantly
amounts due for its general conditions. The complaint advances claims for breach of contract, breach of the
implied covenant of good faith and fair dealing, tortious breach of the implied covenant of good faith and fair dealing,
unjust enrichment and promissory estoppel, and fraud and intentional
misrepresentation. Perini seeks compensatory
damages, punitive damages, attorneys fees and costs.
On
or about April 29, 2010, Perini served an amended complaint in this case which joins as defendants many owners
of CityCenter residential condominium units (the Condo Owner
Defendants), adds a count for foreclosure
of Perinis recorded master mechanics lien against the CityCenter property in the amount of $491,240,000, and asserts
the priority of this mechanics lien over the interests of the CityCenter Owners, the Condo Owner Defendants
and the Project lenders in the CityCenter property.
MGM
MIRAGE and the other defendants dispute Perinis allegations, and contend that the defendants are
entitled to substantial amounts from Perini, including offsets against amounts claimed to be owed to Perini
and its subcontractors and damages based on breach of their
contractual and other duties to CityCenter, duplicative
payment requests, non-conforming work, lack of proof of alleged work performance, defective work related to the
Harmon Hotel & Spa component, property damage and Perinis failure to perform its obligations to pay Project
subcontractors and to prevent filing of liens against the Project. The Company and the CityCenter Owner defendants
intend to vigorously assert and protect their interests in the lawsuit.
26
A complete description of certain factors that may affect our future results and risk
factors is set forth in our Annual Report on Form 10-K for the year ended December 31, 2009.
There have been no material changes to those factors in the three months ended March 31, 2010.
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds |
Our share repurchases are only conducted under repurchase programs approved by our Board
of Directors and publicly announced. We did not repurchase shares of our common stock during
the quarter ended March 31, 2010. The maximum number of available for repurchase as under our
May 2008 repurchase program was 20 million as of March 31, 2010.
|
4.1 |
|
Indenture dated as of March 16, 2010, among the Company, the Subsidiary Guarantors
party thereto, and U.S. Bank National Association as Trustee with respect to $845
million aggregate principal amount of 9% Senior Secured Notes due 2020 (incorporated
by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated April
14, 2010 (the April 14, 2010 8-K)). |
|
|
4.2 |
|
Security Agreement, dated as of March 16, 2010, among MGM Grand Hotel, LLC, and
U.S. Bank National Association (incorporated by reference to Exhibit 4.2 to the April
14, 2010 8-K). |
|
|
4.3 |
|
Pledge Agreement, dated as of March 16, 2010, between the Company and U.S. Bank
National Association (incorporated by reference to Exhibit 4.3 to the April 14, 2010
8-K). |
|
|
4.4 |
|
Registration Rights Agreement, dated as of March 16, 2010, between the Company,
the guarantors named therein, Banc of America Securities LLC and the initial
purchasers named therein (incorporated by reference to Exhibit 4.4 to the April 14,
2010 8-K). |
|
|
4.5 |
|
Indenture dated as of April 10, 2010, among the Company, as issuer, the subsidiary
guarantors party thereto, and U.S. Bank National Association as Trustee with respect
to $1.15 billion aggregate principal amount of 4.25% Convertible Senior Notes due 2015
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K
dated April 16, 2010 (the April 22, 2010 8-K)). |
|
|
10.1 |
|
Agreement dated as of February 26, 2010, by and among Marina District Development Holding Co., LLC, Boyd Atlantic City, Inc., Boyd Gaming Corporation, MAC, Corp., and MGM MIRAGE. |
|
|
10.2 |
|
Stipulation of Settlement in the Matter of the Reopened 2005
Casino License Hearing of Marina District Development Company, LLC
(MDDC) dated March 11, 2010, by and among the State of
New Jersey Department of Law and Public Safety Division
of Gaming Enforcement, MGM MIRAGE, Boyd Gaming Corporation, Boyd Atlantic City, Inc., Marina District Development Holding Co., LLC and MDDC. |
|
|
10.3 |
|
Amendment No. 9, dated February 25, 2010 to the Fifth Amended and Restated Loan
Agreement dated as of October 3, 2006, by and among MGM MIRAGE, as borrower; MGM Grand
Detroit, LLC, as co-borrower; the Lenders and Co-Documentation Agents named therein;
Bank of America, N.A., as Administrative Agent; the Royal Bank of Scotland PLC, as
Syndication Agent; Bank of America Securities LLC and The Royal Bank of Scotland PLC,
as Joint Lead Arrangers; and Bank of America Securities LLC, The Royal Bank of
Scotland PLC, J.P. Morgan Securities Inc., Citibank North America, Inc. and Deutsche
Bank Securities Inc., as Joint Book Managers (incorporated by reference to Exhibit 10
to the Companys Current Report on Form 8-K dated March 3, 2010). |
|
|
10.4 |
|
Sixth Amended and Restated Loan Agreement, dated as of March 16, 2010, by and
among MGM MIRAGE, as borrower, MGM Grand Detroit, LLC, as co-borrower, the Lenders
named therein, Bank of America, N.A., as Administrative Agent and Banc of America
Securities LLC, RBS Securities, Inc., J.P. Morgan Securities Inc., Barclays Capital,
BNP Paribas Securities Corp., Deutsche Bank Securities Inc., Citibank North America,
Inc., Sumitomo Mitsui Banking Corporation, Bank of Scotland PLC, Commerzbank, Wachovia
Bank, National Association, Morgan Stanley Senior Funding, Inc. and UBS Securities
LLC, as Joint Lead Arrangers (incorporated by reference to Exhibit 10 to the
Companys Current Report on Form 8-K dated March 22, 2010). |
27
|
10.5 |
|
Confirmation for Base Capped Call Transaction, dated as of April 15, 2010, between
the Company and Bank of America N.A. (incorporated by reference to Exhibit 10.1 to the
April 22, 2010 8-K). |
|
|
10.6 |
|
Confirmation for Base Capped Call Transaction, dated as of April 15, 2010, between
the Company and Barclays Bank PLC (incorporated by reference to Exhibit 10.2 to the
April 22, 2010 8-K). |
|
|
10.7 |
|
Confirmation for Base Capped Call Transaction, dated as of April 15, 2010, between
the Company and JPMorgan Chase Bank, National Association, London Branch (incorporated
by reference to Exhibit 10.3 to the April 22, 2010 8-K). |
|
|
10.8 |
|
Confirmation for Base Capped Call Transaction, dated as of April 15, 2010, between
the Company and Deutsche Bank AG, London Branch (incorporated by reference to Exhibit
10.4 to the April 22, 2010 8-K). |
|
|
10.9 |
|
Confirmation for Additional Capped Call Transaction, dated as of April 16, 2010,
between the Company and Bank of America N.A. (incorporated by reference to Exhibit
10.5 to the April 22, 2010 8-K). |
|
|
10.10 |
|
Confirmation for Additional Capped Call Transaction, dated as of April 16, 2010,
between the Company and Barclays Bank PLC (incorporated by reference to Exhibit 10.6
to the April 22, 2010 8-K). |
|
|
10.11 |
|
Confirmation for Additional Capped Call Transaction, dated as of April 16, 2010,
between the Company and JPMorgan Chase Bank, National Association, London Branch
(incorporated by reference to Exhibit 10.7 to the April 22, 2010 8-K). |
|
|
10.12 |
|
Confirmation for Additional Capped Call Transaction, dated as of April 16, 2010,
between the Company and Deutsche Bank AG, London Branch (incorporated by reference to
Exhibit 10.8 to the April 22, 2010 8-K). |
|
|
31.1 |
|
Certification of Chief Executive Officer of Periodic Report Pursuant to Rule
13a-14(a) and Rule 15d-14(a). |
|
|
31.2 |
|
Certification of Chief Financial Officer of Periodic Report Pursuant to Rule
13a-14(a) and Rule 15d-14(a). |
|
|
32.1 |
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350. |
|
|
32.2 |
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350. |
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
|
|
|
|
|
MGM MIRAGE
|
|
Date: May 7, 2010 |
By: |
/s/ JAMES J. MURREN
|
|
|
|
James J. Murren |
|
|
|
Chairman of the Board, Chief Executive Officer
and President
(Principal Executive Officer) |
|
|
|
|
|
Date: May 7, 2010 |
|
/s/ DANIEL J. DARRIGO
|
|
|
|
Daniel J. DArrigo |
|
|
|
Executive Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer) |
|
|
29