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 June 30, 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
MGM Resorts International
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
88-0215232 |
|
|
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer Identification No.) |
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)
MGM MIRAGE
(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 þ 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 | |
Smaller reporting company o |
|
|
|
|
(Do not check if a smaller reporting company) |
|
|
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 August 2, 2010
441,317,101 shares |
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
FORM 10-Q
I N D E X
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
ASSETS
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,013,208 |
|
|
$ |
2,056,207 |
|
Accounts receivable, net |
|
|
363,031 |
|
|
|
368,474 |
|
Inventories |
|
|
96,805 |
|
|
|
101,809 |
|
Income tax receivable |
|
|
194,474 |
|
|
|
384,555 |
|
Deferred income taxes |
|
|
34,901 |
|
|
|
38,487 |
|
Prepaid expenses and other |
|
|
89,537 |
|
|
|
103,969 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,791,956 |
|
|
|
3,053,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
14,814,594 |
|
|
|
15,069,952 |
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
Investments in and advances to unconsolidated affiliates |
|
|
2,118,498 |
|
|
|
3,611,799 |
|
Goodwill |
|
|
86,353 |
|
|
|
86,353 |
|
Other intangible assets, net |
|
|
343,192 |
|
|
|
344,253 |
|
Other long-term assets, net |
|
|
832,954 |
|
|
|
352,352 |
|
|
|
|
|
|
|
|
Total other assets |
|
|
3,380,997 |
|
|
|
4,394,757 |
|
|
|
|
|
|
|
|
|
|
$ |
19,987,547 |
|
|
$ |
22,518,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
117,463 |
|
|
$ |
173,719 |
|
Current portion of long-term debt |
|
|
|
|
|
|
1,079,824 |
|
Accrued interest on long-term debt |
|
|
221,447 |
|
|
|
206,357 |
|
Other accrued liabilities |
|
|
856,077 |
|
|
|
923,701 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,194,987 |
|
|
|
2,383,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
2,653,470 |
|
|
|
3,031,303 |
|
Long-term debt |
|
|
13,046,639 |
|
|
|
12,976,037 |
|
Other long-term obligations |
|
|
243,293 |
|
|
|
256,837 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
|
|
Common stock, $.01 par value: authorized 600,000,000 shares;
Issued and outstanding 441,314,885 and 441,222,251 shares |
|
|
4,413 |
|
|
|
4,412 |
|
Capital in excess of par value |
|
|
3,457,200 |
|
|
|
3,497,425 |
|
Retained earnings (accumulated deficit) |
|
|
(609,685 |
) |
|
|
370,532 |
|
Accumulated other comprehensive loss |
|
|
(2,770 |
) |
|
|
(1,937 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
|
2,849,158 |
|
|
|
3,870,432 |
|
|
|
|
|
|
|
|
|
|
$ |
19,987,547 |
|
|
$ |
22,518,210 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
1
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino |
|
$ |
589,392 |
|
|
$ |
625,570 |
|
|
$ |
1,200,149 |
|
|
$ |
1,290,297 |
|
Rooms |
|
|
345,219 |
|
|
|
350,295 |
|
|
|
659,122 |
|
|
|
705,339 |
|
Food and beverage |
|
|
360,217 |
|
|
|
357,859 |
|
|
|
676,373 |
|
|
|
696,256 |
|
Entertainment |
|
|
123,935 |
|
|
|
123,373 |
|
|
|
240,617 |
|
|
|
241,430 |
|
Retail |
|
|
51,062 |
|
|
|
54,311 |
|
|
|
94,951 |
|
|
|
102,260 |
|
Other |
|
|
137,060 |
|
|
|
130,529 |
|
|
|
257,839 |
|
|
|
254,219 |
|
Reimbursed costs |
|
|
90,361 |
|
|
|
13,273 |
|
|
|
183,684 |
|
|
|
26,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,697,246 |
|
|
|
1,655,210 |
|
|
|
3,312,735 |
|
|
|
3,316,757 |
|
Less: Promotional allowances |
|
|
(159,551 |
) |
|
|
(161,055 |
) |
|
|
(317,648 |
) |
|
|
(323,807 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,537,695 |
|
|
|
1,494,155 |
|
|
|
2,995,087 |
|
|
|
2,992,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino |
|
|
346,367 |
|
|
|
349,831 |
|
|
|
692,312 |
|
|
|
725,348 |
|
Rooms |
|
|
108,009 |
|
|
|
106,147 |
|
|
|
208,755 |
|
|
|
216,974 |
|
Food and beverage |
|
|
204,675 |
|
|
|
199,032 |
|
|
|
387,287 |
|
|
|
393,359 |
|
Entertainment |
|
|
90,261 |
|
|
|
88,622 |
|
|
|
181,257 |
|
|
|
176,364 |
|
Retail |
|
|
30,579 |
|
|
|
34,455 |
|
|
|
58,578 |
|
|
|
66,076 |
|
Other |
|
|
84,127 |
|
|
|
72,222 |
|
|
|
162,154 |
|
|
|
142,345 |
|
Reimbursed costs |
|
|
90,361 |
|
|
|
13,273 |
|
|
|
183,684 |
|
|
|
26,956 |
|
General and administrative |
|
|
282,404 |
|
|
|
273,617 |
|
|
|
558,458 |
|
|
|
534,857 |
|
Corporate expense |
|
|
31,950 |
|
|
|
43,006 |
|
|
|
56,828 |
|
|
|
67,367 |
|
Preopening and start-up expenses |
|
|
537 |
|
|
|
9,410 |
|
|
|
4,031 |
|
|
|
17,481 |
|
Property transactions, net |
|
|
1,126,282 |
|
|
|
3,248 |
|
|
|
1,126,971 |
|
|
|
(191,877 |
) |
Depreciation and amortization |
|
|
164,766 |
|
|
|
174,368 |
|
|
|
327,900 |
|
|
|
351,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,560,318 |
|
|
|
1,367,231 |
|
|
|
3,948,215 |
|
|
|
2,526,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from unconsolidated affiliates |
|
|
(26,194 |
) |
|
|
4,175 |
|
|
|
(107,112 |
) |
|
|
19,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(1,048,817 |
) |
|
|
131,099 |
|
|
|
(1,060,240 |
) |
|
|
486,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
876 |
|
|
|
6,296 |
|
|
|
1,642 |
|
|
|
10,678 |
|
Interest expense, net |
|
|
(291,169 |
) |
|
|
(201,287 |
) |
|
|
(555,344 |
) |
|
|
(372,923 |
) |
Non-operating items from unconsolidated affiliates |
|
|
(31,574 |
) |
|
|
(12,314 |
) |
|
|
(54,924 |
) |
|
|
(23,445 |
) |
Other, net |
|
|
7,713 |
|
|
|
(234,181 |
) |
|
|
148,802 |
|
|
|
(235,519 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(314,154 |
) |
|
|
(441,486 |
) |
|
|
(459,824 |
) |
|
|
(621,209 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(1,362,971 |
) |
|
|
(310,387 |
) |
|
|
(1,520,064 |
) |
|
|
(135,011 |
) |
Benefit for income taxes |
|
|
479,495 |
|
|
|
97,812 |
|
|
|
539,847 |
|
|
|
27,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(883,476 |
) |
|
$ |
(212,575 |
) |
|
$ |
(980,217 |
) |
|
$ |
(107,376 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(2.00 |
) |
|
$ |
(0.60 |
) |
|
$ |
(2.22 |
) |
|
$ |
(0.34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
(2.00 |
) |
|
$ |
(0.60 |
) |
|
$ |
(2.22 |
) |
|
$ |
(0.34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
2
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(980,217 |
) |
|
$ |
(107,376 |
) |
Adjustments to reconcile net loss to net cash provided
by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
327,900 |
|
|
|
351,226 |
|
Amortization of debt discounts, premiums and issuance costs |
|
|
39,731 |
|
|
|
18,512 |
|
(Gain) loss on retirement of long-term debt |
|
|
(140,642 |
) |
|
|
58,265 |
|
Provision for doubtful accounts |
|
|
19,135 |
|
|
|
31,488 |
|
Stock-based compensation |
|
|
17,557 |
|
|
|
17,756 |
|
Business interruption insurance lost profits |
|
|
|
|
|
|
(15,115 |
) |
Property transactions, net |
|
|
1,126,971 |
|
|
|
(191,877 |
) |
Convertible note investment impairment |
|
|
|
|
|
|
175,690 |
|
Loss from unconsolidated affiliates |
|
|
165,529 |
|
|
|
20,450 |
|
Distributions from unconsolidated affiliates |
|
|
19,909 |
|
|
|
32,331 |
|
Deferred income taxes |
|
|
(349,177 |
) |
|
|
117,561 |
|
Change in current assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(15,316 |
) |
|
|
(18,697 |
) |
Inventories |
|
|
5,004 |
|
|
|
7,979 |
|
Income taxes receivable and payable |
|
|
183,211 |
|
|
|
(72,354 |
) |
Prepaid expenses and other |
|
|
14,432 |
|
|
|
3,684 |
|
Accounts payable and accrued liabilities |
|
|
(88,691 |
) |
|
|
(52,889 |
) |
Business interruption insurance recoveries |
|
|
|
|
|
|
16,391 |
|
Other |
|
|
4,508 |
|
|
|
(4,996 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
349,844 |
|
|
|
388,029 |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Capital expenditures, net of construction payable |
|
|
(79,095 |
) |
|
|
(93,514 |
) |
Proceeds from sale of Treasure Island, net |
|
|
|
|
|
|
746,266 |
|
Dispositions of property and equipment |
|
|
99 |
|
|
|
153 |
|
Investments in and advances to unconsolidated affiliates |
|
|
(302,000 |
) |
|
|
(757,731 |
) |
Property damage insurance recoveries |
|
|
|
|
|
|
7,186 |
|
Other |
|
|
14,810 |
|
|
|
(4,656 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(366,186 |
) |
|
|
(102,296 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Net repayments under bank credit facilities maturities
of 90 days or less |
|
|
(3,112,807 |
) |
|
|
(2,671,119 |
) |
Borrowings under bank credit facilities maturities longer than 90 days |
|
|
5,122,565 |
|
|
|
6,661,492 |
|
Repayments under bank credit facilities maturities longer than 90 days |
|
|
(4,341,560 |
) |
|
|
(5,576,340 |
) |
Issuance of senior notes, net |
|
|
1,995,000 |
|
|
|
1,459,120 |
|
Retirement of senior notes |
|
|
(508,640 |
) |
|
|
(1,011,647 |
) |
Debt issuance costs |
|
|
(98,531 |
) |
|
|
(99,991 |
) |
Issuance of common stock in public offering, net |
|
|
|
|
|
|
1,103,737 |
|
Issuance of common stock upon exercise of stock options |
|
|
|
|
|
|
632 |
|
Capped call transactions |
|
|
(81,478 |
) |
|
|
|
|
Payment of Detroit Economic Development Corporation bonds |
|
|
|
|
|
|
(49,393 |
) |
Other |
|
|
(1,206 |
) |
|
|
(666 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(1,026,657 |
) |
|
|
(184,175 |
) |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
Net increase (decrease) for the period |
|
|
(1,042,999 |
) |
|
|
101,558 |
|
Change in cash related to assets held for sale |
|
|
|
|
|
|
14,154 |
|
Balance, beginning of period |
|
|
2,056,207 |
|
|
|
295,644 |
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
1,013,208 |
|
|
$ |
411,356 |
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures |
|
|
|
|
|
|
|
|
Interest paid, net of amounts capitalized |
|
$ |
500,523 |
|
|
$ |
348,778 |
|
Federal, state and foreign income taxes paid, net of refunds |
|
|
(361,533 |
) |
|
|
(78,215 |
) |
Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Increase (decrease) in investment in CityCenter related to change in
completion guarantee liability |
|
$ |
115,892 |
|
|
$ |
(141,000 |
) |
The accompanying notes are an integral part of these consolidated financial statements.
3
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION
Organization. MGM Resorts International (the Company) is a Delaware corporation,
formerly named MGM MIRAGE. As of June 30, 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 Resorts International 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 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, Vietnam 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 decree
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; 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. Pansy
Ho Chiu-King owns the other 50% of MGM Grand Macau. Grand Victoria is a riverboat casino 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.
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.
4
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 June 30, 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.
In connection with its accounting for the March 2010 amended and restated credit facility
as discussed in Note 3, the Company estimated fair value of its senior credit facility using
Level 1 inputs. The Company also uses Level 1 inputs for its long-term debt fair value
disclosures. 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.
Recently issued accounting standards. Certain amendments to Accounting Standards
Codification (ASC) Topic 810, Consolidation, became 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.
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 June 30,
2010 and the results of its operations and cash flows for the three and six month periods
ended June 30, 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 three and six months ended June
30, 2009 was $13 million and $27 million, respectively.
5
NOTE 2 INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Investments in and advances to unconsolidated affiliates consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
CityCenter Holdings, LLC CityCenter (50%) |
|
$ |
1,500,629 |
|
|
$ |
2,546,099 |
|
Marina District Development Company Borgata (50%) |
|
|
|
|
|
|
466,774 |
|
Elgin Riverboat ResortRiverboat Casino Grand Victoria (50%) |
|
|
293,613 |
|
|
|
296,248 |
|
MGM Grand Paradise Limited Macau (50%) |
|
|
284,669 |
|
|
|
258,465 |
|
Circus and Eldorado Joint Venture Silver Legacy (50%) |
|
|
27,714 |
|
|
|
28,345 |
|
Other |
|
|
11,873 |
|
|
|
15,868 |
|
|
|
|
|
|
|
|
|
|
$ |
2,118,498 |
|
|
$ |
3,611,799 |
|
|
|
|
|
|
|
|
As discussed further below, the Companys investment in CityCenter decreased
due to a $1.12 billion impairment charge, the Companys share of impairment related to
residential inventory at CityCenter, and the Companys share of CityCenters operating losses.
The Companys $1.5 billion CityCenter investment and advances balance includes $173 million
related to completion guarantee payments to be repaid from condominium sale proceeds as
discussed in Note 4.
As a result of the Companys ownership interest in Borgata being placed into a
trust, as discussed below, the Company no longer has significant influence over Borgata;
therefore, 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. The Company also reclassified the carrying value of its
investment related to Borgata to Other long-term assets, net in the accompanying
consolidated balance sheet as of June 30, 2010. 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 that do not exceed the Companys share of
earnings are recognized currently in earnings. However, distributions to the trust that exceed
the Companys share of earnings for such periods will be applied to reduce the carrying amount
of its investment. In the second quarter of 2010, the trust received distributions from the
joint venture of $15 million, of which $6 million was recorded as a reduction of the carrying
value and $9 million was recorded as Other, net non-operating income.
The Company recorded its share of the results of operations of unconsolidated affiliates as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
For the periods ended June 30, |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Income (loss) from unconsolidated affiliates |
|
$ |
(26,194 |
) |
|
$ |
4,175 |
|
|
$ |
(107,112 |
) |
|
$ |
19,724 |
|
Preopening and start-up expenses |
|
|
|
|
|
|
(8,848 |
) |
|
|
(3,493 |
) |
|
|
(16,729 |
) |
Non-operating items from unconsolidated affiliates |
|
|
(31,574 |
) |
|
|
(12,314 |
) |
|
|
(54,924 |
) |
|
|
(23,445 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(57,768 |
) |
|
$ |
(16,987 |
) |
|
$ |
(165,529 |
) |
|
$ |
(20,450 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in income (loss) from unconsolidated affiliates for the three and six
months ended June 30, 2010 is the Companys share of impairment charges relating to completed
CityCenter residential inventory. Due to the completion of construction of the Mandarin
Oriental residential inventory in the first quarter and completion of the Veer residential
inventory in the second quarter, CityCenter is required to carry its residential inventory at
the lower of its carrying value or fair value less costs to sell. CityCenter management
determined the fair value less costs to sell was below carrying value and as a result recorded
impairment charges for the Mandarin Oriental residential inventory in the first quarter and
the Veer residential inventory in the second quarter. 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. These analyses resulted in
impairment charges of approximately $171 million in the first quarter of 2010 and $57 million
in the second quarter of 2010. The Company recognized 50% of such impairment charges,
resulting in pre-tax charges of approximately $29 million and $114 million in the three and
six month periods ended June 30, 2010, respectively.
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 the 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 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. Due to
circumstances surrounding the Companys negotiations with the DGE, the Company reviewed the
carrying value of its 50% investment in the Borgata joint venture at December 31, 2009. The
Company did not record an impairment charge related to its investment in the Borgata at that
time because the Company determined that the fair value of its 50% investment in the Borgata
joint venture exceeded its carrying value. The Company does not expect the settlement
agreement or amendments to the joint venture agreement to have a material adverse affect on
the carrying value of the Companys investment.
In July 2010, the Company entered into an agreement to sell four long-term
ground leases and their respective underlying real property parcels, approximately 11.3 acres,
underlying the Borgata for $73 million. The transaction is subject to customary closing
conditions contained in the purchase and sale agreement, including approval by the New Jersey
Casino Control Commission and the New Jersey Division of Gaming Enforcement. The Company
expects the transaction to close by the fourth quarter of 2010 and expects to record a small
gain on the sale.
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 $250 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.
At June 30, 2010, the Company reviewed its CityCenter investment for impairment
using revised operating forecasts developed by CityCenter management late in the second
quarter. Based on current and forecasted market conditions and because CityCenters results of
operations through June 30, 2010 were below previous forecasts, and the revised operating
forecasts were lower than previous forecasts, management concluded it should review the
carrying value of its investment. The Companys discounted cash flow analysis for CityCenter
included estimated future cash inflows from operations, including residential sales, and estimated
future cash outflows for capital expenditures.
The analysis used an 11% discount rate and a long term growth rate of 4% related to forecasted cash flows for CityCenters
operating assets.
Based on its analysis, the Company determined
that the carrying value of its investment exceeded its fair value and therefore an impairment
was indicated. The Company intends to and believes it will be able to retain its investment in
CityCenter; however, due to the extent of the shortfall and the Companys assessment of the
uncertainty of fully recovering its investment, the Company determined that the impairment was
other-than-temporary and recorded an impairment charge of $1.12 billion included in
Property transactions, net.
In July 2010, the Company and Infinity World made capital contributions of $32.5 million
each. The Companys contribution was made through a reduction in its receivable from
CityCenter. A portion of Infinity Worlds cash contribution was used to repay an additional portion of the
amounts owed to the Company for costs paid by the Company on behalf of the joint venture.
7
Summary balance sheet information for CityCenter is provided below:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2010 |
|
2009 |
|
|
(In thousands) |
Current assets |
|
$ |
172,766 |
|
|
$ |
234,383 |
|
Property and other assets, net |
|
|
9,885,432 |
|
|
|
10,499,278 |
|
Current liabilities |
|
|
641,911 |
|
|
|
983,419 |
|
Long-term debt and other liabilities |
|
|
2,655,031 |
|
|
|
2,620,869 |
|
Equity |
|
|
6,761,256 |
|
|
|
7,129,373 |
|
Summary results of operations for CityCenter are provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
For the periods ended June 30, |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Net revenues |
|
$ |
400,685 |
|
|
$ |
290 |
|
|
$ |
660,547 |
|
|
$ |
2,648 |
|
Operating expenses, except preopening expenses |
|
|
(528,697 |
) |
|
|
(4,301 |
) |
|
|
(1,037,766 |
) |
|
|
(8,390 |
) |
Preopening and start-up expenses |
|
|
|
|
|
|
(17,350 |
) |
|
|
(6,202 |
) |
|
|
(31,828 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(128,012 |
) |
|
|
(21,361 |
) |
|
|
(383,421 |
) |
|
|
(37,570 |
) |
Other non-operating expense |
|
|
(58,385 |
) |
|
|
(3,291 |
) |
|
|
(113,446 |
) |
|
|
(7,152 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(186,397 |
) |
|
$ |
(24,652 |
) |
|
$ |
(496,867 |
) |
|
$ |
(44,722 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 3 LONG-TERM DEBT
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Senior credit facility: |
|
|
|
|
|
|
|
|
Term loans, net |
|
$ |
2,560,216 |
|
|
$ |
2,119,037 |
|
Revolving loans |
|
|
450,000 |
|
|
|
3,392,806 |
|
$297 million 9.375% senior subordinated notes, repaid in 2010 |
|
|
|
|
|
|
298,135 |
|
$645.8 million 8.5% senior notes, due 2010, net |
|
|
645,775 |
|
|
|
781,689 |
|
$325.5 million 8.375% senior subordinated notes, due 2011 |
|
|
325,470 |
|
|
|
400,000 |
|
$128.7 million 6.375% senior notes, due 2011, net |
|
|
129,034 |
|
|
|
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 |
|
|
152,785 |
|
|
|
153,190 |
|
$750 million 13% senior secured notes, due 2013, net |
|
|
711,434 |
|
|
|
707,144 |
|
$508.9 million 5.875% senior notes, due 2014, net |
|
|
507,767 |
|
|
|
507,613 |
|
$650 million 10.375% senior secured notes, due 2014,
net |
|
|
634,978 |
|
|
|
633,463 |
|
$875 million
6.625% senior notes, due 2015, net |
|
|
878,004 |
|
|
|
878,253 |
|
$1,150 million 4.25% convertible senior notes, due 2015 |
|
|
1,150,000 |
|
|
|
|
|
$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 |
|
|
829,311 |
|
|
|
828,438 |
|
$475 million
11.375% senior notes, due 2018, net |
|
|
463,383 |
|
|
|
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 |
|
|
2,647 |
|
|
|
3,196 |
|
|
|
|
|
|
|
|
|
|
|
13,046,639 |
|
|
|
14,055,861 |
|
Less: Current portion |
|
|
|
|
|
|
(1,079,824 |
) |
|
|
|
|
|
|
|
|
|
$ |
13,046,639 |
|
|
$ |
12,976,037 |
|
|
|
|
|
|
|
|
As of June 30, 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.
8
Interest expense, net consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
For the periods ended June 30, |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Total interest incurred |
|
$ |
291,169 |
|
|
$ |
268,039 |
|
|
$ |
555,344 |
|
|
$ |
507,869 |
|
Interest capitalized |
|
|
|
|
|
|
(66,752 |
) |
|
|
|
|
|
|
(134,946 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
291,169 |
|
|
$ |
201,287 |
|
|
$ |
555,344 |
|
|
$ |
372,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior credit facility. 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 revolving loan (of which
approximately $302 million must be repaid by October 3, 2011). The Company had approximately
$1.5 billion of available borrowing capacity under its senior credit facility at June 30,
2010.
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 revolving loan, 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. In the three and six months ended June 30, 2010, the Company had $10 million of
interest related to the amortization of these 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 had expense of $22 million for 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 revolving 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 June 30, 2010 and December 31, 2009 was 6.7% and 6.0%, respectively.
At June 30, 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 June 30,
2010, the Company was in compliance with the minimum EBITDA and maximum capital expenditures
covenants.
Senior notes. During the second quarter of 2010 the company repurchased $136 million
principal amount of its 8.50% senior notes due 2010 and $75 million principal amount of its
8.375% senior notes due 2011 essentially at par.
9
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 senior note issuance to permanently repay approximately $820 million of
loans previously outstanding under its credit facility.
In February 2010, the Company repaid the $297 million of outstanding principal amount of
its 9.375% senior subordinated notes due 2010 at maturity.
Senior convertible notes. 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 unsecured indebtedness. The Company used the net proceeds
from the senior convertible note issuance to temporarily repay amounts outstanding under its
senior credit facility.
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. The initial
conversion rate was determined based on the closing trading price of the Companys common
stock on the date of the transaction, plus a 27.5% premium. The terms of the notes do not
provide for any beneficial conversion features.
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 per share. The Company paid
approximately $81 million for the capped call transactions, which is reflected as a decrease
in Capital in excess of par value net of $29 million of associated tax benefits.
Financial instruments that are indexed to an entitys own stock and are classified as
stockholders equity in an entitys statement of financial position are not considered within
the scope of derivative instruments. The Company performed an evaluation of the embedded
conversion option and capped call transactions, which included an analysis of contingent
exercise provisions and settlement requirements, and determined that the embedded conversion
option and capped call transactions are considered indexed to the Companys stock and would be
classified as equity, and therefore are not accounted for as derivative instruments.
Accordingly, the entire face amount of the notes was recorded as debt until converted or
retired at maturity, and the capped call transactions were recorded within equity as described
above.
Fair value of long-term debt. The estimated fair value of the Companys long-term debt at
June 30, 2010 was approximately $11.2 billion, compared to its book value of $13.0 billion. At
December 31, 2009, the estimated fair value of the Companys long-term debt was approximately
$12.9 billion, compared to 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 $250 million of net residential proceeds to fund
construction costs, though the timing of receipt of such proceeds is uncertain.
As of June 30, 2010, the Company has funded $302 million under the completion guarantee.
The Company has recorded a receivable from CityCenter of $173 million related to these
amounts, which is net of residential proceeds received and used by CityCenter on construction
expenditures. At June 30, 2010, the Company had a remaining estimated total net obligation
under the completion guarantee of $137 million which represents an estimated $266 million for
its total net obligation less $129 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 that its total net obligation may be up to $330 million, which includes estimated
litigation costs related to the resolution of disputes with
contractors as to the final
construction costs and reflects certain estimated offsets to the
amounts claimed by the
contractors.
10
CityCenter construction litigation. In March 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, 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 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.
In April 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 approximately $491 million, 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 CityCenter Owners 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 CityCenter Owners and the other defendants intend to vigorously assert and
protect their interests in the lawsuit. The range of loss beyond the asserted amount or any
gain the joint venture may realize related to the defendants counterclaims cannot be
reasonably estimated at this time.
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 June 30, 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 $128
million of cash at the corporate level to support normal bankroll requirements at the
Companys Nevada operations.
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 LOSS 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 |
|
Six Months |
For the periods ended June 30, |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
(In thousands) |
Weighted-average common shares outstanding
(used in the calculation of basic earnings per share) |
|
|
441,297 |
|
|
|
352,457 |
|
|
|
441,269 |
|
|
|
314,718 |
|
Potential dilution from stock options and restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common and common equivalent shares
(used in the calculation of diluted earnings per share) |
|
|
441,297 |
|
|
|
352,457 |
|
|
|
441,269 |
|
|
|
314,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
The Company had a loss from continuing operations for the three and six months ended
June 30, 2010 and 2009. Therefore, approximately 26.2 million shares for the 2010 three and
six month periods and 26.5 million shares for the 2009 three and six month periods underlying
outstanding stock-based awards were excluded from the computation of diluted earnings per
share for these periods because to include these awards would be anti-dilutive. In addition,
the effect of an assumed conversion of the Companys convertible senior notes due 2015 would
be anti-dilutive.
NOTE 6 COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
For the periods ended June 30, |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Net loss |
|
$ |
(883,476 |
) |
|
$ |
(212,575 |
) |
|
$ |
(980,217 |
) |
|
$ |
(107,376 |
) |
Valuation adjustment to M Resort convertible
note, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
962 |
|
Currency translation adjustment |
|
|
(763 |
) |
|
|
193 |
|
|
|
(763 |
) |
|
|
822 |
|
Reclassification of comprehensive income to
earnings M Resort note |
|
|
|
|
|
|
53,305 |
|
|
|
|
|
|
|
53,305 |
|
Other |
|
|
|
|
|
|
|
|
|
|
(70 |
) |
|
|
165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(884,239 |
) |
|
$ |
(159,077 |
) |
|
$ |
(981,050 |
) |
|
$ |
(52,122 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 7 STOCK-BASED COMPENSATION
Activity under share-based payment plans. As of June 30, 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 six months ended June 30, 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 |
|
|
138 |
|
|
|
13.00 |
|
Exercised |
|
|
(66 |
) |
|
|
13.22 |
|
Forfeited or expired |
|
|
(3,022 |
) |
|
|
22.23 |
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2010 |
|
|
25,261 |
|
|
|
23.26 |
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2010 |
|
|
17,416 |
|
|
|
26.72 |
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010, there was a total of $47 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 1.8 years.
Restricted stock units (RSUs)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
|
Shares |
|
Grant-Date |
|
|
(000s) |
|
Fair Value |
Nonvested at January 1, 2010 |
|
|
1,080 |
|
|
$ |
15.85 |
|
Granted |
|
|
|
|
|
|
|
|
Vested |
|
|
(128 |
) |
|
|
18.87 |
|
Forfeited |
|
|
(33 |
) |
|
|
15.72 |
|
|
|
|
|
|
|
|
|
|
Nonvested at June 30, 2010 |
|
|
919 |
|
|
|
15.44 |
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010, there was a total of $43 million of unamortized compensation
related to RSUs which is expected to be recognized over a weighted-average period of 1.6
years.
12
The following table includes additional information related to stock options, SARs and
RSUs:
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
|
2010 |
|
2009 |
|
|
(In thousands) |
Intrinsic value of share-based awards exercised or RSUs vested |
|
$ |
1,766 |
|
|
$ |
169 |
|
Income tax benefit from share-based awards exercised or RSUs vested |
|
|
613 |
|
|
|
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 |
|
|
Six Months |
|
For the periods ended June 30, |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Compensation cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and SARS |
|
$ |
4,223 |
|
|
$ |
5,321 |
|
|
$ |
10,020 |
|
|
$ |
10,668 |
|
RSUs |
|
|
4,964 |
|
|
|
5,225 |
|
|
|
10,126 |
|
|
|
10,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total compensation cost |
|
|
9,187 |
|
|
|
10,546 |
|
|
|
20,146 |
|
|
|
20,992 |
|
Less: CityCenter reimbursed costs |
|
|
(1,185 |
) |
|
|
(1,503 |
) |
|
|
(2,589 |
) |
|
|
(3,192 |
) |
Less: Compensation cost capitalized |
|
|
|
|
|
|
(20 |
) |
|
|
|
|
|
|
(44 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation cost recognized as expense |
|
|
8,002 |
|
|
|
9,023 |
|
|
|
17,557 |
|
|
|
17,756 |
|
Less: Related tax benefit |
|
|
(2,781 |
) |
|
|
(3,120 |
) |
|
|
(6,106 |
) |
|
|
(6,137 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense, net of tax benefit |
|
$ |
5,221 |
|
|
$ |
5,903 |
|
|
$ |
11,451 |
|
|
$ |
11,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation cost for 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 |
|
Six Months |
For the periods ended June 30, |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Expected volatility |
|
|
74 |
% |
|
|
82 |
% |
|
|
74 |
% |
|
|
81 |
% |
Expected term |
|
4.8 years |
|
4.7 years |
|
4.8 years |
|
4.7 years |
Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
Risk-free interest rate |
|
|
1.7 |
% |
|
|
2.4 |
% |
|
|
1.8 |
% |
|
|
2.4 |
% |
Forfeiture rate |
|
|
4.8 |
% |
|
|
3.4 |
% |
|
|
4.8 |
% |
|
|
3.4 |
% |
Weighted-average fair value of options granted |
|
$ |
7.88 |
|
|
$ |
3.54 |
|
|
$ |
7.80 |
|
|
$ |
3.75 |
|
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.
NOTE 8 PROPERTY TRANSACTIONS, NET
Net property transactions consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
For the periods ended June 30, |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
CityCenter investment impairment charge |
|
$ |
1,122,456 |
|
|
$ |
|
|
|
$ |
1,122,456 |
|
|
$ |
|
|
Insurance recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,186 |
) |
Gain on sale of TI |
|
|
|
|
|
|
2,928 |
|
|
|
|
|
|
|
(187,442 |
) |
Other property transactions, net |
|
|
3,826 |
|
|
|
320 |
|
|
|
4,515 |
|
|
|
2,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,126,282 |
|
|
$ |
3,248 |
|
|
$ |
1,126,971 |
|
|
$ |
(191,877 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 2 for discussion of the CityCenter investment impairment charge.
13
NOTE 9 CONSOLIDATING CONDENSED FINANCIAL INFORMATION
Excluding MGM Grand Detroit, LLC and certain minor subsidiaries, the Companys
subsidiaries, which are 100% directly or indirectly owned, 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 June 30, 2010 and December 31, 2009 and
for the three and six month periods ended June 30, 2010 and 2009 is as follows:
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2010 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Current assets |
|
$ |
966,314 |
|
|
$ |
733,948 |
|
|
$ |
91,694 |
|
|
$ |
|
|
|
$ |
1,791,956 |
|
Property and equipment, net |
|
|
|
|
|
|
14,163,263 |
|
|
|
663,303 |
|
|
|
(11,972 |
) |
|
|
14,814,594 |
|
Investments in subsidiaries |
|
|
16,743,973 |
|
|
|
460,922 |
|
|
|
|
|
|
|
(17,204,895 |
) |
|
|
|
|
Investments in and advances to
unconsolidated affiliates |
|
|
|
|
|
|
1,833,829 |
|
|
|
284,669 |
|
|
|
|
|
|
|
2,118,498 |
|
Other non-current assets |
|
|
361,785 |
|
|
|
775,432 |
|
|
|
125,282 |
|
|
|
|
|
|
|
1,262,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
18,072,072 |
|
|
$ |
17,967,394 |
|
|
$ |
1,164,948 |
|
|
$ |
(17,216,867 |
) |
|
$ |
19,987,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
354,295 |
|
|
$ |
808,437 |
|
|
$ |
32,255 |
|
|
$ |
|
|
|
$ |
1,194,987 |
|
Intercompany accounts |
|
|
(268,251 |
) |
|
|
187,844 |
|
|
|
80,407 |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
2,653,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,653,470 |
|
Long-term debt |
|
|
12,298,863 |
|
|
|
297,776 |
|
|
|
450,000 |
|
|
|
|
|
|
|
13,046,639 |
|
Other long-term obligations |
|
|
184,537 |
|
|
|
58,184 |
|
|
|
572 |
|
|
|
|
|
|
|
243,293 |
|
Stockholders equity |
|
|
2,849,158 |
|
|
|
16,615,153 |
|
|
|
601,714 |
|
|
|
(17,216,867 |
) |
|
|
2,849,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
18,072,072 |
|
|
$ |
17,967,394 |
|
|
$ |
1,164,948 |
|
|
$ |
(17,216,867 |
) |
|
$ |
19,987,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2010 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Net revenues |
|
$ |
|
|
|
$ |
1,397,986 |
|
|
$ |
139,709 |
|
|
$ |
|
|
|
$ |
1,537,695 |
|
Equity in subsidiaries earnings |
|
|
(1,080,285 |
) |
|
|
24,099 |
|
|
|
|
|
|
|
1,056,186 |
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations |
|
|
2,263 |
|
|
|
876,612 |
|
|
|
75,504 |
|
|
|
|
|
|
|
954,379 |
|
General and administrative |
|
|
2,182 |
|
|
|
255,437 |
|
|
|
24,785 |
|
|
|
|
|
|
|
282,404 |
|
Corporate expense |
|
|
4,865 |
|
|
|
27,625 |
|
|
|
(540 |
) |
|
|
|
|
|
|
31,950 |
|
Preopening and start-up expenses |
|
|
|
|
|
|
537 |
|
|
|
|
|
|
|
|
|
|
|
537 |
|
Property transactions, net |
|
|
|
|
|
|
1,126,282 |
|
|
|
|
|
|
|
|
|
|
|
1,126,282 |
|
Depreciation and amortization |
|
|
|
|
|
|
154,593 |
|
|
|
10,173 |
|
|
|
|
|
|
|
164,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,310 |
|
|
|
2,441,086 |
|
|
|
109,922 |
|
|
|
|
|
|
|
2,560,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from unconsolidated affiliates |
|
|
|
|
|
|
(44,965 |
) |
|
|
18,771 |
|
|
|
|
|
|
|
(26,194 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(1,089,595 |
) |
|
|
(1,063,966 |
) |
|
|
48,558 |
|
|
|
1,056,186 |
|
|
|
(1,048,817 |
) |
Interest income (expense), net |
|
|
(283,688 |
) |
|
|
1,180 |
|
|
|
(7,785 |
) |
|
|
|
|
|
|
(290,293 |
) |
Other, net |
|
|
(4,093 |
) |
|
|
(4,895 |
) |
|
|
(14,873 |
) |
|
|
|
|
|
|
(23,861 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(1,377,376 |
) |
|
|
(1,067,681 |
) |
|
|
25,900 |
|
|
|
1,056,186 |
|
|
|
(1,362,971 |
) |
Benefit (provision) for income taxes |
|
|
493,900 |
|
|
|
(13,156 |
) |
|
|
(1,249 |
) |
|
|
|
|
|
|
479,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(883,476 |
) |
|
$ |
(1,080,837 |
) |
|
$ |
24,651 |
|
|
$ |
1,056,186 |
|
|
$ |
(883,476 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2009 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Net revenues |
|
$ |
|
|
|
$ |
1,358,557 |
|
|
$ |
135,598 |
|
|
$ |
|
|
|
$ |
1,494,155 |
|
Equity in subsidiaries earnings |
|
|
117,075 |
|
|
|
8,103 |
|
|
|
|
|
|
|
(125,178 |
) |
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations |
|
|
3,552 |
|
|
|
783,370 |
|
|
|
76,660 |
|
|
|
|
|
|
|
863,582 |
|
General and administrative |
|
|
2,167 |
|
|
|
248,094 |
|
|
|
23,356 |
|
|
|
|
|
|
|
273,617 |
|
Corporate expense |
|
|
16,393 |
|
|
|
29,026 |
|
|
|
(2,413 |
) |
|
|
|
|
|
|
43,006 |
|
Preopening and start-up expenses |
|
|
|
|
|
|
9,410 |
|
|
|
|
|
|
|
|
|
|
|
9,410 |
|
Property transactions, net |
|
|
|
|
|
|
3,248 |
|
|
|
|
|
|
|
|
|
|
|
3,248 |
|
Depreciation and amortization |
|
|
|
|
|
|
163,657 |
|
|
|
10,711 |
|
|
|
|
|
|
|
174,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,112 |
|
|
|
1,236,805 |
|
|
|
108,314 |
|
|
|
|
|
|
|
1,367,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from unconsolidated affiliates |
|
|
|
|
|
|
9,249 |
|
|
|
(5,074 |
) |
|
|
|
|
|
|
4,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
94,963 |
|
|
|
139,104 |
|
|
|
22,210 |
|
|
|
(125,178 |
) |
|
|
131,099 |
|
Interest income (expense), net |
|
|
(200,912 |
) |
|
|
12,055 |
|
|
|
(6,134 |
) |
|
|
|
|
|
|
(194,991 |
) |
Other, net |
|
|
(209,745 |
) |
|
|
(30,000 |
) |
|
|
(6,750 |
) |
|
|
|
|
|
|
(246,495 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(315,694 |
) |
|
|
121,159 |
|
|
|
9,326 |
|
|
|
(125,178 |
) |
|
|
(310,387 |
) |
Benefit (provision) for income taxes |
|
|
103,119 |
|
|
|
(4,084 |
) |
|
|
(1,223 |
) |
|
|
|
|
|
|
97,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(212,575 |
) |
|
$ |
117,075 |
|
|
$ |
8,103 |
|
|
$ |
(125,178 |
) |
|
$ |
(212,575 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2010 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Net revenues |
|
$ |
|
|
|
$ |
2,709,008 |
|
|
$ |
286,079 |
|
|
$ |
|
|
|
$ |
2,995,087 |
|
Equity in subsidiaries earnings |
|
|
(1,123,509 |
) |
|
|
64,654 |
|
|
|
|
|
|
|
1,058,855 |
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations |
|
|
5,720 |
|
|
|
1,715,600 |
|
|
|
152,707 |
|
|
|
|
|
|
|
1,874,027 |
|
General and administrative |
|
|
4,631 |
|
|
|
502,679 |
|
|
|
51,148 |
|
|
|
|
|
|
|
558,458 |
|
Corporate expense |
|
|
8,514 |
|
|
|
49,731 |
|
|
|
(1,417 |
) |
|
|
|
|
|
|
56,828 |
|
Preopening and start-up expenses |
|
|
|
|
|
|
4,031 |
|
|
|
|
|
|
|
|
|
|
|
4,031 |
|
Property transactions, net |
|
|
|
|
|
|
1,126,971 |
|
|
|
|
|
|
|
|
|
|
|
1,126,971 |
|
Depreciation and amortization |
|
|
|
|
|
|
307,557 |
|
|
|
20,343 |
|
|
|
|
|
|
|
327,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,865 |
|
|
|
3,706,569 |
|
|
|
222,781 |
|
|
|
|
|
|
|
3,948,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from unconsolidated affiliates |
|
|
|
|
|
|
(149,096 |
) |
|
|
41,984 |
|
|
|
|
|
|
|
(107,112 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(1,142,374 |
) |
|
|
(1,082,003 |
) |
|
|
105,282 |
|
|
|
1,058,855 |
|
|
|
(1,060,240 |
) |
Interest income (expense), net |
|
|
(533,727 |
) |
|
|
(5,270 |
) |
|
|
(14,705 |
) |
|
|
|
|
|
|
(553,702 |
) |
Other, net |
|
|
147,464 |
|
|
|
(31,650 |
) |
|
|
(21,936 |
) |
|
|
|
|
|
|
93,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(1,528,637 |
) |
|
|
(1,118,923 |
) |
|
|
68,641 |
|
|
|
1,058,855 |
|
|
|
(1,520,064 |
) |
Benefit (provision) for income taxes |
|
|
548,420 |
|
|
|
(6,018 |
) |
|
|
(2,555 |
) |
|
|
|
|
|
|
539,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(980,217 |
) |
|
$ |
(1,124,941 |
) |
|
$ |
66,086 |
|
|
$ |
1,058,855 |
|
|
$ |
(980,217 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2009 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Net revenues |
|
$ |
|
|
|
$ |
2,713,634 |
|
|
$ |
279,316 |
|
|
$ |
|
|
|
$ |
2,992,950 |
|
Equity in subsidiaries earnings |
|
|
438,998 |
|
|
|
23,150 |
|
|
|
|
|
|
|
(462,148 |
) |
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino and hotel operations |
|
|
6,934 |
|
|
|
1,587,052 |
|
|
|
153,436 |
|
|
|
|
|
|
|
1,747,422 |
|
General and administrative |
|
|
4,033 |
|
|
|
483,860 |
|
|
|
46,964 |
|
|
|
|
|
|
|
534,857 |
|
Corporate expense |
|
|
24,427 |
|
|
|
45,341 |
|
|
|
(2,401 |
) |
|
|
|
|
|
|
67,367 |
|
Preopening and start-up expenses |
|
|
|
|
|
|
17,481 |
|
|
|
|
|
|
|
|
|
|
|
17,481 |
|
Property transactions, net |
|
|
|
|
|
|
(191,877 |
) |
|
|
|
|
|
|
|
|
|
|
(191,877 |
) |
Depreciation and amortization |
|
|
|
|
|
|
329,800 |
|
|
|
21,426 |
|
|
|
|
|
|
|
351,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,394 |
|
|
|
2,271,657 |
|
|
|
219,425 |
|
|
|
|
|
|
|
2,526,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from unconsolidated affiliates |
|
|
|
|
|
|
28,401 |
|
|
|
(8,677 |
) |
|
|
|
|
|
|
19,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
403,604 |
|
|
|
493,528 |
|
|
|
51,214 |
|
|
|
(462,148 |
) |
|
|
486,198 |
|
Interest income (expense), net |
|
|
(352,626 |
) |
|
|
|
|
|
|
(9,619 |
) |
|
|
|
|
|
|
(362,245 |
) |
Other, net |
|
|
(196,801 |
) |
|
|
(46,206 |
) |
|
|
(15,957 |
) |
|
|
|
|
|
|
(258,964 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(145,823 |
) |
|
|
447,322 |
|
|
|
25,638 |
|
|
|
(462,148 |
) |
|
|
(135,011 |
) |
Benefit (provision) for income taxes |
|
|
38,447 |
|
|
|
(8,324 |
) |
|
|
(2,488 |
) |
|
|
|
|
|
|
27,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(107,376 |
) |
|
$ |
438,998 |
|
|
$ |
23,150 |
|
|
$ |
(462,148 |
) |
|
$ |
(107,376 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2010 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities |
|
$ |
(58,908 |
) |
|
$ |
356,410 |
|
|
$ |
52,342 |
|
|
$ |
|
|
|
$ |
349,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures, net of construction
payable |
|
|
|
|
|
|
(77,112 |
) |
|
|
(1,983 |
) |
|
|
|
|
|
|
(79,095 |
) |
Dispositions of property and equipment |
|
|
|
|
|
|
99 |
|
|
|
|
|
|
|
|
|
|
|
99 |
|
Investments in and advances to unconsolidated
affiliates |
|
|
|
|
|
|
(302,000 |
) |
|
|
|
|
|
|
|
|
|
|
(302,000 |
) |
Other |
|
|
|
|
|
|
14,810 |
|
|
|
|
|
|
|
|
|
|
|
14,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
|
|
|
|
(364,203 |
) |
|
|
(1,983 |
) |
|
|
|
|
|
|
(366,186 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments under bank credit
facilities maturities of 90 days or less |
|
|
(2,942,807 |
) |
|
|
|
|
|
|
(170,000 |
) |
|
|
|
|
|
|
(3,112,807 |
) |
Borrowings under bank credit facilities
maturities longer than 90 days |
|
|
4,672,565 |
|
|
|
|
|
|
|
450,000 |
|
|
|
|
|
|
|
5,122,565 |
|
Repayments under bank credit facilities
maturities longer than 90 days |
|
|
(4,061,560 |
) |
|
|
|
|
|
|
(280,000 |
) |
|
|
|
|
|
|
(4,341,560 |
) |
Issuance of senior notes, net |
|
|
1,995,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,995,000 |
|
Retirement of senior notes |
|
|
(211,684 |
) |
|
|
(296,956 |
) |
|
|
|
|
|
|
|
|
|
|
(508,640 |
) |
Debt issuance costs |
|
|
(98,531 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(98,531 |
) |
Intercompany accounts |
|
|
(193,999 |
) |
|
|
245,673 |
|
|
|
(51,674 |
) |
|
|
|
|
|
|
|
|
Capped call transactions |
|
|
(81,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(81,478 |
) |
Other |
|
|
(539 |
) |
|
|
(633 |
) |
|
|
(34 |
) |
|
|
|
|
|
|
(1,206 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(923,033 |
) |
|
|
(51,916 |
) |
|
|
(51,708 |
) |
|
|
|
|
|
|
(1,026,657 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease for the period |
|
|
(981,941 |
) |
|
|
(59,709 |
) |
|
|
(1,349 |
) |
|
|
|
|
|
|
(1,042,999 |
) |
Balance, beginning of period |
|
|
1,718,616 |
|
|
|
263,386 |
|
|
|
74,205 |
|
|
|
|
|
|
|
2,056,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
736,675 |
|
|
$ |
203,677 |
|
|
$ |
72,856 |
|
|
$ |
|
|
|
$ |
1,013,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2009 |
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Elimination |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities |
|
$ |
(261,115 |
) |
|
$ |
651,826 |
|
|
$ |
(2,682 |
) |
|
$ |
|
|
|
$ |
388,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures, net of construction
payable |
|
|
|
|
|
|
(93,212 |
) |
|
|
(302 |
) |
|
|
|
|
|
|
(93,514 |
) |
Proceeds from sale of Treasure Island, net |
|
|
|
|
|
|
746,266 |
|
|
|
|
|
|
|
|
|
|
|
746,266 |
|
Dispositions of property and equipment |
|
|
|
|
|
|
153 |
|
|
|
|
|
|
|
|
|
|
|
153 |
|
Investments in and advances to unconsolidated
affiliates |
|
|
|
|
|
|
(753,033 |
) |
|
|
|
|
|
|
(4,698 |
) |
|
|
(757,731 |
) |
Property damage insurance recoveries |
|
|
|
|
|
|
7,186 |
|
|
|
|
|
|
|
|
|
|
|
7,186 |
|
Other |
|
|
|
|
|
|
(4,656 |
) |
|
|
|
|
|
|
|
|
|
|
(4,656 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
|
|
|
|
(97,296 |
) |
|
|
(302 |
) |
|
|
(4,698 |
) |
|
|
(102,296 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments under bank credit
facilities maturities of 90 days or less |
|
|
(2,457,519 |
) |
|
|
|
|
|
|
(213,600 |
) |
|
|
|
|
|
|
(2,671,119 |
) |
Borrowings under bank credit facilities
maturities longer than 90 days |
|
|
6,211,492 |
|
|
|
|
|
|
|
450,000 |
|
|
|
|
|
|
|
6,661,492 |
|
Repayments under bank credit facilities
maturities longer than 90 days |
|
|
(5,386,340 |
) |
|
|
|
|
|
|
(190,000 |
) |
|
|
|
|
|
|
(5,576,340 |
) |
Issuance of senior notes, net |
|
|
1,459,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,459,120 |
|
Retirement of senior notes |
|
|
(762,648 |
) |
|
|
(248,999 |
) |
|
|
|
|
|
|
|
|
|
|
(1,011,647 |
) |
Debt issuance costs |
|
|
(99,991 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(99,991 |
) |
Issuance of common stock in public
offering, net |
|
|
1,103,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,103,737 |
|
Issuance of common stock upon exercise
of stock options |
|
|
632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
632 |
|
Intercompany accounts |
|
|
993,697 |
|
|
|
(1,040,288 |
) |
|
|
41,893 |
|
|
|
4,698 |
|
|
|
|
|
Payment of Detroit Economic Development
Corporation bonds |
|
|
|
|
|
|
|
|
|
|
(49,393 |
) |
|
|
|
|
|
|
(49,393 |
) |
Other |
|
|
|
|
|
|
(635 |
) |
|
|
(31 |
) |
|
|
|
|
|
|
(666 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
1,062,180 |
|
|
|
(1,289,922 |
) |
|
|
38,869 |
|
|
|
4,698 |
|
|
|
(184,175 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) for the period |
|
|
801,065 |
|
|
|
(735,392 |
) |
|
|
35,885 |
|
|
|
|
|
|
|
101,558 |
|
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 |
|
$ |
798,621 |
|
|
$ |
(453,636 |
) |
|
$ |
66,371 |
|
|
$ |
|
|
|
$ |
411,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
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. MGM Resorts
International together with its subsidiaries may be referred to as we, us or our.
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.
18
Affect of Economic Factors 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 affected as businesses and consumers have altered
their spending patterns which led to decreases in visitor volumes and customer spending.
Businesses responded to the difficult economic conditions by reducing travel budgets. This
factor, along with negative perceptions surrounding certain types of
business travel, adversly
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 have
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.
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 revolving loan (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
revolving loan, 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 senior 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. In the three and six months ended June 30, 2010, we had $10 million of interest
related to the amortization of these loans. Fair value of the term loans was based on
estimates based on trading prices immediately after the transaction.
19
In addition, we wrote-off $15 million of existing debt issuance costs related to the
previous term loans and had expense of $22 million for 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 revolving portion of the 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.
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 ours and rank
equally in right of payment with our other existing senior unsecured indebtedness. We used
the net proceeds from the senior convertible note issuance to temporarily repay amounts
outstanding under our senior credit facility.
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. The initial conversion rate was
determined based on the closing trading price of our common stock on the date of the
transaction, plus a 27.5% premium. The terms of the notes do not provide for any beneficial
conversion features.
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 per share. We paid approximately $81 million
for the capped call transactions, which is reflected as a decrease in Capital in excess of
par value net of $29 million of associated tax benefits.
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. Boyd Gaming Corporations
(Boyd) 50% interest is not affected by the settlement.
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 of the trust assets.
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.
As a result of our ownership interest in Borgata being placed into the trust, we no
longer have significant influence over Borgata; therefore, 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. We also
reclassified the carrying value of our investment related to Borgata to Other long-term
assets, net in the accompanying consolidated balance sheet as of June 30, 2010. 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 that do not exceed our
share of earnings are recognized currently in earnings. However, distributions to the trust
that exceed our share of earnings for such periods will be applied to reduce the carrying
amount of our investment. In the second quarter of 2010, the trust received distributions
from the joint venture of $15 million, of which $6 million was recorded as a reduction of the
carrying value and $9 million was recorded as Other, net non-operating income.
20
In July 2010, we entered into an agreement to sell four long-term ground leases and their
respective underlying real property parcels, approximately 11.3 acres, underlying the Borgata
for $73 million. The transaction is subject to customary closing conditions contained in the
purchase and sale agreement, including approval by the New Jersey Casino Control Commission
and the New Jersey Division of Gaming Enforcement. We expect the transaction to close by the
fourth quarter of this year and expect to record a small gain on the sale.
Impairments
A complete discussion of our critical accounting policies related to impairments of
long-lived assets and investments in unconsolidated affiliates is included in our Form 10-K
for the period ending December 31, 2009. We did not review any of our wholly-owned
long-lived asset groups generally our operating resorts for impairment as of June 30,
2010 as we did not identify circumstances that existed that would indicate the carrying
value of our long-lived assets may not be recoverable. Historically, the undiscounted cash
flows of our long-lived assets have exceeded their carrying values by a substantial margin
such that any recent decline in operating performance would not be indicative of a potential
impairment. However, we did review the carrying value of our investment in CityCenter as
discussed further below.
At June 30, 2010, we reviewed our CityCenter investment for impairment using revised
operating forecasts developed by CityCenter management late in the second quarter.
Because CityCenters results of operations through June 30, 2010 were below
previous forecasts, the fact that the revised operating forecasts were lower than previous
forecasts, and based on current and forecasted market conditions, we concluded we should
review the carrying value of our investment. Our discounted cash flow analysis for
CityCenter included estimated future cash inflows from operations, including residential
sales and estimated future cash outflows for capital expenditures. The analysis used an 11%
discount rate and a long term growth rate of 4% related to forecasted cash flows for
CityCenters operating assets. Based on our analysis, we determined that the
carrying value of our investment exceeded its fair value and therefore an impairment was
indicated. We intend to and believe we will be able to retain our investment in CityCenter;
however, due to the extent of the shortfall and our assessment of the uncertainty of fully
recovering our investment, we determined that the impairment was
other-than temporary and recorded an impairment charge of $1.12 billion included in
Property transactions, net.
In addition, due to the completion of construction of the Mandarin Oriental residential
inventory in the first quarter and completion of the Veer residential inventory in the second
quarter, CityCenter is required to carry its residential inventory at the lower of its carrying
value or fair value less costs to sell. CityCenter management determined the fair value less
costs to sell was below carrying value and as a result recorded impairment charges for the
Mandarin Oriental in the first quarter and the Veer residential inventory in the second
quarter. 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. These analyses resulted in impairment charges of approximately $171 million
in the first quarter of 2010 and $57 million in the second quarter of 2010. We recognized
50% of such impairment charges, resulting in pre-tax charges of approximately $29 million
and $114 million in the three and six month periods, respectively.
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 were $90 million and $13
million for the second quarter of 2010 and 2009, respectively, and $184 million and $27
million for the six months ended June 30, 2010 and 2009, respectively.
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
and six months ended June 30, 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 3% for the second quarter of 2010 compared to the same quarter
in the prior year, which included approximately $90 million of reimbursed costs revenue in the
second quarter of 2010 compared to $13 million in the second quarter of 2009. Excluding
reimbursed costs revenue, net revenue decreased 2%. Net revenue for the 2010 six month period
was flat compared to the prior year and included approximately $184 million of reimbursed
costs in the current year compared to $27 million in the prior year.
21
On a same store basis, excluding reimbursed costs revenue, net revenue decreased 3% for
the six month period. Revenues in the second quarter of 2010 were negatively affected by a
decrease in company-wide table games hold percentage, which was near the low end of our normal
range in the current year quarter. Revenues in general continue to be negatively affected by
a reduction in consumer discretionary spending due to the weakened economy. See further
discussion of revenue trends below in Operating Results Detailed Revenue Information.
Operating loss for the second quarter of 2010 was $1.0 billion compared to operating
income of $131 million in the second quarter of 2009. The 2010 results were negatively
affected by a $1.12 billion impairment charge related to our investment in CityCenter and our
share of a residential inventory impairment charge at CityCenter of approximately $29 million,
partially offset by $28 million of income related to our share of forfeited residential
deposits at CityCenter. The 2009 results were negatively affected by a $12 million charge
related to our postponed North Las Vegas Strip joint venture. Excluding the foregoing
impairment charges and forfeited residential deposit income, preopening expenses and other
property transactions, our operating income decreased 50% for the second quarter of 2010 with
an operating margin of 5% in the current year quarter compared to 11% in the prior year
quarter. These decreases are largely the result of our share of the operating losses at
CityCenter.
For the six months, operating loss was $1.1 billion compared to operating income of $486
million in the prior year. The 2010 operating loss was negatively affected by the items
discussed above and our share of an additional residential impairment charge at CityCenter in
the first quarter. Our share of residential impairment charges for the six months totaled $114
million, partially offset by our share of forfeited deposits of $40 million. The 2009 results
were positively affected by the pre-tax gain of $187 million on Treasure Island and $22
million of insurance recoveries related to the Monte Carlo fire. Excluding the impairment
charges and forfeited residential deposit income, preopening expenses and other property
transactions, operating income decreased 53% for the six months and operating margin was 5% in
the current year compared to 10% in the prior year. These decreases are largely the result of
our share of the operating losses at CityCenter.
Operating Results Detailed Revenue Information
The following table presents details of our net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
Percentage |
|
|
Percentage |
|
|
|
2010 |
|
|
Change |
|
2009 |
|
|
2010 |
|
|
Change |
|
2009 |
|
|
|
(Dollars in thousands) |
|
Casino revenue, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table games |
|
$ |
192,338 |
|
|
|
(11 |
)% |
|
$ |
215,193 |
|
|
$ |
405,018 |
|
|
|
(12 |
)% |
|
$ |
459,166 |
|
Slots |
|
|
380,210 |
|
|
|
(3 |
)% |
|
|
391,069 |
|
|
|
756,817 |
|
|
|
(4 |
)% |
|
|
788,402 |
|
Other |
|
|
16,844 |
|
|
|
(13 |
)% |
|
|
19,308 |
|
|
|
38,314 |
|
|
|
(10 |
)% |
|
|
42,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino revenue, net |
|
|
589,392 |
|
|
|
(6 |
)% |
|
|
625,570 |
|
|
|
1,200,149 |
|
|
|
(7 |
)% |
|
|
1,290,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-casino revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rooms |
|
|
345,219 |
|
|
|
(1 |
)% |
|
|
350,295 |
|
|
|
659,122 |
|
|
|
(7 |
)% |
|
|
705,339 |
|
Food and beverage |
|
|
360,217 |
|
|
|
1 |
% |
|
|
357,859 |
|
|
|
676,373 |
|
|
|
(3 |
)% |
|
|
696,256 |
|
Entertainment, retail and other |
|
|
402,418 |
|
|
|
25 |
% |
|
|
321,486 |
|
|
|
777,091 |
|
|
|
24 |
% |
|
|
624,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-casino revenue |
|
|
1,107,854 |
|
|
|
8 |
% |
|
|
1,029,640 |
|
|
|
2,112,586 |
|
|
|
4 |
% |
|
|
2,026,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,697,246 |
|
|
|
3 |
% |
|
|
1,655,210 |
|
|
|
3,312,735 |
|
|
|
0 |
% |
|
|
3,316,757 |
|
Less: Promotional allowances |
|
|
(159,551 |
) |
|
|
(1 |
)% |
|
|
(161,055 |
) |
|
|
(317,648 |
) |
|
|
(2 |
)% |
|
|
(323,807 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,537,695 |
|
|
|
3 |
% |
|
$ |
1,494,155 |
|
|
$ |
2,995,087 |
|
|
|
0 |
% |
|
$ |
2,992,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table games revenue decreased 11% for the second quarter and was negatively affected
by a lower table games hold percentage approximately 100 basis points though still
within the normal hold range. Total table games revenue was also affected by table games
volume decreasing 4% for the quarter. Within table games, baccarat volume increased 10% while
other table games volume decreased 7%. Slots revenue decreased 3% in the second quarter with
a 7% decrease at our Las Vegas Strip resorts.
Table games revenue decreased 10% year to date on a same store basis, affected by a 110
basis point decrease in table games hold. Hold percentage in the 2010 and 2009 year to date
period were both within our normal hold range. Table game volume including baccarat declined
2%, with baccarat volumes increasing by 14% year to date. Slots revenue was down 2% on a same
store basis with a 6% decrease at our Las Vegas Strip resorts.
22
Rooms revenue in the second quarter decreased 1%, with a 2% decrease in Las Vegas Strip
REVPAR. On a same store basis, rooms revenue year to date decreased 4% with a decrease in Las
Vegas Strip REVPAR of 4%. The following table shows key hotel statistics for our Las Vegas
Strip Resorts on a same store basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
Six Months |
For the periods ended June 30, |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
Occupancy |
|
|
93 |
% |
|
|
94 |
% |
|
|
89 |
% |
|
|
91 |
% |
Average Daily Rate (ADR) |
|
$ |
110 |
|
|
$ |
111 |
|
|
$ |
111 |
|
|
$ |
114 |
|
Revenue per Available Room (REVPAR) |
|
|
102 |
|
|
|
104 |
|
|
|
98 |
|
|
|
103 |
|
Food and beverage revenue was up 1% over the prior year second quarter and down 1% for
the year to date period on a same store basis. Entertainment revenues were flat for the
second quarter and up 3% year to date due to new entertainment including Disneys The Lion
King, added during the second quarter of 2009.
Operating Results Details of Certain Charges
Preopening and start-up expenses largely consisted of our share of CityCenters
preopening costs in 2010 and 2009.
Property transactions, net consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
For the periods ended June 30, |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
CityCenter investment impairment charge |
|
$ |
1,122,456 |
|
|
$ |
|
|
|
$ |
1,122,456 |
|
|
$ |
|
|
Insurance recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,186 |
) |
Gain on sale of TI |
|
|
|
|
|
|
2,928 |
|
|
|
|
|
|
|
(187,442 |
) |
Net (gains) losses on sale or disposal of fixed assets |
|
|
3,826 |
|
|
|
320 |
|
|
|
4,515 |
|
|
|
2,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,126,282 |
|
|
$ |
3,248 |
|
|
$ |
1,126,971 |
|
|
$ |
(191,877 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Results Income from Unconsolidated Affiliates
Income from unconsolidated affiliates decreased to a loss of $26 million in the current
year quarter compared to income of $4 million in the second quarter of 2009 and a loss of $107
million in 2010 compared to income of $20 million in 2009 for the six month period. The
current quarter included $56 million of losses from CityCenter, including our share of the
residential inventory impairment charge of approximately $29 million. Year to date income was
affected by our share of the net losses at CityCenter of $174 million, which included $114
million related to our share of the residential inventory impairment
charges. In addition, we ceased recording Borgata operating results as income from unconsolidated affiliates under the equity method of accounting in the first quarter of 2010. Income from unconsolidated affiliates from Borgata was $14 million in the second quarter of 2009, and $7 million and $26 million for the six months of 2010 and 2009, respectively.
The losses at CityCenter were partially offset by our share of operating income at MGM
Grand Macau, which earned operating income of $40 million in the second quarter of 2010,
including depreciation expense of $21 million, a significant increase compared to an operating
loss of $8 million in the 2009 second quarter, which included depreciation expense of $22
million. MGM Grand Macau earned operating income of $89 million in the six month period of
2010, including $43 million of depreciation expense, compared to an operating loss of $12
million in the 2009 period, which included depreciation expense of $43 million.
Non-operating Results
Net interest expense increased to $291 million in the 2010 second quarter from $201
million in the 2009 period and increased to $555 million compared to $373 million for the six
month period. Interest expense increased due to higher borrowing rates under our senior
credit facility and higher interest rates on public debt issued in 2009 and 2010. We ceased
capitalization of interest expense related to CityCenter in December 2009 and do not have any
other major construction projects ongoing; therefore, we did not have any capitalized interest
in 2010.
During the second quarter of 2010, we recorded $9 million in Other, net related to
income from Borgata, as discussed in Executive Overview Borgata. The prior year second
quarter included a $176 million impairment charge related to our M Resort LLC convertible
note, as well as a $58 million loss associated with retirement of long-term debt in connection
with our May 2009 senior secured note issuance. Other, net for the six month period
included a $141 million gain on debt redemption in 2010, as well as the items noted above.
23
Non-GAAP Measures
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.
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.
The following table presents a reconciliation of Adjusted EBITDA to net loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In thousands) |
|
Adjusted EBITDA |
|
$ |
242,768 |
|
|
$ |
318,125 |
|
|
$ |
398,662 |
|
|
$ |
663,028 |
|
Preopening and start-up expenses |
|
|
(537 |
) |
|
|
(9,410 |
) |
|
|
(4,031 |
) |
|
|
(17,481 |
) |
Property transactions, net |
|
|
(1,126,282 |
) |
|
|
(3,248 |
) |
|
|
(1,126,971 |
) |
|
|
191,877 |
|
Depreciation and amortization |
|
|
(164,766 |
) |
|
|
(174,368 |
) |
|
|
(327,900 |
) |
|
|
(351,226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(1,048,817 |
) |
|
|
131,099 |
|
|
|
(1,060,240 |
) |
|
|
486,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(290,293 |
) |
|
|
(194,991 |
) |
|
|
(553,702 |
) |
|
|
(362,245 |
) |
Other, net |
|
|
(23,861 |
) |
|
|
(246,495 |
) |
|
|
93,878 |
|
|
|
(258,964 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(1,362,971 |
) |
|
|
(310,387 |
) |
|
|
(1,520,064 |
) |
|
|
(135,011 |
) |
Benefit for income taxes |
|
|
479,495 |
|
|
|
97,812 |
|
|
|
539,847 |
|
|
|
27,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(883,476 |
) |
|
$ |
(212,575 |
) |
|
$ |
(980,217 |
) |
|
$ |
(107,376 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA decreased 24% and 40% for the three and six month periods,
respectively. Adjusted EBITDA for the second quarter of 2010 was negatively affected by our
share of losses at CityCenter, which includes the residential impairment charge of
approximately $29 million, offset by $28 million of income related to forfeited residential
deposits. The prior year quarter was affected by the North Las Vegas Strip impairment charge
of $12 million. Adjusted EBITDA for the six month period of 2010 includes $114 million
related to our share of the residential impairment charges at CityCenter and $40 million of
income related to forfeited residential deposits at CityCenter. The 2009 year to date period
includes the North Las Vegas Strip impairment charge and Monte Carlo insurance recoveries of
$15 million. Excluding these items, Adjusted EBITDA decreased 28% for the six month period.
Adjusted Property EBITDA for our wholly-owned resorts decreased 16% and 19% for the
three and six month periods (on a same store basis). The decreases in Adjusted Property
EBITDA were largely due to the factors discussed in Summary Financial Results and Affect
of Economic Factors on Results of Operations.
24
The following tables present reconciliations of operating income (loss) to Adjusted
Property EBITDA and Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2010 |
|
|
|
|
|
|
|
Preopening |
|
|
Property |
|
|
Depreciation |
|
|
|
|
|
|
Operating |
|
|
and Start-up |
|
|
Transactions, |
|
|
and |
|
|
Adjusted |
|
|
|
Income (Loss) |
|
|
Expenses |
|
|
Net |
|
|
Amortization |
|
|
EBITDA |
|
|
|
(In thousands) |
|
Bellagio |
|
$ |
33,267 |
|
|
$ |
|
|
|
$ |
5 |
|
|
$ |
24,041 |
|
|
$ |
57,313 |
|
MGM Grand Las Vegas |
|
|
32,896 |
|
|
|
|
|
|
|
|
|
|
|
19,211 |
|
|
|
52,107 |
|
Mandalay Bay |
|
|
16,868 |
|
|
|
|
|
|
|
659 |
|
|
|
22,815 |
|
|
|
40,342 |
|
The Mirage |
|
|
3,612 |
|
|
|
|
|
|
|
(139 |
) |
|
|
19,746 |
|
|
|
23,219 |
|
Luxor |
|
|
7,134 |
|
|
|
|
|
|
|
(10 |
) |
|
|
10,454 |
|
|
|
17,578 |
|
New York-New York |
|
|
6,417 |
|
|
|
|
|
|
|
6,081 |
|
|
|
7,053 |
|
|
|
19,551 |
|
Excalibur |
|
|
12,565 |
|
|
|
|
|
|
|
|
|
|
|
5,845 |
|
|
|
18,410 |
|
Monte Carlo |
|
|
3,426 |
|
|
|
|
|
|
|
|
|
|
|
6,233 |
|
|
|
9,659 |
|
Circus Circus Las Vegas |
|
|
93 |
|
|
|
|
|
|
|
225 |
|
|
|
5,213 |
|
|
|
5,531 |
|
MGM Grand Detroit |
|
|
27,312 |
|
|
|
|
|
|
|
|
|
|
|
10,153 |
|
|
|
37,465 |
|
Beau Rivage |
|
|
4,404 |
|
|
|
|
|
|
|
|
|
|
|
12,296 |
|
|
|
16,700 |
|
Gold Strike Tunica |
|
|
7,375 |
|
|
|
|
|
|
|
(1,100 |
) |
|
|
3,550 |
|
|
|
9,825 |
|
Management operations |
|
|
(7,274 |
) |
|
|
|
|
|
|
|
|
|
|
3,570 |
|
|
|
(3,704 |
) |
Other operations |
|
|
(964 |
) |
|
|
537 |
|
|
|
5 |
|
|
|
1,649 |
|
|
|
1,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-owned operations |
|
|
147,131 |
|
|
|
537 |
|
|
|
5,726 |
|
|
|
151,829 |
|
|
|
305,223 |
|
CityCenter (50%) |
|
|
(55,562 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,562 |
) |
Macau (50%) |
|
|
18,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,694 |
|
Other unconsolidated resorts |
|
|
10,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,066 |
|
|
|
537 |
|
|
|
5,726 |
|
|
|
151,829 |
|
|
|
279,158 |
|
Stock compensation |
|
|
(8,002 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,002 |
) |
Corporate |
|
|
(1,161,881 |
) |
|
|
|
|
|
|
1,120,556 |
|
|
|
12,937 |
|
|
|
(28,388 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,048,817 |
) |
|
$ |
537 |
|
|
$ |
1,126,282 |
|
|
$ |
164,766 |
|
|
$ |
242,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2009 |
|
|
|
|
|
|
|
Preopening |
|
|
Property |
|
|
Depreciation |
|
|
|
|
|
|
Operating |
|
|
and Start-up |
|
|
Transactions, |
|
|
and |
|
|
Adjusted |
|
|
|
Income (Loss) |
|
|
Expenses |
|
|
Net |
|
|
Amortization |
|
|
EBITDA |
|
|
|
(In thousands) |
|
Bellagio |
|
$ |
47,292 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
28,918 |
|
|
$ |
76,210 |
|
MGM Grand Las Vegas |
|
|
28,229 |
|
|
|
|
|
|
|
(9 |
) |
|
|
23,730 |
|
|
|
51,950 |
|
Mandalay Bay |
|
|
24,486 |
|
|
|
562 |
|
|
|
(12 |
) |
|
|
24,149 |
|
|
|
49,185 |
|
The Mirage |
|
|
15,736 |
|
|
|
|
|
|
|
57 |
|
|
|
16,440 |
|
|
|
32,233 |
|
Luxor |
|
|
11,281 |
|
|
|
|
|
|
|
(6 |
) |
|
|
10,179 |
|
|
|
21,454 |
|
New York-New York |
|
|
15,456 |
|
|
|
|
|
|
|
237 |
|
|
|
7,462 |
|
|
|
23,155 |
|
Excalibur |
|
|
15,382 |
|
|
|
|
|
|
|
5 |
|
|
|
5,841 |
|
|
|
21,228 |
|
Monte Carlo |
|
|
904 |
|
|
|
|
|
|
|
(4 |
) |
|
|
5,535 |
|
|
|
6,435 |
|
Circus Circus Las Vegas |
|
|
5,092 |
|
|
|
|
|
|
|
(111 |
) |
|
|
5,846 |
|
|
|
10,827 |
|
MGM Grand Detroit |
|
|
22,928 |
|
|
|
|
|
|
|
|
|
|
|
10,689 |
|
|
|
33,617 |
|
Beau Rivage |
|
|
4,894 |
|
|
|
|
|
|
|
157 |
|
|
|
12,239 |
|
|
|
17,290 |
|
Gold Strike Tunica |
|
|
7,662 |
|
|
|
|
|
|
|
|
|
|
|
3,924 |
|
|
|
11,586 |
|
Management operations |
|
|
1,581 |
|
|
|
|
|
|
|
|
|
|
|
2,466 |
|
|
|
4,047 |
|
Other operations |
|
|
1,696 |
|
|
|
|
|
|
|
6 |
|
|
|
1,523 |
|
|
|
3,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-owned operations |
|
|
202,619 |
|
|
|
562 |
|
|
|
320 |
|
|
|
158,941 |
|
|
|
362,442 |
|
CityCenter (50%) |
|
|
(10,680 |
) |
|
|
8,675 |
|
|
|
|
|
|
|
|
|
|
|
(2,005 |
) |
Macau (50%) |
|
|
(5,106 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,106 |
) |
Other unconsolidated resorts |
|
|
11,344 |
|
|
|
173 |
|
|
|
|
|
|
|
|
|
|
|
11,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198,177 |
|
|
|
9,410 |
|
|
|
320 |
|
|
|
158,941 |
|
|
|
366,848 |
|
Stock compensation |
|
|
(9,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,023 |
) |
Corporate |
|
|
(58,055 |
) |
|
|
|
|
|
|
2,928 |
|
|
|
15,427 |
|
|
|
(39,700 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
131,099 |
|
|
$ |
9,410 |
|
|
$ |
3,248 |
|
|
$ |
174,368 |
|
|
$ |
318,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2010 |
|
|
|
|
|
|
|
Preopening |
|
|
Property |
|
|
Depreciation |
|
|
|
|
|
|
Operating |
|
|
and Start-up |
|
|
Transactions, |
|
|
and |
|
|
Adjusted |
|
|
|
Income (Loss) |
|
|
Expenses |
|
|
Net |
|
|
Amortization |
|
|
EBITDA |
|
|
|
(In thousands) |
|
Bellagio |
|
$ |
70,831 |
|
|
$ |
|
|
|
$ |
(107 |
) |
|
$ |
48,555 |
|
|
$ |
119,279 |
|
MGM Grand Las Vegas |
|
|
51,279 |
|
|
|
|
|
|
|
|
|
|
|
39,314 |
|
|
|
90,593 |
|
Mandalay Bay |
|
|
18,735 |
|
|
|
|
|
|
|
659 |
|
|
|
46,348 |
|
|
|
65,742 |
|
The Mirage |
|
|
13,431 |
|
|
|
|
|
|
|
(139 |
) |
|
|
35,352 |
|
|
|
48,644 |
|
Luxor |
|
|
8,571 |
|
|
|
|
|
|
|
(10 |
) |
|
|
21,780 |
|
|
|
30,341 |
|
New York-New York |
|
|
17,430 |
|
|
|
|
|
|
|
6,095 |
|
|
|
14,093 |
|
|
|
37,618 |
|
Excalibur |
|
|
20,803 |
|
|
|
|
|
|
|
784 |
|
|
|
11,690 |
|
|
|
33,277 |
|
Monte Carlo |
|
|
3,882 |
|
|
|
|
|
|
|
|
|
|
|
12,226 |
|
|
|
16,108 |
|
Circus Circus Las Vegas |
|
|
(3,553 |
) |
|
|
|
|
|
|
225 |
|
|
|
10,552 |
|
|
|
7,224 |
|
MGM Grand Detroit |
|
|
57,667 |
|
|
|
|
|
|
|
|
|
|
|
20,303 |
|
|
|
77,970 |
|
Beau Rivage |
|
|
8,818 |
|
|
|
|
|
|
|
3 |
|
|
|
24,582 |
|
|
|
33,403 |
|
Gold Strike Tunica |
|
|
13,804 |
|
|
|
|
|
|
|
(1,100 |
) |
|
|
7,182 |
|
|
|
19,886 |
|
Management operations |
|
|
(14,467 |
) |
|
|
|
|
|
|
|
|
|
|
6,901 |
|
|
|
(7,566 |
) |
Other operations |
|
|
(3,493 |
) |
|
|
537 |
|
|
|
5 |
|
|
|
3,090 |
|
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-owned operations |
|
|
263,738 |
|
|
|
537 |
|
|
|
6,415 |
|
|
|
301,968 |
|
|
|
572,658 |
|
CityCenter (50%) |
|
|
(177,667 |
) |
|
|
3,494 |
|
|
|
|
|
|
|
|
|
|
|
(174,173 |
) |
Macau (50%) |
|
|
41,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,793 |
|
Other unconsolidated resorts |
|
|
25,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,424 |
|
|
|
4,031 |
|
|
|
6,415 |
|
|
|
301,968 |
|
|
|
465,838 |
|
Stock compensation |
|
|
(17,557 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,557 |
) |
Corporate |
|
|
(1,196,107 |
) |
|
|
|
|
|
|
1,120,556 |
|
|
|
25,932 |
|
|
|
(49,619 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,060,240 |
) |
|
$ |
4,031 |
|
|
$ |
1,126,971 |
|
|
$ |
327,900 |
|
|
$ |
398,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2009 |
|
|
|
|
|
|
|
Preopening |
|
|
Property |
|
|
Depreciation |
|
|
|
|
|
|
Operating |
|
|
and Start-up |
|
|
Transactions, |
|
|
and |
|
|
Adjusted |
|
|
|
Income (Loss) |
|
|
Expenses |
|
|
Net |
|
|
Amortization |
|
|
EBITDA |
|
|
|
(In thousands) |
|
Bellagio |
|
$ |
86,430 |
|
|
$ |
|
|
|
$ |
1,154 |
|
|
$ |
56,876 |
|
|
$ |
144,460 |
|
MGM Grand Las Vegas |
|
|
48,388 |
|
|
|
|
|
|
|
76 |
|
|
|
48,849 |
|
|
|
97,313 |
|
Mandalay Bay |
|
|
43,132 |
|
|
|
752 |
|
|
|
3 |
|
|
|
47,950 |
|
|
|
91,837 |
|
The Mirage |
|
|
28,790 |
|
|
|
|
|
|
|
296 |
|
|
|
33,012 |
|
|
|
62,098 |
|
Luxor |
|
|
19,758 |
|
|
|
|
|
|
|
271 |
|
|
|
20,779 |
|
|
|
40,808 |
|
Treasure Island |
|
|
12,730 |
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
12,729 |
|
New York-New York |
|
|
28,774 |
|
|
|
|
|
|
|
237 |
|
|
|
14,586 |
|
|
|
43,597 |
|
Excalibur |
|
|
26,130 |
|
|
|
|
|
|
|
2 |
|
|
|
11,832 |
|
|
|
37,964 |
|
Monte Carlo |
|
|
24,206 |
|
|
|
|
|
|
|
(7,193 |
) |
|
|
11,229 |
|
|
|
28,242 |
|
Circus Circus Las Vegas |
|
|
5,503 |
|
|
|
|
|
|
|
(115 |
) |
|
|
11,720 |
|
|
|
17,108 |
|
MGM Grand Detroit |
|
|
52,769 |
|
|
|
|
|
|
|
|
|
|
|
21,400 |
|
|
|
74,169 |
|
Beau Rivage |
|
|
10,320 |
|
|
|
|
|
|
|
157 |
|
|
|
24,382 |
|
|
|
34,859 |
|
Gold Strike Tunica |
|
|
16,862 |
|
|
|
|
|
|
|
|
|
|
|
8,569 |
|
|
|
25,431 |
|
Management operations |
|
|
3,852 |
|
|
|
|
|
|
|
|
|
|
|
5,059 |
|
|
|
8,911 |
|
Other operations |
|
|
(1,369 |
) |
|
|
|
|
|
|
6 |
|
|
|
3,071 |
|
|
|
1,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-owned operations |
|
|
406,275 |
|
|
|
752 |
|
|
|
(5,107 |
) |
|
|
319,314 |
|
|
|
721,234 |
|
CityCenter (50%) |
|
|
(18,784 |
) |
|
|
15,914 |
|
|
|
|
|
|
|
|
|
|
|
(2,870 |
) |
Macau (50%) |
|
|
(8,691 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,691 |
) |
Other unconsolidated resorts |
|
|
30,870 |
|
|
|
815 |
|
|
|
|
|
|
|
|
|
|
|
31,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
409,670 |
|
|
|
17,481 |
|
|
|
(5,107 |
) |
|
|
319,314 |
|
|
|
741,358 |
|
Stock compensation |
|
|
(17,757 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,757 |
) |
Corporate |
|
|
94,285 |
|
|
|
|
|
|
|
(186,770 |
) |
|
|
31,912 |
|
|
|
(60,573 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
486,198 |
|
|
$ |
17,481 |
|
|
$ |
(191,877 |
) |
|
$ |
351,226 |
|
|
$ |
663,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
Liquidity and Capital Resources
Cash Flows Operating Activities
Cash provided by operating activities was $350 million for the six months ended June 30,
2010, compared to $388 million in the prior year period. During the second quarter of 2010 we
received a tax refund of approximately $380 million. At June 30, 2010, we held cash and cash
equivalents of $1.0 billion.
Cash Flows Investing Activities
In the six months ended June 30, 2010, we paid $302 million related to our completion
guarantee for CityCenter, of which $173 million is payable to us from CityCenter out of
residential proceeds to be received. Capital expenditures of $79 million in 2010 mainly
relate to the purchase of an airplane as well as maintenance capital expenditures at various
resorts.
During the six month period ended June 30, 2009, we received $746 million of net
proceeds from the sale of TI and invested $642 million in CityCenter, excluding capitalized
interest of $100 million. Capital expenditures of $94 million in 2009 were primarily
maintenance capital expenditures and our portion of the construction costs related to the
people mover connecting Monte Carlo and Bellagio to CityCenter.
Cash Flows Financing Activities
In the six months ended June 30, 2010, excluding the $1.6 billion we repaid immediately
after year end on our senior credit facility, we borrowed net debt of $737 million. During
2010 we issued $1.15 billion of 4.25% convertible senior notes due 2015 for net proceeds of
$1.12 billion and issued $845 million of 9% senior secured notes due 2020 for net proceeds of
$826 million. We paid $81 million for capped call transactions entered into in connection with
the issuance of our convertible senior notes. In addition, we repaid the $297 million
outstanding principal amount of our 9.375% senior notes at maturity, and repurchased $136
million principal amount of senior notes due 2010 and $75 million principal amount of senior
subordinated notes due 2011, essentially at par.
In the six months ended June 30, 2009, we repaid net debt of $1.1 billion. In addition,
pursuant to our development agreement, we repaid $50 million of bonds issued by the Economic
Development Corporation of the City of Detroit. In May 2009, we issued approximately 164.5
million shares of our common stock at $7 per share, for total net proceeds to us of $1.1
billion and issued $650 million of 10.375% senior secured notes due 2014 and $850 million of
11.125% senior secured notes due 2017.
Other Factors Affecting Liquidity
Senior notes payable within one year. We have $646 million of principal of senior notes
due September 2010 and $325 million of principal of subordinated notes due February 2011. As
of June 30, 2010, we had both the intent and ability to repay these amounts with available
borrowings under the senior credit facility.
Borgata settlement. As discussed in Executive Overview Borgata, 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.
CityCenter completion guarantee. 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. The credit facility agreement also allows
for the first $250 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.
27
As of June 30, 2010, we have funded $302 million under the completion guarantee. We have
recorded a receivable from CityCenter of $173 million related to these amounts, which is net
of residential proceeds received and used by CityCenter on construction expenditures. At June
30, 2010, we had a remaining estimated total net obligation under the completion guarantee of
$137 million which represents an estimated $266 million for our total net obligation less $129
million funded to date that is not subject to be refunded to us through residential proceeds.
We believe that it is reasonably possible that our total net obligation may be up to $330
million, which includes estimated litigation costs related to the resolution of disputes with
contractors as to the final construction costs and reflects certain
estimated offsets to the amounts
claimed by the contractors.
CityCenter July 2010 capital call. We and Infinity World made capital contributions to
CityCenter of $32.5 million each in July 2010. Our contribution was made through a reduction
in our receivable from CityCenter. A portion of Infinity Worlds cash contribution was used to repay an
additional portion of the amounts owed to us for costs paid by us on behalf of the joint
venture. If CityCenter is unable to generate sufficient cash flows to fund its future
obligations, the joint venture may request additional capital contributions from the partners.
CityCenter credit facility. CityCenters credit facility contains certain financial covenants
including requiring CityCenter to maintain certain financial ratios commencing June 30, 2011.
At that time, CityCenter will be required to maintain a maximum leverage ratio (debt to
EBITDA, as defined) of 5.00:1, and maintain a minimum coverage ratio (EBITDA to interest
charges, as defined) of 1.50:1. If CityCenters operating results do not improve significantly
or its outstanding debt is not reduced it will not meet such financial covenants. The Company
can provide no assurance that CityCenters operating results will improve, or that its
outstanding debt will be reduced, or that amendments to its credit facility could be obtained
if required.
The CityCenter credit facility also contains covenants limiting the maximum aggregate
amount of mechanics liens filed against CityCenter. CityCenter obtained an amendment lasting
through September 30, 2010 to the credit facility that allows for construction liens in an
amount more than sufficient to cover non-duplicative liens that have been filed by
CityCenters contractors. CityCenter will be required to seek a further amendment to its
credit facility if liens at September 30, 2010 remain at current levels. We can provide no
assurance that additional mechanics liens will not be filed in the future, or that CityCenter
will be able to resolve current outstanding liens prior to September 30, 2010, or that further
amendments to its credit facility could be obtained if required.
CityCenter construction litigation. In March 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, 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 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.
In April 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 approximately $491 million, 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 CityCenter Owners 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 CityCenter Owners and the other defendants intend to vigorously assert and
protect their interests in the lawsuit. The range of loss beyond the asserted amount or any
gain the joint venture may realize related to the defendants counterclaims cannot be
reasonably estimated at this time.
28
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.
As of June 30, 2010, long-term variable rate borrowings represented approximately 24% 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 $32 million based on gross amounts outstanding at June 30, 2010. The following
table provides additional information about our gross long-term debt subject to changes in
interest rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
Debt maturing in, |
|
June 30, |
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
Thereafter |
|
Total |
|
2010 |
|
|
(In millions) |
|
|
|
|
Fixed rate |
|
$ |
647 |
|
|
$ |
455 |
|
|
$ |
545 |
|
|
$ |
1,384 |
|
|
$ |
1,159 |
|
|
$ |
5,927 |
|
|
$ |
10,117 |
|
|
$ |
8,497 |
|
Average interest rate |
|
|
8.5 |
% |
|
|
7.8 |
% |
|
|
6.8 |
% |
|
|
10.2 |
% |
|
|
8.4 |
% |
|
|
8.7 |
% |
|
|
8.7 |
% |
|
|
|
|
Variable rate |
|
$ |
|
|
|
$ |
941 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,239 |
|
|
$ |
|
|
|
$ |
3,180 |
|
|
$ |
2,686 |
|
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 and
our ability to satisfy our obligations; |
|
|
|
|
economic and credit market conditions and our ability to refinance our
indebtedness and make planned capital expenditures; |
|
|
|
|
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. |
29
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.
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 June 30, 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 June 30, 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 six months ended June 30, 2010, except as follows:
CityCenter
construction litigation. In March 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, 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 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.
30
In April 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 approximately $491 million, 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 CityCenter Owners 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 CityCenter Owners and the other defendants intend to vigorously assert and
protect their interests in the lawsuit. The range of loss beyond the asserted amount or any
gain the joint venture may realize related to the defendants counterclaims cannot be
reasonably estimated at this time.
Securities and derivative litigation. Sanjay Israni v. Robert H. Baldwin, et al. Filed
September 25, 2009. Case No. CV-09-02914, Second Judicial District Court, Washoe
County, Nevada. This purported shareholder derivative action against certain former and
current directors and a Company officer alleges, among other things, breach of fiduciary
duty by defendants' asserted insider selling and misappropriation of information; abuse of
control; gross mismanagement; waste of corporate assets; unjust enrichment; and
contribution and indemnification. MGM Resorts International is named as a nominal
defendant. In May 2010, plaintiffs amended the complaint to, among other things, allege
additional bases for their claims based upon the decision of the defendants' to approve our
joint venture with Pansy Ho, MGM Grand Macau.
Item 1A. Risk Factors
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 six months ended June 30, 2010. We have
provided a revised risk factor related to our joint venture investments below.
Investing through partnerships or joint ventures including CityCenter and MGM
Grand Macau decreases our ability to manage risk. In addition to acquiring or developing
hotels and resorts or acquiring companies that complement our business directly, we have
from time to time invested, and expect to continue to invest, as a co-venturer. Joint
venturers often have shared control over the operation of the joint venture assets.
Therefore, the operation of a joint venture is subject to inherent risk due to the
shared nature of the enterprise and the need to reach agreements on material matters. In
addition, joint venture investments may involve risks such as the possibility that the
co-venturer in an investment might become bankrupt or not have the financial resources
to meet its obligations, or have economic or business interests or goals that are
inconsistent with our business interests or goals, or be in a position to take action
contrary to our instructions or requests or contrary to our policies or objectives.
Consequently, actions by a co-venturer might subject hotels and resorts owned by the
joint venture to additional risk. Further, we may be unable to take action without the
approval of our joint venture partners. Alternatively, our joint venture partners could
take actions binding on the joint venture without our consent. Additionally, should a
joint venture partner become bankrupt, we could become liable for our partners or
co-venturers share of joint venture liabilities.
For instance, if CityCenter, 50% owned and managed by us, is unable to meet its
financial commitments and we and our partners are unable to support future funding
requirements, as necessary, or if CityCenters $1.8 billion senior secured credit
facility is terminated for any reason, such event could have adverse financial
consequences to us. Such credit facility contains certain financial covenants including
requiring CityCenter to maintain certain financial ratios commencing June 30, 2011. At
that time, CityCenter will be required to maintain a maximum leverage ratio (debt to
EBITDA, as defined) of 5.00:1, and maintain a minimum coverage ratio (EBITDA to interest
charges, as defined) of 1.50:1. If CityCenters operating results do not improve
significantly or its outstanding debt is not reduced it will not meet such financial
covenants. The Company can provide no assurance that CityCenters operating results will
improve, or that its outstanding debt will be reduced, or that amendments to its credit
facility could be obtained if required.
31
The CityCenter credit facility also contains covenants limiting the maximum aggregate
amount of mechanics liens filed against CityCenter. CityCenter obtained an amendment
lasting through September 30, 2010 to the credit facility that allows for construction
liens in an amount more than sufficient to cover non-duplicative liens that have been
filed by CityCenters contractors. CityCenter will be required to seek a further
amendment to its credit facility if liens at September 30, 2010 remain at current
levels. The Company can provide no assurance that additional mechanics liens will not be
filed in the future, or that CityCenter will be able to resolve current outstanding
liens prior to September 30, 2010, or that further amendments to its credit facility
could be obtained if required.
In addition, in accordance with our joint venture agreement and the CityCenter credit
facility, we provided a cost overrun guarantee which is secured by our interests in the
assets of Circus Circus Las Vegas and certain adjacent undeveloped land.
Also, the operation of MGM Grand Macau, 50% owned by us, is subject to unique risks,
including risks related to: (a) Macaus regulatory framework; (b) our ability to adapt
to the different regulatory and gaming environment in Macau while remaining in
compliance with the requirements of the gaming regulatory authorities in the
jurisdictions in which we currently operate, as well as other applicable federal, state,
or local laws in the United States and Macau; (c) potential political or economic
instability; and (d) the extreme weather conditions in the region.
Furthermore, such operations in Macau or any future operations in which we may engage in
any other foreign territories are subject to risk pertaining to international
operations. These may include financial risks, such as foreign economy, adverse tax
consequences, and inability to adequately enforce our rights. These may also include
regulatory and political risks, such as foreign government regulations, general
geopolitical risks such as political and economic instability, hostilities with
neighboring countries, and changes in diplomatic and trade relationships.
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 June 30, 2010. The maximum number of shares available for repurchase under our
May 2008 repurchase program was 20 million as of June 30, 2010.
Item 6. Exhibits
|
3.1 |
|
Amended and Restated Certificate of Incorporation of the Company. |
|
|
3.2 |
|
Amended and Restated Bylaws of the Company, effective June 15, 2010 (incorporated
by reference to Exhibit 3 to the Companys Current Report on Form 8-K dated June 15,
2010). |
|
|
4.1 |
|
Indenture dated as of April 20, 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 |
|
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). |
|
|
10.2 |
|
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). |
|
|
10.3 |
|
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). |
|
|
10.4 |
|
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). |
|
|
10.5 |
|
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). |
|
|
10.6 |
|
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). |
32
|
10.7 |
|
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). |
|
|
10.8 |
|
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. |
|
|
101* |
|
The following information from the Companys Quarterly Report on Form 10-Q for
the quarter ended June 30, 2010 formatted in eXtensible Business Reporting Language:
(i) Consolidated Balance Sheets at June 30, 2010 (unaudited) and December 31, 2009
(audited); (ii) Unaudited Statements of Operations for the three and six months ended
June 30, 2010 and 2009; (iii) Unaudited Statements of Cash Flows for the six months
ended June 30, 2010 and 2009; and (iv) Notes to the Unaudited Consolidated Financial
Statements (tagged as blocks of text). |
|
|
|
* |
|
This exhibit is furnished and not filed or a part of a registration statement or
prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as
amended, is deemed not filed for the purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, and otherwise is not subject to liability under these
sections. |
33
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 Resorts International
|
|
Date: August 6, 2010 |
By: |
/s/ JAMES J. MURREN
|
|
|
|
James J. Murren |
|
|
|
Chairman of the Board, Chief Executive Officer
and President
(Principal Executive Officer) |
|
|
|
|
|
Date: August 6, 2010 |
|
/s/
DANIEL J. DARRIGO |
|
|
|
Daniel J. DArrigo |
|
|
|
Executive Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer) |
|
34
EXHIBIT INDEX
|
3.1 |
|
Amended and Restated Certificate of Incorporation of the Company. |
|
|
3.2 |
|
Amended and Restated Bylaws of the Company, effective June 15, 2010 (incorporated
by reference to Exhibit 3 to the Companys Current Report on Form 8-K dated June 15,
2010). |
|
|
4.1 |
|
Indenture dated as of April 20, 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 |
|
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). |
|
|
10.2 |
|
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). |
|
|
10.3 |
|
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). |
|
|
10.4 |
|
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). |
|
|
10.5 |
|
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). |
|
|
10.6 |
|
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). |
|
|
10.7 |
|
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). |
|
|
10.8 |
|
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. |
|
|
101* |
|
The following information from the Companys Quarterly Report on Form 10-Q for
the quarter ended June 30, 2010 formatted in eXtensible Business Reporting Language:
(i) Consolidated Balance Sheets at June 30, 2010 (unaudited) and December 31, 2009
(audited); (ii) Unaudited Statements of Operations for the three and six months ended
June 30, 2010 and 2009; (iii) Unaudited Statements of Cash Flows for the six months
ended June 30, 2010 and 2009; and (iv) Notes to the Unaudited Consolidated Financial
Statements (tagged as blocks of text). |
|
|
|
* |
|
This exhibit is furnished and not filed or a part of a registration statement or
prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as
amended, is deemed not filed for the purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, and otherwise is not subject to liability under these
sections. |
35