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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2023
OR
| | | | | |
☐ | 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
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock (Par Value $0.01) | MGM | New York Stock Exchange (NYSE) |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| | | | | | | | |
Class | | Outstanding at July 31, 2023 |
Common Stock, $0.01 par value | | 350,889,195 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, 2023 | | December 31, 2022 |
ASSETS |
Current assets | | | |
Cash and cash equivalents | $ | 3,843,366 | | | $ | 5,911,893 | |
Accounts receivable, net | 703,971 | | | 852,149 | |
Inventories | 130,889 | | | 126,065 | |
Income tax receivable | 129,497 | | | 73,016 | |
Prepaid expenses and other | 809,272 | | | 583,132 | |
Assets held for sale | — | | | 608,437 | |
Total current assets | 5,616,995 | | | 8,154,692 | |
| | | |
Property and equipment, net | 5,233,400 | | | 5,223,928 | |
| | | |
Other assets | | | |
Investments in and advances to unconsolidated affiliates | 156,993 | | | 173,039 | |
Goodwill | 5,029,189 | | | 5,029,312 | |
Other intangible assets, net | 1,734,012 | | | 1,551,252 | |
Operating lease right-of-use assets, net | 24,276,784 | | | 24,530,929 | |
Other long-term assets, net | 858,456 | | | 1,029,054 | |
Total other assets | 32,055,434 | | | 32,313,586 | |
| $ | 42,905,829 | | | $ | 45,692,206 | |
LIABILITIES AND STOCKHOLDERS' EQUITY |
Current liabilities | | | |
Accounts and construction payable | $ | 358,807 | | | $ | 369,817 | |
Current portion of long-term debt | 35,200 | | | 1,286,473 | |
Accrued interest on long-term debt | 60,225 | | | 83,451 | |
Other accrued liabilities | 2,295,172 | | | 2,236,323 | |
Liabilities related to assets held for sale | — | | | 539,828 | |
Total current liabilities | 2,749,404 | | | 4,515,892 | |
| | | |
Deferred income taxes, net | 3,006,583 | | | 2,969,443 | |
Long-term debt, net | 6,674,044 | | | 7,432,817 | |
Operating lease liabilities | 25,136,719 | | | 25,149,299 | |
Other long-term obligations | 493,996 | | | 256,282 | |
Commitments and contingencies (Note 9) | | | |
Redeemable noncontrolling interests | 9,716 | | | 158,350 | |
Stockholders’ equity | | | |
Common stock, $0.01 par value: authorized 1,000,000,000 shares, issued and outstanding 352,789,905 and 379,087,524 shares | 3,528 | | | 3,791 | |
Capital in excess of par value | — | | | — | |
Retained earnings | 4,382,588 | | | 4,794,239 | |
Accumulated other comprehensive income | 30,057 | | | 33,499 | |
Total MGM Resorts International stockholders’ equity | 4,416,173 | | | 4,831,529 | |
Noncontrolling interests | 419,194 | | | 378,594 | |
Total stockholders’ equity | 4,835,367 | | | 5,210,123 | |
| $ | 42,905,829 | | | $ | 45,692,206 | |
The accompanying notes are an integral part of these consolidated financial statements.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Revenues | | | | | | | |
Casino | $ | 1,951,382 | | | $ | 1,357,134 | | | $ | 3,833,810 | | | $ | 2,778,044 | |
Rooms | 815,323 | | | 774,732 | | | 1,663,811 | | | 1,331,805 | |
Food and beverage | 743,236 | | | 677,756 | | | 1,465,367 | | | 1,170,610 | |
Entertainment, retail and other | 420,711 | | | 445,342 | | | 830,289 | | | 816,908 | |
Reimbursed costs | 11,555 | | | 9,924 | | | 22,226 | | | 21,830 | |
| 3,942,207 | | | 3,264,888 | | | 7,815,503 | | | 6,119,197 | |
Expenses | | | | | | | |
Casino | 1,025,745 | | | 622,166 | | | 2,016,635 | | | 1,296,531 | |
Rooms | 250,300 | | | 232,429 | | | 490,414 | | | 428,542 | |
Food and beverage | 537,824 | | | 480,121 | | | 1,049,416 | | | 848,783 | |
Entertainment, retail and other | 258,472 | | | 265,184 | | | 502,000 | | | 483,933 | |
Reimbursed costs | 11,555 | | | 9,924 | | | 22,226 | | | 21,830 | |
General and administrative | 1,144,390 | | | 1,028,765 | | | 2,279,930 | | | 1,805,602 | |
Corporate expense | 117,088 | | | 119,610 | | | 244,647 | | | 230,851 | |
Preopening and start-up expenses | 149 | | | 542 | | | 288 | | | 976 | |
Property transactions, net | 5,614 | | | (19,395) | | | (390,462) | | | 35,343 | |
Gain on REIT transactions, net | — | | | (2,277,747) | | | — | | | (2,277,747) | |
Depreciation and amortization | 203,503 | | | 366,255 | | | 407,004 | | | 654,893 | |
| 3,554,640 | | | 827,854 | | | 6,622,098 | | | 3,529,537 | |
Loss from unconsolidated affiliates | (16,189) | | | (55,583) | | | (91,188) | | | (102,421) | |
Operating income | 371,378 | | | 2,381,451 | | | 1,102,217 | | | 2,487,239 | |
Non-operating income (expense) | | | | | | | |
Interest expense, net of amounts capitalized | (111,945) | | | (136,559) | | | (242,245) | | | (332,650) | |
Non-operating items from unconsolidated affiliates | (441) | | | (6,120) | | | (1,625) | | | (21,253) | |
Other, net | 23,693 | | | (43,308) | | | 70,000 | | | (9,006) | |
| (88,693) | | | (185,987) | | | (173,870) | | | (362,909) | |
Income before income taxes | 282,685 | | | 2,195,464 | | | 928,347 | | | 2,124,330 | |
Provision for income taxes | (39,141) | | | (572,839) | | | (204,920) | | | (536,498) | |
Net income | 243,544 | | | 1,622,625 | | | 723,427 | | | 1,587,832 | |
Less: Net (income) loss attributable to noncontrolling interests | (42,748) | | | 161,312 | | | (55,824) | | | 178,089 | |
Net Income attributable to MGM Resorts International | $ | 200,796 | | | $ | 1,783,937 | | | $ | 667,603 | | | $ | 1,765,921 | |
Earnings per share | | | | | | | |
Basic | $ | 0.56 | | | $ | 4.24 | | | $ | 1.82 | | | $ | 4.06 | |
Diluted | $ | 0.55 | | | $ | 4.20 | | | $ | 1.80 | | | $ | 4.02 | |
Weighted average common shares outstanding | | | | | | | |
Basic | 361,050 | | | 417,393 | | | 367,535 | | | 430,084 | |
Diluted | 365,339 | | | 421,303 | | | 371,685 | | | 434,336 | |
The accompanying notes are an integral part of these consolidated financial statements.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Net income | $ | 243,544 | | | $ | 1,622,625 | | | $ | 723,427 | | | $ | 1,587,832 | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Foreign currency translation | (6,040) | | | (9,828) | | | (6,089) | | | (27,794) | |
Cash flow hedges | — | | | 1,661 | | | — | | | 37,692 | |
Other | — | | | — | | | 871 | | | — | |
Other comprehensive income (loss) | (6,040) | | | (8,167) | | | (5,218) | | | 9,898 | |
Comprehensive income | 237,504 | | | 1,614,458 | | | 718,209 | | | 1,597,730 | |
Less: Comprehensive (income) loss attributable to noncontrolling interests | (43,459) | | | 163,460 | | | (54,048) | | | 164,781 | |
Comprehensive income attributable to MGM Resorts International | $ | 194,045 | | | $ | 1,777,918 | | | $ | 664,161 | | | $ | 1,762,511 | |
The accompanying notes are an integral part of these consolidated financial statements.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2023 | | 2022 |
Cash flows from operating activities | | | |
Net income | $ | 723,427 | | | $ | 1,587,832 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 407,004 | | | 654,893 | |
Amortization of debt discounts, premiums and issuance costs | 13,876 | | | 18,271 | |
Provision for credit losses | 22,303 | | | 292 | |
Stock-based compensation | 35,121 | | | 38,723 | |
Property transactions, net | (390,462) | | | 35,343 | |
Gain on REIT transactions, net | — | | | (2,277,747) | |
Noncash lease expense | 261,082 | | | 168,022 | |
Other investment losses (gains) | (12,383) | | | 7,974 | |
Loss from unconsolidated affiliates | 92,813 | | | 123,674 | |
Distributions from unconsolidated affiliates | 7,539 | | | 34,830 | |
Deferred income taxes | 35,822 | | | 542,642 | |
Change in operating assets and liabilities: | | | |
Accounts receivable | 111,740 | | | (48,176) | |
Inventories | (4,811) | | | (13,419) | |
Income taxes receivable and payable, net | (48,452) | | | 35,757 | |
Prepaid expenses and other | (3,404) | | | 30,814 | |
Accounts payable and accrued liabilities | (11,926) | | | (13,969) | |
Other | 41,470 | | | 6,957 | |
Net cash provided by operating activities | 1,280,759 | | | 932,713 | |
Cash flows from investing activities | | | |
Capital expenditures | (393,297) | | | (236,844) | |
Dispositions of property and equipment | 5,624 | | | 8,980 | |
Investments in unconsolidated affiliates | (73,788) | | | (167,181) | |
Proceeds from sale of operating resorts | 460,392 | | | — | |
Proceeds from real estate transactions | — | | | 4,373,820 | |
Acquisitions, net of cash acquired | — | | | (1,597,739) | |
Proceeds from repayment of principal on note receivable | 152,518 | | | — | |
Distributions from unconsolidated affiliates | 6,019 | | | 925 | |
Investments and other | (216,485) | | | (155,280) | |
Net cash provided by (used in) investing activities | (59,017) | | | 2,226,681 | |
Cash flows from financing activities | | | |
Net borrowings (repayments) under bank credit facilities - maturities of 90 days or less | (758,441) | | | 837,662 | |
Repayment of long-term debt | (1,250,000) | | | (1,000,000) | |
Debt issuance costs | — | | | (1,367) | |
Dividends paid to common shareholders | — | | | (2,111) | |
Distributions to noncontrolling interest owners | (161,617) | | | (206,254) | |
Repurchases of common stock | (1,103,219) | | | (2,116,055) | |
Other | (56,259) | | | (51,306) | |
Net cash used in financing activities | (3,329,536) | | | (2,539,431) | |
Effect of exchange rate on cash, cash equivalents, and restricted cash | (24,393) | | | (1,617) | |
Change in cash and cash equivalents classified as assets held for sale | 25,938 | | | (37,232) | |
Cash, cash equivalents, and restricted cash | | | |
Net change for the period | (2,106,249) | | | 581,114 | |
Balance, beginning of period | 6,036,388 | | | 5,203,059 | |
Balance, end of period | $ | 3,930,139 | | | $ | 5,784,173 | |
Supplemental cash flow disclosures | | | |
Interest paid, net of amounts capitalized | $ | 250,469 | | | $ | 329,621 | |
Federal, state and foreign income taxes paid (refunds received), net | 216,873 | | | (32,736) | |
Non-cash investing and financing activities | | | |
MGM Grand Paradise gaming concession intangible asset | $ | 226,083 | | | $ | — | |
MGM Grand Paradise gaming concession payment obligation | 226,083 | | | — | |
The accompanying notes are an integral part of these consolidated financial statements.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | | | | | | | | | | | |
| Shares | | Par Value | | Capital in Excess of Par Value | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total MGM Resorts International Stockholders’ Equity | | Noncontrolling Interests | | Total Stockholders’ Equity |
Balances, April 1, 2023 | 367,241 | | | $ | 3,672 | | | $ | — | | | $ | 4,799,178 | | | $ | 36,808 | | | $ | 4,839,658 | | | $ | 382,445 | | | $ | 5,222,103 | |
Net income | — | | | — | | | — | | | 200,796 | | | — | | | 200,796 | | | 42,577 | | | 243,373 | |
Currency translation adjustment | — | | | — | | | — | | | — | | | (6,751) | | | (6,751) | | | 711 | | | (6,040) | |
Stock-based compensation | — | | | — | | | 10,594 | | | — | | | — | | | 10,594 | | | 636 | | | 11,230 | |
Issuance of common stock pursuant to stock-based compensation awards | 132 | | | 1 | | | (1,224) | | | — | | | — | | | (1,223) | | | — | | | (1,223) | |
Distributions to noncontrolling interest owners | — | | | — | | | — | | | — | | | — | | | — | | | (6,854) | | | (6,854) | |
Repurchases of common stock | (14,583) | | | (145) | | | (8,807) | | | (617,386) | | | — | | | (626,338) | | | — | | | (626,338) | |
Adjustment of redeemable noncontrolling interest to redemption value | — | | | — | | | 114 | | | — | | | — | | | 114 | | | — | | | 114 | |
Other | — | | | — | | | (677) | | | — | | | — | | | (677) | | | (321) | | | (998) | |
Balances, June 30, 2023 | 352,790 | | | $ | 3,528 | | | $ | — | | | $ | 4,382,588 | | | $ | 30,057 | | | $ | 4,416,173 | | | $ | 419,194 | | | $ | 4,835,367 | |
| | | | | | | | | | | | | | | |
Balances, January 1, 2023 | 379,088 | | | $ | 3,791 | | | $ | — | | | $ | 4,794,239 | | | $ | 33,499 | | | $ | 4,831,529 | | | $ | 378,594 | | | $ | 5,210,123 | |
Net income | — | | | — | | | — | | | 667,603 | | | — | | | 667,603 | | | 55,486 | | | 723,089 | |
Currency translation adjustment | — | | | — | | | — | | | — | | | (4,313) | | | (4,313) | | | (1,776) | | | (6,089) | |
Stock-based compensation | — | | | — | | | 33,822 | | | — | | | — | | | 33,822 | | | 1,299 | | | 35,121 | |
Issuance of common stock pursuant to stock-based compensation awards | 205 | | | 2 | | | (2,566) | | | — | | | — | | | (2,564) | | | — | | | (2,564) | |
Distributions to noncontrolling interest owners | — | | | — | | | — | | | — | | | — | | | — | | | (14,090) | | | (14,090) | |
| | | | | | | | | | | | | | | |
Issuance of restricted stock units | — | | | — | | | 1,701 | | | — | | | — | | | 1,701 | | | — | | | 1,701 | |
Repurchases of common stock | (26,503) | | | (265) | | | (33,688) | | | (1,079,254) | | | — | | | (1,113,207) | | | — | | | (1,113,207) | |
Adjustment of redeemable noncontrolling interest to redemption value | — | | | — | | | 1,411 | | | — | | | — | | | 1,411 | | | — | | | 1,411 | |
Other | — | | | — | | | (680) | | | — | | | 871 | | | 191 | | | (319) | | | (128) | |
Balances, June 30, 2023 | 352,790 | | | $ | 3,528 | | | $ | — | | | $ | 4,382,588 | | | $ | 30,057 | | | $ | 4,416,173 | | | $ | 419,194 | | | $ | 4,835,367 | |
The accompanying notes are an integral part of these consolidated financial statements.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | | | | | | | | | | | |
| Shares | | Par Value | | Capital in Excess of Par Value | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total MGM Resorts International Stockholders’ Equity | | Noncontrolling Interests | | Total Stockholders’ Equity |
Balances, April 1, 2022 | 430,562 | | | $ | 4,306 | | | $ | 761,559 | | | $ | 4,321,482 | | | $ | (22,007) | | | $ | 5,065,340 | | | $ | 4,814,284 | | | $ | 9,879,624 | |
Net income (loss) | — | | | — | | | — | | | 1,783,937 | | | — | | | 1,783,937 | | | (163,596) | | | 1,620,341 | |
Currency translation adjustment | — | | | — | | | — | | | — | | | (6,709) | | | (6,709) | | | (3,119) | | | (9,828) | |
Cash flow hedges | — | | | — | | | — | | | — | | | 690 | | | 690 | | | 971 | | | 1,661 | |
Stock-based compensation | — | | | — | | | 12,075 | | | — | | | — | | | 12,075 | | | 3,304 | | | 15,379 | |
Issuance of common stock pursuant to stock-based compensation awards | 225 | | | 2 | | | (5,406) | | | — | | | — | | | (5,404) | | | — | | | (5,404) | |
Cash distributions to noncontrolling interest owners | — | | | — | | | — | | | — | | | — | | | — | | | (2,448) | | | (2,448) | |
Dividends declared and paid to common shareholders ($0.0025 per share) | — | | | — | | | — | | | (1,021) | | | — | | | (1,021) | | | — | | | (1,021) | |
Repurchases of common stock | (32,369) | | | (324) | | | (755,893) | | | (357,866) | | | — | | | (1,114,083) | | | — | | | (1,114,083) | |
Adjustment of redeemable noncontrolling interest to redemption value | — | | | — | | | (12,412) | | | — | | | — | | | (12,412) | | | — | | | (12,412) | |
Deconsolidation of MGP | — | | | — | | | — | | | — | | | 11,084 | | | 11,084 | | | (3,184,710) | | | (3,173,626) | |
Other | — | | | — | | | 77 | | | — | | | — | | | 77 | | | (577) | | | (500) | |
Balances, June 30, 2022 | 398,418 | | | $ | 3,984 | | | $ | — | | | $ | 5,746,532 | | | $ | (16,942) | | | $ | 5,733,574 | | | $ | 1,464,109 | | | $ | 7,197,683 | |
| | | | | | | | | | | | | | | |
Balances, January 1, 2022 | 453,804 | | | $ | 4,538 | | | $ | 1,750,135 | | | $ | 4,340,588 | | | $ | (24,616) | | | $ | 6,070,645 | | | $ | 4,906,121 | | | $ | 10,976,766 | |
Net income (loss) | — | | | — | | | — | | | 1,765,921 | | | — | | | 1,765,921 | | | (182,642) | | | 1,583,279 | |
Currency translation adjustment | — | | | — | | | — | | | — | | | (16,893) | | | (16,893) | | | (10,901) | | | (27,794) | |
Cash flow hedges | — | | | — | | | — | | | — | | | 13,483 | | | 13,483 | | | 24,209 | | | 37,692 | |
Stock-based compensation | — | | | — | | | 34,456 | | | — | | | — | | | 34,456 | | | 4,267 | | | 38,723 | |
Issuance of common stock pursuant to stock-based compensation awards | 329 | | | 3 | | | (7,718) | | | — | | | — | | | (7,715) | | | — | | | (7,715) | |
Cash distributions to noncontrolling interest owners | — | | | — | | | — | | | — | | | — | | | — | | | (91,289) | | | (91,289) | |
Dividends declared and paid to common shareholders ($0.005 per share) | — | | | — | | | — | | | (2,111) | | | — | | | (2,111) | | | — | | | (2,111) | |
Issuance of restricted stock units | — | | | — | | | 1,941 | | | — | | | — | | | 1,941 | | | 186 | | | 2,127 | |
Repurchases of common stock | (55,715) | | | (557) | | | (1,757,632) | | | (357,866) | | | — | | | (2,116,055) | | | — | | | (2,116,055) | |
Adjustment of redeemable noncontrolling interest to redemption value | — | | | — | | | (21,398) | | | — | | | — | | | (21,398) | | | — | | | (21,398) | |
Deconsolidation of MGP | — | | | — | | | — | | | — | | | 11,084 | | | 11,084 | | | (3,184,710) | | | (3,173,626) | |
Other | — | | | — | | | 216 | | | — | | | — | | | 216 | | | (1,132) | | | (916) | |
Balances, June 30, 2022 | 398,418 | | | $ | 3,984 | | | $ | — | | | $ | 5,746,532 | | | $ | (16,942) | | | $ | 5,733,574 | | | $ | 1,464,109 | | | $ | 7,197,683 | |
The accompanying notes are an integral part of these consolidated financial statements.
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 — ORGANIZATION
Organization. MGM Resorts International, a Delaware corporation (together with its consolidated subsidiaries, unless otherwise indicated or unless the context requires otherwise, the “Company”) is a global gaming and entertainment company with domestic and international locations featuring hotels and casinos, convention, dining, and retail offerings, and sports betting and online gaming operations.
As of June 30, 2023, the Company’s domestic casino resorts include the following integrated casino, hotel and entertainment resorts in Las Vegas, Nevada: Aria (including Vdara), Bellagio, The Cosmopolitan of Las Vegas (“The Cosmopolitan”), MGM Grand Las Vegas (including The Signature), Mandalay Bay, Luxor, New York-New York, Park MGM, and Excalibur. The Company also operates MGM Grand Detroit in Detroit, Michigan, MGM National Harbor in Prince George’s County, Maryland, MGM Springfield in Springfield, Massachusetts, Borgata in Atlantic City, New Jersey, Empire City in Yonkers, New York, MGM Northfield Park in Northfield Park, Ohio, and Beau Rivage in Biloxi, Mississippi. Additionally, the Company operates The Park, a dining and entertainment district located between New York-New York and Park MGM. The Company leases the real estate assets of its domestic properties pursuant to triple-net lease agreements, as further discussed in Note 8.
The Company has an approximate 56% controlling interest in MGM China Holdings Limited (together with its subsidiaries, “MGM China”), which owns MGM Grand Paradise, S.A. (“MGM Grand Paradise”). MGM Grand Paradise owns and operates MGM Macau and MGM Cotai, two integrated casino, hotel and entertainment resorts in Macau, as well as the related gaming concession and land concessions.
The Company also owns LeoVegas AB (“LeoVegas”), a consolidated subsidiary that has global online gaming operations headquartered in Sweden and Malta. Additionally, the Company and its venture partner, Entain plc, each have a 50% ownership interest in BetMGM, LLC (“BetMGM”), an unconsolidated affiliate, which provides online sports betting and gaming in certain jurisdictions in North America.
Japan. In April 2023, the Japanese government officially certified the Area Development Plan previously submitted by the city/prefecture of Osaka and the Company’s 50% owned unconsolidated venture.
MGM Grand Paradise gaming concession. Gaming in Macau is currently administered by the Macau Government through concessions awarded to six different concessionaires. On December 16, 2022, MGM Grand Paradise was awarded a ten-year concession contract to permit the operation of games of chance or other games in casinos in Macau, which commenced on January 1, 2023. Refer to Note 5 for further discussion of the gaming concession.
Reportable segments. The Company has three reportable segments: Las Vegas Strip Resorts, Regional Operations and MGM China. See Note 12 for additional information about the Company’s segments.
Impact of COVID-19 - Update. On January 8, 2023, Macau lifted the majority of its COVID-19 pandemic travel and quarantine restrictions with the exception of overseas visitors travelling from outside of mainland China, Hong Kong and Taiwan being required to present a negative nucleic acid test or rapid antigen test result, and on February 6, 2023 all remaining COVID-19 travel restrictions were removed. As of June 30, 2023, all of the Company’s properties were open and not subject to any COVID-19 related operating restrictions.
NOTE 2 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation. As permitted by the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the Company’s 2022 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
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 Company’s interim financial statements. The results for such periods are not necessarily indicative of the results to be expected for the full year.
Principles of consolidation. The Company evaluates entities for which control is achieved through means other than voting rights to determine if it is the primary beneficiary of a variable interest entity (“VIE”). The Company consolidates its investment in a VIE when it determines that it is its primary beneficiary. The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis.
The Company has a 5% ownership interest in the venture that owns and leases back the real estate assets of Bellagio (the “Bellagio BREIT Venture”). Bellagio BREIT Venture is a VIE of which the Company is not the primary beneficiary and, accordingly, the Company does not consolidate the venture. The Company’s maximum exposure to loss in Bellagio BREIT Venture is equal to the carrying value of its investment of $55 million as of June 30, 2023, assuming no future capital funding requirements, plus the exposure to loss resulting from the Company’s guarantee of the debt of Bellagio BREIT Venture, which guarantee is immaterial as of June 30, 2023, as further discussed in Note 9.
For entities determined not to be a VIE, the Company consolidates such entities in which the Company owns 100% of the equity. For entities in which the Company owns less than 100% of the equity interest, the Company consolidates the entity under the voting interest model if it has a controlling financial interest based upon the terms of the respective entities’ ownership agreements, such as MGM China. For these entities, the Company records a noncontrolling interest in the consolidated balance sheets and all intercompany balances and transactions are eliminated in consolidation. If the entity does not qualify for consolidation under the voting interest model and the Company has significant influence over the operating and financial decisions of the entity, the Company generally accounts for the entity under the equity method, such as BetMGM, which does not qualify for consolidation as the Company has joint control, given the entity is structured with substantive participating rights whereby both owners participate in the decision making process, which prevents the Company from exerting a controlling financial interest in such entity, as defined in Accounting Standards Codification (“ASC”) 810. For entities over which the Company does not have significant influence, the Company accounts for its equity investment under ASC 321.
Fair value measurements. Fair value measurements affect the Company’s accounting and impairment assessments of its long-lived assets, investments in unconsolidated affiliates or equity interests, assets acquired, and liabilities assumed in an acquisition, and goodwill and other intangible assets. Fair value measurements also affect the Company’s 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 quoted prices for identical or comparable instruments or pricing using observable market data; or Level 3 inputs, which are unobservable inputs. The Company used the following inputs in its fair value measurements:
•Level 1 inputs when measuring its equity investments recorded at fair value;
•Level 2 inputs for its long-term debt fair value disclosures; See Note 6; and
•Level 1 and Level 2 inputs for its debt investments.
Equity investments. Fair value is measured based upon trading prices on the applicable securities exchange for equity investments for which the Company has elected the fair value option of ASC 825 and equity investments accounted for under ASC 321 that have a readily determinable fair value. The fair value of these investments was $466 million and $461 million as of June 30, 2023 and December 31, 2022, respectively, and is reflected within “Other long-term assets, net” on the consolidated balance sheets. Gains and losses are recorded in “Other, net” in the statements of operations. For the three and six months ended June 30, 2023, the Company recorded a net gain on its equity investments of $6 million and $5 million, respectively. For the three and six months ended June 30, 2022, the Company recorded a net loss on its equity investments of $23 million and $8 million, respectively.
Debt investments. The Company’s investments in debt securities are classified as trading securities and recorded at fair value. Gains and losses are recorded in “Other, net” in the statements of operations. Debt securities are considered cash equivalents if the criteria for such classification is met or otherwise classified as short-term investments within “Prepaid expenses and other” since the investment of cash is available for current operations.
The following tables present information regarding the Company’s debt investments:
| | | | | | | | | | | | | | |
| Fair value level | June 30, 2023 | | December 31, 2022 |
| (In thousands) |
Cash and cash equivalents: | | | | |
Money market funds | Level 1 | $ | 2,195 | | | $ | 12,009 | |
Commercial paper and certificates of deposit | Level 2 | — | | | 5,992 | |
Cash and cash equivalents | | 2,195 | | | 18,001 | |
Short-term investments: | | | | |
U.S. government securities | Level 1 | 57,696 | | | 56,835 | |
U.S. agency securities | Level 2 | 29,049 | | | 9,530 | |
Commercial paper and certificates of deposit | Level 2 | 4,561 | | | 4,466 | |
Corporate bonds | Level 2 | 416,420 | | | 213,875 | |
Short-term investments | | 507,726 | | | 284,706 | |
Total debt investments | | $ | 509,921 | | | $ | 302,707 | |
Restricted cash. MGM China’s pledged cash of $87 million and $124 million as of June 30, 2023 and December 31, 2022, respectively, securing the bank guarantees discussed in Note 9 is restricted in use and classified within “Other long-term assets, net.” Such amounts plus “Cash and cash equivalents” on the consolidated balance sheets equal “Cash, cash equivalents, and restricted cash” on the consolidated statements of cash flows as of June 30, 2023 and December 31, 2022.
Accounts receivable. As of June 30, 2023 and December 31, 2022, the loss reserve on accounts receivable was $129 million and $113 million, respectively.
Note receivable. In February 2023, the secured note receivable related to the sale of Circus Circus Las Vegas and the adjacent land was repaid, prior to maturity, for $170 million, which approximated its carrying value on the date of repayment. As of December 31, 2022, the carrying value of the note receivable was $167 million and was recorded within “Other long-term assets, net” on the consolidated balance sheets.
Accounts payable. As of June 30, 2023 and December 31, 2022, the Company had accrued $60 million and $80 million, respectively, for purchases of property and equipment within “Accounts and construction payable” on the consolidated balance sheets.
Revenue recognition. Contract and Contract-Related Liabilities. There may be a difference between the timing of cash receipts from the customer and the recognition of revenue, resulting in a contract or contract-related liability. The Company generally has three types of liabilities related to contracts with customers: (1) outstanding chip liability, which represents the amounts owed in exchange for gaming chips held by a customer, (2) loyalty program obligations, which represents the deferred allocation of revenue relating to loyalty program incentives earned, and (3) customer advances and other, which is primarily funds deposited by customers before gaming play occurs (“casino front money”) and advance payments on goods and services yet to be provided, such as advance ticket sales and deposits on rooms and convention space or for unpaid wagers. These liabilities are generally expected to be recognized as revenue within one year of being purchased, earned, or deposited and are recorded within “Other accrued liabilities” on the consolidated balance sheets.
The following table summarizes the activity related to contract and contract-related liabilities:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Outstanding Chip Liability | | Loyalty Program | | Customer Advances and Other |
| 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| (In thousands) |
Balance at January 1 | $ | 185,669 | | | $ | 176,219 | | | $ | 183,602 | | | $ | 144,465 | | | $ | 816,376 | | | $ | 640,001 | |
Balance at June 30 | 196,446 | | | 165,564 | | | 194,570 | | | 160,752 | | | 806,072 | | | 704,404 | |
Increase / (decrease) | $ | 10,777 | | | $ | (10,655) | | | $ | 10,968 | | | $ | 16,287 | | | $ | (10,304) | | | $ | 64,403 | |
The January 1, 2023 balances exclude liabilities related to assets held for sale.
Revenue by source. The Company presents the revenue earned disaggregated by the type or nature of the good or service (casino, room, food and beverage, and entertainment, retail and other) and by relevant geographic region within Note 12.
Leases. The Company determines if an arrangement is or contains a lease at inception or modification of the arrangement. An arrangement is or contains a lease if there are identified assets and the right to control the use of an identified asset is conveyed for a period of time in exchange for consideration. Control over the use of the identified asset means the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.
The Company classifies a lease with terms greater than twelve months as either operating or finance. At commencement, the right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. The initial measurement of ROU assets also includes any prepaid lease payments and are reduced by any previously accrued deferred rent. When available, such as for the Company’s triple-net operating leases for which the lessor has provided its implicit rate or provided the assumptions required for the Company to readily determine the rate implicit in the lease, the Company uses the rate implicit in the lease to discount lease payments to present value. However, for most of the Company’s leases, such as its ground subleases and equipment leases, the Company cannot readily determine the implicit rate. Accordingly, the Company uses its incremental borrowing rate to discount the lease payments for such leases based on the information available at the commencement date. Lease terms include options to extend or terminate the lease when it is reasonably certain that such option will be exercised. The Company’s triple-net operating leases each contain renewal periods at the Company’s option, each of which are not considered to be reasonably certain of being exercised. Many of the Company’s leases include fixed rental escalation clauses that are factored into the determination of lease payments. For operating leases, lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term. For finance leases, the ROU asset depreciates on a straight-line basis over the shorter of the lease term or useful life of the ROU asset and the lease liability accretes interest based on the interest method using the discount rate determined at lease commencement. Refer to Note 8 for discussion of leases under which the Company is a lessee.
The Company is a lessor under certain other lease arrangements. Lease revenues earned by the Company from third parties are classified within the line item corresponding to the type or nature of the tenant’s good or service. For the three and six months ended June 30, 2023, lease revenues from third-party tenants include $19 million and $37 million recorded within food and beverage revenue, respectively, and $29 million and $59 million recorded within entertainment, retail, and other revenue for the same such periods, respectively. For the three and six months ended June 30, 2022, lease revenues from third-party tenants include $19 million and $33 million recorded within food and beverage revenue, respectively, and $29 million and $55 million recorded within entertainment, retail, and other revenue for the same such periods, respectively. Lease revenues from the rental of hotel rooms are recorded as rooms revenues within the consolidated statements of operations.
Redeemable noncontrolling interest. Certain noncontrolling interest parties have non-voting economic interests in MGM National Harbor which provide for annual preferred distributions by MGM National Harbor to the noncontrolling interest parties based on a percentage of its annual net gaming revenue (as defined in the MGM National Harbor operating agreement). Such distributions are accrued each quarter and are paid 90 days after the end of each fiscal year. The noncontrolling interest parties each have the ability to require MGM National Harbor to purchase all or a portion of their interests for a purchase price based on a contractually agreed upon formula.
The Company has recorded the interests as “Redeemable noncontrolling interests” in the mezzanine section of the accompanying consolidated balance sheets and not stockholders’ equity because their redemption is not exclusively in the Company’s control. The interests were initially accounted for at fair value. Subsequently, the Company recognizes changes in the redemption value as they occur and adjusts the carrying amount of the redeemable noncontrolling interests to equal the maximum redemption value, provided such amount does not fall below the initial carrying value, at the end of each reporting period. The Company records any changes caused by such an adjustment in capital in excess of par value. Additionally, the carrying amount of the redeemable noncontrolling interests is adjusted for accrued annual preferred distributions, with changes caused by such adjustments recorded within net income (loss) attributable to noncontrolling interests.
During the six months ended June 30, 2023 and 2022, MGM National Harbor purchased $138 million and $21 million of interests from the noncontrolling interest parties, respectively.
Share repurchases. Shares repurchased pursuant to the Company’s share repurchase plans are retired upon purchase. The cost of the repurchases in excess of the aggregate par value of the shares reduces capital in excess of par value, to the extent available, with any residual cost applied against retained earnings.
NOTE 3 — ACQUISITIONS AND DIVESTITURES
LeoVegas acquisition. On May 2, 2022, the Company commenced a public offer to the shareholders of LeoVegas to tender 100% of the shares at a price of SEK 61 in cash per share. On September 7, 2022, the Company completed its tender offer and acquired 65% of the outstanding shares of LeoVegas and, at the completion of an extended acceptance period on September 22, 2022, acquired an additional 2% of outstanding shares, for an aggregate cash tender price of $370 million. During the tender offer period, the Company had acquired 31% of outstanding shares in open market purchases that had an acquisition-date fair value of approximately $172 million. As the Company’s previous 31% ownership interest was accounted for at fair value, no gain or loss was recorded upon consolidation. The remaining outstanding shares, with a fair value of approximately $11 million based upon the tender price, were settled by the Company in cash in connection with squeeze-out proceedings during the second quarter of 2023. The acquisition provides the Company an opportunity to create a scaled global online gaming business.
The Company recognized 100% of the assets, liabilities, and noncontrolling interests of LeoVegas at fair value at the date of the acquisition. The fair value of the acquired equity interests of LeoVegas was determined by the tender price and equaled $556 million, inclusive of cash settlement of equity awards. Under the acquisition method, the fair value was allocated to the assets acquired, liabilities assumed, and noncontrolling interests. The Company estimated fair value using level 1 inputs, level 2 inputs, and level 3 inputs. The estimated fair values of the identified intangible assets were determined using methodologies under the income approach based on significant inputs that were not observable. The intangible assets include trademarks, which is an indefinite-lived intangible asset, and customer lists and technology, which are finite-lived intangibles that are amortized over each of their estimated useful lives of five years. Goodwill is primarily attributable to the profitability of LeoVegas in excess of identifiable assets and is not deductible for tax purposes. All of the goodwill was assigned to Corporate and other.
The following table sets forth the purchase price allocation (in thousands):
| | | | | |
Cash and cash equivalents | $ | 93,407 | |
Receivables and other current assets | 36,872 | |
Technology | 109,027 | |
Trademarks | 144,374 | |
Customer lists | 126,526 | |
Goodwill | 288,367 | |
Other long-term assets | 19,181 | |
Accounts payable, accrued liabilities, and other current liabilities | (118,302) | |
Debt | (104,439) | |
Other long-term liabilities | (36,457) | |
Noncontrolling interests | (2,861) | |
| $ | 555,695 | |
The Cosmopolitan acquisition. On May 17, 2022, the Company acquired 100% of the equity interests in the entities that own the operations of The Cosmopolitan for cash consideration of $1.625 billion plus working capital adjustments for a total purchase price of approximately $1.7 billion. The acquisition expands the Company’s customer base and provides a greater depth of choices and experiences for guests in Las Vegas.
The Company recognized 100% of the acquired assets and assumed liabilities at fair value at the date of the acquisition. Under the acquisition method, the fair value was allocated to the assets acquired and liabilities assumed in the transaction. The Company estimated fair value using level 1 inputs, level 2 inputs, and level 3 inputs. The estimated fair values of the identified intangible assets were determined using methodologies under the income approach based on significant inputs that were not observable. The intangible assets include trademarks, which is an indefinite-lived intangible asset, and customer lists, which is amortized over its estimated useful life of seven years. Goodwill, which is deductible for
tax purposes, is primarily attributable to the profitability of The Cosmopolitan in excess of identifiable assets as well as expected synergies. All of the goodwill was assigned to the Las Vegas Strip Resorts segment.
The following table sets forth the purchase price allocation (in thousands):
| | | | | |
Cash and cash equivalents | $ | 80,670 | |
Receivables and other current assets | 94,354 | |
Property and equipment | 120,912 | |
Trademarks | 130,000 | |
Customer lists | 95,000 | |
Goodwill | 1,289,468 | |
Operating lease right-of-use-assets, net | 3,404,894 | |
Other long-term assets | 23,709 | |
Accounts payable, accrued liabilities, and other current liabilities | (145,136) | |
Operating lease liabilities | (3,401,815) | |
Other long-term liabilities | (1,570) | |
| $ | 1,690,486 | |
Unaudited pro forma information - The Cosmopolitan acquisition. The following unaudited pro forma consolidated financial information for the Company has been prepared assuming the Company’s acquisition of The Cosmopolitan had occurred as of January 1, 2021. The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been consummated as of the indicated date. Pro forma results of operations for the LeoVegas acquisition have not been included because it is not material to the consolidated results of operations.
| | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2022 |
| (In thousands) |
Net revenues | $ | 3,422,277 | | | $ | 6,542,015 | |
Net income attributable to MGM Resorts International | 1,781,930 | | | 1,780,076 | |
VICI Transaction. Prior to the closing of the VICI Transaction (defined below), MGM Growth Properties LLC (“MGP”) was a consolidated subsidiary of the Company. Substantially all of its assets were owned by and substantially all of its operations were conducted through MGM Growth Properties Operating Partnership LP ("MGP OP”). MGP had two classes of common shares: Class A shares and a single Class B share. The Company owned MGP’s Class B share, through which it held a controlling interest in MGP as it was entitled to an amount of votes representing a majority of the total voting power of MGP’s shares. The Company and MGP each held MGP OP units representing limited partner interests in MGP OP.
Additionally, the Company had leased the real estate assets of The Mirage, Luxor, New York-New York, Park MGM, Excalibur, The Park, Gold Strike Tunica, MGM Grand Detroit, Beau Rivage, Borgata, Empire City, MGM National Harbor, MGM Northfield Park, and MGM Springfield from MGP OP. The Company also leased, and continues to lease, the real estate assets of Mandalay Bay and MGM Grand Las Vegas from subsidiaries of a venture that was 50.1% owned by a subsidiary of MGP OP at the time of the transaction (such venture, the “MGP BREIT Venture”).
On April 29, 2022, VICI Properties Inc. (“VICI”) acquired MGP in a stock-for-stock transaction (such transaction, the “VICI Transaction”). MGP Class A shareholders received 1.366 shares of newly issued VICI stock in exchange for each MGP Class A share outstanding and the Company received 1.366 units of VICI OP in exchange for each MGP OP unit held by the Company. The fixed exchange ratio represents an agreed upon price of $43 per share of MGP Class A share to the five-day volume weighted average price of VICI stock as of the close of business on July 30, 2021. In connection with the exchange, VICI OP redeemed the majority of the Company’s VICI OP units for cash consideration of $4.4 billion, with the Company retaining an approximate 1% ownership interest in VICI OP that had a fair value of approximately $375 million. MGP’s Class B share that was held by the Company was cancelled. Accordingly, the Company no longer held a controlling interest in MGP and deconsolidated MGP upon the closing of the transactions.
Further, the Company entered into an amended and restated master lease with VICI as discussed in Note 8. The Mandalay Bay and MGM Grand Las Vegas lease remained unchanged.
In connection with the transactions, the Company recognized a $2.3 billion gain recorded within “Gain on REIT transactions, net.” The gain reflects the fair value of consideration received of $4.8 billion plus the carrying amount of noncontrolling interest immediately prior to the transactions of $3.2 billion less the net carrying value of the assets and liabilities and accumulated comprehensive income derecognized of $5.7 billion.
The major classes of assets and liabilities derecognized were as follows:
| | | | | |
| (In thousands) |
Cash and cash equivalents | $ | 25,387 | |
Income tax receivable | 5,486 | |
Prepaid expenses and other | 128 | |
Property and equipment, net | 9,250,519 | |
Investments in and advances to unconsolidated affiliates | 817,901 | |
Operating lease right-of-use assets, net | 236,255 | |
Other long-term assets, net | 3,991 | |
Total assets | $ | 10,339,667 | |
| |
Accounts payable | $ | 1,136 | |
Accrued interest on long-term debt | 68,150 | |
Other accrued liabilities | 4,057 | |
Deferred income taxes, net | 1,284 | |
Long-term debt, net | 4,259,473 | |
Operating lease liabilities | 336,689 | |
Total liabilities | $ | 4,670,789 | |
The Mirage transaction. On December 19, 2022, the Company completed the sale of the operations of The Mirage to an affiliate of Seminole Hard Rock Entertainment, Inc. (“Hard Rock”) for cash consideration of $1.075 billion, or $1.1 billion, net of purchase price adjustments and transaction costs. At closing, the master lease between the Company and VICI was amended to remove The Mirage and to reflect a $90 million reduction in annual cash rent.
Gold Strike Tunica. On February 15, 2023, the Company completed the sale of the operations of Gold Strike Tunica to CNE Gaming Holdings, LLC (“CNE”), a subsidiary of Cherokee Nation Business, for cash consideration of $450 million, or $474 million, net of purchase price adjustments and transaction costs. At closing, the master lease between the Company and VICI was amended to remove Gold Strike Tunica and to reflect a $40 million reduction in annual cash rent. The Company recognized a $399 million gain recorded within “Property transactions, net.” The gain reflects the net cash consideration less the net carrying value of the assets and liabilities derecognized of $75 million.
The operations of Gold Strike Tunica are not classified as discontinued operations because the Company concluded that the sale is not a strategic shift that has a major effect on the Company’s operations or its financial results and it does not represent a major geographic segment or product line.
The major classes of assets and liabilities derecognized are as follows:
| | | | | |
| (In thousands) |
Cash and cash equivalents | $ | 26,911 | |
Accounts receivable, net | 2,466 | |
Inventories | 1,087 | |
Prepaid expenses and other | 1,522 | |
Property and equipment, net | 21,300 | |
Goodwill | 40,523 | |
Other intangible assets, net | 5,700 | |
Operating lease right-of-use assets, net | 507,231 | |
Other long-term assets, net | 1,251 | |
Total assets | $ | 607,991 | |
Accounts payable | $ | 1,657 | |
Other accrued liabilities | 13,778 | |
Other long-term obligations | 1,707 | |
Operating lease liabilities | 516,136 | |
Total liabilities | $ | 533,278 | |
NOTE 4 — INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Investments in and advances to unconsolidated affiliates consisted of the following:
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
| (In thousands) |
BetMGM (50%) | $ | — | | | $ | 31,760 | |
Other | 156,993 | | | 141,279 | |
| $ | 156,993 | | | $ | 173,039 | |
The Company’s share of losses of BetMGM in excess of its equity method investment balance is $21 million as of June 30, 2023.
The Company recorded its share of loss from unconsolidated affiliates as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (In thousands) |
Loss from unconsolidated affiliates | $ | (16,189) | | | $ | (55,583) | | | $ | (91,188) | | | $ | (102,421) | |
Non-operating items from unconsolidated affiliates | (441) | | | (6,120) | | | (1,625) | | | (21,253) | |
| $ | (16,630) | | | $ | (61,703) | | | $ | (92,813) | | | $ | (123,674) | |
The following table summarizes information related to the Company’s share of operating loss from unconsolidated affiliates:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
| (In thousands) |
MGP BREIT Venture (through April 29, 2022) | $ | — | | | $ | 12,116 | | | $ | — | | | $ | 51,051 | |
BetMGM | (22,499) | | | (71,229) | | | (104,372) | | | (163,223) | |
Other | 6,310 | | | 3,530 | | | 13,184 | | | 9,751 | |
| $ | (16,189) | | | $ | (55,583) | | | $ | (91,188) | | | $ | (102,421) | |
In connection with the VICI Transaction in April 2022, the Company deconsolidated MGP and, accordingly, derecognized the assets and liabilities of MGP, which included MGP OP’s investment in MGP BREIT Venture.
MGP BREIT Venture distributions. For the three and six months ended June 30, 2022, MGP OP received $8 million and $32 million in distributions from MGP BREIT Venture, respectively.
BetMGM contributions. For the three and six months ended June 30, 2023, the Company contributed $25 million and $50 million to BetMGM, respectively. For the three and six months ended June 30, 2022, the Company contributed $25 million and $150 million to BetMGM, respectively.
NOTE 5 — GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consisted of the following:
| | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| | (In thousands) |
Goodwill | | $ | 5,029,189 | | | $ | 5,029,312 | |
| | | | |
Indefinite-lived intangible assets: | | | | |
Trademarks | | $ | 757,410 | | | $ | 754,431 | |
Gaming rights and other | | 385,165 | | | 385,060 | |
Total indefinite-lived intangible assets | | 1,142,575 | | | 1,139,491 | |
Finite-lived intangible assets: | | | | |
MGM Grand Paradise gaming subconcession | | — | | | 4,519,486 | |
Less: Accumulated amortization | | — | | | (4,519,486) | |
| | — | | | — | |
Customer lists | | 285,818 | | | 283,232 | |
Less: Accumulated amortization | | (83,243) | | | (60,055) | |
| | 202,575 | | | 223,177 | |
Gaming rights | | 332,428 | | | 106,600 | |
Less: Accumulated amortization | | (48,150) | | | (33,316) | |
| | 284,278 | | | 73,284 | |
Technology and other | | 131,287 | | | 129,061 | |
Less: Accumulated amortization | | (26,703) | | | (13,761) | |
| | 104,584 | | | 115,300 | |
Total finite-lived intangible assets, net | | 591,437 | | | 411,761 | |
Total other intangible assets, net | | $ | 1,734,012 | | | $ | 1,551,252 | |
MGM Grand Paradise gaming subconcession and concession. Pursuant to the gaming concession contract that MGM Grand Paradise entered into with the Macau government, which commenced January 1, 2023, MGM Grand Paradise
is required, among other things, to pay a fixed annual premium and an annual variable premium based on the number of gaming tables and machines for the term of the gaming concession. Additionally, in connection with the expiration of the MGM Grand Paradise gaming subconcession on December 31, 2022, the casino areas of MGM Cotai and MGM Macau reverted, free of charge and without any encumbrances, to the Macau government, which became the legal owner of the reverted gaming assets. Upon the commencement of the gaming concession, the gaming assets were temporarily transferred to MGM Grand Paradise for the duration of the concession term in return for annual payments determined by square meters of the reverted casino areas.
On January 1, 2023, MGM Grand Paradise recorded an intangible asset, included within “Gaming rights” above, of $226 million for the right to conduct gaming and operate the reverted gaming equipment and gaming areas and a corresponding liability for the in-substance consideration to be paid over the concession term for such rights, which is the unconditional obligation of the fixed and variable annual premiums, as well as the payments relating to the use of the reverted gaming assets. The initial value of the intangible asset and liability were measured as the present value of these payments based upon the approved number of gaming tables and slot machines, estimates of the Macau average price index, and square meters of the reverted casino areas, each as of January 1, 2023. The current portion of $7 million and noncurrent portion of $212 million of the remaining liability was recorded within “Other accrued liabilities” and “Other long-term liabilities,” respectively, in the consolidated balance sheets as of June 30, 2023. The gaming concession intangible asset is being amortized on a straight-line basis over the ten-year term of the gaming concession contract. The fully amortized gaming subconcession intangible asset was derecognized upon the expiration of the gaming subconcession and corresponding commencement of the gaming concession contract.
NOTE 6 — LONG-TERM DEBT
Long-term debt consisted of the following:
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
| (In thousands) |
MGM China first revolving credit facility | $ | 708,224 | | | $ | 1,249,744 | |
MGM China second revolving credit facility | — | | | 224,313 | |
6% senior notes, due 2023 | — | | | 1,250,000 | |
LeoVegas senior notes, due 2023 | 35,248 | | | 36,580 | |
5.375% MGM China senior notes, due 2024 | 750,000 | | | 750,000 | |
6.75% senior notes, due 2025 | 750,000 | | | 750,000 | |
5.75% senior notes, due 2025 | 675,000 | | | 675,000 | |
5.25% MGM China senior notes, due 2025 | 500,000 | | | 500,000 | |
5.875% MGM China senior notes, due 2026 | 750,000 | | | 750,000 | |
4.625% senior notes, due 2026 | 400,000 | | | 400,000 | |
5.5% senior notes, due 2027 | 675,000 | | | 675,000 | |
4.75% MGM China senior notes, due 2027 | 750,000 | | | 750,000 | |
4.75% senior notes, due 2028 | 750,000 | | | 750,000 | |
7% debentures, due 2036 | 552 | | | 552 | |
| 6,744,024 | | | 8,761,189 | |
Less: Premiums, discounts, and unamortized debt issuance costs, net | (34,780) | | | (41,899) | |
| 6,709,244 | | | 8,719,290 | |
Less: Current portion | (35,200) | | | (1,286,473) | |
| $ | 6,674,044 | | | $ | 7,432,817 | |
MGM China's senior notes due within one year of the June 30, 2023 balance sheet were classified as long-term as MGM China has both the intent and ability to refinance the current maturities on a long-term basis.
Senior secured credit facility. At June 30, 2023, the Company’s senior secured credit facility consisted of a $1.675 billion revolving credit facility, of which no amounts were drawn.
The Company’s senior secured credit facility contains customary representations and warranties, events of default and positive and negative covenants. The Company was in compliance with its credit facility covenants at June 30, 2023.
MGM China first revolving credit facility. At June 30, 2023, the MGM China first revolving credit facility consisted of a HK$9.75 billion (approximately $1.2 billion) unsecured revolving credit facility and the weighted average interest rate was 7.83%.
In June 2023, MGM China amended its first revolving credit agreement, which extended the maturity date to May 2026.
The MGM China first revolving credit facility contains customary representations and warranties, events of default, and positive, negative and financial covenants, including that MGM China maintains compliance with a maximum leverage ratio and a minimum interest coverage ratio. In connection with the June 2023 amendment, the financial covenants under the MGM China first revolving credit facility are waived through December 31, 2024 and become effective beginning on March 31, 2025. MGM China was in compliance with its applicable MGM China first revolving credit facility covenants at June 30, 2023.
MGM China second revolving credit facility. At June 30, 2023, the MGM China second revolving credit facility consisted of a HK$3.12 billion (approximately $398 million) unsecured revolving credit facility with an option to increase the amount of the facility up to HK$5.85 billion (approximately $747 million), subject to certain conditions. At June 30, 2023, no amounts were drawn on the MGM China second revolving credit facility.
In June 2023, MGM China amended its second revolving credit agreement, which extended the maturity date to May 2026, increased the amount to which MGM China may upsize the facility, and removed the requirement for the MGM China first revolving credit facility to be fully drawn prior to utilizing the MGM China second revolving credit facility.
The MGM China second revolving credit facility contains customary representations and warranties, events of default, and positive, negative and financial covenants, including that MGM China maintains compliance with a maximum leverage ratio and a minimum interest coverage ratio. In connection with the June 2023 amendment, the financial covenants under the MGM China second revolving credit facility are waived through December 31, 2024 and become effective beginning on March 31, 2025. MGM China was in compliance with its applicable MGM China second revolving credit facility covenants at June 30, 2023.
Senior notes. In March 2023, the Company repaid its $1.25 billion 6% notes due 2023 upon maturity. In March 2022, the Company repaid its $1.0 billion 7.75% notes due 2022 upon maturity.
Fair value of long-term debt. The estimated fair value of the Company’s long-term debt was $6.5 billion and $8.4 billion at June 30, 2023 and December 31, 2022, respectively.
NOTE 7 — INCOME TAXES
For interim income tax reporting the Company estimates its annual effective tax rate and applies it to its year-to-date ordinary income. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur. The Company’s effective income tax rate was 13.8% and 22.1% for the three and six months ended June 30, 2023, respectively, compared to 26.1% and 25.3% for the three and six months ended June 30, 2022, respectively.
The Company recognizes deferred income tax assets, net of applicable reserves, related to net operating losses, tax credit carryforwards and certain temporary differences. The Company recognizes future tax benefits to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.
NOTE 8 — LEASES
The Company leases real estate, land underlying certain of its properties, and various equipment under operating and, to a lesser extent, finance lease arrangements.
Real estate assets and land. The Company leases the real estate assets of its domestic properties pursuant to triple-net lease agreements, which are classified as operating leases. The triple-net structure of the leases requires the Company to
pay substantially all costs associated with each property, including real estate taxes, insurance, utilities and routine maintenance (with each lease obligating the Company to spend a specified percentage of net revenues at the properties on capital expenditures), in addition to the annual cash rent. Each of the leases also requires the Company to comply with certain financial covenants, which, if not met, would require the Company to maintain cash security or provide one or more letters of credit in favor of the landlord in an amount equal to 6 months or 1 year of rent, as applicable to the circumstances, under the VICI lease, 1 year of rent under the Mandalay Bay and MGM Grand Las Vegas lease, the Aria and Vdara lease, and The Cosmopolitan lease, and 2 years of rent under the Bellagio lease. The Company was in compliance with its applicable covenants under its leases as of June 30, 2023.
Bellagio lease. The Company leases the real estate assets of Bellagio from Bellagio BREIT Venture. The Bellagio lease commenced November 15, 2019 and has an initial term of 30 years with two 10-year renewal periods, exercisable at the Company’s option, with a fixed 2% rent escalator for the first 10 years and, thereafter, an escalator equal to the greater of 2% and the CPI increase during the prior year, subject to a cap of 3% during the 11th through 20th years and 4% thereafter. Annual cash rent payments for the fourth lease year that commenced on December 1, 2022 increased to $260 million as a result of the 2% fixed annual escalator.
Mandalay Bay and MGM Grand Las Vegas lease. The Company leases the real estate assets of Mandalay Bay and MGM Grand Las Vegas from subsidiaries of VICI. The Mandalay Bay and MGM Grand Las Vegas lease commenced F