Takeaway: We're still cautious on Las Vegas in 2013

In line quarter with low than normal hold in Macau (known) and higher than normal hold in Las Vegas (wasn't known).


"2012 was a transformational year for MGM...highlighted by major improvements in our financial position, significant progress on future growth opportunities and strengthening of our company culture.  We closed the year with strong fourth quarter results driven by a 5% increase in wholly owned domestic resorts EBITDA.  We are off to a great start in 2013, with our Cotai land recently gazetted, a $500 million special dividend announced by MGM China, and solid events thus far in Las Vegas including Super Bowl and Chinese New Year."


- Jim Murren, MGM Resorts International Chairman and CEO



  • Board meeting next week at MGM China where they will discuss putting together a formal dividend policy
  • Made some tweaks to CityCenter that are going a long way to improve results
  • Goal is to improve employee morale which will result in higher customer satisfaction
  • Maryland: in the ERP process for the 6th license in MD. Have a May deadline to submit their proposal and believe that they will succeed in winning the award - should be awarded by year-end.
  • Confident that their proposal will prevail in MA
  • Partnership with Cadallac Fairview in Ontario - which is the premier developer in Canada- subsidiary of their Canadian Teacher's fund. 
  • Seeing encouraging signs in their domestic play.  Non-baccarrat drop grew 6% in the quarter.
  • Increase in occupied room nights was due to completion of MGM Grand renovations
  • Convention mix was flat YoY in 2012 at 15%
  • 1Q Strip trends similar to 4Q - flat RevPAR
  • $230MM of savings on cash interest expense due to refinance
  • Guidance:
    • Corporate expense of $40-45MM/Q
    • Stock comp expense of $9MM in 1Q
    • D&A: consistent with 4Q in 1Q
  • Interest expense: Gross interest expense : 225MM (8MM from MGM china and 8MM in amortization expense)
  • City Center:
    • Seeing results from changes in Aria - Zarkana opened - and sales are at 88% of availability- which is helping drive F&B
    • Slot handle increased 11%; table drop increased 5%; hotel revenues grew 3%
    • Strength from international visitors
    • So far, the remodeled buffet is well-received. 
    • Opening new pizza concept in the summer
    • Convention sales are pacing well, with sales 14% ahead of this time last year
    • Vdara occupancy grew to the low 80s
  • MGM China: 
    • Seeing early signs of success from their level 2 VIP expansion opened in September
    • Adding another junket operator
    • Main floor table gaming business had their best quarter to date
    • 60% of their EBITDA comes from non-VIP sources, which is also helping their margins at the property
    • Feb 27th is their scheduled ground breaking for Cotai
    • Construction budget of $2.6BN excluding land and capitalized interest.  Includes expanded foundation work. 80% of GSA allocated to non-gaming amenties.
  • Off to a very solid start in 2013.  What is very solid, is it = to good? Already had new events which set a positive tone for the year.  CNY was strong for them. Believe that the international business is off to a great start. Light Group is opening 3 new restuarant/bars in the Spring and a daytime pool. Mayweather is signed on for as many as 6 fights. The Hotel will be rebranded to a Delano and undergo a full room renovation.  Luxor should benefit from improvements at the Mandalay.


  • Margins in 4Q were better than expected in LV. How much of that was due the impact of renovations earlier in the year? Margins and traffic were impacted by rooms being offline at MGM Grand in 2012.  Streamlined FTE's and doing a better job attracting better guests which spent more at their resorts.
  • Expect to show better profit than revenue growth in 2013
  • Thoughts on CNY in Macau early results? 
    • Trend that they have been seeing over the last 4 years
    • Seeing a lot more families during the holiday season
    • As that traffic departs, they see a stronger return of gambler play
    • Seeing a lot less volatility around holidays
    • Main gaming play is very strong
  • Seeing a continued trend of strength in non-baccarrat play in 1Q.  They are seeing a pick up in their domestic customers recently. Business is good around events. Weekends are still strong. Mid-week is still a little choppy. But things are headed in the right direction. M LIFE investments are helping their mid-week business. ASCA deal is also helping their traffic.
  • Their promotional expenses are down and they are getting better at target marketing to their customers. 
  • Convention block looks up for 2013 vs 2012...they are pacing higher as a company and 2014 is looking even stronger. They will have more room nights at the MGM Grand in 2013 so that helps too. They are also assuming higher rates.
  • Have no interest in acquiring assets regionally or otherwise. Have a great interest in deleveraging though. Think that that there will be industry M&A but they will not participate. They are interested in MA where they aleady have a lot of customers in their database.  The one at National Harbor right next to the nation's capital is an even better international opportunity for them.
  • They are reapplying in AC because they believe in that property.
  • Their Cotai development is their #1 priority
  • Maryland and Mass will not open until 2016/2017 - so that gives them plenty of time to get their balance sheet in order
  • Cotai budget is up a little bit due to the tenders they received and some scope changes, intentions to apply to increase their GSA in the future
  • Vegas - mid-week group segment competition:  It has gotten more competitive especially with other cities that they compete with. It's really the lower end and Core properties that they struggle and 2013 will be a bit of a challenge. Miami and Chicago are more aggressive then they used to be with competing for citywide business.
  • City Center JV update with Dubai World:
    • They are looking at ways to monetize portions of City Center... looking at Crystals. It was always designed to be sold. That is a high target opportunity for them. They are not in negotiations to sell it yet but that is something that they will look at down the road.
    • Their relationship with their partner have never been better
    • Looking forward to refinance their debt there which has a 9% coupon
  • Segmentation of the Macau customer base and how that works, how much more upside remains?
    • Driven from premium down. Physically segmented their property to make sure each segment of their casino has the right product for the targeted customer.
  • Strip high-end does did better than the rest of their portfolio? Why is that?
    • Without the solid Citywide conventions, their lower end properties are harder to fill
    • They don't believe that their lower end customers are suffering more economically - in fact they are spending more than they used to in some cases. It's more of a supply demand issue and being able to get the right customers in there.
  • Smoking ban impact in Macau & work in Macau
    • Supporting the premium product - want to expand premium slot products - into the supreme private high limit product
    • Will upgrade platinum lounge
    • Too early to make a judgement on the impact of the smoking ban. There is clearly some impact on play patterns in their Mass floor.
  • Expect that they would get strong returns - at least high teens from investments in MA & MD. In the case of Toronto, it's still unclear on what the opportunity will be.  MGM Detriot is a good guide for what they expect.
  • Too premature for FY guidance but they like how things are shaping out for Vegas
  • The opening of Hakkasan will have a material adverse impact that will drive traffic and currently they have construction disruption at that end of the Strip
  • City Center cash - what is the plan there? Cash from condo sales. They intend to reduce leverage and improve cash flow there. At some point in the future they will look to pull money out of that venture. They are still owed about $100MM of cash proceeds from condos but those proceeds can't be dispersed until the Perini dispute is resolved.



  • Adjusted Property EBITDA of $505MM and wholly owned property EBITDA of $334MM
  • Wholly owned domestic resort highlights:
    • Consolidated casino revenue increased 1% YoY
      • Overall table games hold percentage was 21.9% compared to 22.8% last year
      • Slots revenue increased 2%
    • Rooms revenue at wholly owned domestic resorts increased 2% with a 1% increase in RevPAR at the MGM's Strip resorts to $112
      • Strip Occupancy was 87%, up 1% YoY
      • ADR increased $1 to $130
  • MGM China Adjusted EBITDA of $176MM and net revenue of $731MM
    • YoY revenue increase was driven "by increases in volume for main floor table games and slots of 13% and 37%, respectively. VIP table games turnover increased 6%... while hold percentage was 2.9%... compared to 3.2% in the prior year quarter"
    • Cotai development: "We look forward to our groundbreaking ceremony next week. We remain on track for an early to mid 2016 opening of what will be our most stunning resort and casino yet"
    • February 20, 2013, MGM China's Board of Directors announced a special dividend of $500MM, which will be paid to shareholders of record as of March 11, 2013 and distributed on or about March 18, 2013.  MGM will receive $255MM, representing its 51% share of the dividend.
  • City Center Adjusted EBITDA of $68MM and net revenue of $272MM
    • Aria's table hold was 23.9% vs. 27.2% last year
    • Aria's occupancy percentage was 86% and its ADR was $202, resulting in REVPAR of $173, a 2% increase compared to the prior year quarter
    • In December 2012, CityCenter closed on a sale of 427 of the remaining 438 units at Veer for $119 million in proceeds
  • Corporate expense increased to $87MM, primarily as a result of approximately $34MM of costs associated with development efforts in Maryland and Massachusetts
  • "We achieved several financial milestones in 2012, culminating with the refinancing transactions in December which allowed us to lower interest expense by over $200 million annually. We remain focused on reducing debt while continuing to maximize our free cash flow and have set a foundation for the execution of growth and development initiatives at our existing resorts and in new markets."
  • Cash: $1.5BN ($952MM at MGM China)
  • Debt: $13.6NBN ($2.8BN on Sr credit facility & $554MM under the MGM China credit facility). 
    • "At December 31, 2012, the Company's senior credit facility consisted of approximately $1.05 billion in term A loans, $1.75 billion in term B loans, and $1.2 billion of revolving loan commitments"
    • "At December 31, 2012, the interest rate on the term A loans was 3.3% and the interest rate on the term B loans was 4.25%."
  • Impairments & one time charges in the quarter included:
    • $65MM impairment charge related to MGM's investment in Borgata;
    • $366MM impairment charge related to land holdings on the north end of the Las Vegas Strip;
    • $167MM impairment charge related to land holdings in Atlantic City;
    • $47MM write-off related to the MGM's holding of South Jersey Transportation Authority ("SJTA") road development special revenue bonds;
    • Loss of $505MM related to the December refinancing transactions;
    • $372MM related to the change in valuation allowance for U.S. deferred tax assets

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