MGM Resorts International — FY 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing, not a standalone fourth-quarter report. MGM Resorts owns and operates casino, hotel and entertainment resorts in the U.S. and Macau, with Las Vegas Strip Resorts, Regional Operations and MGM China as its reportable segments.
Key financial results
| Metric | 2020 | 2019 |
|---|---|---|
| Net revenue | $5.16 billion | $12.90 billion |
| Operating income (loss) | $(642) million | $3.94 billion |
| Net income (loss) attributable to MGM Resorts | $(1.03) billion; diluted EPS $(2.02) | $2.05 billion; diluted EPS $3.88 |
| Net cash from (used in) operating activities | $(1.49) billion | $1.81 billion |
| Cash and cash equivalents at year-end | $5.10 billion | $2.33 billion |
| Long-term debt, net on balance sheet | $12.38 billion | $11.17 billion |
Consolidated revenue fell 60%, reflecting property closures, operating limits and reduced travel and visitation during the pandemic. Revenue declined 61% at Las Vegas Strip Resorts, 45% in Regional Operations and 77% at MGM China. Las Vegas visitor volume fell 55% and Macau visitor arrivals fell 85% year over year.
Adjusted Property EBITDAR was $232 million for Las Vegas Strip Resorts, down 86%, with margin of 10.3% versus 28.2%; Regional Operations generated $344 million, down 65%, with margin of 17.5% versus 27.3%; MGM China recorded a $194 million loss versus $735 million of EBITDAR in 2019. These segment measures are not equivalent to GAAP operating income and exclude rent and other items.
Cash used in investing activities was $2.16 billion, including $2.46 billion of proceeds from the Mandalay Bay and MGM Grand real-estate transaction. Financing activities provided $2.10 billion, including debt issuance and other financing proceeds. Capital expenditures were $271 million, down from $739 million. No debt principal was scheduled to mature in 2021; $1.0 billion was due in 2022.
Material changes and unusual items
- 2020 results included a net $1.49 billion gain on REIT transactions, principally from the February sale/contribution of the MGM Grand Las Vegas and Mandalay Bay real estate. 2019 included a $2.68 billion net REIT transaction gain, principally from Bellagio. These transactions generated cash but also added long-term lease commitments.
- The new Mandalay Bay and MGM Grand lease had initial annual base rent of $292 million; Bellagio annual rent rose to $250 million. Annual MGP master-lease rent was $828 million at year-end. The leases have escalators and substantial remaining terms.
- The October 1 shooting litigation settlement was funded with $800 million: $751 million from insurers and $49 million recorded as company expense. Most participating claims were dismissed with prejudice; the company said remaining claims were not expected to be material.
- Other 2020 items included $44 million of CEO transition expense, a $64 million impairment of an equity-method investment, and $126 million of debt early-retirement losses. The CARES Act produced a recorded $206 million federal tax receivable from NOL carryback and approximately $121 million in permanent payroll-tax savings.
Liquidity, outlook and risks
Management said the pandemic materially harmed 2020 results and was expected to continue materially affecting results in 2021 and potentially later. Properties had reopened, but remained subject to capacity limits and reduced amenities; midweek hotel operations at Mandalay Bay and Park MGM and midweek operations at The Mirage were expected to resume March 3, 2021. Management provided no numerical revenue or earnings guidance.
Management planned 2021 capital expenditures of approximately $425–$450 million domestically and $100–$125 million at MGM China, plus approximately $220 million for BetMGM. It cited liquidity, real estate assets and cost reductions as support for funding obligations, while cautioning that the duration and effects of COVID-19 were uncertain.
At December 31, 2020, consolidated principal debt was approximately $12.5 billion and cash was $5.1 billion. MGM Resorts also provided shortfall guarantees on $3.01 billion of Bellagio BREIT Venture debt and $3.0 billion of MGP BREIT Venture debt. A February 2021 amendment extended covenant relief through the period before the second quarter of 2022 and raised the minimum liquidity requirement to $1.0 billion. Rent, debt service, refinancing needs and covenant restrictions remain significant liquidity considerations.
Other key risks include ongoing pandemic-related demand and operating restrictions; the Macau gaming subconcession’s June 2022 expiry and renewal uncertainty; competition, including online gaming; high fixed lease obligations; labor negotiations; and credit collection risk. The casino receivables loss reserve increased to $127 million, or 41% of casino receivables, from 22% in 2019. The company reported effective internal controls and received an unqualified audit opinion; the auditor identified accounting for the MGP BREIT Venture investment and consolidation assessment as a critical audit matter.
Most important facts for investors to verify
- Recovery in visitation, room occupancy, rates, conventions and gaming volumes by segment, particularly Macau and Las Vegas.
- Cash burn, available liquidity, debt maturities and refinancing options, covenant compliance, and the terms and duration of covenant relief.
- Ability to meet fixed rent and capital-spending obligations, and exposure under the two real-estate venture guarantees.
- Macau subconcession renewal developments before June 2022 and any changes to travel or operating restrictions.
- Execution and funding requirements for BetMGM and planned 2021 capital expenditures; future dividend policy remains at board discretion.