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  • 10-Q (Nov 9, 2017)
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MGM Resorts International 10-Q 2017

Documents found in this filing:

  1. 10-Q
  2. Ex-10.1
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32.1
  6. Ex-32.2
  7. Ex-32.2
mgm-10q_20170930.htm

 

 

UNITED STATES

SECURITIES & 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 September 30, 2017

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)

(702) 693-7120

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   Yes       No  

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       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: Yes    No   

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 November 6, 2017 

Common Stock, $.01 par value

 

566,138,245 shares

 

 

 

 

 

 


 

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

 

FORM 10-Q

 

I N D E X

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited)

1

 

 

Consolidated Balance Sheets at September 30, 2017 and December 31, 2016

1

 

 

Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2017 and September 30, 2016

2

 

 

Consolidated Statements of Comprehensive Income for the Three Months and Nine Months Ended September 30, 2017 and September 30, 2016

3

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and September 30, 2016

4

 

 

Condensed Notes to Consolidated Financial Statements

5

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4.

 

Controls and Procedures

47

 

PART II.

OTHER INFORMATION

 

Item 1.

 

Legal Proceedings

49

Item 1A.

 

Risk Factors

50

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

51

Item 6.

 

Exhibits

52

 

SIGNATURES

53

 

 

 

 


 

Part I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

September 30,

 

 

December 31,

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

ASSETS

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

1,986,688

 

 

$

1,446,581

 

Accounts receivable, net

 

515,423

 

 

 

542,924

 

Inventories

 

101,242

 

 

 

97,733

 

Prepaid expenses and other

 

191,183

 

 

 

142,349

 

Total current assets

 

2,794,536

 

 

 

2,229,587

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

19,134,748

 

 

 

18,425,023

 

 

 

 

 

 

 

 

 

Other assets

 

 

 

 

 

 

 

Investments in and advances to unconsolidated affiliates

 

1,007,584

 

 

 

1,220,443

 

Goodwill

 

1,807,009

 

 

 

1,817,119

 

Other intangible assets, net

 

3,924,566

 

 

 

4,087,706

 

Other long-term assets, net

 

433,447

 

 

 

393,423

 

Total other assets

 

7,172,606

 

 

 

7,518,691

 

 

$

29,101,890

 

 

$

28,173,301

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable

$

242,604

 

 

$

250,477

 

Construction payable

 

238,086

 

 

 

270,361

 

Income tax payable

 

6,013

 

 

 

10,654

 

Current portion of long-term debt, net

 

466,375

 

 

 

8,375

 

Accrued interest on long-term debt

 

121,650

 

 

 

159,028

 

Other accrued liabilities

 

1,661,032

 

 

 

1,594,526

 

Total current liabilities

 

2,735,760

 

 

 

2,293,421

 

 

 

 

 

 

 

 

 

Deferred income taxes, net

 

2,668,864

 

 

 

2,551,228

 

Long-term debt, net

 

13,026,927

 

 

 

12,979,220

 

Other long-term obligations

 

286,262

 

 

 

325,981

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

59,337

 

 

 

54,139

 

Stockholders' equity

 

 

 

 

 

 

 

Common stock, $.01 par value: authorized 1,000,000,000 shares, issued and outstanding 565,493,891 and 574,123,706 shares

 

5,655

 

 

 

5,741

 

Capital in excess of par value

 

5,390,071

 

 

 

5,653,575

 

Retained earnings

 

922,657

 

 

 

545,811

 

Accumulated other comprehensive income (loss)

 

(9,840

)

 

 

15,053

 

Total MGM Resorts International stockholders' equity

 

6,308,543

 

 

 

6,220,180

 

Noncontrolling interests

 

4,016,197

 

 

 

3,749,132

 

Total stockholders' equity

 

10,324,740

 

 

 

9,969,312

 

 

$

29,101,890

 

 

$

28,173,301

 

 

 

 

 

 

 

 

 

The accompanying condensed 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 data)

(Unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Casino

$

1,543,693

 

 

$

1,307,827

 

 

$

4,454,145

 

 

$

3,569,587

 

Rooms

 

564,476

 

 

 

530,331

 

 

 

1,669,213

 

 

 

1,518,721

 

Food and beverage

 

481,656

 

 

 

448,666

 

 

 

1,392,671

 

 

 

1,238,537

 

Entertainment

 

149,536

 

 

 

140,151

 

 

 

418,244

 

 

 

380,330

 

Retail

 

59,141

 

 

 

52,724

 

 

 

163,947

 

 

 

150,629

 

Other

 

162,318

 

 

 

148,470

 

 

 

464,260

 

 

 

400,115

 

Reimbursed costs

 

102,380

 

 

 

99,316

 

 

 

301,888

 

 

 

301,160

 

 

 

3,063,200

 

 

 

2,727,485

 

 

 

8,864,368

 

 

 

7,559,079

 

Less: Promotional allowances

 

(236,460

)

 

 

(212,370

)

 

 

(687,712

)

 

 

(564,776

)

 

 

2,826,740

 

 

 

2,515,115

 

 

 

8,176,656

 

 

 

6,994,303

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Casino

 

822,103

 

 

 

696,329

 

 

 

2,389,957

 

 

 

1,957,203

 

Rooms

 

157,293

 

 

 

148,317

 

 

 

464,864

 

 

 

435,311

 

Food and beverage

 

269,170

 

 

 

252,108

 

 

 

780,510

 

 

 

712,856

 

Entertainment

 

118,234

 

 

 

108,464

 

 

 

326,791

 

 

 

299,579

 

Retail

 

28,129

 

 

 

27,105

 

 

 

78,515

 

 

 

73,191

 

Other

 

95,971

 

 

 

93,880

 

 

 

281,859

 

 

 

260,901

 

Reimbursed costs

 

102,380

 

 

 

99,316

 

 

 

301,888

 

 

 

301,160

 

General and administrative

 

402,134

 

 

 

371,950

 

 

 

1,145,432

 

 

 

1,001,900

 

Corporate expense

 

88,506

 

 

 

87,782

 

 

 

241,087

 

 

 

240,833

 

NV Energy exit expense

 

 

 

 

139,335

 

 

 

(40,629

)

 

 

139,335

 

Preopening and start-up expenses

 

29,349

 

 

 

31,660

 

 

 

65,508

 

 

 

78,444

 

Property transactions, net

 

7,711

 

 

 

(1,268

)

 

 

22,650

 

 

 

4,717

 

Gain on Borgata transaction

 

 

 

 

(429,778

)

 

 

 

 

 

(429,778

)

Depreciation and amortization

 

249,600

 

 

 

209,737

 

 

 

744,123

 

 

 

616,475

 

 

 

2,370,580

 

 

 

1,834,937

 

 

 

6,802,555

 

 

 

5,692,127

 

Income from unconsolidated affiliates

 

37,701

 

 

 

32,577

 

 

 

117,987

 

 

 

495,588

 

Operating income

 

493,861

 

 

 

712,755

 

 

 

1,492,088

 

 

 

1,797,764

 

Non-operating income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of amounts capitalized

 

(163,287

)

 

 

(168,048

)

 

 

(511,404

)

 

 

(533,069

)

Non-operating items from unconsolidated affiliates

 

(8,825

)

 

 

(11,132

)

 

 

(26,302

)

 

 

(45,229

)

Other, net

 

(30,138

)

 

 

(17,310

)

 

 

(31,706

)

 

 

(67,715

)

 

 

(202,250

)

 

 

(196,490

)

 

 

(569,412

)

 

 

(646,013

)

Income before income taxes

 

291,611

 

 

 

516,265

 

 

 

922,676

 

 

 

1,151,751

 

Benefit (provision) for income taxes

 

(115,115

)

 

 

44,995

 

 

 

(251,551

)

 

 

15,205

 

Net income

 

176,496

 

 

 

561,260

 

 

 

671,125

 

 

 

1,166,956

 

Less: Net income attributable to noncontrolling interests

 

(27,381

)

 

 

(25,641

)

 

 

(104,552

)

 

 

(90,185

)

Net income attributable to MGM Resorts International

$

149,115

 

 

$

535,619

 

 

$

566,573

 

 

$

1,076,771

 

Net income per share of common stock attributable to MGM Resorts International

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.26

 

 

$

0.94

 

 

$

0.99

 

 

$

1.90

 

Diluted

$

0.26

 

 

$

0.93

 

 

$

0.97

 

 

$

1.88

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

573,527

 

 

 

568,125

 

 

 

574,262

 

 

 

566,220

 

Diluted

 

580,676

 

 

 

573,812

 

 

 

580,941

 

 

 

571,350

 

Dividends declared per common share

$

0.11

 

 

$

 

 

$

0.33

 

 

$

 

 

The accompanying condensed notes are an integral part of these consolidated financial statements.

 

 

2


 

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net income

$

176,496

 

 

$

561,260

 

 

$

671,125

 

 

$

1,166,956

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

(3,004

)

 

 

1,734

 

 

 

(41,313

)

 

 

(4,402

)

Unrealized gain (loss) on cash flow hedges

 

1,316

 

 

 

 

 

 

(2,641

)

 

 

 

Other comprehensive income (loss)

 

(1,688

)

 

 

1,734

 

 

 

(43,954

)

 

 

(4,402

)

Comprehensive income

 

174,808

 

 

 

562,994

 

 

 

627,171

 

 

 

1,162,554

 

Less: Comprehensive income attributable to noncontrolling interests

 

(26,495

)

 

 

(26,456

)

 

 

(85,600

)

 

 

(88,078

)

Comprehensive income attributable to MGM Resorts International

$

148,313

 

 

$

536,538

 

 

$

541,571

 

 

$

1,074,476

 

 

The accompanying condensed notes are an integral part of these consolidated financial statements.

 

 

3


 

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Nine Months Ended

 

 

September 30,

 

 

2017

 

 

2016

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net income

$

671,125

 

 

$

1,166,956

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

744,123

 

 

 

616,475

 

Amortization of debt discounts, premiums and issuance costs

 

25,931

 

 

 

31,661

 

Loss on retirement of long-term debt

 

31,345

 

 

 

66,904

 

Provision for doubtful accounts

 

13,764

 

 

 

2,984

 

Stock-based compensation

 

46,306

 

 

 

38,877

 

Property transactions, net

 

22,650

 

 

 

4,717

 

Gain on Borgata transaction

 

 

 

 

(429,778

)

Income from unconsolidated affiliates

 

(91,685

)

 

 

(447,191

)

Distributions from unconsolidated affiliates

 

10,450

 

 

 

14,016

 

Deferred income taxes

 

95,672

 

 

 

(89,658

)

Change in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

13,534

 

 

 

24,740

 

Inventories

 

(3,598

)

 

 

11,135

 

Income taxes receivable and payable, net

 

(4,639

)

 

 

2,073

 

Prepaid expenses and other

 

(50,253

)

 

 

(15,619

)

Prepaid Cotai land concession premium

 

(9,492

)

 

 

(24,113

)

Accounts payable and accrued liabilities

 

3,120

 

 

 

88,630

 

Other

 

(6,444

)

 

 

(13,804

)

Net cash provided by operating activities

 

1,511,909

 

 

 

1,049,005

 

Cash flows from investing activities

 

 

 

 

 

 

 

Capital expenditures, net of construction payable

 

(1,399,278

)

 

 

(1,590,308

)

Dispositions of property and equipment

 

371

 

 

 

3,290

 

Proceeds from partial disposition of investment in unconsolidated affiliate

 

 

 

 

15,000

 

Acquisition of Borgata, net of cash acquired

 

 

 

 

(550,975

)

Investments in unconsolidated affiliates

 

(5,921

)

 

 

(1,555

)

Distributions from unconsolidated affiliates in excess of cumulative earnings

 

300,000

 

 

 

543,036

 

Other

 

(21,786

)

 

 

(8,257

)

Net cash used in investing activities

 

(1,126,614

)

 

 

(1,589,769

)

Cash flows from financing activities

 

 

 

 

 

 

 

Net borrowings under bank credit facilities – maturities of 90 days or less

 

618,734

 

 

 

298,448

 

Borrowings under bank credit facilities – maturities longer than 90 days

 

 

 

 

1,845,375

 

Repayments under bank credit facilities – maturities longer than 90 days

 

 

 

 

(1,845,375

)

Issuance of long term debt

 

350,000

 

 

 

2,050,000

 

Retirement of senior notes

 

(502,669

)

 

 

(2,258,053

)

Repayment of Borgata credit facility

 

 

 

 

(583,598

)

Debt issuance costs

 

(9,760

)

 

 

(138,454

)

Issuance of MGM Growth Properties common shares in public offering

 

404,685

 

 

 

1,207,500

 

MGM Growth Properties common share issuance costs

 

(17,137

)

 

 

(75,032

)

Acquisition of MGM China shares

 

 

 

 

(100,000

)

Dividends paid to common shareholders

 

(189,726

)

 

 

 

Distributions to noncontrolling interest owners

 

(139,670

)

 

 

(78,690

)

Purchases of common stock

 

(327,500

)

 

 

 

Other

 

(28,937

)

 

 

(4,409

)

Net cash provided by financing activities

 

158,020

 

 

 

317,712

 

Effect of exchange rate on cash

 

(3,208

)

 

 

(1,102

)

Cash and cash equivalents

 

 

 

 

 

 

 

Net increase (decrease) for the period

 

540,107

 

 

 

(224,154

)

Balance, beginning of period

 

1,446,581

 

 

 

1,670,312

 

Balance, end of period

$

1,986,688

 

 

$

1,446,158

 

Supplemental cash flow disclosures

 

 

 

 

 

 

 

Interest paid, net of amounts capitalized

$

522,851

 

 

$

551,345

 

Federal, state and foreign income taxes paid, net of refunds

 

158,537

 

 

 

63,322

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

Common stock issued for acquisition of MGM China shares

 

 

 

 

174,041

 

Deferred cash payment for acquisition of MGM China shares

 

 

 

 

42,612

 

 

The accompanying condensed notes are an integral part of these consolidated financial statements.

 

 

4


 

MGM RESORTS INTERNATIONAL AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  

 

NOTE 1 — ORGANIZATION

 

Organization. MGM Resorts International (together with its consolidated subsidiaries, unless otherwise indicated or unless the context requires otherwise, the “Company”) is a Delaware corporation that acts largely as a holding company and, through subsidiaries, owns and operates casino resorts. As discussed further below, the Company leases certain of its real estate assets from MGM Growth Properties Operating Partnership LP (the “Operating Partnership”), which is a consolidated subsidiary.

 

The Company owns and operates the following integrated casino, hotel and entertainment 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. The Company operates and, along with local investors, owns MGM Grand Detroit in Detroit, Michigan and MGM National Harbor in Prince George’s County, Maryland. The Company also owns and operates the Borgata Hotel Casino & Spa (“Borgata”), located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey and the following resorts in Mississippi: Beau Rivage in Biloxi and Gold Strike in Tunica. Additionally, the Company owns and operates The Park, a dining and entertainment district located between New York-New York and Monte Carlo, 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.

 

MGM Growth Properties LLC (“MGP”), a consolidated subsidiary of the Company, is organized as an umbrella partnership REIT (commonly referred to as an “UPREIT”) structure in which substantially all of its assets are owned by and substantially all of its businesses are conducted through its Operating Partnership subsidiary. MGP has two classes of authorized and outstanding voting common shares (collectively, the “shares”): Class A shares and a single Class B share. The Company owns MGP’s Class B share, which does not provide its holder any rights to profits or losses or any rights to receive distributions from operations of MGP or upon liquidation or winding up of MGP. MGP’s Class A shareholders are entitled to one vote per share, while the Company, as the owner of the Class B share, is entitled to an amount of votes representing a majority of the total voting power of MGP’s shares so long as the Company and its controlled affiliates’ (excluding MGP) aggregate beneficial ownership of the combined economic interests in MGP and the Operating Partnership does not fall below 30%. The Operating Partnership units held by the Company are exchangeable into Class A shares of MGP on a one-to-one basis, or cash at the fair value of a Class A share. The determination of settlement method is at the option of MGP’s independent conflicts committee. Subsequent to MGP closing its public offering of 13,225,000 Class A shares in September 2017, the Company indirectly owned 72.3% of the partnership units in the Operating Partnership, and MGP owned the remaining 27.7% ownership interest in the Operating Partnership. Prior to September 2017, the Company owned 76.3% of the Operating Partnership units and MGP owned the remaining 23.7% ownership interest in the Operating Partnership. MGP owns 100% of the general partner of the Operating Partnership. See Note 9 for additional information pertaining to the public offering of MGP’s Class A shares. In addition, as discussed further in Note 11, the Company indirectly acquired additional partnership units in connection with the closing of the National Harbor transaction in October 2017 and subsequently holds a 73.4% ownership interest in the Operating Partnership.

 

Pursuant to a master lease agreement between a subsidiary of the Company (the “Tenant”) and a subsidiary of the Operating Partnership (the “Landlord”), the Company leases the real estate assets of The Mirage, Mandalay Bay, Luxor, New York-New York, Monte Carlo, Excalibur, The Park, Borgata, Gold Strike Tunica, MGM Grand Detroit and Beau Rivage from subsidiaries of the Operating Partnership. As discussed further in Note 11, MGP acquired the long-term leasehold interest and real property associated with MGM National Harbor from a subsidiary of the Company in October 2017. An amendment to the master lease agreement executed in October 2017 provides for the Company to lease the real estate assets of MGM National Harbor from a subsidiary of the Operating Partnership. See Note 11 for additional information related to MGP and certain of the Company’s related intercompany agreements with MGP or the Operating Partnership.

 

The Company has an approximately 56% controlling interest in MGM China, which owns MGM Grand Paradise, S.A. (“MGM Grand Paradise”), the Macau company that owns and operates the MGM Macau resort and casino and the related gaming subconcession and land concessions, and is in the process of developing an 18 acre site on the Cotai Strip in Macau (“MGM Cotai”). MGM Cotai will be an integrated casino, hotel and entertainment resort with capacity for up to 500 gaming tables and up to 1,500 slots, and featuring approximately 1,400 hotel rooms. The actual number of gaming tables allocated to MGM Cotai will be determined by the Macau government prior to opening, and such allocation is expected to be less than MGM Cotai’s 500 gaming table capacity. The total estimated project budget increased to $3.4 billion excluding development fees eliminated in consolidation, capitalized interest and land related costs as a result of the damage and delays caused by Typhoon Hato in August 2017.

 

The Company owns 50% of and manages CityCenter Holdings, LLC (“CityCenter”), located between Bellagio and Monte Carlo. The other 50% of CityCenter is owned by Infinity World Development Corp, a wholly owned subsidiary of Dubai World, a

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Dubai, United Arab Emirates government decree entity. CityCenter consists of Aria, an integrated casino, hotel and entertainment resort; Mandarin Oriental Las Vegas, a non-gaming boutique hotel; and Vdara, a luxury condominium-hotel. In addition, CityCenter features residential units in the Residences at Mandarin Oriental and Veer. See Note 4 for additional information related to CityCenter.

 

The Company and a subsidiary of Anschutz Entertainment Group, Inc. (“AEG”) each own 42.5% of the Las Vegas Arena Company, LLC (“Las Vegas Arena Company”), the entity which owns the T-Mobile Arena, and Athena Arena, LLC owns the remaining 15%. The Company manages the T-Mobile Arena, which is located on a parcel of the Company’s land between Frank Sinatra Drive and New York-New York, adjacent to the Las Vegas Strip. The T-Mobile Arena is a 20,000 seat venue designed to host world-class events – from mixed martial arts, boxing, basketball and bull riding, to high profile awards shows and top-name concerts, and is the home of the Vegas Golden Knights of the National Hockey League. Additionally, the Company leases the MGM Grand Garden Arena, located adjacent to the MGM Grand Las Vegas, to the Las Vegas Arena Company. See Note 4 for additional information regarding the Company’s investment in the Las Vegas Arena Company.

 

The Company also has a 50% interest in Grand Victoria. 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. See Note 4 for additional information regarding the Company’s investment in Grand Victoria.

 

A subsidiary of the Company was awarded a casino license to build and operate MGM Springfield in Springfield, Massachusetts. MGM Springfield will be developed on approximately 14 acres of land in downtown Springfield. The Company’s plans for the resort currently include a casino with approximately 2,550 slots and 120 table games including poker; a 250-room hotel; 100,000 square feet of retail and restaurant space; 44,000 square feet of meeting and event space; and a 3,500 space parking garage, with an expected development and construction cost of approximately $960 million, excluding capitalized interest and land related costs.  

 

The Company has two reportable segments: domestic resorts and MGM China. See Note 10 for additional information about the Company’s segments.

 

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, 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 2016 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

 

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. For entities not determined to be a variable interest entity (“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 if it has the direct or indirect ability to control the entities’ activities based upon the terms of the respective entities’ ownership agreements. For these entities, the Company records a noncontrolling interest in the consolidated balance sheets. The Company’s investments in unconsolidated affiliates which are 50% or less owned are accounted for under the equity method when the Company can exercise significant influence over or has joint control of the unconsolidated affiliate. All intercompany balances and transactions are eliminated in 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 VIE. A VIE is an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. The Company consolidates its investment in a VIE when it determines that it is its primary beneficiary. For these VIEs, the Company records a noncontrolling interest in the consolidated balance sheets. 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.

 

Management has determined that MGP is a VIE because the Class A equity investors as a group lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance. The

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