MGM RESORTS INTERNATIONAL This management's discussion and analysis of financial condition and results of operations includes discussion as of and for the year endedDecember 31, 2022 compared toDecember 31, 2021 . Discussion of our financial condition and results of operations as of and for the year endedDecember 31, 2021 compared toDecember 31, 2020 can be found in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 , filed with theSecurities and Exchange Commission ("SEC") onFebruary 25, 2022 .
Description of our business and key performance indicators
Our primary business is the operation of casino resorts, which offer gaming, hotel, convention, dining, entertainment, retail and other resort amenities. We operate several of the finest casino resorts in the world and we continually reinvest in our resorts to maintain our competitive advantage. Most of our revenue is cash-based, through customers wagering with cash or paying for non-gaming services with cash or credit cards. We rely on the ability of our resorts to generate operating cash flow to pay rent, fund capital expenditures, provide excess cash flow for future development, repay debt financings, and return capital to our shareholders. We lease the real estate assets of our domestic resorts pursuant to triple-net lease agreements and make significant investments in our resorts through newly remodeled hotel rooms, restaurants, entertainment and nightlife offerings, as well as other new features and amenities. We also offer online gaming and sports betting through LeoVegas, our consolidated subsidiary, as well as through BetMGM, our unconsolidated affiliate.
Our results of operations are affected by decisions we make related to our capital allocation, our access to capital and our cost of capital. While we continue to be focused on maintaining a strong balance sheet with adequate liquidity and returning capital to shareholders, we are also dedicated to capitalizing on strategic development or initiatives.
Our results of operations do not tend to be seasonal in nature, though a variety of factors may affect the results of any interim period, including the timing of major conventions, Far East baccarat volumes, the amount and timing of marketing and special events for our high-end gaming customers, and the level of play during major holidays, including New Year andLunar New Year . While our results do not depend on key individual customers, a significant portion of our operating income is generated from high-end gaming customers, which can cause variability in our results. In addition, our success in marketing to customer groups such as convention customers and the financial health of customer segments such as business travelers or high-end gaming customers from a specific country or region can affect our results. Our results will also depend upon our ability to expand our ownership, management and operation of gaming facilities and accessing new markets for iGaming and online sports betting.
Impact of COVID-19
The spread of COVID-19 and developments surrounding the global pandemic have had a significant impact on our business, financial condition, results of operations and cash flows in 2020, 2021 and 2022 and may continue to impact our business thereafter. InMarch 2020 , all of our domestic properties were temporarily closed pursuant to state and local government restrictions imposed as a result of COVID-19. Throughout the second and third quarters of 2020, all of our properties that were temporarily closed re-opened to the public, with temporary re-closures and re-openings occurring for certain of our properties or portions thereof into the first quarter of 2021. Upon re-opening, the properties continued to operate without certain amenities and subject to certain occupancy limitations, with restrictions varying by jurisdiction. Beginning in the latter part of the first quarter of 2021 and continuing into the second quarter of 2021, our domestic jurisdictions eased and removed prior operating restrictions, including capacity and occupancy limits, as well as social distancing policies. As ofDecember 31, 2022 , all of our domestic properties were open and not subject to operating restrictions; however, travel and business volume were negatively affected in the early part of the first quarter of 2022 due to the spread of the omicron variant. InMacau , following a temporary closure of our properties onFebruary 5, 2020 , operations resumed onFebruary 20, 2020 , subject to certain health safeguards, such as limiting the number of seats available at each table game, slot machine spacing, reduced operating hours at a number of restaurants and bars, temperature checks, and mask protection. The issuance of tourist visas (including the individual visit scheme) for residents of Zhuhai,Guangdong Province and all other provinces in mainlandChina to travel toMacau resumed onAugust 12, 2020 ,August 26, 2020 andSeptember 23, 2020 , respectively, however several travel and entry restrictions inMacau ,Hong Kong and mainlandChina remained in place (including the temporary suspension of ferry services betweenHong Kong andMacau , the negative nucleic acid test result 32 -------------------------------------------------------------------------------- certificate, and mandatory quarantine requirements for returning residents, for visitors fromHong Kong ,Taiwan , and certain regions in mainlandChina , and bans on entry on other visitors), which significantly impacted visitation to ourMacau properties. In the third and fourth quarters of 2021, local COVID-19 cases were identified inMacau . Upon such occurrences, a state of immediate prevention was declared and mass mandatory nucleic acid testing was imposed inMacau , the validity period of negative test results for re-entry into mainlandChina was shortened and quarantine requirements were imposed, certain events were cancelled or suspended, and in some instances, certain entertainment and leisure facilities were closed throughoutMacau . Gaming operations were temporarily suspended onJuly 11, 2022 due to an increase in the number of COVID-19 cases inMacau and resumed onJuly 23, 2022 , subject to certain continuing health safeguards, with most restaurants and bars and certain retail outlets remaining closed. OnOctober 30, 2022 , a COVID-19 case was identified as connected toMGM Cotai . All guests and staff atMGM Cotai were isolated untilNovember 1, 2022 and all gaming, hotel, restaurant, and retail operations were suspended with limited operations resumed beginningNovember 3, 2022 . More broadly, electronic applications for individual and group travel visas toMacau resumed onNovember 1, 2022 , however, certain travel and entry restrictions inMacau and mainlandChina remained in place at the time, including COVID-19 testing and certain quarantine requirements, which significantly impacted visitation to ourMacau properties. Beginning inDecember 2022 ,Macau and mainlandChina started to unwind testing and quarantine requirements as well as travel and entry restrictions associated with the "dynamic zero" COVID-19 policy. OnJanuary 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 mainlandChina ,Hong Kong andTaiwan being required to present a negative nucleic acid test or rapid antigen test result in place untilFebruary 6, 2023 when all remaining COVID-19 travel restrictions were removed. Visitation Statistics The Las Vegas Strip segment results of operations are heavily impacted by visitor volume and trends. During the year endedDecember 31, 2022 ,Las Vegas visitor volume increased 21% compared to the prior year period according to information published by theLas Vegas Convention and Visitors Authority . TheLas Vegas market has had the expansion of convention center, sporting, music, and entertainment events in the current year, which have significantly impacted visitation positively among business and leisure travel. TheMGM China segment results of operations also are heavily impacted by visitor volume and trends. During the year endedDecember 31, 2022 ,Macau visitor arrivals decreased 26% compared to the prior year period according to statistics published by the Statistics and Census Service of the Macau Government, as the current year period was more negatively affected by travel and entry restrictions inMacau than in the prior year period. For a discussion of the risks to our business resulting from COVID-19, please see "Item 1A. Risk Factors - Risks Related to Our Business, Industry, and Market Conditions." Other Developments InFebruary 2020 , we completed theMGM Grand Las Vegas andMandalay Bay transaction pursuant to which the real estate assets ofMGM Grand Las Vegas andMandalay Bay (includingMandalay Place ) were contributed to VICI BREIT Venture, owned 50.1% by MGP OP (now owned by VICI) and 49.9% by a subsidiary of BREIT. In exchange for the contribution of the real estate assets,MGM and MGP received total consideration of$4.6 billion , which was comprised of$2.5 billion of cash,$1.3 billion of MGP OP's secured indebtedness assumed by VICI BREIT Venture, and MGP OP's 50.1% equity interest in VICI BREIT Venture (now owned by VICI). In addition, MGP OP issued approximately 3 million MGP OP units to us representing 5% of the equity value of VICI BREIT Venture. We also provide a shortfall guarantee of the principal amount of indebtedness of VICI BREIT Venture (and any interest accrued and unpaid thereon). On the closing date, BREIT also purchased approximately 5 million MGP Class A shares for$150 million . See Note 1, Note 11, and Note 12 in the accompanying consolidated financial statements for information regarding this transaction, lease agreement, and shortfall guarantee, respectively. In connection with theMGM Grand Las Vegas andMandalay Bay transaction, the master lease with MGP was modified to remove theMandalay Bay property and VICI BREIT Venture entered into a lease with us for the real estate assets ofMandalay Bay andMGM Grand Las Vegas . See Note 11 for information regarding theMGM Grand Las Vegas andMandalay Bay lease. Also, inJanuary 2020 , we, MGP OP, and MGP entered into an agreement for MGP OP to waive its right following the closing of theMGM Grand Las Vegas andMandalay Bay transaction to issue MGP Class A shares, in lieu of cash, to us in connection with us exercising our right to require MGP OP to redeem the MGP OP units we hold, at a price per unit 33 -------------------------------------------------------------------------------- equal to a 3% discount to the ten day average closing price prior to the date of the notice of redemption. The waiver was effective upon closing of the transaction onFebruary 14, 2020 and was scheduled to terminate on the earlier ofFebruary 14, 2022 or upon our receipt of cash proceeds of$1.4 billion as consideration for the redemption of our MGP OP units. OnMay 18, 2020 MGP OP redeemed approximately 30 million MGP OP units that we held for$700 million , or$23.10 per unit, and onDecember 2, 2020 , MGP OP redeemed approximately 24 million of the MGP OP units that we held for the remaining$700 million , or$29.78 per unit. As a result, the waiver terminated in accordance with its terms. InMarch 2021 , we delivered a notice of redemption to MGP covering approximately 37 million MGP OP units that they held which was satisfied with aggregate cash proceeds of approximately$1.2 billion , using cash on hand together with the proceeds from MGP's issuance of Class A shares. See Note 13 in the accompanying consolidated financial statements for information regarding this transaction, which eliminates in consolidation. InSeptember 2021 , we completed the acquisition of the remaining 50% ownership interest inCityCenter for cash consideration of$2.125 billion . Upon the closing of the transaction, we own 100% ofCityCenter and accordingly no longer account for our interest under the equity method of accounting, and we now consolidateCityCenter in our financial statements. See Note 4 in the accompanying consolidated financial statements for information regarding this transaction. InSeptember 2021 , we sold the real estate assets of Aria and Vdara for cash consideration of$3.89 billion and entered into a lease pursuant to which we lease back the real property. See Note 11 in the accompanying consolidated financial statements for information regarding this lease. InOctober 2021 , MGP acquired the real estate assets ofMGM Springfield from us andMGM Springfield was added to the master lease with MGP. Transactions with MGP, including transactions under the master lease with MGP, have been eliminated in our consolidation of MGP. InApril 2022 , we completed the VICI Transaction in a stock-for-stock transaction. In connection with the transaction, VICI OP redeemed the majority of our VICI OP units for cash consideration of$4.4 billion , with us retaining an approximate 1% ownership interest in VICI OP. MGP's Class B share that was previously held by us was cancelled. Accordingly, we no longer hold a controlling interest in MGP and deconsolidated MGP upon the closing of the transactions. In connection with the VICI Transaction, we entered into an amended and restated master lease with VICI. See Note 4 and Note 11 in the accompanying consolidated financial statements for discussion of the transaction and lease, respectively. InMay 2022 , we acquired 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 . Additionally, we entered into a lease agreement for the real estate assets of the The Cosmopolitan. See Note 4 and Note 11 in the accompanying consolidated financial statements for discussion of the transaction and lease, respectively. InJune 2022 , theMacau government enacted a new gaming law that provides for material changes to the legal form of gaming concessions inMacau , including discontinuing and prohibiting gaming subconcessions subsequent to their expiration, and also includes material changes to the rights and obligations provided for under the new gaming concessions that were awarded in the public tender that concluded inDecember 2022 , such as limiting the term of concessions to a maximum of 10 years. As a result, we reassessed the useful life of theMGM Grand Paradise gaming subconcession intangible asset and reduced the useful life to align with the contractual term of the subconcession, which expired onDecember 31, 2022 , thereby accelerating the recognition of amortization within our statements of operations. See Note 1 and Note 7 in the accompanying consolidated financial statements for further discussion. InDecember 2022 , we were awarded a new gaming concession, which permits the operation of games of chance or other games in casinos inMacau , commencing onJanuary 1, 2023 . InSeptember 2022 , we acquired LeoVegas through a tender offer at a cash price ofSEK 61 per share, for a total fair value of equity interests acquired of approximately$556 million , inclusive of cash settlement of equity awards. See Note 4 in the accompanying consolidated financial statements for discussion of this transaction. InDecember 2022 , we completed the sale of the operations of The Mirage toHard Rock for cash consideration of$1.075 billion , subject to certain purchase price adjustments. At closing, the master lease with VICI was amended to remove The Mirage and reflect a$90 million reduction in annual cash rent. Refer to Note 4 in the accompanying consolidated financial statements for discussion of this transaction. 34 -------------------------------------------------------------------------------- InFebruary 2023 , we completed the sale of the operations of Gold Strike Tunica to CNE for cash consideration of$450 million , subject to certain purchase price adjustments. At closing, the master lease with VICI was amended to remove Gold Strike Tunica and reflect a$40 million reduction in annual cash rent. Refer to Note 4 in the accompanying consolidated financial statements for further discussion of this transaction.
Key Performance Indicators
Key performance indicators related to gaming and hotel revenue are:
•Gaming revenue indicators: table games drop and slots handle (volume indicators); "win" or "hold" percentage, which is not fully controllable by us. Our normal table games hold percentage at ourLas Vegas Strip Resorts is in the range of 25.0% to 35.0% of table games drop for Baccarat and 19.0% to 23.0% for non-Baccarat; however, reduced gaming volumes as a result of the COVID-19 pandemic could cause volatility in our hold percentages; and •Hotel revenue indicators (forLas Vegas Strip Resorts ): hotel occupancy (a volume indicator); average daily rate ("ADR," a price indicator); and revenue per available room ("REVPAR," a summary measure of hotel results, combining ADR and occupancy rate). Our calculation of ADR, which is the average price of occupied rooms per day, includes the impact of complimentary rooms. Complimentary room rates are determined based on standalone selling price. Because the mix of rooms provided on a complimentary basis, particularly to casino customers, includes a disproportionate suite component, the composite ADR including complimentary rooms is slightly higher than the ADR for cash rooms, reflecting the higher retail value of suites. Rooms that were out of service during the years endedDecember 31, 2021 and 2020 as a result of property closures due to the pandemic were excluded from the available room count when calculating hotel occupancy and REVPAR.
Additional key performance indicators at
•Gaming revenue indicators:MGM China utilizes "turnover," which is the sum of nonnegotiable chip wagers won byMGM China calculated as nonnegotiable chips purchased plus nonnegotiable chips exchanged less nonnegotiable chips returned. Turnover provides a basis for measuring VIP casino win percentage. Win for VIP gaming operations atMGM China is typically in the range of 2.6% to 3.3% of turnover; however, reduced gaming volumes as a result of the pandemic could cause volatility inMGM China's hold percentages.
Results of Operations
Summary Operating Results
The following table summarizes our operating results:
Year Ended December 31,
2022 2021 2020
(In thousands)
Net revenues $ 13,127,485 $ 9,680,140 $ 5,162,082
Operating income (loss) 1,439,372 2,278,699 (642,434)
Net income (loss) 206,731 1,208,389 (1,319,907)
Net income (loss) attributable to MGM Resorts
International 1,473,093 1,254,370 (1,032,724)
Certain of our properties or portions thereof were temporarily closed due to COVID-19 during the comparative period in 2021 as follows:
•Park MGM andMandalay Bay's hotel tower operations were closed midweek and full week hotel operations resumedMarch 3, 2021 . •The Mirage's hotel tower operations were closed midweek, with the entire property closed midweek startingJanuary 4, 2021 , and re-opened onMarch 3, 2021 . •MGM Springfield's hotel was closed and partial hotel operations resumed with midweek closures onMarch 5, 2021 . Full hotel operations resumed onDecember 13, 2021 . •MGM Grand Detroit's hotel tower operations were closed and resumed onFebruary 9, 2021 . 35 -------------------------------------------------------------------------------- Consolidated net revenues were$13.1 billion in 2022 compared to$9.7 billion in 2021, an increase of 36%. The current year benefited from the inclusion of the net revenues of The Cosmopolitan and a full year of net revenues related to Aria, partially offset by the disposition of The Mirage. The current year was initially negatively affected by a decrease in business volume and travel due to the spread of the omicron variant in the early part of the year; however, business volumes subsequently improved at our domestic resorts with a significant increase primarily at ourLas Vegas Strip Resorts over the prior year, which was negatively affected by midweek property and hotel closures, lower travel activity, and operational restrictions due to the COVID-19 pandemic. AtMGM China , the current and prior years were significantly impacted by travel and entry restrictions inMacau with the current year being negatively affected by property closures and more significantly impacted by restrictions related to the COVID-19 pandemic compared to the prior year. As a result, net revenues at ourLas Vegas Strip Resorts increased 77%, Regional Operations increased 12%, andMGM China decreased 44% compared to the prior year. Consolidated operating income was$1.4 billion in 2022 compared to$2.3 billion in 2021, a decrease of 37%. The current year period benefited from an increase in gains from transactions and the increase in domestic business volumes discussed above, partially offset by an increase in general and administrative expense, an increase in depreciation and amortization expense, and a decrease in income from unconsolidated affiliates. Gains from transactions in the current year included a$2.3 billion net gain related to the VICI Transaction recorded in gain on REIT transactions, net, and a$1.1 billion net gain related to the sale of the operations of The Mirage recorded within property transactions, net, while the prior year benefited from the$1.6 billion net gain on consolidation ofCityCenter . General and administrative expense increased$1.7 billion primarily due to an increase of rent expense of$1.1 billion related to the Aria and Vdara, VICI, and The Cosmopolitan leases, which commenced inSeptember 2021 ,April 2022 , andMay 2022 , respectively, as well as other increases, primarily in payroll costs. Depreciation and amortization expense increased$2.3 billion compared to the prior year period, due primarily to an increase of$2.5 billion in amortization expense of theMGM Grand Paradise gaming concession as a result of the change in its useful life.
Net Revenues by Segment
The following table presents a detail by segment of net revenues:
Year Ended December 31,
2022 2021 2020
(In thousands)
Las Vegas Strip Resorts
Casino $ 2,104,096 $ 1,549,419 $ 728,254
Rooms 2,729,715 1,402,712 662,813
Food and beverage 2,125,738 1,015,366 471,529
Entertainment, retail and other 1,438,823 769,688 383,189
8,398,372 4,737,185 2,245,785
Regional Operations
Casino 2,901,072 2,721,515 1,569,193
Rooms 284,213 220,828 130,945
Food and beverage 429,188 307,750 184,153
Entertainment, retail and other, and reimbursed costs 201,412 142,270 82,880
3,815,885 3,392,363 1,967,171
MGM China
Casino 567,573 1,057,962 565,671
Rooms 43,216 66,498 36,624
Food and beverage 49,312 68,489 40,284
Entertainment, retail and other 13,492 17,812 14,124
673,593 1,210,761 656,703
Reportable segment net revenues 12,887,850 9,340,309 4,869,659
Corporate and other 239,635 339,831 292,423
$ 13,127,485 $ 9,680,140 $ 5,162,082
36--------------------------------------------------------------------------------
Las Vegas Strip Resorts casino revenue was$2.1 billion in 2022, compared to$1.5 billion in 2021, an increase of 36%, due primarily to the inclusion of The Cosmopolitan and a full year of casino revenue related to Aria, partially offset by the disposition of The Mirage, and was negatively affected by a decrease in business volume and travel due to the spread of the omicron variant in the early part of the current year; however, business volumes subsequently improved with a significant increase over the prior year, which was negatively affected by midweek property and hotel closures, lower travel activity, and operational restrictions due to the pandemic. The following table shows key gaming statistics for ourLas Vegas Strip Resorts : Year Ended December 31, 2022 2021 2020 (Dollars in millions) Table Games Drop$ 5,804 $ 3,597 $ 2,001 Table Games Win$ 1,391 $ 885 $ 470 Table Games Win % 24.0 % 24.6 % 23.5 % Slots Handle$ 22,812 $ 15,089 $ 6,904 Slots Win$ 2,127 $ 1,417 $ 649 Slots Hold % 9.3 % 9.4 % 9.4 %Las Vegas Strip Resorts rooms revenue was$2.7 billion in 2022, compared to$1.4 billion in 2021, an increase of 95%. The current year benefited from the inclusion of The Cosmopolitan and a full year of revenues from Aria, partially offset by the disposition of The Mirage. Although operations were initially negatively affected by the omicron variant in the early part of the year, REVPAR increased significantly due to an increase in occupancy and ADR as business volume and travel activity improved in the current year. The following table shows key hotel statistics for ourLas Vegas Strip Resorts : Year Ended December 31, 2022 2021 2020 Occupancy(1) 89 % 74 % 55 % Average Daily Rate (ADR)$ 229 $ 173 $ 161 Revenue per Available Room (REVPAR)(1)$ 203 $ 128 $ 88 (1)Rooms that were out of service, including full and midweek closures, during the years endedDecember 31, 2021 and 2020 due to the COVID-19 pandemic were excluded from the available room count when calculating hotel occupancy and REVPAR.Las Vegas Strip Resorts food and beverage revenue was$2.1 billion in 2022, compared to$1.0 billion in 2021, an increase of 109%, andLas Vegas Strip Resorts entertainment, retail and other revenue was$1.4 billion in 2022, compared to$770 million in 2021, an increase of 87%, due primarily to the inclusion of The Cosmopolitan and a full year of revenues from Aria, partially offset by the disposition of The Mirage. The current year was initially negatively affected by the omicron variant in the early part of the year; however, business volume and travel activity subsequently improved with a significant increase over the prior year, which was negatively impacted by temporary midweek property and hotel tower closures at certain properties, lower business and travel activity, and operational restrictions related to the pandemic.
Regional Operations
Regional Operations casino revenue was$2.9 billion in 2022, compared to$2.7 billion in 2021, an increase of 7%, due primarily to table game win increasing 18% over the prior year and slots win increasing 9% over the prior year, as the prior year was negatively affected by midweek hotel closures at certain properties and operational restrictions related to the pandemic primarily during the first quarter of 2021. 37 -------------------------------------------------------------------------------- The following table shows key gaming statistics for our Regional Operations: Year Ended December 31, 2022 2021 2020 (Dollars in millions) Table Games Drop$ 4,469 $ 3,980 $ 2,422 Table Games Win$ 933 $ 788 $ 488 Table Games Win % 20.9 % 19.8 % 20.1 % Slots Handle$ 28,226 $ 25,566 $ 14,527 Slots Win$ 2,692 $ 2,462 $ 1,405 Slots Hold % 9.5 % 9.6 % 9.7 % Regional Operations rooms revenue was$284 million in 2022, compared to$221 million in 2021, an increase of 29%, due to an increase in business volume and travel activity over the prior year, which was negatively affected by midweek hotel closures at certain properties and operational restrictions related to the pandemic primarily during the first quarter of 2021. Regional Operations food and beverage revenue was$429 million in 2022, compared to$308 million in 2021, an increase of 39%, and Regional Operations entertainment, retail and other, and reimbursed costs revenue was$201 million in 2022, compared to$142 million in 2021, an increase of 42%, due primarily to increased business volume and the prior year period being negatively affected by operational restrictions related to pandemic.
The following table shows key gaming statistics for
Year Ended December 31,
2022 2021 2020
(Dollars in millions)
VIP Table Games Turnover $ 2,954 $ 8,499 $ 7,015
VIP Table Games Win $ 74 $ 272 $ 213
VIP Table Games Win % 2.5 % 3.2 % 3.0 %
Main Floor Table Games Drop $ 2,512 $ 4,509 $ 2,037
Main Floor Table Games Win $ 572 $ 966 $ 467
Main Floor Table Games Win % 22.8 % 21.4 % 22.9 %
MGM China net revenues were $674 million in 2022, compared to $1.2 billion in
2021, a decrease of 44%, due to the current and prior year being significantly
impacted by travel and entry restrictions in Macau with the current year being
negatively affected by COVID-19 related property closures and more significantly
impacted by restrictions related to the COVID-19 pandemic.
Corporate and other
Corporate and other revenue in the current year includes revenues from LeoVegas, other corporate operations, and management services. In the prior year periods, corporate and other revenue also included reimbursed costs revenue related to ourCityCenter management agreement (which was terminated upon the acquisition ofCityCenter inSeptember 2021 ).
Adjusted Property EBITDAR and Adjusted EBITDAR
The following table presents Adjusted Property EBITDAR and Adjusted EBITDAR.
Adjusted Property EBITDAR is our reportable segment generally accepted
accounting principles ("GAAP") measure, which we utilize as the primary profit
measure for our reportable segments. See Note 17 to the accompanying
consolidated financial statements and
38
--------------------------------------------------------------------------------"Reportable Segment GAAP measure" below for additional information. Adjusted EBITDAR is a non-GAAP measure, discussed within "Non-GAAP measures" below.
Year Ended December 31,
2022 2021 2020
(In thousands)
Las Vegas Strip Resorts $ 3,142,308 $ 1,738,211
Regional Operations 1,294,630 1,217,814 343,990
MGM China (203,136) 25,367 (193,832)
Corporate and other (736,548) (560,309) (530,843)
Adjusted EBITDAR $ 3,497,254
Las Vegas Strip Resorts
Las Vegas Strip Resorts Adjusted Property EBITDAR was $3.1 billion in 2022
compared to $1.7 billion in 2021, an increase of 81%. Las Vegas Strip Resorts
Adjusted Property EBITDAR margin increased to 37.4% in 2022 compared to 36.7% in
2021. The current year benefited from the increase in revenues, partially offset
by increases in contribution from lower-margin non-gaming outlets and venues and
promotional activities.
Regional Operations
Regional Operations Adjusted Property EBITDAR was $1.3 billion in 2022 compared
to $1.2 billion in 2021, an increase of 6%. Regional Operations Adjusted
Property EBITDAR margin decreased to 33.9% in 2022 compared to 35.9% in 2021.
The margin decrease was due primarily to an increase in contribution from lower
margin non-gaming outlets and venues.
MGM China's Adjusted Property EBITDAR was a loss of$203 million in 2022 compared to Adjusted Property EBITDAR of$25 million in 2021. The decrease was due primarily the decrease in revenues, discussed above, and the current year period included an$18 million charge related to litigation reserves. License fee expense was$12 million for 2022 and$21 million in the prior year.
Supplemental Information - Same-store Results of Operations
The following table presents the financial results ofLas Vegas Strip Resorts on a same-store basis for the periods presented below. Same-Store Adjusted Property EBITDAR is a non-GAAP measure, discussed within "Non-GAAP measures" below. Year Ended December 31, 2022 2021 2020 (In thousands) Las Vegas Strip Resorts net revenues$ 8,398,372 $ 4,737,185 $ 2,245,785 Acquisitions (1) (2,226,495) (366,879) - Dispositions (2) (559,858) (419,063) (172,720) Las Vegas Strip Resorts same-store net revenues$ 5,612,019
Las Vegas Strip Resorts Adjusted Property EBITDAR$ 3,142,308 $ 1,738,211 $ 232,188 Acquisitions (1) (908,841) (159,930) - Dispositions (2) (159,267) (122,127) 18,354
Las Vegas Strip Resorts Same-Store Adjusted Property EBITDAR
$ 2,074,200
(1)Excludes the net revenues and Adjusted Property EBITDAR of The Cosmopolitan
and Aria
(2)Excludes the net revenues and Adjusted Property EBITDAR of The Mirage
39
--------------------------------------------------------------------------------Operating Results - Details of Certain Charges
Property transactions, net consisted of the following:
Year Ended December 31,
2022 2021 2020
(In thousands)
Gain on sale of the operations of The Mirage
- $ -
Other property transactions, net 29,787 (67,736) 93,567
$ (1,036,997) $ (67,736) $ 93,567 See Note 16 to the accompanying consolidated financial statements for discussion of property transactions, net.
Income (loss) from Unconsolidated Affiliates
The following table summarizes information related to our share of operating income (loss) from unconsolidated affiliates:
Year Ended December 31,
2022 2021 2020
(In thousands)
VICI BREIT Venture (through April 29, 2022) 51,051 155,817 136,755
BetMGM (234,464) (211,182) (61,663)
Other 23,200 12,061 (2,401)
$ (160,213) $ 84,823 $ 42,938 In
InSeptember 2021 , we completed the acquisition of the remaining 50% ownership interest inCityCenter and now own 100% of the equity interest inCityCenter . Accordingly, we no longer account for our interest inCityCenter under the equity method of accounting, and we now consolidateCityCenter in our financial statements. InApril 2022 , we completed the VICI Transaction pursuant to which the assets and liabilities of MGP were derecognized, which included MGP OP's investment in the VICI BREIT Venture. Non-operating Results Interest expense The following table summarizes information related to interest expense, net: Year Ended December 31, 2022 2021 2020 (In thousands) Total interest incurred$ 595,692 $ 800,156 $ 679,251 Interest capitalized (738) (563) (2,871)$ 594,954 $ 799,593 $ 676,380 Gross interest expense was$596 million in 2022 compared to$800 million in 2021. The decrease from the prior year period is due primarily to a decrease in debt outstanding as a result of the derecognition of MGP OP's senior notes in connection with the deconsolidation of MGP, partially offset by an increase in the debt outstanding underMGM China's revolving credit facilities. See Note 9 to the accompanying consolidated financial statements for discussion on long-term debt and see "Liquidity and Capital Resources" for discussion on issuances and repayments of long-term debt and other sources and uses of cash. 40 --------------------------------------------------------------------------------
Other, net
Other income, net was$83 million in 2022 compared to$66 million in 2021. The current and prior year included interest income of$87 million and$22 million , respectively, and a net gain on equity investments of$10 million and$28 million , respectively. The current year income was partially offset by a$12 million loss relating to interest rate swaps, while the prior year included a$39 million gain on interest rate swaps.
Income taxes
The following table summarizes information related to our income taxes:
Year Ended December 31,
2022 2021 2020
(In thousands)
Income (loss) before income taxes $ 903,799 $ 1,461,804 $ (1,511,479)
Benefit (provision) for income taxes (697,068) (253,415) 191,572
Effective income tax rate 77.1 % 17.3 % 12.7 %
Federal, state and foreign income taxes paid, net of
refunds $ 22,955 $ 43,018 $ 8,543
Our effective rate for 2022 was unfavorably impacted by losses in Macau that we
could not benefit and an increase in state deferred tax liabilities as a result
of the New Jersey income tax regulation issuance, partially offset by a decrease
in Macau deferred tax liabilities resulting from the acceleration of
amortization of the MGM Grand Paradise gaming subconcession and the extension of
the exemption from the Macau 12% complementary tax to the end of the year as
well as the impact of a decrease in state deferred tax liabilities as a result
of the VICI Transaction. Our effective rate for 2021 was favorably impacted by
the permanent exclusion of a portion of the gain on consolidation of CityCenter ,
partially offset by the unfavorable impact of losses in Macau that we could not
benefit.
Cash taxes paid decreased in 2022 compared to 2021 primarily due to refunds received from carryback claims related to losses incurred in 2020.
Reportable Segment GAAP measure
"Adjusted Property EBITDAR" is our reportable segment GAAP measure, which we utilize as the primary profit measure for our reportable segments and underlying operating segments. Adjusted Property EBITDAR is a measure defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses, property transactions, net, gain on REIT transactions, net, restructuring costs (which represents costs related to severance, accelerated stock compensation expense, and consulting fees directly related to the operating model component of theMGM 2020 Plan), rent expense related to triple-net operating leases and ground leases, income from unconsolidated affiliates related to investments in real estate ventures, and also excludes gain on consolidation ofCityCenter , net, gain related toCityCenter's sale of Harmon land recorded within income from unconsolidated affiliates, corporate expense (which includes CEO transition expense andOctober 1 litigation settlement) and stock compensation expense, which are not allocated to each operating segment, and rent expense related to the master lease with MGP that eliminated in consolidation. We manage capital allocation, tax planning, stock compensation, and financing decisions at the corporate level. "Adjusted Property EBITDAR margin" is Adjusted Property EBITDAR divided by related segment net revenues. Non-GAAP Measures "Same-Store Adjusted Property EBITDAR" is Adjusted Property EBITDAR further adjusted to exclude the Adjusted Property EBITDAR of acquired operating segments from the date of acquisition through the end of the reporting period and to exclude the Adjusted Property EBITDAR of disposed operating segments from the beginning of the reporting period through the date of disposition. Accordingly, we have excluded the Adjusted Property EBITDAR of The Cosmopolitan for periods subsequent to its acquisition onMay 17, 2022 , Aria for periods subsequent to its acquisition onSeptember 27, 2021 , and The Mirage for the periods prior to its disposition onDecember 19, 2022 in Same-Store Adjusted Property EBITDAR for the periods indicated, as applicable.
Same-Store Adjusted Property EBITDAR is a non-GAAP measure and is presented solely as a supplemental disclosure to reported GAAP measures because management believes this measure is useful in providing meaningful
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period-to-period comparisons of the results of our operations for operating
segments that were consolidated for the full period presented to assist users of
the financial statements in reviewing operating performance over time.
Same-Store Adjusted Property EBITDAR should not be viewed as a measure of
overall operating performance, considered in isolation, or as an alternative to
our reportable segment GAAP measure or net income, or as an alternative to any
other measure determined in accordance with generally accepted accounting
principles, because this measure is not presented on a GAAP basis, and is
provided for the limited purposes discussed herein. In addition, Same-Store
Adjusted Property EBITDAR may not be defined in the same manner by all companies
and, as a result, may not be comparable to similarly titled non-GAAP financial
measures of other companies, and such differences may be material. A
reconciliation of our reportable segment Adjusted Property EBITDAR GAAP measure
to Same-Store Adjusted Property EBITDAR is included herein.
"Adjusted EBITDAR" is earnings before interest and other non-operating income
(expense), taxes, depreciation and amortization, preopening and start-up
expenses, property transactions, net, gain on REIT transactions, net, gain on
consolidation of CityCenter , net, CEO transition expense, October 1 litigation
settlement, restructuring costs (which represents costs related to severance,
accelerated stock compensation expense, and consulting fees directly related to
the operating model component of the MGM 2020 Plan), rent expense related to
triple-net operating leases and ground leases, gain related to CityCenter's sale
of Harmon land recorded within income from unconsolidated affiliates, and income
from unconsolidated affiliates related to investments in real estate ventures.
Adjusted EBITDAR information is a non-GAAP measure that is a valuation metric,
should not be used as an operating metric, and is presented solely as a
supplemental disclosure to reported GAAP measures because we believe this
measure is widely used by analysts, lenders, financial institutions, and
investors as a principal basis for the valuation of gaming companies. We believe
that while items excluded from Adjusted EBITDAR may be recurring in nature and
should not be disregarded in evaluation of our earnings performance, it is
useful to exclude such items when analyzing current results and trends. Also, we
believe excluded items may not relate specifically to current trends or be
indicative of future results. For example, preopening and start-up expenses will
be significantly different in periods when we are developing and constructing a
major expansion project and will depend on where the current period lies within
the development cycle, as well as the size and scope of the project(s). Property
transactions, net includes normal recurring disposals, gains and losses on sales
of assets related to specific assets within our resorts, but also includes gains
or losses on sales of an entire operating resort or a group of resorts and
impairment charges on entire asset groups or investments in unconsolidated
affiliates, which may not be comparable period over period. In addition,
management excludes rent expense related to triple-net operating leases and
ground leases. Management believes excluding rent expense related to triple-net
operating leases and ground leases provides useful information to analysts,
lenders, financial institutions, and investors when valuing us, as well as
comparing our results to other gaming companies, without regard to differences
in capital structure and leasing arrangements since the operations of other
gaming companies may or may not include triple-net operating leases or ground
leases. However, as discussed herein, Adjusted EBITDAR should not be viewed as a
measure of overall operating performance, an indicator of our performance,
considered in isolation, or construed as an alternative to operating income or
net income, or as an alternative to cash flows from operating activities, as a
measure of liquidity, or as an alternative to any other measure determined in
accordance with generally accepted accounting principles because this measure is
not presented on a GAAP basis and excludes certain expenses, including the rent
expense related to our triple-net operating leases and ground leases, and is
provided for the limited purposes discussed herein. In addition, other companies
in the gaming and hospitality industries that report Adjusted EBITDAR may
calculate Adjusted EBITDAR in a different manner and such differences may be
material. We have significant uses of cash flows, including capital
expenditures, interest payments, taxes, triple-net lease and ground lease
payments, and debt principal repayments, which are not reflected in Adjusted
EBITDAR. A reconciliation of GAAP net income (loss) to Adjusted EBITDAR is
included herein.
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The following table presents a reconciliation of net income (loss) attributable
to
Year Ended December 31,
2022 2021 2020
(In thousands)
Net income (loss) attributable to MGM Resorts
International $ 1,473,093
(45,981) (287,183)
Net income (loss) 206,731 1,208,389 (1,319,907)
Provision (benefit) for income taxes 697,068 253,415 (191,572)
Income (loss) before income taxes 903,799 1,461,804 (1,511,479)
Non-operating (income) expense
Interest expense, net of amounts capitalized 594,954 799,593 676,380
Non-operating items from unconsolidated affiliates 23,457 83,243 103,304
Other, net (82,838) (65,941) 89,361
535,573 816,895 869,045
Operating income (loss) 1,439,372 2,278,699 (642,434)
Preopening and start-up expenses 1,876 5,094 84
Property transactions, net (1,036,997) (67,736) 93,567
Depreciation and amortization 3,482,050 1,150,610 1,210,556
Gain on REIT transactions, net (2,277,747) - (1,491,945)
Gain on consolidation of CityCenter, net - (1,562,329) -
CEO transition expense - - 44,401
October 1 litigation settlement - - 49,000
Restructuring - - 26,025
Triple-net operating lease and ground lease rent expense 1,950,566
833,158 710,683
Gain related to sale of Harmon land - unconsolidated affiliate
- (49,755) -
Income from unconsolidated affiliates related to real
estate ventures (61,866) (166,658) (148,434)
Adjusted EBITDAR $ 3,497,254 Guarantor Financial Information
As ofDecember 31, 2022 , all of our principal debt arrangements are guaranteed by each of our wholly owned material domestic subsidiaries that guarantee our senior credit facility. Our principal debt arrangements are not guaranteed byMGM Grand Detroit ,MGM National Harbor , Blue Tarp reDevelopment, LLC (the entity that operatesMGM Springfield ), and each of their respective subsidiaries. Our foreign subsidiaries, including LeoVegas,MGM China , and each of their respective subsidiaries, are also not guarantors of our principal debt arrangements. In the event that any subsidiary is no longer a guarantor of our credit facility or any of our future capital markets indebtedness, that subsidiary will be released and relieved of its obligations to guarantee our existing senior notes. The indentures governing the senior notes further provide that in the event of a sale of all or substantially all of the assets of, or capital stock in a subsidiary guarantor then such subsidiary guarantor will be released and relieved of any obligations under its subsidiary guarantee. The guarantees provided by the subsidiary guarantors rank senior in right of payment to any future subordinated debt of ours or such subsidiary guarantors, junior to any secured indebtedness to the extent of the value of the assets securing such debt and effectively subordinated to any indebtedness and other obligations of our subsidiaries that do not guarantee the senior notes. In addition, the obligations of each subsidiary guarantor under its guarantee is limited so as not to constitute a fraudulent conveyance under applicable law, which may eliminate the subsidiary guarantor's obligations or reduce such obligations to an amount that effectively makes the subsidiary guarantee lack value. The summarized financial information of us and our guarantor subsidiaries, on a combined basis, is presented below. Prior to the VICI Transaction, certain of our guarantor subsidiaries accounted for the master lease with MGP as an operating lease with the rent expense reflected within the summarized financial information. Additionally, assets held for 43 --------------------------------------------------------------------------------
sale and liabilities related to assets held for sale associated with Gold Strike Tunica are included within current assets and other current liabilities, respectively, within the summarized financial information.
December 31, 2022
Balance Sheet (In thousands)
Current assets $ 6,733,048
Other long-term assets 28,802,794
Other current liabilities 3,892,694
Other long-term liabilities 28,285,295
Year Ended December 31, 2022
Income Statement (In thousands)
Net revenues $ 10,477,542
MGP master lease rent expense 429,065
Operating income 4,981,058
Income from continuing operations 2,589,135
Net income 1,668,214
Net income attributable to MGM Resorts International 1,668,214
Liquidity and Capital Resources
Cash Flows - Summary
Our cash flows consisted of the following:
Year Ended December 31,
2022 2021 2020
(In thousands)
Net cash provided by (used in) operating activities $ 1,756,462 $ 1,373,423 $ (1,493,043)
Net cash provided by investing activities 2,118,181 1,543,645 2,159,304
Net cash provided by (used in) financing activities (3,024,302) (2,814,095) 2,103,427
Cash Flows
Operating activities. Trends in our operating cash flows tend to follow trends
in operating income, excluding non-cash charges, but can be affected by changes
in working capital, the timing of significant interest payments, and tax
payments or refunds. Cash provided by operating activities was $1.8 billion in
2022 compared to $1.4 billion in 2021. The change from the prior year was due
primarily to the increase in Adjusted Property EBITDAR at our Las Vegas Strip
Resorts and Regional Operations discussed within the Results of Operations
section above and a decrease in cash paid for interest, partially offset by an
increase in triple-net lease rent payments.
Investing activities. Our investing cash flows can fluctuate significantly from
year to year depending on our decisions with respect to strategic capital
investments in new or existing resorts, business acquisitions or dispositions,
and the timing of maintenance capital expenditures to maintain the quality of
our resorts. Capital expenditures related to regular investments in our existing
resorts can also vary depending on timing of larger remodel projects related to
our public spaces and hotel rooms.
Cash provided by investing activities was $2.1 billion in 2022 compared to $1.5
billion in 2021. In 2022, we received $4.4 billion in net cash proceeds related
to the VICI Transaction and $1.1 billion in net cash proceeds related to the
sale of the operations of The Mirage, which were partially offset by cash paid
of $1.6 billion to acquire The Cosmopolitan, net of cash acquired, cash paid of
$279 million in connection with the LeoVegas tender offer, net of cash acquired,
cash paid of $183 million to acquire shares of LeoVegas in the open market
during the tender offer period, payments of $765 million in capital
expenditures, as further discussed below, contributions of $225 million to our
unconsolidated affiliate, BetMGM, and $282 million in net investments in debt
securities. In comparison, in the prior year period, we received $3.9 billion in
net cash proceeds from the sale of the real estate of Aria and Vdara, received
$107
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million in net proceeds from the sale of property and equipment, primarily
related to the sale of art, which were partially offset by our payments of $1.8
billion to acquire CityCenter , net of cash acquired, $491 million in capital
expenditures, as further discussed below, and contributions of $225 million to
BetMGM.
Capital Expenditures
In 2022, we made capital expenditures of
In 2021, we made capital expenditures of$491 million , of which$68 million related toMGM China . Capital expenditures atMGM China included$49 million primarily related to construction of theEmerald Tower project atMGM Cotai and$19 million related to projects atMGM Macau . Capital expenditures at ourLas Vegas Strip Resorts , Regional Operations and corporate entities of$423 million were primarily related to expenditures in information technology and room remodels. Financing activities. Cash used in financing activities was$3.0 billion in 2022 compared to$2.8 billion in 2021. In 2022, we had net borrowings of debt of$78 million , as further discussed below, distributed$211 million to noncontrolling interest owners, and we repurchased$2.8 billion of our common stock. In comparison, in the prior year period, we had net repayments of debt of$1.3 billion , as further discussed below, distributed$324 million to noncontrolling interest owners, and we repurchased$1.8 billion of our common stock, partially offset by net proceeds received of$793 million from the issuance of MGP's Class A shares.
Borrowings and Repayments of Long-term Debt
In 2022, we had net borrowings of debt of$78 million , which consisted of net draws of$40 million on MGP OP's revolving credit facility, net borrowings of$884 million onMGM China's first revolving credit facility and borrowings of$224 million onMGM China's second revolving credit facility to fund an increase in share capital ofMGM Grand Paradise pursuant to the capital requirements under the newMacau gaming law and for general corporate purposes, partially offset by the repayment of$1.0 billion of aggregate principal amount of our 7.75% senior notes due 2022 at maturity, and the repayments of$30 million of LeoVegas senior unsecured notes and$40 million of LeoVegas' revolving credit facility due to change-in-control provisions. In 2021, we had net repayments of debt of$1.3 billion , which consisted of the repayment of the$1.7 billion outstanding onCityCenter's credit facility in full, which was assumed in the acquisition, using cash on hand, and net repayments of$407 million onMGM China's first revolving credit facility. These repayments were partially offset byMGM China's March 2021 issuance of$750 million in aggregate principal amount of 4.75% senior notes due 2027 at an issue price of 99.97% and net draws of$40 million on MGP OP's revolving credit facility, of which$35 million was used in connection with MGP's acquisition ofMGM Springfield with the remainder used to fund MGP OP's and MGP's distribution and dividend payments. The net proceeds fromMGM China's 4.75% senior notes due 2027 issuance were used to partially repay amounts outstanding under theMGM China first revolving credit facility and for general corporate purposes.
Dividends, Distributions to Noncontrolling Interest Owners and Share Repurchases
In 2022, we repurchased and retired$2.8 billion of our common stock pursuant to our stock repurchase plans. In connection with those repurchases, theFebruary 2020 $3.0 billion stock repurchase plan was completed. As ofDecember 31, 2022 , the remaining availability under theMarch 2022 $2.0 billion stock repurchase plan was$475 million . Additionally, inFebruary 2023 , we announced that the Board of Directors authorized a$2.0 billion stock repurchase plan. In 2021, we repurchased and retired$1.8 billion of our common stock pursuant to ourMay 2018 $2.0 billion andFebruary 2020 $3.0 billion stock repurchase plans. In connection with those repurchases, we completed ourMay 2018 $2.0 billion stock repurchase plan. InMarch 2022 ,June 2022 ,September 2022 , andDecember 2022 , we paid dividends of$0.0025 per share, totaling$4 million for 2022. InMarch 2021 ,June 2021 ,September 2021 , andDecember 2021 , we paid dividends of$0.0025 per share, totaling$5 million for 2021. 45 --------------------------------------------------------------------------------
MGP OP paid the following distributions to its partnership unit holders during 2022 and 2021:
•$283 million of distributions paid in 2022, of which we received$117 million and MGP received$166 million , which MGP concurrently paid as a dividend to its Class A shareholders; and •$545 million of distributions paid in 2021, of which we received$243 million and MGP received$302 million , which MGP concurrently paid as a dividend to its Class A shareholders.
Other Factors Affecting Liquidity and Anticipated Uses of Cash
We require a certain amount of cash on hand to operate our resorts. In addition to required cash on hand for operations, we utilize corporate cash management procedures to minimize the amount of cash held on hand or in banks. Funds are swept from the accounts at most of our domestic resorts daily into central bank accounts, and excess funds are invested overnight or are used to repay amounts drawn under our revolving credit facility. In addition, from time to time we may use excess funds to repurchase our outstanding debt and equity securities subject to limitations in our revolving credit facility andDelaware law, as applicable. We have significant outstanding debt, interest payments, rent payments, and contractual obligations in addition to planned capital expenditures and commitments. As ofDecember 31, 2022 , we had cash and cash equivalents of$5.9 billion , of whichMGM China held$860 million . In addition to the cash and cash equivalents,MGM China also had approximately$124 million of restricted cash. AtDecember 31, 2022 , we had$8.8 billion in principal amount of indebtedness, including$1.2 billion outstanding underMGM China's first revolving credit facility and$224 million outstanding underMGM China's second revolving credit facility. No amounts were drawn on our revolving credit facility. We have$1.3 billion of debt maturing in the next twelve months, which we expect to repay with cash on hand.
Due to the continued impact of the COVID-19 pandemic, in
Our estimated cash interest payments, based on principal amounts of debt outstanding and the contractual maturity dates and interest rates as ofDecember 31, 2022 , for 2023, 2024, and 2025 are approximately$230 million ,$190 million , and$145 million , respectively, excludingMGM China , and approximately$480 million ,$355 million , and$235 million , respectively, on a consolidated basis, which includesMGM China . We are also required as ofDecember 31, 2022 to make annual cash rent payments of$1.7 billion over the next twelve months under triple-net lease agreements, which triple-net leases are also subject to annual escalators and also require us to pay substantially all costs associated with the lease, including real estate taxes, ground lease payments, insurance, utilities and routine maintenance, in addition to the annual cash rent. See Note 11 for discussion of our leases and lease obligations. We have planned capital expenditures in 2023 of approximately$795 million to$835 million domestically, which is inclusive of the capital expenditures required under the triple-net lease agreements, each of which requires us to spend a specified percentage of net revenues at the respective domestic properties, and an estimate of approximately$110 million to$150 million atMGM China . Refer to Note 12 for discussion ofMGM Grand Paradise's commitment to investment in gaming and non-gaming projects and the development of international tourist markets as well as other contractual obligations pursuant to its gaming concession. The estimated amount of the investment for 2023 that relates to capital projects is included within the capital expenditure amounts above. We additionally have planned contributions to BetMGM in 2023 of approximately$75 million . We continue to explore potential development or investment opportunities, such as a commercial gaming facility inNew York and our venture inJapan , which may require cash commitments in the future. We also expect to continue to repurchase shares pursuant to our share repurchase plans. Subsequent toDecember 31, 2022 , we repurchased approximately 6 million shares of our common stock at an average price of$38.12 per share for an aggregate amount of$210 million . Repurchased shares were retired. OnFebruary 8, 2023 , we announced that the Board of Directors has determined to suspend the ongoing dividends in light of our current preferred method of returning value to shareholders through our share repurchase plan. To the extent we determine to reinstate the dividend in the future, determinations regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our results of operations, financial condition, and other factors that our Board of Directors may deem relevant. 46 -------------------------------------------------------------------------------- For additional information related to our long-term obligations, refer to the maturities of long-term debt table in Note 9 and the lease liability maturity table in Note 11.
Principal Debt Arrangements
See Note 9 to the accompanying consolidated financial statements for information
regarding our debt agreements as of
Critical Accounting Policies and Estimates
Management's discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements. To prepare our consolidated financial statements in accordance with accounting principles generally accepted inthe United States of America , we must make estimates and assumptions that affect the amounts reported in the consolidated financial statements. We regularly evaluate these estimates and assumptions, particularly in areas we consider to be critical accounting estimates, where the estimates and assumptions involve both a significant level of estimation uncertainty due to the levels of subjectivity and judgment necessary to account for the matters or the susceptibility of such matters to change is high and also have had or are reasonably likely to have a material effect on our financial condition or results of operations. However, by their nature, judgments are subject to an inherent degree of uncertainty and therefore actual results can differ from our estimates.
Loss Reserve for
Marker play represents a significant portion of the table games volume at certain of ourLas Vegas resorts. Our other casinos do not emphasize marker play to the same extent, although we offer markers to customers at those casinos as well.MGM China extends credit to certain in-house VIP gaming customers. We maintain strict controls over the issuance of markers and aggressively pursue collection from our customers who fail to pay their marker balances timely. These collection efforts are similar to those used by most large corporations when dealing with overdue customer accounts, including the mailing of statements and delinquency notices, personal contacts, the use of outside collection agencies and civil litigation. Markers are generally legally enforceable instruments inthe United States andMacau . Markers are not legally enforceable instruments in some foreign countries, butthe United States assets of foreign customers may be reached to satisfy judgments entered inthe United States . We consider the likelihood and difficulty of enforceability, among other factors, when we issue credit to customers at our domestic resorts who are not residents ofthe United States .MGM China performs background checks and investigates credit worthiness prior to issuing credit. We maintain a loss reserve for casino accounts at all of our operating casino resorts. Expected credit losses, an operating expense, increases the loss reserve. We regularly evaluate the loss reserve for casino accounts, which involves judgments and assumptions about realizability, current and expected future economic conditions in various geographies, and business conditions. At domestic resorts where marker play is not significant, the loss reserve is generally established by applying standard reserve percentages to aged account balances, which is supported by ongoing evaluation of relevant historical analysis and any other known information such as the current economic conditions that could drive losses. At domestic resorts where marker play is significant, we apply standard reserve percentages to aged account balances under a specified dollar amount and specifically analyze the collectability of each account with a balance over the specified dollar amount, based on the age of the account, the customer's current and expected future financial condition, collection history, and current and expected future economic conditions.MGM China specifically analyzes the collectability of casino receivables on an individual basis taking into account the age of the account, the financial condition and the collection history of the customer. Approximately$54 million and$63 million of casino receivables and$25 million and$31 million of the loss reserve for casino receivables relate toMGM China atDecember 31, 2022 and 2021, respectively.
The following table shows key statistics related to our casino receivables:
December 31,
2022 2021
(In thousands)
Casino receivables $ 500,986 $ 380,907
Loss reserve for casino accounts receivable 97,929 117,539
Loss reserve as a percentage of casino accounts receivable 20 % 31 %
The loss reserve as a percentage of casino accounts receivable decreased in the
current year primarily due to a decrease in the age of outstanding receivables.
Because individual customer account balances can be significant, the loss
reserve and credit losses can change significantly between periods, as
information about a certain customer becomes
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known or as changes in economic conditions occur. At December 31, 2022 , a 100
basis-point change in the loss reserve as a percentage of casino receivables
would change income before income taxes by $5 million .
Fixed Asset Capitalization
Property and equipment are stated at cost. A significant amount of our property and equipment was acquired through business combinations and was therefore recognized at fair value at the acquisition date. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. When we construct assets, we capitalize direct costs of the project, including fees paid to architects and contractors, property taxes, and certain costs of our design and construction subsidiaries. We must make estimates and assumptions when accounting for capital expenditures. Whether an expenditure is considered a maintenance expense, or a capital asset is a matter of judgment. When constructing or purchasing assets, we must determine whether existing assets are being replaced or otherwise impaired, which also may be a matter of judgment. In addition, our depreciation expense is highly dependent on the assumptions we make about our assets' estimated useful lives. We determine the estimated useful lives based on our experience with similar assets, engineering studies, and our estimate of the usage of the asset. Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively.
Impairment of Long-lived Assets,
We evaluate our property and equipment and other long-lived assets for
impairment based on our classification as held for sale or to be held and used.
Several criteria must be met before an asset is classified as held for sale,
including that management with the appropriate authority commits to a plan to
sell the asset at a reasonable price in relation to its fair value and is
actively seeking a buyer. For assets classified as held for sale, we recognize
the asset at the lower of carrying value or fair market value less costs of
disposal, as estimated based on comparable asset sales, offers received, or a
discounted cash flow model. For assets to be held and used, we review for
impairment whenever indicators of impairment exist. We then compare the
estimated future cash flows of the asset, on an undiscounted basis, to the
carrying value of the asset. If the undiscounted cash flows exceed the carrying
value, no impairment is indicated. If the undiscounted cash flows do not exceed
the carrying value, then an impairment is recorded based on the fair value of
the asset. For operating assets, fair value is typically measured using a
discounted cash flow model whereby future cash flows are discounted using a
weighted average cost of capital, developed using a standard capital asset
pricing model, based on guideline companies in our industry. If an asset is
still under development, future cash flows include remaining construction costs.
All recognized impairment losses, whether for assets to be held for sale or
assets to be held and used, are recorded as operating expenses.
There are several estimates, assumptions and decisions in measuring impairments
of long-lived assets. First, management must determine the usage of the asset.
To the extent management decides that an asset will be sold, it is more likely
that an impairment may be recognized. Assets must be tested at the lowest level
for which identifiable cash flows exist. This means that some assets must be
grouped, and management has some discretion in the grouping of assets. Future
cash flow estimates are, by their nature, subjective and actual results may
differ materially from our estimates.
On a quarterly basis, we review our major long-lived assets to determine if
events have occurred or circumstances exist that indicate a potential
impairment. Potential factors which could trigger an impairment include
underperformance compared to historical or projected operating results, negative
industry or economic factors, significant changes to our operating environment,
or changes in intended use of the asset group. We estimate future cash flows
using our internal budgets and probability weight cash flows in certain
circumstances to consider alternative outcomes associated with recoverability of
the asset group, including potential sale. Historically, undiscounted cash flows
of our significant operating asset groups have exceeded their carrying values by
a substantial margin.
We review indefinite-lived intangible assets at least annually and between
annual test dates in certain circumstances. We perform our annual impairment
test for indefinite-lived intangible assets in the fourth quarter of each fiscal
year. Indefinite-lived intangible assets consist primarily of license rights and
trademarks. For our 2022 annual impairment tests, we utilized the option to
perform a qualitative ("step zero") analysis for certain of our indefinite-lived
intangibles and concluded it was more likely than not that the fair values of
such intangibles exceeded their carrying values by a substantial margin. As
discussed below, management makes significant judgments and estimates as part of
these analyses. If certain future operating results do not meet current
expectations it could cause carrying values of the intangibles to exceed their
fair values in future periods, potentially resulting in an impairment charge.
We review goodwill at least annually and between annual test dates in certain
circumstances. None of our reporting units incurred any goodwill impairment
charges in 2022. For our 2022 annual impairment tests, we either utilized the
option to perform a step zero analysis for certain of our reporting units and
concluded it was more likely than not that the
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fair values of such reporting units exceeded their carrying values by a
substantial margin or we elected to perform a quantitative analysis and the fair
value of the reporting units exceeded their carrying value by a substantial
margin. There are several estimates inherent in evaluating these assets for
impairment. In particular, future cash flow estimates are, by their nature,
subjective and actual results may differ materially from our estimates. If
future operating results of our reporting units do not meet current expectations
it could cause carrying values of our reporting units to exceed their fair
values in future periods, potentially resulting in a goodwill impairment charge.
In addition, the determination of multiples, capitalization rates and the
discount rates used in the impairment tests are highly judgmental and dependent
in large part on expectations of future market conditions or events outside of
our control. The value of our Empire City reporting unit is dependent upon us
obtaining a commercial gaming license and the timing thereof, as well as other
assumptions that may change throughout the bidding process as additional
information becomes known, which includes the size, scope, and timing of
constructing an expanded facility, the potential for and timing of a transaction
for the monetization of the improvements and the proceeds and any rent
associated with such transaction, and the incremental cash flows generated by
the expanded facility, such as license payments and other payments to government
entities, gaming tax rates, and forecasted revenue and expenses from operations.
While the quantitative impairment analysis performed in 2022 resulted in the
fair value of Empire City exceeding its carrying value by a substantial margin
based upon the assumptions as of the date of the analysis, any of these
assumptions could change materially as a result of new or additional information
and, if they do, could result in an impairment of up to the full amount of the
reporting unit's goodwill of $256 million .
See Note 2 and Note 7 to the accompanying consolidated financial statements for further discussion of goodwill and other intangible assets.
Long-lived assets -
In connection with the enactment of the newMacau gaming law inJune 2022 , that provides for material changes to the legal form of gaming concessions inMacau , including discontinuing and prohibiting gaming subconcessions subsequent to their expiration, which occurred onDecember 31, 2022 , and provided for other material changes to the rights and obligations provided for under new gaming concessions, we determined thatMGM Grand Paradise's gaming subconcession and new gaming concession are two separate units of account. Further, as the material changes in the legal and regulatory environment could have had an adverse effect on the value ofMGM Grand Paradise's gaming subconcession, we concluded that a trigger event had occurred inJune 2022 for theMGM China asset group. The gaming subconcession was an entity-wide asset ofMGM China as the benefit of the right to conduct gaming provided by the gaming subconcession was shared by each ofMGM China's casino resorts and the cash flows generated by the gaming subconcession cannot be separated from the casino resorts in which gaming operations are conducted. We determined that the real estate is the primary asset of the asset group as the real estate component generates a significant portion of the entity's cash flows through gaming operations conducted at its casino resorts. Accordingly, cash flows were projected over the remaining useful life of the real estate, including cash flows from gaming operations. The estimated undiscounted cash flows of the asset group significantly exceeded the carrying value; accordingly, no impairment was indicated. There were several estimates inherent in evaluating the gaming subconcession asset for impairment. The determination of the asset group to be tested for recoverability and the primary asset of the asset group are matters of judgment as it is dependent on corporate structure, the legal and regulatory environment in which the entity operates, and the level of interdependency between assets used in revenue generating activities. The determination of the primary asset directly affects the period over which cash flows are forecasted when performing the recoverability test. In particular, future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. In addition, the determination of undiscounted cash flows used in the impairment tests are highly judgmental and dependent in large part on expectations of land concession renewals and successfully obtaining a gaming concession in connection with future public tenders. Additionally, we reassessed the useful life of the gaming subconcession intangible asset and, given the new gaming law and the resulting changes described above, we determined that the useful life would no longer be based on the initial term of theMGM Cotai land concession that ends inJanuary 2038 , and that the new useful life is consistent with the remaining contractual term of the existing gaming subconcession, which ended onDecember 31, 2022 . Accordingly, amortization of theMGM Grand Paradise gaming subconcession was recognized on a straight-line basis over its reduced useful life, thereby accelerating the recognition of amortization within our statements of operations.
The determination of the unit of account and useful life of the gaming subconcession are based upon facts and circumstances as of a point in time and may change as such conditions develop, evolve, or change. We have determined the
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unit of account and useful life based upon the final gaming law and its
enactment in
Impairment of Investments in Unconsolidated Affiliates
See Note 2 to the accompanying consolidated financial statements for discussion
of our evaluation of other-than-temporary impairment of investments in
unconsolidated affiliates. During 2022, our investments in unconsolidated
affiliates had no material impairments. In 2021 and 2020, we recorded
Income Taxes
We are subject to income taxes in theU.S. federal jurisdiction, various state and local jurisdictions, and foreign jurisdictions, although the income taxes paid in foreign jurisdictions are not material. We recognize deferred tax assets and liabilities related to net operating losses, tax credit carryforwards and temporary differences with future tax consequences. We reduce the carrying amount of deferred tax assets by a valuation allowance if it is more likely than not such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on such "more-likely-than-not" realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the scheduled reversal of deferred tax liabilities, the duration of statutory carryforward periods, and tax planning strategies. We recorded a valuation allowance on the net deferred tax assets of our domestic jurisdictions of$2.6 billion and$2.7 billion as ofDecember 31, 2022 and 2021, respectively, and a valuation allowance on certain net deferred tax assets of foreign jurisdictions of$245 million and$149 million as ofDecember 31, 2022 and 2021, respectively. We reassess the realization of deferred tax assets each reporting period. In the event we were to determine that it is more likely than not that we will be unable to realize all or part of our deferred tax assets in the future, we would increase the valuation allowance and recognize a corresponding charge to earnings or other comprehensive income in the period in which we make such a determination. Likewise, if we later determine that we are more likely than not to realize the deferred tax assets, we would reverse the applicable portion of the previously recognized valuation allowance. In order for us to realize our deferred tax assets, we must be able to generate sufficient taxable income in the jurisdictions in which the deferred tax assets are located. Furthermore, we are subject to routine corporate income tax audits in many of these jurisdictions. We believe that positions taken on our tax returns are fully supported, but tax authorities may challenge these positions, which may not be fully sustained on examination by the relevant tax authorities. Accordingly, our income tax provision includes amounts intended to satisfy assessments that may result from these challenges. Determining the income tax provision for these potential assessments and recording the related effects requires management judgments and estimates. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our income tax provision, net income and cash flows.
Refer to Note 10 in the accompanying consolidated financial statements for further discussion relating to income taxes.
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