UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2014
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
(Registrants 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 x 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 x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act:
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ¨ No x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:
Class |
Outstanding at August 4, 2014 |
|
Common Stock, $.01 par value | 490,741,383 shares |
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
FORM 10-Q
Page |
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PART I. |
FINANCIAL INFORMATION | |||||
Item 1. |
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Consolidated Balance Sheets at June 30, 2014 and December 31, 2013 |
1 | |||||
2 | ||||||
3 | ||||||
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and June 30, 2013 |
4 | |||||
5-24 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
25-38 | ||||
Item 3. |
38 | |||||
Item 4. |
Controls and Procedures | 38 | ||||
PART II. |
OTHER INFORMATION | |||||
Item 1. |
39 | |||||
Item 1A. |
40 | |||||
Item 2. |
40 | |||||
Item 6. |
40 | |||||
42 |
Item 1. | Financial Statements |
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
(In thousands, except share data)
(Unaudited)
June 30,
2014 |
December 31,
2013 |
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ASSETS | ||||||||
Current assets |
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Cash and cash equivalents |
$ | 1,365,137 | $ | 1,803,669 | ||||
Accounts receivable, net |
473,922 | 488,217 | ||||||
Inventories |
102,524 | 107,907 | ||||||
Deferred income taxes, net |
| 80,989 | ||||||
Prepaid expenses and other |
224,732 | 238,657 | ||||||
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Total current assets |
2,166,315 | 2,719,439 | ||||||
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Property and equipment, net |
14,113,722 | 14,055,212 | ||||||
Other assets |
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Investments in and advances to unconsolidated affiliates |
1,420,924 | 1,374,836 | ||||||
Goodwill |
2,898,861 | 2,897,442 | ||||||
Other intangible assets, net |
4,396,436 | 4,511,861 | ||||||
Other long-term assets, net |
576,045 | 551,395 | ||||||
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Total other assets |
9,292,266 | 9,335,534 | ||||||
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$ | 25,572,303 | $ | 26,110,185 | |||||
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LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities |
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Accounts payable |
$ | 253,475 | $ | 241,192 | ||||
Income taxes payable |
32,817 | 14,813 | ||||||
Current portion of long-term debt |
317,194 | | ||||||
Deferred income taxes, net |
1,522 | | ||||||
Accrued interest on long-term debt |
191,141 | 188,522 | ||||||
Other accrued liabilities |
1,764,167 | 1,770,801 | ||||||
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Total current liabilities |
2,560,316 | 2,215,328 | ||||||
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Deferred income taxes |
2,356,998 | 2,430,414 | ||||||
Long-term debt |
12,606,520 | 13,447,230 | ||||||
Other long-term obligations |
106,941 | 141,590 | ||||||
Commitments and contingencies (Note 5) |
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Stockholders equity |
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Common stock, $.01 par value: authorized 1,000,000,000 shares; issued and outstanding 490,712,807 and 490,360,628 shares |
4,907 | 4,904 | ||||||
Capital in excess of par value |
4,166,365 | 4,156,680 | ||||||
Retained earnings |
270,796 | 57,092 | ||||||
Accumulated other comprehensive income |
15,235 | 12,503 | ||||||
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Total MGM Resorts International stockholders equity |
4,457,303 | 4,231,179 | ||||||
Noncontrolling interests |
3,484,225 | 3,644,444 | ||||||
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Total stockholders equity |
7,941,528 | 7,875,623 | ||||||
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$ | 25,572,303 | $ | 26,110,185 | |||||
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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
June 30, |
Six Months
Ended
June 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenues |
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Casino |
$ | 1,475,165 | $ | 1,443,157 | $ | 3,058,597 | $ | 2,844,577 | ||||||||
Rooms |
463,151 | 437,710 | 915,537 | 838,960 | ||||||||||||
Food and beverage |
412,723 | 394,247 | 796,115 | 754,129 | ||||||||||||
Entertainment |
138,735 | 121,001 | 272,512 | 234,855 | ||||||||||||
Retail |
50,811 | 52,748 | 95,427 | 97,455 | ||||||||||||
Other |
134,068 | 127,914 | 259,495 | 251,740 | ||||||||||||
Reimbursed costs |
95,745 | 92,741 | 190,720 | 182,977 | ||||||||||||
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2,770,398 | 2,669,518 | 5,588,403 | 5,204,693 | |||||||||||||
Less: Promotional allowances |
(189,365 | ) | (188,253 | ) | (376,972 | ) | (371,280 | ) | ||||||||
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2,581,033 | 2,481,265 | 5,211,431 | 4,833,413 | |||||||||||||
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Expenses |
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Casino |
916,817 | 916,807 | 1,907,651 | 1,792,053 | ||||||||||||
Rooms |
142,413 | 134,001 | 276,651 | 261,710 | ||||||||||||
Food and beverage |
241,124 | 225,696 | 461,182 | 430,436 | ||||||||||||
Entertainment |
104,761 | 89,940 | 203,698 | 173,665 | ||||||||||||
Retail |
26,055 | 27,865 | 49,531 | 53,831 | ||||||||||||
Other |
92,077 | 92,819 | 179,654 | 178,792 | ||||||||||||
Reimbursed costs |
95,745 | 92,741 | 190,720 | 182,977 | ||||||||||||
General and administrative |
327,484 | 314,324 | 646,730 | 618,225 | ||||||||||||
Corporate expense |
54,439 | 52,364 | 107,790 | 98,988 | ||||||||||||
Preopening and start-up expenses |
9,759 | 3,506 | 15,395 | 5,652 | ||||||||||||
Property transactions, net |
33,170 | 88,131 | 33,728 | 96,622 | ||||||||||||
Depreciation and amortization |
203,070 | 218,151 | 410,725 | 430,069 | ||||||||||||
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2,246,914 | 2,256,345 | 4,483,455 | 4,323,020 | |||||||||||||
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Income from unconsolidated affiliates |
5,868 | 6,682 | 24,644 | 23,026 | ||||||||||||
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Operating income |
339,987 | 231,602 | 752,620 | 533,419 | ||||||||||||
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Non-operating income (expense): |
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Interest expense, net of amounts capitalized |
(203,936 | ) | (214,500 | ) | (413,323 | ) | (439,947 | ) | ||||||||
Non-operating items from unconsolidated affiliates |
(14,578 | ) | (38,864 | ) | (28,301 | ) | (60,943 | ) | ||||||||
Other, net |
(309 | ) | (4,951 | ) | (1,743 | ) | (6,233 | ) | ||||||||
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(218,823 | ) | (258,315 | ) | (443,367 | ) | (507,123 | ) | |||||||||
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Income (loss) before income taxes |
121,164 | (26,713 | ) | 309,253 | 26,296 | |||||||||||
Benefit (provision) for income taxes |
52,540 | (3,865 | ) | 56,059 | (34,296 | ) | ||||||||||
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Net income (loss) |
173,704 | (30,578 | ) | 365,312 | (8,000 | ) | ||||||||||
Less: Net income attributable to noncontrolling interests |
(68,160 | ) | (62,380 | ) | (151,608 | ) | (78,412 | ) | ||||||||
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Net income (loss) attributable to MGM Resorts International |
$ | 105,544 | $ | (92,958 | ) | $ | 213,704 | $ | (86,412 | ) | ||||||
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Net income (loss) per share of common stock attributable to MGM Resorts International |
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Basic |
$ | 0.22 | $ | (0.19 | ) | $ | 0.44 | $ | (0.18 | ) | ||||||
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Diluted |
$ | 0.21 | $ | (0.19 | ) | $ | 0.42 | $ | (0.18 | ) | ||||||
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The accompanying condensed notes are an integral part of these consolidated financial statements.
2
MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
Three Months Ended
June 30, |
Six Months Ended
June 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
Net income (loss) |
$ | 173,704 | $ | (30,578 | ) | $ | 365,312 | $ | (8,000 | ) | ||||||
Other comprehensive income (loss), net of tax: |
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Foreign currency translation adjustment |
5,862 | 6,416 | 3,102 | (6,225 | ) | |||||||||||
Other |
| | 1,250 | 115 | ||||||||||||
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Other comprehensive income (loss) |
5,862 | 6,416 | 4,352 | (6,110 | ) | |||||||||||
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Comprehensive income (loss) |
179,566 | (24,162 | ) | 369,664 | (14,110 | ) | ||||||||||
Less: Comprehensive income attributable to noncontrolling interests |
(71,023 | ) | (65,470 | ) | (153,228 | ) | (75,297 | ) | ||||||||
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Comprehensive income (loss) attributable to MGM Resorts International |
$ | 108,543 | $ | (89,632 | ) | $ | 216,436 | $ | (89,407 | ) | ||||||
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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)
Six Months
Ended
June 30, |
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2014 | 2013 | |||||||
Cash flows from operating activities |
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Net income (loss) |
$ | 365,312 | $ | (8,000 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation and amortization |
410,725 | 430,069 | ||||||
Amortization of debt discounts, premiums and issuance costs |
18,728 | 16,876 | ||||||
Loss on retirement of long-term debt |
| 3,791 | ||||||
Provision for doubtful accounts |
24,294 | 16,696 | ||||||
Stock-based compensation |
16,600 | 16,555 | ||||||
Property transactions, net |
33,728 | 96,622 | ||||||
Loss from unconsolidated affiliates |
3,777 | 38,293 | ||||||
Distributions from unconsolidated affiliates |
7,260 | 8,075 | ||||||
Deferred income taxes |
(3,052 | ) | 69,143 | |||||
Change in operating assets and liabilities: |
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Accounts receivable |
(9,964 | ) | (13,703 | ) | ||||
Inventories |
5,391 | 6,456 | ||||||
Income taxes receivable and payable, net |
18,005 | 5,420 | ||||||
Prepaid expenses and other |
(2,605 | ) | (30,646 | ) | ||||
Prepaid Cotai land concession premium |
(11,206 | ) | 3,289 | |||||
Accounts payable and accrued liabilities |
(78,514 | ) | 98,230 | |||||
Other |
5,145 | (27,104 | ) | |||||
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Net cash provided by operating activities |
803,624 | 730,062 | ||||||
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Cash flows from investing activities |
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Capital expenditures, net of construction payable |
(370,248 | ) | (242,878 | ) | ||||
Dispositions of property and equipment |
412 | 323 | ||||||
Investments in and advances to unconsolidated affiliates |
(53,750 | ) | (14,400 | ) | ||||
Distributions from unconsolidated affiliates in excess of earnings |
790 | | ||||||
Investments in treasury securities - maturities longer than 90 days |
(93,137 | ) | (120,332 | ) | ||||
Proceeds from treasury securities - maturities longer than 90 days |
111,238 | 135,268 | ||||||
Other |
2,535 | 1,806 | ||||||
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Net cash used in investing activities |
(402,160 | ) | (240,213 | ) | ||||
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Cash flows from financing activities |
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Net repayments under bank credit facilities - maturities of 90 days or less |
(1,737,750 | ) | (14,000 | ) | ||||
Borrowings under bank credit facilities - maturities longer than 90 days |
3,451,875 | 2,793,000 | ||||||
Repayments under bank credit facilities - maturities longer than 90 days |
(1,728,125 | ) | (2,793,000 | ) | ||||
Retirement of senior notes |
(508,900 | ) | (462,234 | ) | ||||
Debt issuance costs |
| (17,061 | ) | |||||
Distributions to noncontrolling interest owners |
(314,447 | ) | (259,016 | ) | ||||
Other |
(2,173 | ) | (1,687 | ) | ||||
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Net cash used in financing activities |
(839,520 | ) | (753,998 | ) | ||||
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Effect of exchange rate on cash |
(476 | ) | (687 | ) | ||||
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Cash and cash equivalents |
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Net decrease for the period |
(438,532 | ) | (264,836 | ) | ||||
Balance, beginning of period |
1,803,669 | 1,543,509 | ||||||
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Balance, end of period |
$ | 1,365,137 | $ | 1,278,673 | ||||
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Supplemental cash flow disclosures |
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Interest paid, net of amounts capitalized |
$ | 391,976 | $ | 436,147 | ||||
Federal, state and foreign income taxes paid, net of refunds |
8,508 | 1,382 | ||||||
Non-cash investing and financing activities |
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Increase in investment in and advances to CityCenter related to change in completion guarantee liability |
$ | 42,922 | $ | 43,271 |
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 (the Company) is a Delaware corporation that acts largely as a holding company and, through wholly owned subsidiaries, primarily owns and/or operates casino resorts. The Company owns and operates the following casino 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. Other Nevada operations include Circus Circus Reno, Gold Strike in Jean and Railroad Pass in Henderson. Along with its local partners, the Company owns and operates MGM Grand Detroit in Detroit, Michigan. The Company owns and operates two resorts in Mississippi: Beau Rivage in Biloxi and Gold Strike Tunica. The Company also owns 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.
The Company owns 51% and has a controlling interest in MGM China Holdings Limited (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 concession. MGM Grand Paradise has a land concession contract with the government of Macau to develop a second resort and casino on an approximately 17.8 acre site in Cotai, Macau (MGM Cotai). MGM Cotai will be an integrated casino, hotel and entertainment complex with up to 1,600 hotel rooms, 500 gaming tables and 2,500 slots. The total estimated project budget is $2.9 billion, excluding development fees eliminated in consolidation, capitalized interest and land.
The Company owns 50% of 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 Dubai, United Arab Emirates government decree entity. CityCenter consists of Aria, a casino resort; Mandarin Oriental Las Vegas, a non-gaming boutique hotel; Crystals, a retail, dining and entertainment district; and Vdara, a luxury condominium-hotel. In addition, CityCenter features residential units in the Residences at Mandarin Oriental and Veer. The Company receives a management fee of 2% of revenues for the management of Aria and Vdara, and 5% of EBITDA (as defined in the agreements governing the Companys management of Aria and Vdara). In addition, the Company receives an annual fee of $3 million for the management of Crystals. See Note 3 for additional information related to CityCenter.
The Company has 50% interests in Grand Victoria and Silver Legacy. 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. Silver Legacy is located in Reno, adjacent to Circus Circus Reno, and the other 50% is owned by Eldorado LLC.
The Company seeks to leverage its management expertise and well-recognized brands through domestic and international expansion opportunities. The Company has entered into management agreements for non-gaming hotels, resorts and residential products in the Middle East, North Africa, India and the United States. In 2014, the Company and the Hakkasan Group formed MGM Hakkasan Hospitality (MGM Hakkasan), owned 50% by each member, to design, develop and manage luxury non-gaming hotels, resorts and residences under certain brands licensed from the Company and the Hakkasan Group. The Company will contribute all of the management agreements for non-gaming hotels, resorts and residential projects (outside of the greater China region) that are currently under development to MGM Hakkasan. In addition, the Company will continue to develop and manage properties in the greater China region with Diaoyutai State Guesthouse, including the MGM Grand Sanya on Hainan Island, in the Peoples Republic of China, which opened in 2012.
The Maryland Video Lottery Facility Location Commission has awarded MGM National Harbor, LLC (MGM National Harbor) the license to build and operate a destination resort casino in Prince Georges County at National Harbor. Currently, the expected cost to develop and construct MGM National Harbor is approximately $1.2 billion, excluding capitalized interest and land related costs. The Company expects the resort to include a casino with approximately 3,600 slots, 160 table games including poker; a 300 suite hotel with luxury spa and rooftop pool; high end branded retail; fine and casual dining; a dedicated 3,000 seat theater venue; 35,000 square feet of meeting and event space; and a 5,000 space parking garage.
On June 13, 2014, the Massachusetts Gaming Commission (the MGC) agreed to award the Companys subsidiary developing MGM Springfield the Category One casino license in Region B, Western Massachusetts, one of three licensing regions designated by legislation. However, on June 24, 2014, the Massachusetts Supreme Judicial Court ruled that a proposed ballot initiative seeking to prohibit local casinos, slot parlors and other wagering in Massachusetts was constitutional and thereby allowed the ballot initiative to appear on the November 4, 2014 ballot. The MGC has agreed that the Company is not required to make the final award payment of licensing fees and other costs unless the ballot initiative fails to pass in the November 2014 elections.
MGM Springfield is proposed to be developed on 14.5 acres of land between Union and State streets, and Columbus Avenue and Main Street in Springfield, Massachusetts. The cost to develop and construct MGM Springfield is currently expected to be approximately $690 million, excluding capitalized interest and land related costs. The Company expects the resort will include a casino with approximately 3,000 slots and 75 table games, a poker room and high limit VIP gambling area, 250 hotel rooms, 55,000 square feet of retail and restaurant space that will accommodate 15 shops and restaurants, and a multi-level parking garage.
5
In 2013, the Company entered into an agreement with a subsidiary of Anschutz Entertainment Group, Inc. (AEG) (a leader in sports, entertainment, and promotions) to design, construct, and operate an arena which will be located on a parcel of the Companys land between Frank Sinatra Drive and New York-New York, adjacent to the Las Vegas Strip. The Company and AEG each own 50% of the developer of the arena. The proposed arena is anticipated to seat between 18,000 20,000 people and is currently scheduled to be completed in 2016. Such development is estimated to cost approximately $350 million, excluding capitalized interest and land related costs, and is contingent on obtaining permanent financing.
The Company has two reportable segments: wholly owned domestic resorts and MGM China. See Note 10 for additional information about the Companys segments.
Borgata. The Company has a 50% economic interest in the Borgata Hotel Casino & Spa (Borgata) located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey. Boyd Gaming Corporation owns the other 50% of Borgata and also operates the resort. The Companys interest is held in trust and was offered for sale pursuant to its amended settlement agreement with the New Jersey Division of Gaming Enforcement and approved by the New Jersey Casino Control Commission (CCC). The terms of the amended settlement agreement previously mandated the sale by March 2014. The Company had the right to direct the sale through March 2013 (the divesture period), subject to approval of the CCC, and the trustee was responsible for selling the trust property during the following 12-month period (the terminal sale period). On February 13, 2013, the settlement agreement was further amended to allow the Company to re-apply to the CCC for licensure in New Jersey and to defer expiration of these periods pending the outcome of the licensure process. The Company has submitted its licensure request to the CCC and there can be no assurances that such request will be approved or with respect to the timing of the licensure process. If the CCC denies the Companys licensure request, then the divesture period will immediately end, and the terminal sale period will immediately begin, which will result in the Companys Borgata interest being disposed of by the trustee pursuant to the terms of the settlement agreement.
The Company consolidates the trust because it is the sole economic beneficiary and accounts for its interest in Borgata under the cost method. The Company reviews its investment carrying value whenever indicators of impairment exist. As of June 30, 2014, the trust had $86 million of cash and investments, of which $69 million is held in U.S. treasury securities with maturities greater than three months but less than one year, and is recorded within Prepaid expenses and other.
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 (GAAP) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the Companys 2013 annual consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2013.
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 Companys interim financial statements. The results for such periods are not necessarily indicative of the results to be expected for the full year.
Fair value measurements. Fair value measurements affect the Companys accounting and impairment assessments of its long-lived assets, investments in unconsolidated affiliates, cost method investments, assets acquired and liabilities assumed in an acquisition, and goodwill and other intangible assets. Fair value measurements also affect the Companys accounting for certain of its financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes: Level 1 inputs, such as quoted prices in an active market; Level 2 inputs, which are observable inputs for similar assets; or Level 3 inputs, which are unobservable inputs.
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The Company uses Level 2 inputs to measure the fair value of the Companys treasury securities held by the Borgata trust. See Note 1; |
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The Company uses Level 1 inputs for its long-term debt fair value disclosures. See Note 4; and |
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The Company used Level 3 inputs when assessing the fair value of its investment in Grand Victoria at June 30, 2014 and 2013. See Note 3. |
Income tax provision. For interim income tax reporting the Company estimates its annual effective tax rate and applies it to its year-to-date ordinary income. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates are reported in the interim period in which they occur. The Companys effective income tax rate was (43.4%) and (18.1%) for the three months and six months ended June 30, 2014, respectively.
6
The Company recognizes deferred tax assets, net of applicable reserves, related to tax loss and credit carryforwards and other temporary differences with a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied. Because of the Companys history of recent losses in the United States, the Company does not rely on future United States sourced operating income in assessing the realization of its deferred tax assets.
Because MGM China is presently exempt from the Macau 12% complementary tax on gaming profits, the Company believes that payment of the Macau Special Gaming Tax qualifies as a tax paid in lieu of an income tax that is creditable against U.S. taxes. As long as the exemption from Macaus 12% complementary tax on gaming profits continues, the Company expects that it will generate excess foreign tax credits on an annual basis and that none of the excess foreign credits will be utilized until the exemption expires. Although the Companys current five-year exemption from the Macau 12% complementary tax on gaming profits ends on December 31, 2016, the Company believes it will be entitled to receive a third five-year exemption from Macau based upon exemptions granted to the Companys competitors in order to ensure non-discriminatory treatment among gaming concessionaires and subconcessionaires. For all periods beyond December 31, 2021, the Company has assumed that it will be paying the Macau 12% complementary tax on gaming profits and will thus not be able to credit the Macau Special Gaming Tax in such years, and has factored that assumption into both the measurement of its foreign deferred tax assets and liabilities as well as its future projections of foreign sourced income. As a result, the Company projects that it will be able to realize a benefit, and hence, projects that it will record a deferred tax asset for foreign tax credits, net of valuation allowance (net deferred foreign tax credit asset), of approximately $335 million as of December 31, 2014 and has reflected this assumption in its annual effective tax rate for 2014. Should the Company in a future period actually receive or be able to assume under the law a fourth five-year exemption, an additional valuation allowance would likely need to be provided on some portion or all of the net deferred foreign tax credit asset, resulting in an increase in the provision for income taxes in such period.
During the quarter ended June 30, 2014 the Company received final approval from the Joint Committee on Taxation of the results of IRS examinations covering its 2005 through 2009 tax years. These examinations are now considered settled for financial reporting purposes. Consequently, the Company reduced unrecognized tax benefits by $81 million and recorded income tax benefit of $31 million to reflect the effects of this settlement. The Company previously made a deposit of $30 million with the IRS to cover the expected cash taxes and interest resulting from the tentatively agreed adjustments for these examinations and does not expect to make any further cash payments as a result of this final settlement. Since the tax and interest had not been assessed by the end of the second quarter, the deposit is included in Prepaid expenses and other while the expected amount of the assessment is included in Income taxes payable on the balance sheet at June 30, 2014.
Recently issued accounting standards. During the six months ended June 30, 2014, the Company implemented Financial Accounting Standards Board (FASB) Accounting Standards Update No. 2013-11 (ASU 2013-11), which is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2013. ASU 2013-11 provides explicit guidance on the financial statement presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. As a result of implementing ASU 2013-11, the Company recorded a reduction in liability for unrecognized tax benefits and a corresponding reduction in deferred tax assets of $19 million in the six months ended June 30, 2014.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, (ASU 2014-09), which is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2016. ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. Additionally, the new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The Company is currently assessing the impact of adopting this new accounting guidance will have on its consolidated financial statements and footnote disclosures.
NOTE 3 INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Investments in and advances to unconsolidated affiliates consisted of the following:
June 30, | December 31, | |||||||
2014 | 2013 | |||||||
(In thousands) | ||||||||
CityCenter Holdings, LLC CityCenter (50%) |
$ | 1,226,940 | $ | 1,172,087 | ||||
Elgin Riverboat ResortRiverboat Casino Grand Victoria (50%) |
140,000 | 169,579 | ||||||
Other |
53,984 | 33,170 | ||||||
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$ | 1,420,924 | $ | 1,374,836 | |||||
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7
The Company recorded its share of the results of operations of unconsolidated affiliates as follows:
Three Months Ended
June 30, |
Six Months Ended
June 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Income from unconsolidated affiliates |
$ | 5,868 | $ | 6,682 | $ | 24,644 | $ | 23,026 | ||||||||
Preopening and start-up expenses |
(101 | ) | | (120 | ) | (376 | ) | |||||||||
Non-operating items from unconsolidated affiliates |
(14,578 | ) | (38,864 | ) | (28,301 | ) | (60,943 | ) | ||||||||
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$ | (8,811 | ) | $ | (32,182 | ) | $ | (3,777 | ) | $ | (38,293 | ) | |||||
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Grand Victoria
At June 30, 2014, the Company reviewed the carrying value of its Grand Victoria investment for impairment due to a greater than anticipated decline in operating results, as well as a decrease in forecasted cash flows for 2014 through 2017 compared to the prior forecast. The Company used a blended discounted cash flow analysis and guideline public company method to determine the estimated fair value from a market participants viewpoint. Key assumptions included in the discounted cash flow analysis were estimates of future cash flows including outflows for capital expenditures, a long-term growth rate of 2% and a discount rate of 10.5%. Key assumptions in the guideline public company method included business enterprise value multiples selected based on the range of multiples in Grand Victorias peer group. As a result of the analysis, the Company determined that it was necessary to record an other-than-temporary impairment charge of $29 million at June 30, 2014, based on an estimated fair value of $140 million for the Companys 50% interest. The Company intends to, and believes it will be able to, retain the investment in Grand Victoria; however, due to the extent of the shortfall and the Companys assessment of the uncertainty of fully recovering its investment, the Company has determined that the impairment was other-than-temporary. At June 30, 2013, the Company recorded an impairment charge of $37 million on its investment in Grand Victoria based on the then estimated fair value of $170 million for its 50% interest.
City Center
CityCenter summary financial information. Summarized balance sheet information for CityCenter is as follows:
June 30, | December 31, | |||||||
2014 | 2013 | |||||||
(In thousands) | ||||||||
Current assets |
$ | 494,634 | $ | 451,058 | ||||
Property and other assets, net |
8,070,612 | 8,261,240 | ||||||
Current liabilities |
511,485 | 462,487 | ||||||
Long-term debt and other long-term obligations |
1,552,353 | 1,688,113 | ||||||
Equity |
6,501,408 | 6,561,698 |
Summarized income statement information for CityCenter is as follows:
Three Months Ended
June 30, |
Six Months Ended
June 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Net revenues |
$ | 319,875 | $ | 333,174 | $ | 656,292 | $ | 648,316 | ||||||||
Operating expenses |
(344,710 | ) | (356,948 | ) | (676,164 | ) | (672,258 | ) | ||||||||
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Operating loss |
(24,835 | ) | (23,774 | ) | (19,872 | ) | (23,942 | ) | ||||||||
Non-operating expenses |
(26,953 | ) | (101,992 | ) | (52,118 | ) | (169,667 | ) | ||||||||
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Net loss |
$ | (51,788 | ) | $ | (125,766 | ) | $ | (71,990 | ) | $ | (193,609 | ) | ||||
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8
NOTE 4 LONG-TERM DEBT
Long-term debt consisted of the following:
June 30, | December 31, | |||||||
2014 | 2013 | |||||||
(In thousands) | ||||||||
Senior credit facility: |
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$2,758 million ($2,772 million at December 31, 2013) term loans, net |
$ | 2,751,575 | $ | 2,765,041 | ||||
MGM Grand Paradise credit facility |
553,520 | 553,242 | ||||||
$508.9 million 5.875% senior notes, due 2014, net |
| 508,848 | ||||||
$1,450 million 4.25% convertible senior notes, due 2015, net |
1,453,795 | 1,456,153 | ||||||
$875 million 6.625% senior notes, due 2015, net |
875,701 | 876,022 | ||||||
$242.9 million 6.875% senior notes, due 2016 |
242,900 | 242,900 | ||||||
$732.7 million 7.5% senior notes, due 2016 |
732,749 | 732,749 | ||||||
$500 million 10% senior notes, due 2016, net |
497,459 | 496,987 | ||||||
$743 million 7.625% senior notes, due 2017 |
743,000 | 743,000 | ||||||
$475 million 11.375% senior notes, due 2018, net |
468,178 | 467,451 | ||||||
$850 million 8.625% senior notes, due 2019 |
850,000 | 850,000 | ||||||
$500 million 5.25% senior notes, due 2020 |
500,000 | 500,000 | ||||||
$1,000 million 6.75% senior notes, due 2020 |
1,000,000 | 1,000,000 | ||||||
$1,250 million 6.625% senior notes, due 2021 |
1,250,000 | 1,250,000 | ||||||
$1,000 million 7.75% senior notes, due 2022 |
1,000,000 | 1,000,000 | ||||||
$0.6 million 7% debentures, due 2036, net |
572 | 572 | ||||||
$4.3 million 6.7% debentures, due 2096 |
4,265 | 4,265 | ||||||
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12,923,714 | 13,447,230 | |||||||
Less: Current portion |
(317,194 | ) | | |||||
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$ | 12,606,520 | $ | 13,447,230 | |||||
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As of June 30, 2014, the amount available under the Companys revolving senior credit facility is less than current maturities related to the Companys term loan credit facilities and convertible senior notes. The Company has excluded from the current portion of long-term debt the amount available for refinancing under its revolving credit facility.
Senior credit facility. At June 30, 2014, the Companys senior credit facility consisted of a $1.2 billion revolving credit facility, a $1.03 billion term loan A facility and a $1.72 billion term loan B facility. The revolving and term loan A facilities bear interest at LIBOR plus an applicable rate determined by the Companys credit rating (2.75% as of June 30, 2014). The term loan B facility bears interest at LIBOR plus 2.50%, with a LIBOR floor of 1.00%. The revolving and term loan A facilities mature in December 2017 and the term loan B facility matures in December 2019. The term loan A and term loan B facilities are subject to scheduled amortization payments on the last day of each calendar quarter in an amount equal to 0.25% of the original principal balance. The Company permanently repaid $7 million and $14 million in the three and six months ended June 30, 2014, respectively, in accordance with the scheduled amortization. The Company had $1.2 billion of available borrowing capacity under its senior credit facility at June 30, 2014. At June 30, 2014, the interest rate on the term loan A was 2.9%, the interest rate on the term loan B was 3.5%.
The land and substantially all of the assets of MGM Grand Las Vegas, Bellagio and The Mirage secure up to $3.35 billion of obligations outstanding under the senior credit facility. In addition, the land and substantially all of the assets of New York-New York and Gold Strike Tunica secure the entire amount of the senior credit facility and the land and substantially all of the assets of MGM Grand Detroit secure its $450 million of obligations as a co-borrower under the senior credit facility. In addition, the senior credit facility is secured by a pledge of the equity or limited liability company interests of the subsidiaries that own the pledged properties.
The senior credit facility contains customary representations and warranties and customary affirmative and negative covenants. In addition, the senior credit facility requires the Company and its restricted subsidiaries to maintain a minimum trailing four-quarter EBITDA and limits the ability of the Company and its restricted subsidiaries to make capital expenditures and investments. As of June 30, 2014, the Company and its restricted subsidiaries are required to maintain a minimum EBITDA (as defined in the senior credit facility) of $1.10 billion. The minimum EBITDA increases to $1.20 billion for September 30, 2014 and December 31, 2014 and to $1.25 billion for March 31, 2015 and June 30, 2015, with periodic increases thereafter. EBITDA for the trailing four quarters ended June 30, 2014, calculated in accordance with the terms of the senior credit facility, was $1.38 billion. The senior credit facility limits the Company and its restricted subsidiaries to capital expenditures of $500 million per fiscal year, with unused amounts in any fiscal year rolling over to the next fiscal year, but not any fiscal year thereafter. The Companys total capital expenditures allowable under the senior credit facility for fiscal year 2014, after giving effect to unused amounts from 2013, was $681 million. In addition, the senior credit facility limits the Companys ability to make investments subject to certain thresholds and other important exceptions. As of June 30, 2014, the Company and its restricted subsidiaries were within the limit of capital expenditures and other investments for the calendar year 2014.
9
The senior credit facility provides for customary events of default, including, without limitation, (i) payment defaults, (ii) covenant defaults, (iii) cross-defaults to certain other indebtedness in excess of specified amounts, (iv) certain events of bankruptcy and insolvency, (v) judgment defaults in excess of specified amounts, (vi) the failure of any loan document by a significant party to be in full force and effect and such circumstance, in the reasonable judgment of the required lenders, is materially adverse to the lenders, or (vii) the security documents cease to create a valid and perfected first priority lien on any material portion of the collateral. In addition, the senior credit facility provides that a cessation of business due to revocation, suspension or loss of any gaming license affecting a specified amount of its revenues or assets, will constitute an event of default.
MGM China credit facility. At June 30, 2014, the MGM China credit facility consisted of approximately $550 million of term loans and an approximately $1.45 billion revolving credit facility due October 2017. The credit facility is subject to scheduled amortization payments beginning in 2016. The outstanding balance at June 30, 2014 was comprised solely of term loans. The interest rate on the facility fluctuates annually based on HIBOR plus a margin, which ranges between 1.75% and 2.50%, based on MGM Chinas leverage ratio. The margin was 1.75% at June 30, 2014. MGM China is a joint and several co-borrower with MGM Grand Paradise. The MGM China credit facility is secured by MGM Grand Paradises interest in the Cotai land use right, and MGM China, MGM Grand Paradise and their guarantor subsidiaries have granted a security interest in substantially all of their assets to secure the amended facilities; the material subsidiaries of MGM China continue to guarantee the facilities. The credit facility will be used for general corporate purposes and for the development of the Cotai project.
The MGM China credit facility agreement contains customary representations and warranties, events of default, affirmative covenants and negative covenants, which impose restrictions on, among other things, the ability of MGM China and its subsidiaries to make investments, pay dividends and sell assets, and to incur additional debt and additional liens. MGM China is also required to maintain compliance with a maximum consolidated total leverage ratio of 4.50 to 1.00 prior to the first anniversary of the MGM Cotai opening date and 4.00 to 1.00 thereafter, in addition to a minimum interest coverage ratio of 2.50 to 1.00. MGM China was in compliance with its credit facility covenants at June 30, 2014.
Senior notes. The Company repaid its $509 million 5.875% senior notes in February 2014 at maturity.
Senior convertible notes. In April 2010, the Company issued $1.15 billion of 4.25% convertible senior notes due 2015 for net proceeds to the Company of $1.12 billion. The notes are general unsecured obligations of the Company and rank equally in right of payment with the Companys other existing senior unsecured indebtedness. The notes are convertible at an initial conversion rate of approximately 53.83 shares of the Companys common stock per $1,000 principal amount of the notes, representing an initial conversion price of approximately $18.58 per share of the Companys common stock. In connection with the offering, the Company entered into capped call transactions to reduce the potential dilution of the Companys stock upon conversion of the notes. The capped call transactions have a cap price equal to approximately $21.86 per share.
In June 2011, the Company sold an additional $300 million in aggregate principal amount of 4.25% convertible senior notes due 2015 (the Notes) on terms that were consistent with those governing the Companys existing convertible senior notes due 2015 for a purchase price of 103.805% of the principal amount. The Company received approximately $311 million in proceeds related to this transaction. The Notes were recorded at fair value determined by the trading price (105.872%) of the Companys existing convertible notes on the date of issuance of the Notes, with the excess over the principal amount recorded as a premium to be recognized over the term of the Notes.
Fair value of long-term debt. The estimated fair value of the Companys long-term debt at June 30, 2014 was $14.7 billion. At December 31, 2013, the estimated fair value of the Companys long-term debt was $14.9 billion. Fair value was estimated using quoted market prices for the Companys senior notes and senior credit facility. Carrying value of the MGM Grand Paradise credit facility approximates fair value.
NOTE 5 COMMITMENTS AND CONTINGENCIES
CityCenter construction litigation. In March 2010, Perini Building Company, Inc. (Perini), general contractor for CityCenter, filed a lawsuit in the Eighth Judicial District Court for Clark County, State of Nevada, against MGM MIRAGE Design Group (a wholly owned subsidiary of the Company which was the original party to the Perini construction agreement) and certain direct or indirect subsidiaries of CityCenter Holdings, LLC (the CityCenter Owners). Perini asserted that CityCenter was substantially completed, but the defendants failed to pay Perini approximately $490 million allegedly due and owing under the construction agreement for labor, equipment and materials expended on CityCenter. The complaint further charged the defendants with failure to provide timely and complete design documents, late delivery to Perini of design changes, mismanagement of the change order process, obstruction of Perinis ability to complete the Harmon component, and fraudulent inducement of Perini to compromise significant amounts due for its general conditions. The complaint advanced claims for breach of contract, breach of the implied covenant of good faith and fair dealing, tortious breach of the implied covenant of good faith and fair dealing, unjust enrichment and promissory estoppel, and fraud and intentional misrepresentation. Perini seeks compensatory damages, punitive damages, attorneys fees and costs.
In April 2010, Perini served an amended complaint in this case which joins as defendants many owners of CityCenter residential condominium units (the Condo Owner Defendants), added a count for foreclosure of Perinis recorded master mechanics lien against the CityCenter property in the amount of approximately $491 million, and asserted the priority of this mechanics lien over the interests of the CityCenter Owners, the Condo Owner Defendants and CityCenter lenders in the CityCenter property.
10
The CityCenter Owners and the other defendants dispute Perinis allegations and contend that the defendants are entitled to substantial amounts from Perini, including offsets against amounts claimed to be owed to Perini and its subcontractors and damages based on breach of their contractual and other duties to CityCenter, duplicative payment requests, non-conforming work, lack of proof of alleged work performance, defective work related to the Harmon, property damage and Perinis failure to perform its obligations to pay certain subcontractors and to prevent filing of liens against CityCenter. Parallel to the court litigation, CityCenter management conducted an extra-judicial program for settlement of CityCenter subcontractor claims. CityCenter has resolved the claims of 219 first-tier Perini subcontractors (including the claims of any lower-tier subcontractors that might have claims through those first-tier subcontractors), with only three remaining for further proceedings along with trial of Perinis claims and CityCenters Harmon-related counterclaim and other claims by CityCenter against Perini and its parent guarantor, Tutor Perini. Two of the remaining subcontractors are implicated in the defective work at the Harmon. In August 2013, Perini recorded an amended notice of lien reducing its lien to approximately $167 million.
In November 2012, Perini filed a second amended complaint which, among other things, added claims against the CityCenter defendants of breach of contract (alleging that CityCenters Owner Controlled Insurance Program (OCIP) failed to provide adequate project insurance for Perini with broad coverages and high limits), and tortious breach of the implied covenant of good faith and fair dealing (alleging improper administration by CityCenter of the OCIP and Builders Risk insurance programs).
In 2013, CityCenter reached a settlement agreement with certain professional service providers against whom it had asserted claims in this litigation for errors or omissions with respect to the CityCenter project, which settlement has been approved by the court. In April 2014, CityCenter settled for $55 million, net of deductible, its 2008 builders risk insurance claim for loss and damage with respect to the Harmons defective condition.
Further, CityCenter and Perini have entered a settlement agreement which resolves most but not all of the components of Perinis non-Harmon-related lien claim against CityCenter. The settlement established a stipulated value for Perinis mechanics lien, which amount will not be paid until resolution of CityCenters damages claim for the Harmon and will be offset against any judgment CityCenter obtains against Perini for damages relating to construction of the Harmon. Pursuant to the parties stipulation, on February 24, 2014, Perini filed a revised lien for $174 million as the amount claimed by Perini and the remaining Harmon-related subcontractors. The discovery process continues. Trial of the remainder of Perinis lien claim, the remaining subcontractors claims against CityCenter, and CityCenters counterclaims against Perini and certain subcontractors for defective work at the Harmon has been rescheduled to commence on September 23, 2014.
CityCenter Owners and the other defendants will continue to vigorously assert and protect their interests in the Perini lawsuit. The Company believes it is probable that the CityCenter Owners and the other defendants will be liable for $170 million in connection with the non-Harmon settlement agreement and remaining claims in this lawsuit. Amounts determined to be owed would be funded in part under the Companys completion guarantee which is discussed below. The Company does not believe it is reasonably possible it will be liable for any material amount in excess of its estimate of its probable liability. The Companys estimate of its probable liability does not include any offset for amounts that may be recovered on its counterclaims against Perini and certain subcontractors for defective work at the Harmon.
Please see below for further discussion on the Companys completion guarantee obligation which may be impacted by the outcome of the above litigation and CityCenters extra-judicial settlement process.
CityCenter completion guarantee. In October 2013, the Company entered into a third amended and restated completion and cost overrun guarantee, which is collateralized by substantially all of the assets of Circus Circus Las Vegas, as well as certain undeveloped land adjacent to that property. The terms of the amended and restated completion guarantee provide CityCenter the ability to utilize up to $72 million of net residential proceeds to fund construction costs, or to reimburse the Company for construction costs previously expended. As of June 30, 2014, CityCenter is holding approximately $72 million in a separate bank account representing the remaining condo proceeds available to fund completion guarantee obligations or be reimbursed to the Company. In accordance with the amended and restated completion guarantee such amounts may only be used to fund construction lien obligations or to reimburse the Company once the Perini litigation is settled.
As of June 30, 2014, the Company has funded $727 million under the completion guarantee and has accrued a liability of $128 million, which includes estimated litigation costs related to the resolution of disputes with contractors concerning the final construction costs and estimated amounts to be paid to contractors in connection with the Perini litigation. The Companys estimated obligation has been offset by the $72 million of condominium proceeds received and held in escrow by CityCenter, which are available to fund construction lien claims upon final resolution of the Perini litigation. Also, the Companys accrual reflects certain estimated offsets to the amounts claimed by the contractors. The Company does not believe it is reasonably possible it could be liable for amounts in excess of what it has accrued related to the Perini Litigation claims. However, an insurer participating in the OCIP for the CityCenter construction project has initiated an arbitration against the Company in an attempt to recover certain costs it has allegedly incurred in connection with CityCenters claims against Perini and certain subcontractors for defective work at the Harmon. The Company disputes that such amounts are owed to the insurance company, but believes it is reasonably possible it may ultimately be found liable for some portion of the claim. The arbitration is in its beginning phase and there are significant factual and legal issues to be determined and resolved. Further, the Company has not had the opportunity to engage in any discovery, and the amount of damages to be sought by the insurer is indeterminate. Because of these factors, the Company does not currently have sufficient information to determine a range of reasonably possible loss.
11
Harmon demolition. In response to a request by the Clark County Building Division (the Building Division), CityCenter engaged an engineer to conduct an analysis, based on all available information, as to the structural stability of the Harmon under building-code-specified load combinations. On July 11, 2011, that engineer submitted the results of his analysis of the Harmon tower and podium in its current as-built condition. The engineer opined, among other things, that [i]n a code-level earthquake, using either the permitted or current code specified loads, it is likely that critical structural members in the tower will fail and become incapable of supporting gravity loads, leading to a partial or complete collapse of the tower. There is missing or misplaced reinforcing steel in columns, beams, shear walls, and transfer walls throughout the structure of the tower below the twenty-first floor. Based on this engineering opinion, the Building Division requested a plan of action from CityCenter. CityCenter informed the Building Division that it decided to abate the potential for structural collapse of the Harmon in the event of a code-level earthquake by demolishing the building, and enclosed a plan of action for demolition by implosion prepared by LVI Environmental Services of Nevada, Inc (LVI). CityCenter also advised that prior to undertaking the demolition plan of action, it would seek relief from a standing order of the district court judge presiding over the Perini litigation that prohibits alteration or destruction of the building without court approval. In addition, CityCenter supplied the foundational data for the engineering conclusions stated in the July 11, 2011 letter declaring the Harmons structural instability in the event of a code-level earthquake. On November 22, 2011, the Building Division required that CityCenter submit a plan to abate the code deficiencies discovered in the Harmon tower.
In December 2011, CityCenter resubmitted to the Building Division the plan of abatement action prepared by LVI which was first submitted on August 15, 2011, and met with the Building Division about the requirements necessary to obtain demolition permits and approvals. As discussed above, the timing of the demolition of the Harmon is subject to rulings in the Perini litigation.
The district court presiding over the Perini litigation had previously granted CityCenters motion to demolish the Harmon, but stayed the demolition to allow CityCenter an opportunity to conduct additional Phase 4 destructive testing at the Harmon following the courts order prohibiting CityCenters structural engineering expert from extrapolating the results of pre-Phase 4 testing to untested portions of the building.
In May 2013, CityCenter completed additional Phase 4 destructive testing of 468 structural elements at the Harmon, analysis of which data confirmed the existence of a wide variety of construction defects throughout the Harmon tower. In his June 2013 expert report CityCenters structural engineer opined that the additional test results and extrapolation thereof to untested portions of the building show that after a service-level earthquake (typically defined as an earthquake with a 50% chance of occurring in 30 years), the Harmon can be expected to sustain extensive damage and failure of many structural elements, and in a large earthquake, such as a building code-level earthquake, critical elements of the Harmon are likely to fail and lead to a partial or complete collapse of the tower. In April 2013, Perinis structural engineering expert John A. Martin & Associates (JAMA) had sent a letter to the Building Division which declared in part that JAMA no longer believes that the Harmon Tower can be repaired to a code compliant structure, which condition JAMA attributed to CityCenters building testing. On July 18, 2013 CityCenter filed a renewed motion with the district court for permission to demolish the Harmon. On August 23, 2013, the court granted CityCenters motion, and CityCenter commenced planning for demolition of the building. On January 31, 2014, the court revoked its prior authorization of demolition of the Harmon, without prejudice to renewal of the application, on the grounds that CityCenters non-party builders risk insurer requested further testing in the building. That request for further testing was withdrawn pursuant to the insurers settlement of CityCenters Harmon 2008 policy claim. On April 22, 2014 the court granted CityCenters renewed application for permission to demolish the Harmon. The Clark County Building Department has issued the first in a series of permits required for demolition of this building. CityCenter has commenced a controlled deconstruction of the Harmon structure in accordance with the standards set by its expert consultants and the Clark County Building Department.
The Company does not believe it would be responsible for funding any additional amounts under the completion guarantee that might be required with respect to the Harmon; however, the Companys view is based on a number of developing factors, including with respect to on-going litigation with CityCenters contractors and other developments related to the CityCenter venture, all of which are subject to change.
Cotai land concession contract. MGM Grand Paradises land concession contract for an approximate 17.8 acre site in Cotai, Macau became effective on January 9, 2013 and has an initial term of 25 years. The total land premium payable to the Macau government for the land concession contract is $161 million and is composed of a down payment and eight additional semi-annual payments. As of June 30, 2014, MGM China had paid $86 million of the contract premium recorded within Other long-term assets, net. In July 2014, MGM China paid the third semi-annual installment payment of $15 million under the land concession contract. Including interest on the five remaining semi-annual payments, MGM China has $73 million remaining payable for the land concession contract. In addition, MGM Grand Paradise is required to pay the Macau government approximately $269,000 per year in rent during the course of development of the land and approximately $681,000 per year in rent once the development is completed. The annual rent is subject to review by the Macau government every five years. Under the terms of the land concession contract, MGM Grand Paradise is required to complete the development of the land by January 2018.
Other guarantees. The Company is party to various guarantee contracts in the normal course of business, which are generally supported by letters of credit issued by financial institutions. The Companys senior credit facility limits the amount of letters of credit that can be issued to $500 million, and the amount of available borrowings under the senior credit facility is reduced by any outstanding letters of credit. At June 30, 2014, the Company had provided $35 million of letters of credit. MGM Chinas senior credit facility limits the amount of letters of credit that can be issued to $100 million, and the amount of available borrowings under the senior credit facility is reduced by any outstanding letters of credit. At June 30, 2014, MGM China had provided $39 million of letters of credit under its credit facility.
Other litigation. The Company is a party to various legal proceedings, most of which relate to routine matters incidental to its business. Management does not believe that the outcome of such proceedings will have a material adverse effect on the Companys financial position, results of operations or cash flows.
12
NOTE 6 INCOME (LOSS) PER SHARE OF COMMON STOCK
The weighted-average number of common and common equivalent shares used in the calculation of basic and diluted income (loss) per share consisted of the following:
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Numerator: |
||||||||||||||||
Net income (loss) attributable to MGM Resorts Internationalbasic |
$ | 105,544 | $ | (92,958 | ) | $ | 213,704 | $ | (86,412 | ) | ||||||
Interest on convertible debt, net of tax |
2,103 | | 4,298 | | ||||||||||||
Potentially dilutive effect due to MGM China share option plan |
(84 | ) | | (213 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) attributable to MGM Resorts Internationaldiluted |
$ | 107,563 | $ | (92,958 | ) | $ | 217,789 | $ | (86,412 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||
Denominator: |
||||||||||||||||
Weighted-average common shares outstandingbasic |
490,786 | 489,484 | 490,692 | 489,388 | ||||||||||||
Potential dilution from share-based awards |
6,436 | | 6,446 | | ||||||||||||
Potential dilution from assumed conversion of convertible debt |
16,149 | | 16,149 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted-average common and common equivalent sharesdiluted |
513,371 | 489,484 | 513,287 | 489,388 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Antidilutive share-based awards excluded from the calculation of diluted earnings per share |
2,534 | 18,498 | 2,580 | 18,498 | ||||||||||||
|
|
|
|
|
|
|
|
For the three and six months ended June 30, 2014, potential dilution from the assumed conversion of convertible debt relates to the $300 million 4.25% senior convertible notes issued in June 2011. The $1.15 billion 4.25% senior convertible notes issued in April 2010 were excluded from the three and six months ended June 30, 2014 calculation of diluted earnings per share as their effect would be antidilutive.
NOTE 7 STOCKHOLDERS EQUITY
MGM China dividends. MGM China paid a $499 million special dividend in March 2014, of which $254 million remained within the consolidated entity and $245 million was distributed to noncontrolling interests, and a $127 million final dividend in June 2014, of which $65 million remained within the consolidated entity and $62 million was distributed to noncontrolling interests.
MGM China paid a $500 million special dividend in March 2013, of which $255 million remained within the consolidated entity and $245 million was distributed to noncontrolling interests.
On August 5, 2014, MGM Chinas board of directors announced a dividend of $136 million, which will be paid to shareholders of record as of August 25, 2014 and distributed on or about September 1, 2014. The Company will receive $69 million, representing its 51% share of the dividend.
13
Supplemental equity information. The following table presents the Companys changes in stockholders equity for the six months ended June 30, 2014:
MGM Resorts
International Stockholders Equity |
Noncontrolling
Interests |
Total
Stockholders Equity |
||||||||||
(In thousands) | ||||||||||||
Balances, January 1, 2014 |
$ | 4,231,179 | $ | 3,644,444 | $ | 7,875,623 | ||||||
Net income |
213,704 | 151,608 | 365,312 | |||||||||
Foreign currency translation adjustment |
1,482 | 1,620 | 3,102 | |||||||||
Other comprehensive income from unconsolidated affiliate, net |
1,250 | | 1,250 | |||||||||
Stock-based compensation |
15,450 | 1,684 | 17,134 | |||||||||
Change in excess tax benefit from stock-based compensation |
(9,263 | ) | | (9,263 | ) | |||||||
Issuance of MGM Resorts common stock pursuant to stock-based compensation awards |
(3,751 | ) | | (3,751 | ) | |||||||
Cash distributions to noncontrolling interest owners |
| (314,865 | ) | (314,865 | ) | |||||||
Issuance of performance share units |
7,529 | | 7,529 | |||||||||
Other |
(277 | ) | (266 | ) | (543 | ) | ||||||
|
|
|
|
|
|
|||||||
Balances, June 30, 2014 |
$ | 4,457,303 | $ | 3,484,225 | $ | 7,941,528 | ||||||
|
|
|
|
|
|
Accumulated other comprehensive income (loss). Changes in accumulated other comprehensive income (loss) by component are as follows:
Foreign
Currency Translation Adjustment |
Other
Adjustments |
Total | ||||||||||
(In thousands) | ||||||||||||
Balances, January 1, 2014 |
$ | 13,082 | $ | (579 | ) | $ | 12,503 | |||||
Current period other comprehensive income |
1,482 | 1,250 | 2,732 | |||||||||
|
|
|
|
|
|
|||||||
Balances, June 30, 2014 |
$ | 14,564 | $ | 671 | $ | 15,235 | ||||||
|
|
|
|
|
|
NOTE 8 STOCK-BASED COMPENSATION
2005 Omnibus Incentive Plan. As of June 30, 2014, the Company had an aggregate of 16 million shares of common stock available for grant as share-based awards under the Companys omnibus incentive plan (Omnibus Plan). At the Annual Meeting on June 5, 2014, the Companys stockholders approved an amendment to the Omnibus Plan to increase the number of shares of common stock available for grant by 10 million shares. As of June 30, 2014, the approved shares were pending registration with the Securities and Exchange Commission, and thus were not included in the shares of common stock available for grant. A summary of activity under the Companys share-based payment plans for the six months ended June 30, 2014 is presented below:
Stock options and stock appreciation rights (SARs)
Units
(000s) |
Weighted
Average Exercise Price |
|||||||
Outstanding at January 1, 2014 |
16,074 | $ | 15.22 | |||||
Granted |
65 | 25.62 | ||||||
Exercised |
(1,040 | ) | 14.91 | |||||
Forfeited or expired |
(341 | ) | 54.82 | |||||
|
|
|||||||
Outstanding at June 30, 2014 |
14,758 | 14.37 | ||||||
|
|
|||||||
Exercisable at June 30, 2014 |
9,295 | 15.01 | ||||||
|
|
14
Restricted stock units (RSUs) and performance share units (PSUs)
RSUs | PSUs | |||||||||||||||||||
Units
(000s) |
Weighted
Average Grant-Date Fair Value |
Units
(000s) |
Weighted
Average Grant-Date Fair Value |
Weighted
Average Target Price |
||||||||||||||||
Nonvested at January 1, 2014 |
1,339 | $ | 13.85 | 1,055 | $ | 13.91 | $ | 16.95 | ||||||||||||
Granted |
50 | 25.37 | | | | |||||||||||||||
Vested |
(95 | ) | 13.99 | | | | ||||||||||||||
Forfeited |
(14 | ) | 13.14 | | | | ||||||||||||||
|
|
|
|
|||||||||||||||||
Nonvested at June 30, 2014 |
1,280 | 14.30 | 1,055 | 13.91 | 16.95 | |||||||||||||||
|
|
|
|
The vested RSUs amount in the table above includes approximately 53,000 vested shares deferred by members of the Companys Board of Directors that will not release until such members termination from the Board of Directors. In 2013, the Company began granting PSUs for the portion of any calculated bonus for a Section 16 officer of the Company that is in excess of such officers base salary (the Bonus PSU Policy). Awards granted under the Bonus PSU Policy have the same terms as PSUs granted under the Omnibus Plan with the exception that as of the grant date the awards will not be subject to forfeiture in the event of the officers termination. In March of 2014, the Company granted 265,122 PSUs pursuant to the Bonus PSU Policy with a target price of $31.72. Such awards are excluded from the table above.
MGM China Share Option Plan. As of June 30, 2014, MGM China had an aggregate of 341 million shares of stock available for grant as share-based awards under the MGM China share option plan (MGM China Plan). A summary of activity under the MGM China Plan for the six months ended June 30, 2014 is presented below:
Stock options
Units
(000s) |
Weighted
Average Exercise Price |
|||||||
Outstanding at January 1, 2014 |
16,916 | $ | 2.06 | |||||
Granted |
18,080 | 3.49 | ||||||
Exercised |
(258 | ) | 1.91 | |||||
Forfeited or expired |
(263 | ) | 2.28 | |||||
|
|
|||||||
Outstanding at June 30, 2014 |
34,475 | 2.81 | ||||||
|
|
|||||||
Exercisable at June 30, 2014 |
10,267 | 2.00 | ||||||
|
|
Recognition of compensation cost. Compensation cost for both the Omnibus Plan and MGM China Plan was recognized as follows:
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Compensation cost: |
||||||||||||||||
Omnibus Plan |
$ | 6,695 | $ | 6,508 | $ | 13,697 | $ | 13,768 | ||||||||
MGM China Plan |
1,976 | 1,686 | 3,437 | 3,366 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total compensation cost |
8,671 | 8,194 | 17,134 | 17,134 | ||||||||||||
Less: Reimbursed costs and other |
(266 | ) | (262 | ) | (534 | ) | (579 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Compensation cost recognized as expense |
8,405 | 7,932 | 16,600 | 16,555 | ||||||||||||
Less: Related tax benefit |
(2,209 | ) | | (4,526 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Compensation expense, net of tax benefit |
$ | 6,196 | $ | 7,932 | $ | 12,074 | $ | 16,555 | ||||||||
|
|
|
|
|
|
|
|
In June 2014, MGM China granted 17 million stock options pursuant to the MGM China Plan. Compensation cost for stock options granted under the MGM China Plan is based on the fair value of each award measured by applying the Black-Scholes model on the date of grant. The following weighted average-assumptions were used to determine fair value of awards granted during the second quarter of 2014: expected volatility of 39%, an expected term of 7.8 years, an expected dividend yield of 1.6% and a risk-free interest rate of 1.8%, which resulted in a $1.04 weighted-average per share fair value. Expected volatility is based on historical volatility of MGM Chinas stock price. The expected term
15
considers the contractual term of the option as well as historical exercise behavior of previously granted options. The dividend yield is estimated with reference to the dividend policy of MGM China. The risk-free interest rate is based on rates in effect at the valuation date for the Hong Kong Exchange Fund Notes with maturities matching the relevant expected term of the award.
NOTE 9 PROPERTY TRANSACTIONS, NET
Property transactions, net includes:
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Grand Victoria investment impairment charge |
$ | 28,789 | $ | 36,607 | $ | 28,789 | $ | 36,607 | ||||||||
Corporate buildings impairment charge |
| 44,510 | | 44,510 | ||||||||||||
Other property transactions, net |
4,381 | 7,014 | 4,939 | 15,505 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 33,170 | $ | 88,131 | $ | 33,728 | $ | 96,622 | |||||||||
|
|
|
|
|
|
|
|
See Note 3 for discussion of the Grand Victoria investment impairment charges in 2014 and 2013. During the second quarter of 2013, the Company recorded an impairment charge of $45 million related to corporate buildings which were removed from service in connection with the new Las Vegas arena project, of which the Company will own 50%, that will be located on the land underlying these buildings. Other property transactions, net for the three and six months ended June 30, 2014 and 2013 includes miscellaneous asset disposals and demolition costs.
NOTE 10 SEGMENT INFORMATION
The Companys management views each of its casino resorts as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate, and their management and reporting structure. The Companys principal operating activities occur in two geographic regions: the United States and Macau S.A.R. The Company has aggregated its operations into two reportable segments based on the similar characteristics of the operating segments within the regions in which they operate: wholly owned domestic resorts and MGM China. The Companys operations related to investments in unconsolidated affiliates and certain other corporate operations and management services have not been identified as separate reportable segments; therefore, these operations are included in corporate and other in the following segment disclosures to reconcile to consolidated results.
The Companys management utilizes Adjusted Property EBITDA as the primary profit measure for its reportable segments. Adjusted Property EBITDA is a non-GAAP measure defined as Adjusted EBITDA before corporate expense and stock compensation expense related to the MGM Resorts stock option plan, which are not allocated to the reportable segments. MGM China recognizes stock compensation expense related to its stock compensation plan which is included in the calculation of Adjusted EBITDA for MGM China. Adjusted EBITDA is a non-GAAP measure defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses and property transactions, net.
The following tables present the Companys segment information:
Three Months
Ended
June 30, |
Six Months
Ended
June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Net Revenues: |
||||||||||||||||
Wholly owned domestic resorts |
$ | 1,639,270 | $ | 1,535,996 | $ | 3,209,504 | $ | 3,025,184 | ||||||||
MGM China |
827,928 | 835,149 | 1,769,376 | 1,582,706 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reportable segment net revenues |
2,467,198 | 2,371,145 | 4,978,880 | 4,607,890 | ||||||||||||
Corporate and other |
113,835 | 110,120 | 232,551 | 225,523 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 2,581,033 | $ | 2,481,265 | $ | 5,211,431 | $ | 4,833,413 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA: |
||||||||||||||||
Wholly owned domestic resorts |
$ | 414,398 | $ | 375,603 | $ | 817,244 | $ | 736,640 | ||||||||
MGM China |
210,488 | 204,815 | 451,213 | 385,270 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reportable segment Adjusted Property EBITDA |
624,886 | 580,418 | 1,268,457 | 1,121,910 | ||||||||||||
Corporate and other |
(38,900 | ) | (39,028 | ) | (55,989 | ) | (56,148 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
585,986 | 541,390 | 1,212,468 | 1,065,762 |
16
Other operating expense: |
||||||||||||||||
Preopening and start-up expenses |
(9,759 | ) | (3,506 | ) | (15,395 | ) | (5,652 | ) | ||||||||
Property transactions, net |
(33,170 | ) | (88,131 | ) | (33,728 | ) | (96,622 | ) | ||||||||
Depreciation and amortization |
(203,070 | ) | (218,151 | ) | (410,725 | ) | (430,069 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
339,987 | 231,602 | 752,620 | 533,419 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-operating income (expense): |
||||||||||||||||
Interest expense, net of amounts capitalized |
(203,936 | ) | (214,500 | ) | (413,323 | ) | (439,947 | ) | ||||||||
Non-operating items from unconsolidated affiliates |
(14,578 | ) | (38,864 | ) | (28,301 | ) | (60,943 | ) | ||||||||
Other, net |
(309 | ) | (4,951 | ) | (1,743 | ) | (6,233 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
(218,823 | ) | (258,315 | ) | (443,367 | ) | (507,123 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes |
121,164 | (26,713 | ) | 309,253 | 26,296 | |||||||||||
Benefit (provision) for income taxes |
52,540 | (3,865 | ) | 56,059 | (34,296 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
173,704 | (30,578 | ) | 365,312 | (8,000 | ) | ||||||||||
Less: Net income attributable to noncontrolling interests |
(68,160 | ) | (62,380 | ) | (151,608 | ) | (78,412 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) attributable to MGM Resorts International |
$ | 105,544 | $ | (92,958 | ) | $ | 213,704 | $ | (86,412 | ) | ||||||
|
|
|
|
|
|
|
|
NOTE 11 RELATED PARTY TRANSACTIONS
MGM China. MGM Branding and Development Holdings, Ltd., (together with its subsidiary MGM Development Services, Ltd, MGM Branding and Development), an entity included in the Companys consolidated financial statements in which Ms. Pansy Ho indirectly holds a noncontrolling interest, entered into a brand license agreement with MGM China. MGM China pays a license fee to MGM Branding and Development equal to 1.75% of MGM Chinas consolidated net revenue, subject to an annual cap of $43 million in 2014 with a 20% increase per annum during the agreement term. During the three and six months ended June 30, 2014, MGM China incurred total license fees of $14 million and $31 million, respectively. During the three and six months ended June 30, 2013, MGM China incurred total license fees of $15 million and $28 million, respectively. Such amounts have been eliminated in consolidation.
MGM China entered into a development services agreement with MGM Branding and Development to provide certain development services to MGM China in connection with future expansion of existing projects and development of future resort gaming projects. Such services are subject to a development fee which is calculated separately for each resort casino property upon commencement of development. For each such property, the fee is 2.625% of project costs, to be paid in installments as certain benchmarks are achieved. Project costs are the total costs incurred for the design, development and construction of the casino, casino hotel, integrated resort and other related sites associated with each project, including costs of construction, fixtures and fittings, signage, gaming and other supplies and equipment and all costs associated with the opening of the business to be conducted at each project but excluding the cost of land and gaming concessions and financing costs. The development fee for MGM Cotai is subject to a cap of $24 million in 2014, which will increase by 10% per annum for each year during the term of the agreement. During the six months ended June 30, 2013, MGM China incurred $15 million of fees to MGM Branding and Development related to development services. Such amounts have been eliminated in consolidation. No fee was incurred during the six months ended June 30, 2014.
An entity owned by Ms. Pansy Ho received distributions of $5 million and $8 million during the three and six months ended June 30, 2014, respectively, in connection with the ownership of a noncontrolling interest in MGM Branding and Development. The entity received distributions of $4 million and $14 million in the three and six months ended June 30, 2013, respectively.
17
NOTE 12 CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The Companys domestic subsidiaries, excluding certain minor subsidiaries, its domestic insurance subsidiaries and MGM Grand Detroit, LLC, have fully and unconditionally guaranteed, on a joint and several basis, payment of the senior credit facility and the outstanding debt securities. The Companys international subsidiaries, including MGM China, are not guarantors of such indebtedness. Separate condensed financial statement information for the subsidiary guarantors and non-guarantors as of June 30, 2014 and December 31, 2013, and for the three and six months ended June 30, 2014 and 2013, as presented below. Within the Condensed Consolidating Statements of Cash Flows for the period ending June 30, 2014, the Company has presented net changes in intercompany accounts as investing activities if the applicable entities have a net asset in intercompany accounts, and as a financing activity if the applicable entities have a net intercompany liability balance.
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
At June 30, 2014 | ||||||||||||||||||||
Parent |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Elimination | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Current assets |
$ | 357,775 | $ | 891,917 | $ | 917,115 | $ | (492 | ) | $ | 2,166,315 | |||||||||
Property and equipment, net |
| 12,467,651 | 1,658,043 | (11,972 | ) | 14,113,722 | ||||||||||||||
Investments in subsidiaries |
20,193,503 | 3,843,505 | | (24,037,008 | ) | | ||||||||||||||
Investments in and advances to unconsolidated affiliates |
| 1,388,087 | 7,837 | 25,000 | 1,420,924 | |||||||||||||||
Intercompany accounts |
| 1,932,342 | | (1,932,342 | ) | | ||||||||||||||
Other non-current assets |
158,090 | 545,733 | 7,167,519 | | 7,871,342 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 20,709,368 | $ | 21,069,235 | $ | 9,750,514 | $ | (25,956,814 | ) | $ | 25,572,303 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Current liabilities |
$ | 685,324 | $ | 961,631 | $ | 913,853 | $ | (492 | ) | $ | 2,560,316 | |||||||||
Intercompany accounts |
1,882,373 | | 49,969 | (1,932,342 | ) | | ||||||||||||||
Deferred income taxes |
2,047,103 | | 309,895 | | 2,356,998 | |||||||||||||||
Long-term debt |
11,599,978 | 4,836 | 1,001,706 | | 12,606,520 | |||||||||||||||
Other long-term obligations |
37,287 | 52,511 | 17,143 | | 106,941 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
16,252,065 | 1,018,978 | 2,292,566 | (1,932,834 | ) | 17,630,775 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
MGM Resorts stockholders equity |
4,457,303 | 20,050,257 | 3,973,723 | (24,023,980 | ) | 4,457,303 | ||||||||||||||
Noncontrolling interests |
| | 3,484,225 | | 3,484,225 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total stockholders equity |
4,457,303 | 20,050,257 | 7,457,948 | (24,023,980 | ) | 7,941,528 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 20,709,368 | $ | 21,069,235 | $ | 9,750,514 | $ | (25,956,814 | ) | $ | 25,572,303 | ||||||||||
|
|
|
|
|
|
|
|
|
|
At December 31, 2013 | ||||||||||||||||||||
Parent |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Elimination | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Current assets |
$ | 494,296 | $ | 903,537 | $ | 1,322,170 | $ | (564 | ) | $ | 2,719,439 | |||||||||
Property and equipment, net |
| 12,552,828 | 1,514,356 | (11,972 | ) | 14,055,212 | ||||||||||||||
Investments in subsidiaries |
20,017,270 | 4,037,168 | | (24,054,438 | ) | | ||||||||||||||
Investments in and advances to unconsolidated affiliates |
| 1,367,071 | 7,765 | | 1,374,836 | |||||||||||||||
Other non-current assets |
167,552 | 542,259 | 7,250,887 | | 7,960,698 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 20,679,118 | $ | 19,402,863 | $ | 10,095,178 | $ | (24,066,974 | ) | $ | 26,110,185 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Current liabilities |
$ | 340,343 | $ | 959,118 | $ | 941,431 | $ | (25,564 | ) | $ | 2,215,328 | |||||||||
Intercompany accounts |
1,446,952 | (1,470,305 | ) | 23,353 | | | ||||||||||||||
Deferred income taxes |
2,120,676 | | 309,738 | | 2,430,414 | |||||||||||||||
Long-term debt |
12,441,112 | 4,836 | 1,001,282 | | 13,447,230 | |||||||||||||||
Other long-term obligations |
98,856 | 41,758 | 976 | | 141,590 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
16,447,939 | (464,593 | ) | 2,276,780 | (25,564 | ) | 18,234,562 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
MGM Resorts stockholders equity |
4,231,179 | 19,867,456 | 4,173,954 | (24,041,410 | ) | 4,231,179 | ||||||||||||||
Noncontrolling interests |
| | 3,644,444 | | 3,644,444 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total stockholders equity |
4,231,179 | 19,867,456 | 7,818,398 | (24,041,410 | ) | 7,875,623 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 20,679,118 | $ | 19,402,863 | $ | 10,095,178 | $ | (24,066,974 | ) | $ | 26,110,185 | ||||||||||
|
|
|
|
|
|
|
|
|
|
18
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME INFORMATION
Three Months Ended June 30, 2014 | ||||||||||||||||||||
Parent |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Elimination | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net revenues |
$ | | $ | 1,617,302 | $ | 964,352 | $ | (621 | ) | $ | 2,581,033 | |||||||||
Equity in subsidiaries earnings |
249,078 | 85,446 | | (334,524 | ) | | ||||||||||||||
Expenses: |
||||||||||||||||||||
Casino and hotel operations |
1,299 | 971,928 | 646,386 | (621 | ) | 1,618,992 | ||||||||||||||
General and administrative |
1,134 | 272,340 | 54,010 | | 327,484 | |||||||||||||||
Corporate expense |
16,724 | 36,198 | 1,517 | | 54,439 | |||||||||||||||
Preopening and start-up expenses |
| 1,015 | 8,744 | | 9,759 | |||||||||||||||
Property transactions, net |
| 33,044 | 126 | | 33,170 | |||||||||||||||
Depreciation and amortization |
| 123,853 | 79,217 | | 203,070 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
19,157 | 1,438,378 | 790,000 | (621 | ) | 2,246,914 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from unconsolidated affiliates |
| 5,730 | 138 | | 5,868 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
229,921 | 270,100 | 174,490 | (334,524 | ) | 339,987 | ||||||||||||||
Interest expense, net of amounts capitalized |
(196,215 | ) | (120 | ) | (7,601 | ) | | (203,936 | ) | |||||||||||
Other, net |
16,358 | (14,089 | ) | (17,156 | ) | | (14,887 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) before income taxes |
50,064 | 255,891 | 149,733 | (334,524 | ) | 121,164 | ||||||||||||||
Benefit (provision) for income taxes |
55,480 | (2,108 | ) | (832 | ) | | 52,540 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
105,544 | 253,783 | 148,901 | (334,524 | ) | 173,704 | ||||||||||||||
Less: Net income attributable to noncontrolling interests |
| | (68,160 | ) | | (68,160 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) attributable to MGM Resorts International |
$ | 105,544 | $ | 253,783 | $ | 80,741 | $ | (334,524 | ) | $ | 105,544 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | 105,544 | $ | 253,783 | $ | 148,901 | $ | (334,524 | ) | $ | 173,704 | |||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||||||
Foreign currency translation adjustment |
2,999 | 2,999 | 5,862 | (5,998 | ) | 5,862 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income (loss) |
2,999 | 2,999 | 5,862 | (5,998 | ) | 5,862 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
108,543 | 256,782 | 154,763 | (340,522 | ) | 179,566 | ||||||||||||||
Less: Comprehensive income attributable to noncontrolling interests |
| | (71,023 | ) | | (71,023 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) attributable to MGM Resorts International |
$ | 108,543 | $ | 256,782 | $ | 83,740 | $ | (340,522 | ) | $ | 108,543 | |||||||||
|
|
|
|
|
|
|
|
|
|
19
Six Months Ended June 30, 2014 | ||||||||||||||||||||
Parent |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Elimination | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net revenues |
$ | | $ | 3,173,631 | $ | 2,039,014 | $ | (1,214 | ) | $ | 5,211,431 | |||||||||
Equity in subsidiaries earnings |
556,049 | 178,815 | | (734,864 | ) | | ||||||||||||||
Expenses: |
||||||||||||||||||||
Casino and hotel operations |
2,553 | 1,893,902 | 1,373,846 | (1,214 | ) | 3,269,087 | ||||||||||||||
General and administrative |
2,246 | 532,980 | 111,504 | | 646,730 | |||||||||||||||
Corporate expense |
33,463 | 69,784 | 4,543 | | 107,790 | |||||||||||||||
Preopening and start-up expenses |
| 3,006 | 12,389 | | 15,395 | |||||||||||||||
Property transactions, net |
| 33,538 | 190 | | 33,728 | |||||||||||||||
Depreciation and amortization |
| 251,928 | 158,797 | | 410,725 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
38,262 | 2,785,138 | 1,661,269 | (1,214 | ) | 4,483,455 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from unconsolidated affiliates |
| 24,453 | 191 | | 24,644 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
517,787 | 591,761 | 377,936 | (734,864 | ) | 752,620 | ||||||||||||||
Interest expense, net of amounts capitalized |
(397,112 | ) | (224 | ) | (15,987 | ) | | (413,323 | ) | |||||||||||
Other, net |
34,948 | (28,452 | ) | (36,540 | ) | | (30,044 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) before income taxes |
155,623 | 563,085 | 325,409 | (734,864 | ) | 309,253 | ||||||||||||||
Benefit (provision) for income taxes |
58,081 | (467 | ) | (1,555 | ) | | 56,059 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
213,704 | 562,618 | 323,854 | (734,864 | ) | 365,312 | ||||||||||||||
Less: Net income attributable to noncontrolling interests |
| | (151,608 | ) | | (151,608 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) attributable to MGM Resorts International |
$ | 213,704 | $ | 562,618 | $ | 172,246 | $ | (734,864 | ) | $ | 213,704 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | 213,704 | $ | 562,618 | $ | 323,854 | $ | (734,864 | ) | $ | 365,312 | |||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||||||
Foreign currency translation adjustment |
1,482 | 1,482 | 3,102 | (2,964 | ) | 3,102 | ||||||||||||||
Other |
1,250 | 1,250 | | (1,250 | ) | 1,250 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income (loss) |
2,732 | 2,732 | 3,102 | (4,214 | ) | 4,352 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
216,436 | 565,350 | 326,956 | (739,078 | ) | 369,664 | ||||||||||||||
Less: Comprehensive income attributable to noncontrolling interests |
| | (153,228 | ) | | (153,228 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) attributable to MGM Resorts International |
$ | 216,436 | $ | 565,350 | $ | 173,728 | $ | (739,078 | ) | $ | 216,436 | |||||||||
|
|
|
|
|
|
|
|
|
|
20
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
Six Months Ended June 30, 2014 | ||||||||||||||||||||
Parent |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Elimination | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Cash flows from operating activities |
||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | (366,066 | ) | $ | 664,206 | $ | 480,484 | $ | 25,000 | $ | 803,624 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from investing activities |
||||||||||||||||||||
Capital expenditures, net of construction payable |
| (166,418 | ) | (203,830 | ) | | (370,248 | ) | ||||||||||||
Dispositions of property and equipment |
| 104 | 308 | | 412 | |||||||||||||||
Investments in and advances to unconsolidated affiliates |
(11,700 | ) | (17,050 | ) | | (25,000 | ) | (53,750 | ) | |||||||||||
Distributions from unconsolidated affiliates in excess of earnings |
| 790 | | | 790 | |||||||||||||||
Investments in treasury securities - maturities longer than 90 days |
| (93,137 | ) | | | (93,137 | ) | |||||||||||||
Proceeds from treasury securities - maturities longer than 90 days |
| 111,238 | | | 111,238 | |||||||||||||||
Intercompany transactions |
| (462,037 | ) | | 462,037 | | ||||||||||||||
Other |
| 2,535 | | | 2,535 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) investing activities |
(11,700 | ) | (623,975 | ) | (203,522 | ) | 437,037 | (402,160 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from financing activities |
||||||||||||||||||||
Net repayments under bank credit facilities - maturities of 90 days or less |
(1,287,750 | ) | | (450,000 | ) | | (1,737,750 | ) | ||||||||||||
Borrowings under bank credit facilities - maturities longer than 90 days |
3,001,875 | | 450,000 | | 3,451,875 | |||||||||||||||
Repayments under bank credit facilities - maturities longer than 90 days |
(1,728,125 | ) | | | | (1,728,125 | ) | |||||||||||||
Retirement of senior notes |
(508,900 | ) | | | | (508,900 | ) | |||||||||||||
Intercompany accounts |
849,275 | (38,418 | ) | (348,820 | ) | (462,037 | ) | | ||||||||||||
Distributions to noncontrolling interest owners |
| | (314,447 | ) | | (314,447 | ) | |||||||||||||
Other |
(1,696 | ) | | (477 | ) | | (2,173 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) financing activities |
324,679 | (38,418 | ) | (663,744 | ) | (462,037 | ) | (839,520 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Effect of exchange rate on cash |
| | (476 | ) | | (476 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash and cash equivalents |
||||||||||||||||||||
Net increase (decrease) for the period |
(53,087 | ) | 1,813 | (387,258 | ) | | (438,532 | ) | ||||||||||||
Balance, beginning of period |
378,660 | 237,457 | 1,187,552 | | 1,803,669 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance, end of period |
$ | 325,573 | $ | 239,270 | $ | 800,294 | $ | | $ | 1,365,137 | ||||||||||
|
|
|
|
|
|
|
|
|
|
21
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME INFORMATION
Three Months Ended June 30, 2013 | ||||||||||||||||||||
Parent |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Elimination | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net revenues |
$ | | $ | 1,513,692 | $ | 968,039 | $ | (466 | ) | $ | 2,481,265 | |||||||||
Equity in subsidiaries earnings |
120,773 | 78,596 | | (199,369 | ) | | ||||||||||||||
Expenses: |
||||||||||||||||||||
Casino and hotel operations |
1,366 | 920,319 | 658,650 | (466 | ) | 1,579,869 | ||||||||||||||
General and administrative |
1,037 | 260,928 | 52,359 | | 314,324 | |||||||||||||||
Corporate expense |
14,646 | 30,375 | 7,343 | | 52,364 | |||||||||||||||
Preopening and start-up expenses |
| 1,248 | 2,258 | | 3,506 | |||||||||||||||
Property transactions, net |
| 87,980 | 151 | | 88,131 | |||||||||||||||
Depreciation and amortization |
| 135,887 | 82,264 | | 218,151 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
17,049 | 1,436,737 | 803,025 | (466 | ) | 2,256,345 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from unconsolidated affiliates |
| 5,620 | 1,062 | | 6,682 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
103,724 | 161,171 | 166,076 | (199,369 | ) | 231,602 | ||||||||||||||
Interest expense, net of amounts capitalized |
(199,982 | ) | (2,714 | ) | (11,804 | ) | | (214,500 | ) | |||||||||||
Other, net |
12,595 | (39,034 | ) | (17,376 | ) | | (43,815 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) before income taxes |
(83,663 | ) | 119,423 | 136,896 | (199,369 | ) | (26,713 | ) | ||||||||||||
Benefit (provision) for income taxes |
(9,295 | ) | 5,955 | (525 | ) | | (3,865 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
(92,958 | ) | 125,378 | 136,371 | (199,369 | ) | (30,578 | ) | ||||||||||||
Less: Net income attributable to noncontrolling interests |
| | (62,380 | ) | | (62,380 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) attributable to MGM Resorts International |
$ | (92,958 | ) | $ | 125,378 | $ | 73,991 | $ | (199,369 | ) | $ | (92,958 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (92,958 | ) | $ | 125,378 | $ | 136,371 | $ | (199,369 | ) | $ | (30,578 | ) | |||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||||||
Foreign currency translation adjustment |
3,326 | 3,326 | 6,416 | (6,652 | ) | 6,416 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income (loss) |
3,326 | 3,326 | 6,416 | (6,652 | ) | 6,416 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
(89,632 | ) | 128,704 | 142,787 | (206,021 | ) | (24,162 | ) | ||||||||||||
Less: Comprehensive income attributable to noncontrolling interests |
| | (65,470 | ) | | (65,470 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) attributable to MGM Resorts International |
$ | (89,632 | ) | $ | 128,704 | $ | 77,317 | $ | (206,021 | ) | $ | (89,632 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
22
Six Months Ended June 30, 2013 | ||||||||||||||||||||
Parent |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Elimination | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net revenues |
$ | | $ | 2,977,657 | $ | 1,856,701 | $ | (945 | ) | $ | 4,833,413 | |||||||||
Equity in subsidiaries earnings |
304,196 | 108,582 | | (412,778 | ) | | ||||||||||||||
Expenses: |
||||||||||||||||||||
Casino and hotel operations |
2,876 | 1,806,402 | 1,265,131 | (945 | ) | 3,073,464 | ||||||||||||||
General and administrative |
2,127 | 512,477 | 103,621 | | 618,225 | |||||||||||||||
Corporate expense |
29,454 | 58,114 | 11,420 | | 98,988 | |||||||||||||||
Preopening and start-up expenses |
| 1,020 | 4,632 | | 5,652 | |||||||||||||||
Property transactions, net |
| 96,275 | 347 | | 96,622 | |||||||||||||||
Depreciation and amortization |
| 263,718 | 166,351 | | 430,069 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
34,457 | 2,738,006 | 1,551,502 | (945 | ) | 4,323,020 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from unconsolidated affiliates |
| 21,958 | 1,068 | | 23,026 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income (loss) |
269,739 | 370,191 | 306,267 | (412,778 | ) | 533,419 | ||||||||||||||
Interest expense, net of amounts capitalized |
(408,665 | ) | (5,699 | ) | (25,583 | ) | | (439,947 | ) | |||||||||||
Other, net |
27,761 | (61,852 | ) | (33,085 | ) | | (67,176 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) before income taxes |
(111,165 | ) | 302,640 | 247,599 | (412,778 | ) | 26,296 | |||||||||||||
Benefit (provision) for income taxes |
24,753 | 7,412 | (66,461 | ) | | (34,296 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
(86,412 | ) | 310,052 | 181,138 | (412,778 | ) | (8,000 | ) | ||||||||||||
Less: Net income attributable to noncontrolling interests |
| | (78,412 | ) | | (78,412 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) attributable to MGM Resorts International |
$ | (86,412 | ) | $ | 310,052 | $ | 102,726 | $ | (412,778 | ) | $ | (86,412 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | (86,412 | ) | $ | 310,052 | $ | 181,138 | $ | (412,778 | ) | $ | (8,000 | ) | |||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||||||
Foreign currency translation adjustment |
(3,110 | ) | (3,110 | ) | (6,225 | ) | 6,220 | (6,225 | ) | |||||||||||
Other |
115 | 115 | | (115 | ) | 115 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other comprehensive income (loss) |
(2,995 | ) | (2,995 | ) | (6,225 | ) | 6,105 | (6,110 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
(89,407 | ) | 307,057 | 174,913 | (406,673 | ) | (14,110 | ) | ||||||||||||
Less: Comprehensive income attributable to noncontrolling interests |
| | (75,297 | ) | | (75,297 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) attributable to MGM Resorts International |
$ | (89,407 | ) | $ | 307,057 | $ | 99,616 | $ | (406,673 | ) | $ | (89,407 | ) | |||||||
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|
|
|
|
|
|
|
|
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23
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
Six Months Ended June 30, 2013 | ||||||||||||||||||||
Parent |
Guarantor
Subsidiaries |
Non-Guarantor
Subsidiaries |
Elimination | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Cash flows from operating activities |
||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | (402,258 | ) | $ | 565,476 | $ | 566,844 | $ | | $ | 730,062 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from investing activities |
||||||||||||||||||||
Capital expenditures, net of construction payable |
| (108,574 | ) | (134,304 | ) | | (242,878 | ) | ||||||||||||
Dispositions of property and equipment |
| 127 | 196 | | 323 | |||||||||||||||
Investments in and advances to unconsolidated affiliates |
(12,400 | ) | (2,000 | ) | | | (14,400 | ) | ||||||||||||
Investments in treasury securities - maturities longer than 90 days |
| (120,332 | ) | | | (120,332 | ) | |||||||||||||
Proceeds from treasury securities - maturities longer than 90 days |
| 135,268 | | | 135,268 | |||||||||||||||
Other |
| 1,806 | | | 1,806 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash used in investing activities |
(12,400 | ) | (93,705 | ) | (134,108 | ) | | (240,213 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from financing activities |
||||||||||||||||||||
Net repayments under bank credit facilities - maturities of 90 days or less |
(14,000 | ) | | | | (14,000 | ) | |||||||||||||
Borrowings under bank credit facilities - maturities longer than 90 days |
2,343,000 | | 450,000 | | 2,793,000 | |||||||||||||||
Repayments under bank credit facilities - maturities longer than 90 days |
(2,343,000 | ) | | (450,000 | ) | | (2,793,000 | ) | ||||||||||||
Retirement of senior notes |
(462,226 | ) | (8 | ) | | | (462,234 | ) | ||||||||||||
Debt issuance costs |
(17,061 | ) | | | | (17,061 | ) | |||||||||||||
Intercompany accounts |
756,926 | (488,344 | ) | (268,582 | ) | | | |||||||||||||
Distributions to noncontrolling interest owners |
| | (259,016 | ) | | (259,016 | ) | |||||||||||||
Other |
(1,346 | ) | | (341 | ) | | (1,687 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) financing activities |
262,293 | (488,352 | ) | (527,939 | ) | | (753,998 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Effect of exchange rate on cash |
| | (687 | ) | | (687 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash and cash equivalents |
||||||||||||||||||||
Net decrease for the period |
(152,365 | ) | (16,581 | ) | (95,890 | ) | | (264,836 | ) | |||||||||||
Balance, beginning of period |
254,385 | 226,242 | 1,062,882 | | 1,543,509 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance, end of period |
$ | 102,020 | $ | 209,661 | $ | 966,992 | $ | | $ | 1,278,673 | ||||||||||
|
|
|
|
|
|
|
|
|
|
24
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
This managements discussion and analysis of financial condition and results of operations (MD&A) contains forward-looking statements that involve risks and uncertainties. Please see Cautionary Statement Concerning Forward-Looking Statements for a discussion of the uncertainties, risks and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes for the fiscal year ended December 31, 2013, which were included in our Form 10-K, filed with the Securities and Exchange Commission on March 3, 2014. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods. MGM Resorts International together with its subsidiaries may be referred to as we, us or our. MGM China Holdings Limited together with its subsidiaries is referred to as MGM China.
Executive Overview
Our primary business is the ownership and operation of casino resorts, which includes offering gaming, hotel, convention, dining, entertainment, retail and other resort amenities. We believe that we own and invest in several of the premier casino resorts in the world and have continually reinvested 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 heavily on the ability of our resorts to generate operating cash flow to repay debt financings, fund capital expenditures and provide excess cash flow for future development. We make significant investments in our resorts through newly remodeled hotel rooms, restaurants, entertainment and nightlife offerings, as well as other new features and amenities.
Results of operations from our wholly owned domestic resorts in the second quarter of 2014 improved compared to the second quarter of 2013, primarily as a result of increased casino and hotel revenues as general economic conditions continue to improve. During the six months ended June 30, 2014, visitor volume to Las Vegas increased 4.2% and the average daily Las Vegas Strip room rate increased 6.9% compared to the same period in the prior year, as reported by the Las Vegas Convention and Visitors Authority. We expect our resorts to benefit from a continued trend of improvements in general economic conditions in 2014.
In Macau, results of operations also improved in the second quarter of 2014 compared to the prior year period primarily as a result of strong main floor gaming volume. VIP gaming volumes were negatively impacted during the current year quarter due in part to macroeconomic factors in mainland China. Despite continued concerns about the sustainability of economic growth in China, we expect the Macau market to continue to grow as a result of a large and growing Asian middle class and infrastructure improvements expected to facilitate more convenient travel to and within Macau. According to statistics published by the Statistics Census Service of the Macau government, visitor arrivals were 15 million for the six months ended June 30, 2014, an 8% increase compared to the prior year period. Gross casino revenues for the Macau market increased 13% for the six months ended June 30, 2014, compared to the prior year period, with increases in main floor volumes.
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 improving our financial position, we are also dedicated to capitalizing on development opportunities. In Macau, we plan to spend approximately $2.9 billion, excluding development fees eliminated in consolidation, capitalized interest and land related costs, to develop a resort and casino featuring up to 1,600 hotel rooms, 500 gaming tables, and 2,500 slots built on an approximately 17.8 acre site in Cotai, Macau (MGM Cotai). MGM Cotai is anticipated to open in 2016.
In December 2013, our subsidiary MGM National Harbor, LLC (MGM National Harbor) was awarded the sixth and final casino license under current statutes in the State of Maryland by the Maryland Video Lottery Facility Location Commission to build and operate a destination resort casino in Prince Georges County at National Harbor. We currently expect the cost to develop and construct MGM National Harbor to be approximately $1.2 billion, excluding capitalized interest and land related costs. We expect that the resort will include a casino with approximately 3,600 slots and 160 table games including poker; a 300-suite hotel with luxury spa and rooftop pool; high-end branded retail; fine and casual dining; a dedicated 3,000 seat theater venue; 35,000 square feet of meeting and event space; and a 5,000-space parking structure. Construction of MGM National Harbor has commenced with estimated completion in the second half of 2016.
On June 13, 2014, the Massachusetts Gaming Commission (the MGC) agreed to award our subsidiary developing MGM Springfield the Category One casino license in Region B, Western Massachusetts, one of three licensing regions designated by legislation. However, on June 24, 2014, the Massachusetts Supreme Judicial Court ruled that a proposed ballot initiative seeking to prohibit local casinos, slot parlors and other wagering in Massachusetts was constitutional and thereby allowed the ballot initiative to appear on the November 4, 2014 ballot. The MGC has agreed that we are not required to make the final award payment of licensing fees and other costs unless the ballot initiative fails to pass in the November 2014 elections.
MGM Springfield is proposed to be developed on 14.5 acres of land between Union and State streets, and Columbus Avenue and Main Street in Springfield, Massachusetts. We currently expect the cost to develop and construct MGM Springfield to be approximately $690 million, excluding capitalized interest and land related costs. We expect the resort will include a casino with approximately 3,000 slots and 75 table games, a poker room and high limit VIP gambling area, 250 hotel rooms, 55,000 square feet of retail and restaurant space that will accommodate 15 shops and restaurants, and a multi-level parking garage.
25
In 2013, we entered into an agreement with a subsidiary of Anschutz Entertainment Group, Inc. (AEG) (a leader in sports, entertainment, and promotions) to design, construct, and operate an arena which will be located on a parcel of our land between Frank Sinatra Drive and New York-New York, adjacent to the Las Vegas Strip. We and AEG each own 50% of the developer of the arena. The proposed arena is anticipated to seat between 18,000 20,000 people and is currently scheduled to be completed in 2016. Such development is estimated to cost approximately $350 million, excluding capitalized interest and land related costs, and is contingent on obtaining permanent financing.
Wholly Owned Domestic Resorts
Over half of the net revenue from our wholly owned domestic resorts is derived from non-gaming operations including hotel, food and beverage, entertainment and other non-gaming amenities. We market to different customer groups and utilize our significant convention and meeting facilities to maximize hotel occupancy and customer volumes during off-peak times such as mid-week or during traditionally slower leisure travel periods, which also leads to better labor utilization. Our operating results are highly dependent on the volume of customers at our resorts, which in turn affects the price we can charge for our hotel rooms and other amenities. As a result of our leveraged business model, our operating results are significantly affected by our ability to generate operating revenues. Also, we generate a significant portion of our revenue from our wholly owned domestic resorts in Las Vegas, Nevada, which exposes us to certain risks, such as increased competition from new or expanded Las Vegas resorts, and from the expansion of gaming in the United States generally.
Key performance indicators related to gaming and hotel revenue at our wholly owned domestic resorts 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 is in the range of 18% to 22% of table games drop and our normal slots hold percentage is in the range of 8.0% to 8.5% of slots handle; and |
|
Hotel revenue indicators 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 an analysis of retail or cash rates for each customer segment and each type of room product to estimate complimentary rates which are consistent with retail rates. Complimentary rates are reviewed at least annually and on an interim basis if there are significant changes in market conditions. 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. |
MGM China
We own 51% and have a controlling interest in MGM China Holdings Limited (MGM China), which owns MGM Grand Paradise, S.A. (MGM Grand Paradise), the Macau company that owns the MGM Macau resort and casino and the related gaming subconcession and land concession and is in the process of developing a gaming resort in Cotai. We believe our investment in MGM China plays an important role in extending our reach internationally and will foster future growth and profitability. Asia is the fastest growing gaming market in the world and Macau is the worlds largest gaming destination in terms of revenue.
Revenues at MGM Macau are generated from three primary customer segments in the Macau gaming market: VIP casino gaming operations, main floor gaming operations, and slot machine operations. VIP players play mostly in dedicated VIP rooms or designated gaming areas. VIP customers can be further divided into customers sourced by in-house VIP programs and those sourced through gaming promoters. A significant portion of our VIP volume is generated through the use of gaming promoters. Gaming promoters introduce VIP gaming players to MGM Macau, assist these customers with travel arrangements, and extend gaming credit to these players. In exchange for their services, gaming promoters are compensated through payment of commissions. In-house VIP players also typically receive a commission based on the program in which they participate. The main floor gaming operation in Macau is also referred to as the mass gaming operation. MGM Macau main floor operations primarily consist of walk-in and day trip visitors. Unlike VIP players, main floor players do not receive commissions. The profit contribution from the main floor segment exceeds the VIP segment due to commission costs paid to gaming promoters. Gaming revenues from the main gaming floors have grown significantly in recent years and we believe this segment represents the most potential for sustainable growth in the future.
VIP gaming at MGM Macau is conducted by the use of special purpose nonnegotiable gaming chips called rolling chips. Gaming promoters purchase these rolling chips from MGM Macau and in turn they sell these chips to their players. The rolling chips allow MGM Macau to track the amount of wagering conducted by each gaming promoters clients in order to determine VIP gaming play. Gaming promoter commissions are based on either a percentage of actual win plus a monthly complimentary allowance based on a percentage of the rolling chip turnover their customers generate, or a percentage of the rolling chip turnover plus discounted offerings on nongaming amenities. The estimated portion of the gaming promoter payments that represent amounts passed through to VIP customers is recorded as a reduction of casino revenue, and the estimated portion retained by the gaming promoter for its compensation is recorded as casino expense. In-house VIP commissions are based on a percentage of rolling chip turnover and are recorded as a reduction of casino revenue.
26
Main floor table games wagers at MGM Macau are conducted by the use of cash chips. In addition to purchasing cash chips at gaming tables, main floor customers may also purchase cash chips at the casino cage. As a result of recent significant increases in cash chips purchased at the casino cage, we now adjust main floor table games drop to include such purchases in order to more meaningfully reflect main floor table games volume and hold percentage. MGM Macaus main floor normal table games hold percentage, as calculated on this basis, is in the range of 20% to 28% of table games drop. Slots hold percentage at MGM Macau is in the range of 4.3% to 5.3% of slots handle.
In addition to the key performance indicators used by our wholly owned domestic resorts, MGM Macau utilizes turnover, which is the sum of rolling chip wagers won by MGM Macau calculated as rolling chips purchased plus rolling chips exchanged less rolling chips returned. Turnover provides a basis for measuring VIP casino win percentage. Win for VIP gaming operations at MGM Macau is in the range of 2.7% to 3.0% of turnover.
Corporate and Other
Corporate and other includes our investments in unconsolidated affiliates and certain management and other operations.
CityCenter. We own 50% of CityCenter. The other 50% of CityCenter is owned by Infinity World Development Corp (Infinity World), a wholly owned subsidiary of Dubai World, a Dubai, United Arab Emirates government decree entity. CityCenter consists of Aria, a casino resort; Mandarin Oriental Las Vegas, a non-gaming boutique hotel; Crystals, a retail and entertainment district; and Vdara, a luxury condominium-hotel. In addition, CityCenter includes residential units in the Residences at Mandarin Oriental and Veer. We receive a management fee of 2% of revenues for the management of Aria and Vdara, and 5% of EBITDA (as defined in the agreements governing our management of Aria and Vdara). In addition, we receive an annual fee of $3 million for the management of Crystals.
Other unconsolidated affiliates and management services. We also own 50% interests in Grand Victoria and Silver Legacy. 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. Silver Legacy is located in Reno, adjacent to Circus Circus Reno, and the other 50% is owned by Eldorado LLC, which operates the resort.
We seek to leverage our management expertise and well-recognized brands through domestic and international expansion opportunities. We have entered into management agreements for non-gaming hotels, resorts and residential products in the Middle East, North Africa, India and the United States. In 2014, we and the Hakkasan Group formed MGM Hakkasan Hospitality (MGM Hakkasan), owned 50% by each member, to design, develop and manage luxury non-gaming hotels, resorts and residences under certain brands licensed from us and the Hakkasan Group. We will contribute all of the management agreements for non-gaming hotels, resorts and residential projects (outside of the greater China region) that are currently under development to MGM Hakkasan. In addition, we will continue to develop and manage properties in the greater China region with Diaoyutai State Guesthouse, including the MGM Grand Sanya on Hainan Island, in the Peoples Republic of China, which opened in early 2012.
Borgata. We have a 50% economic interest in Borgata Hotel Casino & Spa (Borgata) located on Renaissance Pointe in the Marina area of Atlantic City, New Jersey. Boyd Gaming Corporation owns the other 50% of Borgata and also operates the resort. Our interest is held in trust and was offered for sale pursuant to our amended settlement agreement with the New Jersey Division of Gaming Enforcement and approved by the New Jersey Casino Control Commission (CCC). The terms of the amended settlement agreement previously mandated the sale by March 2014. We had the right to direct the sale through March 2013 (the divesture period), subject to approval of the CCC, and the trustee was responsible for selling the trust property during the following 12-month period (the terminal sale period). On February 13, 2013, the settlement agreement was further amended to allow the Company to re-apply to the CCC for licensure in New Jersey and to defer expiration of these periods pending the outcome of the licensure process. We have submitted our licensure request to the CCC and there can be no assurances that such request will be approved or with respect to the timing of the licensure process. If the CCC denies our licensure request, then the divesture period will immediately end, and the terminal sale period will immediately begin, which will result in our Borgata interest being disposed of by the trustee pursuant to the terms of the settlement agreement.
We consolidate the trust because we are the sole economic beneficiary and we account for our interest in Borgata under the cost method. As of June 30, 2014, the trust had $86 million of cash and investments, of which $69 million is held in U.S. treasury securities with maturities greater than three months but less than one year, and is recorded within Prepaid expenses and other.
27
Results of Operations
The following discussion is based on our consolidated financial statements for the three and six months ended June 30, 2014 and 2013.
Summary Financial Results
The following table summarizes our financial results:
Three Months
Ended
June 30, |
Six Months
Ended
June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Net revenues |
$ | 2,581,033 | $ | 2,481,265 | $ | 5,211,431 | $ | 4,833,413 | ||||||||
Operating income |
339,987 | 231,602 | 752,620 | 533,419 | ||||||||||||
Net income (loss) |
173,704 | (30,578 | ) | 365,312 | (8,000 | ) | ||||||||||
Net income (loss) attributable to MGM Resorts International |
105,544 | (92,958 | ) | 213,704 | (86,412 | ) |
Consolidated net revenues for the three months ended June 30, 2014 increased 4% over the prior year period due to increases in both casino and non-casino revenues at our wholly owned domestic resorts. Consolidated net revenues for the six months ended June 30, 2014 increased 8% over the prior year period as a result of an increase in casino revenues at MGM China and an increase at our wholly owned domestic resorts primarily related to non-casino revenues. See below for additional information related to segment revenues.
Consolidated operating income for the three months ended June 30, 2014 benefited from increased revenues at our wholly owned domestic resorts and a decrease in depreciation and amortization expense primarily due to accelerated depreciation recognized in 2013 for assets to be disposed in the Bellagio and Mandalay Bay room remodels. General and administrative expense increased compared to the prior year quarter as a result of an increase in payroll costs and utility costs. Operating income for the second quarter of 2014 was negatively impacted by an impairment charge of $29 million related to our investment in Grand Victoria recorded in Property transactions, net. In the prior year quarter, operating income was negatively impacted by impairment charges of $37 million related to our investment in Grand Victoria and $45 million related to certain corporate buildings.
Consolidated operating income for the six months ended June 30, 2014 benefited from increases in revenues at our wholly owned domestic resorts and MGM China and a decrease in depreciation and amortization expense due to the accelerated depreciation recognized in 2013 as noted above, as well as assets that had become fully depreciated at MGM China in the fourth quarter of 2013. General and administrative expense increased in the year to date period as a result of an increase in the items noted above, and property transactions, net was negatively impacted in the current and prior year to date periods for the impairment charges noted above. Corporate expense increased 9% over the prior year period to $108 million due to an increase in personnel costs and professional fees.
Operating Results Detailed Segment Information
The following table presents a detail by segment of consolidated net revenue and Adjusted EBITDA. Management uses Adjusted Property EBITDA as the primary profit measure for its reportable segments. See Non-GAAP Measures for additional information:
Three Months Ended
June 30, |
Six Months
Ended
June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Net revenues: |
||||||||||||||||
Wholly owned domestic resorts |
$ | 1,639,270 | $ | 1,535,996 | $ | 3,209,504 | $ | 3,025,184 | ||||||||
MGM China |
827,928 | 835,149 | 1,769,376 | 1,582,706 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reportable segment net revenues |
2,467,198 | 2,371,145 | 4,978,880 | 4,607,890 | ||||||||||||
Corporate and other |
113,835 | 110,120 | 232,551 | 225,523 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 2,581,033 | $ | 2,481,265 | $ | 5,211,431 | $ | 4,833,413 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA: |
||||||||||||||||
Wholly owned domestic resorts |
$ | 414,398 | $ | 375,603 | $ | 817,244 | $ | 736,640 | ||||||||
MGM China |
210,488 | 204,815 | 451,213 | 385,270 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reportable segment Adjusted Property EBITDA |
624,886 | 580,418 | 1,268,457 | 1,121,910 | ||||||||||||
Corporate and other |
(38,900 | ) | (39,028 | ) | (55,989 | ) | (56,148 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 585,986 | $ | 541,390 | $ | 1,212,468 | $ | 1,065,762 | |||||||||
|
|
|
|
|
|
|
|
28
Wholly owned domestic resorts . The following table presents detailed net revenue at our wholly owned domestic resorts:
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Casino revenue: |
||||||||||||||||
Table games |
$ | 226,527 | $ | 184,546 | $ | 459,034 | $ | 424,139 | ||||||||
Slots |
416,020 | 418,528 | 816,582 | 826,562 | ||||||||||||
Other |
13,872 | 14,567 | 32,561 | 30,974 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Casino revenue |
656,419 | 617,641 | 1,308,177 | 1,281,675 | ||||||||||||
Non-casino revenue: |
||||||||||||||||
Rooms |
447,506 | 423,285 | 884,171 | 811,127 | ||||||||||||
Food and beverage |
391,503 | 373,414 | 751,616 | 712,448 | ||||||||||||
Entertainment, retail and other |
305,385 | 283,564 | 585,259 | 539,990 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-casino revenue |
1,144,394 | 1,080,263 | 2,221,046 | 2,063,565 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
1,800,813 | 1,697,904 | 3,529,223 | 3,345,240 | |||||||||||||
Less: Promotional allowances |
(161,543 | ) | (161,908 | ) | (319,719 | ) | (320,056 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 1,639,270 | $ | 1,535,996 | $ | 3,209,504 | $ | 3,025,184 | |||||||||
|
|
|
|
|
|
|
|
Net revenue related to wholly owned domestic resorts increased 7% for the three months ended June 30, 2014, as a result of increased casino, rooms, food and beverage, and entertainment revenues. Overall table games volume increased 6% for the second quarter, and table games hold percentage was 21.3% for the current quarter compared to 18.1% in the prior year period. Slots revenue decreased 1% compared to the prior year quarter.
Net revenue related to wholly owned domestic resorts increased 6% for the six months ended June 30, 2014, as a result of increased casino, rooms, food and beverage, and entertainment revenues. Table games hold percentage was 21.1% for the six months ended June 30, 2014, compared to 20.1% for the prior year period, and total table games volume increased 5% compared to the prior year period. Slots revenue decreased 1% for the six months ended June 30, 2014 compared to the six months ended June 30, 2013.
Rooms revenue for the three months ended June 30, 2014 increased 6%, with a 6% increase in Las Vegas Strip REVPAR. Rooms revenue for the six months ended June 30, 2014 increased 9% with a 10% increase in Las Vegas Strip REVPAR. The following table shows key hotel statistics for our Las Vegas Strip resorts:
Food and beverage revenue for the three and six months ended June 30, 2014 increased 5% and 6%, respectively, compared to the prior year periods due primarily to increased convention and banquet revenue and the opening of several new outlets. Entertainment revenue increased 15% and 16% for each of the three and six months ended June 30, 2014, respectively, compared to the prior year periods, as a result of the opening of the Michael Jackson ONE Cirque du Soleil production show at Mandalay Bay in June 2013, which replaced the Lion King which closed in December 2011.
Adjusted Property EBITDA at our wholly owned domestic resorts increased 10% during the three months ended June 30, 2014 primarily as a result of increased revenues. Adjusted Property EBITDA margin for the three months ended June 30, 2014 increased by approximately 80 basis points to 25.3% from the prior year quarter. Adjusted Property EBITDA increased 11% during the six months ended June 30, 2014, due primarily to an increase in casino and rooms revenues and improved rooms margins. Adjusted Property EBITDA margin for the six months ended June 30, 2014 increased by approximately 110 basis points from the prior year to 25.5%.
29
MGM China. The following table presents detailed net revenue for MGM China:
Three Months Ended
June 30, |
Six Months
Ended
June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Casino revenue, net: |
||||||||||||||||
VIP table games |
$ | 427,447 | $ | 521,226 | $ | 977,385 | $ | 974,237 | ||||||||
Main floor table games |
325,291 | 230,530 | 627,487 | 439,459 | ||||||||||||
Slots |
66,007 | 73,758 | 145,548 | 149,205 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Casino revenue, net |
818,745 | 825,514 | 1,750,420 | 1,562,901 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-casino revenue |
35,843 | 34,591 | 73,627 | 68,537 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
854,588 | 860,105 | 1,824,047 | 1,631,438 | |||||||||||||
Less: Promotional allowances |
(26,660 | ) | (24,956 | ) | (54,671 | ) | (48,732 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 827,928 | $ | 835,149 | $ | 1,769,376 | $ | 1,582,706 | |||||||||
|
|
|
|
|
|
|
|
For the quarter ended June 30, 2014, net revenue for MGM China decreased 1%, primarily as a result of a decrease in VIP table games revenue of 18%, which was partially offset by a 41% increase in main floor table games revenue. VIP table games turnover decreased 10% and VIP table games hold percentage decreased from 2.9% in the prior year quarter to 2.7% in the current quarter. Main floor table games hold percentage increased from 24.4% in the prior quarter to 25.8% in the current quarter and main floor table games volume increased 33% in the current year quarter. Slots revenue decreased 11% due to a decrease in slots hold percentage from 5.4% in the prior year quarter to 4.3% in the current quarter.
MGM Chinas Adjusted EBITDA for the quarter ended June 30, 2014 was $210 million. Excluding branding fees of $14 million and $15 million for the quarter ended June 30, 2014 and 2013, respectively, Adjusted EBITDA increased 3% compared to the same period in the prior year. Adjusted EBITDA margin increased approximately 90 basis points to 25.4% in the current year quarter, and benefited from an increase in main floor table games revenues.
Net revenue for the six months ended June 30, 2014 increased 12% compared to the same period in the prior year, due primarily to an increase in main floor table games revenue of 43%. Main floor table games volume increased 32% and hold percentage increased from 23.3% in the prior year period to 25.2% in the current year. VIP table games turnover increased 1% and VIP table games hold percentage increased slightly from 2.8% to 2.9% for the six months ended June 30, 2014.
MGM Chinas Adjusted EBITDA for the six months ended June 30, 2014 was $451 million. Excluding branding fees of $31 million and $28 million for the six months ended June 30, 2014 and 2013, respectively, Adjusted EBITDA increased 17% compared to the same period in the prior year. Adjusted EBITDA margin increased approximately 120 basis points to 25.5% in the current year period due to an increase in main floor table games revenues.
Corporate and other. Corporate and other revenue includes revenues from other corporate operations, management services and reimbursed costs revenue primarily related to our CityCenter management agreement. Corporate and other Adjusted EBITDA loss for the three and six months ended June 30, 2014 was flat compared to the prior year. See below for additional discussion of our share of operating results from unconsolidated affiliates.
Operating Results Details of Certain Charges
Property transactions, net consisted of the following:
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Grand Victoria investment impairment charge |
$ | 28,789 | $ | 36,607 | $ | 28,789 | $ | 36,607 | ||||||||
Corporate buildings impairment charge |
| 44,510 | | 44,510 | ||||||||||||
Other property transactions, net |
4,381 | 7,014 | 4,939 | 15,505 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 33,170 | $ | 88,131 | $ | 33,728 | $ | 96,622 | |||||||||
|
|
|
|
|
|
|
|
At June 30, 2014, we reviewed the carrying value of our Grand Victoria investment for impairment due to a greater than anticipated decline in operating results, as well as a decrease in forecasted cash flows for 2014 through 2017 compared to the prior forecast. We used a blended discounted cash flow analysis and guideline public company method to determine the estimated fair value from a market participants viewpoint. Key assumptions included in the discounted cash flow analysis were estimates of future cash flows including outflows for capital expenditures, a long-term growth
30
rate of 2% and a discount rate of 10.5%. Key assumptions in the guideline public company method included business enterprise value multiples selected based on the range of multiples in Grand Victorias peer group. As a result of the analysis, we determined that it was necessary to record an other-than-temporary impairment charge of $29 million at June 30, 2014, based on an estimated fair value of $140 million for our 50% interest. We intend to, and believe we will be able to, retain our investment in Grand Victoria; however, due to the extent of the shortfall and our assessment of the uncertainty of fully recovering our investment, we have determined that the impairment was other-than-temporary. At June 30, 2013, we recorded an impairment charge of $37 million on our investment in Grand Victoria based on the then estimated fair value of $170 million for its 50% interest.
During the second quarter of 2013 we recorded an impairment charge of $45 million related to corporate buildings which were removed from service that were located on the land underlying the Las Vegas Arena project. Other property transactions, net for the six months ended June 30, 2014 and 2013 includes miscellaneous asset disposals and demolition costs.
Operating Results Income from Unconsolidated Affiliates
The following table summarizes information related to our income from unconsolidated affiliates:
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
CityCenter |
$ | (1,055 | ) | $ | 861 | $ | 12,991 | $ | 12,556 | |||||||
Other |
6,923 | 5,821 | 11,653 | 10,470 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 5,868 | $ | 6,682 | $ | 24,644 | $ | 23,026 | |||||||||
|
|
|
|
|
|
|
|
Our share of CityCenters operating loss, including certain basis difference adjustments, for the three months ended June 30, 2014 was $1 million. Improved operating results at Aria, Vdara and Crystals were offset by property transactions, net. Arias table games volume increased 19% and hold percentage increased to 23.4% in the current year quarter from 20.8% in the prior year quarter. Hotel revenue increased as a result of an increase in REVPAR at Aria and Vdara of 6% and 10%, respectively. CityCenters second quarter results were negatively affected by $16 million of property transactions in the current year period and $10 million in the prior year period.
For the six months ended June 30, 2014 and 2013, improved operating results at Aria, Vdara and Crystals were offset by property transactions, net. Hotel revenue at Aria and Vdara increased as a result of an increase in REVPAR of 10% and 15%, respectively. Property transactions, net for the six months ended June 30, 2014 were $19 million, compared to $10 million for the prior year period.
Non-operating Results
Interest expense. Interest expense decreased $11 million and $27 million for the three and six months ended June 30, 2014 compared to the prior year periods, respectively, primarily as a result of a decrease in the average debt balance as well as a reduction in interest rate due to the repricing of the term loan B in May 2013. We had $4 million and $8 million of capitalized interest in the three and six months ended June 30, 2014, respectively, primarily related to the MGM Cotai project.
Non-operating items from unconsolidated affiliates. Non-operating charges from unconsolidated affiliates decreased by $24 million and $33 million for the three and six months ended June 30, 2014, respectively, primarily related to a decrease in interest expense at CityCenter as a result of debt restructuring transactions that occurred in October 2013 and to lower statutory interest recorded by CityCenter related to estimated amounts owed in connection with the CityCenter construction litigation.
Income taxes. We recorded income tax benefit of $53 million and $56 million for the three and six months ended June 30, 2014, respectively, compared to income tax provision of $4 million and $34 million for the three and six months ended June 30, 2013, respectively. The income tax benefit recorded for the three and six months ended June 30, 2014 was favorably impacted by a $31 million benefit resulting from the settlement during the quarter of our 2005-2009 IRS audits as well as assumptions made in our annual effective tax rate calculation regarding the realization of a portion of our foreign tax credit deferred tax asset in future years. The provision recorded during the six months ended June 30, 2013 was primarily the result of non-recurring taxation events recorded during the first quarter of 2013, including the re-measurement of the net deferred tax liability of MGM Grand Paradise, resulting in a provision for income taxes of $65 million, offset by a $38 million reduction in provision for the settlement of all 2003 and 2004 issues under appeal with the IRS. See Note 2 in the accompanying financial statements for further discussion of our annual effective tax rate assumptions regarding projected foreign tax credit usage and valuation allowance.
31
Non-GAAP Measures
Adjusted EBITDA is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening and start-up expenses and property transactions, net. Adjusted Property EBITDA is Adjusted EBITDA before corporate expense and stock compensation expense related to the MGM Resorts stock option plan, which is not allocated to each property. MGM China recognizes stock compensation expense related to its stock compensation plan which is included in the calculation of Adjusted EBITDA for MGM China. Adjusted EBITDA information is presented solely as a supplemental disclosure to reported GAAP measures because management believes these measures are 1) widely used measures of operating performance in the gaming and hospitality industry, and 2) a principal basis for valuation of gaming and hospitality companies.
We believe that while items excluded from Adjusted EBITDA and Adjusted Property EBITDA 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 compared to other periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods being presented. Also, we believe excluded items may not relate specifically to current operating 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, capital allocation, tax planning, financing and stock compensation awards are all managed at the corporate level. Therefore, we use Adjusted Property EBITDA as the primary measure of wholly owned domestic resorts operating performance.
Adjusted EBITDA or Adjusted Property EBITDA should not be construed as an alternative to operating income or net income, as an indicator of our performance; or as an alternative to cash flows from operating activities, as a measure of liquidity; or as any other measure determined in accordance with generally accepted accounting principles. We have significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in Adjusted EBITDA. Also, other companies in the gaming and hospitality industries that report Adjusted EBITDA information may calculate Adjusted EBITDA in a different manner.
The following table presents a reconciliation of Adjusted EBITDA to net income (loss):
Three Months Ended
June 30, |
Six Months
Ended
June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(In thousands) | ||||||||||||||||
Adjusted EBITDA |
$ | 585,986 | $ | 541,390 | $ | 1,212,468 | $ | 1,065,762 | ||||||||
Preopening and start-up expenses |
(9,759 | ) | (3,506 | ) | (15,395 | ) | (5,652 | ) | ||||||||
Property transactions, net |
(33,170 | ) | (88,131 | ) | (33,728 | ) | (96,622 | ) | ||||||||
Depreciation and amortization |
(203,070 | ) | (218,151 | ) | (410,725 | ) | (430,069 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
339,987 | 231,602 | 752,620 | 533,419 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Non-operating income (expense) |
||||||||||||||||
Interest expense, net of amounts capitalized |
(203,936 | ) | (214,500 | ) | (413,323 | ) | (439,947 | ) | ||||||||
Other, net |
(14,887 | ) | (43,815 | ) | (30,044 | ) | (67,176 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
(218,823 | ) | (258,315 | ) | (443,367 | ) | (507,123 | ) | |||||||||
Income (loss) before income taxes |
121,164 | (26,713 | ) | 309,253 | 26,296 | |||||||||||
Benefit (provision) for income taxes |
52,540 | (3,865 | ) | 56,059 | (34,296 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
173,704 | (30,578 | ) | 365,312 | (8,000 | ) | ||||||||||
Less: Net income attributable to noncontrolling interests |
(68,160 | ) | (62,380 | ) | (151,608 | ) | (78,412 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) attributable to MGM Resorts International |
$ | 105,544 | $ | (92,958 | ) | $ | 213,704 | $ | (86,412 | ) | ||||||
|
|
|
|
|
|
|
|
32
The following tables present reconciliations of operating income (loss) to Adjusted Property EBITDA and Adjusted EBITDA:
Three Months Ended June 30, 2014 | ||||||||||||||||||||
Operating
Income (Loss) |
Preopening
and Start-up Expenses |
Property
Transactions, Net |
Depreciation
and Amortization |
Adjusted
EBITDA |
||||||||||||||||
(In thousands) | ||||||||||||||||||||
Bellagio |
$ | 94,027 | $ | | $ | 594 | $ | 20,998 | $ | 115,619 | ||||||||||
MGM Grand Las Vegas |
34,429 | | 207 | 19,735 | 54,371 | |||||||||||||||
Mandalay Bay |
33,524 | 331 | 241 | 18,907 | 53,003 | |||||||||||||||
The Mirage |
14,362 | 22 | 1,801 | 12,725 | 28,910 | |||||||||||||||
Luxor |
11,734 | (3 | ) | 1 | 9,590 | 21,322 | ||||||||||||||
New York-New York |
19,755 | 47 | 98 | 4,578 | 24,478 | |||||||||||||||
Excalibur |
16,605 | | 332 | 3,769 | 20,706 | |||||||||||||||
Monte Carlo |
14,091 | 464 | 154 | 5,290 | 19,999 | |||||||||||||||
Circus Circus Las Vegas |
3,308 | 36 | 3 | 3,866 | 7,213 | |||||||||||||||
MGM Grand Detroit |
33,804 | | 78 | 5,771 | 39,653 | |||||||||||||||
Beau Rivage |
11,476 | | 559 | 6,454 | 18,489 | |||||||||||||||
Gold Strike Tunica |
6,651 | | 265 | 3,269 | 10,185 | |||||||||||||||
Other resort operations |
(86 | ) | | (8 | ) | 544 | 450 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Wholly owned domestic resorts |
293,680 | 897 | 4,325 | 115,496 | 414,398 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
MGM China |
134,112 | 2,917 | 48 | 73,411 | 210,488 | |||||||||||||||
CityCenter (50%) |
(1,055 | ) | | | | (1,055 | ) | |||||||||||||
Other unconsolidated resorts |
6,822 | 101 | | | 6,923 | |||||||||||||||
Management and other operations |
10,054 | | 1 | 2,047 | 12,102 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
443,613 | 3,915 | 4,374 | 190,954 | 642,856 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Stock compensation |
(6,393 | ) | | | | (6,393 | ) | |||||||||||||
Corporate |
(97,233 | ) | 5,844 | 28,796 | 12,116 | (50,477 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 339,987 | $ | 9,759 | $ | 33,170 | $ | 203,070 | $ | 585,986 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Three Months Ended June 30, 2013 | ||||||||||||||||||||
Operating
Income (Loss) |
Preopening
and Start-up Expenses |
Property
Transactions, Net |
Depreciation
and Amortization |
Adjusted
EBITDA |
||||||||||||||||
(In thousands) | ||||||||||||||||||||
Bellagio |
$ | 71,386 | $ | | $ | 337 | $ | 27,799 | $ | 99,522 | ||||||||||
MGM Grand Las Vegas |
29,400 | | 104 | 20,131 | 49,635 | |||||||||||||||
Mandalay Bay |
23,414 | 1,078 | 1,854 | 23,012 | 49,358 | |||||||||||||||
The Mirage |
11,714 | | 141 | 12,673 | 24,528 | |||||||||||||||
Luxor |
9,097 | 112 | (252 | ) | 9,331 | 18,288 | ||||||||||||||
New York-New York |
17,958 | | 499 | 5,215 | 23,672 | |||||||||||||||
Excalibur |
16,382 | | 13 | 3,376 | 19,771 | |||||||||||||||
Monte Carlo |
12,183 | 58 | 2,964 | 4,678 | 19,883 | |||||||||||||||
Circus Circus Las Vegas |
801 | | 10 | 4,485 | 5,296 | |||||||||||||||
MGM Grand Detroit |
32,709 | | | 5,953 | 38,662 | |||||||||||||||
Beau Rivage |
8,732 | | 7 | 7,727 | 16,466 | |||||||||||||||
Gold Strike Tunica |
3,966 | | 1,187 | 3,365 | 8,518 | |||||||||||||||
Other resort operations |
1,441 | | | 563 | 2,004 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Wholly owned domestic resorts |
239,183 | 1,248 | 6,864 | 128,308 | 375,603 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
MGM China |
126,134 | 2,258 | 150 | 76,273 | 204,815 | |||||||||||||||
CityCenter (50%) |
861 | | | | 861 | |||||||||||||||
Other unconsolidated resorts |
5,821 | | | | 5,821 | |||||||||||||||
Management and other operations |
6,111 | | (4 | ) | 2,953 | 9,060 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
378,110 | 3,506 | 7,010 | 207,534 | 596,160 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Stock compensation |
(6,246 | ) | | | | (6,246 | ) | |||||||||||||
Corporate |
(140,262 | ) | | 81,121 | 10,617 | (48,524 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 231,602 | $ | 3,506 | $ | 88,131 | $ | 218,151 | $ | 541,390 | |||||||||||
|
|
|
|
|
|
|
|
|
|
33
Six Months Ended June 30, 2014 | ||||||||||||||||||||
Operating
Income (Loss) |
Preopening
and Start-up Expenses |
Property
Transactions, Net |
Depreciation
and Amortization |
Adjusted
EBITDA |
||||||||||||||||
(In thousands) | ||||||||||||||||||||
Bellagio |
$ | 175,878 | $ | | $ | 573 | $ | 44,317 | $ | 220,768 | ||||||||||
MGM Grand Las Vegas |
75,361 | 197 | 199 | 40,847 | 116,604 | |||||||||||||||
Mandalay Bay |
67,935 | 1,133 | 239 | 39,696 | 109,003 | |||||||||||||||
The Mirage |
36,954 | 22 | 1,948 | 25,405 | 64,329 | |||||||||||||||
Luxor |
20,541 | | | 18,759 | 39,300 | |||||||||||||||
New York-New York |
40,642 | 102 | 342 | 9,019 | 50,105 | |||||||||||||||
Excalibur |
32,060 | | 331 | 7,205 | 39,596 | |||||||||||||||
Monte Carlo |
28,105 | 1,379 | 157 | 10,253 | 39,894 | |||||||||||||||
Circus Circus Las Vegas |
4,845 | 36 | (8 | ) | 7,649 | 12,522 | ||||||||||||||
MGM Grand Detroit |
61,458 | | 78 | 11,483 | 73,019 | |||||||||||||||
Beau Rivage |
19,642 | | 559 | 12,929 | 33,130 | |||||||||||||||
Gold Strike Tunica |
13,016 | | 265 | 6,471 | 19,752 | |||||||||||||||
Other resort operations |
(1,855 | ) | | (8 | ) | 1,085 | (778 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Wholly owned domestic resorts |
574,582 | 2,869 | 4,675 | 235,118 | 817,244 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
MGM China |
298,701 | 5,325 | (56 | ) | 147,243 | 451,213 | ||||||||||||||
CityCenter (50%) |
12,991 | | | | 12,991 | |||||||||||||||
Other unconsolidated resorts |
11,533 | 120 | | | 11,653 | |||||||||||||||
Management and other operations |
27,015 | | 1 | 4,938 | 31,954 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
924,822 | 8,314 | 4,620 | 387,299 | 1,325,055 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Stock compensation |
(13,092 | ) | | | | (13,092 | ) | |||||||||||||
Corporate |
(159,110 | ) | 7,081 | 29,108 | 23,426 | (99,495 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 752,620 | $ | 15,395 | $ | 33,728 | $ | 410,725 | $ | 1,212,468 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Six Months Ended June 30, 2013 | ||||||||||||||||||||
Operating
Income (Loss) |
Preopening
and Start-up Expenses |
Property
Transactions, Net |
Depreciation
and Amortization |
Adjusted
EBITDA |
||||||||||||||||
(In thousands) | ||||||||||||||||||||
Bellagio |
$ | 137,778 | $ | | $ | 341 | $ | 50,982 | $ | 189,101 | ||||||||||
MGM Grand Las Vegas |
70,372 | | 770 | 40,498 | 111,640 | |||||||||||||||
Mandalay Bay |
44,236 | 474 | 2,436 | 41,626 | 88,772 | |||||||||||||||
The Mirage |
25,264 | | 4,295 | 25,130 | 54,689 | |||||||||||||||
Luxor |
12,872 | 112 | 2,927 | 17,951 | 33,862 | |||||||||||||||
New York-New York |
35,695 | | 530 | 10,847 | 47,072 | |||||||||||||||
Excalibur |
27,544 | | 13 | 7,323 | 34,880 | |||||||||||||||
Monte Carlo |
25,041 | 58 | 2,952 | 9,318 | 37,369 | |||||||||||||||
Circus Circus Las Vegas |
412 | | 10 | 9,431 | 9,853 | |||||||||||||||
MGM Grand Detroit |
67,080 | | | 11,235 | 78,315 | |||||||||||||||
Beau Rivage |
15,159 | | (291 | ) | 15,471 | 30,339 | ||||||||||||||
Gold Strike Tunica |
10,786 | | 1,174 | 6,545 | 18,505 | |||||||||||||||
Other resort operations |
1,113 | | (1 | ) | 1,131 | 2,243 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Wholly owned domestic resorts |
473,352 | 644 | 15,156 | 247,488 | 736,640 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
MGM China |
225,251 | 4,632 | 345 | 155,042 | 385,270 | |||||||||||||||
CityCenter (50%) |
12,180 | 376 | | | 12,556 | |||||||||||||||
Other unconsolidated resorts |
10,470 | | | | 10,470 | |||||||||||||||
Management and other operations |
18,894 | | | 5,927 | 24,821 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
740,147 | 5,652 | 15,501 | 408,457 | 1,169,757 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Stock compensation |
(13,189 | ) | | | | (13,189 | ) | |||||||||||||
Corporate |
(193,539 | ) | | 81,121 | 21,612 | (90,806 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 533,419 | $ | 5,652 | $ | 96,622 | $ | 430,069 | $ | 1,065,762 | |||||||||||
|
|
|
|
|
|
|
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Liquidity and Capital Resources
Cash Flows
Our cash and cash equivalents balance at June 30, 2014 was $1.4 billion, which included $658 million at MGM China.
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 tax payments or refunds, and by distributions from unconsolidated affiliates. Cash provided by operating activities was $804 million for the six months ended June 30, 2014, compared to cash provided by operating activities of $730 million in the prior year period. Operating cash flows increased primarily as a result of an increase in operating income and a decrease in interest payments compared to the prior year period.
Operating cash flows related to MGM China were $453 million for the six months ended June 30, 2014, compared to $528 million in the prior year period. MGM Chinas operating income increased compared to the prior year period, however cash flows in the prior year period benefited significantly from changes in working capital primarily related to short-term gaming liabilities.
Investing activities . We made capital expenditures of $370 million for the six months ended June 30, 2014, of which $184 million related to MGM China and $14 million related to the construction of MGM National Harbor. Capital expenditures at MGM China included $170 million related to the construction of MGM Cotai and $14 million related to improvements at MGM Macau. Capital expenditures at our wholly owned domestic resorts and corporate entities included various room remodels including the Delano rooms at Mandalay Bay and suites at Bellagio, a remodel of the facades of New York-New York and Monte Carlo, restaurant and entertainment venue remodels and costs incurred to relocate and renovate certain corporate offices. Most of the costs capitalized at our wholly owned domestic resorts related to furniture and fixtures, materials and external labor costs.
We made capital expenditures of $243 million for the six months ended June 30, 2013, of which $125 million related to MGM China, excluding development fees eliminated in consolidation. Capital expenditures at MGM China primarily related to the construction of MGM Cotai, including a $47 million construction deposit. Capital expenditures at our wholly owned domestic resorts included various room remodels, restaurant remodels, and entertainment venue remodels. Most of the costs capitalized at our wholly owned domestic resorts related to furniture and fixtures, materials and external labor costs.
For the six months ended June 30, 2014, investments in and advances to unconsolidated affiliates primarily represent investments in CityCenter, MGM Hakkasan and the Las Vegas Arena Company. In the six months ended June 30, 2013, we made investments and advances of $12 million to CityCenter pursuant to the completion guarantee.
Investing activities include activity related to investments of funds held by the trust holding our 50% ownership in Borgata.
Financing activities . During the six months ended June 30, 2014, we repaid net debt of $523 million, which included the repayment of the $509 million 5.875% senior notes at maturity on February 27, 2014. During the first half of 2013 we repaid the $462 million 6.75% senior notes at maturity on April 1, 2013 and we incurred $17 million of debt issuance costs related to the re-pricing of the term loan B facility in May 2013.
MGM China paid a $499 million special dividend in March 2014 and a $127 million final dividend in June 2014, of which $245 million and $62 million was distributed to noncontrolling interests, respectively. MGM China paid a $500 million special dividend in March 2013, of which $245 million was distributed to noncontrolling interests.
Other Factors Affecting Liquidity
Anticipated uses of cash. We have significant outstanding debt and contractual obligations in addition to planned capital expenditures. At June 30, 2014, we had $12.9 billion of indebtedness, including $2.8 billion of borrowings outstanding under our $4.0 billion senior credit facility and $554 million outstanding under the $2.0 billion MGM China credit facility. We expect to meet our debt obligations and planned capital expenditure requirements with future anticipated operating cash flows, cash and cash equivalents, and available borrowings under our senior credit facility. At June 30, 2014 we had $1.5 billion of principal amount of long-term debt maturing within one year, primarily related to our $1.45 billion 4.25% convertible senior notes. At June 30, 2014 the price per share of our common stock was above the conversion price of our convertible senior notes. We have an estimated $797 million of cash interest payments based on current outstanding debt and applicable interest rates within the next twelve months.
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In addition, we expect to make capital investments as described below during the full year 2014. See Executive Overview for further information regarding the scope and timing of our significant development projects.
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$350 million in capital expenditures at our wholly owned domestic resorts and corporate entities; |
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$50 million investment in our arena project, subject to the project obtaining permanent financing; |
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$110 million in capital expenditures, including land costs, related to the MGM National Harbor project; and |
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If we are awarded the license in Massachusetts, $85 million related to the initial license fee and $40 million related to land acquisition costs. |
During the full year 2014, MGM China expects to spend approximately $70 million in capital improvements at MGM Macau and $500 million on the MGM Cotai project, excluding capitalized interest and land.
Our capital expenditures fluctuate depending on our decisions with respect to strategic capital investments in new or existing resorts and the timing of capital investments to maintain the quality of our resorts, the amounts of which can vary depending on timing of larger remodel projects related to our public spaces and hotel rooms. Future capital expenditures could vary from our current expectations depending on the progress of our development efforts and the structure of our ownership interests in future developments.
Cotai land concession. MGM Grand Paradises land concession contract for an approximate 17.8 acre site in Cotai, Macau became effective on January 9, 2013 and has an initial term of 25 years. The total land premium payable to the Macau government for the land concession contract is $161 million and is composed of a down payment and eight additional semi-annual payments. As of June 30, 2014, MGM China had paid $86 million of the contract premium. In July 2014, MGM China paid the third semi-annual installment payment of $15 million under the land concession contract. Including interest on the five remaining semi-annual payments, MGM China has $73 million remaining payable for the land concession contract. In addition, MGM Grand Paradise is required to pay the Macau government approximately $269,000 per year in rent during the course of development of the land.
MGM China dividend policy. On August 5, 2014, MGM Chinas Board of Directors announced a dividend of $136 million, which will be paid to shareholders of record as of August 25, 2014 and distributed on or about September 1, 2014. We will receive $69 million, representing our 51% share of the dividend.
CityCenter completion guarantee. In October 2013, we entered into a third amended and restated completion and cost overrun guarantee, which is collateralized by substantially all of the assets of Circus Circus Las Vegas, as well as certain undeveloped land adjacent to that property. The terms of the amended and restated completion guarantee provide CityCenter the ability to utilize up to $72 million of net residential proceeds to fund construction costs, or to reimburse us for construction costs previously expended. As of June 30, 2014, CityCenter is holding approximately $72 million in a separate bank account representing the remaining condo proceeds available to fund completion guarantee obligations or be reimbursed to us. In accordance with the amended and restated completion guarantee, such amounts can only be used to fund construction lien obligations or reimbursed to us once the Perini litigation is settled.
As of June 30, 2014, we have funded $727 million under the completion guarantee and have accrued a liability of $128 million, which includes estimated litigation costs related to the resolution of disputes with contractors concerning the final construction costs and estimated amounts to be paid to contractors in connection with the Perini litigation. Our estimated obligation has been offset by the $72 million of condominium proceeds received and held in escrow by CityCenter, which are available to fund construction lien claims upon final resolution of the Perini litigation. Also, our accrual reflects certain estimated offsets to the amounts claimed by the contractors. We do not believe it is reasonably possible we could be liable for amounts in excess of what we have accrued related to the Perini Litigation claims. However, an insurer participating in the OCIP for the CityCenter construction project has initiated an arbitration against us in an attempt to recover certain costs it has allegedly incurred in connection with CityCenters claims against Perini and certain subcontractors for defective work at the Harmon. We dispute that such amounts are owed to the insurance company, but believe it is reasonably possible we may ultimately be found liable for some portion of the claim. The arbitration is in its beginning phase and there are significant factual and legal issues to be determined and resolved. Further, we have not had the opportunity to engage in any discovery, and the amount of damages to be sought by the insurer is indeterminate. Because of these factors, we do not currently have sufficient information to determine a range of reasonably possible loss.
Critical Accounting Policies and Estimates
A complete discussion of our critical accounting policies and estimates is included in our Form 10-K for the fiscal year ended December 31, 2013. There have been no significant changes in our critical accounting policies and estimates since year end.
Market Risk
In addition to the inherent risks associated with our normal operations, we are also exposed to additional market risks. Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. Our primary exposure to market risk is interest rate risk associated with our variable rate long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate borrowings and short-term borrowings under our bank credit facilities. A change in interest rates generally does not have an impact upon our future earnings and cash flow for fixed-rate debt instruments. As fixed-rate debt matures,
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however, and if additional debt is acquired to fund the debt repayment, future earnings and cash flow may be affected by changes in interest rates. This effect would be realized in the periods subsequent to the periods when the debt matures. We do not hold or issue financial instruments for trading purposes and do not enter into derivative transactions that would be considered speculative positions.
As of June 30, 2014, variable rate borrowings represented 26% of our total borrowings. Assuming a 100 basis-point increase in LIBOR (in the case of the term B facility, over the 1% floor specified in our senior credit facility), our annual interest cost would increase by $28 million based on gross amounts outstanding at June 30, 2014. Assuming a 100 basis-point increase in HIBOR for the MGM Grand Paradise credit facility, our annual interest cost would increase by $6 million based on amounts outstanding at June 30, 2014. The following table provides additional information about our gross long-term debt subject to changes in interest rates:
Debt maturing in |
Fair Value
June 30, |
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2014 | 2015 | 2016 | 2017 | 2018 | Thereafter | Total | 2014 | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Fixed-rate |
$ | | $ | 2,325 | $ | 1,476 | $ | 743 | $ | 475 | $ | 4,605 | $ | 9,624 | $ | 11,391 | ||||||||||||||||
Average interest rate |
N/A | 5.1 | % | 8.2 | % | 7.6 | % | 11.4 | % | 7.1 | % | 7.1 | % | |||||||||||||||||||
Variable rate |
$ | 14 | $ | 28 | $ | 166 | $ | 1,440 | $ | 18 | $ | 1,645 | $ | 3,311 | $ | 3,309 | ||||||||||||||||
Average interest rate |
3.3 | % | 3.3 | % | 2.2 | % | 2.6 | % | 3.5 | % | 3.5 | % | 3.1 | % |
In addition to the risk associated with our variable interest rate debt, we are also exposed to risks related to changes in foreign currency exchange rates, mainly related to MGM China and to our operations at MGM Macau and the development of MGM Cotai. While recent fluctuations in exchange rates have not been significant, potential changes in policy by governments or fluctuations in the economies of the United States, Macau or Hong Kong could cause variability in these exchange rates. As of June 30, 2014, a 1% change in the Hong Kong Dollar (the functional currency of MGM China) exchange rate would impact the carrying value of the Companys cash and debt balances by $7 million and $6 million, respectively.
Cautionary Statement Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as anticipates, intends, plans, seeks, believes, estimates, expects, will, may and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make regarding our ability to generate significant cash flow, our expectations with respect to improvements in the global economy, amounts we will pay in capital expenditures and investments, the opening and development of new resorts and projected tax benefits to be realized in future periods. The foregoing is not a complete list of all forward-looking statements we make.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Therefore, we caution you against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, regional, national or global political, economic, business, competitive, market, and regulatory conditions and the following:
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our substantial indebtedness and significant financial commitments could adversely affect our development options and financial results and impact our ability to satisfy our obligations; |
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current and future economic and credit market conditions could adversely affect our ability to service or refinance our indebtedness and to make planned expenditures and investments; |
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restrictions and limitations in the agreements governing our senior credit facility and other senior indebtedness could significantly affect our ability to operate our business, as well as significantly affect our liquidity; |
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significant competition we face with respect to destination travel locations generally and with respect to our peers in the industries in which we compete; |
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the fact that our businesses are subject to extensive regulation and the cost of compliance or failure to comply with such regulations could adversely affect our business; |
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the impact on our business of economic and market conditions in the markets in which we operate and in the locations in which our customers reside; |
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restrictions on our ability to have any interest or involvement in gaming business in China, Macau, Hong Kong and Taiwan, other than through MGM China; |
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the ability of the Macau government to terminate MGM Grand Paradises gaming subconcession under certain circumstances without compensating MGM Grand Paradise or refuse to grant MGM Grand Paradise an extension of the subconcession, which is scheduled to expire on March 31, 2020; |
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our ability to build and open our development in Cotai by January 2018; |
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the dependence of MGM Macau upon gaming promoters for a significant portion of gaming revenues in Macau; |
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extreme weather conditions or climate change may cause property damage or interrupt business; |
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the concentration of our major gaming resorts on the Las Vegas Strip; |
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the fact that we extend credit to a large portion of our customers and we may not be able to collect gaming receivables; |
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the potential occurrence of impairments to goodwill, indefinite-lived intangible assets or long-lived assets which could negatively affect future profits; |
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the susceptibility of leisure and business travel, especially travel by air, to global geopolitical events, such as terrorist attacks or acts of war or hostility; |
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the fact that investing in other entities through partnerships, joint ventures or otherwise, including CityCenter decreases our ability to manage risk; |
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the fact that future construction or development projects will be susceptible to substantial development and construction risks; |
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the fact that our insurance coverage may not be adequate to cover all possible losses that our properties could suffer, our insurance costs may increase and we may not be able to obtain similar insurance coverage in the future; |
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the fact that CityCenter has decided to abate the potential for structural collapse of the Harmon in the event of a code-level earthquake by demolishing the building, which exposes us to risks prior to or in connection with the demolition process; |
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the fact that a failure to protect our trademarks could have a negative impact on the value of our brand names and adversely affect our business; |
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the risks associated with doing business outside of the United States and the impact of any potential violations of the Foreign Corrupt Practices Act or other similar anti-corruption laws; |
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risks related to pending claims that have been, or future claims that may be brought against us; |
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the fact that a significant portion of our labor force is covered by collective bargaining agreements; |
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the sensitivity of our business to energy prices and a rise in energy prices could harm our operating results; |
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the potential that failure to maintain the integrity of our computer systems and internal customer information could result in damage of reputation and/or subject us to fines, payment of damages, lawsuits or other restrictions on our use or transfer of data; |
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increases in gaming taxes and fees in the jurisdictions in which we operate; |
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the potential for conflicts of interest to arise because certain of our directors and officers are also directors of MGM China, which is a publicly traded company listed on the Hong Kong Stock Exchange; and |
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the risks associated with doing business outside of the United States. |
Any forward-looking statement made by us in this Form 10-Q speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. If we update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.
You should also be aware that while we from time to time communicate with securities analysts, we do not disclose to them any material non-public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility and are not endorsed by us.
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
We incorporate by reference the information appearing under Market Risk in Part I, Item 2 of this Form 10-Q.
Item 4. | Controls and Procedures |
Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that our disclosure controls and procedures (as such term is defined in Rules 13(a)-15(e) and 15d-15(e) under the Exchange Act) were effective as of June 30, 2014 to provide reasonable assurance that information required to be disclosed in the Companys reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations and to provide that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures. This conclusion is based on an evaluation as required by Rule 13a-15(b) under the Exchange Act conducted under the supervision and participation of the principal executive officer and principal financial officer along with company management.
During the quarter ended June 30, 2014, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Item 1. | Legal Proceedings |
CityCenter construction litigation . In March 2010, Perini Building Company, Inc. (Perini), general contractor for CityCenter, filed a lawsuit in the Eighth Judicial District Court for Clark County, State of Nevada, against MGM MIRAGE Design Group (a wholly owned subsidiary of the Company which was the original party to the Perini construction agreement) and certain direct or indirect subsidiaries of CityCenter Holdings, LLC (the CityCenter Owners). Perini asserted that CityCenter was substantially completed, but the defendants failed to pay Perini approximately $490 million allegedly due and owing under the construction agreement for labor, equipment and materials expended on CityCenter. The complaint further charged the defendants with failure to provide timely and complete design documents, late delivery to Perini of design changes, mismanagement of the change order process, obstruction of Perinis ability to complete the Harmon component, and fraudulent inducement of Perini to compromise significant amounts due for its general conditions. The complaint advanced claims for breach of contract, breach of the implied covenant of good faith and fair dealing, tortious breach of the implied covenant of good faith and fair dealing, unjust enrichment and promissory estoppel, and fraud and intentional misrepresentation. Perini seeks compensatory damages, punitive damages, attorneys fees and costs.
In April 2010, Perini served an amended complaint in this case which joins as defendants many owners of CityCenter residential condominium units (the Condo Owner Defendants), added a count for foreclosure of Perinis recorded master mechanics lien against the CityCenter property in the amount of approximately $491 million, and asserted the priority of this mechanics lien over the interests of the CityCenter Owners, the Condo Owner Defendants and CityCenter lenders in the CityCenter property.
The CityCenter Owners and the other defendants dispute Perinis allegations, and contend that the defendants are entitled to substantial amounts from Perini, including offsets against amounts claimed to be owed to Perini and its subcontractors and damages based on breach of their contractual and other duties to CityCenter, duplicative payment requests, non-conforming work, lack of proof of alleged work performance, defective work related to the Harmon, property damage and Perinis failure to perform its obligations to pay certain subcontractors and to prevent filing of liens against CityCenter. Parallel to the court litigation, CityCenter management conducted an extra-judicial program for settlement of CityCenter subcontractor claims. CityCenter has resolved the claims of 219 first-tier Perini subcontractors (including the claims of any lower-tier subcontractors that might have claims through those first-tier subcontractors), with only three remaining for further proceedings along with trial of Perinis claims and CityCenters Harmon-related counterclaim and other claims by CityCenter against Perini and its parent guarantor, Tutor Perini. Two of the remaining subcontractors are implicated in the defective work at the Harmon. In August 2013 Perini recorded an amended notice of lien reducing its lien to approximately $167 million.
In November 2012, Perini filed a second amended complaint which, among other things, added claims against the CityCenter defendants of breach of contract (alleging that CityCenters Owner Controlled Insurance Program (OCIP) failed to provide adequate project insurance for Perini with broad coverages and high limits), and tortious breach of the implied covenant of good faith and fair dealing (alleging improper administration by CityCenter of the OCIP and Builders Risk insurance programs).
In 2013, CityCenter reached a settlement agreement with certain professional service providers against whom it had asserted claims in this litigation for errors or omissions with respect to the CityCenter project, which settlement has been approved by the court. In April 2014, CityCenter settled for $55 million, net of deductible, its 2008 builders risk insurance claim for loss and damage with respect to the Harmons defective condition.
Further, CityCenter and Perini have entered a settlement agreement which resolves most but not all of the components of Perinis non-Harmon-related lien claim against CityCenter. The settlement established a stipulated value for Perinis mechanics lien, which amount will not be paid until resolution of CityCenters damages claim for the Harmon and will be offset against any judgment CityCenter obtains against Perini for damages relating to construction of the Harmon. Pursuant to the parties stipulation, on February 24, 2014, Perini filed a revised lien for $174 million as the amount claimed by Perini and the remaining Harmon-related subcontractors. The discovery process continues. Trial of the remainder of Perinis lien claim, the remaining subcontractors claims against CityCenter, and CityCenters counterclaims against Perini and certain subcontractors for defective work at the Harmon has been rescheduled to commence on September 23, 2014.
The CityCenter Owners and the other defendants will continue to vigorously assert and protect their interests in the Perini lawsuit. The Company believes that a loss with respect to Perinis punitive damages claim is neither probable nor reasonably possible.
Please refer to Note 5 in the accompanying consolidated financial statements for further discussion on the Companys completion guarantee obligation which may be impacted by the outcome of the above litigation and CityCenters extra-judicial settlement process.
Securities and derivative litigation. In 2009 various shareholders filed six lawsuits in Nevada federal and state court against the Company and various of its former and current directors and officers alleging federal securities laws violations and/or related breaches of fiduciary duties in connection with statements allegedly made by the defendants during the period August 2007 through the date of such lawsuit filings in 2009 (the class period). In
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general, the lawsuits assert the same or similar allegations, including that during the relevant period defendants artificially inflated the Companys common stock price by knowingly making materially false and misleading statements and omissions to the investing public about the Companys financial statements and condition, operations, CityCenter, and the intrinsic value of the Companys common stock; that these alleged misstatements and omissions thereby enabled certain Company insiders to derive personal profit from the sale of Company common stock to the public; that defendants caused plaintiffs and other shareholders to purchase Company common stock at artificially inflated prices; and that defendants imprudently implemented a share repurchase program to the detriment of the Company. The lawsuits seek unspecified compensatory damages, restitution and disgorgement of alleged profits and/or attorneys fees and costs in amounts to be proven at trial, as well as injunctive relief related to corporate governance. There have been no significant developments to the lawsuits disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013, except as noted below:
In re MGM MIRAGE Derivative Litigation. Mario Guerrero v. James J. Murren, et al. (Case No. 2:09-cv-01815-KJD-RJJ, filed September 14, 2009, U.S. District Court for the District of Nevada); Regina Shamberger v. J. Terrence Lanni, et al. (Case No. 2:09-cv-01817-PMP-GWF, filed September 14, 2009, U.S. District Court for the District of Nevada), filed September 14, 2009. These purported shareholder derivative actions involve the same former and current director and officer defendants as those in the consolidated state court derivative actions, and also name the Company as a nominal defendant. They make factual allegations similar to those alleged in the state court actions, asserting claims of, among other things, breach of fiduciary duty by defendants asserted improper financial reporting, insider selling and misappropriation of information; waste of corporate assets; and unjust enrichment. In June 2010, the plaintiffs in these two actions made a joint motion for consolidation and appointment of lead plaintiffs and lead counsel. In March 2011, on stipulation of both plaintiffs and without opposition from the defendants, the two actions were consolidated under the caption In re MGM MIRAGE Derivative Litigation. In March 2011, with the stipulation of all parties, the court ordered that defendants need not respond to the complaints currently on file pending the disposition of the motions to dismiss in In re MGM MIRAGE Securities Litigation, without prejudice to either sides right to seek to lift the stay at an earlier time. By the terms of the courts order, the stay expired in November 2013, and in April 2014 the court issued an order that denied plaintiffs request to extend the stay. In March 2014 plaintiff Regina Shamberger filed a Notice of Voluntary Dismissal by which she withdrew from the action. On June 30, 2014 the federal court granted defendants motion to dismiss the Guerrero derivative suit, on the grounds that the Nevada state court orders dismissing the state-based shareholder derivative cases, Charles Kim v. James J. Murren, et al. (Case No. A-09-599937-C, Eighth Judicial District Court, Clark County, Nevada (2009), and Sanjay Israni v. Robert H. Baldwin, et al. (Case No. CV-09-02914, Second Judicial District Court, Washoe County, Nevada (2009); transferred to Case No. A-10-619411-C, Eighth Judicial District Court, Clark County, Nevada (2010), on the basis of demand futility preclude the federal derivative action. The court denied plaintiffs request to amend the complaint. Plaintiffs have filed a notice of appeal of the federal district courts dismissal order and judgement to the Ninth Circuit Court of Appeals.
Item 1A. | Risk Factors |
A description of certain factors that may affect our future results and risk factors is set forth in our Annual Report on Form 10-K for the year ended December 31, 2013. There have been no material changes to those factors for the six months ended June 30, 2014.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
In April 2014, we terminated the May 2008 Stock Repurchase Program. During the quarter ended June 30, 2014, we did not repurchase shares of our common stock prior to termination of the May 2008 Stock Repurchase Program.
Item 6. | Exhibits |
10.1 | Amended and Restated Deferred Compensation Plan for Non-employee Directors, effective as of June 5, 2014. | |
10.2 | MGM Resorts International Amended and Restated 2005 Ominbus Incentive Plan (incorporated by reference to Exhibit 10 to the Companys Current Report on Form 8-K filed on June 5, 2014). | |
10.3 | Deferred Compensation Plan II, as Amended and Restated, effective January 1, 2008. | |
10.4 | Amendment Number One to the MGM Resorts Deferred Compensation Plan II, dated as of December 3, 2008. | |
10.5 | Amendment Number Two to the MGM Resorts Deferred Compensation Plan II, dated as of December 20, 2010. | |
10.6 | Amendment Number Three to the MGM Resorts Deferred Compensation Plan II, dated as of May 31, 2012. | |
31.1 | Certification of Chief Executive Officer of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a). |
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31.2 | Certification of Chief Financial Officer of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a). | |
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350. | |
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350. | |
101 | The following information from the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 formatted in eXtensible Business Reporting Language: (i) Consolidated Balance Sheets at June 30, 2014 (unaudited) and December 31, 2013 (audited); (ii) Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013; (iii) Unaudited Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2014 and 2013; (iv) Unaudited Consolidated Statements of Cash Flows for the three and six months ended June 30, 2014 and 2013; and (v) Condensed Notes to the Unaudited Consolidated Financial Statements. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MGM Resorts International | ||||||
Date: August 8, 2014 | By: |
/s/ JAMES J. MURREN |
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James J. Murren | ||||||
Chairman of the Board and Chief Executive Officer |
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(Principal Executive Officer) | ||||||
Date: August 8, 2014 |
/s/ DANIEL J. DARRIGO |
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Daniel J. DArrigo | ||||||
Executive Vice President, Chief Financial Officer
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EXHIBIT 10.1
AMENDED AND RESTATED
MGM RESORTS INTERNATIONAL
2012 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
MGM Resorts International (the Company) hereby amends and restates this nonqualified deferred compensation plan for members of the Board of Directors of the Company who are not employees or officers of the Company (Non-Employee Directors), which is known as the Amended and Restated MGM Resorts International 2012 Deferred Compensation Plan for Non-Employee Directors (the Plan). The purpose of the Plan is to enhance the Companys ability to attract and retain Non-Employee Directors whose training, experience and ability will promote the interests of the Company and to directly align the interests of such Non-Employee Directors with the interests of the Companys stockholders. The Plan is designed to permit Non-Employee Directors to defer the receipt of all or a portion of the compensation otherwise payable to them for services to the Company as members of the Board.
The Plan was originally effective as of June 12, 2012 (the Effective Date). This amendment and restatement is effective as of June 5, 2014. The Plan is intended to be, and shall be administered as, an unfunded plan maintained for the purpose of providing deferred compensation for the Non-Employee Directors and, as such, is not an employee benefit plan within the meaning of Title I of ERISA (as defined below).
ARTICLE I
DEFINITIONS
(a) Administrator means the administrator that has been appointed by the Board pursuant to Article V of the Plan.
(b) Board means the Board of Directors of the Company.
(c) Cash Fees shall have the meaning set forth in Section 3.2(b) of the Plan.
(d) Code means the Internal Revenue Code of 1986, as amended.
(e) Committee means the Compensation Committee of the Board.
(f) Common Stock means the common stock, par value $0.01, of the Company.
(g) Company means MGM Resorts International.
(h) Deferred Compensation Accounts shall have the meaning set forth in Article III of the Plan.
(i) Deferred Stock Unit shall have the meaning set forth in Section 3.3 of the Plan.
(j) ERISA means the Employee Retirement Income Security Act of 1974, as amended.
(k) Fees includes all fee income payable to Non-Employee Directors for their service on the Board, including, but not limited to (i) annual retainer fees (whether paid in equity (including RSUs) or cash) and (iii) compensation that may be payable to such Non-Employee Directors for serving on any of the committees of the Board, as chairperson of any of the committees of the Board or as Lead Director. The term Fees does not include travel payments that may be made to such Non-Employee Directors as a result of attending meetings of the Board or payments that constitute reimbursement for expenses incurred by a Non-Employee Director in connection with his or her services to the Board.
(l) Measurement Fund shall have the meaning set forth in Section 3.3 of the Plan.
(m) Participant means a Non-Employee Director of the Company (and, if applicable, his or her beneficiaries) who has elected to participate in the Plan.
(n) Plan Year means the calendar year.
(o) Restricted Stock Unit or RSU means an award granted to a Participant pursuant to Article 8 of the Companys Amended and Restated 2005 Omnibus Incentive Plan, as amended from time to time.
(p) Service End Date means the first day of the month following the month in which the Participant terminates his or her services as a Non-Employee Director.
(q) Subsidiary means any corporation, limited liability company or partnership in which the Company owns, directly or indirectly, more than 50% of the total combined voting power of all classes of stock of such corporation or of the capital interest or profits interest of such partnership.
ARTICLE II
PARTICIPATION REQUIREMENTS
2.1. Eligibility . All Non-Employee Directors are eligible to participate in the Plan. A Non-Employee Director will be deemed a Participant in the Plan if he or she defers all or a portion of the RSUs and/or other Fees to be earned during a Plan Year as provided herein.
2.2. Elections .
(a) General Rules . The election to defer all or a portion of the Participants RSUs and/or other Fees for the next Plan Year, as well as the election of the form and timing of any distributions on the Participants behalf with respect to the amount deferred during such Plan Year, shall be made by written notice delivered by the Participant to the Company in the manner specified by the Company and not later than the last day immediately preceding such Plan Year. In the case of a Non-Employee Director who first becomes eligible during a Plan Year, such election must be made by written notice not later than thirty (30) days after such Non-Employee Director first becomes eligible to participate in this Plan; provided, however, that with respect to such initial elections, no RSUs and/or other Fees attributable to the period before which the
2
election is made and presented to the Company are eligible for deferral under this Plan. Each such election shall be irrevocable during such Plan Year and thereafter, except as set forth below.
(b) Amendment of Election Form . Each Participant may amend his or her election forms with respect to his or her Deferred Compensation Account balance (i) to change the previously-elected form of distribution in respect of all distributions under the Plan to another distribution form permitted under Section 4.1, or (ii) to change the starting date for commencement of all payments under the Plan to another definitely determinable date, provided, however that such election shall be made in the manner specified by the Company. Notwithstanding the foregoing, to be effective, any election made pursuant to this Section 2.2(b) must satisfy the following conditions: (x) it must be made at least twelve months prior to the date as of which distribution to the Participant in respect of his or her Deferred Compensation Account would otherwise have been made to the Participant and (y) it must defer the commencement date of distribution to the Participant in respect of his or her Deferred Compensation Account for at least five (5) years from the date that would have applied absent such election.
ARTICLE III
DEFERRED COMPENSATION ACCOUNTS
3.1. Establishment of Deferred Compensation Accounts . An account shall be established for each Participant which shall be designated as his or her Deferred Compensation Account. Each Participants Deferred Compensation Account may be sub-allocated as a recordkeeping matter and accounting convenience, but the Company shall not be required to segregate any amounts credited to the Deferred Compensation Accounts in any manner or in any form, except in its sole discretion.
3.2. Crediting Deferred Compensation Accounts .
(a) Crediting of RSUs to Deferred Compensation Accounts . Upon the execution of a valid election form pursuant to Section 2.2(a) with respect to the deferral of RSUs, such deferred RSUs shall be credited to the Participants Deferred Compensation Accounts as of the date the award would have otherwise vested.
(b) Crediting of Other Fees to Deferred Compensation Accounts . Upon the execution of a valid election form pursuant to Section 2.2(a) with respect to the deferral of Fees other than RSUs attributable to services performed by the Participant in the next Plan Year (such Fees referred to herein as Cash Fees), such Fees shall be credited to the Participants Deferred Compensation Accounts on the last day of the fiscal quarter to which such Fees relate.
3.3. Crediting/Debiting of Account Balances . In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participants Deferred Compensation Account in accordance with the following rules:
(a) Election of Measurement Funds . Solely with respect to Cash Fees deferred under the Plan, a Participant may elect, on an election form provided by the Committee, one or more Measurement Fund(s) (as described in Section 3.3(c)) to be used to determine the
3
additional amounts to be credited or debited to the Participants Deferred Compensation Account. A Participant may elect to add or delete one or more available Measurement Fund(s) to be used to determine the additional amounts to be credited or debited to the Participants Deferred Compensation Account, or, other than with respect to changes between the Company stock fund and any other Measurement Fund, to change the portion of the Cash Fees deferred under the Participants Deferred Compensation Account allocated to each previously or newly elected Measurement Fund. A Participant may elect to make such a change by submitting an election form, whether written or electronic (as determined by the Committee from time to time and in its sole discretion), to the Committee. Any election so made and accepted by the Committee shall apply no later than the third business day following the Committees acceptance of the election. Any such election shall continue to apply to Cash Fees deferred under the Participants Deferred Compensation Account, unless subsequently changed in accordance with this Section 3.3(a). Once an election has been made to allocate deferred Cash Fees to the Company stock fund, the Participant shall not be permitted to change such election to allocate such Cash Fees to a different Measurement Fund.
(b) Proportionate Allocation . In making any election described in Section 3.3(a), the Participant shall specify on the election form, in increments of one percentage point (1%), the percentage of the Cash Fees deferred under the Participants Deferred Compensation Account to be allocated to a Measurement Fund (as if the Participant were making an investment in that Measurement Fund with that portion of the Participants Deferred Compensation Account).
(c) Measurement Funds . A Participant may elect one or more measurement funds (the Measurement Funds) from among those selected by the Committee for the purpose of crediting or debiting additional amounts to the Participants Deferred Compensation Account. Measurement Funds selected by the Committee may include one or more mutual funds, a fixed interest crediting rate formula, a Company stock fund and/or other investment alternatives. As necessary, the Committee may, in its sole discretion, discontinue, substitute or add Measurement Funds. Each such action will take effect as of the first day of the calendar quarter that follows by thirty (30) days or more the day on which the Committee gives Participants advance written notice of such change, unless such advance notice cannot be given due to reasons beyond the control of the Committee, in which case notice of the change shall be given as soon as administratively practical. In selecting the Measurement Funds that are available from time to time, neither the Committee nor the Company shall be liable to any Participant for such selection or adding, deleting or continuing any available Measurement Fund. The Participant shall bear full responsibility for all results associated with the Participants selection of Measurement Funds under this Section 3.3, and the Company shall have no responsibility or liability with respect to the Participants selection of such Measurement Funds.
(d) Crediting or Debiting Method . The performance of each elected Measurement Fund (either positive or negative) will be reasonably determined by the Committee. The portion of a Participants Deferred Compensation Account that relates to Cash Fees deferred under the Plan shall be credited or debited on a daily basis based on the performance of each Measurement Fund selected by the Participant.
4
(e) No Actual Investment . Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participants election of any such Measurement Fund, the allocation to the Participants Deferred Compensation Account thereof, the calculation of additional amounts and the crediting or debiting of such amounts to a Participants Deferred Compensation Account shall not be considered or construed in any manner as an actual investment of the Participants Deferred Compensation Account in any such Measurement Fund. In the event that the Company, in its sole discretion, decides to invest funds in any or all of the Measurement Funds, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participants Deferred Compensation Account shall at all times be a bookkeeping entry only and shall not represent any investment made on the Participants behalf by the Company; and the Participant shall at all times remain an unsecured creditor of the Company.
(f) Deferred Stock Units . With respect to the portion of a Participants Deferred Compensation Account attributable to deferred RSUs and the portion of a Participants Deferred Compensation Account attributable to Cash Fees for which the Measurement Fund selected is the Company stock fund, such amounts will be deemed invested in deferred stock units that are intended to mirror the performance of shares of Common Stock, with each deferred stock unit the equivalent of one share of Common Stock (Deferred Stock Units). Such amounts will be credited under the Plan as if the Participant had actually purchased shares of Common Stock on the date of such deferral. If dividends on the Common Stock are declared while a Participant holds Deferred Stock Units in his or her Deferred Compensation Account, additional Deferred Stock Units will be credited to such Deferred Compensation Account in the following manner. First, a notional value equal to the cash value of dividends that would be paid upon the same number of whole shares of Common Stock as the Participant has Deferred Stock Units in his or her Deferred Compensation Account on the dividend crediting date (e.g., the date such dividend is payable) will be calculated. Second, such notional value will be deemed to be allocated to the Participants Deferred Compensation Account and credited to a corresponding number of Deferred Stock Units to such Deferred Compensation Account (in whole or fractional units) as of the same date, as soon as administratively practicable. For the avoidance of doubt, deferred RSUs must always be hypothetically invested in Deferred Stock Units, however, although Cash Fees deferred under the Plan may be hypothetically invested in any of the Measurement Funds, including Deferred Stock Units, once invested in Deferred Stock Units, deferred Cash Fees may not be transferred to any other Measurement Funds.
(g) Valuation of Deferred Compensation Account . With respect to any distribution for a Participants Deferred Compensation Account as provided for in Article IV of the Plan, the aggregate value of any such distribution shall be valued as of the date of distribution.
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ARTICLE IV
DISTRIBUTIONS FROM THE PLAN
4.1. Timing and Form of Distribution . The Company shall pay to the Participant (or, in the event of the Participants death, to the Participants designated beneficiary) a sum, equal to the amount then standing to his or her credit in his or her Deferred Compensation Account (plus earnings or losses as provided for under Section 3.3 herein), in the following manner:
(a) Lump Sum or Installment Payments . Payments shall be made in a lump sum, or in installments (to the extent made available by the Administrator), as elected by the Participant in his or her deferral election form, to begin within 90 days following the Participants Service End Date. In the event an installment option is chosen, such installments shall be as nearly equal as practicable and shall continue even if the Participant again serves on the Board. The form of distribution for that portion of a Participants Deferred Compensation Account deemed invested in Deferred Stock Units shall be Common Stock. The form of distribution for that portion of a Participants Deferred Compensation Account deemed invested in Measurement Fund(s) other than Deferred Stock Units shall be cash.
(b) Small Account Balances Lump Sum Payout . Notwithstanding the foregoing, in the event the amount scheduled for distribution on or following the Participants Service End Date in installments (rather than lump sum) is ten thousand dollars ($10,000) or less at the time distributions would commence by reason of the application of this Section 4.1(a), payment of such portion of Participants Deferred Compensation Account balance shall be made in a single lump sum within 90 days of the date such distribution would otherwise have commenced, notwithstanding the form of benefit payment elected by the Participant.
(c) Normal Form of Benefits . In the event no election is made pursuant to this Article IV, payments shall be made in lump sum within 90 days following the Participants Service End Date.
(d) Death of Participant . Notwithstanding the above, if the Participant dies (either before payments commence from the Plan or while such payments are being made), the balance of the Participants Deferred Compensation Account shall immediately become due and payable in one lump sum to the Participants beneficiary or, if no beneficiary is designated or then living, to the Participants estate within 90 days of the date of the Participants death.
ARTICLE V
ADMINISTRATION OF THE PLAN
5.1. Administration of the Plan . The Board shall appoint an Administrator to administer the Plan, which shall be comprised of one or more executive officers of the Company. The Administrator shall maintain such procedures and records as will enable the Administrator to determine the Participants and their beneficiaries who are entitled to receive benefits under the Plan and the amounts thereof.
5.2. General Powers of Administration . The Committee shall have the exclusive right, power, and authority to interpret, in its sole discretion, any and all of the provisions of the Plan; and to consider and decide conclusively any questions (whether of fact or otherwise) arising in
6
connection with the administration of the Plan or any claim for benefits arising under the Plan. Any decision or action of the Committee or the Administrator shall be conclusive and binding on the Company and the Participants. The Plan is designed to comply with the applicable requirements of Section 409A of the Code and the regulations promulgated thereunder, and shall be administered and construed to the maximum extent possible consistent with the requirements of such Section and such regulations.
ARTICLE VI
AMENDMENT AND TERMINATION
6.1. Amendment of the Plan . The Committee shall have the authority to adopt minor amendments to the Plan without prior approval by the Board that:
(a) are necessary or advisable for purposes of complying with applicable laws and regulations;
(b) relate to administrative practices under the Plan (including, but not limited to, the establishment of any procedures or processes or accounts related to the distribution of Common Stock or other amounts under the Plan); or
(c) have an insubstantial financial effect on the Plan.
The Board shall have the authority to adopt any other amendments to the Plan not encompassed under the terms of the preceding sentence. Any such amendments must be made by written instrument, and notice of such amendments shall be provided as soon as practicable to Participants after their adoption.
6.2. Limitations on Amendment or Termination of the Plan . The Company reserves the right to amend or terminate the Plan in any respect and at any time, without the consent of Participants or beneficiaries; provided, however, that the following conditions with respect to such amendment or termination must be satisfied in order for such amendment or termination to be binding and in effect:
(a) Such amendment or termination must be made pursuant to a written resolution of the Committee which is approved thereafter by the Board; and
(b) Such amendment or termination resolution may not adversely affect the rights of any Participant or beneficiary to receive benefits earned and accrued under the Plan prior to such amendment or termination; provided, however, that the following shall not be deemed to violate this provision:
(i) any acceleration of payments of amounts accrued under the Plan by action of the Committee or by operation of the Plans terms; or
(ii) any decision by the Committee to limit participation (or other features of the Plan) prospectively under the Plan.
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ARTICLE VII
GENERAL PROVISIONS
7.1. Common Stock Issued Under the Plan . Any shares of Common Stock that are distributed under the Plan in accordance with Article IV shall be funded from the share pool available under the Companys 2005 Omnibus Incentive Plan, as amended from time to time or any other equity incentive plan of the Company. No shares shall be separately issuable under the Plan.
7.2. Participants Rights Unsecured and Unfunded . This Plan is an unfunded plan maintained primarily to provide deferred compensation benefits for Non-Employee Directors, and therefore is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA. Accordingly, no assets of the Company shall be segregated or earmarked to represent the liability for accrued benefits under the Plan. Amounts referenced in Participant account statements are only recordkeeping devices reflecting such liability for accrued benefits, and do not reflect any actual amounts credited. The right of a Participant (or his or her Beneficiary) to receive a payment hereunder shall be an unsecured claim against the general assets of the Company or any successor to the Company. All payments under the Plan shall be made from the general funds of the Company or any successor. The Company is not required to set aside money or any other property to fund its obligations under the Plan, and all amounts that may be set aside by the Company prior to the distribution of account balances under the terms of the Plan remain the property of the Company (or, if applicable, any successor). Notwithstanding the foregoing, nothing in this Section 7.2 shall preclude the Company, in its sole discretion, from establishing a rabbi trust or other vehicle in connection with the operation of this Plan, provided that no such action shall cause the Plan to fail to be an unfunded plan designed to provide deferred compensation benefits for Non-Employee Directors within the meaning of Title I of ERISA.
7.3. No Guarantee of Benefits . Nothing contained in the Plan shall constitute a guaranty by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder.
7.4. No Creation of Employee Rights; Plan is Not A Contract of Employment . Participation in the Plan shall not be construed to give or deem any Participant to be an employee of the Company. This Plan shall not constitute a contract of employment between the Company and any Participant.
7.5. Non-Alienation Provision . No interest of any person or entity in, or right to receive a benefit or distribution under, the Plan shall be subject in any manner to sale, transfer, anticipation, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings.
7.6. Applicable Law; Severability . The Plan shall be construed and administered under the laws of the State of Delaware, except to the extent that such laws are preempted by ERISA, if applicable. In the event any provision of this Plan shall be determined to be illegal or invalid for
8
any reason, the remaining portion(s) shall continue in full force and effect as if such illegal or invalid provision had never been included herein.
7.7. No Impact on Other Benefits . Amounts accrued under the Plan shall not be included in a Participants compensation for purposes of calculating benefits under any other plan, program or arrangement sponsored by the Company.
7.8. Incapacity of Recipient . If a Participant or other beneficiary entitled to a distribution under the Plan is living under guardianship or conservatorship, distributions payable under the terms of the Plan to such Participant or beneficiary shall be paid to his or her appointed guardian or conservator and such payment shall be a complete discharge of any liability of the Company under the Plan.
7.9. Usage of Terms and Headings . Words in the masculine gender shall include the feminine and the singular shall include the plural, and vice versa, unless qualified by the context. Any headings are included for ease of reference only, and are not to be construed to alter the terms of the Plan.
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EXHIBIT 10.3
Deferred Compensation Plan II
Master Plan Document
As Amended and Restated
Effective January 1, 2008
Deferred Compensation Plan II
Master Plan Document
TABLE OF CONTENTS
Page | ||||||
PURPOSE | 5 | |||||
ARTICLE 1 Definitions | 5 | |||||
ARTICLE 2 Selection, Enrollment, Eligibility | 11 | |||||
2.1 | Selection by Committee | 11 | ||||
2.2 | Enrollment Requirements | 11 | ||||
2.3 | Eligibility; Commencement of Participation | 11 | ||||
2.4 | Termination of Participation and/or Deferrals | 12 | ||||
ARTICLE 3 Deferral Commitments/Company Contribution/Company Matching/Crediting/Taxes | 12 | |||||
3.1 | Minimum Deferrals | 12 | ||||
3.2 | Maximum Deferrals | 12 | ||||
3.3 | Election to Defer; Effect of Election Form | 12 | ||||
3.4 | Withholding of Annual Deferral Amounts | 13 | ||||
3.5 | Transfer Account | 13 | ||||
3.6 | Annual Company Matching Amount | 13 | ||||
3.7 | Vesting | 14 | ||||
3.8 | Crediting/Debiting of Account Balances | 15 | ||||
3.9 | FICA and Other Taxes | 16 | ||||
ARTICLE 4 Short-Term Payout; Unforeseeable Financial Emergencies; Withdrawal Election | 17 | |||||
4.1 | Short-Term Payout | 17 | ||||
4.2 | Other Benefits Take Precedence Over Short-Term | 17 | ||||
4.3 | Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies | 18 | ||||
ARTICLE 5 Retirement Benefit | 18 | |||||
5.1 | Retirement Benefit | 18 | ||||
5.2 | Payment of Retirement Benefit | 18 | ||||
5.3 | Death Prior to Completion of Retirement Benefit | 18 | ||||
ARTICLE 6 Pre-Retirement Survivor Benefit | 19 | |||||
6.1 | Pre-Retirement Survivor Benefit | 19 | ||||
6.2 | Payment of Pre-Retirement Survivor Benefit | 19 | ||||
ARTICLE 7 Termination Benefit | 19 | |||||
7.1 | Termination Benefit | 19 | ||||
7.2 | Payment of Termination Benefit | 19 | ||||
7.3 | Death Prior to Completion of Termination Benefit | 20 | ||||
ARTICLE 8 Disability Benefit | 20 | |||||
8.1 | Disability Benefit | 20 | ||||
ARTICLE 9 Beneficiary Designation | 20 | |||||
9.1 | Beneficiary | 20 | ||||
9.2 | Beneficiary Designation; Change; Spousal Consent | 20 | ||||
9.3 | Acknowledgment | 21 |
Deferred Compensation Plan II
Master Plan Document
9.4 | No Beneficiary Designation | 21 | ||||
9.5 | Doubt as to Beneficiary | 21 | ||||
9.6 | Discharge of Obligations | 21 | ||||
ARTICLE 10 Leave of Absence | 21 | |||||
10.1 | Leaves of Absence | 21 | ||||
ARTICLE 11 Termination, Amendment or Modification | 22 | |||||
11.1 | Termination | 22 | ||||
11.2 | Amendment | 22 | ||||
11.3 | Plan Agreement | 22 | ||||
11.4 | Effect of Payment; Non-Discretionary Cashout | 22 | ||||
ARTICLE 12 Administration | 22 | |||||
12.1 | Committee Duties | 22 | ||||
12.2 | Agents | 23 | ||||
12.3 | Binding Effect of Decisions | 23 | ||||
12.4 | Indemnity of Committee | 23 | ||||
12.5 | Employer Information | 23 | ||||
ARTICLE 13 Other Benefits and Agreements | 23 | |||||
13.1 | Coordination with Other Benefits | 23 | ||||
ARTICLE 14 Claims Procedures | 24 | |||||
14.1 | Presentation of Claim | 24 | ||||
14.2 | Notification of Decision | 24 | ||||
14.3 | Review of a Denied Claim | 24 | ||||
14.4 | Decision on Review | 25 | ||||
14.5 | Legal Action | 25 | ||||
ARTICLE 15 Trust | 25 | |||||
15.1 | Establishment of the Trust | 25 | ||||
15.2 | Interrelationship of the Plan and the Trust | 25 | ||||
15.3 | Distributions from the Trust | 26 | ||||
15.4 | Investment of Trust Assets | 26 | ||||
15.5 | No Claim on Trust Assets | 26 | ||||
ARTICLE 16 Miscellaneous | 26 | |||||
16.1 | Status of Plan | 26 | ||||
16.2 | Unsecured General Creditor | 26 | ||||
16.3 | Employers Liability | 26 | ||||
16.4 | Nonassignability | 26 | ||||
16.5 | Not a Contract of Employment | 27 | ||||
16.6 | Furnishing Information | 27 | ||||
16.7 | Terms | 27 | ||||
16.8 | Captions | 27 | ||||
16.9 | Governing Law | 27 | ||||
16.10 | Notice | 27 | ||||
16.11 | Successors | 28 | ||||
16.12 | Spouses Interest | 28 | ||||
16.13 | Validity | 28 |
Deferred Compensation Plan II
Master Plan Document
16.14 | Incompetent | 28 | ||||
16.15 | Court Order | 28 | ||||
16.16 | Distribution in the Event of Taxation | 29 | ||||
16.17 | Legal Fees To Enforce Rights After Change in Control | 29 | ||||
16.18 | Unvested Account Balances Under Prior Plan | 29 |
Deferred Compensation Plan II
Master Plan Document
MGM MIRAGE
DEFERRED COMPENSATION PLAN II
As Amended and Restated
Effective January 1, 2008
Purpose
The purpose of this Plan is to provide specified benefits to a select group of management and highly compensated Employees who contribute materially to the continued growth, development and future business success of MGM MIRAGE, a Delaware corporation, and its subsidiaries that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA.
ARTICLE 1
Definitions
For purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:
1.1 Account Balance shall mean, with respect to a Participant, a credit on the records of the Employer equal to the sum of (i) the Deferral Account balance, (ii) the Company Contribution Account balance, (iii) the Company Matching Account balance and (iv) the Transfer Account balance. The Account Balance, and each other specified account balance, shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or the Participants designated Beneficiary, pursuant to this Plan.
1.2 Annual Company Contribution Amount shall mean, for any one Plan Year, the amount determined in accordance with Section 3.9.
1.3 Annual Company Matching Amount shall mean, for any one Plan Year, the amount determined in accordance with Section 3.6.
1.4 Annual Deferral Amount shall mean that portion of a Participants Base Annual Salary and Bonus that a Participant elects to have, and is, deferred in accordance with Article 3, for any one Plan Year. In the event of a Participants Retirement, Disability, death or a Termination of Employment prior to the end of a Plan Year, such years Annual Deferral Amount shall be the actual amount withheld prior to such event.
1.5 Base Annual Salary shall mean the annual cash compensation relating to services performed during any calendar year, whether or not paid in such calendar year or included on the Federal Income Tax Form W-2 for such calendar year, excluding bonuses, commissions, overtime, fringe benefits, stock options, relocation expenses, incentive payments, non-monetary awards and other fees, automobile and other allowances paid to a Participant for employment
5
Deferred Compensation Plan II
Master Plan Document
services rendered (whether or not such allowances are included in the Employees gross income). Base Annual Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non-qualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participants gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that, had there been no such plan, the amount would have been payable in cash to the Employee.
1.6 Beneficiary shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a Participant or the death of a predecessor Beneficiary receiving benefits under the Plan.
1.7 Beneficiary Designation Form shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries.
1.8 Board shall mean the board of directors of the Company.
1.9 Bonus shall mean any cash compensation, other than Base Salary, earned by a Participant for services rendered during a Plan Year, under any Employers bonus or cash incentive plans or policies (whether written or oral).
1.10 Change in Control shall mean the first to occur of any of the following events:
(a) Any person or group of persons (as such terms are used in Section 13 and 14(d)(2) of the Securities Exchange Act of 1934, as amended (Exchange Act)), other than Tracinda Corporation, Kirk Kerkorian, members of the immediate family of Kirk Kerkorian, the heirs and legatees of Kirk Kerkorian and trusts or other entities for the benefit of such persons or affiliates of such persons (as such term affiliates is defined in the rules promulgated by the Securities and Exchange Commission), becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the Companys capital stock entitled to vote generally in the election of directors. (For the avoidance of doubt, as of the date of the adoption of this Plan, Tracinda Corporation and its sole shareholder, Kirk Kerkorian, are the beneficial owners of in excess of fifty percent (50%) of the Companys capital stock);
(b) At any time, individuals who, at the date of the adoption of this Plan, constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c), (d) or (e) of this Section 1.10) whose election by the Board or nomination for election by the Companys shareholders was approved by a majority vote of either (1) the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, or (2) the members of the Companys Executive
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Deferred Compensation Plan II
Master Plan Document
Committee then still in office who either were members at the beginning of the period or whose election or nomination for election to the Executive Committee was previously so approved by the directors or the Executive Committee, cease for any reason to constitute at least a majority of the Board;
(c) Any consolidation or merger of the Company, other than a consolidation or merger of the Company in which the holders of the common stock of the Company immediately prior to the consolidation or merger hold more than fifty percent (50%) of the common stock of the surviving corporation immediately after the consolidation or merger;
(d) Any liquidation or dissolution of the Company; or
(e) The sale or transfer of all or substantially all of the assets of the Company to parties that are not within a controlled group of corporations (as defined in Code Section 1563) in which the Company is a member.
1.11 Claimant shall have the meaning set forth in Section 14.1.
1.12 Code shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.
1.13 Committee shall mean the committee described in Article 12.
1.14 Company shall mean MGM MIRAGE, a Delaware corporation, and any successor to all or substantially all of the Companys assets or business.
1.15 Company Contribution Account shall mean the sum of (a) and (b) less the sum of (c) and (d):
(a) All of the Participants Annual Company Contribution Amounts.
(b) Amounts credited or debited in accordance with all applicable crediting provisions of this Plan that relate to the Participants Company Contribution Account.
(c) Any forfeitures under Section 3.7.
(d) All distributions made to the Participant or the Participants Beneficiary pursuant to this Plan that relate to the Participants Company Contribution Account.
1.16 Company Matching Account shall mean the sum of (a) and (b) less the sum of (c) and (d):
(a) All of the Participants Annual Company Matching Amounts.
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Deferred Compensation Plan II
Master Plan Document
(b) Amounts credited or debited in accordance with all applicable crediting provisions of this Plan that relate to the Participants Company Matching Account.
(c) Any forfeitures under Section 3.7.
(d) All distributions made to the Participant or the Participants Beneficiary pursuant to this Plan that relate to the Participants Company Matching Account.
1.17 Deduction Limitation shall mean the following described limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan. Except as otherwise provided, this limitation shall be applied to all distributions that are subject to the Deduction Limitation under this Plan. If an Employer determines in good faith prior to a Change in Control that there is a reasonable likelihood that any compensation paid to a Participant for a taxable year of the Employer would not be deductible by the Employer solely by reason of the limitation under Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution to the Participant pursuant to this Plan prior to the Change in Control is deductible, the Employer may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation shall continue to be credited/debited with additional amounts in accordance with Section 3.8, even if such amount is being paid out in installments. The amounts so deferred and amounts credited thereon shall be distributed to the Participant or the Participants Beneficiary (in the event of the Participants death) at the earliest possible date, as determined by the Employer in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Employer during which the distribution is made will not be limited by Section 162(m). Notwithstanding the foregoing, the Committee shall interpret this Section in a manner that is consistent with Code Section 409A and the regulations thereunder, including without limitation guidance issued in connection with that Section.
1.18 Deferral Account shall mean the sum of (a) and (b) less (c):
(a) The sum of all of a Participants Annual Deferral Amounts.
(b) Amounts credited or debited in accordance with all applicable crediting provisions of this Plan that relate to the Participants Deferral Account.
(c) All distributions made to the Participant or the Participants Beneficiary pursuant to this Plan that relate to the Participants Deferral Account.
1.19 Disability shall mean that a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, as certified by a licensed physician, or (ii) is receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Participants Employer by reason of any medically determinable physical or mental
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impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, as certified by a licensed physician in each case.
1.20 Disability Benefit shall mean the benefit set forth in Article 8.
1.21 Election Form shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan.
1.22 Employee shall mean a person who is an employee of any Employer.
1.23 Employer(s) shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor.
1.24 ERISA shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.
1.25 401(k) Savings Plan shall mean the MGM MIRAGE 401(k) Savings Plan, as amended from time to time.
1.26 Participant shall mean any Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement, an Election Form and a Beneficiary Designation Form, (iv) whose signed Plan Agreement, Election Form and Beneficiary Designation Form are accepted by the Committee, (v) who commences participation in the Plan, and (vi) whose Plan Agreement has not terminated. A spouse or former spouse of a Participant, as such, shall not be treated as a Participant in the Plan or have an account balance under the Plan, even if the Participant has an interest in the Participants benefits under the Plan in accordance with Article 5 or 6 of the Plan, or as a result of applicable law or property settlements resulting from legal separation or divorce.
1.27 Plan shall mean the Companys Deferred Compensation Plan II, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time.
1.28 Plan Agreement shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant and the Participants Employer shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Employer and the Participant.
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1.29 Plan Year shall mean January 1 of each calendar year, beginning on or after January 1, 2005, and continuing through December 31 of such calendar year.
1.30 Pre-Retirement Survivor Benefit shall mean the benefit set forth in Article 6.
1.31 Quarterly Installment Method shall mean quarterly installment payments over the number of quarters selected by the Participant in accordance with this Plan, calculated as follows: the vested Account Balance of the Participant shall be calculated as of the close of business on the last business day of the calendar quarter in which the Participant becomes entitled to a quarterly installment payment under this Plan. The quarterly installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one, and the denominator of which is the remaining number of quarterly payments due the Participant. By way of example, if the Participant elects 40 quarters, the first payment shall be 1/40 of the vested Account Balance, calculated as described in this definition. For the following calendar quarter, the payment shall be 1/39 of the vested Account Balance, calculated as described in this definition. Continuing Payments pursuant to the Quarterly Installment Method shall be made no later than 60 days following the last business day of the applicable calendar quarter for which the installment payment is made.
1.32 Retirement, Retire(s) or Retired shall mean separation from service (as defined in accordance with Section 409A and the regulations issued thereunder) from all Employers for any reason other than an authorized leave of absence, death or Disability on or after the earlier of the attainment of (a) age sixty-five (65) or (b) age fifty-five (55) with ten (10) Years of Service.
1.33 Retirement Benefit shall mean the benefit set forth in Article 5. 1.34 Short-Term Payout shall mean the payout set forth in Section 4.1. 1.35 Termination Benefit shall mean the benefit set forth in Article 7.
1.34 Termination of Employment shall mean separation from service (as defined in accordance with Section 409A and the regulations issued thereunder) from all Employers, voluntarily or involuntarily, for any reason other than Retirement, Disability or death.
1.35 Transfer Account shall mean the sum of (a) and (b) less (c):
(a) The amount credited to this Plan pursuant to Section 3.5.
(b) Amounts credited or debited in accordance with all applicable crediting provisions of this Plan that relate to the Participants Transfer Account.
(c) All distributions made to the Participant or the Participants Beneficiary pursuant to this Plan that relate to the Participants Transfer Account.
1.36 Trust shall mean one or more trusts established in accordance with Section 15.1.
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1.37 Unforeseeable Financial Emergency shall mean severe financial hardship to a Participant resulting from an illness or accident of the Participant, the Participants spouse, or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participants property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, as determined in the sole discretion of the Committee consistent with Code Section 409A.
1.38 Years of Service shall mean the total number of full years of employment in which a Participant has been employed by one or more Employers. For purposes of this definition, a year of employment shall be a 365 day period (or 366 day period in the case of a leap year) that, for the first year of employment, commences on the Employees date of hiring and that, for any subsequent year, commences on an anniversary of that hiring date. Any partial year of employment shall not be counted.
1.39 Year of Vesting Service shall mean a full year of employment in which a Participant has been employed by one or more Employers. For purposes of this definition, a year of employment shall be a 365 day period (or 366 day period in the case of a leap year).
ARTICLE 2
Selection, Enrollment, Eligibility
2.1 Selection by Committee . Participation in the Plan shall be limited to a select group of management and highly compensated Employees, as determined by the Committee in its sole discretion. From that group, the Committee shall select, in its sole discretion, Employees to participate in the Plan, who upon selection become eligible to participate in the Plan. Notwithstanding the foregoing, an Employee cannot be selected to be a participant in the Plan until the Employee has been employed with an Employer for at least 90 days.
2.2 Enrollment Requirements . As a condition to participation, each selected Employee shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, all within 30 days after the Employee becomes eligible to participate in the Plan. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.
2.3 Eligibility; Commencement of Participation . Subject to the next sentence, an Employee shall commence participation in the Plan as of the first day of the calendar quarter following the calendar quarter in which the Committee selects that Employee to participate in the Plan in accordance with Section 2.1 (the First Day of the Quarter). However, if the Employee fails to meet the requirements of Section 2.2, that Employee shall not be eligible to participate in the Plan until the first day of the Plan Year following the delivery to and acceptance by the Committee of the required documents. If an Employee meets the requirements of Section 2.2 within the time period prescribed within that Section, but the Employees enrollment materials are not received by the Company until after the First Day of the Quarter, the Employee shall
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commence participation as of the first payroll period that follows the Companys receipt of the Employees enrollment materials.
2.4 Termination of Participation and/or Deferrals . If the Committee determines in good faith that a Participant no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee shall have the right, in its sole discretion, to prevent the Participant from making future deferral elections.
ARTICLE 3
Deferral Commitments/Company Contribution/Company Matching/Crediting/Taxes
3.1 Minimum Deferrals . For each Plan Year, a Participant may elect to defer, as the Participants Annual Deferral Amount, Base Annual Salary and/or Bonus in the following minimum percentages for each deferral elected:
Deferral | Minimum Amount | |||
Base Annual Salary |
2.5 | % | ||
Bonus |
2.5 | % |
If an election is made for less than the stated minimum amounts, or if no election is made, the amount deferred shall be zero.
3.2 Maximum Deferrals . For each Plan Year, a Participant may elect to defer, as the Participants Annual Deferral Amount, Base Annual Salary and/or Bonus up to the following maximum percentages for each deferral elected:
Deferral | Maximum Amount | |||
Base Annual Salary |
50 | % | ||
Bonus |
75 | % |
Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, the maximum Annual Deferral Amount, with respect to Base Annual Salary and Bonus, shall be limited to the amount of such compensation earned by the Participant after the Participant commences participation in the Plan in accordance with Section 2.3 above.
3.3 Election to Defer; Effect of Election Form .
(a) First Plan Year . In connection with a Participants commencement of participation in the Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which the Participant commences participation in the Plan, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Committee (in accordance with Section 2.2) and accepted by the Committee.
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(b) Subsequent Plan Years . For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, shall be made by timely delivering to the Committee, in accordance with its rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made (or such earlier time as the Committee may establish, in its sole discretion), a new Election Form. If no such Election Form is timely delivered for a Plan Year, the Annual Deferral Amount shall be zero for that Plan Year.
(c) Performance-Based Compensation . Notwithstanding the foregoing, the Committee may, in its sole discretion, determine that an irrevocable deferral election pertaining to performance-based compensation may be made by timely delivering a new Election Form to the Committee, in accordance with its rules and procedures, no later than six (6) months before the end of the performance service period. Performance-based compensation shall be compensation based on services performed over a period of at least twelve (12) months, in accordance with Code Section 409A and related guidance.
3.4 Withholding of Annual Deferral Amounts . For each Plan Year, the Base Annual Salary portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Base Annual Salary payroll in the percentage elected by the Participant. The Bonus portion of the Annual Deferral Amount shall be withheld at the time the Bonus is paid to the Participant.
3.5 Transfer Account . If at the time of a Participants commencement of Participation in this Plan, the Participant had an Account under that certain MGM Grand Hotel, Inc. Nonqualified Deferred Retirement Plan, restated effective January 1, 1999 (the NDRP), and that balance was not previously transferred to the MGM MIRAGE Deferred Compensation Plan, effective January 1, 2000 (Prior DCP), the Participants balance in that Account shall automatically be transferred to this Plan and shall be credited to the Participants Transfer Account as of the first day of the Participants participation in this Plan. Upon such transfer, this Plan, rather than the NDRP, shall govern the amount so transferred. Notwithstanding the foregoing, the Committee shall interpret this Section in a manner that is consistent with Code Section 409A and the regulations thereunder, including without limitation guidance issued in connection with that Section.
3.6 Annual Company Matching Amount . To be eligible for an Annual Company Matching Amount for a Plan Year, a Participant must elect to defer for that Plan Year at least the minimum Base Annual Salary or Bonus set forth in Section 3.1 above. Subject to making such election, a Participants Annual Company Matching Amount for any Plan Year shall be equal to 100% of the sum of (i) the Participants Annual Deferral Amount for such Plan Year and (ii) the Participants deferrals under the 401(k) Savings Plan for such Plan Year, up to a combined amount that does not exceed 4% of the Participants annual base salary earned at the end of the Plan Year, as determined by the Committee in its sole discretion, reduced by the amount of any matching contributions made to the 401(k) Savings Plan on the Participants behalf for the plan year of the 401(k) Savings Plan that corresponds to the Plan Year. For purposes of this Section
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3.6, with respect to such Employees as are determined by the Committee in its discretion, Base Annual Salary shall include cash amounts, or other amounts, paid to an Employee by a joint venture partner of the Employer, other business partner or other organization, in all cases as determined by the Committee in its discretion. This amount shall be credited to the Participants Company Matching Account as soon as is administratively practical after the end of the Plan Year to which the Annual Company Matching Amount relates. If a Participant is not employed by an Employer as of the last day of a Plan Year other than by reason of the Participants Retirement, Disability or death, the Annual Company Matching Amount for such Plan Year shall be zero. In the event of Retirement, Disability or death, a Participant shall be credited with the Annual Company Matching Amount for the Plan Year in which the Participant Retires, suffers a Disability or dies as soon as is administratively practical after the time of the Participants Retirement, Disability or death. Notwithstanding anything herein to the contrary, the Annual Company Matching Amount shall also continue to be credited, and the Participant shall continue to vest in his Annual Company Matching Amount, pursuant to Section 3.7 of the Plan, to the extent required under any Participants employment agreement with the Employer(s), provided such employment agreement is dated prior to October 1, 2007.
3.7 Vesting .
(a) A Participant shall at all times be 100% vested in the Participants Deferral Account and Transfer Account.
(b) A Participant shall vest in 33 1/3% of each Annual Company Matching Amount, plus earnings thereon, at the end of each 3 consecutive Plan Years, starting with the Plan Year to which the match relates, provided that the Participant is continuously employed with an Employer at the end of each such Plan Year. If not so continuously employed, the Participant shall vest, if at all, to the extent that the Participant was so employed at the end of the applicable Plan Year.
(c) Notwithstanding anything to the contrary contained in this Section 3.7, in the event of a Change in Control or a Participants death, Disability or Retirement, a Participants Company Contribution Account and Company Matching Account shall immediately become 100% vested (if it is not already vested in accordance with the above vesting schedules).
(d) Notwithstanding subsection (c), the vesting schedule for a Participants Company Contribution Account and Company Matching Account shall not be accelerated to the extent that the Committee determines that such acceleration would cause the deduction limitations of Section 280G of the Code to become effective. In the event that all of a Participants Company Contribution Account and/or Company Matching Account are not vested pursuant to such a determination, the Participant may request independent verification of the Committees calculations with respect to the application of Section 280G. In such case, the Committee must provide to the Participant within 15 business days of such a request an opinion from a nationally recognized accounting firm selected by the Participant (the Accounting Firm). The opinion shall state the Accounting Firms opinion that any limitation on the vested percentage hereunder
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is necessary to avoid the limits of Section 280G and contain supporting calculations. The reasonable cost of such opinion shall be paid for by the Company.
(e) Any amount not vested under this Section 3.7 when a Participant first becomes entitled to the payment of a benefit under this Plan shall be forfeited and debited against the applicable Account Balance.
3.8 Crediting/Debiting of Account Balances . In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participants Account Balance in accordance with the following rules:
(a) Election of Measurement Funds . A Participant, in connection with the Participants initial deferral election in accordance with Section 3.3(a), shall elect, on the Election Form, one or more Measurement Fund(s) (as described in Section 3.8(c)) to be used to determine the additional amounts to be credited or debited to the Participants Account Balance. A Participant may (but is not required to) elect to add or delete one or more available Measurement Fund(s) to be used to determine the additional amounts to be credited or debited to the Participants Account Balance, or to change the portion of the Participants Account Balance allocated to each previously or newly elected Measurement Fund. A Participant may elect to make such a change by submitting an Election Form, whether written or electronic (as determined by the Committee from time to time and in its sole discretion), to the Committee. Any election so made and accepted by the Committee shall apply no later than the third business day following the Committees acceptance of the election. Any such election shall continue to apply, unless subsequently changed in accordance with this Section 3.3(a).
(b) Proportionate Allocation . In making any election described in Section 3.8(a), the Participant shall specify on the Election Form, in increments of one percentage point (1%), the percentage of the Participants Account Balance to be allocated to a Measurement Fund (as if the Participant were making an investment in that Measurement Fund with that portion of the Participants Account Balance).
(c) Measurement Funds . A Participant may elect one or more measurement funds (the Measurement Funds) from among those selected by the Committee for the purpose of crediting or debiting additional amounts to the Participants Account Balance. As necessary, the Committee may, in its sole discretion, discontinue, substitute or add Measurement Funds. Each such action will take effect as of the first day of the calendar quarter that follows by thirty (30) days or more the day on which the Committee gives Participants advance written notice of such change. In selecting the Measurement Funds that are available from time to time, neither the Committee nor any Employer shall be liable to any Participant for such selection or adding, deleting or continuing any available Measurement Fund.
(d) Crediting or Debiting Method . The performance of each elected Measurement Fund (either positive or negative) will be reasonably determined by the Committee. A
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Participants Account Balance shall be credited or debited on a daily basis based on the performance of each Measurement Fund selected by the Participant.
(e) No Actual Investment . Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participants election of any such Measurement Fund, the allocation to the Participants Account Balance thereof, the calculation of additional amounts and the crediting or debiting of such amounts to a Participants Account Balance shall not be considered or construed in any manner as an actual investment of the Participants Account Balance in any such Measurement Fund. In the event that the Company or the Trustee (as that term is defined in the Trust), in its sole discretion, decides to invest funds in any or all of the Measurement Funds, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participants Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on the Participants behalf by the Company or the Trust; and the Participant shall at all times remain an unsecured creditor of the Company.
(f) Employer Discretion . Notwithstanding the foregoing provisions of this Section 3.8, the Committee shall retain the overriding discretion regarding the Participants designation of Measurement Funds under this Section 3.8. If a Participant fails to designate any Measurement Fund under this Section 3.8, the Participant shall be deemed to have elected the money market fund, or such other fund as determined from time to time by the Committee in its sole discretion.
(g) Selection Results . The Participant shall bear full responsibility for all results associated with the Participants selection of Measurement Funds under this Section 3.8, and the Employers shall have no responsibility or liability with respect to the Participants selection of such Measurement Funds.
3.9 FICA and Other Taxes .
(a) Annual Deferral Amounts . For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participants Employer(s) shall withhold from that portion of the Participants Base Annual Salary and Bonus that is not being deferred, in a manner determined by the Employer(s), the Participants share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.9.
(b) Company Contribution Amounts and Company Matching Amounts . When a Participant becomes vested in any Annual Company Contribution Amount and/or Annual Company Matching Amount, plus earnings thereon, the Participants Employer(s) shall withhold from the Participants Base Annual Salary and/or Bonus that is not deferred, in a manner determined by the Employer(s), the Participants share of FICA and other employment taxes. If necessary, the Committee may reduce the vested portion of the Participants Company
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Contribution Account and/or Company Matching Account in order to comply with this Section 3.9.
(c) Distributions . The Participants Employer(s), or the Trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer(s), or the Trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in good faith in the sole discretion of the Employer(s) and the Trustee of the Trust.
ARTICLE 4
Short-Term Payout; Unforeseeable Financial Emergencies;
Withdrawal Election
4.1 Short-Term Payout . In connection with each election to defer an Annual Deferral Amount, a Participant may irrevocably elect to receive a future Short-Term Payout from the Plan with respect to such Annual Deferral Amount. Subject to the Deduction Limitation, the Short-Term Payout shall be a lump sum payment in an amount that is equal to the Annual Deferral Amount plus amounts credited or debited in the manner provided in Section 3.8 above on that amount, determined at the time that the Short-Term Payout becomes payable. Subject to the Deduction Limitation and the other terms and conditions of this Plan, each Short-Term Payout elected shall be paid out during a 60 day period commencing immediately after the last day of any Plan Year designated by the Participant that is at least five Plan Years after the Plan Year in which the Annual Deferral Amount is actually deferred. By way of example, if a five-year Short-Term Payout is elected for Annual Deferral Amounts that are deferred in the Plan Year commencing January 1, 2005, the five-year Short-Term Payout would become payable during a 60 day period commencing January 1, 2011.
A Participant may make a one time election to postpone a Short-Term Payout described above, and have such amount paid out during a sixty (60) day period commencing immediately after an allowable alternative distribution date designated by the Participant in accordance with the following rules. To make this one time election, the Participant must submit a new Election Form to the Committee in accordance with the following criteria: (i) the Election Form is submitted at least 1 year prior to the schedule distribution date of the Short-Term Payout, (ii) the election cannot take effect until at least 12 months after the date on which the election is made, (iii), the first payment with respect to which such election is made must be deferred for a period of 5 years from the date such payment would otherwise have been made, (iv) the election cannot accelerate the payment of such benefit and (v) the election is accepted by the Committee in its sole discretion.
4.2 Other Benefits Take Precedence Over Short-Term . Should an event occur that triggers a benefit under Article 5, 6, 7 or 8, any Annual Deferral Amount, plus amounts credited or debited thereon, that is subject to a Short-Term Payout election under Section 4.1 shall not be paid in accordance with Section 4.1 but shall be paid in accordance with the other applicable Article. Notwithstanding the foregoing, the Committee shall interpret this Section in a manner
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that is consistent with Code Section 409A and the regulations thereunder, including without limitation guidance issued in connection with that Section.
4.3 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies . If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to (i) suspend any deferrals required to be made by a Participant during the remaining portion of the Plan Year and/or (ii) receive a partial or full payout from the Plan. The payout shall not exceed the lesser of the Participants vested Account Balance, calculated as if such Participant were receiving a Termination Benefit, or the amount necessary to satisfy the Unforeseeable Financial Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the participants assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). . If, in the sole discretion of the Committee, the petition for a suspension and/or payout is approved, suspension shall take effect upon the date of approval and any payout shall be made within 60 days of the date of approval. The payment of any amount under this Section 4.3 shall be subject to the Deduction Limitation.
ARTICLE 5
Retirement Benefit
5.1 Retirement Benefit . Subject to the Deduction Limitation, a Participant who Retires shall receive, as a Retirement Benefit, the Participants vested Account Balance.
5.2 Payment of Retirement Benefit . In connection with the Participants commencement of participation in the Plan, a Participant will elect on an Election Form to receive the Retirement Benefit within sixty (60) days following the six month anniversary of the Participants Retirement, in a lump sum or in installments of up to 60 quarters pursuant to the Quarterly Installment Method. The Participant may change the Participants election once to an allowable alternative payout period by submitting a new Election Form to the Committee, provided that (i) the election cannot take effect until at least 12 months after the date on which the election is made, (ii) the payment with respect to which such election is made must be deferred for a period of 5 years from the date such payment would otherwise have been made under the previous election, (iii) the election cannot accelerate the payment of such benefit and (iv) the election is accepted by the Committee in its sole discretion. Subject to the prior sentence, the Election Form most recently accepted by the Committee shall govern the payout of the Retirement Benefit. If a Participant does not make any election with respect to the payment of the Retirement Benefit, then such benefit shall be payable in a lump sum. The lump sum payment shall be made, or installment payments shall commence, no earlier than six months after the Participants Retirement and no later than 60 days after that six month anniversary. Any payment made shall be subject to the Deduction Limitation.
5.3 Death Prior to Completion of Retirement Benefit . If a Participant dies after Retirement but before the Retirement Benefit is paid in full, the Participants unpaid Retirement Benefit
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payments shall continue and shall be paid to the Participants Beneficiary(ies) (a) over the remaining number of quarters and in the same amounts as the Retirement Benefit would have been paid had the participant survived.
ARTICLE 6
Pre-Retirement Survivor Benefit
6.1 Pre-Retirement Survivor Benefit . Subject to the Deduction Limitation, the Participants Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to the Participants vested Account Balance if the Participant dies before the Participant Retires, experiences a Termination of Employment or suffers a Disability.
6.2 Payment of Pre-Retirement Survivor Benefit . A Participant, in connection with the Participants commencement of participation in the Plan, will elect on an Election Form whether the Pre-Retirement Survivor Benefit shall be received by the Participants Beneficiary in a lump sum or in installments of up to 60 quarters pursuant to the Quarterly Installment Method, payable or commencing within sixty (60) days after the last business day of the calendar quarter in which the Committee receives proof of the Participants death that it deems satisfactory. The Participant may change this election once to an allowable alternative payout period by submitting a new Election Form to the Committee, provided that (i) the election cannot take effect until at least 12 months after the date on which the election is made, (ii) the election cannot accelerate the payment of such benefit and (iii) the election is accepted by the Committee in its sole discretion. Subject to the prior sentence, the Election Form most recently accepted by the Committee prior to the Participants death shall govern the payout of the Participants Pre-Retirement Survivor Benefit. If a Participant does not make any election with respect to the payment of the Pre-Retirement Survivor Benefit, then such benefit shall be paid in a lump sum payment made no later than 60 days after the last business day of the calendar quarter in which the Committee is provided with proof of the Participants death that it deems satisfactory. Any payment made shall be subject to the Deduction Limitation.
ARTICLE 7
Termination Benefit
7.1 Termination Benefit . Subject to the Deduction Limitation, the Participant shall receive a Termination Benefit, which shall be equal to the Participants vested Account Balance if a Participant experiences a Termination of Employment prior to the Participants Retirement, death or Disability.
7.2 Payment of Termination Benefit . In connection with the commencement of participation in the Plan, a Participant will elect on an Election Form to receive the Termination Benefit in a lump sum or in installments of up to 20 quarters, pursuant to the Quarterly Installment Method, commencing or paid no later than sixty (60) days following the six month anniversary of the Participants Termination of Employment. The Participant may change the Participants election once to an allowable alternative payout period by submitting a new
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Election Form to the Committee, provided that (i) the election cannot take effect for at least 12 months after the date on which the election is made, (ii), the payment with respect to which such election is made must be deferred for a period of 5 years from the date such payment would otherwise have been made, (iii) the election cannot accelerate the payment of such benefit and (iv) the election is accepted by the Committee in its sole discretion. Subject to the prior sentence, the Election Form most recently accepted by the Committee shall govern the payout of the Termination Benefit. If a Participant does not make any election with respect to the payment of the Termination Benefit, then such benefit shall be payable in a lump sum, payable no later than 60 days after the six month anniversary of the Participants Termination of Employment. Any payment made shall be subject to the Deduction Limitation.
7.3 Death Prior to Completion of Termination Benefit . If a Participant dies after Termination of Employment but before the Termination Benefit is paid in full, the Participants unpaid Termination Benefit payments shall continue and shall be paid to the Participants Beneficiary over the remaining number of quarters and in the same amounts as that benefit would have been paid to the Participant had the Participant survived.
ARTICLE 8
Disability Benefit
8.1 Disability Benefit . A Participant who is determined by the Committee to be suffering from a Disability shall receive a Disability Benefit equal to the Participants vested Account Balance. In connection with commencement of participation in the Plan, the Participant will elect on an Election Form receive the Disability Benefit in a lump sum or in installments of up to 60 quarters, pursuant to the Quarterly Installment Method, payable or commencing within sixty days of the last business day of the calendar quarter in which the Committee determines that the Participant has suffered a Disability. In the event a Participant does not make any election, the Disability Benefit shall be paid in a lump sum payment commencing within sixty days after the last business day of the calendar quarter in which the Committee determines that the Participant has suffered a Disability. Any such payment shall be subject to the Deduction Limitation.
ARTICLE 9
Beneficiary Designation
9.1 Beneficiary . Each Participant shall have the right, at any time, to designate the Participants Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant or the death of a predecessor Beneficiary receiving benefits under the Plan. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates.
9.2 Beneficiary Designation; Change; Spousal Consent . A Participant shall designate the Participants Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change
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a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committees rules and procedures, as in effect from time to time. If a married Participant names someone other than the Participants spouse as a primary Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Participants spouse and returned to the Committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to the Participants death.
9.3 Acknowledgment . No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent.
9.4 No Beneficiary Designation . If a Participant fails to designate a Beneficiary as provided in Sections 9.1, 9.2 and 9.3 or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participants benefits, then the Participants designated Beneficiary shall be deemed to be the Participants surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participants estate.
9.5 Doubt as to Beneficiary . If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participants Employer to withhold such payments until this matter is resolved to the Committees satisfaction.
9.6 Discharge of Obligations . The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participants Plan Agreement shall terminate upon such full payment of benefits.
ARTICLE 10
Leave of Absence
10.1 Leaves of Absence . A Participant on a leave of absence will be treated as employed by the Employer if the period of leave does not exceed six months (extended to 29 months in the case of disability leave) or, if longer, the period during which the Participant retains a right to reemployment under applicable law or contract. A participant on an unpaid leave of absence shall not be required to make deferrals until the Participant returns to a paid employment status. Upon such return, the Participant may make a deferral election in accordance with the terms of the Plan, to take effect in the following Plan Year. If a Participant is authorized by the Participants Employer for any reason to take a paid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Annual Deferral Amount shall continue to be withheld during such paid leave of absence in accordance with Section 3.3.
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ARTICLE 11
Termination, Amendment or Modification
11.1 Termination . Although each Employer anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that any Employer will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, each Employer reserves the right, in its sole discretion, to discontinue its sponsorship of the Plan and/or to terminate the Plan at any time with respect to any or all of its participating Employees by action of either the Committee or its board of directors, consistent with the requirements of Section 409A of the Code and the regulations thereunder. Termination of the Plan shall not result in a reduction in any Participants vested Account Balance under the Plan.
11.2 Amendment . The Committee may, at any time in its sole discretion, amend or modify the Plan in whole or in part with respect to any Employer; provided, however, that: (i) no amendment or modification shall be effective to decrease or restrict the value of a Participants vested Account Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced a Termination of Employment as of the effective date of the amendment or modification or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of the amendment or modification, and (ii) no amendment or modification of this Section 11.2 shall be effective. The amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification, except to the extent permitted or required under Section 409A of the Code or the regulations issued thereunder.
11.3 Plan Agreement . Despite the provisions of Section 11.1 and 11.2, if a Participants Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions with the consent of the Participant.
11.4 Effect of Payment; Non-Discretionary Cashout . The full payment of the applicable benefit under Article 4, 5, 6, 7 or 8 of the Plan shall completely discharge all obligations to a Participant and the Participants designated Beneficiary under this Plan and the Participants Plan Agreement shall terminate. Notwithstanding anything in this Plan to the contrary, in the event a Participants vested Account Balance under the Plan, determined as of the last business day of the calendar quarter following the date the Participant first becomes entitled to a benefit pursuant to Articles 4, 5, 6,7 or 8, is less than $25,000, the Participants vested Account Balance shall be paid in a lump sum within sixty (60) days after the last business day of the applicable calendar quarter in which the Account Balance determination is made by the Employer.
ARTICLE 12
Administration
12.1 Committee Duties . Except as otherwise provided in this Article 12, this Plan shall be administered by a Committee which shall consist of the Board, or such committee as the Board
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shall appoint from time to time. Members of the Committee may be Participants under this Plan and need not be members of the Board. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and the governance of the Committee and (ii) decide or resolve any and all questions, including interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company.
12.2 Agents . In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer. The Company shall pay all expenses of such agents.
12.3 Binding Effect of Decisions . The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation or application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.
12.4 Indemnity of Committee . All Employers shall indemnify, defend and hold harmless each member of the Committee, and any Employee to whom the duties of the Committee may be delegated, against any and all claims, losses, damages, expenses or liabilities, including reasonable attorneys fees and court costs, arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by such member of the Committee or such Employee.
12.5 Employer Information . To enable the Committee to perform its functions, the Company and each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Committee may reasonably require.
ARTICLE 13
Other Benefits and Agreements
13.1 Coordination with Other Benefits . The benefits provided for a Participant and Participants Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participants Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided.
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ARTICLE 14
Claims Procedures
14.1 Presentation of Claim . Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a Claimant) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.
14.2 Notification of Decision . The Committee shall consider a Claimants claim within a reasonable time, and shall notify the Claimant in writing:
(a) that the Claimants requested determination has been made, and that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimants requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:
(i) the specific reason(s) for the denial of the claim, or any part of it;
(ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based;
(iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and
(iv) an explanation of the claim review procedure set forth in Section 14.3.
14.3 Review of a Denied Claim . Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimants duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimants duly authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole discretion, may grant.
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14.4 Decision on Review . The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committees decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and
(c) such other matters as the Committee deems relevant.
14.5 Legal Action . A Claimants compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimants right to commence any legal action with respect to any claim for benefits under this Plan.
ARTICLE 15
Trust
15.1 Establishment of the Trust . The Company shall establish the Trust, with sub-trusts for each Employer. Each Employer shall at least annually transfer over to the Trust such assets as the Employer determines, in its sole discretion, are necessary to provide, on a present value basis, for its respective future liabilities created with respect to the Annual Deferral Amounts, Annual Company Contribution Amounts and Annual Company Matching Amounts for such Employers Participants for all periods prior to the transfer, as well as any debits and credits to the Participants Account Balances for all periods prior to the transfer, taking into consideration the value of the assets in the trust at the time of the transfer. Such assets shall be allocated to the respective sub-trust of each contributing Employer.
15.2 Interrelationship of the Plan and the Trust . The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan with respect to its Participants. In this regard, if a Participant has been employed by only one Employer, such Employer shall be responsible for the total amounts credited to such Participants Account Balance under this Plan. If a Participant has been employed by more than one Employer, each Employer shall be responsible only for the amounts credited to the Participants Account Balance by such Employer.
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15.3 Distributions from the Trust . Each Employers obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employers obligations under this Plan.
15.4 Investment of Trust Assets . The Trustee of the Trust shall be authorized, upon written instructions received from the Committee or investment manager appointed by the Committee, to invest and reinvest the assets of the Trust in accordance with the applicable Trust Agreement.
15.5 No Claim on Trust Assets . A Participant shall have no preferred claim on, or any beneficial interest in, any assets of the Trust. Any assets held by the Trust shall be subject to the claims of general creditors of each Employer that is the grantor of the Trust under federal and state law in the event of the Employers insolvency (i.e., the Employer is unable to pay its debts as they become due or is subject to a pending proceeding as a debtor under the United States Bankruptcy Code), but only with respect to the assets of the Trust held for the benefit of Participants employed or formerly employed by such Employer.
ARTICLE 16
Miscellaneous
16.1 Status of Plan . The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). In addition, the Plan is intended to comply with Code Sections 409A(a)(1) to (4) and (b)(1) to (2). The Plan shall be administered and interpreted in a manner consistent with those foregoing intents. Should any provision of this Plan not comply the provisions of Code Section 409A listed above, that provision shall have no affect on the remaining parts of this Plan and this Plan shall be construed and enforced as if such provision had never been inserted herein.
16.2 Unsecured General Creditor . Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employers assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employers obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.
16.3 Employers Liability . An Employers liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and the Participants Plan Agreement.
16.4 Nonassignability . Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable
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hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participants or any other persons bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise.
16.5 Not a Contract of Employment . The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an at will employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless otherwise expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer or to interfere with the right of any Employer to discipline or discharge the Participant at any time.
16.6 Furnishing Information . A Participant or Participants Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary.
16.7 Terms . Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply.
16.8 Captions . The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.
16.9 Governing Law . Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Nevada, without regard to its conflicts of laws principles.
16.10 Notice . Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:
Secretary of the MGM MIRAGE Deferred
Compensation Plan Committee
3600 Las Vegas Blvd So.
Las Vegas, NV 89109
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Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.
16.11 Successors . The provisions of this Plan shall bind and inure to the benefit of the Participants Employer and its successors and assigns and the Participant and the Participants designated Beneficiaries. No other person shall be a third-party beneficiary or acquire any rights under this Plan.
16.12 Spouses Interest . The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouses will, nor shall such interest pass under the laws of intestate succession.
16.13 Validity . In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.
16.14 Incompetent . If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or a person incapable of handling the disposition of that persons property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participants Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.
16.15 Court Order . The Committee is authorized to make any payments directed by court order in any action in which the Plan or the Committee has been named as a party. In addition, if a court determines that a spouse or former spouse of a Participant has an interest in the Participants benefits under the Plan in connection with a property settlement or otherwise, the Committee, in its sole discretion, shall have the right, notwithstanding any election made by a Participant, to immediately distribute the spouses or former spouses interest in the Participants benefits under the Plan to that spouse or former spouse. Notwithstanding the foregoing, the Committee shall interpret this provision in a manner that is consistent with Code Section 409A and other applicable tax law, including but not limited to guidance issued after the effective date of this Plan.
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16.16 Distribution in the Event of Taxation .
(a) In General. If, for any reason, all or any portion of a Participants benefits under this Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Committee before a Change in Control, or the Trustee of the Trust after a Change in Control, for a distribution of that portion of the Participants benefit that has become taxable. Upon the grant of such a petition, which grant shall not be unreasonably withheld (and, after a Change in Control, shall be granted), a Participants Employer shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of the Participants benefit (which amount shall not exceed a Participants unpaid vested Account Balance under the Plan). If the petition is granted, the tax liability distribution shall be made within 90 days of the date when the Participants petition is granted. Such a distribution shall affect and reduce the benefits to be paid under this Plan. Notwithstanding the foregoing, the Committee shall interpret this provision in a manner that is consistent with Code Section 409A and other applicable tax law, including but not limited to guidance issued after the effective date of this Plan.
(b) Trust . If the Trust terminates in accordance with its terms and benefits are distributed from the Trust to a Participant in accordance therewith, the Participants benefits under this Plan shall be reduced to the extent of such distributions.
16.17 Legal Fees To Enforce Rights After Change in Control . The Company and each Employer is aware that upon the occurrence of a Change in Control, the Board or the board of directors of a Participants Employer (which might then be composed of new members) or a shareholder of the Company or the Participants Employer, or of any successor corporation, might cause or attempt to cause, the Company, the Participants Employer or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company or the Participants Employer to institute, or may institute, litigation seeking to deny Participants the benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a Change in Control, it should appear to any Participant that the Company, the Participants Employer or any successor corporation has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company, such Employer or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided (collectively, the Dispute), then the Company and the Participants Employer shall pay, if the Participant prevails in the Dispute, the Participants reasonable legal fees and court costs actually incurred by the Participant in the initiation or defense of the Dispute, whether by or against the Company or the Participants Employer or any director, officer, shareholder or other person affiliated with the Company, the Participants Employer or any successor thereto.
16.18 Unvested Account Balances Under Prior Plan. If a Participant participated in the Prior DCP, and all or a part of the Participants account balance under that plan was unvested as of December 31, 2004, that unvested balance will be transferred to this Plan in accordance with Code Section 409A and the regulations thereunder, and such balance shall be administered in
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accordance with the provisions of this Plan, provided, however, that the vesting of that balance shall be based on the applicable vesting schedule(s) under the Prior DCP, which are incorporated herein by reference.
IN WITNESS WHEREOF, the Company has signed this Plan document effective as of December 30, 2004.
Company | ||
MGM MIRAGE, a Delaware corporation | ||
/s/ Gary N. Jacobs | ||
By: | Gary N. Jacobs | |
Title: | Executive Vice President and General Counsel |
30
EXHIBIT 10.4
AMENDMENT NO. 1
TO THE MGM MIRAGE
DEFERRED COMPENSATION PLAN II
WHEREAS, Section 11.2 of the MGM MIRAGE Deferred Compensation Plan II (the Plan) provides that the Plan may be amended in whole or in part by the Board of Directors of MGM MIRAGE (the Board), provided that no amendment or modification shall decrease or restrict the value of a Participants vested account balance in existence at the time of such amendment or modification; and
WHEREAS, the Board has approved and authorized this Amendment No. 1 to the Plan (this Amendment).
NOW, THEREFORE, effective as of October 28, 2008, the Plan is hereby amended as follows:
1. Section 3.6 of the Plan shall be amended to add the following sentence at the end thereof:
Notwithstanding anything herein to the contrary, no Annual Company Matching Amounts shall be credited to the account of any Participant with respect to any Plan Year commencing on or after January 1, 2009; provided, however, that a Participant shall continue to vest in Annual Company Matching Amounts credited prior to such date in accordance with Section 3.7 of the Plan.
2. Article 11 of the Plan shall be amended to add the following new Section 11.5:
Notwithstanding anything herein to the contrary, the Committee, in its sole discretion and to the extent it deems appropriate, may permit Participants to make changes to existing payment elections prior to December 31, 2008 or such earlier date as the Committee may specify. Any election changes made pursuant to this Section 11.5 may not defer into later years amounts that would have been payable in 2008 or cause payment of amounts payable in later years to be accelerated into 2008. Elections under this section 11.5 shall comply in all respects with the provisions of Internal Revenue Service Notice 2007-86 and other applicable Internal Revenue Service and Treasury guidance.
IN WITNESS WHEREOF, this Amendment is executed by a duly authorized officer as of the date set forth below.
By: |
/s/ John McManus |
Date: | Dec. 3, 2008 | |||||
Its: | Asst. Secretary |
EXHIBIT 10.5
AMENDMENT NUMBER TWO
TO THE MGM MIRAGE
DEFERRED COMPENSATION PLAN II
WHEREAS, Section 11.2 of the MGM MIRAGE Deferred Compensation Plan II (the Plan) provides that the Committee may amend the Plan in whole or in part; provided that no amendment or modification shall decrease or restrict the value of a Participants vested account balance in existence at the time of such amendment or modification; and
WHEREAS, the Committee now desires to amend the Plan to reflect the corporate name change effective June 15, 2010.
NOW, THEREFORE, effective as of June 15, 2010, the Plan is hereby amended as follows:
1. Each reference to MGM MIRAGE in the Plan except for references in the name of the Plan is replaced with a reference to MGM Resorts International.
2. Section 1.27 is amended and restated to read as follows:
1.27 Plan shall mean the MGM Resorts Deferred Compensation Plan II, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time.
IN WITNESS WHEREOF, this Amendment is executed by a duly authorized officer as of the date set forth below.
By: |
/s/ John McManus |
Date: | 12/20/10 | |||||
Its: |
Executive Vice President, General Counsel & Secretary |
EXHIBIT 10.6
AMENDMENT NUMBER THREE
TO THE MGM RESORTS
DEFERRED COMPENSATION PLAN II
WHEREAS, Section 11.2 of the MGM Resorts Deferred Compensation Plan II (the Plan) provides that the Committee may amend the Plan in whole or in part, provided that no amendment or modification shall decrease or restrict the value of a Participants vested account balance in existence at the time of such amendment or modification; and
WHEREAS, the Committee now desires to amend the Plan, effective June 1, 2012, to provide for immediate distribution of certain small Account Balances in a lump sum, in accordance with the requirements of Treasury Regulation Section 1.409A-3(j)(4)(v).
NOW, THEREFORE, effective as of June 1, 2012, the Plan is hereby amended as follows:
1. |
The title of Article 4 is hereby changed to read as follows: |
Short-Term Payout; Unforeseeable Financial Emergencies; Withdrawal Elections; Small Sum Cashouts
2. |
Article 4 is amended to add the following Section 4.4 at the end thereof: |
4.4 Small Sum Cashouts . Notwithstanding any provision in the Plan to the contrary, if (i) the total of the Participants Account Balance under the Plan (together with the Participants account balance under any other arrangements that, with this Plan, would be treated as a single nonqualified deferred compensation plan within the meaning of Treasury Regulation Section 1.409A-1(c)(2) with the elective deferral component or employer contribution component of the Plan) does not exceed $16,500 on June 1, 2012, and (ii) no deferral election for the Participant under the Plan has been made for the current Plan Year, such Participants Account Balance shall be distributed in a lump sum as soon as practicable and in no event later than [June 30], 2012; provided, however, that if the Participant participates in any other arrangements that, together with this Plan, would be treated as a single nonqualified deferred compensation plan, the lump sum payment provided hereunder shall be made only if the Participants interests in the other aggregated arrangements are also being paid out simultaneously. For Plan Years beginning after June 1, 2012, the Company may elect in writing to effect a cashout pursuant to Treasury Regulation Section 1.409A-3(j)(4)(v), where the Account Balance under the Plan (together with account balances of any other aggregated arrangements) do not exceed the applicable dollar amount under Code Section 402(g)(1)(B) (or a lower threshold set by the Company in such election).
IN WITNESS WHEREOF, this Amendment is executed by a duly authorized officer as of the date set forth below.
By: |
/s/ John McManus |
Date: | May 31, 2012 | |||||
Its: |
Executive Vice President, General Counsel & Secretary |
2
EXHIBIT 31.1
CERTIFICATION
I, James J. Murren, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of MGM Resorts International; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
August 8, 2014
/s/ JAMES J. MURREN |
James J. Murren |
Chairman of the Board and Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION
I, Daniel J. DArrigo, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of MGM Resorts International; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
August 8, 2014
/s/ DANIEL J. DARRIGO |
Daniel J. DArrigo |
Executive Vice President, Chief Financial Officer and |
Treasurer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of MGM Resorts International (the Company) on Form 10-Q for the period ending June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, James J. Murren, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
/s/ JAMES J. MURREN |
James J. Murren |
Chairman of the Board and Chief Executive Officer |
August 8, 2014 |
A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of MGM Resorts International (the Company) on Form 10-Q for the period ending June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Daniel J. DArrigo, Executive Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
/s/ DANIEL J. DARRIGO |
Daniel J. DArrigo |
Executive Vice President, Chief Financial Officer and Treasurer |
August 8, 2014 |
A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.