MGM RESORTS INTERNATIONAL AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
MGM Resorts International (“MGM” or “the Company”) is a Delaware corporation incorporated in 1986 that acts largely as a holding company and, through subsidiaries, owns and operates integrated casino, hotel, and entertainment resorts across the United States and in Macau.
Prior to the VICI Transaction (as defined below), MGM Growth Properties LLC (“MGP”), was a consolidated subsidiary of the Company. Substantially all of MGP’s assets were owned by and substantially all of its operations were conducted through its subsidiary MGM Growth Properties Operating Partnership LP (the “Operating Partnership”). Pursuant to a master lease agreement between a subsidiary of MGM and a subsidiary of MGP, the Company leased the real estate assets of The Mirage, Luxor, New York-New York, Park MGM, Excalibur, The Park, Gold Strike Tunica, MGM Grand Detroit, Beau Rivage, Borgata, Empire City, MGM National Harbor, MGM Northfield Park, and MGM Springfield (the “Properties”). On April 29, 2022, the Company completed a series of transactions (collectively the “VICI Transaction”) with VICI Properties Inc. (“VICI”) pursuant to which VICI acquired MGP in a stock-for-stock transaction. MGP Class A shareholders received 1.366 shares of newly issued VICI stock in exchange for each MGP Class A share outstanding and MGM received 1.366 units of the new VICI operating partnership (“VICI OP”) in exchange for each Operating Partnership unit held by MGM. In connection with the exchange, VICI OP redeemed the majority of MGM’s VICI OP units for cash consideration of $4.4 billion, with MGM retaining approximately 12 million VICI OP units, or an approximate 1% ownership in VICI OP. MGP’s Class B share, which was held by MGM and which represented a majority of the voting power of MGP’s shares, was cancelled. Accordingly, the Company no longer holds a controlling interest in MGP and will deconsolidate MGP.
In connection with the transaction, the Company entered into an amended and restated master lease with VICI (such lease, the “VICI Master Lease”). The VICI Master Lease has an initial term of 25 years, with three 10-year renewals, and initial annual rent of $860 million, escalating annually at a rate of 2% per annum for the first 10 years and thereafter equal to the greater of 2% and the CPI increase during the prior year subject to a cap of 3%. The lease has a triple-net structure, which requires the Company to pay substantially all costs associated with each property, including real estate taxes, insurance, utilities and routine maintenance, in addition to the rent. Additionally, the Company is required to pay the rent payments under the ground leases of the Borgata, Beau Rivage, and National Harbor.
The following unaudited pro forma condensed consolidated financial information was derived from, and should be read in conjunction with, the Company’s consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2021 and Quarterly Report on Form 10-Q for the three months ended March 31, 2022.
MGM Resorts International and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 2022
(in thousands)
| | | | | | | | | | | | | | | | | |
| |
Historical | | Transaction Accounting Adjustments | Item in Note 2 | Pro Forma |
| ASSETS | | | | | |
| Current assets | | | | | |
| Cash and cash equivalents | $ | 2,719,115 | | $ | 4,396,386 | (a),(b) | $ | 7,115,501 |
| Restricted cash | 500,101 | | — | | 500,101 |
| Accounts receivable, net | 593,466 | | (2) | (b) | 593,464 |
| Inventories | 102,050 | | — | | 102,050 |
| Income tax receivable | 234,659 | | (901) | (b) | 233,758 |
| Prepaid expenses and other | 365,554 | | (330) | (b) | 365,224 |
| Total current assets | 4,514,945 | | 4,395,153 | | 8,910,098 |
| | | | | |
| Property and equipment, net | 14,144,526 | | (9,180,973) | (b),(c) | 4,963,553 |
| | | | | |
| Other assets | | | | | |
| Investments in and advances to unconsolidated affiliates | 1,008,144 | | (818,053) | (b) | 190,091 |
| Goodwill | 3,474,861 | | — | | 3,474,861 |
| Other intangible assets, net | 3,555,466 | | — | | 3,555,466 |
| Operating lease right-of-use assets, net | 11,438,442 | | 12,214,372 | (b),(c) | 23,652,814 |
| Other long-term assets, net | 513,621 | | 370,503 | (a),(b) | 884,124 |
| Total other assets | 19,990,534 | | 11,766,822 | | 31,757,356 |
| $ | 38,650,005 | | $ | 6,981,002 | | $ | 45,631,007 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | |
| Current liabilities | | | | | |
| Accounts payable | $ | 281,225 | | $ | (151) | (b) | $ | 281,074 |
| Construction payable | 20,703 | | — | | 20,703 |
| Current portion of long-term debt | 1,250,000 | | — | | 1,250,000 |
| Accrued interest on long-term debt | 169,630 | | (51,619) | (b) | 118,011 |
| Other accrued liabilities | 1,878,043 | | (46,177) | (a),(b),(c) | 1,831,866 |
| Total current liabilities | 3,599,601 | | (97,947) | | 3,501,654 |
| | | | | |
| Deferred income taxes, net | 2,442,618 | | 502,507 | (b),(d) | 2,945,125 |
| Long-term debt, net | 10,507,140 | | (4,168,857) | (b) | 6,338,283 |
| Operating lease liabilities | 11,810,047 | | 12,099,050 | (b),(c) | 23,909,097 |
| Other long-term obligations | 280,077 | | 86,255 | (c) | 366,332 |
| Redeemable noncontrolling interests | 130,898 | | — | | 130,898 |
| Stockholders' equity | | | | | |
| Common stock, $.01 par value: authorized 1,000,000,000 shares, issued and outstanding 430,562,057 shares | 4,306 | | — | | 4,306 |
| Capital in excess of par value | 761,559 | | — | | 761,559 |
| Retained earnings | 4,321,482 | | 1,715,197 | (a),(b),(d) | 6,036,679 |
| Accumulated other comprehensive loss | (22,007) | | 11,723 | (b) | (10,284) |
| Total MGM Resorts International stockholders' equity | 5,065,340 | | 1,726,920 | | 6,792,260 |
| Noncontrolling interests | 4,814,284 | | (3,166,926) | (b) | 1,647,358 |
| Total stockholders' equity | 9,879,624 | | (1,440,006) | | 8,439,618 |
| $ | 38,650,005 | | $ | 6,981,002 | | $ | 45,631,007 |
See accompanying notes to unaudited pro forma condensed consolidated financial information.
MGM Resorts International and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 2022
(in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | |
| | | | Transaction Accounting | Item in | |
| | Historical | | Adjustments | Note 2 | Pro Forma |
| Revenues | | | | | |
| Casino | $ | 1,420,910 | | $ | — | | $ | 1,420,910 |
| Rooms | 557,073 | | — | | 557,073 |
| Food and beverage | 492,854 | | — | | 492,854 |
| Entertainment, retail and other | 371,566 | | — | | 371,566 |
| Reimbursed costs | 11,906 | | — | | 11,906 |
| 2,854,309 | | — | | 2,854,309 |
| Expenses | | | | | |
| Casino | 674,365 | | — | | 674,365 |
| Rooms | 196,113 | | — | | 196,113 |
| Food and beverage | 368,662 | | — | | 368,662 |
| Entertainment, retail and other | 218,749 | | — | | 218,749 |
| Reimbursed costs | 11,906 | | — | | 11,906 |
| General and administrative | 776,837 | | 274,848 | (aa),(bb) | 1,051,685 |
| Corporate expense | 111,241 | | (2,782) | (bb) | 108,459 |
| Preopening and start-up expenses | 434 | | — | | 434 |
| Property transactions, net | 54,738 | | (1,546) | (bb) | 53,192 |
| Depreciation and amortization | 288,638 | | (72,933) | (aa),(bb) | 215,705 |
| 2,701,683 | | 197,587 | | 2,899,270 |
| Loss from unconsolidated affiliates | (46,838) | | (38,936) | (bb) | (85,774) |
| Operating income (loss) | 105,788 | | (236,523) | | (130,735) |
| Non-operating income (expense) | | | | | |
| Interest expense, net of amounts capitalized | (196,091) | | 62,357 | (aa),(bb) | (133,734) |
| Non-operating items from unconsolidated affiliates | (15,133) | | 13,524 | (bb) | (1,609) |
| Other, net | 34,302 | | (29,079) | (bb) | 5,223 |
| (176,922) | | 46,802 | | (130,120) |
| Loss before income taxes | (71,134) | | (189,721) | | (260,855) |
| Benefit for income taxes | 36,341 | | 29,323 | (bb),(dd) | 65,664 |
| Net loss | (34,793) | | (160,398) | | (195,191) |
| Less: Net loss attributable to noncontrolling interests | 16,777 | | 69,428 | (bb) | 86,205 |
| Net loss attributable to MGM Resorts International | $ | (18,016) | | $ | (90,970) | | $ | (108,986) |
| | | | | |
| Loss per share | | | | | |
| Basic | $ | (0.06) | | | | $ | (0.27) |
| Diluted | $ | (0.06) | | | | $ | (0.27) |
| Weighted average common shares outstanding | | | | | |
| Basic | 442,916 | | | | 442,916 |
| Diluted | 442,916 | | | | 442,916 |
See accompanying notes to unaudited pro forma condensed consolidated financial information.
MGM Resorts International and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2021
(in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | |
| | | | Transaction Accounting | Item in | |
| | Historical | | Adjustments | Note 2 | Pro Forma |
| Revenues | | | | | |
| Casino | $ | 5,362,912 | | $ | — | | $ | 5,362,912 |
| Rooms | 1,690,037 | | — | | 1,690,037 |
| Food and beverage | 1,391,605 | | — | | 1,391,605 |
| Entertainment, retail and other | 1,009,503 | | — | | 1,009,503 |
| Reimbursed costs | 226,083 | | — | | 226,083 |
| 9,680,140 | | — | | 9,680,140 |
| Expenses | | | | | |
| Casino | 2,551,169 | | — | | 2,551,169 |
| Rooms | 600,942 | | — | | 600,942 |
| Food and beverage | 1,034,780 | | — | | 1,034,780 |
| Entertainment, retail and other | 617,635 | | — | | 617,635 |
| Reimbursed costs | 226,083 | | — | | 226,083 |
| General and administrative | 2,507,239 | | 1,099,038 | (aa),(bb) | 3,606,277 |
| Corporate expense | 422,777 | | (25,555) | (bb) | 397,222 |
| Preopening and start-up expenses | 5,094 | | — | | 5,094 |
| Property transactions, net | (67,736) | | (1,710) | (bb) | (69,446) |
| Gain on real estate transactions, net | — | | (2,218,988) | (cc) | (2,218,988) |
| Gain on consolidation of CityCenter, net | (1,562,329) | | — | | (1,562,329) |
| Depreciation and amortization | 1,150,610 | | (275,933) | (aa),(bb) | 874,677 |
| 7,486,264 | | (1,423,148) | | 6,063,116 |
| Income (loss) from unconsolidated affiliates | 84,823 | | (155,817) | (bb) | (70,994) |
| Operating income | 2,278,699 | | 1,267,331 | | 3,546,030 |
| Non-operating income (expense) | | | | | |
| Interest expense, net of amounts capitalized | (799,593) | | 260,298 | (aa),(bb) | (539,295) |
| Non-operating items from unconsolidated affiliates | (83,243) | | 54,992 | (bb) | (28,251) |
| Other, net | 65,941 | | (38,020) | (bb) | 27,921 |
| (816,895) | | 277,270 | | (539,625) |
| Income before income taxes | 1,461,804 | | 1,544,601 | | 3,006,405 |
| Provision for income taxes | (253,415) | | (384,447) | (bb),(dd) | (637,862) |
| Net income | 1,208,389 | | 1,160,154 | | 2,368,543 |
| Less: Net loss attributable to noncontrolling interests | 45,981 | | 205,503 | (bb) | 251,484 |
| Net income attributable to MGM Resorts International | $ | 1,254,370 | | $ | 1,365,657 | | $ | 2,620,027 |
| | | | | |
| Earnings per share | | | | | |
| Basic | $ | 2.44 | | | | $ | 5.27 |
| Diluted | $ | 2.41 | | | | $ | 5.22 |
| Weighted average common shares outstanding | | | | | |
| Basic | 481,930 | | | | 481,930 |
| Diluted | 487,356 | | | | 487,356 |
See accompanying notes to unaudited pro forma condensed consolidated financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1.Basis of Presentation
The unaudited pro forma condensed consolidated financial information is prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed consolidated balance sheets as of March 31, 2022 give effect to the VICI Transaction as if it had occurred on March 31, 2022. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2021 and for the period ended March 31, 2022 give effect to the VICI Transaction as if it had occurred on January 1, 2021. The unaudited pro forma condensed consolidated financial information presented is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the VICI Transaction had actually been completed on the dates indicated, nor is it indicative of the future operating results or financial position of MGM.
The VICI Transaction has been accounted for as one transaction in consideration of ASC 810, Consolidation. The MGM-VICI Master Lease and the ground subleases for National Harbor and Beau Rivage have been classified and accounted for as operating leases and the ground sublease for Borgata has been classified and accounted for as a finance lease by the Company for purposes of this unaudited pro forma condensed consolidated financial information.
The pro forma adjustments represent management’s best estimates and are based upon currently available information and certain assumptions that MGM believes are reasonable, and in many cases are also based on estimates and preliminary information. The assumptions underlying the pro forma adjustments are described herein. Although we believe such assumptions are reasonable under the circumstances and reflect our best currently available estimates and judgments, the conclusions reflected in the unaudited pro forma condensed consolidated financial information are subject to change as further assessment is performed and finalized.
2.Transaction Accounting Adjustments
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(a)Reflects the consideration received by the Company from VICI consisting of cash consideration of $4.4 billion, reflected within “Cash and cash equivalents,” as well as the retained ownership interest in the VICI OP of approximately 12 million VICI OP units that has a fair value of $375 million based on the closing price of VICI common stock on April 28, 2022 of $30.64 per share, reflected within “Other long-term assets, net,” each offset by the deconsolidation adjustments described in Note 2(b) as well as the estimated $20 million of transaction costs. Changes in the VICI common stock price may impact the results of operations and balance sheet in future periods. If there was a 10% change in the VICI common stock price, the fair value of the investment would change by approximately $37 million.
(b)Reflects the deconsolidation of MGP, which includes the derecognition of assets for which MGM operating subsidiaries were the accounting owner, but which are the legal assets of MGP, and the carrying value of noncontrolling interest, with the net impact being reflected within retained earnings for purposes of these pro forma financial statements. The following table summarizes the effect of derecognition on the balance sheet:
| | | | | |
| As of March 31, 2022 |
| (in thousands) |
| Cash and cash equivalents | $ | (7,614) |
| Accounts receivable, net | (2) |
| Income tax receivable | (901) |
| Prepaid expenses and other | (330) |
| Property and equipment, net | (9,268,703) |
| Investments in and advances to unconsolidated affiliates | (818,053) |
| Operating lease right-of-use assets, net | (240,206) |
| Other long-term assets, net | (4,266) |
| Total assets | $ | (10,340,075) |
| |
| Accounts payable | $ | (151) |
| Accrued interest on long-term debt | (51,619) |
| Other accrued liabilities | (86,613) |
| Deferred income taxes, net | (1,284) |
| Long-term debt, net | (4,168,857) |
| Operating lease liabilities | (336,651) |
| Total liabilities | $ | (4,645,175) |
| | |
| Accumulated other comprehensive loss | $ | 11,723 |
| Noncontrolling interests | $ | (3,166,926) |
| Retained earnings adjustment | $ | (2,539,697) |
(c)Reflects the recognition of the right-of-use assets and lease liabilities for the VICI Master Lease and the ground subleases:
| | | | | | | | |
| | As of March 31, 2022 | Account |
| | (in thousands) | |
| Operating lease right-of-use assets | $ | 12,454,578 | Operating lease right-of-use assets, net |
| | | |
| Operating lease liability - current | $ | 18,877 | Other accrued liabilities |
| Operating lease liability - noncurrent | 12,435,701 | Operating lease liabilities |
| | $ | 12,454,578 | |
| | | |
| Finance lease right-of-use asset | $ | 87,730 | Property and equipment, net |
| | |
| Finance lease liability - current | $ | 1,475 | Other accrued liabilities |
| Finance lease liability - noncurrent | 86,255 | Other long-term obligations |
| | $ | 87,730 | |
(d)Reflects the increase to deferred tax liabilities of $504 million as a result of the nontaxable gain expected to be recognized as a result of the transaction, as well as the effect of derecognition described in Note 2(b).
Unaudited Pro Forma Condensed Consolidated Statements of Operations
(aa)Reflects the lease costs associated with the VICI Master Lease and the ground subleases for Borgata, Beau Rivage, and National Harbor, as shown below, partially offset by the elimination of historical operations of MGP described in Note 2(bb):
| | | | | | | | | | | | | | |
| |
Three Months Ended March 31, 2022 | | Year Ended December 31, 2021 | Account |
| | (in thousands) | |
| Operating lease expense | $ | 280,190 | | $ | 1,120,758 | General and administrative |
| | | | |
| Interest expense | $ | 1,411 | | $ | 5,644 | Interest expense, net of amounts capitalized |
| Amortization expense | 877 | | 3,509 | Depreciation and amortization |
| Total finance lease costs | $ | 2,288 | | $ | 9,153 | |
(bb) Reflects the deconsolidation of MGP, which includes adjustments to remove expenses related to assets and liabilities recorded by MGM operating subsidiaries, discussed in Note 2(b). The following table summarizes the effect of derecognition on the statements of operations:
| | | | | | | | | | | |
| Three Months Ended March 31, 2022 | | Year Ended December 31, 2021 |
| (in thousands) |
| Expenses | | | |
| General and administrative | $ | (5,342) | | $ | (21,720) |
| Corporate expense | (2,782) | | (25,555) |
| Property transactions, net | (1,546) | | (1,710) |
| Depreciation and amortization | (73,810) | | (279,442) |
| | (83,480) | | (328,427) |
| Loss from unconsolidated affiliates | (38,936) | | (155,817) |
| Operating income | 44,544 | | 172,610 |
| Non-operating expense | | | |
| Interest expense, net of amounts capitalized | 63,768 | | 265,942 |
| Non-operating items from unconsolidated affiliates | 13,524 | | 54,992 |
| Other, net | (29,079) | | (38,020) |
| | 48,213 | | 282,914 |
| Income before income taxes | 92,757 | | 455,524 |
| Provision for income taxes | (34,235) | | (139,404) |
| Net income | 58,522 | | 316,120 |
| Less: Net loss attributable to noncontrolling interests | 69,428 | | 205,503 |
| Net income attributable to MGM Resorts International | $ | 127,950 | | $ | 521,623 |
(cc) Reflects the estimated gain on the VICI Transaction, based upon the balance sheet amounts as of March 31, 2022, as described in Note 2(b), and the cash consideration and fair value of the investment in VICI OP retained based upon the closing price of VICI common stock on April 28, 2022 net of estimated transaction costs, as described in Note 2(a). This is a non-recurring item.
(dd) Reflects the transaction accounting adjustments to income tax expense to eliminate the historical MGP income taxes, as described in Note 2(bb), and the adjustment for estimated income taxes of all transaction accounting adjustments using MGM’s blended federal and state statutory tax rate of 22.5%.
