Exhibit 99.1
Excerpts from the Preliminary Offering Memorandum of MGP Escrow Issuer, LLC, Dated April 4, 2016
Certain operational and non-U.S. GAAP financial measures of MGM and the Operating Partnership
In order to evaluate the business results of casino resorts, MGM Resorts International (“MGM”) monitors their net revenues and Adjusted Property EBITDA, as well as the key hotel performance indicators of occupancy rate, average daily rate (“ADR”) and revenue per available room (“REVPAR”). MGM’s 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. REVPAR is a summary measure of hotel results, combining ADR and occupancy rate.
MGM uses Adjusted EBITDA and Adjusted Property EBITDA as the primary profit measure for its reportable segments. Adjusted EBITDA is a 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. Adjusted Property EBITDA is a measure defined as Adjusted EBITDA before corporate expense and stock compensation expense related to MGM’s stock option plan, not allocated to each casino resort. Adjusted EBITDA or Adjusted Property EBITDA should not be construed as an alternative to operating income or net income, as an indicator of MGM’s 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. MGM has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments, which are not reflected in Adjusted EBITDA or Adjusted Property EBITDA. Also, other companies in the gaming and hospitality industries that report Adjusted EBITDA or Adjusted Property EBITDA information may calculate Adjusted EBITDA or Adjusted Property EBITDA in a different manner.
Please see Annex I for a reconciliation of MGM’s Adjusted EBITDA and Adjusted Property EBITDA to net income (loss) and of MGM’s operating income (loss) to Adjusted Property EBITDA and Adjusted EBITDA, all as reported by MGM. We are unable to provide a reconciliation of estimated stabilized Adjusted Property EBITDA objectives to estimated net income or operating income for future development projects as a result of the uncertainty regarding, and the potential variability of, start-up and related expenses, depreciation and amortization expense and other expenses, that are expected to be incurred in the future.
Please see “Reconciliation of pro forma FFO, AFFO, OP Adjusted EBITDA and Further Adjusted EBITDA to Net Income” for a reconciliation of the pro forma Further Adjusted EBITDA of MGM Growth Properties Operating Partnership LP (the “Operating Partnership”).
Summary historical financial statements and pro forma financial information
Following the Formation Transactions (described below), which include the initial public offering (the “IPO”) of MGM Growth Properties LLC (“MGP”) (with the proceeds therefrom to be used by MGP to purchase Operating Partnership Units (as defined below)), the incurrence by the Operating Partnership of $3.4 billion principal amount of new indebtedness (the “Financing”) in the form of (1) the notes to be issued in this offering, (2) a senior secured revolving credit facility (the “Revolving Credit Facility”), (3) a senior secured term loan A facility (the “Term Loan A Facility”) and (4) a senior secured term loan B facility (the “Term Loan B Facility” and, together with the Term Loan A Facility, the “Term Loan Facilities”), and the merger of MGP Escrow Issuer, LLC with and into the Operating Partnership, and the assumption by the Operating Partnership of the Bridge Facilities (as defined below) which are to be repaid with the proceeds of the above-mentioned financings, we will be primarily engaged in the real property business. Initially, our portfolio will consist of nine premier destination resorts operated by MGM, including properties that we believe are among the world’s finest casino resorts, and The Park in Las Vegas (collectively, the “Properties”) that are owned by subsidiaries of MGM as of the date of this offering memorandum, which will be contributed to us by subsidiaries of MGM in connection with the Formation Transactions. A subsidiary of the Operating Partnership (the “Landlord”) will lease all of the Properties to a subsidiary of MGM (the “Tenant”) pursuant to a long-term triple-net master lease agreement (the “Master Lease”). We initially expect to generate revenues by leasing the Properties to the Tenant.
The following summary financial information does not reflect our financial position or results of operations for the periods indicated. The Predecessor Financial Statements presented below were prepared by combining the financial results of the Properties expected to be owned by us at the completion of the Formation Transactions. The following table should be read in conjunction with: “Operating partnership unaudited pro forma condensed consolidated financial information,” “Management’s discussion and analysis of financial condition and results of operations” and the Predecessor Financial Statements and notes thereto presented elsewhere herein.
The pro forma financial information may not be indicative of our future performance and does not necessarily reflect what our financial position and results of operations would have been had we operated independent from MGM during the periods presented.
| | | | | | | | | | | | |
| | | (Historical) | | | (Pro forma)(1) | |
| | | For the year ended December 31, | |
| (in thousands) | | 2014 | | | 2015 | | | 2015 | |
| | | | | | | | | (unaudited) | |
| | | |
Statement of Operations Data: | | | | | | | | | | | | |
| | | |
Revenues | | | | | | | | | | | | |
Rental income | | $ | — | | | $ | — | | | $ | 552,300 | |
Property taxes reimbursed by Tenant | | | — | | | | — | | | | 48,122 | |
| | | | | | | | | | | | |
Total revenues | | | — | | | | — | | | | 600,422 | |
| | | | | | | | | | | | |
| | | |
Operating expenses | | | | | | | | | | | | |
Depreciation | | | 186,262 | | | | 196,816 | | | | 196,816 | |
Property transactions, net | | | — | | | | 6,665 | | | | 6,665 | |
Property taxes | | | 48,346 | | | | 48,122 | | | | 48,122 | |
Property insurance | | | 11,634 | | | | 10,351 | | | | — | |
Other general and administrative(1) | | | — | | | | — | | | | 1,650 | |
| | | | | | | | | | | | |
Total operating expenses | | | 246,242 | | | | 261,954 | | | | 253,253 | |
| | | | | | | | | | | | |
Operating income (loss) | | | (246,242 | ) | | | (261,954 | ) | | | 347,169 | |
Interest expense | | | — | | | | — | | | | 186,563 | |
| | | | | | | | | | | | |
Income (loss) before income taxes | | | (246,242 | ) | | | (261,954 | ) | | | 160,606 | |
Provision for income taxes | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Net income (loss) | | $ | (246,242 | ) | | $ | (261,954 | ) | | $ | 160,606 | |
| | | | | | | | | | | | |
(1) See “Operating Partnership unaudited pro forma condensed consolidated financial information.”
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| | | | | | | | | | | | |
| | | (Historical) | | | (Pro forma) | |
| | | For the year ended December 31, | |
| (in thousands) | | 2014 | | | 2015 | | | 2015 | |
| | | | | | | | | (unaudited) | |
| | | |
Balance Sheet Data: | | | | | | | | | | | | |
| | | |
Assets | | | | | | | | | | | | |
Property and equipment, net | | $ | 7,867,812 | | | $ | 7,793,639 | | | $ | 7,793,639 | |
| | | | | | | | | | | | |
Total assets | | $ | 7,867,812 | | | $ | 7,793,639 | | | $ | 7,793,639 | |
| | | | | | | | | | | | |
| | | |
Liabilities | | | | | | | | | | | | |
Long term debt, net | | $ | — | | | $ | — | | | $ | 3,258,575 | |
Deferred tax liabilities | | | 1,740,465 | | | | 1,734,680 | | | | — | |
| | | | | | | | | | | | |
Total liabilities | | | 1,740,465 | | | | 1,734,680 | | | | 3,258,575 | |
| | | |
Partners’ capital | | | | | | | | | | | | |
Net Parent investment | | | 6,127,347 | | | | 6,058,959 | | | | — | |
General partner | | | — | | | | — | | | | — | |
Limited partners | | | — | | | | — | | | | 4,535,064 | |
| | | | | | | | | | | | |
Total partners’ capital | | | 6,127,347 | | | | 6,058,959 | | | | 4,535,064 | |
| | | | | | | | | | | | |
Total liabilities and partners’ capital | | $ | 7,867,812 | | | $ | 7,793,639 | | | $ | 7,793,639 | |
| | | | | | | | | | | | |
Reconciliation of pro forma FFO, AFFO, OP Adjusted EBITDA and Further Adjusted EBITDA to Net Income
Pro forma Funds from operations (“FFO”) is a financial measure that is not prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and is considered a supplement to U.S. GAAP measures for the real estate industry. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (computed in accordance with U.S. GAAP), excluding gains and losses from sales of property (presented below as property transactions, net), plus real estate depreciation. We have defined pro forma Adjusted Funds From Operations (“AFFO”) as FFO as adjusted for pro forma amortization of financing costs, non-cash compensation expense, and the net effect of straight-line rents. We define pro forma OP Adjusted EBITDA as pro forma net income of the Operating Partnership (computed in accordance with U.S. GAAP) excluding pro forma gains and losses from sales of property (presented below as property transactions, net), plus pro forma real estate depreciation, interest expense (including amortization of financing costs), non-cash compensation expense, and the net effect of straight-line rents. We define pro forma Further Adjusted EBITDA as Adjusted EBITDA less general and administrative expenses (excluding non-cash compensation) that are not yet contractually committed.
Pro forma FFO, AFFO, OP Adjusted EBITDA and Further Adjusted EBITDA are useful supplemental performance measures to investors in comparing operating and financial results between periods. This is especially true since these measures exclude real estate depreciation and amortization expense and the Operating Partnership believes that real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. The Operating Partnership believes such a presentation also provides investors with a more meaningful measure of the Operating Partnership’s operating results in comparison to the operating results of other REITs. Pro forma OP Adjusted EBITDA and Further Adjusted EBITDA are useful for
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investors to further supplement pro forma AFFO and FFO and to provide investors a performance metric which excludes interest expense and, in the case of pro forma Further Adjusted EBITDA, accounts for estimated general and administrative expenses expected to be incurred but not included in pro forma OP Adjusted EBITDA.
Pro forma FFO, AFFO, OP Adjusted EBITDA and Further Adjusted EBITDA do not represent cash flow from operations as defined by U.S. GAAP, should not be considered as an alternative to net income as defined by U.S. GAAP and are not indicative of cash available to fund all cash flow needs. Investors are also cautioned that pro forma FFO, AFFO, OP Adjusted EBITDA and Further Adjusted EBITDA, as presented, may not be comparable to similarly titled measures reported by other REITs due to the fact that not all real estate companies use the same definitions.
The following reconciles pro forma FFO, AFFO, OP Adjusted EBITDA and Further Adjusted EBITDA to pro forma net income (in thousands):
| | | | |
| | | Pro forma for the
year ended
December 31, 2015 | |
Net income (loss) | | $ | 160,606 | |
Real estate depreciation | | | 196,816 | |
Property transactions, net | | | 6,665 | |
| | | | |
FFO | | | 364,087 | |
Amortization of financing costs | | | 12,328 | |
Non-cash compensation expense | | | 450 | |
Net effect of straight-line rents | | | (2,300 | ) |
| | | | |
AFFO | | | 374,565 | |
Interest expense | | | 186,563 | |
Amortization of financing costs | | | (12,328 | ) |
| | | | |
OP Adjusted EBITDA | | | 548,800 | |
Incremental G&A expense (excluding non-cash compensation)(1) | | | (11,500 | ) |
| | | | |
Further Adjusted EBITDA | | $ | 537,300 | |
| | | | |
(1) Includes the midpoint of estimated incremental general and administrative costs of approximately $10 million to $13 million that are not yet contractually committed.
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Operating partnership unaudited pro forma condensed consolidated financial information
We are a newly formed limited partnership formed in Delaware on January 6, 2016 through which our parent, MGP, will conduct its operations. Following the IPO, MGP will be a publicly traded, controlled REIT primarily engaged in owning, acquiring and leasing large-scale casino resort properties, which include casino gaming, hotel, convention, dining, entertainment, retail and mixed-use facilities, and other resort amenities.
In connection with MGP’s IPO, MGM will engage in the Formation Transactions in which certain subsidiaries of MGM will transfer the real estate assets that comprise our Properties to newly formed property company subsidiaries that are controlled by MGM (each a “Property Holdco”) that will be indirectly owned by MGM, with 100% of the ownership interests in the Property Holdcos subsequently transferred to us in exchange for partnership units in the Operating Partnership (the “Operating Partnership Units”). The Property Holdcos will then be contributed to a subsidiary of the Operating Partnership, and subsequently merge into a single Property Holdco, the Landlord, which is the lessor under the Master Lease. In light of the foregoing, such real estate assets and related operations are referred to as our predecessor (the “Predecessor” or “Propco”). Following the proposed Formation Transactions, a wholly owned subsidiary of MGP will be our general partner and operate and control all of our business affairs and consolidate our financial results, including those of our subsidiaries. The above Formation Transactions are considered to be between legal entities under common control under U.S. GAAP.
The following unaudited pro forma condensed consolidated financial information presents our unaudited pro forma condensed consolidated balance sheet as of December 31, 2015, as if the Formation Transactions had occurred on December 31, 2015. Our unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2015 is presented as if the Formation Transactions had occurred on January 1, 2015, and has been derived from our Predecessor Financial Statements included elsewhere in this offering memorandum. This unaudited condensed consolidated pro forma financial information and other data should be read in conjunction with our Predecessor Financial Statements and notes thereto included elsewhere in this offering memorandum.
The following unaudited pro forma condensed consolidated financial information and explanatory notes present how the financial statements may have appeared had the capital structure reflected the Formation Transactions and related transactions as of the dates noted above.
The following unaudited pro forma condensed consolidated financial information was prepared in accordance with Article 11 of Regulation S-X, using the assumptions set forth in the notes to the unaudited pro forma condensed consolidated financial information. The unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and does not purport to reflect the results we may achieve in future periods or the historical results that would have been obtained had the Formation Transactions and related transactions been completed on January 1, 2015 or as of December 31, 2015, as the case may be.
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Unaudited pro forma condensed consolidated balance sheet
As of December 31, 2015
(in thousands)
| | | | | | | | | | | | | | | | | | | | |
| | | As of
December 31,
2015 | | | As of
January 6,
2016 | | | Pro forma
adjustments | | | | | | As of
December 31,
2015 | |
| | | Historical
Predecessor (a) | | | Operating
Partnership at
date of
inception | | | | | Pro forma
Operating
Partnership | |
| | | | | |
Assets | | | | | | | | | | | | | | | | | | | | |
Property and equipment, net | | $ | 7,793,639 | | | $ | — | | | $ | — | | | | | | | $ | 7,793,639 | |
| | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 7,793,639 | | | $ | — | | | $ | — | | | | | | | $ | 7,793,639 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Liabilities | | | | | | | | | | | | | | | | | | | | |
Long term debt, net | | $ | — | | | $ | — | | | $ | 3,258,575 | | | | (b) | | | $ | 3,258,575 | |
Deferred tax liabilities | | | 1,734,680 | | | | — | | | | (1,734,680 | ) | | | (c) | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | 1,734,680 | | | | — | | | | 1,523,895 | | | | | | | | 3,258,575 | |
| | | | | |
Partners’ capital | | | | | | | | | | | | | | | | | | | | |
Net Parent investment | | | 6,058,959 | | | | — | | | | (6,058,959 | ) | | | (b)(c) | | | | — | |
General partner | | | — | | | | — | | | | — | | | | | | | | — | |
Limited partners | | | — | | | | — | | | | 4,535,064 | | | | (b)(c) | | | | 4,535,064 | |
| | | | | | | | | | | | | | | | | | | | |
Total partners’ capital | | | 6,058,959 | | | | — | | | | (1,523,895 | ) | | | | | | | 4,535,064 | |
| | | | | | | | | | | | | | | | | | | | |
Total liabilities and partners’ capital | | $ | 7,793,639 | | | $ | — | | | $ | — | | | | | | | $ | 7,793,639 | |
| | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed consolidated financial information.
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Unaudited pro forma condensed consolidated statement of operations
For the year ended December 31, 2015
(in thousands)
| | | | | | | | | | | | | | | | | | |
| | | Year ended
December 31,
2015 | | | As of
January 6,
2016 | | | | | Year ended
December 31,
2015 | |
| | | Historical
Predecessor
(aa) | | | Operating
Partnership at
date of
inception | | | Pro forma
adjustments | | Pro forma
Operating
Partnership | |
Revenues Rental income | | $ | — | | | $ | — | | | $ | 552,300 | | | (bb) | | $ | 552,300 | |
Property taxes reimbursed by Tenant | | | — | | | | — | | | | 48,122 | | | (cc) | | | 48,122 | |
| | | | | | | | | | | | | | | | | | |
Total revenues | | | — | | | | — | | | | 600,422 | | | | | | 600,422 | |
| | | | | | | | | | | | | | | | | | |
| | | | | |
Operating expenses | | | | | | | | | | | | | | | | | | |
Depreciation | | | 196,816 | | | | — | | | | — | | | | | | 196,816 | |
Property transactions, net | | | 6,665 | | | | — | | | | — | | | | | | 6,665 | |
Property taxes | | | 48,122 | | | | — | | | | — | | | | | | 48,122 | |
Property insurance | | | 10,351 | | | | — | | | | (10,351 | ) | | (dd) | | | — | |
Other general and administrative | | | — | | | | — | | | | 1,650 | | | (ee) | | | 1,650 | |
| | | | | | | | | | | | | | | | | | |
Total operating expenses | | | 261,954 | | | | — | | | | (8,701 | ) | | | | | 253,253 | |
| | | | | | | | | | | | | | | | | | |
Operating income (loss) | | | (261,954 | ) | | | — | | | | 609,123 | | | | | | 347,169 | |
Interest expense | | | — | | | | — | | | | 186,563 | | | (ff) | | | 186,563 | |
| | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | (261,954 | ) | | | — | | | | 422,560 | | | | | | 160,606 | |
Provision for income taxes | | | — | | | | — | | | | — | | | | | | — | |
| | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | (261,954 | ) | | | — | | | $ | 422,560 | | | | | $ | 160,606 | |
| | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed consolidated financial information.
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Pro forma condensed consolidated financial information
Note 1—Balance sheet pro forma adjustments
(a) Represents the historical amounts of our Predecessor, including the historical cost of real estate assets to be acquired by us. The assets of the Properties transferred pursuant to the Formation Transactions will be recorded at historical cost as the Formation Transactions do not result in a change in control of the assets. Following the Formation Transactions, we will consolidate the assets and liabilities of the Predecessor.
(b) Represents the net proceeds from the IPO and the indebtedness to be incurred by us described below, offset by their respective financing costs in connection with the Formation Transactions, as well as the assumption and repayment of the indebtedness under the approximately $4.0 billion of liabilities from MGM and certain subsidiaries of MGM under bridge facilities (the “Bridge Facilities”) assumed by us.
We estimate that proceeds from the IPO of approximately $800.0 million will be used to purchase Operating Partnership Units representing economic interests in the Operating Partnership. We will use the proceeds to repay a portion of the indebtedness assumed by us in connection with the Formation Transactions.
In addition, we are expected to incur approximately $3.4 billion principal amount of new indebtedness. The net proceeds of such new indebtedness will be used to refinance the Bridge Facilities. Debt issuance costs of $91.4 million incurred in connection with obtaining the Revolving Credit Facility, the Term Loan Facilities and the notes to be issued in this offering are offset against the carrying amount of the debt. In the event that the gross proceeds from the IPO are less than the $800.0 million that MGP expects to raise, we expect to incur additional indebtedness under our Revolving Credit Facility equal to the difference, but not exceeding $300.0 million of total outstanding indebtedness under the Revolving Credit Facility on the date all of the Formation Transactions are consummated (the “Transaction Consummation Date”). In addition, to the extent the underwriters in the IPO exercise their overallotment option to purchase additional shares in the IPO, we expect MGP to contribute such additional proceeds to the Operating Partnership to purchase additional Operating Partnership Units, and the Operating Partnership expects to use such additional proceeds to reduce outstanding indebtedness under the Revolving Credit Facility. No assurance can be given that the underwriters will exercise such overallotment option.
The weighted average interest rate on our indebtedness under the Revolving Credit Facility, the Term Loan Facilities and the notes to be issued in this offering is expected to be 5.2%.
For purposes of this pro forma presentation, the net issuance proceeds from the IPO, the Financing and debt issuance costs have been applied to the pro forma condensed consolidated balance sheet assuming they had occurred on December 31, 2015.
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Cash and cash equivalents includes the following cash inflows and cash outflows (in thousands):
| | | | | | | | | | |
| Sources | | | | | Uses | | | |
Proceeds from MGP’s purchase of Operating Partnership Units | | $ | 741,425 | | | Repayment of the Bridge Facilities | | $ | 4,000,000 | |
Proceeds from debt issuance | |
| 3,350,000
|
| | Debt issuance costs | | | 91,425 | |
| | | | | | | | | | |
| | $ | 4,091,425 | | | | | $ | 4,091,425 | |
| | | | | | | | | | |
| | |
| Long term debt represents the following (in thousands): | | | | | | |
Proceeds from debt issuance | | $ | 3,350,000 | | | | | | | |
Debt issuance costs | | | (91,425 | ) | | | | | | |
Bridge Facilities assumed by us | | | 4,000,000 | | | | | | | |
Repayment of the Bridge Facilities | | | (4,000,000 | ) | | | | | | |
| | | | | | | | | | |
| | $ | 3,258,575 | | | | | | | |
| | | | | | | | | | |
(c) Represents the reversal of the historical deferred tax liability associated with the transferred property and equipment. The deferred tax liability will be retained by MGM upon MGM’s contribution of the Properties to us. As we are organized as a partnership, we are not a taxable entity for federal and state income tax purposes.
Note 2—Statement of operations pro forma adjustments
(aa) Represents the historical amounts of our Predecessor, including the historical expenses directly associated with real estate assets to be contributed to us, comprised of depreciation, property tax, and property insurance expenses. The assets of the Properties transferred pursuant to the Formation Transactions will be recorded at the historical cost as the Formation Transactions do not result in a change in control of the assets. Following the Formation Transactions, we will consolidate the results of operations of the Predecessor.
(bb) Represents rental income associated with the rent from the Master Lease. The base rent component of rent under the Master Lease (the “Base Rent”) includes a fixed annual rent escalator of 2.0% for the second through the sixth lease years (as defined in the Master Lease). Thereafter, the annual escalator of 2.0% will be subject to the Tenant and, without duplication, the MGM operating subsidiary sublessees of our Tenant collectively, meeting an adjusted net revenue to rent ratio of 6.25:1.00 based on their adjusted net revenue from the leased properties subject to the Master Lease (excluding net revenue attributable to certain scheduled subleases). The percentage rent component of rent under the Master Lease (the “Percentage Rent”) will initially be a fixed amount for approximately the first six lease years and will then be adjusted every five years based on the average actual annual adjusted net revenues from the leased properties subject to the Master Lease at such time (excluding net revenue attributable to certain scheduled subleases) for the trailing five-calendar-year period. Base Rent and Percentage Rent that is known at the lease commencement date will be recorded on a straight-line basis over the initial non-cancelable lease term and any reasonably assured renewal terms.
For the year ended December 31, 2015, pro forma rental revenue recognized is $552.3 million compared to total lease payments due under the Master Lease of $550.0 million. The difference of $2.3 million is an adjustment to recognize fixed amounts due under the Master Lease on a straight-line basis over the lease term.
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(cc) Represents revenue for the property taxes paid by the Tenant under the Master Lease with an offsetting expense recorded in operating expenses, as one of our subsidiaries is the primary obligor.
(dd) Represents the elimination of property insurance expense, which will be paid directly by the Tenant under the terms of the Master Lease.
(ee) Represents expense related to the base salary and annual equity awards pursuant to the employment agreements with our Chief Executive Officer and Chief Financial Officer. Any amount related to equity awards for our Chief Executive Officer and Chief Financial Officer that are not factually supportable have been excluded.
In addition, we also expect to incur fees pursuant to a corporate services agreement (the “Corporate Services Agreement”) in connection with financial, administrative and operational support services provided by MGM, including accounting and finance support, human resources support, legal and regulatory compliance support, insurance advisory services, internal audit services, governmental affairs monitoring and reporting services, information technology support, construction services, and various other support services, which will be based on costs MGM incurs directly related to providing services under the agreement. Such amounts will be based on an allocation of costs incurred by MGM in the future. As a result, such amounts are not factually supportable and an adjustment for these amounts has been excluded.
We estimate that general and administrative costs, including costs incurred under the Corporate Services Agreement, could result in incremental general and administrative expenses of $10 million to $13 million per year (excluding non-cash compensation that is not factually supportable).
(ff) Represents interest expense related to borrowings that will be incurred by us under the Financing, including the amortization of debt issuance costs associated with the Financing. It is estimated that a one-eighth percentage change in the annual interest rates on our variable rate obligations would change annual interest expense by $2.8 million. In addition, in the event that the gross proceeds from the IPO are less than the $800.0 million that MGP expects to raise, we expect to incur additional indebtedness under our Revolving Credit Facility equal to the difference, but not exceeding $300.0 million of total outstanding indebtedness under the Revolving Credit Facility on the Transaction Consummation Date. To the extent the underwriters in the IPO exercise their overallotment option to purchase additional shares in the IPO, we expect MGP to contribute such additional proceeds to the Operating Partnership to purchase additional Operating Partnership Units, and the Operating Partnership expects to use such additional proceeds to reduce outstanding indebtedness under the Revolving Credit Facility. No assurance can be given that the underwriters in the IPO will exercise such overallotment option. It is estimated that a $100 million change in borrowings that will be incurred by us in connection with the Financing would change annual interest expense by $3.0 million. See Note 1(b).
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Contractual obligations and commitments
Information concerning our obligations and commitments to make future payments under contracts such as our anticipated indebtedness is included in the following table.
| | | | | | | | | | | | | | | | | | | | |
| | | Payments due by period | |
| Contractual obligations | | Total | | | Within
1 Year | | | 1-3
Years | | | 4-5
Years | | | After 5
Years | |
| (in thousands) | | | | | | | | | | | | | | | |
| | | | | |
Pro forma data (unaudited): | | | | | | | | | | | | | | | | | | | | |
Pro forma long-term debt(1) | | $ | 4,562,774 | | | $ | 205,484 | | | $ | 406,630 | | | $ | 775,846 | | | $ | 3,174,814 | |
| | | | | | | | | | | | | | | | | | | | |
Total Pro forma contractual obligations | | $ | 4,562,774 | | | $ | 205,484 | | | $ | 406,630 | | | $ | 775,846 | | | $ | 3,174,814 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Including estimated interest payments.
11
Annex I
Unaudited reconciliation of non-U.S. GAAP measures of MGM
The following table presents a reconciliation of MGM’s Adjusted EBITDA to net income (loss), each as reported by MGM:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended | |
| | | December 31,
2008 | | | December 31,
2009 | | | December 31,
2010 | | | December 31,
2011 | | | December 31,
2012 | | | December 31,
2013 | | | December 31,
2014 | | | December 31,
2015 | |
| | | (in thousands) | |
Adjusted EBITDA | | $ | 1,882,441 | | | $ | 1,107,099 | | | $ | 972,389 | | | $ | 1,603,771 | | | $ | 1,747,981 | | | $ | 2,124,581 | | | $ | 2,219,562 | | | $ | 2,238,920 | |
Preopening and start-up expenses | | | (23,059 | ) | | | (53,013 | ) | | | (4,247 | ) | | | 316 | | | | (2,127 | ) | | | (13,314 | ) | | | (39,257 | ) | | | (71,327 | ) |
Property transactions, net | | | (1,277,132 | ) | | | (1,328,689 | ) | | | (1,454,349 | ) | | | 3,318,838 | | | | (696,806 | ) | | | (124,761 | ) | | | (41,002 | ) | | | (1,503,942 | ) |
Depreciation and amortization | | | (778,236 | ) | | | (689,273 | ) | | | (633,423 | ) | | | (817,146 | ) | | | (927,697 | ) | | | (849,225 | ) | | | (815,765 | ) | | | (819,883 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating income | | | (195,986 | ) | | | (963,876 | ) | | | (1,119,630 | ) | | | 4,105,779 | | | | 121,351 | | | | 1,137,281 | | | | 1,323,538 | | | | (156,232 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Non-operating income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net of amounts capitalized | | | (609,286 | ) | | | (775,431 | ) | | | (1,113,580 | ) | | | (1,086,832 | ) | | | (1,116,358 | ) | | | (857,347 | ) | | | (817,061 | ) | | | (797,579 | ) |
Other, net | | | 69,901 | | | | (273,286 | ) | | | 11,807 | | | | (181,938 | ) | | | (739,206 | ) | | | (217,744 | ) | | | (95,591 | ) | | | (92,432 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | (539,385 | ) | | | (1,048,717 | ) | | | (1,101,773 | ) | | | (1,268,770 | ) | | | (1,855,564 | ) | | | (1,075,091 | ) | | | (912,652 | ) | | | (890,011 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | (735,371 | ) | | | (2,012,593 | ) | | | (2,221,403 | ) | | | 2,837,009 | | | | (1,734,213 | ) | | | 62,190 | | | | 410,886 | | | | (1,046,243 | ) |
Provision for income taxes | | | (186,298 | ) | | | 720,911 | | | | 780,825 | | | | 401,116 | | | | 117,301 | | | | (20,816 | ) | | | (283,708 | ) | | | 6,594 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | | (921,669 | ) | | | (1,291,682 | ) | | | (1,440,578 | ) | | | 3,238,125 | | | | (1,616,912 | ) | | | 41,374 | | | | 127,178 | | | | (1,039,649 | ) |
Less: Net income attributable to noncontrolling interests | | | — | | | | — | | | | — | | | | (120,307 | ) | | | (150,779 | ) | | | (213,108 | ) | | | (277,051 | ) | | | 591,929 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) attributable to MGM Resorts International | | $ | (921,669 | ) | | $ | (1,291,682 | ) | | $ | (1,440,578 | ) | | $ | 3,117,818 | | | $ | (1,767,691 | ) | | $ | (171,734 | ) | | $ | (149,873 | ) | | $ | (447,720 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
A-1
The following tables present reconciliations of MGM’s operating income (loss) to Adjusted Property EBITDA and Adjusted EBITDA, each as reported by MGM:
| | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, 2015 | |
| | | Operating
income (loss) | | | Preopening
and start-up
expenses | | | Property
transactions,
net | | | Depreciation
and
amortization | | | Adjusted
EBITDA | |
| | | (in thousands) | |
Bellagio | | $ | 303,858 | | | $ | — | | | $ | 1,085 | | | $ | 90,442 | | | $ | 395,385 | |
MGM Grand Las Vegas | | | 206,896 | | | | — | | | | 110 | | | | 73,260 | | | | 280,266 | |
Mandalay Bay | | | 120,142 | | | | — | | | | 3,599 | | | | 79,733 | | | | 203,474 | |
The Mirage | | | 66,069 | | | | 115 | | | | 1,729 | | | | 44,562 | | | | 112,475 | |
Luxor | | | 49,369 | | | | (2 | ) | | | 94 | | | | 37,708 | | | | 87,169 | |
New York-New York | | | 81,618 | | | | (74 | ) | | | 4,931 | | | | 19,982 | | | | 106,457 | |
Excalibur | | | 67,545 | | | | — | | | | 111 | | | | 14,591 | | | | 82,247 | |
Monte Carlo | | | 55,594 | | | | — | | | | 3,219 | | | | 27,149 | | | | 85,962 | |
Circus Circus Las Vegas | | | 27,305 | | | | 280 | | | | 21 | | | | 15,639 | | | | 43,245 | |
MGM Grand Detroit | | | 131,016 | | | | — | | | | (36 | ) | | | 23,999 | | | | 154,979 | |
Beau Rivage | | | 62,613 | | | | — | | | | (5 | ) | | | 26,235 | | | | 88,843 | |
Gold Strike Tunica | | | 34,362 | | | | — | | | | 221 | | | | 11,440 | | | | 46,023 | |
Other resort operations | | | 2,975 | | | | — | | | | — | | | | 466 | | | | 3,441 | |
| | | | | | | | | | | | | | | | | | | | |
Wholly owned domestic resorts | | | 1,209,362 | | | | 319 | | | | 15,079 | | | | 465,206 | | | | 1,689,966 | |
| | | | | | | | | | | | | | | | | | | | |
MGM China | | | (1,212,377 | ) | | | 13,863 | | | | 1,472,128 | | | | 266,267 | | | | 539,881 | |
Unconsolidated resorts | | | 254,408 | | | | 3,475 | | | | — | | | | — | | | | 257,883 | |
Management and other operations | | | 27,395 | | | | 1,179 | | | | 1,080 | | | | 7,765 | | | | 37,419 | |
| | | | | | | | | | | | | | | | | | | | |
| | | 278,788 | | | | 18,836 | | | | 1,488,287 | | | | 739,238 | | | | 2,525,149 | |
| | | | | | | | | | | | | | | | | | | | |
Stock compensation | | | (32,125 | ) | | | — | | | | — | | | | — | | | | (32,125 | ) |
Corporate | | | (402,895 | ) | | | 52,491 | | | | 15,655 | | | | 80,645 | | | | (254,104 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | $ | (156,232 | ) | | $ | 71,327 | | | $ | 1,503,942 | | | $ | 819,883 | | | $ | 2,238,920 | |
| | | | | | | | | | | | | | | | | | | | |
A-2
| | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, 2014 | |
| | Operating
income (loss) | | | Preopening
and start-up
expenses | | | Property
transactions,
net | | | Depreciation
and
amortization | | | Adjusted
EBITDA | |
| | | (in thousands) | |
Bellagio | | $ | 304,144 | | | $ | — | | | $ | 900 | | | $ | 88,658 | | | $ | 393,702 | |
MGM Grand Las Vegas | | | 174,297 | | | | 197 | | | | (667 | ) | | | 81,027 | | | | 254,854 | |
Mandalay Bay | | | 95,449 | | | | 1,133 | | | | 2,307 | | | | 76,737 | | | | 175,626 | |
The Mirage | | | 57,338 | | | | 452 | | | | 2,464 | | | | 49,900 | | | | 110,154 | |
Luxor | | | 31,801 | | | | 2 | | | | 432 | | | | 37,849 | | | | 70,084 | |
New York-New York | | | 75,360 | | | | 732 | | | | 427 | | | | 18,586 | | | | 95,105 | |
Excalibur | | | 52,915 | | | | — | | | | 500 | | | | 14,804 | | | | 68,219 | |
Monte Carlo | | | 48,937 | | | | 1,507 | | | | 290 | | | | 21,046 | | | | 71,780 | |
Circus Circus Las Vegas | | | 8,135 | | | | 85 | | | | 61 | | | | 15,334 | | | | 23,615 | |
MGM Grand Detroit | | | 118,755 | | | | — | | | | 2,728 | | | | 23,315 | | | | 144,798 | |
Beau Rivage | | | 43,152 | | | | — | | | | 1,000 | | | | 26,109 | | | | 70,261 | |
Gold Strike Tunica | | | 27,460 | | | | — | | | | 392 | | | | 12,480 | | | | 40,332 | |
Other resort operations | | | (2,318 | ) | | | — | | | | 336 | | | | 1,759 | | | | (223 | ) |
| | | | | | | | | | | | | | | | | | | | |
Wholly owned domestic resorts | | | 1,035,425 | | | | 4,108 | | | | 11,170 | | | | 467,604 | | | | 1,518,307 | |
| | | | | | | | | | | | | | | | | | | | |
MGM China | | | 547,977 | | | | 9,091 | | | | 1,493 | | | | 291,910 | | | | 850,471 | |
Unconsolidated resorts | | | 62,919 | | | | 917 | | | | — | | | | — | | | | 63,836 | |
Management and other operations | | | 26,152 | | | | 359 | | | | 415 | | | | 9,058 | | | | 35,984 | |
| | | | | | | | | | | | | | | | | | | | |
| | | 1,672,473 | | | | 14,475 | | | | 13,078 | | | | 768,572 | | | | 2,468,598 | |
| | | | | | | | | | | | | | | | | | | | |
Stock compensation | | | (28,372 | ) | | | — | | | | — | | | | — | | | | (28,372 | ) |
Corporate | | | (320,563 | ) | | | 24,782 | | | | 27,924 | | | | 47,193 | | | | (220,664 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 1,323,538 | | | $ | 39,257 | | | $ | 41,002 | | | $ | 815,765 | | | $ | 2,219,562 | |
| | | | | | | | | | | | | | | | | | | | |
A-3
| | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, 2013 | |
| | | Operating
income (loss) | | | Preopening
and start-up
expenses | | | Property
transactions,
net | | | Depreciation
and
amortization | | | Adjusted
EBITDA | |
| | | (in thousands) | |
Bellagio | | $ | 261,321 | | | $ | — | | | $ | 470 | | | $ | 96,968 | | | $ | 358,759 | |
MGM Grand Las Vegas | | | 149,602 | | | | — | | | | 2,220 | | | | 84,310 | | | | 236,132 | |
Mandalay Bay | | | 78,096 | | | | 1,903 | | | | 2,823 | | | | 84,332 | | | | 167,154 | |
The Mirage | | | 63,090 | | | | — | | | | 4,722 | | | | 49,612 | | | | 117,424 | |
Luxor | | | 21,730 | | | | 802 | | | | 2,177 | | | | 36,852 | | | | 61,561 | |
New York-New York | | | 65,006 | | | | — | | | | 3,533 | | | | 20,642 | | | | 89,181 | |
Excalibur | | | 49,184 | | | | — | | | | 69 | | | | 14,249 | | | | 63,502 | |
Monte Carlo | | | 45,597 | | | | 791 | | | | 3,773 | | | | 18,780 | | | | 68,941 | |
Circus Circus Las Vegas | | | (1,596 | ) | | | — | | | | 1,078 | | | | 17,127 | | | | 16,609 | |
MGM Grand Detroit | | | 135,516 | | | | — | | | | (2,402 | ) | | | 22,575 | | | | 155,689 | |
Beau Rivage | | | 38,015 | | | | — | | | | (260 | ) | | | 29,182 | | | | 66,937 | |
Gold Strike Tunica | | | 22,767 | | | | — | | | | 1,330 | | | | 13,390 | | | | 37,487 | |
Other resort operations | | | (21,951 | ) | | | — | | | | 23,018 | | | | 2,243 | | | | 3,310 | |
| | | | | | | | | | | | | | | | | | | | |
Wholly owned domestic resorts | | | 906,377 | | | | 3,496 | | | | 42,551 | | | | 490,262 | | | | 1,442,686 | |
| | | | | | | | | | | | | | | | | | | | |
MGM China | | | 501,021 | | | | 9,109 | | | | 390 | | | | 303,589 | | | | 814,109 | |
Unconsolidated resorts | | | 68,322 | | | | 507 | | | | — | | | | — | | | | 68,829 | |
Management and other operations | | | 13,749 | | | | 189 | | | | 4 | | | | 11,835 | | | | 25,777 | |
| | | | | | | | | | | | | | | | | | | | |
| | | 1,489,469 | | | | 13,301 | | | | 42,945 | | | | 805,686 | | | | 2,351,401 | |
| | | | | | | | | | | | | | | | | | | | |
Stock compensation | | | (26,112 | ) | | | — | | | | — | | | | — | | | | (26,112 | ) |
Corporate | | | (326,076 | ) | | | 13 | | | | 81,816 | | | | 43,539 | | | | (200,708 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | $ | 1,137,281 | | | $ | 13,314 | | | $ | 124,761 | | | $ | 849,225 | | | $ | 2,124,581 | |
| | | | | | | | | | | | | | | | | | | | |
A-4
| | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, 2012 | |
| | | Operating
income (loss) | | | Preopening
and start-up
expenses | | | Property
transactions,
net | | | Depreciation
and
amortization | | | Adjusted
EBITDA | |
| | | (in thousands) | |
Bellagio | | $ | 206,679 | | | $ | — | | | $ | 2,101 | | | $ | 94,074 | | | $ | 302,854 | |
MGM Grand Las Vegas | | | 94,529 | | | | — | | | | 6,271 | | | | 79,926 | | | | 180,726 | |
Mandalay Bay | | | 64,818 | | | | 830 | | | | 3,786 | | | | 77,327 | | | | 146,761 | |
The Mirage | | | 65,266 | | | | — | | | | 929 | | | | 51,423 | | | | 117,618 | |
Luxor | | | 20,777 | | | | — | | | | 4,794 | | | | 37,689 | | | | 63,260 | |
New York-New York | | | 68,591 | | | | — | | | | 581 | | | | 21,333 | | | | 90,505 | |
Excalibur | | | 43,978 | | | | — | | | | 5 | | | | 17,805 | | | | 61,788 | |
Monte Carlo | | | 38,418 | | | | — | | | | 1,328 | | | | 18,935 | | | | 58,681 | |
Circus Circus Las Vegas | | | 4,514 | | | | — | | | | 106 | | | | 19,452 | | | | 24,072 | |
MGM Grand Detroit | | | 130,564 | | | | 641 | | | | 922 | | | | 33,543 | | | | 165,670 | |
Beau Rivage | | | 40,713 | | | | — | | | | (50 | ) | | | 30,698 | | | | 71,361 | |
Gold Strike Tunica | | | 27,420 | | | | — | | | | (53 | ) | | | 13,102 | | | | 40,469 | |
Other resort operations | | | (904 | ) | | | — | | | | (14 | ) | | | 2,373 | | | | 1,455 | |
| | | | | | | | | | | | | | | | | | | | |
Wholly owned domestic resorts | | | 805,363 | | | | 1,471 | | | | 20,706 | | | | 497,680 | | | | 1,325,220 | |
| | | | | | | | | | | | | | | | | | | | |
MGM China | | | 302,092 | | | | — | | | | 2,307 | | | | 374,946 | | | | 679,345 | |
Unconsolidated resorts | | | (17,456 | ) | | | 656 | | | | — | | | | — | | | | (16,800 | ) |
Management and other operations | | | (4,258 | ) | | | — | | | | — | | | | 14,205 | | | | 9,947 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | 1,085,741 | | | | 2,127 | | | | 23,013 | | | | 886,831 | | | | 1,997,712 | |
| | | | | | | | | | | | | | | | | | | | |
Stock compensation | | | (33,974 | ) | | | — | | | | — | | | | — | | | | (33,974 | ) |
Corporate | | | (930,416 | ) | | | — | | | | 673,793 | | | | 40,866 | | | | (215,757 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | $ | 121,351 | | | $ | 2,127 | | | $ | 696,806 | | | $ | 927,697 | | | $ | 1,747,981 | |
| | | | | | | | | | | | | | | | | | | | |
A-5
| | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, 2011 | |
| | | Operating
income (loss) | | | Preopening
and start-up
expenses | | | Gain on MGM
China
transaction
and Property
transactions,
net | | | Depreciation
and
amortization | | | Adjusted
EBITDA | |
| | | (in thousands) | |
Bellagio | | $ | 203,026 | | | $ | — | | | $ | 2,772 | | | $ | 96,699 | | | $ | 302,497 | |
MGM Grand Las Vegas | | | 71,762 | | | | — | | | | 232 | | | | 77,142 | | | | 149,136 | |
Mandalay Bay | | | 84,105 | | | | — | | | | 531 | | | | 84,488 | | | | 169,124 | |
The Mirage | | | 41,338 | | | | — | | | | 1,559 | | | | 59,546 | | | | 102,443 | |
Luxor | | | 39,866 | | | | — | | | | 112 | | | | 38,103 | | | | 78,081 | |
New York-New York | | | 63,824 | | | | — | | | | (76 | ) | | | 23,536 | | | | 87,284 | |
Excalibur | | | 44,428 | | | | — | | | | 646 | | | | 20,183 | | | | 65,257 | |
Monte Carlo | | | 35,059 | | | | — | | | | 131 | | | | 22,214 | | | | 57,404 | |
Circus Circus Las Vegas | | | 4,040 | | | | — | | | | (1 | ) | | | 18,905 | | | | 22,944 | |
MGM Grand Detroit | | | 125,235 | | | | — | | | | 1,415 | | | | 39,369 | | | | 166,019 | |
Beau Rivage | | | 30,313 | | | | — | | | | 58 | | | | 39,649 | | | | 70,020 | |
Gold Strike Tunica | | | 15,991 | | | | — | | | | 36 | | | | 13,639 | | | | 29,666 | |
Other resort operations | | | (86,012 | ) | | | — | | | | 80,120 | | | | 4,133 | | | | (1,759 | ) |
| | | | | | | | | | | | | | | | | | | | |
Wholly owned domestic resorts | | | 672,975 | | | | — | | | | 87,535 | | | | 537,606 | | | | 1,298,116 | |
| | | | | | | | | | | | | | | | | | | | |
MGM China | | | 137,440 | | | | — | | | | 1,120 | | | | 221,126 | | | | 359,686 | |
MGM Macau (50%) | | | 115,219 | | | | — | | | | — | | | | — | | | | 115,219 | |
CityCenter (50%) | | | (56,291 | ) | | | — | | | | — | | | | — | | | | (56,291 | ) |
Other unconsolidated resorts | | | 79,368 | | | | — | | | | — | | | | — | | | | 79,368 | |
Management and other operations | | | (13,813 | ) | | | (316 | ) | | | — | | | | 14,416 | | | | 287 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | 934,898 | | | | (316 | ) | | | 88,655 | | | | 773,148 | | | | 1,796,385 | |
| | | | | | | | | | | | | | | | | | | | |
Stock compensation | | | (36,528 | ) | | | — | | | | — | | | | — | | | | (36,528 | ) |
Corporate | | | 3,207,409 | | | | — | | | | (3,407,493 | ) | | | 43,998 | | | | (156,086 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | $ | 4,105,779 | | | $ | (316 | ) | | $ | (3,318,838 | ) | | $ | 817,146 | | | $ | 1,603,771 | |
| | | | | | | | | | | | | | | | | | | | |
A-6
| | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, 2010 | |
| | | Operating
income (loss) | | | Preopening
and start-up
expenses | | | Property
transactions,
net | | | Depreciation
and
amortization | | | Adjusted
EBITDA | |
| | | (in thousands) | |
Bellagio | | $ | 174,355 | | | $ | — | | | $ | (17 | ) | | $ | 96,290 | | | $ | 270,628 | |
MGM Grand Las Vegas | | | 84,359 | | | | — | | | | 127 | | | | 78,607 | | | | 163,093 | |
Mandalay Bay | | | 29,859 | | | | — | | | | 2,892 | | | | 91,634 | | | | 124,385 | |
The Mirage | | | 36,189 | | | | — | | | | (207 | ) | | | 66,124 | | | | 102,106 | |
Luxor | | | 18,822 | | | | — | | | | 257 | | | | 42,117 | | | | 61,196 | |
New York-New York | | | 41,845 | | | | — | | | | 6,880 | | | | 27,529 | | | | 76,254 | |
Excalibur | | | 39,534 | | | | — | | | | 803 | | | | 22,899 | | | | 63,236 | |
Monte Carlo | | | 5,020 | | | | 185 | | | | 3,923 | | | | 24,427 | | | | 33,555 | |
Circus Circus Las Vegas | | | (5,366 | ) | | | — | | | | 230 | | | | 20,741 | | | | 15,605 | |
MGM Grand Detroit | | | 115,040 | | | | — | | | | (327 | ) | | | 40,460 | | | | 155,173 | |
Beau Rivage | | | 21,564 | | | | — | | | | 349 | | | | 39,374 | | | | 61,287 | |
Gold Strike Tunica | | | 26,115 | | | | — | | | | (540 | ) | | | 14,278 | | | | 39,853 | |
Other resort operations | | | (6,391 | ) | | | — | | | | 20 | | | | 5,413 | | | | (958 | ) |
| | | | | | | | | | | | | | | | | | | | |
Wholly owned domestic resorts | | | 580,945 | | | | 185 | | | | 14,390 | | | | 569,893 | | | | 1,165,413 | |
Macau (50%) | | | 129,575 | | | | — | | | | — | | | | — | | | | 129,575 | |
CityCenter (50%) | | | (253,976 | ) | | | 3,494 | | | | — | | | | — | | | | (250,482 | ) |
Other unconsolidated resorts | | | 84,940 | | | | — | | | | — | | | | — | | | | 84,940 | |
Management and other operations | | | (27,084 | ) | | | 568 | | | | — | | | | 14,358 | | | | (12,158 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | 514,400 | | | | 4,247 | | | | 14,390 | | | | 584,251 | | | | 1,117,288 | |
| | | | | | | | | | | | | | | | | | | | |
Stock compensation | | | (34,988 | ) | | | — | | | | — | | | | — | | | | (34,988 | ) |
Corporate | | | (1,599,042 | ) | | | — | | | | 1,439,959 | | | | 49,172 | | | | (109,911 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | $ | (1,119,630 | ) | | $ | 4,247 | | | $ | 1,454,349 | | | $ | 633,423 | | | $ | 972,389 | |
| | | | | | | | | | | | | | | | | | | | |
A-7
| | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, 2009 | |
| | | Operating
income (loss) | | | Preopening
and start-up
expenses | | | Property
transactions,
net | | | Depreciation
and
amortization | | | Adjusted
EBITDA | |
| | | (in thousands) | |
Bellagio | | $ | 157,079 | | | $ | — | | | $ | 2,326 | | | $ | 115,267 | | | $ | 274,672 | |
MGM Grand Las Vegas | | | 123,378 | | | | — | | | | 30 | | | | 90,961 | | | | 214,369 | |
Mandalay Bay | | | 65,841 | | | | 948 | | | | (73 | ) | | | 93,148 | | | | 159,864 | |
The Mirage | | | 74,756 | | | | — | | | | 313 | | | | 66,049 | | | | 141,118 | |
Luxor | | | 37,527 | | | | (759 | ) | | | 181 | | | | 39,218 | | | | 76,167 | |
Treasure Island (1) | | | 12,730 | | | | — | | | | (1 | ) | | | — | | | | 12,729 | |
New York-New York | | | 45,445 | | | | — | | | | 1,631 | | | | 31,479 | | | | 78,555 | |
Excalibur | | | 47,973 | | | | — | | | | (16 | ) | | | 24,173 | | | | 72,130 | |
Monte Carlo | | | 16,439 | | | | — | | | | (4,740 | ) | | | 24,895 | | | | 36,594 | |
Circus Circus Las Vegas | | | 4,015 | | | | — | | | | (9 | ) | | | 23,116 | | | | 27,122 | |
MGM Grand Detroit | | | 90,183 | | | | — | | | | 7,336 | | | | 40,491 | | | | 138,010 | |
Beau Rivage | | | 16,234 | | | | — | | | | 157 | | | | 49,031 | | | | 65,422 | |
Gold Strike Tunica | | | 29,010 | | | | — | | | | (209 | ) | | | 16,250 | | | | 45,051 | |
Other resort operations | | | (4,172 | ) | | | — | | | | (57 | ) | | | 5,988 | | | | 1,759 | |
| | | | | | | | | | | | | | | | | | | | |
Wholly owned domestic resorts | | | 716,438 | | | | 189 | | | | 6,869 | | | | 620,066 | | | | 1,343,562 | |
Macau (50%) | | | 24,615 | | | | — | | | | — | | | | — | | | | 24,615 | |
CityCenter (50%) | | | (260,643 | ) | | | 52,009 | | | | — | | | | — | | | | (208,634 | ) |
Other unconsolidated resorts | | | 96,132 | | | | 815 | | | | — | | | | — | | | | 96,947 | |
Management and other operations | | | 7,285 | | | | — | | | | 2,473 | | | | 8,564 | | | | 18,322 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | 583,827 | | | | 53,013 | | | | 9,342 | | | | 628,630 | | | | 1,274,812 | |
Stock compensation | | | (36,571 | ) | | | — | | | | — | | | | — | | | | (36,571 | ) |
Corporate | | | (1,511,132 | ) | | | — | | | | 1,319,347 | | | | 60,643 | | | | (131,142 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | $ | (963,876 | ) | | $ | 53,013 | | | $ | 1,328,689 | | | $ | 689,273 | | | $ | 1,107,099 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Treasure Island was sold in March 2009.
A-8
| | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, 2008 | |
| | | Operating
income (loss) | | | Preopening
and start-up
expenses | | | Property
transactions,
net | | | Depreciation
and
amortization | | | Adjusted
EBITDA | |
| | | (in thousands) | |
Bellagio | | $ | 257,415 | | | $ | — | | | $ | 1,130 | | | $ | 133,755 | | | $ | 392,300 | |
MGM Grand Las Vegas | | | 170,049 | | | | 443 | | | | 2,639 | | | | 97,661 | | | | 270,792 | |
Mandalay Bay | | | 145,005 | | | | 11 | | | | 1,554 | | | | 101,925 | | | | 248,495 | |
The Mirage | | | 99,061 | | | | 242 | | | | 6,080 | | | | 62,968 | | | | 168,351 | |
Luxor | | | 84,948 | | | | 1,116 | | | | 2,999 | | | | 43,110 | | | | 132,173 | |
Treasure Island (1) | | | 63,454 | | | | — | | | | 1,828 | | | | 37,729 | | | | 103,011 | |
New York-New York | | | 74,276 | | | | 726 | | | | 3,627 | | | | 32,830 | | | | 111,459 | |
Excalibur | | | 83,953 | | | | — | | | | 961 | | | | 25,235 | | | | 110,149 | |
Monte Carlo | | | 46,788 | | | | — | | | | (7,544 | ) | | | 25,380 | | | | 64,624 | |
Circus Circus Las Vegas | | | 33,745 | | | | — | | | | 5 | | | | 22,401 | | | | 56,151 | |
MGM Grand Detroit | | | 77,671 | | | | 135 | | | | 6,028 | | | | 53,674 | | | | 137,508 | |
Beau Rivage | | | 22,797 | | | | — | | | | 76 | | | | 48,150 | | | | 71,023 | |
Gold Strike Tunica | | | 15,093 | | | | — | | | | 2,326 | | | | 13,981 | | | | 31,400 | |
Other resort operations | | | (5,367 | ) | | | — | | | | 2,718 | | | | 6,244 | | | | 3,595 | |
| | | | | | | | | | | | | | | | | | | | |
Wholly owned domestic resorts | | | 1,168,888 | | | | 2,673 | | | | 24,427 | | | | 705,043 | | | | 1,901,031 | |
Macau (50%) | | | 11,898 | | | | — | | | | — | | | | — | | | | 11,898 | |
CityCenter (50%) | | | (36,821 | ) | | | 17,270 | | | | — | | | | — | | | | (19,551 | ) |
Other unconsolidated resorts | | | 101,297 | | | | 3,011 | | | | — | | | | — | | | | 104,308 | |
Management and other operations | | | 6,609 | | | | — | | | | — | | | | 10,285 | | | | 16,894 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | | 1,251,871 | | | | 22,954 | | | | 24,427 | | | | 715,328 | | | | 2,014,580 | |
Stock compensation | | | (36,277 | ) | | | — | | | | — | | | | — | | | | (36,277 | ) |
Corporate | | | (1,411,580 | ) | | | 105 | | | | 1,252,705 | | | | 62,908 | | | | (95,862 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| | $ | (195,986 | ) | | $ | 23,059 | | | $ | 1,277,132 | | | $ | 778,236 | | | $ | 1,882,441 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Treasure Island was sold in March 2009.
A-9
Annex II
Calculation of MGM historical corporate rent coverage ratio(1)
The following table presents the formulation used to calculate MGM’s corporate rent coverage ratio.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, | |
| | | 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | 2015 | |
| | | (unaudited, in thousands) | |
Adjusted EBITDA related to: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Wholly owned domestic resorts | | $ | 1,901,031 | | | $ | 1,343,562 | | | $ | 1,165,413 | | | $ | 1,298,116 | | | $ | 1,325,220 | | | $ | 1,442,686 | | | $ | 1,518,307 | | | $ | 1,689,966 | |
Management and other operations | | | 16,894 | | | | 18,322 | | | | (12,158 | ) | | | 287 | | | | 9,947 | | | | 25,777 | | | | 35,984 | | | | 37,419 | |
Corporate (excluding stock-based compensation) | | | (95,862 | ) | | | (131,142 | ) | | | (109,911 | ) | | | (156,086 | ) | | | (215,757 | ) | | | (200,708 | ) | | | (220,664 | ) | | | (254,104 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | 1,822,063 | | | $ | 1,230,742 | | | $ | 1,043,344 | | | $ | 1,142,317 | | | $ | 1,119,410 | | | $ | 1,267,755 | | | $ | 1,333,627 | | | $ | 1,473,281 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate Rent Coverage Ratio excluding dividends and distributions received by MGM | | | 3.3x | | | | 2.2x | | | | 1.9x | | | | 2.1x | | | | 2.0x | | | | 2.3x | | | | 2.4x | | | | 2.7x | |
Dividends and distributions received by MGM(2): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CityCenter | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 200,000 | |
MGM China | | | — | | | | — | | | | 192,355 | | | | 30,513 | | | | 203,886 | | | | 312,225 | | | | 389,739 | | | | 304,159 | |
Grand Victoria | | | 41,125 | | | | 33,750 | | | | 33,500 | | | | 30,000 | | | | 22,000 | | | | 16,275 | | | | 15,450 | | | | 16,850 | |
Borgata | | | 19,579 | | | | 60,136 | | | | 113,422 | | | | — | | | | — | | | | — | | | | — | | | | 14,094 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | 60,704 | | | $ | 93,886 | | | $ | 339,277 | | | $ | 60,513 | | | $ | 225,886 | | | $ | 328,500 | | | $ | 405,189 | | | $ | 535,103 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | 1,882,767 | | | $ | 1,324,628 | | | $ | 1,382,621 | | | $ | 1,202,830 | | | $ | 1,345,296 | | | $ | 1,596,255 | | | $ | 1,738,816 | | | $ | 2,008,384 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate Rent Coverage Ratio | | | 3.4x | | | | 2.4x | | | | 2.5x | | | | 2.2x | | | | 2.4x | | | | 2.9x | | | | 3.2x | | | | 3.7x | |
(1) MGM’s Corporate Rent Coverage Ratio is calculated by dividing (a) the sum of Adjusted EBITDA as reported by MGM related to wholly owned domestic resorts, management and other operations, and corporate (excluding stock-based compensation), plus dividends and distributions received by MGM from CityCenter, Borgata, Grand Victoria and MGM China, by (b) year one rent under the Master Lease of $550.0 million.
(2) Represents special and ordinary dividends and other cash distributions actually received by MGM from CityCenter, Borgata, Grand Victoria and MGM China for the periods indicated. Dividends and distributions are made at the discretion of each relevant entity’s board of directors or similar body, and depend on several factors, including financial position, results of operations, cash flows, capital requirements, debt covenants, and applicable law, among others. Accordingly, historical dividends and distributions may not be indicative of future dividends or distributions and should not be relied upon as an indicator of MGM’s corporate rent coverage ratio for future periods.
A-10
