MGM China doubles net revenues year-on-year in 2Q
MGM China earned net revenues of US$668 million for the second quarter of 2011 compared to US$307 million in the second quarter of 2010.
This was primarily due to an increase in VIP table games turnover of 110% and a 21% increase in main floor table games drop said the parent MGM Resorts International in its 2Q earnings statement. VIP table games hold percentage was slightly above the company’s expected range of 2.7% to 3.0%.
Adjusted Property EBITDA increased to US$170 million, a 177% increase compared to the second quarter of 2010 and included approximately US$3 million of expenses related to the branding agreement between MGM China and an entity jointly owned by the Company and Ms. Pansy Ho.
Depreciation and amortization expense in both the current and prior year quarter includes amortization of approximately US$75 million related to intangible assets recognized in the Company’s accounting for its acquisition and resulting consolidation.
Key results for the group as a whole during 2011 second quarter included the following:
- Consolidated net revenue for the second quarter was US$1.8 billion, up 17% over the prior year; the current quarter included net revenue related to MGM China for the period of consolidation (June 3, 2011 through June 30, 2011) of US$193 million;
- Consolidated operating income for the second quarter of 2011 was US$3.7 billion compared to a US$1.0 billion operating loss in the second quarter of 2010, affected by the MGM China transaction gain in the current quarter and an impairment charge related to the Company’s investment in CityCenter in the prior year quarter;
- Adjusted EBITDA(2) was US$366 million in the 2011 quarter, a 51% increase compared to US$243 million in the 2010 quarter, primarily due to strong performances at the Company’s Las Vegas resorts and MGM Macau;
- MGM China reported Adjusted Property EBITDA of US$170 million compared to US$61 million in the prior year second quarter; and
“We have shown growth in year over year cash flows throughout the first half and expect those trends will continue. We believe the foundation of the Las Vegas recovery is solid and our business is building,” said Jim Murren, MGM Resorts International Chairman and CEO. “MGM Macau had another record quarter and the acquisition of a controlling interest in MGM China marks an important step in expanding our global operations and profitability.”
MGM China
As previously announced, MGM China completed its initial public offering of shares on The Stock Exchange of Hong Kong Limited on June 3, 2011 and the Company acquired an additional 1% interest in MGM China, which owns the MGM Macau resort and casino. This acquisition increased the Company’s ownership interest to 51% and, as a result, the Company began consolidating MGM China as of June 3, 2011. Prior to June 3, 2011 the results of MGM Macau were accounted for under the equity method of accounting.
The acquisition of the controlling interest was accounted for as a business combination and the Company recognized 100% of the assets, liabilities, and noncontrolling interests of MGM China at fair value at the date of acquisition. The fair value of the equity interests of MGM China was determined by the IPO transaction price and equaled approximately US$7.5 billion. The fair value was allocated to the assets acquired and liabilities assumed in the transaction including identifiable intangible assets and goodwill. The carrying value of the Company’s equity method investment was significantly less than its share of the fair value of MGM China at the acquisition date, resulting in the Company recognizing a US$3.5 billion gain on the acquisition in current earnings.
The schedules accompanying this release provide pro forma information for MGM China, presented for the three and six month periods ended June 30, 2011 and 2010, as if the acquisition of the Company’s controlling interest occurred as of the beginning of each period presented.
