Actionable news
0
All posts from Actionable news
Actionable news in MGM: MGM RESORTS INTERNATIONAL,

MGM Resorts: Excerpts From The Preliminary Offering Memorandum Of Mgp Escrow Issuer, Llc, Dated April 4, 2016

The following excerpt is from the company's SEC filing.

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). MGMs 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 s egment 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 MGMs 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 MGMs 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 MGMs Adjusted EBITDA and Adjusted Property EBITDA to net income (loss) and of MGMs 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 worlds 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, Managements 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)

For the year ended December 31,

(in thousands)

(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

Property transactions, net

48,346

Property insurance

11,634

10,351

Other general and administrative

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

160,606

Provision for income taxes

Net income (loss)

(1) See Operating Partnership unaudited pro forma condensed consolidated financial information.

(Pro forma)

Balance Sheet Data:

Assets

Property and equipment, net

7,867,812

7,793,639

Total assets

Liabilities

Long term debt, net

3,258,575

Deferred tax liabilities

1,740,465

1,734,680

Total liabilities

Partners capital

Net Parent investment

6,127,347

6,058,959

General partner

Limited partners

4,535,064

Total partners capital

Total liabilities and partners capital

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 Partnerships operating results in comparison to the operating results of other REITs. Pro forma OP Adjusted EBITDA and Further Adjusted EBITDA are useful for

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...


More