MGM Resorts International (MGM)

Q4 2012 Earnings Call

February 20, 2013 11:00 am ET

Executives

Daniel J. D'Arrigo - Chief Financial Officer, Executive Vice President and Treasurer

James Joseph Murren - Chairman and Chief Executive Officer

Robert H. Baldwin - Chief Design & Construction Officer, President of Project Citycenter, Director and Chief Executive Officer of Project CC LLC

Grant R. Bowie - President

Corey I. Sanders - Chief Operating Officer

Analysts

Joseph Greff - JP Morgan Chase & Co, Research Division

Felicia R. Hendrix - Barclays Capital, Research Division

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Harry C. Curtis - Nomura Securities Co. Ltd., Research Division

Steven E. Kent - Goldman Sachs Group Inc., Research Division

Robin M. Farley - UBS Investment Bank, Research Division

Carlo Santarelli - Deutsche Bank AG, Research Division

Susan Berliner - JP Morgan Chase & Co, Research Division

Presentation

Operator

Good morning, and welcome to the MGM Resorts International Fourth Quarter and Full Year 2012 Earnings Conference Call. Joining the call from the company today are Jim Murren, Chairman and Chief Executive Officer; Bobby Baldwin, Chief Design and Construction Officer of MGM Resorts International and President and CEO of CityCenter; Dan D'Arrigo, Executive Vice President, Chief Financial Officer and Treasurer; Grant Bowie, Chief Executive Officer of MGM China Holdings Limited. [Operator Instructions] Now I would like to turn the call over to Mr. Dan D'Arrigo.

Daniel J. D'Arrigo

Well, thank you, Mackenzie, and good morning, everyone, and welcome to our fourth quarter earnings call. This call is being webcast live on the Internet at www.mgmresorts.com, and a complete replay of the call will be made available on our company website. This morning, we furnished our press release on Form 8-K to the SEC as well.

And before turning it over to Jim and get started, I'd just like to read our Safe Harbor disclosure. On this call, we will make forward-looking statements under the Safe Harbor provisions of the federal securities law. Actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in these forward-looking statements is contained in today's press release and in our periodic filings with the SEC, including our most recent Form 10-K.

During the call, we will also discuss non-GAAP financial measures in talking about the company's performance. And you can find the reconciliation of these measures to GAAP financial measures in our press release, which is also available on our website. Finally, please note that this presentation is being recorded. And with that, I'd now turn it over to Jim.

James Joseph Murren

Well, thank you, Dan, and good morning, everyone. I'm happy to report that in 2012, MGM Resorts' revenue grew by 17% and EBITDA grew by 13%. We closed a very productive year with solid fourth quarter results. And you can recall that for the fourth quarter, we had guided to flat to slightly up REVPAR, and we came in at 1% growth. Our net revenues were essentially flat, but we were able to increase our margins by over 100 basis points to drive EBITDA up 5% year-over-year despite lower year-to-year hold.

Today, MGM China announced a special dividend of $500 million. Recall that MGM Resorts International, as a 51% owner, will receive approximately $255 million from this dividend. I expect MGM China will be able to continue to pay distributions to shareholders while investing in its second property in Cotai. In fact, we have a board meeting next week where we will discuss putting in place a formal dividend policy.

2012 was a landmark year for MGM Resorts, and I'd like to pause a moment to identify a few of the highlights. We transformed our balance sheet in the quarter. I'm extremely proud of Dan and the team for the major refinancing transactions that you're aware of that we completed in December. They resulted in significant interest savings and that will obviously translate into incremental free cash flow and further help the company deleverage itself, which is our overarching goal.

We improved our properties. The fully remodeled rooms at MGM Grand and at the Bellagio Spa Tower are already obviously paying dividends. We launched several new entertainment and dining options, and they're generating nice returns, and we're going continue to do that in 2013. And that product delivery and improvement has allowed us last year and we believe will continue to allow us to gain market share and wallet share on the Strip going forth.

CityCenter is now obviously a rising star. Bobby will get into the details, but we made some tweaks to the property which are showing signs of real success in driving revenues across all business segments. And with an improving real estate market here in Las Vegas, we sold 427 condos at Veer in December for $119 million. That represented one of the largest residential real estate transactions in the city last year, and it cleaned up all the inventory at Veer with the exception of a few penthouses.

And of course, MGM China is a star and had another record year for results. Grant and his team are doing a tremendous job there. We continue to grow our business. We maintained our market share despite new additions to the market, and we improved our operating efficiencies. Back home, I made a few strategic changes to the management of our company to better, I believe, align our growth and initiatives and really improve how we use our resources as a company to work together. In addition to his job as Chief Marketing Officer, Bill Hornbuckle, was promoted to the title of President. And with this added role, he took on the management of our gaming and hospitality development businesses. Bobby Baldwin became the CEO in addition to his other titles at CityCenter, is running Aria for us, and there's no better executive to do that in our company. Corey Sanders took on more responsibilities and the team here, I believe, is streamlined, focused, dedicated, and it's been one of my goals to improve the company's culture to improve employee morale, which I believe we've accomplished, and ultimately, we're seeing that result in higher customer service and satisfaction. And of course, with all that we accomplished in 2012, I think '13 will be a better year. I consider the '13 to be the beginning of the new era for our company, with the refinancing and the strong fourth quarter results being the concluding chapter to a company that was recovering through the recession, now we're a company growing through a growing economy.

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