MGM fourth quarter loss driven by impairment charge, weakness in Macau

Vincent Yu / AP

Visitors queue up for entry of the new MGM Grand Macau casino resort after the opening ceremony in Macau, Tuesday, Dec. 18, 2007.

MGM Resorts, the casino giant whose Strip properties include the Bellagio, Aria and MGM Grand, reported its fourth-quarter and full-year earnings today.

Company: MGM Resorts International (NYSE: MGM)

Revenue: $2.19 billion for the fourth quarter, down 8.1 percent from the same time period a year earlier. For the full year, MGM Resorts’ net revenue was $9.19 billion, down 8.8 percent from 2014.

Loss: $781.5 million for the fourth quarter, compared to a loss of $342.3 million during the fourth quarter of 2014. For the full year, the company’s net loss was $447.7 million, compared to a net loss of $149.9 million in 2014.

Loss per share: $1.38 in the fourth quarter, compared to a loss of 70 cents per share from the same time period of 2014. For the full year, the company reported a loss of 82 cents per share, compared to a loss of 31 cents per share in 2014.

What it means: Fourth quarter overall revenue was hurt by a 31 percent year-over-year decrease in revenue from the company’s MGM China division. There, main floor table games revenue fell 14 percent from the year before, while VIP table games revenue declined 49 percent, MGM Resorts said in a statement.

Gaming revenue in Macau, where MGM China operates, has declined for 20 straight months. The market has been hurt by both a government-led corruption crackdown that has damaged business from high-rollers, as well as struggles in the broader Chinese economy.

MGM Resorts also pointed to a $1.5 billion noncash goodwill impairment charge related to MGM China that the company said accounted for $1.33 of its $1.38 loss per share in the fourth quarter. The charge was related to changing conditions in the Macau market, according to the company.

In the United States, where MGM Resorts operates on the Strip and elsewhere, the company’s fourth-quarter results were a bit better. MGM Resorts’ wholly-owned domestic resorts reported a net revenue increase of 2 percent, as did its wholly-owned Strip properties. And CityCenter, of which MGM is a joint owner, reported record cash flow for the quarter, the company said.

CEO Jim Murren said on a conference call to discuss the quarterly results that MGM Resorts is making good progress in its profit growth plan, an initiative that’s supposed to generate $300 million in extra annual cash flow. Murren said the company already realized more than $35 million in extra cash flow during the fourth quarter of last year alone and is on track to realize the entire $300 million in 2017.

The company is also progressing with plans for an initial public offering for MGM Growth Properties LLC, a real estate investment trust that will be a subsidiary of MGM Resorts. Names of the REIT’s chief executive officer, chief financial officer and board members were recently announced by MGM Resorts.

An IPO is expected this year for the REIT, which will own 10 MGM Resorts properties, including seven on the Strip.

MGM Resorts had plans to open a new $3 billion resort in Macau, MGM Cotai, during the fourth quarter of this year. But the opening is now planned for the first quarter of 2017 due to “current market conditions and the timing of other resort openings” in Macau, MGM Resorts said.