MGM Resorts International (MGM) Q4 2012 Earnings Report, Transcript and Summary

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.

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.

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. Our properties continue to stun. We just, I think just yesterday, received over Four & Five Diamond Awards for this year. Our properties represent 20% of the entire AAA index. 15 of our resorts have received the prestigious Green Key rating for environmental conservation. That's up from '12 a year ago. And just last week, MGM was recognized by PR News as having the finest corporate social responsibility program in the country among large employers. We're especially proud of this as we had some pretty heady competition from companies like Coke and Pepsi and UPS. Just last month, in Cotai, our land was gazetted, and we've recently received our general building permit, and we are moving quickly to start construction on what will soon to be what we believe will be the most exciting resort in all of Cotai. And we remain on track, as we said before, for an early to mid-2016 opening, and there's an awful lot of work on-site right now. In the quarter last quarter, a referendum was passed in Prince George's County in Maryland, and we are now in the RFP process for what would be a very lucrative fixed license in Maryland. We have a deadline, as do others, of May to submit our proposal. We will easily meet that deadline, and we believe that we will prevail for an MGM at National Harbor, which is a tremendous destination resort, literally minutes from our nation's capital. A decision on that by the State of Maryland will be before the end of the year, we expect. We also recently submitted our RFP for Springfield, Massachusetts. And last week, the mayor of Springfield made a decision to negotiate a host city agreement with both MGM and another operator in that market. We are confident that our proposal delivers the best benefits to the city and has the best chance of prevailing for the Western Massachusetts license and we'll see. And in Toronto, we recently announced a partnership with Cadillac Fairview. Cadillac Fairview is the premier real estate developer in Canada and has developed some of the most iconic retail and mixed-use developments in Toronto and really across Canada. They are a subsidiary of Ontario Teachers' Pension Fund, and we are very proud to have them as our partner as we jointly pursue the exciting opportunity in Ontario. So with that, I'd like to turn it over to Dan to talk about how we did in terms of operating results and our financial position today.

Thank you, Jim, and good morning again, everyone. As Jim mentioned, we had a solid fourth quarter, which was led by a good October, a somewhat soft November and a strong finish in December, driven by Western New Year's. I'll go through a few highlights from our fourth quarter results. Our wholly-owned EBITDA increased by 5%, driven by a 6% increase in cash flows on the Las Vegas Strip. We were able to grow our EBITDA and our margins during the fourth quarter despite a holding over 100 basis points lower year-over-year. Our International casino business continues to be strong as this was a record fourth quarter for our strip properties when you include Aria for both the international drop and win. And we are seeing some encouraging signs in our domestic casino play as our non-Baccarat table drop at our wholly-owned strip properties increased 6% year-over-year. Slot revenues grew 4% at our Las Vegas Strip properties, a testament to our M life best efforts, and as Jim mentioned, the various rollouts of different venues and entertainment options for our guests. In our hotel segment, room revenues were up 2%, led by a modest increase in rate, as well as an increase in occupied room nights during the quarter. The increase in occupied room nights is largely a result of the completion of the MGM Grand room remodel in September. As you recall, we had roughly about 70,000 rooms out at the Grand for the first 3 quarters last year. Our convention mix during the fourth quarter, overall, was essentially flat year-over-year at approximately 15%, which is solid given the increase in our available rooms. Looking at the room trends here in the first quarter. We anticipate the trends to be similar to what we saw in the fourth quarter, with room revenues up low-single digits and essentially flat REVPAR. Our regional properties are continuing to do well despite a difficult, competitive and operating environment. Both MGM Grand Detroit and Beau Rivage increased their EBITDA year-over-year. In fact, MGM Grand Detroit achieved a record fourth quarter EBITDA. With these best-in-class assets and the power of M life, we were able to maintain a premium market share in each of those markets. Moving over to the balance sheet and some help with your models going forward, as Jim mentioned, in December, we completed a comprehensive refinancing transaction, which will save our company roughly $230 million per year in annual cash interest expense. Consistent with our strategy, these transactions will allow us to maximize our free cash flow and further enhance the company's deleveraging efforts. We currently have approximately $1.2 billion in available capacity under our corporate revolver and approximately $220 million in excess cash on the balance sheet, totaling just over $1.4 billion in available liquidity, excluding MGM China. We will continue to evaluate opportunities to derisk the company and improve our overall cost of capital. At the end of the fourth quarter, MGM China had cash of approximately $952 million, debt of approximately $554 million and adjusted leverage ratio of less than 1 based on their trailing 12-month EBITDA. Pretty strong balance sheet and clearly led to the board's decision to make the announcement on the special dividend today. CityCenter is on solid financial foundation with approximately $1.85 billion in outstanding debt, excess cash of approximately $210 million. And in addition to that, CityCenter is also sitting on about $140 million in cash related to condo proceeds, led by the late December sale of the Veer units. Our fourth quarter CapEx was approximately $83 million on our wholly-owned domestic resorts, and MGM China spent about $23 million. Full year CapEx for 2012 was approximately $343 million, just inside of our guidance of about $350 million for the year. And MGM China CapEx for 2012 was about $80 million, which included approximately $36 million for design and development fees related to our Cotai project. Looking forward into 2013, we expect our CapEx to be similar to 2012 at about $350 million, excluding MGM China. And MGM China will spend about $75 million at MGM Macau, and about another $175 million on our development efforts in Cotai, excluding land and cap interest. Our corporate expense in the quarter was higher, driven primarily by $34 million in costs associated with the referendum in Maryland, as well as our other development efforts in Massachusetts and Toronto. Going forward, we expect corporate expense to be in the range of $40 million to $45 million per quarter. Stock compensation expense in the first quarter is estimated to be approximately $9 million. Depreciation is estimated to be relatively consistent with the fourth quarter. Our interest expense in the fourth quarter was approximately $280 million, including about $8 million from MGM China and $17 million in amortization expense. We estimate that our gross interest expense in the first quarter will be approximately $225 million, including $8 million from MGM China and about $8 million in amortization expense. With that, I'll turn it over to Bobby to talk about CityCenter.

Thank you, Dan, and good morning, everyone. We're pleased to report that CityCenter posted EBITDA of $68 million in the fourth quarter of 2012, a 17% year-over-year increase. For the full year 2012, CityCenter EBITDA for -- from resort operations was $230 million. ARIA achieved EBITDA of $54 million in the fourth quarter, a 15% increase year-over-year despite a 330-basis-point decrease in table games hold percentage. We are beginning to see results from the changes we've made at our -- and continue to make, notably our new Cirque du Soleil show, Zarkana, opened on November 1, and is off to a great start as show occupancy through the end of the year was 88%. ARIA showroom revenues grew 38% year-over-year during the fourth quarter. Zarkana's success has helped drive restaurant covers and other incremental spend at ARIA. We are happy with the growth in volumes we are seeing in both slot and table games revenues. Slot handle increased 11%, making fourth quarter of 2012 our highest slot handle quarter yet. On the table games side, drop increased 5% to the highest level since Q4 in 2010 with particularly strong volume coming from our international customers. Hotel revenues grew 3% in the fourth quarter compared to last year. Occupancy was up 370 basis points to 86% with REVPAR up 2%. This was our first full quarter with Javier's Mexican restaurant on property, and it continues to do well. In addition, the remodeled buffet opened December 21. So far the new look and cuisine offerings have been well received and customers have provided very positive feedback. We will be opening a new concept -- a pizza concept by chef Shawn McClain at our recent sports book mid-summer this year. While it is still early, ARIA is off to a good start in 2013, and we expect to continue to build traction throughout the year. Convention sales are pacing well as room nights on the books for 2013, as of February 1 are 14% ahead of last year at this time. Construction continues to progress on the new marquee, which will be the tallest on the Las Vegas Strip with -- when completed in the second quarter of this year. It is over halfway up and already has a commanding presence on the Las Vegas Strip. We're excited about this project and look forward to utilizing the striking marquee to better advertise and showcase the wonderful venues that ARIA and CityCenter has to offer. Vdara continued to grow occupancy, which is now in the low 80%, with all of its room online -- all the rooms online driving hotel revenues up 6% year-over-year. Crystal finished the year very strong with EBITDA of $9 million in the fourth quarter, which is the highest ever and a 34% increase over 2011. These results were driven by growth in the number of tenants and sales volumes. Construction is underway for the 2 new Starbucks located at the Mandarin Oriental and the Crystals pod location in Crystals. They are expected to open in March and April of this year. And that concludes my report, and I'll turn it over to Grant Bowie. Grant?

Thanks, Bobby, and good morning to everybody, particularly the early morning for those of us in Asia. Another good result from MGM China. And for the fourth quarter, MGM China net revenues were $731 million, that's up 2% year-over-year. Adjusted EBITDA for the quarter was $176 million, a slight increase over the year despite lower hold. For the full year, net revenues at MGM China were up 8% to $2.8 billion. And adjusted EBITDA was $679 million, that's an increase of 10% before branding fees. Our overall VIP win for the quarter was approximately 2.9% and a decrease from the prior year which was approximately 3.2%. VIP table games turnover increased by 6% year-over-year. We're seeing early signs of success from our Level 2 VIP gaming floor expansion, which opened in late September. We're also expecting to add another junket operator in the second quarter of 2013. The fourth quarter was our strongest volume quarter for the year for our own in-house VIP business. We expect to see continued growth in this business with the support from the MGM International marketing team. And main floor table game business has had its best quarter today with volumes up 13%. For the full year, our main floor table games volume grew 24%. Our slot handle increased by 37% during the third quarter and was up 35% for the year, outperforming the market growth of 16%. Our main floor table games and slot business now accounts for approximately 60% of our EBITDA, and that's up from 50% in 2011. This transition of mix has also driven an increase in our pre-branding fee EBITDA margins by 60 basis points. We expect this positive trend of increasing main floor mix to continue, driven by upgrades to our main gaming floor product, marketing efforts and, of course, the strong growth in the Macau mass market revenues. We've made great progress with regard to our second resort to be built in Cotai, as Jim mentioned. Our land was gazetted on January 9. We've also received the approval for our general building plan. And our next step will be to host an official groundbreaking, which I'm pleased to announce will be scheduled for February 27. As a recap, our Cotai project will have 1,600, 2,500 slots and up to 500 tables. General contract tenders for the project are now in, and we've updated plans to include additional foundation work that will allow for future expansion. With these upstates, the construction budget is expected to be approximately $2.6 billion, excluding land and capitalized interest. Spending will be over a time frame of 30 to 36 months. And as previously indicated, we -- our project -- projected opening date is early to mid-2016. The project will feature over 85% of our floor area allocated to nongaming amenities, including a broad range of restaurants, retail and entertainment offerings. And with that, I'd like to turn back to Jim for his closing remarks.

Well, thank you, Grant. Well, we are off to a very solid start here in 2013. We've already had several major events during the first quarter, which have set a positive tone. The Super Bowl was a great event for us, with strong table games drop. And as I think you saw, the state had record sports book right. And although we're still collecting our data both here in Las Vegas for Chinese New Year's, we are because many of our customers are happily still here, the Year of the Snake looks to be a very good one for us. Bellagio, here we debuted a private gaming salon on our villa level, which drew some very important, high-end international customers for the holiday. And we also, here at Bellagio, hosted the Diaoyutai State Guesthouse, our partners in China, for a series of extraordinary dinners with senior elected officials from both China and the United States, as well as some of the most important customers that we know. We have great volumes throughout the company, throughout this period of time, both -- at all of our major luxury resorts. And we believe that the International business is off to a tremendous start for 2013. We have some great new restaurant, nightclub, entertainment offerings coming online this year. Just in the second quarter alone, we have a new showroom at Mandalay Bay for the Michael Jackson Cirque show. And our friends at Hakkasan are spending a tremendous amount of money to build the most elaborate, luxurious club restaurant lounge at the MGM Grand, which will debut in May. The Light Group will be opening 3 new restaurants and a nightclub at Mandalay Bay in the spring. And of course, they're opening a day pool, which we've learned is very profitable to us where we have done such an entertainment environment. And last night, you might have seen that Floyd Mayweather, who has fought nowhere but the MGM Grand, will fight again there on May 4. Very few events draw as much casino play as a Mayweather event, and he has signed on for as many as 6 fights to this year, May and September, with hopefully many more to follow. The hotel will undergo a full room remodel towards the end of the year and, as you know, will be rebranded as the Delano. We're excited about this. We believe it's going to bring a new customer data to Mandalay Bay and help further increase Mandalay's visitation. And of course, as Mandalay does, so does Luxor. So as we improve Mandalay Bay, we expect to see Luxor's results follow suit. We believe that by doing this, and we proved it last year, investing in our properties, offering new entertainment ideas, offerings to our guests, will not only enhance the customer experience, but will drive more profitability to our strip properties, increase our market share. We did so last year. We expect to do so again in 2013 and beyond. Our goal with all of this is to continue to improve free cash flow, to combine that operating free cash flow by our distributions from abroad, to continue to deleverage our balance sheet as we look strategically for a handful of high-return, high-value growth opportunities, 3 of which I've talked about today. We're excited to be here and proud of what we've accomplished, and we really believe that MGM Resorts' best days are now ahead of us. So with that, operator, I'd like to turn it over to you so we can get on with the Q&A of our call.

[Operator Instructions] Your first question comes from the line of Joseph Greff with JPMorgan. Joseph Greff - JP Morgan Chase & Co, Research Division: Jim, looking at the margins in Las Vegas in the fourth quarter, it probably is better than what most had forecasted, when you look back at the previous quarters and full year 2012, to what extent were margins impacted by room renovation and the like, and how sustainable are these revenue to operating expense relationships from here where you can actually see that same degree of flow-through?

Well, when I was on your side, Joe, I hated it when companies talked about construction disruption and how it impacted results. But clearly, when you take off floors at a time and major problems that we had to solve, particularly over the MGM Grand, you do impact margins because you impact traffic. But I think that really, what's happened is we really have focused on our FTEs, which are essentially flat, down slightly. We streamlined quite a bit of our operating management so as to, not only I think make better decisions, quicker decisions, but that has a margin improvement to it. We have -- we're yielding better from a standpoint of finding guests that, not only will occupy our rooms, but spend more in nongaming and gaming areas, which has a positive impact on margin. And we believe that with relatively modest revenue growth, we should have a similar kind of improvement in margin or more as we saw in the fourth quarter. So we had a company that had higher margins than we do today. We endeavor to get back to it. And I would believe that because most of our disruptive projects are behind us, certainly the MGM would be one. We've had major projects underway at Mandalay, Luxor. I think that, that combined with a real focus on our expenses and our mix improvement on the revenue side, we expect to show better profit growth than revenue growth. Joseph Greff - JP Morgan Chase & Co, Research Division: Perfect. And then, Grant, since you're on the call, obviously a lot of chatter about performance thus far this month in Macau. I'll leave this question as broad as possible, but can you give us a sense of trends or your interpretation of the VIP trends that we saw in February and what's your view of what transpired in the month? We understand that's the thing [indiscernible] I really would love to hear your thoughts on the VIP side.

I think it's pretty well canvassed that the first days of Chinese New Year were possibly softer than people expected. But, frankly, that's been a trend that we've now been seeing for the last 4 holiday seasons. And I do think that it is an impact of -- there's basically 2 groups of customers. During a heavy holiday season, we're seeing a lot more families, which is obviously a lot more main floor traffic. They probably don't have quite as much to spend. As that traffic departs Macau, we are really seeing in this week some strong return of some play, and that was totally consistent with what we saw in Chinese New Year last year. So it is true now that these holiday periods are not so much of the peaks that we once saw. I think what we're now seeing is that the business is much more stable right through the year. So we're still very confident. The main floor has been very busy. I actually just went for a walk because I had a few hours to kill. Traffic's looking good and VIP traffic in the junket rooms this evening is particularly, particularly strong. So I just think that we need to be careful to try to draw too many conclusions from some relatively short-term patterns that we see.

Your next question comes from the line of Felicia Hendrix with Barclays.

Dan, you highlighted in your prepared remarks the nice performance you saw in the non-Baccarat casino play. Just wondering is the trend that you saw in the fourth quarter continuing into the first quarter?

Yes. I mean, it is, Felicia. We saw obviously some good activity, as Jim pointed out, around the Super Bowl time period. Obviously we got March Madness coming up, so that'll be another data point here to be looking at later on here in the first quarter. But we are starting to see domestic customers again, starting to see their activity pick up. And it's been a while since we've been able to say that, so we are pleased with the direction that's going.

Okay. So it sounds like -- I mean, well, we've seen the many pattern for many years now is around events, business is good. But when you don't have the events, it drops off. It sounds like are you seeing that pattern change a bit?

The events are still strong. Weekends are still strong. Midweek is still a little choppy here and there. But I think, overall, the direction that we're seeing in terms of the spend levels and the play patterns of our -- the rest of the customers are heading in the right direction.

And I'd add, Dan, that it's been, what, over 2 years now on M life, but the M life investments we've been making are helping our midweek slot business, as well as our event-related slot business. And our marketing alliances, say, for example, the Ameristar is driving some really good business to us and for them. So I think a combination of what Dan mentioned, getting better attendance, broader attendance on these events and our marketing on M life is driving particularly high-margin slot business, which we're very pleased. And then also getting to the margin question, where you might've noticed our promo expenses are down and we're getting a more specific more targeted on how we market to our customers which should result in higher profitability as well on the casino side.

Great. And then also you guys touched on group performance at ARIA, but I was wondering if you could update us on group trends for '13 and perhaps '14 for your overall strip properties?

Yes, we did ARIA, company-wide it's -- do you have that, Dan?

Yes. I mean, in terms of -- Felicia, in terms of our convention block of business, it's looking to be up for the full year in terms of our mix year-over-year, '13 versus '12. We're pacing higher in '13 as a company right now at this point in time. '14 is looking even stronger as we look forward. So there's still work to do in '14, but its pace is actually even up higher than what we're experiencing here in '13.

Yes, '13 looks like what we mentioned last quarter and '14 is picking; even a little bit more.

And the important thing to note is we have all of the rooms back online at the MGM. So our occupied room nights in that segment is going to be higher, and that's going to allow us to drive incremental room revenue in that segment and help to bolster and hopefully, improve ADRs at our luxury properties.

Okay, that's gets to my question. You said pace, but you're also assuming higher rate as well?

Correct.

Yes, it will be up.

Your next question comes from the line of Shaun Kelley with Bank of America.

Just wanted to ask about maybe a little bit more of a strategic question, but obviously you're starting to pursue some meaningful development projects in Massachusetts and in Maryland. Could you just give us your thoughts about kind of the health of the regional consumer and how you think about now that you've refinanced the balance sheet, we've started to see some strategic consolidation in the industry again and some of your appetite for the regional markets versus, I think, investing some or more of your discretionary cash flow in either deleveraging the balance sheet or focusing it on Macau?

Well, Maybe I'll start that, Dan, you can jump in if you like. We have no interest in acquiring assets regionally or otherwise. We have an interest in investing in markets where we feel like we can generate a great return. And we have a great interest in deleveraging the company and investing here in Las Vegas where we have so many competitive advantages. So I think there will be some M&A. I don't think we'll participate on the acquisition front there. I think that where we are looking obviously in places like western Mass where we have a tremendously large database already of M life members that live in the Connecticut, New York, Massachusetts area that are frequent customers of ours to Las Vegas and to our regional properties, that's a lucrative opportunity for us. The one at National Harbor, with literally on the Potomac, minutes away from the nation's capital, we know who we know there, and that's even -- a better international opportunity for us. As you saw, we are reapplying in New Jersey because we believe in Borgata and in our partners at Boyd. We believe that, that opportunity has merit to us. But for the most part, I don't think you'll find us in the M&A front. I think that our goals here are, if we can generate the kinds of returns we think we can in our existing results, we're going to use that cash to look at a few markets around the world, but really predominantly deleverage the company, invest in our existing assets recover the cash flows that we lost in '06 and '07. And I think that, that's the best way for the shareholders. Anything you want to add to that, Dan?

Yes, I think from a priority standpoint, Shaun, obviously our Cotai development is and will be priority #1 given the strong free cash flow characteristics out of Macau. The capital is all in place for that project, so that's going to run its course and as we pointed out, be open in 2016. And then I think when you look at the time line of these other developments, it gives us a lot of time before we even have to be spending money if we're fortunate enough in either or both Maryland or Mass. These are projects that aren't going to open until 2016, 2017, time lines. So it gives us plenty of time to deleverage the balance sheet, get our house in order and take on those projects when we need to.

Great. I think that's really clear. And just one more on Macau, if I could. I think in the prepared remarks, you mentioned something about re-evaluating the dividend policy for MGM China. Just wondering if you could elaborate there? And then one specific one, did you guys give an updated full budget for the Cotai project? I thought -- it sounded like the scope had changed there a little bit. I just wanted to make sure we got the number.

Yes, the number there in Cotai is approximately $2.6 billion, excluding land and capitalized interest. It is up a little bit, mostly as it relates to the tenders we received to date, as well as we've added some scope to the project in terms of our general foundation work in some of the basements to allow for future expansion. And we intend to apply for additional GSA to expand that facility in the future, so part of the increase relates to that in our Cotai budget. And so that's really where the priority is. So as far as -- you saw this morning special dividend, we had one last year. We are going to talk next week at the board level about a formal dividend policy going forward, and you just need to stay tuned to the outcome of that board decision.

Your next question comes from the line of Harry Curtis with Nomura.

A question on Vegas. Can you give us a sense of specifically targeting the midweek group segment, just competition in that segment, both in -- within Vegas amongst your competitors and then against other cities? And maybe it would be helpful to put your comments into historic context relative to the midweek group business in 2006, 2007 when it really was a seller's market?

Let’s see, maybe I'll -- you want to take that first, you want to take it?

Sure. I think, Harry, obviously that always the biggest challenge for Las Vegas, is obviously the midweek. I mean, we're comfortable with how we're filling that up. As I said, we've got more work to do on that front. But buildings like Bellagio and Mandalay and the MGM Grand and ARIA, they can create their own business. And they're doing great job at filling up as best we can and maximize the opportunity. The challenges on the citywide, we've -- we had citywide convention attendees as high as 6.3 million, 6.4 million at the peak. That kind of troughed in the low 4 millions, and for the past couple of years, we've been on about 4.9 million citywide. So it has gotten a little bit more competitive from a general marketplace standpoint with other cities that we operate. And then we're working closely with the LVCVA, and they have some real good plans going forward over the next few years. But that's still the piece that we can work on together and drive that midweek performance. And really, where that helps is kind of the mid-tier and the value-oriented properties up and down the strip. As you see, when Con Hank [ph] is in town and some of the big shows, the pricing power that those buildings get really don't focus on the convention segment, really get that uplift and that benefit and you see the flow-through. So that's really, I think, over the next couple of years, where the challenge lies. And I think between companies like ourselves and the LVCVA, we're up for the challenge.

Harry, I would add in the Luxor properties, peak periods, midweeks, we're fine. We fill the buildings. We get our mix where we need to. Really, it's the citywide and the core properties -- that the citywide's come back, which they will in '14. '13 is going to be a little bit down year for them, that's where our struggle is. From competition, in '06 and '07, cities like Orlando and Chicago weren't reducing their pricing. They weren't going after the business as aggressively as they are now. So that definitely is a challenge for us.

Okay. And then a quick question for Grant. Grant, if you could give us your thoughts on the target market that the Cotai building is going to -- is going to focus on given that the mass market is growing faster than VIP now, and it's 3x to 4x more profitable?

Thanks, Harry. The target market for us, as we've always indicated is the mid- to upper mass market. We will obviously also balance that up with appropriate VIP junket business. But for us, it's always about trying to get that portfolio mix. And clearly the scale of the project is bigger and we have a lot more nongaming. So the mass market and the potential to drive that mass market is really important to us. And that also fits in pretty comfortably with what's actually happening out in the Cotai as a whole space, a whole geographic area. So for us it's building from the strengths that we have here. And over the next 3 years, as we build the property, we're investing considerable amounts of assets in building our data around customer analytics, learning the same sorts of opportunities that M life has given to the U.S. domestic properties. We're also applying those principles here, and it's been extremely successful for us.

Your next question comes from the line of Steven Kent with Goldman Sachs.

A couple of questions. First -- and maybe it's Bobby who could talk to this or Jim, just update on the center JV with Dubai World, any potential or movement or corporate finance solution to that property at some point? And then, Grant, you just mentioned that you were doing a segmentation of the Macau customer base. We've heard about that and I was just wondering if you could give a little bit more color on how that works and how that -- how much more upside there is to it. And then one final thing, and I think it was Corey who just mentioned this. There does seem to be a little bit of a dispersion within your properties on the strip with the high end doing better than the lower or the mid-priced market. Is that, Corey, due to the customer strength or that target customer or is it, as you just mentioned, more an issue about the sort of group or conference business? It wasn't clear from your answer.

All right. I think we -- I think you hit all of us here, Steve. I'll start with CityCenter. We have a tremendously strong relationship with our partners there. And in fact, we just welcomed Dan to the board of MGM Resorts; a board member of CityCenter, Bill Grounds, who's been on the board of CityCenter with Bobby and I for many years now, is on the parent company board as well. CityCenter is always looking for ways to improve the value for its shareholders, the 50% we own and the 50% they own. One early way to do that was to try to clear out some of the residential inventory, we are obviously finally becoming successful in doing so. The overarching way do it is to drive more cash flow, and that's happily happening now. The third is to continue to improve the balance sheet, extend out maturities. We've been doing that. The fourth is looking for ways to monetize portions of CityCenter where it could make sense. And I think that the most attractive candidate down the road would be Crystals, which is one of the most successful retail -- and certainly one of the most visible and highly sought-after retail environment in the United States. And it was always, if you recall, designed initially when we designed it to be sold ultimately. That's a high target opportunity for us. It could raise a tremendous amount of money for its owners down the road. We're not in negotiations today to sell it, but you have to believe that that's something we think about down the road. And then there are other opportunities, too, from a standpoint of nongaming opportunities, whether it be Vdara or Mandarin and other opportunities we'll look at. As it relates to the relationship between the partners, it's never been stronger than it is today. And I think that both of us believe that CityCenter's higher cash flow days are upon us and that it would be best to see this property and this whole complex reach its potential, which we believe it can do over the next couple of years. But I think that's what the CityCenter board believes. Bobby, you feel it's pretty...

Yes, I would agree with that, Jim. We always have opportunities to -- many opportunities, the balance sheet in particular, our debt is $1.850 million, our interest rate is a little less than 9%. We're obviously looking to refinance that at some point in time in a much lower rate given the condition of our balance sheet and the improvement in our earnings at CityCenter.

Thank you. And then the next one is that you, Dan?

I think it was Grant in terms of market segmentation.

Okay, thanks. I'm trying to be very short because most people know I can talk a long time about this. So the key for us is that it's basically a -- it's a customer value segmentation strategy and primarily is driven from the top down, from premium down. And that implies identification, geographic segmentation, but also product matching in terms of ensuring we have the right product to match the right customer groups. And that's through our customer relationship strategy. And we've actually physically segmented the property out so those customers can see and perceive the true values that each of those groupings can do. As we move out to Cotai, clearly, we start to broaden and move down that value proposition as we need to broaden the base to increase the customer penetration. So in short, that's how it works for this property. It was always designed recognizing that we are going to have multiple business units and we understood that, that what we needed to do was build a committed MGM customer, and that's what we're very excited about that we've done here. And we're even more excited about the opportunities we're going to have with expanding into Cotai.

And, Steve, on the convention side, without the solid citywide convention base, what ends up happening is our lower end properties, Circus and Excalibur, they're the last to fill, and there's always a challenge there from a pricing perspective. With regards to Luxor, they're also usually a benefactor of Mandalay's overfill and that hasn't quite happened as much it used to happen in the past. But it's well positioned to get that overfill coming up in the future here.

But, Corey, just -- and then I'll let it go, but this is -- I was asking more on a broader base, meaning, is the mid- or -- mid-market customer, which we're hearing from other consumer companies showing some weakness, and is that one of the reasons why your lower or middle properties are showing less strength than the higher end beyond this conference convention issue?

I don't -- I wouldn't say there's weakness. I think it's a supply-and-demand thing and the number of rooms. What we're seeing in the people that are staying in those hotels, they're spending the same way they were even a little bit up at some of these properties. So it's just being able to fill those hotels with the right customers. Because we won't -- there's a certain point we won't fill a hotel room.

Your next question comes from the line of Robin Farley with UBS.

I wonder if you could talk a little bit about the renovations that you're going to be doing on the main gaming floor in Macau, and also it sounds like you're not seeing any real impact from the smoking ban there. And then, Jim and -- on the new projects that you're pursuing in some of the U.S. regional markets, can you talk a little bit about returns in those markets or for those projects?

Great. Grant, you want to start that?

Sure. Thanks, Jim. So on the main floor, first thing we're doing is, after 5 years, we're obviously in the work, we're actually moving back in and doing some general tidying up around the whole property. Focus for this year is going to continue to be supporting some of the premium products. We want to expand particularly for slots into supreme, which is the private high-limit main floor business. And then we also want to upgrade one area that we have, which is our Las Vegas room. And we're going to upgrade that again and making sure that we can provide a high-quality of service, complementary with both the supreme and the platinum lands we've already created. To your point on the smoking, frankly, it's probably still a little early to make a judgment on it. There is clearly some changes in pattern. There is migration and higher performance coming out of the smoking areas, particularly on our main floor, not quite so evident in our VIP business, but I think it's still a little early to see what true impact that will have, and we continue to look at ways to use the floor space as efficiently as we can. Our analytics have been very powerful in trying to position products to ensure that we can minimize those negative impacts, but obviously providing a compliant and most importantly, a safe environment for our team.

Thank you, Grant. And, Robin, on the return front, maybe one way of looking at it is that is looking at MGM Grand Detroit, we spent on the permanent facility there a little over -- about $800 million. And last year, we made $165 million of cash flow there. We take, as you know, a different approach to regional markets. We do not go into every regional market, that's one. Two, we don't go in with a bare-minimum investment and build a $300 million, $400 million box that can easily become a commodity, and therefore, less relevant on a going-forward basis. MGM Grand Detroit has withstood an awful lot of recession and otherwise, and it's obviously doing well. It was up in the quarter, so was Beau Rivage, I think, up in the quarter and another preeminent regional property. We would expect if we were to prevail in National Harbor and/or in Springfield, because the investments are fairly similar in the $800 million, $900 million range to get strong returns. We do not expect to build in markets where we're going to get anything lower than a high-teens return. And so I think that guides our thinking and reason why we're targeting a few higher-value markets. In the case in Toronto, where we have a 50-50 partner, it's very unclear as to what the opportunity will be, if any at all. And so it's impossible really at this point in time, to evaluate and put a return criteria on it. It's much easier for us to, and we have obviously already, developed a market side market size, a budget, a forecast for markets like western Mass and for Maryland and National Harbor. And I think looking at MGM Grand Detroit is a good guide for you.

Your next question comes from the line of Kelly Knybel with Deutsche Bank.

It's Carlo. Just a quick one, a follow-up. I know, Dan, you've guided 1Q REVPAR year-over-year, I believe, to flattish. Could you guys maybe talk a little bit about how you're thinking of the cadence of REVPAR throughout the year on the strip? And if there's any highlights and or maybe soft spots that you're seeing as we look out a little bit further?

Carlo, as you know, this market is highly driven on more the near term. I mean, when you look at 60% of your room inventory being filled within 60- to 90-day kind of window, it's historically been a very short booking window. We like the way our convention business is shaping up for the calendar year 2013. And obviously, the leisure and the transient business has been performing well for us, but that's a big part of our business. So I think it's too premature right now to go on with full year guidance, but we like the way the calendar is shaping up and we like the way the convention business is booked and the pace that we're on. And I think it's best to just kind of leave it at that for now.

Understood. That's helpful. And then if I could just ask one follow up on the fourth quarter specifically on the strip, when you think about obviously that the hotel room revenues bringing on the extra rooms and having a little bit more strength on the casino side on a year-over-year basis, it looks like maybe some of the non-room spend was a little softer than maybe the aggregate. Is that something that you guys are seeing basically permeate throughout the portfolio or is that subject to a few properties or maybe there's some construction disruption and/or other things going on?

I think it's predominantly a factor of certain properties. I mean, I'll use Mandalay as an example. Mandalay Bay had -- essentially with the exception of a few events in the event center had 0 in-house entertainment in the fourth quarter this year. And in the year prior, it had both Lion King for the full quarter. And for the full month of December, it had the Cirque Michael Jackson concert that was extremely well attended for the full month of December, a slower period of time from an entertainment standpoint. So I think it's really specific to certain properties. The Grand here without Studio 54 for the past several quarters. So it's really specific to certain properties and certain venues within those properties. The flipside, Bellagio with Hyde. It's been home run at both Hyde and Bank’s for the full year. So didn't skip a beat with the first full year of Hyde here at Bellagio, and The Bank has performed quite nicely and is actually consistent with the prior year so it's all incremental there.

I think what I'd add to that, Dan, is looking at the second quarter, I'll just reemphasize what's happening for us in the second quarter between when someone spends over $100 million on the corner of Tropicana in the Las Vegas Strip in Hakkasan to build a nightclub, lounge, bar, which right now has been a construction site and has been for the better part of 9 months, is going to have a material impact on MGM Grand; having a Mayweather fight in May, a material impact on MGM Grand; having a new Cirque show at Mandalay Bay, a material impact on the second quarter for Mandalay Bay; and the restaurants that we're adding there. I think that's very much driven by our success at the room remodel at MGM and here at Bellagio, we know -- I think we have a very good idea now how to spend our capital wisely to get the best returns whether it's in higher room rates or higher nongaming spend. And now on the gaming side, when you add the private gaming villas that we just have added and the new villa here at Bellagio, we see immediate impact in terms of customer response. It gives us more evidence as to how to spend our money in the future.

Yes, Mandalay's investments is about close to $100 million also. The clubs, the show and restaurants. So it's a significant investment that should bring some good lift to the property.

And Mandalay has never had a show like this that's going in here, I mean, this is 2 shows a night, 5 days a week. I mean they never had that kind of stickiness from an entertainment-venue perspective at Mandalay.

Your last question comes from the line of Susan Berliner with JPMorgan. Susan Berliner - JP Morgan Chase & Co, Research Division: I wanted to focus on CityCenter, if I may. You had a lot of cash sitting there, and I guess, I wanted to know what are your plans for that cash. And also the condo proceeds that are sitting there, does that get returned to MGM? And if you could just talk about, I guess, going forward, kind of the leverage target at CityCenter.

Sure, I'll take a stab at those. So as far as the cash that's building up, we do intend on continuing to reduce leverage, whether it'd be through debt reduction or as Bobby mentioned earlier, continuing to improve the cash flows where we as partners are not pleased with where the overall leverage is on the campus right now. And that'll be the focus with the excess cash and the improving cash flows going forward will be to reduce debt and continue to improve leverage there. And at some point in time in the future, you can rest assure that both partners have a lot invested in this and we will be looking to pull money out of that venture in the future. As far as the condo proceeds, we as an MGM Resort are still owed roughly about $100 million in advance condo proceeds that we made under the completion guarantee agreements. Those funds will sit in the condo proceeds account until the Perini matters are resolved and reach their conclusion, so those dollars will -- can't be spent and will sit there until such time if that matter is resolved. And, operator, with that, I think we've gone slightly over our allotted time. We're around all day for any follow-up questions with anyone here in the office. Please feel free to reach out for us, and thanks again for joining us this morning.

This concludes today's conference call. You may now disconnect.