美高梅國際酒店集團 (MGM) 2013 Q4 法說會逐字稿

Good morning, and welcome to the MGM Resorts International fourth-quarter and full-year 2013 earnings conference call.

Joining the call from the Company today are Jim Murren, Chairman and Chief Executive Officer; 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 Dan D'Arrigo.

Thank you, Ginger, and good morning and welcome to the MGM Resorts fourth-quarter earnings call.

We also have on the line with us today Bill Hornbuckle, our President; and Corey Sanders, our Chief Operating Officer.

So good morning, everyone.

Before turning it over to Jim, let me go through our prepared remarks here.

This call is being broadcast live on the Internet at www.mgmresorts.com, and a replay of the call will be made available on our website.

We furnished our press release on Form 8-K to the SEC this morning, as well.

On this call we will make forward-looking statements under the Safe Harbor provisions under the Federal Securities Laws.

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.

You can find the reconciliation of these measures to GAAP financial measures in our press release, which is available on our website.

Finally, please note that this presentation is being recorded.

And with that, I will turn it over to Jim Murren.

Thank you, Dan, and good morning everyone.

And for Grand Macau, and Bill and I in Japan, good evening.

We're very proud of what we accomplished in 2013, and as we reflect upon those accomplishments, I have to say that I am very proud to report that our revenues grew 7% and our EBITDA grew 18%.

We closed the year with a very solid fourth quarter.

Our fourth quarter revenues were up 10% year over year, and our EBITDA grew 21%, driven by growth at our Las Vegas strip properties and record quarters at MGM China and at CityCenter.

We think these results are a reflection of good operating management and the employee dedication that we have to execute on our Company's goals, both for revenue and for cost containment.

And, as you know, we have significant operating leverage in the recovering economy that we have.

Today MGM China announced a special dividend of $500 million and will also recommend a $128 million final dividend as part of our regular dividend policy.

MGM Resorts International, as a 51% shareholder, will receive approximately $320 million from these dividends.

2013 was truly a great year for MGM.

I recall about this time last year, we had said that 2013 would be really a new era for MGM Resorts International, transforming a Company that was recovering through the recession to a Company that was growing through an improving economy.

That is what we have done, and I would like to take a moment to give a few highlights in the year and what we see that we have ahead.

We do continue to perform financially.

We achieved record results at CityCenter and at MGM China in 2013, and our US wholly-owned operations for them, it was their best EBITDA quarter and year in five years.

We continue to enhance our existing portfolio of strip properties.

Our new strip frontage at New York-New York and Monte Carlo will be completed in the first half of this year, and we are well underway with the design and development of a park between those two properties that will highlight some pretty spectacular entertainment and food and beverage options.

And that park experience will lead up to what we believe will be one of the country's best arenas, which we are building in partnership with AEG, and that is expected to be completed in 2016.

The remodel of THEhotel into the Delano will begin in April, and that is expected to be completed by September.

Our new loyalty program, as you know, M life, has fulfilled all of our goals in 2013 by both increasing active members in our database, shifting customers from the leisure channel to direct customers, and our partners are driving tens of thousands of room nights each quarter.

MyVegas, our social gaming app, has also been a great success.

MyVegas mobile recently hit number one for casino apps in the iTunes App Store, and importantly, MyVegas has proven its ability to convert its players to consumers of our Las Vegas resorts, as over 80,000 players visited an MGM property in 2013.

We are well underway in the construction of our second resort in the world's largest gaming market.

We have completed the de-piling and the majority of the conventional piling and site work in the MGM Cotai in 2013.

And early this year, we begin work on the basement substructure.

We have been devoting our time to the design, the development, and the bidding of all of the work for our Cotai resort, and we have concluded that we will increase the scope and the complexity of our entertainment offerings and make several upgrades to key consumer experiences.

That, combined with some market cost increases, has led us to increase our project cost from what we have announced previously of $2.6 billion to $2.9 billion.

The Boards at MGM China and in MGM Resorts are extremely excited about these improvements and changes, and we know that MGM Cotai, when it opens in early 2016, will be the success that we believe it can be.

We won an exclusive license to operate a casino in Prince George's County in Maryland.

We have designed what we truly believe to be a great resort and a casino for Maryland, and we look forward to breaking ground in a few months and opening in 2016.

We were also selected by the city of Springfield and had a successful local referendum.

We were found suitable for a license in the western zone of Massachusetts, and we remain very excited about the opportunity for a downtown revitalization project in Springfield.

We await a decision in the awarding of that license this year.

And we continue to pursue further international expansion opportunities, including, of course, Japan and South Korea.

Here in Japan, I am happy to say that the MGM team has been very warmly received by the business community and the public.

We will continue to, as we have for a number of years, work hard here, and believe that our prospects are as good as anyone who has shown an interest in Japan.

With all that we have accomplished in 2013, I really expect to see even further improvements in this year, 2014.

We are seeing a extremely strong convention market in Las Vegas in 2014, with improving corporate business.

We are seeing continued growth in Asia, and we have set out expansion plans in a handful of key geographies with, we believe, very attractive demographics.

And so with that, I would like to turn it back over to Dan to talk about our operating results and financial position.

Thanks, Jim.

I am pleased to say that we have delivered a nice track record of improved operations, as this is our fifth consecutive quarter of year-over-year strip EBITDA growth and margin improvement.

On the Las Vegas strip, our revenues were up 2% and EBITDA was up 6%.

Our flow-through was a bit better than our expectations, due to strong collection efforts, which have been consistent throughout the year, continued refinements to our M life program, and a change to our employee vacation policy and accrual.

As a result, strip flow-through was approximately 70% in the quarter, above our 50% to 60% target.

Despite the strong performance in Las Vegas, our regional properties have been impacted by severe weather and other market pressures, as evidenced by a 2% revenue decline during the quarter.

However, the cash flow of these properties did benefit from a few items during the quarter.

Our fourth quarter strip RevPAR increased by 1% year over year, slightly better than our guidance, as we were able to book more in the quarter, for the quarter, convention room nights, which allowed us to drive room rates.

In the first quarter, as Jim mentioned, we are seeing accelerating trends, driven by an improving convention booking.

We expect our convention mix in the first quarter to be approximately 22%, which is near peak levels for any first quarter prior.

Given the strong convention bookings in the first quarter, we expect RevPAR to be up approximately 10% year over year.

For the full year, we continue to expect to see our convention mix increase by about 100 basis points to approximately 15.5%, 16%, which is also beginning to approach prior peak levels.

CityCenter resort operations had its best quarter and year ever, with EBITDA of $93 million for the fourth quarter and $316 million for 2013.

Aria's fourth quarter EBITDA was $77 million, up 42% year over year.

EBITDA was positively affected by approximately $6 million related to our higher hold percentage when compared to the prior year quarter.

Total table games hold was 26% in the current quarter compared to about 23.9% in the prior year.

Hotel revenue increased 4% during Q4, driven primarily by increased rate, while food and beverage revenue increased 11%, driven by higher convention and banquet revenue and continue increases in volume at our buffet.

Crystals continues to produce record results, up 13% compared to prior year's quarter.

And we've added a few more tenants and look forward to bringing on a few more in the current calendar year.

We continue to have solid sales results on the remaining residential inventory.

During the fourth quarter, we sold 11 units at Mandarin Oriental, generating approximately $12 million in revenue.

In 2014, sales are off to a strong start, with 18 units closed in January alone.

Switching gears over to the balance sheet, at year end and basically now, we have about $1.2 billion in available liquidity under our corporate revolver, and MGM China has approximately $1.45 billion in availability under their revolver.

Our balance sheet at the end of the year on a cash side was about $1.8 billion, of which approximately $1 billion was at MGM China.

During the fourth quarter, we spent approximately $127 million in capital related to our domestic operations.

Our full-year 2013 CapEx related to domestic operations was approximately $324 million, in line with our guidance.

During the fourth quarter, MGM China spent $4 million at MGM Macau, and approximately $51 million on our MGM Cotai development.

For the year, we spent approximately $35 million on MGM Macau, and roughly $204 million on MGM Cotai.

To help with your modeling and looking forward into 2014, we expect our CapEx at our wholly-owned domestic resorts to be approximately $350 million.

In addition, we plan to spend up to $75 million on our share of our investment in our Las Vegas arena joint venture with AEG.

And at MGM Maryland, once we have all requisite construction approvals, the Company could spend approximately $170 million, one seven zero, on development costs this year.

MGM China will spend about $70 million at MGM Macau, and another approximately $500 million this year on our development efforts in Cotai, which, as previously stated, excludes the land, cap interest, and development fees.

With that, I will turn it over to Grant Bowie.

Thanks, Dan.

2013 has turned out to be another landmark year for MGM China, as we achieved strong financial results by growing our business in every segment, while at the same time effectively managing costs.

We ended the year on a high note, with the fourth quarter being a record.

Net revenue was up 27% to $926 million, and property EBITDA was $238 million, a 35% increase year over year.

EBITDA margin was stable at 25.7%, as maintaining profitability is one of our key operating objectives, as we've spoken about on many occasions.

VIP turnover increased by 32% year over year.

And we continue to actively manage our VIP business and maximize table productivity.

Our overall VIP hold for the quarter was approximately 2.8%, which is down slightly compared to the prior year at 2.9%.

We're also able to drive main floor table volumes up 12%, and revenue by 18% year over year.

Slot handle also increased by 16% during the fourth quarter.

In terms of product enhance, we continue to work on remodeling and refurbishing our property.

At the same time, we are also working on developing technology solutions to help us deliver more personalized and precise marketing efforts to our customers.

In our ongoing efforts to maximize profitability, we continuously review the table and slot mix on the gaming floor and across different business segments.

This year people can expect to see a prominent presence of MGM China across our marketing channels.

This will include, or not be limited to, a significant expansion at M life, our Company-wide customer recognition program.

M life will certainly be a catalyst for expanding our footprint and awareness around China.

MGM Cotai is well underway, as Jim mentioned.

I was out there yesterday and it was truly a monumental project that's underway.

And we are excited to see the commencement of the basement of the construction -- and the tower construction -- along with the ongoing development of our interior designs.

We are also progressing a number of exciting ideas for cutting-edge entertainment and interactive technology, as Jim indicated, and once the 1600-room hotel, 500 table-casino with 2,500 slots is completed in early 2016, I certainly know that we are all going to be very excited from the results that that will generate.

With that, I would like to turn it back to Jim for his closing remarks.

Why thank you, Grant.

Just want to say a few final points.

We're happy to say that this year is off to a strong start.

Chinese New Years was a very successful holiday in both Macau and in Las Vegas.

And despite the pretty rugged weather in the United States that has put a damper on some US travel, we had a great CES show, and in fact, a very strong convention month in January, another strong month in February, a successful Super Bowl weekend, and March looks quite promising.

Las Vegas is truly recovering.

MGM China continues to grow.

Our balance sheet has improved dramatically, and we are working towards these several exciting projects, which we believe will accrue to the value and benefit of our shareholders.

Our goal continues to improve our free cash flow, and to combine that operating free cash flow with our distributions from abroad and continue to rapidly deleverage our balance sheet as we grow our top and bottom line.

We continue to look strategically for a handful of high-return, high-value growth opportunities, and we believe we have found those in the United States in Maryland and Massachusetts, and we are actively seeking those overseas.

We are excited for our future at MGM and we are quite proud of our accomplishments and look forward to working hard to achieve more in the future.

And with that, I would turn it over to the operator and we can move into Q&A.

(Operator Instructions)

Shaun Kelley, Bank of America.

Hi, good morning, and I guess good evening to everyone.

Jim, since you and Bill are on the ground in Japan, maybe we could start there because of the timing of that.

Could you give us your thoughts about what you guys are hearing from your very latest conversations on the ground as it relates to the possibility for legislation in the market, the timing that you guys are hearing back, and maybe specifically, the partnership requirement that we continue to hear back on?

Bill, do you want to tackle that, or do you want me to take it?

Yes, maybe I'd kick it off.

Things remain on track.

We're hopeful that either April or May legislation enabling will come out.

The process will ensue from there.

We anticipate about a year to get the regulatory regime put in play.

And from there, hopefully we are off to the races for the RFP process.

In terms of partnerships and basically a consortium, we also continue to hear that it will be somewhat of a requirement, or at least an expectation.

And I think we are working hard now on the ground, trying to put together the right consortium, whether it be Tokyo, Osaka, or frankly or anywhere in the greater Japan area, by Japan.

Great, thanks.

And then, Jim, obviously, your comments around the Las Vegas operating environment were pretty bullish.

Could you just give us your thoughts on -- one of the consistent questions we get from investors is, beyond the robust first quarter, which is obviously going to benefit from the return of the Conexpo.

How do you think about the remainder of the year?

It does sound like overall, the trend is positive.

But what you seeing in your bookings and the forward calendar for Q2 through Q4 that gives you some of the confidence that I think you showed us?

Shaun, maybe Corey and I will tackle that.

I think the important thing to focus on is, for the entire year, our convention mix looks pretty strong.

As I mentioned earlier, we are going to be up about 100 basis points, we believe, in terms of that convention mix.

And more importantly, the quality of the convention mix is continuing to improve.

With industries and corporates coming back into the fold, not only is it a better customer in our business throughout the full calendar year this year, but we pick up higher banquet spending, catering spending, and restaurant food and beverage spending throughout.

So the first quarter is strong, clearly, as it always is from a convention calendar standpoint.

But the rest of the year is looking to be up, as well.

And as I mentioned, we are approaching that prior peak level in terms of our convention room mix.

And maybe I will see if Corey has anything he wanted to add.

Shaun, the other thing I would add is, not only is it -- does it feel good, but the attrition coming in lower now.

We are seeing pickup in the quarter for the quarter, and we are actually seeing positive room nights at each quarter booking compared to what we had on budget, which we haven't seen in the past.

All in all, I think the tone is very positive from a convention side for the remainder of 2014.

Great, thanks guys.

Felicia Hendrix, Barclays.

Hi, thank you.

Just to follow up on that.

Obviously, you think you're going to see RevPAR growth for the remainder of the year.

Just wondering, for the last three quarters, is that in the low single-digit range, or more mid, given your recent comments about the convention mix?

Hi, Felicia.

This is Dan.

I don't recall any of us giving RevPAR guidance for the remainder of the three quarters.

We feel good about the remainder of the year.

Our booking window, as we've always stated, in Las Vegas has always been a relatively short one, in that 60- to 90-day booking window.

The convention business is the data point.

We have -- that is the best long-term data point we have, and that is looking very good throughout the course of 2014.

But as we always do, we will give quarterly guidance at a time, but we do feel good about the remainder of the year.

Dan, can I add to that a little bit?

Sure.

I think we are partly responsible for this fixation over the discussion of Con/Agg.

We did bring it up at the last -- I think the last two conference calls, as we were excited for it to occur.

I think its important to note that we haven't even had it yet.

We had a tremendously strong January.

I'm thinking about one convention, in particular, say for example, Corey surfaces, surfaces is a convention it comes in, basically anything that goes on on the surface, wall coverings, carpeting, tile, et cetera.

And they had a tremendously strong convention here in Las Vegas in January.

RE/MAX is obviously a good indicator of what is going on in real estate, large attendees.

So we feel that what we have seen so far, two-thirds into the quarter just about, and what we have seen from in the year, for the year, that we feel more confident about RevPAR than we did before.

We do know the first quarter is a particularly strong one.

We don't know for sure how the rest of the year is going to turn out.

But we are very heartened by the amount of convention business we have seen thus far.

That is really helpful color, thank you.

Just on flow-through, Dan, you gave us some good color about what benefited margins in the quarter.

First, just wondering if there was any kind of polled benefits that we should think about?

But also, just thinking about the rest of the year, do you expect to see that kind of flow-through that we saw this quarter -- this past quarter?

From a flow-through, we still project in that 50% to 60% range as where our goal is going forward.

Polled was actually down a touch year over year in the fourth quarter.

So there was no real benefit overall to the wholly-owned properties from a hold perspective.

It actually went against us a little bit in the fourth quarter, except for on a property basis, except for that Aria piece that I mentioned earlier.

Okay, thank you very much.

Thank you Felicia.

Joe Greff, JPMorgan.

Hello all.

Grant, a question for you.

In Macau, looking at the early results for the first quarter in January, (inaudible) fixated looking at market share, but rather the absolute level of revenues and cash flow.

But looking at the first quarter and looking at January's result on the mass side, you had a nice bump up in market share.

Is there anything there that is one time, or are you doing things differently?

Is that a sustainable trend?

If you can help us understand that, that would be great.

Sure.

I think the critical point is your comment -- it's about the real quantum as opposed to share.

Because I think we all accept that the share moves around.

We are very confident that we just simply are continuing to execute our strategy in terms of maximizing the retention of customers, reactivation, and obviously, acquisition.

We are very positive about the trends we're seeing.

We are continuing to do a range of activities to obviously lock in those opportunities.

In simple terms, I am pretty confident that it is sustainable, because I know that it is being driven by a lot of hard work and a lot of detailed effort being put in.

Thank you.

And then sticking with the Macau topic, and something that has investors talking about this morning and last night, is about the casino license renewal process in Macau and leaving it very broad.

I know there have been comments in the press by certain people in the Macau government.

But can you give us your views on this potential new, five-year licensing cycle and maybe what some of the discussions you have had to date with the government.

I know it is early, but if you can give us some perspective, that would be great.

What I would like to say first is that the Macau government has been very clear that they haven't made any determination or haven't given any indication of any change to any of the current regimes.

And I think Secretary Tam reaffirmed that today.

This, I think, strange comment about the five years.

I think is just a misunderstanding yet again.

It's been very clear for quite some time.

When this issue came up last time, under the Macau law, the chief executive does have the prerogative to be able to extend any concession, not just gaming concessions, but any concessions, for an additional five years.

And I would say that he would reserve that prerogative as it applies to gaming concessions.

I think it's really important that there is no change, nothing is altered.

The Macau government continues to reaffirm that they will look at these issues into the future, but they have also reaffirmed that they are very comfortable with the system in place and the concession holders that are in place at this point in time.

Great.

And then if I could have one final question, I have an MGM call and it's a question about Las Vegas.

Dan, with RevPAR up 10%, and presuming some of that is occupancy and volumes, do you see a drastically dissimilar operating expense relationship between, say, this year with volumes up and last year?

I think overall, Joe, as we continue to move more into our convention mix, we think that gives us a pretty good ability midweek to drive some incremental food and beverage productivity.

As well as, obviously, the hotel rates we can get midweek versus the leisure channel, as we have stated before, are typically up in a range of $50 to $70 different from the leisure channel.

That clearly will help us from the perspective of driving that flow-through in the incremental cash flows into the buildings.

On the operating expense side, we think there will be relatively in check in 2014.

Corey and the team successfully negotiated the new union contract, so we know what that is going forward.

We have a pretty good handle on the rest of our expense line items, and continue to find ways, whether it's through shared services or other venues, to take costs out of the system and neutralize any sort of cost creep.

And we think we will be successful at that, as well, in 2014.

So I think we're pretty will positioned.

And we did have some very strong casino collections throughout 2013, which is attributable to our marketing team and the efforts of Bill and Anton and the group there.

That clearly benefited 2013, but we think we've got an equally good chance here in 2014, as well.

And, Joe, I would add that, yes, the RevPAR is going up.

Most of that RevPAR growth will come from rate.

Great, thank you all.

Thomas Allen, Morgan Stanley.

Hi guys.

Just focusing on strip RevPAR a little bit more -- sorry.

But I'm recognizing you guys have a very short booking window.

The concern we get from people is that once 2014 is over and you have had this really strong convention year and a tough comp, how will 2015 and beyond look?

Any thoughts, that would be helpful.

Thanks.

Hi Thomas, this is Dan.

Corey and I will tackle that as best we can.

But I think when you look at it clearly, this allows us to establish a base throughout all of our channels in terms of pricing.

And 2014 is going to be better than 2013.

And we are going to set the stage for 2015 to be better than 2014.

So it is something that the team is focused on.

The Las Vegas market, particularly in the convention market, on a relative basis versus our peer markets, is a great value, from not just a rate standpoint, but from a one-stop shopping perspective and what we have to offer vis-a-vis other markets.

This is, in my mind, a stepping stone to a better rate environment as we look to go forward and book more conventions in 2015 and 2016.

And we have grown RevPAR multiple quarters in a row.

Our convention pace for 2015, 2016, 2017 all look above where they were prior year for the previous years.

The other, I think, positive sign is the airlift is beginning to increase, both nationally and internationally.

We saw 2% increases the last few months coming out of McCarran.

Those are big deals to bring other visitors other than convention customers into the business.

So things look positive in Las Vegas.

Corey did you see that WestJet just added another 18 flights to Las Vegas?

Yes, they did.

There are already 1 million -- they are already flying over 1 million Canadians a year in.

So that will just increase it.

Great.

Just some more clarity around that convention pace for 2015 to 2017.

Can you read into it now, and maybe if you strip out Con/Agg, does it look like things -- that it's positive growth so far 2015 versus 2014?

When we look at the pace, Con/Aggs in prior years, so for us to be up, I think that is a sign that bookings continue to be strong.

Everything we get from the convention planners and meeting planners, which are good resources, by the way, are all positive.

And it only keeps getting our occupancy to the levels that we are looking to to be able to raise ADRs.

Thomas, maybe as an example, obviously Con/Agg's is getting a lot of air time here.

But when we look to three years ago, when the show was last in town, obviously, we grew RevPAR pretty strong in that first quarter.

I think it was up some 15%, 16%.

But maybe more importantly, when you look at the following year first quarter, we still grew RevPAR by about another 4% off that higher base.

And that's what I mean about the stepping stone ability to start pricing into those channels higher as we continue to recover.

We are not fully recovered in terms of rate versus those 2005, 2006, 2007 rate periods.

But again, this is the ability to start getting back some of that rate back into the system.

Very helpful, thank you.

Thanks Thomas.

Harry Curtis, Nomura securities.

Hi, you guys would be disappointed if I didn't jump on the bandwagon here on the 2014 rate.

In the last quarter, I believe you made a comment that your group booking pace was up about -- in the mid- single digits in the back three quarters.

And what I am trying to get a sense of is, just in the last three months, has that group booking pace or your production level gotten sequentially better for the back three quarters of 2014?

Obviously, as we put more on the books, that hurdle as we move forward starts to diminish as we lap the time periods.

But we still feel comfortable with the pace of bookings in the remaining three quarters of the year.

And there is still some more work to do, say, in the fourth quarter in and around the holiday period.

But overall, we feel very confident in our ability to meet or exceed the prior-year levels.

And are you getting any color from your group meeting planners about the competitiveness of your rate and the attractiveness of Vegas versus some of the other options that they have?

Corey, do you want to take that?

I haven't heard a lot of that, Harry.

I do know that we are getting our fair share of the business, more than our fair share of the business.

We haven't heard anyone out there going after us to the point where we are losing business elsewhere.

I'm actually thinking about in the opposite way, that you are taking business.

Okay.

And then just a housekeeping item, you had mentioned strong collection efforts.

Did that lead to any reversal of reserves or any lower provision in the fourth quarter, and how sustainable might that be, if it, in fact, happened?

There was some reversals, because I can think of, without getting into specifics, there were some items that had been sitting on the books for the past couple of years that were fully reserved, and we actually collected, that customers came in in 2013.

So it does happen from time to time.

There was some benefit throughout all of 2013 on that front.

And we feel we are in pretty good shape in terms of our overall receivables and our reserves against that receivable.

So for 2014 you don't see any of that creeping back in?

No, we would not expect it.

Obviously, we will let the markets decide, but we don't anticipate that at this point.

Okay, thanks a lot.

Thanks, Harry.

Joel Simkins, Credit Suisse.

Yes, good morning guys, good afternoon, evening, as well.

I promise, no convention questions.

Had a question, though, on the CapEx, the incremental $300 million of investment for Cotai.

Can you give us a sense of where that capital might go?

Is it dragon boats and gondolas, or is it really going to be ROI-generating opportunities used potentially in the building?

Jim, did you want to take that one?

I will take some and turn it over to Grant.

We have spent a lot of time inside of the resort.

We know the overall square footage, we know most of the programming on the exterior.

We have been working a lot on the interior to create experiences that people just have to see.

And we have come up with some of that program and it's going to cost a bit more money.

So one aspect is on the programming of entertainment.

The second is the development of the mansion product that has been so successful for us in Las Vegas.

And trying to achieve a higher bar for that type of ultra luxury, high-end product, and we feel like we have come up with the right plan and that added to the cost.

There has been some market increases, so there has been escalation in labor and some materials as well.

That factors into it.

But primarily, we would focus on the content inside the building and the confidence that we have now that we have bid out so much of the project, and have a very firm understanding of what the actual end costs will be.

And if I may, one other follow-up.

I don't know if Grant was going to jump in on that, but in terms of -- turning to Vegas very quickly, what are you guys seeing in terms of the ancillary entertainment side of the business, nightclub business for 2014?

Obviously, you've got a couple of new things coming online this year.

You've had a lot of success of Hakkasan.

Just curious on what you expect from that segment this year.

Corey, do you want to take that one?

I think it just continues to grow, both the nightclubs and the day pools.

I think what you're going to start seeing are other entertainment experiences that people are looking for, whether they are food and beverage and slash entertainment, that concepts will evolve.

But everything we are hearing from our operators and what we are seeing are very positive in that sector.

Thank you.

Thanks, Joel.

Steven Kent, Goldman Sachs.

Hi, just a couple questions.

One, I don't know if you actually said what the use of the cash flow from the MGM China dividend, MGM Resorts how that would actually flow through.

And then, maybe just talk more broadly, and maybe this is for Corey, any disparity between the higher end and the lower end properties or players in the Las Vegas market?

Sure Steve, this is Dan.

I will take the first piece.

In our 51% share of the dividends that we received, we will use in this interim period to pay down debt, and we anticipate to do that throughout 2014 as we begin to set the stage for the development projects we have in 2015 and that ultimately come online in 2016.

So the goal there will continue to be to improve the balance sheet with those distributions and reinvest dollars back into our existing resorts and our growth opportunities.

Steve, on the spend, the luxury properties continue to see a pretty good customer, and we continue to see them improve their spending.

For example, Bellagio had their best slot fourth quarter ever.

So the luxury properties have some pretty good strength.

The core properties, when that convention basis is there, they continue to be challenged on the consumer spend.

But when it is in here, they are able to get a higher quality customer in their hotel, and we see that spend -- the correlation between the ADR and spend is definitely there.

Okay, thanks.

Robert Shore, Union Gaming Group.

Hi guys.

I just had a quick question on Las Vegas.

Aside from the Arena and the Monte Carlo, New York-New York renovations, are there any other assets that could be up next for reprogramming here in Las Vegas?

Robert, this is Dan.

We are looking at a few different options in regards in partnering up with some landholdings we have here that could be intriguing to drive more events into it.

As we look forward beyond the New York-New York and Monte Carlo improvement, Monte Carlo, in and of itself, could be a very interesting property, as it will be sitting center stage between all of our asset holdings and has a tremendous amount of upside potential as we look at its location, its product offerings, and what it could be in the future.

So we are going to continue to look at opportunities at our existing buildings.

You can rest assured that we are not looking to add more room inventory into the marketplace.

Right now, it's all about how do we drive more foot traffic into our buildings.

And the Mandalay, Luxor, Excalibur properties, collectively, is also something that we will be looking at longer term from a development standpoint.

As Jim mentioned earlier, the Delano will start -- The Hotel will start its conversion into the Delano in April, and finish up in the September timeframe this year.

So that, too, will be a new branding and product offering that we'll have towards the back half of this year.

And Dan, if I could just add to that.

For those of you who come out to Las Vegas, and most of you do, if you haven't been out in a few months, you just really won't believe the changes that are occurring right now at New York-New York and at Monte Carlo, in terms of the accessibility into the resorts from the Strip.

In terms of the new food and beverage and retail content that we have already started to open.

In terms of the pedestrian environment that we have created.

And there's a lot more to come, with Shake Shack on the way and a variety of other well-known, really fun F&B concepts that will populate the park that we are designing and will build right up to that arena.

This is the new generation of the way to design, we think, in Las Vegas and why I said in the past and believe that the link will be so successful for Caesars on that side of the Strip.

And why I've said in the past, and believe, that the link will be so successful for Caesars, on that side of the Strip people want to get outside, walk around, and the companies that engage the consumer that way will get increased market share of a growing market in Las Vegas.

And the impact to Monte Carlo and New York-New York over the next year or two, I think, will be material.

And even more so, dramatically more so, when we build the 20,000-seat arena that will anchor the park.

And that opens in the first half of 2016.

So the next couple years, the gravity around New York-New York, Monte Carlo will increase tremendously.

That is really our focus right now.

And I think if we are as successful, as we believe we will be, we will be looking for those type of experiences to enhance and energize the other resorts over time.

Thanks for the color, that is very helpful.

Thanks, Robert.

David Bain, Sterne Agee.

Great thanks.

Just to follow up on the dividend, Dan or Grant.

As spend on Cotai accelerates, how should we view payouts for MGM China?

Should we view it differently than in 2012 or 2013?

Grant, maybe I will jump in there, and then you can add any of your commentary.

I think the MGM China Board is being prudent in terms of how it is approaching its dividend policy.

It obviously has the semiannual dividend policy in place, up to the 35% of profit.

And I think each time the Board meets, it will consider special dividends from time to time, and it will weigh that decision with its investment profile, its opportunities, whether it be future development opportunities or other areas of investment, and weigh that against returning capital to shareholders.

So from that standpoint, I think the Board is taking a prudent approach to its dividend policy, returning capital to shareholders when it deems appropriate, based on performance, balance sheet positioning, and future opportunities.

And obviously, it is mindful of the fact that we have a very large construction project underway, but does have the semiannual dividend policy in place today.

Okay, thank you.

Kevin Coyne, Goldman Sachs.

Hi, thanks for taking the questions.

Dan, just a follow-up on your comments on using cash to pay down debt later this year.

With regards to the Maryland project and likely the Massachusetts project, will that be project finance, or do think you will have to go back to the debt markets and fund that at the MGM level?

We are keeping that option open at this point in time.

Clearly, with each of those projects we are going to own a vast majority of each of the National Harbor and the Springfield opportunities.

So we are going to weigh that cost of capital decision as in and when we need it from the perspective of what is going to be the cheapest way to finance these projects?

Right now, if I was to make that decision, I would probably recommend to the Board to use our corporate facility as we go in and out of that for construction spending.

But we will keep our optionality open as we go forward.

But we clearly have the capacity to do it at the corporate level for each of these projects, and we can do it in a way that we keep the balance sheet in a relatively neutral position through the timeframe of these construction projects.

That make sense.

Thanks.

And then just my next question is a two-parter.

My understanding that convention group business with you guys is somewhat gated by the amount of meeting space you have to offer those groups.

Part one of my question is, for the first quarter you did 22% mix.

Is that a theoretical maximum for the first quarter?

And as part two, when the arena is completed in 2016, do you expect that you could use that for convention and group events to help increase that theoretical convention and group mix?

Or will the arena just be for pure entertainment events?

I will take that.

At 22%, we are probably fully occupied in most of our convention space.

We could do -- where we could continue to increase that is making sure that our room-to-space utilization is maximized.

And there are some opportunities there as we get smarter in how we book business and how we move it around.

The new arena absolutely could be used for additional convention space in midweek periods or when there is not events in there.

And we do plan on using it for that.

And it also frees up our two existing ones for events in the new arena and convention business in the existing Mandalay Event Center and the MGM Grand Garden.

It gives us a lot of flexibility going forward to book, not only incremental concerts, sporting events, et cetera, but drive more convention business into our buildings.

Thank you.

Thanks, Kevin.

Rich Hightower, ISI Group.

Hi, good afternoon, guys.

One quick balance sheet question.

Can you just remind us of the limitations, or the opportunities, surrounding potential asset sales of some of the non-core properties?

Sure, there's obviously some parameters around which we need to follow, whether it be an asset sale in terms of cash consideration and different pieces of our debt instruments.

I think it is roughly about 70% needs to be in cash and some limitations.

There's a small basket in our facilities for smaller type transactions.

But really, there is -- the non-collateral assets have more flexibility from that standpoint than, say, the collateral assets which either need to pay down debt or have replacement collateral put in their place.

There is no prohibition, there's just different parameters around which to work in our credit facility.

Thanks, Dan.

Is that something you guys would consider as an additional source of funds for deleveraging over the next couple of years?

Historically, we bought and sold asset throughout our timeframe with the Company.

We have recently sold some land on the outskirts of the Las Vegas Strip.

And yes, we would consider some future non-core asset sales from that perspective of way of pruning the -- just like any portfolio manager in the way of pruning the assets.

Okay, thank you.

Thanks, Rich.

Operator, I think we're running up to our hour time.

Maybe we will take one more question.

Robin Farley, UBS.

Great, thanks.

I wanted to ask two things.

One is, I think that you guys had talked about getting relicensed in New Jersey at some point in the first quarter, and being able to access the cash that is trapped in the trust there.

I don't know if there is an update on that timing.

And then also, looking at your margin flow-through in the first quarter, just trying to get a sense of -- I know you talked about the rest of the year, the flow-through being in the 50% to 60% range and not the 70% flow-through in Q1.

Trying to get a sense of how much of that is you being conservative versus what things were one-time in nature in Q1?

So wonder if you could go through a little bit of the detail.

I know you mentioned there were some reserves reversed, and I guess that may be a one-time thing, maybe you expect to recur later in the year.

And I know you talked about a change in vacation policy.

It sounds like that was an accrual that was reversed and maybe also one time.

Just try to get a sense of what was a benefit that was one time versus we might see recurring.

Sure, Robin.

The fourth quarter was roughly about 70% here in Las Vegas.

And we think when you adjust the factors we pointed out, we would land in that range of 50% to 60% overall, which is why we are comfortable with that.

Hopefully we can do better, but we will -- we are most comfortable with that range as we continue to drive the incremental topline pieces.

So we feel good about that range and where we ended up.

As far as the New Jersey timing, it is ongoing.

The dialogue is continuing.

And we would look to some time here in the first half, be back in front of the New Jersey Casino Commission and the DGE on that opportunity.

But we continue the dialogue, we continue to work with the authorities there, and hope to resolve that and get access to, obviously, the trust.

More importantly, be a partner again with Boyd in the successful Borgata operation back in New Jersey.

I guess, Dan, to follow up on that, I think we have what -- I think Robin asked the trust balance is about $102 million or so.

It is just a touch over $100 million at this point.

About $102 million, correct.

And the vacation accrual was under $5 million, I think it was around $4 million or something, the reversal.

One final question.

Looking at Vegas RevPAR end up about 1%, I think your slot revenues were down 2% or 3%.

Is that, in your view, is it the convention mix that is maybe crowding out some gaming business, or was that just a continuation of softer gaming trends per visitor?

I think a couple of points I will make.

Robin, there.

Actually, our slot business here in Las Vegas is actually up when the market has been actually down.

So I think our properties, our teams, our M life, is working, and we are gaining share in that business here in Las Vegas.

Our overall slot numbers are down because of the regional properties, which we pointed out that their revenue, whether it be weather, market conditions, et cetera, have been down.

And so the decrease is largely attributable to the regional properties in the fourth quarter, while the Strip properties continue to outperform the rest of the market here.

Okay, great.

Thank you very much.

Thank you, thanks Robin and thank you all for participating.

Sarah, myself, and the rest of the team will be around all day for any follow-up questions, and we appreciate everyone joining us this morning.

Thank you.

And evening.

Thank you.

This does conclude today's conference call.

Thank you for participating.

At this time you may now disconnect.