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Melco Resorts & Entertainment(MLCO) - 2022 Q4 - Annual Report
MLCOMelco Resorts & Entertainment(MLCO)2023-03-30 16:00
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Capital Expenditures and Development Projects - Total capital expenditures for 2022, 2021, and 2020 were 598.4million,598.4 million, 782.2 million, and 464.3million,respectively,with464.3 million, respectively, with 488.3 million, 653.8million,and653.8 million, and 249.2 million allocated to development and construction projects[647] - The company's total capital expenditures for 2022, 2021, and 2020 were 598.4million,598.4 million, 782.2 million, and 464.3million,respectively,withsignificantportionsallocatedtodevelopmentandconstructionprojects[647]ImpairmentLosses−Impairmentlossesrecognizedin2022included464.3 million, respectively, with significant portions allocated to development and construction projects[647] Impairment Losses - Impairment losses recognized in 2022 included 3.6 million for a decrease in the market value of an aircraft and 6.8millionforapieceoffreeholdland[649][652]−Animpairmentlossof6.8 million for a piece of freehold land[649][652] - An impairment loss of 13.9 million was recognized against the goodwill of the Japan Ski Resort for the year ended December 31, 2020[659] - An impairment loss of 3.6millionwasrecognizedin2022forasignificantdecreaseinthemarketvalueofanaircraft,and3.6 million was recognized in 2022 for a significant decrease in the market value of an aircraft, and 1.1 million in 2021 for a piece of freehold land[649][650] - The company recognized no impairment losses on goodwill and trademarks for the years ended December 31, 2022 and 2021, but a 13.9millionimpairmentlosswasrecognizedfortheJapanSkiResortin2020[659]CasinoRevenuesandGamingPromoters−Casinorevenuesderivedfromrollingchipgamingpromotersaccountedfor0.313.9 million impairment loss was recognized for the Japan Ski Resort in 2020[659] Casino Revenues and Gaming Promoters - Casino revenues derived from rolling chip gaming promoters accounted for 0.3%, 11.9%, and 15.6% of total casino revenues in 2022, 2021, and 2020, respectively[667] - Casino revenues are measured by the net difference between gaming wins and losses, with commissions and incentives recorded as reductions of casino revenues[661] - Casino revenues derived from rolling chip gaming promoters accounted for 0.3%, 11.9%, and 15.6% of total casino revenues in 2022, 2021, and 2020, respectively[667] - The company ceased all gaming promoter arrangements in Macau in December 2021 but may engage gaming promoters in the future[638] Goodwill and Intangible Assets - Goodwill and purchased intangible assets with indefinite useful lives as of December 31, 2022, were associated with Mocha Clubs, a reporting unit[653] - The fair value of reporting units is determined using discounted cash flow methods, with cash flow projections based on historical experience and future growth assumptions[655] Property and Equipment - The estimated useful lives of property and equipment are periodically reviewed based on factors such as operating plans and economic conditions[644] - Costs of repairs and maintenance are expensed when incurred, while costs of property and equipment retired or disposed of are eliminated from accounts[645] - Software development costs for internal use are capitalized and amortized over the estimated useful life, with periodic reviews of remaining useful lives[646] COVID-19 Impact - The disruptions caused by COVID-19 outbreaks had adverse effects on the financial condition and operations of Mocha Clubs and the Japan Ski Resort[659] - COVID-19 disruptions have adversely affected the company's operations, with recovery remaining highly uncertain due to potential re-imposition of travel restrictions, vaccine efficacy, and economic impacts such as higher unemployment and reduced discretionary spending[636] Credit Loss Allowances and Deferred Tax Assets - Casino credit loss allowances were 80.0% of gross casino accounts receivables as of December 31, 2022, compared to 83.4% in 2021[671] - A 100 basis-point change in the estimated allowance for credit losses would impact the allowance by approximately 2.7 million[671] - Valuation allowances for deferred tax assets were 299.6millionasofDecember31,2022,upfrom299.6 million as of December 31, 2022, up from 267.3 million in 2021[672] - As of December 31, 2022, the company's allowance for casino credit losses was 80.0% of gross casino accounts receivable, with a 100 basis-point change impacting the allowance by approximately 2.7million[671]−Deferredtaxassetswerereducedbyvaluationallowancesof2.7 million[671] - Deferred tax assets were reduced by valuation allowances of 299.6 million and 267.3millionasofDecember31,2022,and2021,respectively,duetomanagement′sbeliefthattheseassetsmaynotberealized[672]FinancingandInvestments−Thecompanycompletedprivateplacementsof267.3 million as of December 31, 2022, and 2021, respectively, due to management's belief that these assets may not be realized[672] Financing and Investments - The company completed private placements of 500 million in August 2020 and 300millioninMarch2022,withnetproceedsof300 million in March 2022, with net proceeds of 499.2 million and 299.2million,respectively[622]−ThecompanyisrequiredtoinvestMOP11,823,700,000(approximately299.2 million, respectively[622] - The company is required to invest MOP11,823,700,000 (approximately 1.5 billion) in Macau, including MOP10,008,000,000 (approximately 1.2billion)innon−gamingprojects[623]−Totallong−termindebtednessandcontractualobligationsasofDecember31,2022,amountedto1.2 billion) in non-gaming projects[623] - Total long-term indebtedness and contractual obligations as of December 31, 2022, amounted to 11,786.1 million[626] - Fixed interest payments for 2022 totaled 1,731.9million,whilevariableinterestpaymentswere1,731.9 million, while variable interest payments were 248.8 million[626] - The company committed to an additional non-gaming investment of MOP2,003,000,000 (approximately 249.0million)ifMacau′sannualgrossgamingrevenuereachesMOP180,000,000,000(approximately249.0 million) if Macau's annual gross gaming revenue reaches MOP180,000,000,000 (approximately 22.4 billion)[629] Licensing Agreements and Corporate Ratings - The company holds licensing agreements with Hyatt, Nobu Hospitality, DreamWorks Animation, and Marriott International for branding and intellectual property rights[633][635] - The company's corporate ratings are "BB-" and "B+" by Standard & Poor's, and "Ba3" and "B1" by Moody's for its subsidiaries[631] Regulatory and Competitive Environment - The amended Macau Gaming Operations Law and other Macau government policies, including travel and visa restrictions, may impact the company's operations and financial conditions[636] - Chinese government policies, including anti-corruption campaigns and restrictions on cross-border currency movements, may limit the recovery and growth of patrons visiting the company's properties[636] - Increased competition in Macau and the Philippines due to new gaming and non-gaming facilities, with the company's Cyprus market expected to be volatile as the City of Dreams Mediterranean project is still under development[636] - The company's compliance costs may increase due to greater regulatory scrutiny on anti-money laundering, anti-bribery, and corruption laws globally[636] Cybersecurity and Operational Risks - Cybersecurity and ransomware attacks have increased globally, necessitating continuous evaluation and enhancement of the company's internal processes and technology infrastructure[638] Revenue Recognition and Loyalty Programs - Complimentary goods or services provided to incentivize future gaming are allocated based on standalone selling prices and recorded as operating expenses if supplied by third parties[662] - Loyalty program points are deferred as a liability, with revenue recognized upon redemption of points for goods or services[664] - The company recognizes revenue on a gross basis for its hotel and Grand Dragon Casino operations, acting as the principal in these arrangements[665]