UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-6697
Mirage Resorts, Incorporated
______________________________________________________
(Exact name of Registrant as specified in its charter)
Nevada 88-0058016
_______________________________ ___________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3400 Las Vegas Boulevard South, Las Vegas, Nevada 89109
__________________________________________________________________________
(Address of principal executive offices - Zip Code)
(702) 791-7111
__________________________________________________________________________
(Registrant's telephone number, including area code)
___________________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $0.008 par value, 90,978,623 shares outstanding as
of October 31, 1994.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited condensed consolidated financial information as of
September 30, 1994 and for the three-month and nine-month periods
then ended included in this report was reviewed by Arthur
Andersen LLP, independent public accountants, in accordance with
the professional standards and procedures established for such
reviews by the American Institute of Certified Public
Accountants.
<PAGE>
REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Directors and Stockholders
of Mirage Resorts, Incorporated
Las Vegas, Nevada
We have reviewed the accompanying condensed consolidated balance
sheet of Mirage Resorts, Incorporated and subsidiaries (the
"Company") as of September 30, 1994, and the related condensed
consolidated statements of income for the three-month and nine-
month periods ended September 30, 1994 and the related condensed
consolidated statement of cash flows for the nine-month period
ended September 30, 1994. These financial statements are the
responsibility of the Company's management. The unaudited
condensed consolidated statements of income for the three-month
and nine-month periods ended September 30, 1993 and the condensed
consolidated statement of cash flows for the nine-month period
ended September 30, 1993 were reviewed by other auditors whose
report dated November 12, 1993, stated that they were not aware
of any material modifications that should be made to those
statements in order for them to be in conformity with generally
accepted accounting principles. In addition, the consolidated
financial statements of Mirage Resorts, Incorporated as of
December 31, 1993, were audited by other auditors whose report
dated February 11, 1994, expressed an unqualified opinion on
those statements.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
November 11, 1994
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<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED Mirage Resorts, Incorporated
BALANCE SHEETS
____________________________________________________________________________________
At September 30, At December 31,
1994 1993
____________________________________________________________________________________
(In thousands) (Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 42,419 $ 57,462
Receivables, net of allowance for doubtful
accounts of $41,165 and $26,876 68,635 58,182
Inventories 26,233 30,374
Deferred income taxes 18,898 26,756
Prepaid expenses and other 18,489 24,656
____________________________________________________________________________________
Total current assets 174,674 197,430
Property and equipment, net of accumulated
depreciation of $385,678 and $331,746 1,402,770 1,421,366
Other assets, net 91,470 86,462
____________________________________________________________________________________
$1,668,914 $1,705,258
====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 54,770 $ 76,811
Accrued expenses 90,370 82,922
Current maturities of long-term debt 4,596 31,617
____________________________________________________________________________________
Total current liabilities 149,736 191,350
Long-term debt, net of current maturities 435,861 535,025
Other liabilities, including deferred income taxes
of $73,709 and $60,115 81,816 68,019
____________________________________________________________________________________
Total liabilities 667,413 794,394
____________________________________________________________________________________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock: 90,957 and 90,607 shares outstanding 940 940
Additional paid-in capital 698,553 695,587
Retained earnings 458,361 372,683
Treasury stock, at cost: 26,617 and 26,967 shares (156,353) (158,346)
____________________________________________________________________________________
Total stockholders' equity 1,001,501 910,864
____________________________________________________________________________________
$1,668,914 $1,705,258
====================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED Mirage Resorts, Incorporated
STATEMENTS OF INCOME (UNAUDITED)
___________________________________________________________________________________________________
Three Months Nine Months
____________________ _______________________
For the periods ended September 30 1994 1993 1994 1993
___________________________________________________________________________________________________
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
GROSS REVENUES $365,769 $252,424 $1,030,802 $744,332
Less-promotional allowances (29,424) (24,292) (87,590) (70,321)
___________________________________________________________________________________________________
336,345 228,132 943,212 674,011
___________________________________________________________________________________________________
COSTS AND EXPENSES
Casino-hotel operations 185,760 129,626 542,108 393,449
Provision for losses on receivables 5,320 4,289 15,418 12,878
Advertising 1,620 1,359 5,530 4,483
General and administrative 33,960 27,117 102,171 74,467
Depreciation and amortization 23,590 17,629 70,342 52,540
Corporate expense 11,166 7,124 27,574 22,262
___________________________________________________________________________________________________
261,416 187,144 763,143 560,079
___________________________________________________________________________________________________
OPERATING INCOME 74,929 40,988 180,069 113,932
___________________________________________________________________________________________________
OTHER INCOME AND (EXPENSES)
Interest and other income 1,001 935 4,729 4,608
Interest cost (12,971) (23,096) (41,011) (70,421)
Interest capitalized 1,988 8,570 5,809 21,152
Other, net (3,072) (738) (3,401) (655)
___________________________________________________________________________________________________
(13,054) (14,329) (33,874) (45,316)
___________________________________________________________________________________________________
INCOME BEFORE INCOME TAXES AND EXTRA-
ORDINARY ITEM 61,875 26,659 146,195 68,616
Provision for income taxes (22,370) (9,370) (53,180) (22,950)
___________________________________________________________________________________________________
INCOME BEFORE EXTRAORDINARY ITEM 39,505 17,289 93,015 45,666
Extraordinary item-loss on early retirements
of debt, net of applicable income tax benefit (2,773) (6,915) (7,337) (9,019)
___________________________________________________________________________________________________
NET INCOME $ 36,732 $ 10,374 $ 85,678 $ 36,647
===================================================================================================
INCOME PER SHARE OF COMMON STOCK
Income before extraordinary item $0.42 $0.21 $0.98 $0.56
Extraordinary item-loss on early retirements
of debt, net of applicable income tax benefit (0.03) (0.08) (0.08) (0.11)
___________________________________________________________________________________________________
NET INCOME PER SHARE OF COMMON STOCK $0.39 $0.13 $0.90 $0.45
===================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED Mirage Resorts, Incorporated
STATEMENTS OF CASH FLOWS (UNAUDITED)
_______________________________________________________________________________
Nine months ended September 30 1994 1993
_______________________________________________________________________________
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 85,678 $ 36,647
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for losses on receivables 15,418 12,878
Depreciation and amortization of property
and equipment 73,061 54,415
Amortization of original issue discount and
debt issue costs 10,196 10,298
Other amortization 3,443 2,997
Loss on early retirements of debt 11,287 13,876
Deferred income taxes 21,452 6,578
Changes in assets and liabilities
Net increase in receivables and other
current assets (15,563) (8,851)
Net increase (decrease) in trade
accounts payable and accrued expenses (12,730) 18,398
Other, net (192) (688)
_______________________________________________________________________________
Net cash provided by operating activities 192,050 146,548
_______________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (58,203) (380,951)
Net decrease in non-current cash equivalents
restricted for construction - 157,196
Joint venture and other equity investments (22,660) -
Proceeds from sales of investments 17,913 -
Other, net (2,080) 1,855
_______________________________________________________________________________
Net cash used for investing activities (65,030) (221,900)
_______________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Early retirements of debt (117,314) (143,194)
Net proceeds from issuance of senior subordinated notes - 97,500
Borrowings under bank credit facilities 153,000 125,000
Repayments of borrowings under bank credit facilities (145,000) (45,000)
Other additions to (reductions in) debt, net (30,486) 6,132
Exercise of stock options, including related
income tax benefit 4,290 15,721
Other, net (6,553) (1,220)
_______________________________________________________________________________
Net cash provided by (used for) financing
activities (142,063) 54,939
_______________________________________________________________________________
CASH AND CASH EQUIVALENTS
Decrease for the period (15,043) (20,413)
Balance, beginning of period 57,462 142,983
_______________________________________________________________________________
Balance, end of period $ 42,419 $ 122,570
===============================================================================
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid, net of amounts capitalized $ 25,718 $ 34,968
Income taxes paid (refunded), net 20,500 (8,580)
_______________________________________________________________________________
</TABLE>
See notes to condensed consolidated financial statements.
-5-
<PAGE>
NOTES TO CONDENSED CONSOLIDATED Mirage Resorts, Incorporated
FINANCIAL STATEMENTS (UNAUDITED)
_________________________________________________________________
NOTE 1 - BASIS OF PRESENTATION
Mirage Resorts, Incorporated (the "Company" or the "Registrant"),
through wholly owned Nevada subsidiaries, owns and operates some
of the most successful casino-based entertainment resorts in the
world. These facilities include The Mirage and Treasure Island
on the Las Vegas Strip, the Golden Nugget in downtown Las Vegas
and the Golden Nugget-Laughlin in Laughlin, Nevada. In January
1993, the Company purchased the assets of the former Dunes Hotel,
Casino and Country Club on the Las Vegas Strip and has announced
plans for construction of extensive new hotel, casino and resort
facilities on the approximately 164-acre site.
The condensed consolidated financial statements have been
prepared in accordance with the accounting policies described in
the Company's 1993 Annual Report on Form 10-K (as amended) and
should be read in conjunction with the Notes to Consolidated
Financial Statements which appear in that report. The Condensed
Consolidated Balance Sheet at December 31, 1993 was derived from
audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation
of the results for the interim periods have been included. The
interim results reflected in the condensed consolidated financial
statements are not necessarily indicative of expected results for
the full year.
Certain amounts in the 1993 condensed consolidated financial
statements have been reclassified to conform with the 1994
presentation. These reclassifications had no effect on the
Company's net income.
NOTE 2 - LONG-TERM DEBT
NEW BANK CREDIT FACILITY. On May 25, 1994, the Company obtained
a $525 million five-year reducing revolving credit facility from
a group of commercial banks (the "New Facility"), replacing its
previous $150 million bank credit facility. Borrowings under the
New Facility bear interest at a floating rate equal to, at the
Company's option, the prime rate plus 5/8% or the one-, two-,
three- or six-month London Interbank Offered Rate plus 1 5/8%.
The Company incurs a commitment fee of 0.4375% per annum on the
unused portion of the New Facility.
The Company and most of its significant subsidiaries, excluding
the subsidiaries which own and operate the Golden Nugget and
Golden Nugget-Laughlin and certain related subsidiaries, are
directly liable for or have guaranteed the repayment of
borrowings under the New Facility. Borrowings under the New
Facility are collateralized principally by first deeds of trust
on the Dunes site and the Company's Shadow Creek golf course.
The credit agreement governing the New Facility contains
financial covenants requiring the Company and most of its
subsidiaries, excluding the Golden Nugget subsidiaries, to
maintain a specific tangible net worth and to meet other
financial ratios. The credit agreement also contains covenants
that impose various restrictions (subject to permitted amounts)
on the ability of the Company and most of its subsidiaries,
excluding the Golden Nugget subsidiaries, to, among other things,
incur additional debt, commit funds to capital expenditures or
new business ventures, make investments, merge or sell assets or
pay dividends on or repurchase the Company's capital stock.
-6-
<PAGE>
NOTES TO CONDENSED CONSOLIDATED Mirage Resorts, Incorporated
FINANCIAL STATEMENTS (UNAUDITED)
_________________________________________________________________
EARLY RETIREMENTS OF DEBT. During the nine-month period ended
September 30, 1994, the Company repurchased approximately $118.7
million aggregate principal amount of the 9 7/8% first mortgage
notes associated with The Mirage and Treasure Island. The cost
of the repurchases was provided by internal cash flows and
borrowings under the bank credit facilities.
In connection with these retirements and the write-off of the
unamortized financing costs associated with the previous bank
credit facility, during the nine-month period ended September 30,
1994, the Company recorded an extraordinary loss of $7.3 million,
net of applicable income tax benefits of $4.0 million.
During October and early November 1994, the Company repurchased
an additional $55.4 million principal amount of the 9 7/8% notes
and $15.0 million face amount ($10.3 million accreted value) of
the zero coupon first mortgage notes also associated with The
Mirage and Treasure Island. The retirements resulted in an
extraordinary loss of $3.1 million, net of applicable income
tax benefits of $1.6 million, which will be reflected in the
Company's 1994 fourth quarter results. The cost of the
repurchases was provided by borrowings under the New Facility
and internal cash flows.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED
SEPTEMBER 30, 1994 AND 1993
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Financial Highlights
% Increase
Three months ended September 30 1994 1993 (Decrease)
_________________________________________________________________________________
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Gross revenues $365,769 $252,424 44.9%
Promotional allowances (29,424) (24,292) 21.1%
________________________________________________________________________________
Net revenues 336,345 228,132 47.4%
________________________________________________________________________________
Operating income 74,929 40,988 82.8%
Income before extraordinary item 39,505 17,289 128.5%
Net income 36,732 10,374 254.1%
________________________________________________________________________________
Income per share before extraordinary item $0.42 $0.21 100.0%
Net income per share $0.39 $0.13 200.0%
Average common and dilutive common
equivalent shares (in thousands) 94,448 82,049 15.1%
________________________________________________________________________________
Operating margin* 22.3% 18.0% 4.3pts
Company-wide table games win percentage 22.1% 19.7% 2.4pts
Company-wide occupancy of standard guest rooms 98.9% 99.4% (0.5)pts
________________________________________________________________________________
*Operating income/net revenues.
</TABLE>
Excluding the first quarter of 1987, when the Company recorded an
after-tax gain of approximately $131 million on the sale of its
Atlantic City, New Jersey hotel-casino, net income during the
1994 third quarter set a new quarterly record for the Company.
This record exceeded similar records set in both the first and
second quarters of this year. The 1994 third quarter was also
the Company's sixth consecutive quarter of year-to-year earnings
growth before preopening expense and extraordinary items.
Results at The Mirage were strong during the quarter. Gross
revenues increased 9.1% and operating income reached record
levels. Operating income exceeded the previous record by 22.9%,
and increased 44.4% over the 1993 third quarter.
Treasure Island, which opened on October 26, 1993, also set a
new record, reporting gross revenues during the quarter of $94.1
million and operating income of $19.4 million. This reflects
an increase of 5.4% and 40.2%, respectively, over the 1994
second quarter.
The Golden Nugget in downtown Las Vegas had one of its best
quarters in its 48-year history, despite competition from the new
resorts on the Las Vegas Strip and the closing in mid-September
of Fremont Street for construction of The Fremont Street
Experience. Compared to the third quarter of 1993, the Golden
Nugget's gross revenues increased 5.9% and its operating income
increased 20.2%.
The Golden Nugget-Laughlin performed reasonably well in its
seasonally slowest quarter, amidst difficult market conditions.
The Laughlin market appears to have been adversely affected by
the new competition in Las Vegas and the capacity addition by a
major Laughlin competitor. As a result, the Golden Nugget-
Laughlin reported a 4.0% decline in gross revenues and a 14.5%
decline in operating income versus the 1993 third quarter.
-8-
<PAGE>
The Company's 1994 third quarter results were assisted by a
somewhat higher than historical table games win percentage. The
Company-wide table games win percentage during the quarter was
22.1%, versus 19.7% in the 1993 third quarter and 19.3% for the
full year 1993. Due to a somewhat different mix of business,
Treasure Island, as expected, tends to have a lower table games
win percentage than the Company's overall average. Excluding
Treasure Island, the Company-wide table games win percentage was
23.3%, versus 19.7% in the prior-year quarter. By comparison,
excluding Treasure Island, the Company-wide table games win
percentage for the full year 1993 and 1992 was 19.4% and 19.5%,
respectively.
Table games activity was also up strongly during the quarter.
The Company's overall table games drop, excluding Treasure
Island, grew by 5.4% over the 1993 third quarter. Including
Treasure Island, table games drop was up 29.4%. Slot revenues
showed similar improvement during the quarter. Including and
excluding Treasure Island, the Company's overall slot win
increased by 41.5% and 4.6%, respectively, over the 1993 quarter.
Gross non-casino revenues, including Treasure Island, grew by
47.4% over the 1993 third quarter and comprised 45.4% of the
Company's overall gross revenues. Excluding Treasure Island,
gross non-casino revenues declined by 1.9%. This decline
reflects the absence of the revenues from Cirque du Soleil. This
world-renowned performance troupe performed in a tent at The
Mirage during 1993 and is now appearing in an all-new show,
"Mystere," at Treasure Island. Excluding the revenues from
Cirque du Soleil from the 1993 third quarter and Treasure
Island from the 1994 quarter, gross non-casino revenues
increased by 1.2%.
The Company's standard guest rooms continued to operate at very
near full occupancy during the quarter, notwithstanding a 55%
increase in the Company's available standard guest rooms with the
addition of Treasure Island.
Management's ongoing efforts to improve the Company's balance
sheet and reduce its overall cost of capital through early
retirements and refinancing of higher cost debt contributed
significantly to the improvement in net income. Interest cost,
net of amounts capitalized, declined by $3.5 million, or 24.4%,
from the 1993 period.
The improvement in earnings per share was realized despite a
15.1% increase in the average number of common and dilutive
common equivalent shares. This increase principally reflects the
November 1993 public offering of 13,750,000 shares of common
stock.
The Mirage
<TABLE>
<CAPTION>
Three months ended September 30 1994 1993 % Increase
_______________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Gross revenues $202,866 $185,913 9.1%
Net revenues 185,655 167,373 10.9%
Operating income 55,444 38,389 44.4%
Operating margin 29.9% 22.9% 7.0pts
_______________________________________________________________________
</TABLE>
The substantial growth in The Mirage's operating results
principally reflects a $17.7 million, or 28.7%, increase in table
games revenues representing an improvement in drop and a higher
than historical average win percentage. The Mirage's table
games win percentage was 24.8%, versus 20.8% in the 1993 third
quarter and 20.4% for the full year 1993. Slot revenues also
increased by 6.7% despite the increase in competition since the
1993 quarter. Management attributes the improvement in part to
the completion early in the 1994 second quarter of a program
to install new upgraded slot machines at The Mirage.
-9-
<PAGE>
Due to the absence of the revenues from Cirque du Soleil, gross
non-casino revenues were down slightly from the 1993 third
quarter. The Mirage's standard guest rooms continued to operate
at near full occupancy during the quarter-99.6% versus 99.9% in
the 1993 period.
The improvement in the operating margin primarily reflects lower
payroll, advertising and depreciation costs and expenses, coupled
with the improved table games win percentage.
Treasure Island
<TABLE>
<CAPTION>
Three months ended September 30 1994
___________________________________________________________________
(Dollars in thousands)
<S> <C>
Gross revenues $94,075
Net revenues 88,191
Operating income 19,435
Operating margin 22.0%
___________________________________________________________________
</TABLE>
As mentioned previously, Treasure Island achieved record-setting
results in its third full quarter of operation. Casino revenues
and gross non-casino revenues totaled $38.5 million and $55.6
million, respectively. Occupancy of its standard guest rooms was
99.0%.
The improvement in operating results over those of the first and
second quarters principally reflects higher revenues in
virtually all departments.
Golden Nugget
<TABLE>
<CAPTION>
Three months ended September 30 1994 1993 % Increase
_____________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Gross revenues $53,275 $50,302 5.9%
Net revenues 48,428 46,058 5.1%
Operating income 10,060 8,371 20.2%
Operating margin 20.8% 18.2% 2.6pts
_____________________________________________________________________
</TABLE>
The growth in the Golden Nugget's operating results reflects
increases in both casino and non-casino revenues. Slot revenues
were up 7.1% over the 1993 third quarter, principally accounting
for the increase in casino revenues. Most of the slot machines
at the Golden Nugget were also upgraded during the 1994 second
quarter, which management believes contributed to the
improvement in revenues. Table games revenues were also up
5.8% reflecting an improvement in the win percentage.
The increase in gross non-casino revenues is principally due to
the additional revenues from the popular new production show
"Country Fever" that opened on June 16 in the showroom at the
Golden Nugget.
As discussed previously, Fremont Street in downtown Las Vegas was
closed in mid-September for construction of The Fremont Street
Experience. This project is being developed by the Golden Nugget
and a group of other downtown casinos in order to compete more
effectively with the Strip hotel-casinos. The Fremont Street
Experience will tie together the casinos along Fremont Street,
creating a pedestrian mall environment. A computerized light
show will feature a choreographed production of light and sound
within the 4 1/2-acre space frame structure. The streetscape
will include retailing kiosks and themed special events to bring
tourists and local residents to the downtown area. The Fremont
Street Experience will also include a 1,500-vehicle parking
garage, which is much needed in downtown Las Vegas, and
approximately 38,000 square feet of additional retail space. The
project is scheduled to be completed in September 1995.
-10-
<PAGE>
Golden Nugget-Laughlin
<TABLE>
<CAPTION>
Three months ended September 30 1994 1993 % (Decrease)
________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Gross revenues $15,553 $16,209 (4.0)%
Net revenues 14,071 14,701 (4.3)%
Operating income 1,156 1,352 (14.5)%
Operating margin 8.2% 9.2% (1.0)pts
________________________________________________________________________
</TABLE>
The decline in the Golden Nugget-Laughlin's operating results is
principally the result of a reduction in slot and table games
revenues. Gross non-casino revenues were up slightly over the
1993 third quarter.
As discussed previously, the Laughlin market has become very
competitive in recent months. In addition to the new competition
in Las Vegas and new casinos on Indian reservations in Arizona,
a major competitor in Laughlin added substantially to the guest
room base in October 1993. This additional capacity came in a
period when there were no significant enhancements to the
city's overall tourism experience. As a result, several
Laughlin casinos have reported sharp declines in their operating
results. Hotel room occupancy at the Golden Nugget-Laughlin,
however, remained strong during the 1994 third quarter at 94.4%.
Other Factors Affecting Earnings
Corporate expense rose $4.0 million, or 56.7%, principally
reflecting additional costs associated with the Company's
continuing evaluation and pursuit of potential opportunities in
new and emerging gaming jurisdictions.
Due to significantly lower levels of debt and a lower average
cost of borrowings, the Company's interest cost declined by $10.1
million, or 43.8%, compared with the 1993 third quarter. The
Company's total debt (including current maturities) was $440.5
million at September 30, 1994- a 50.8% decline from the $895.7
million outstanding at September 30, 1993.
The construction of Treasure Island was substantially completed
in October 1993. As a result, a much smaller portion of the
Company's interest cost is being capitalized in 1994 than in
1993. Nevertheless, interest cost, net of amounts capitalized,
declined by 24.4%.
The Company owns a 50% interest in an $8.0 million joint venture
that was awarded an exclusive concession to operate a casino near
Iguazu Falls, Argentina, one of South America's leading tourist
attractions. The new facility, named "Casino Iguazu," opened on
July 6, 1994. The "Other, net" caption in the 1994 third quarter
includes a $1.6 million charge representing the Company's
proportionate share of the preopening costs associated with the
new facility.
Also included in the "Other, net" caption in the 1994 period is a
$1.4 million loss incurred in connection with the sale of certain
non-operating assets.
The Company's effective income tax rate, including the tax
benefits associated with the extraordinary losses described
below, increased to 36.2%, versus 35.0% in the prior-year period.
This increase is due to decreases in the deductibility of
certain expenses.
In the third quarter of both years, some of the Company's more
expensive debt was retired prior to its scheduled maturity.
Although management believes that these early retirements were
financially beneficial for the Company, the repurchase premiums
paid and the write-off of unamortized debt issue costs resulted
in extraordinary charges in both periods.
-11-
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE NINE-MONTH PERIODS ENDED
SEPTEMBER 30, 1994 AND 1993
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Financial Highlights
% Increase
Nine months ended September 30 1994 1993 (Decrease)
________________________________________________________________________________
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Gross revenues $1,030,802 $744,332 38.5%
Promotional allowances (87,590) (70,321) 24.6%
________________________________________________________________________________
Net revenues 943,212 674,011 39.9%
________________________________________________________________________________
Operating income 180,069 113,932 58.0%
Income before extraordinary item 93,015 45,666 103.7%
Net income 85,678 36,647 133.8%
________________________________________________________________________________
Income per share before extraordinary item $0.98 $0.56 75.0%
Net income per share $0.90 $0.45 100.0%
Average common and dilutive common
equivalent shares (in thousands) 94,715 80,686 17.4%
________________________________________________________________________________
Operating margin 19.1% 16.9% 2.2pts
Company-wide table games win percentage 19.2% 19.3% (0.1)pts
Company-wide occupancy of standard guest rooms 98.7% 97.9% 0.8pts
________________________________________________________________________________
</TABLE>
Led by the success of Treasure Island, the Company's operating
results improved substantially over the 1993 nine-month period.
Treasure Island contributed gross revenues and operating income
of $271.7 million and $47.9 million, respectively.
The Mirage also made a significant contribution to the
improvement in earnings. Its gross revenues and operating income
were up $15.8 million and $22.0 million, respectively. Results
at the Golden Nugget properties were nearly flat compared with
the 1993 nine-month period.
The Company-wide table games win percentage was down slightly
from the prior-year period. As discussed previously, Treasure
Island has been operating, as expected, at a somewhat lower win
percentage than the Company's overall average. Excluding
Treasure Island, the Company-wide table games win percentage was
19.9%, versus 19.3% in the 1993 nine-month period. Table games
activity, excluding Treasure Island, was up 3.8% over the prior-
year period.
The Company's overall slot and gross non-casino revenues,
excluding Treasure Island, were relatively unchanged compared
with the 1993 period. As discussed earlier, Cirque du Soleil
performed at The Mirage during 1993, and is now appearing in an
all-new show at Treasure Island. Excluding the Cirque du Soleil
revenues from the 1993 period and Treasure Island from the 1994
period, gross non-casino revenues were up 2.7%.
Even with the additional room inventory, the Company's standard
guest rooms remained nearly 100% occupied throughout the period.
Company-wide occupancy of standard guest rooms was 98.7%, up
from the 97.9% experienced during the 1993 period.
Interest cost, net of amounts capitalized, declined $14.1
million, or 28.6%, reflecting the effect of management's ongoing
efforts to reduce the Company's overall cost of capital.
-12-
<PAGE>
The Mirage
<TABLE>
<CAPTION>
Nine months ended September 30 1994 1993 % Increase
_________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Gross revenues $556,221 $540,454 2.9%
Net revenues 505,062 487,327 3.6%
Operating income 126,558 104,532 21.1%
Operating margin 25.1% 21.5% 3.6pts
_________________________________________________________________________
</TABLE>
The substantial improvement in The Mirage's operating results
reflects an $18.4 million, or 6.5%, increase in casino revenues.
This increase is attributable to a 10.4% growth in table games
revenues resulting principally from higher levels of activity.
With the absence of the Cirque du Soleil revenues from the 1994
period, gross non-casino revenues declined $2.6 million, or 1.0%.
Excluding the Cirque du Soleil revenues from the 1993 period,
gross non-casino revenues grew by $7.3 million, or 3.0%, over the
prior-year period. This improvement represents increases in
virtually every category. Most notably, room revenues increased
$4.3 million, or 4.7%, reflecting an increase in both occupancy
and the average room rate. Occupancy of The Mirage's standard
guest rooms was 98.8%, versus 98.4% in the 1993 nine-month
period.
Treasure Island
<TABLE>
<CAPTION>
Nine months ended September 30 1994
___________________________________________________________________
(Dollars in thousands)
<S> <C>
Gross revenues $271,691
Net revenues 253,636
Operating income 47,928
Operating margin 18.9%
___________________________________________________________________
</TABLE>
Treasure Island's gross revenues during the nine-month period
consisted of casino and non-casino revenues of $112.9 million and
$158.8 million, respectively. Occupancy of standard guest rooms
was 99.3%.
Golden Nugget
<TABLE>
<CAPTION>
% Increase
Nine months ended September 30 1994 1993 (Decrease)
_____________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Gross revenues $152,937 $154,093 (0.8)%
Net revenues 139,192 141,369 (1.5)%
Operating income 27,273 26,304 3.7%
Operating margin 19.6% 18.6% 1.0pts
______________________________________________________________________
</TABLE>
The Golden Nugget's overall operating results were relatively
equal to those of the prior-year period. Casino revenues
declined $2.2 million, or 2.3%, which was largely offset by a
$1.0 million, or 1.8%, increase in gross non-casino revenues.
Lower table games revenues caused by a decline in both activity
and the win percentage accounted for substantially all of the
decline in casino revenues. Slot revenues showed improvement
over the 1993 period.
-13-
<PAGE>
The increase in gross non-casino revenues largely reflects the
revenues from the new Country Fever show. Room revenues also
showed a modest improvement during the period, reflecting an
increase in occupancy. The Golden Nugget's standard guest rooms
were 98.0% occupied during the 1994 period, compared with 97.6%
in the prior-year period.
Offsetting the decline in revenues, more stringent cost controls
resulted in an improvement in the operating margin and a 3.7%
increase in operating income.
Golden Nugget-Laughlin
<TABLE>
<CAPTION>
Nine months ended September 30 1994 1993 % Increase
________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Gross revenues $49,953 $49,785 0.3%
Net revenues 45,322 45,315 0.0%
Operating income 5,884 5,358 9.8%
Operating margin 13.0% 11.8% 1.2pts
________________________________________________________________________
</TABLE>
Similar to the Golden Nugget in Las Vegas, operating results at
the Golden Nugget-Laughlin were substantially unchanged compared
with the 1993 nine-month period.
Occupancy of standard guest rooms was up over the prior-year
period, 96.3% versus 94.8%. Nevertheless, due to the recent
addition to the Laughlin room base discussed previously, guest
room prices in the market have declined. As a result, room
revenues were down slightly.
The improvement in the Golden Nugget-Laughlin's operating margin
principally reflects a decline in depreciation and amortization
expense and payroll costs.
Other Factors Affecting Earnings
The factors discussed previously with respect to the three-month
periods had a similar effect on corporate expense, interest cost,
interest capitalized and other, net when comparing the nine-month
periods.
The Company recorded an extraordinary loss on early retirements
of debt, net of applicable income tax benefits, of $7.3 million
in the 1994 nine-month period, versus $9.0 million in the 1993
period.
Also due to the factors discussed earlier in comparing the three-
month periods, the Company's effective income tax rate, including
the tax benefits associated with the extraordinary losses,
increased to 36.5%, versus 33.1% in the prior-year period.
CAPITAL RESOURCES AND LIQUIDITY
Funds from Operations
The Company's operations provided its principal source of funds
during the 1994 period for capital expenditures, debt
retirements, investments and other corporate requirements. The
other major source was amounts available under the Company's new
$525 million bank credit facility. The new bank facility has
also provided the Company with the opportunity to carry lower
working capital balances and still maintain adequate liquidity
and financial flexibility.
-14-
<PAGE>
Net cash provided by operating activities was $192.1 million
during the 1994 nine-month period, representing a $45.5 million,
or 31.0%, increase over the prior-year period. This improvement
principally reflects Treasure Island's significant contribution
to the Company's operations.
Capital Spending
Capital spending during the 1994 nine-month period was
considerably less than that of the 1993 period principally due to
the substantial completion of Treasure Island in October 1993.
The 1993 nine-month period also includes $70.0 million associated
with the acquisition of the Dunes site.
Capital expenditures of $58.2 million during the 1994 period
primarily reflect the completion of certain projects at Treasure
Island and amounts expended to upgrade the Company's slot
machines. The balance principally consists of maintenance
capital spending and amounts associated with the Dunes site.
Management believes in maintaining the Company's facilities in
first-class condition. Maintenance capital spending for its four
properties is anticipated to aggregate $30 million per year.
The Company plans to begin refurbishing most of the standard
guest rooms at The Mirage in early 1995. The project will be
undertaken in a manner designed to minimize the disruption to
guests and employees and any adverse effect on the Company's
operating results. The scope of the project is still uncertain,
but it is expected to cost in excess of $25 million.
Future Expansion
The Company recently announced plans to build a new luxury
casino-based entertainment resort on the north end of the Dunes
site at the corner of Flamingo Road and the Strip. The new
resort, to be named "Beau Rivage," will be approximately the same
size as The Mirage, with approximately 3,000 guest rooms and a
casino of 85,000 to 100,000 square feet.
Construction of the project is currently expected to begin in
mid-1995 and be completed by late 1997. Although the
construction plans and budget are still preliminary and are
subject to change, the total cost of the project is anticipated
to be between $700 million and $900 million, exclusive of land
costs.
The Company has also signed a letter of intent with the
principals of the Gold Strike, Nevada Landing and Railroad Pass
hotel-casinos in Jean, Henderson and Boulder City, Nevada ("Gold
Strike") to form a joint venture to develop a new themed hotel-
casino resort on approximately 44 acres at the south end of the
Dunes site near Tropicana Avenue. The resort will have more than
400 feet of frontage on the Strip and will feature approximately
3,000 guest rooms and an 80,000- to 100,000-square foot casino.
The resort will be designed and marketed to appeal to the value-
minded Las Vegas visitor.
The Company and Gold Strike will each own 50% of the joint
venture. Gold Strike will supervise the design and construction
and will manage and operate the resort without fee.
Construction of the project is expected to begin in early 1995
and be completed in mid-1996. Based on preliminary estimates,
the total cost of the project is anticipated to be between $250
million and $300 million. This amount includes the estimated
value of the land, which the Company will contribute for its
equity interest in the venture.
-15-
<PAGE>
The Company and Gold Strike recently obtained a commitment from a
group of commercial banks to provide a $175 million reducing
revolving loan to the joint venture to fund a substantial portion
of the construction costs. The bank loan, consummation of which
is subject to certain conditions, will be collateralized by a
first mortgage on the joint venture's assets and will be non-
recourse to the Company. The balance of the construction costs
will be provided primarily by an equity contribution from Gold
Strike.
The Company continues to evaluate and pursue potential
opportunities in new and emerging gaming jurisdictions. As part
of these efforts, earlier this year the Company had proposed
projects with local joint venture partners in Miami Beach,
Florida, Houston, Texas and Vancouver, British Columbia. Voters
recently failed to approve a referendum which would have
legalized casino gaming in Florida. Casino enabling
legislation in Texas and British Columbia necessary to
permit these projects to proceed has thus far not been enacted.
There can be no assurance that management will determine to
proceed with any new projects. Conversely, it is also possible
that management will decide to undertake new projects, in
addition to Beau Rivage and the Gold Strike joint venture,
which could require significant financing.
Financing and Liquidity
During the 1994 nine-month period, the Company expended $147.8
million to further reduce its outstanding indebtedness. Such
expenditures consisted principally of the March 15 maturity of
the $27.0 million principal amount of floating rate first
mortgage notes and the early retirement of $118.7 million
principal amount of the 9 7/8% first mortgage notes ($7.3 million
of which was funded in early October 1994).
During October and early November 1994, the Company expended
approximately $69.3 million to repurchase an additional $55.4
million principal amount of the 9 7/8% notes and $15.0 million
face amount of the zero coupon first mortgage notes. The cost of
the repurchases was provided by borrowings under the Company's
bank credit facility and internal cash flows.
At September 30, 1994, the Company had cash and cash equivalents
of $42.4 million and net working capital of $24.9 million. After
giving effect to borrowings for the October and early November
debt repurchases discussed above, at November 11, 1994, the
Company had $443.0 million available under the bank credit
facility.
Management believes that the Company's internally generated cash
flow, existing cash reserves and amounts available under its bank
credit facility will be sufficient to fund its projected capital
expenditure needs and future debt obligations.
-16-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11 Mirage Resorts, Incorporated - Computation of Net Income
Per Share of Common Stock for the three-month and nine-
month periods ended September 30, 1994 and 1993.
15 Letter from independent public accountants acknowledging
awareness of the use of their report dated November 11,
1994 in the Registrant's registration statements.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the three-month
period ended September 30, 1994.
-17-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Mirage Resorts, Incorporated
November 11, 1994 by: DANIEL R. LEE
_________________ ________________________
Date Daniel R. Lee
Senior Vice President -
Finance and Development,
Chief Financial Officer
and Treasurer (Principal
Financial Officer)
-18-
<TABLE>
<CAPTION>
EXHIBIT 11
MIRAGE RESORTS, INCORPORATED
COMPUTATION OF NET INCOME PER SHARE
OF COMMON STOCK
Three Months Nine Months
Ended September 30, Ended September 30,
__________________________ _________________________
1994 1993 1994 1993
__________ _________ __________ __________
<S> <C> <C> <C> <C>
Weighted-average shares outstanding 90,950,529 75,895,377 90,840,068 75,469,090
Assumed exercise of options at
average market price 3,497,474 6,153,763 3,875,141 5,216,570
___________ ___________ ___________ ___________
Weighted-average shares outstanding
and common stock equivalents used
in the computation of primary
earnings per share 94,448,003 82,049,140 94,715,209 80,685,660
Additional shares issuable upon
the assumed exercise of options
at period-end market price 393,423 1,084,157 131,141 2,021,350
___________ ___________ ___________ ___________
Total shares outstanding assuming
full dilution 94,841,426 83,133,297 94,846,350 82,707,010
=========== =========== =========== ===========
Net income $36,732,000 $10,374,000 $85,678,000 $36,647,000
=========== =========== =========== ===========
Primary earnings per share $0.39 $0.13 $0.90 $0.45
===== ===== ===== =====
Fully diluted earnings per share $0.39 $0.12 $0.90 $0.44
===== ===== ===== =====
</TABLE>
EXHIBIT 15
November 11, 1994
To Mirage Resorts, Incorporated:
We are aware that Mirage Resorts, Incorporated has incorporated
by reference in its Registration Statements on Form S-3 (File No.
2-87138), on Form S-3 (File No. 2-92051), on Form S-3 (File No.
2-96534), on Form S-3 (File No. 33-5693), on Form S-8 (File No.
33-16037), on Form S-3 (File No. 33-16572), on Form S-8 (File No.
33-48394), and on Form S-8 (File No. 33-63804), its Form 10-Q for
the quarter ended September 30, 1994, which includes our report
dated November 11, 1994 covering the unaudited interim
financial information contained therein. Pursuant to Regulation
C of the Securities Act of 1933, that report is not considered a
part of these registration statements or a report prepared or
certified by our firm within the meaning of Sections 7 and 11 of
the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30,
1994 AND THE RELATED UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR
THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 42,419
<SECURITIES> 0
<RECEIVABLES> 109,800
<ALLOWANCES> 41,165
<INVENTORY> 26,233
<CURRENT-ASSETS> 174,674
<PP&E> 1,788,448
<DEPRECIATION> 385,678
<TOTAL-ASSETS> 1,668,914
<CURRENT-LIABILITIES> 149,736
<BONDS> 435,861
<COMMON> 940
0
0
<OTHER-SE> 1,000,561
<TOTAL-LIABILITY-AND-EQUITY> 1,668,914
<SALES> 0
<TOTAL-REVENUES> 943,212
<CGS> 0
<TOTAL-COSTS> 542,108
<OTHER-EXPENSES> 75,872
<LOSS-PROVISION> 15,418
<INTEREST-EXPENSE> 35,202
<INCOME-PRETAX> 146,195
<INCOME-TAX> 53,180
<INCOME-CONTINUING> 93,015
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<EXTRAORDINARY> (7,337)
<CHANGES> 0
<NET-INCOME> 85,678
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.90
</TABLE>
