UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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. 01-6697
Mirage Resorts, Incorporated
_________________________________________________________________
(Exact name of Registrant as specified in its charter)
Nevada 88-0058016
_______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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, $0.004 par value, 179,540,607 shares outstanding as
of May 12, 1998.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited condensed consolidated financial information as of
March 31, 1998 and for the three-month periods ended March 31,
1998 and 1997 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
We have reviewed the accompanying condensed consolidated balance
sheet of Mirage Resorts, Incorporated (a Nevada corporation) and
subsidiaries (the "Company") as of March 31, 1998, and the
related condensed consolidated statements of income and cash
flows for the three-month periods ended March 31, 1998 and 1997.
These condensed consolidated financial statements are the
responsibility of the Company's management.
We conducted our reviews 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 reviews, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Mirage
Resorts, Incorporated and subsidiaries as of December 31, 1997,
and the related consolidated statements of income, stockholders'
equity and cash flows for the year then ended (not presented
herein), and, in our report dated March 16, 1998, we expressed an
unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet of Mirage Resorts,
Incorporated and subsidiaries as of December 31, 1997, is fairly
stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
May 8, 1998
2
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
BALANCE SHEETS
AT MARCH 31, At December 31,
1998 1997
-----------------------------------------------------------------------------------------
(In thousands) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 139,506 $ 99,337
Receivables, net of allowance for doubtful accounts
of $47,692 and $42,477 75,099 101,635
Inventories 29,808 29,179
Prepaid expenses and other 89,588 70,771
-----------------------------------------------------------------------------------------
Total current assets 334,001 300,922
Property and equipment, net of accumulated depreciation
of $657,433 and $633,563 1,457,482 1,455,125
Construction in progress 1,438,580 1,261,084
Other assets, net 353,772 330,219
-----------------------------------------------------------------------------------------
$3,583,835 $3,347,350
=========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 115,703 $ 151,993
Accrued expenses 118,236 104,467
Current maturities of long-term debt 1,020 927
-----------------------------------------------------------------------------------------
Total current liabilities 234,959 257,387
Long-term debt, net of current maturities 1,612,011 1,396,728
Other liabilities, including deferred income taxes
of $172,039 and $167,415 185,487 180,751
-----------------------------------------------------------------------------------------
Total liabilities 2,032,457 1,834,866
-----------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity
Common stock: 179,489 and 179,422 shares outstanding 940 940
Additional paid-in capital 735,038 734,547
Retained earnings 1,101,872 1,063,793
Treasury stock, at cost: 55,659 and 55,726 shares (286,472) (286,796)
-----------------------------------------------------------------------------------------
Total stockholders' equity 1,551,378 1,512,484
-----------------------------------------------------------------------------------------
$3,583,835 $3,347,350
=========================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
STATEMENTS OF INCOME (UNAUDITED)
-------------------------------------------------------------------------------------------------
Three Months Ended March 31 1998 1997
-------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C>
Gross revenues $377,932 $394,399
Less - promotional allowances (35,328) (32,360)
-------------------------------------------------------------------------------------------------
342,604 362,039
-------------------------------------------------------------------------------------------------
Costs and expenses
Casino-hotel operations 205,646 202,918
General and administrative 39,981 38,416
Depreciation and amortization 22,584 21,356
Corporate expense 8,485 8,612
-------------------------------------------------------------------------------------------------
276,696 271,302
-------------------------------------------------------------------------------------------------
Operating income 65,908 90,737
-------------------------------------------------------------------------------------------------
Other income (expense)
Interest cost (29,167) (12,726)
Interest capitalized 23,825 9,565
Other, including interest income 4,857 144
-------------------------------------------------------------------------------------------------
(485) (3,017)
-------------------------------------------------------------------------------------------------
Income before income taxes and extraordinary item 65,423 87,720
Provision for income taxes 23,823 31,031
-------------------------------------------------------------------------------------------------
Income before extraordinary item 41,600 56,689
Extraordinary item - loss on early retirement of debt,
net of applicable income tax benefit (3,521) (2,225)
-------------------------------------------------------------------------------------------------
Net income $ 38,079 $ 54,464
=================================================================================================
Income per share before extraordinary item
Basic $ 0.23 $ 0.32
Diluted 0.22 0.30
Net income per share
Basic $ 0.21 $ 0.31
Diluted 0.20 0.28
Weighted-average common shares outstanding (used in the
computation of basic earnings per share) 179,443 178,454
Effect of common stock options under the treasury stock method 13,270 13,522
-------------------------------------------------------------------------------------------------
Weighted-average common and common equivalent shares
(used in the computation of diluted earnings per share) 192,713 191,976
=================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
---------------------------------------------------------------------------------------------
Three months ended March 31 1998 1997
---------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Cash flows from operating activities
Net income $ 38,079 $ 54,464
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for losses on receivables 4,638 2,695
Depreciation and amortization of property and equipment,
including amounts reported as corporate expense 25,853 23,665
Equity in undistributed earnings of Monte Carlo (7,439) (7,408)
Amortization of debt discount and issuance costs 3,330 3,741
Loss on early retirement of debt 5,418 3,422
Deferred income taxes 1,068 4,337
Changes in components of working capital pertaining to
operating activities
Decrease in receivables and other current assets 22,294 28,523
Decrease in trade accounts payable and accrued expenses (21,349) (23,743)
Other (257) (3,603)
---------------------------------------------------------------------------------------------
Net cash provided by operating activities 71,635 86,093
---------------------------------------------------------------------------------------------
Cash flows from investing activities
Capital expenditures (232,282) (192,149)
Proceeds from sales of property and equipment 26,490 3,774
Preopening costs (12,525) (2,778)
Other (19,009) 7,439
---------------------------------------------------------------------------------------------
Net cash used for investing activities (237,326) (183,714)
---------------------------------------------------------------------------------------------
Cash flows from financing activities
Net bank credit facility and commercial paper borrowings 47,647 99,317
Issuance of long-term debt 394,728 -
Retirement of long-term debt (237,110) -
Other 595 701
---------------------------------------------------------------------------------------------
Net cash provided by financing activities 205,860 100,018
---------------------------------------------------------------------------------------------
Cash and cash equivalents
Increase for the period 40,169 2,397
Balance, beginning of period 99,337 81,908
---------------------------------------------------------------------------------------------
Balance, end of period $ 139,506 $ 84,305
=============================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
FINANCIAL STATEMENTS (UNAUDITED)
-----------------------------------------------------------------
NOTE 1 - COMPANY DESCRIPTION AND BASIS OF PRESENTATION
Mirage Resorts, Incorporated (the "Company"), a Nevada
corporation, through wholly owned subsidiaries, owns and operates
some of the most successful casino-based entertainment resorts in
the world. These resorts 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. The Company
is also a 50% partner in a joint venture that owns and operates
the Monte Carlo Resort & Casino ("Monte Carlo") on the Las Vegas
Strip.
The Company is currently constructing two additional wholly owned
hotel-casino resorts. Bellagio, an elegant 3,005-guest room
luxury resort, is being constructed on approximately 90 acres of
a 120-acre site on the Las Vegas Strip. Beau Rivage, a luxurious
1,780-guest room beachfront resort, is being constructed on
approximately 23 acres in Biloxi, Mississippi. Bellagio is
scheduled to open in October 1998 and Beau Rivage is expected to
open in the first quarter of 1999.
The accompanying condensed consolidated financial statements have
been prepared in accordance with the accounting policies
described in the Company's 1997 Annual Report on Form 10-K (the
"1997 Annual Report") 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, 1997 contained herein was derived from audited
financial statements, but does not include all disclosures
included in the 1997 Annual Report and applicable under 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
results for the 1998 interim period are not necessarily
indicative of expected results for the full year.
Certain amounts in the 1997 condensed consolidated financial
statements have been reclassified to conform with the 1998
presentation. These reclassifications had no effect on the
Company's net income.
6
<PAGE>
NOTE 2 - LONG-TERM DEBT
ISSUANCE. On February 4, 1998, the Company received net proceeds
of approximately $394.7 million (after deducting original issue
discount and debt issuance costs) from the issuance of $200
million principal amount of 6 5/8% notes due February 1, 2005
and $200 million principal amount of 6 3/4% notes due February
1, 2008. The notes were issued pursuant to a "shelf" registration
statement filed with the Securities and Exchange Commission in
October 1997 that allows the Company to issue a total of up to
$750 million of debt or equity securities or any combination
thereof.
RETIREMENTS. On March 15, 1998, the Company repaid at maturity
the $133 million principal amount of its zero coupon first
mortgage notes and redeemed all $100 million principal amount of
its 9 1/4% senior subordinated notes. The 9 1/4% notes,
scheduled to mature in March 2003, were redeemed at 104.11% of
the principal amount. The call premium and write-off of the
unamortized debt issuance costs associated with the 9 1/4% notes
resulted in an extraordinary loss of $3.5 million ($0.02 per
share basic and diluted), net of applicable income tax benefit of
$1.9 million.
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
MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Three months ended March 31 1998 1997
----------------------------------------------------------------------------------
(Dollars in thousands, except per share and room rate amounts)
<S> <C> <C>
Gross revenues
The Mirage $203,004 $217,002
Treasure Island 100,568 101,314
Golden Nugget 51,319 52,777
Golden Nugget-Laughlin 15,602 15,898
----------------------------------------------------------------------------------
370,493 386,991
Equity in earnings of Monte Carlo 7,439 7,408
----------------------------------------------------------------------------------
$377,932 $394,399
----------------------------------------------------------------------------------
Net revenues
The Mirage $184,094 $198,674
Treasure Island 90,895 94,020
Golden Nugget 46,470 47,748
Golden Nugget-Laughlin 13,706 14,189
----------------------------------------------------------------------------------
335,165 354,631
Equity in earnings of Monte Carlo 7,439 7,408
----------------------------------------------------------------------------------
$342,604 $362,039
----------------------------------------------------------------------------------
Operating profit
The Mirage $ 41,755 $ 59,136
Treasure Island 16,819 22,529
Golden Nugget 6,755 8,269
Golden Nugget-Laughlin 1,625 2,007
----------------------------------------------------------------------------------
66,954 91,941
Equity in earnings of Monte Carlo 7,439 7,408
Corporate expense (8,485) (8,612)
----------------------------------------------------------------------------------
$ 65,908 $ 90,737
----------------------------------------------------------------------------------
Operating margin (operating profit/net revenues)
The Mirage 22.7% 29.8%
Treasure Island 18.5% 24.0%
Golden Nugget 14.5% 17.3%
Golden Nugget-Laughlin 11.9% 14.1%
Company-wide (before Monte Carlo and corporate expense) 20.0% 25.9%
----------------------------------------------------------------------------------
Income before extraordinary item $ 41,600 $ 56,689
Net income $ 38,079 $ 54,464
----------------------------------------------------------------------------------
Income per share before extraordinary item
Basic $ 0.23 $ 0.32
Diluted 0.22 0.30
Net income per share
Basic $ 0.21 $ 0.31
Diluted 0.20 0.28
----------------------------------------------------------------------------------
Other information (excluding Monte Carlo)
Company-wide table games win percentage 19.8% 20.0%
Company-wide occupancy of standard guest rooms 98.1% 99.4%
Average standard guest room rate (a) $ 89 $ 94
----------------------------------------------------------------------------------
(a) Cash rate (i.e., excluding complimentary accommodations) at the Company's Las
Vegas hotels.
</TABLE>
8
<PAGE>
The Company reported income before extraordinary item of $41.6
million, or $0.22 per share, during the 1998 first quarter,
versus $56.7 million, or $0.30 per share, achieved in the prior-
year period. As expected, earnings during the recent quarter
were impacted by a decline in international baccarat business and
increased competitive pressures in the Las Vegas market. The
Company also experienced a slightly lower table games win
percentage during the 1998 first quarter, as well as additional
costs associated with the upcoming openings of Bellagio and Beau
Rivage. The 1997 first quarter included a pre-tax gain of $3.6
million associated with the sale and exchange of land in Las
Vegas. There were no similar non-recurring gains in the 1998
quarter.
Approximately 10% of the Company's 1997 first quarter net
revenues were attributable to the game of baccarat, versus
approximately 8% in the 1998 period. Baccarat tends to be the
game of choice of certain VIP customers, many of whom reside or
have wealth originating in the Far East. The economies of
certain Asian countries have experienced well-publicized
difficulties over the past several months, with sharp declines in
regional stock markets and devaluation of certain currencies.
The Company's international baccarat business was strong in the
prior-year first quarter and generally remained strong through
January 1998. Such business declined significantly, however, in
February and March. As a result, baccarat revenues in the first
quarter of 1998 declined by 30% from the prior-year period, which
was the principal reason for the 5% decline in the Company's net
operating revenues. Management expects the level of baccarat
play during 1998 to continue to be substantially lower than in
1997 due to the economic situation in the Far East. Excluding
baccarat, the Company's table games revenues were approximately
flat versus the 1997 first quarter. Company-wide slot revenues,
meanwhile, increased by 2% over the prior-year period.
The Las Vegas market experienced a substantial increase in room
inventory during 1997. As a result, city-wide occupancy and
average room rates have declined. Although less affected than
much of its competition, the Company has also experienced a
decline in the average standard room rate and occupancy at its
Las Vegas hotels.
The Bellagio and Beau Rivage projects remain on schedule and on
budget for their respective mid-October 1998 and first quarter
1999 openings. Combined, these two resorts will create
approximately 13,000 new job opportunities. Many of these
positions will be filled through promotion or transfer of
employees from the Company's existing resorts. To ensure a
smooth transition, the Company has begun hiring and training
replacement employees, resulting in higher-than-normal staffing
levels. Management estimates the higher staffing levels reduced
the Company's pre-tax income by $2 million to $3 million during
the 1998 first quarter, and will probably have a similar or
greater impact in the second and third quarters of 1998.
9
<PAGE>
The decline in baccarat business during the 1998 first quarter
occurred principally at The Mirage, accounting for most of the
decline in that resort's revenues and operating income. The
Mirage's table games revenues, excluding baccarat, increased by
2% over the 1997 first quarter and slot revenues were up 9%. The
Mirage's standard guest room occupancy was near 99% during both
first quarters, with a slight decline in the 1998 quarter's
average daily rate.
Treasure Island's gross revenues were approximately $101 million
in the first quarter of both 1998 and 1997. Casino revenues were
relatively flat. Increases in race and sports book revenues and
a small increase in slot revenues were offset by lower table
games revenues resulting from a decline in activity and the win
percentage. Standard guest room occupancy remained strong at
98.7%, versus nearly 100% during the first quarter of 1997.
Increases in competition, however, particularly in Treasure
Island's market segment, resulted in increases in promotional
allowances and expenses and a 4% decline in the average standard
room rate. These factors, together with the higher-than-normal
staffing levels discussed previously, resulted in a decrease in
Treasure Island's net revenues and operating income. The Golden
Nugget-Las Vegas and the Golden Nugget-Laughlin were likewise
affected by competitive market conditions.
Monte Carlo achieved gross revenues of $67.4 million during the
1998 first quarter, exceeding any quarter during 1997.
Nevertheless, promotional allowances and operating expenses at
the resort also increased, resulting in small declines in both
net revenues and operating income. The joint venture, however,
used Monte Carlo's operating cash flow to reduce its total debt
from $165.8 million at March 31, 1997 to $93.2 million at March
31, 1998. As a result of the related decrease in interest
expense, Monte Carlo's contribution to the Company's earnings
increased slightly over the 1997 first quarter.
Interest cost and interest capitalized more than doubled over the
prior-year period, reflecting the Company's growing investment in
its Bellagio and Beau Rivage projects. On March 15, 1998, the
Company repaid at maturity the $133 million principal amount of
its zero coupon first mortgage notes and redeemed prior to
maturity all $100 million principal amount of its 9 1/4% senior
subordinated notes. The zero coupon notes accreted at an
effective interest rate of 11% and represented the Company's only
outstanding secured indebtedness. The 9 1/4% notes, scheduled
to mature in March 2003, were redeemed at 104.11% of the
principal amount. Although redemption of the 9 1/4% notes was
financially advantageous to the Company, the call premium and
write-off of the unamortized debt issuance costs resulted in an
extraordinary loss of $3.5 million, net of applicable income
tax benefit of $1.9 million. The 1997 first quarter included an
extraordinary charge of $2.2 million, net of applicable income
tax benefit of $1.2 million, associated with amending and
increasing the size of the Company's revolving bank credit
facility.
10
<PAGE>
CAPITAL SPENDING, CAPITAL RESOURCES AND LIQUIDITY
Completion of the Bellagio and Beau Rivage projects, by most
measures, will nearly double the size of the Company. The
capital required for such expansion is being provided by the
Company's net operating cash flow, revolving bank credit facility
and commercial paper borrowings and the issuance of long-term
unsecured debt.
During the first quarter of 1998, the Company's existing resorts
contributed net operating cash flow (as shown in the Condensed
Consolidated Statements of Cash Flows) of $71.6 million, versus
$86.1 million in the first three months of 1997. The lower
operating cash flow contribution principally reflects the decline
in the Company's operating income.
Capital expenditures during the first quarter of 1998 totaled
$232.3 million, compared with $192.1 million in the prior-year
period. Capital expenditures during both periods primarily
represent amounts invested in the Bellagio and Beau Rivage
projects. Including land, capitalized interest and preopening
costs, but excluding fine art acquired for display and resale at
Bellagio, Bellagio is expected to cost approximately $1.6 billion
and Beau Rivage is expected to cost approximately $600 million.
Of such amounts, the Company had incurred approximately $1.1
billion associated with Bellagio and approximately $287 million
associated with Beau Rivage at March 31, 1998. In January 1998,
the Company sold four of the works of art acquired for Bellagio
to its Chairman for a total sale price of approximately $25.6
million. The sale price was equal to the amount paid by the
Company for the artwork in the fourth quarter of 1997. The
Company is leasing from its Chairman, on a month-to-month basis,
12 works of fine art (including three of the works purchased
from the Company) for public display at its hotel-casinos. The
monthly rental as a percentage of the total purchase price of
the artwork is substantially less than the Company's current
cost of borrowing.
Further expansion of the Company is currently being planned for
Atlantic City, New Jersey. In January 1998, the City of Atlantic
City conveyed to the Company approximately 180 acres (125 acres
of which are developable) in the Marina area of the City in ex-
change for the Company agreeing to develop a hotel-casino on the
site and undertaking certain other obligations. The Company has
also entered into an agreement with certain State agencies with
respect to the construction and joint funding of road
improvements necessary to improve access to the Marina area. In
connection with such agreement, in October 1997 the Company and
one of the State agencies funded their respective $110 million
and $125 million portions of the $330 million estimated total
cost of the road improvements. The funds were deposited into
escrow accounts and are restricted for construction of the road
improvement project. The remaining $95 million estimated cost of
the project is being provided by the other State agency party to
the agreement. The contractor is currently in the design phase
of the road improvement project, which is being undertaken
pursuant to a fixed-price design/build contract.
11
<PAGE>
Numerous governmental permits must be received and various other
conditions must be satisfied before construction can commence on
the road improvement project and the Company's hotel-casino.
Accordingly, there can be no assurance that the Company will
construct a hotel-casino in Atlantic City or as to the timing or
cost of construction. The Company is currently in the early
design stage of its planned Atlantic City hotel-casino and a
project budget has not yet been developed.
In December 1997, the Company entered into agreements to acquire
Boardwalk Casino, Inc. ("BCI") and certain related assets. The
acquisition will require total cash outlays (including the cost
of previously acquired BCI debt) of approximately $107 million.
The Company had expended approximately $59 million of such
amount at March 31, 1998. Consummation of the BCI acquisition is
subject to a number of conditions, including approval by the
stockholders of BCI and the receipt of requisite approvals from
gaming regulatory authorities. The Company holds proxies covering
approximately 53% of BCI's outstanding shares and has agreed to
vote such shares in favor of the acquisition at the special meet-
ing of BCI shareholders scheduled for May 27, 1998. If the
necessary approvals are obtained, the acquisition is expected to
close in June 1998.
BCI owns and operates the Boardwalk, a hotel-casino on the Las
Vegas Strip between Monte Carlo and Bellagio. The Boardwalk in-
cludes a 33,000-square foot casino and a 653-room hotel currently
being operated under a Holiday Inn -Registered Trademark- fran-
chise license agreement. The acquisition, together with adjacent
land owned by the Company (including a portion of the Bellagio
site not required for Bellagio) and land the Company has agreed
to acquire in an exchange with Monte Carlo, would afford the
Company a 42-acre site with 817 feet of frontage on the Las Vegas
Strip for potential future development between and contiguous to
Bellagio and Monte Carlo. The design, timing and cost of any such
future development is still highly uncertain.
On February 4, 1998, the Company received net proceeds of $394.7
million from the issuance of $200 million principal amount of
6 5/8% unsecured notes due February 2005 and an equal principal
amount of 6 3/4% unsecured notes due February 2008. The notes
were issued pursuant to a "shelf" registration statement filed
with the Securities and Exchange Commission in October 1997 that
allows the Company to issue a total of up to $750 million of
debt or equity securities or any combination thereof. On March
15, 1998, net proceeds from the offering of $237.1 million were
effectively used to retire the zero coupon notes and redeem the
9 1/4% notes discussed previously. At March 31, 1998, bank credit
facility borrowings and the face amount of outstanding commercial
paper notes totaled $665.0 million, leaving approximately $1.1
billion available.
12
<PAGE>
Management believes that existing cash balances, operating cash
flow and available borrowing capacity will provide the Company
with sufficient resources to meet its existing debt obligations
and foreseeable capital expenditure requirements.
RECENTLY ISSUED ACCOUNTING STATEMENT
In April 1998, the Accounting Standards Executive Committee of
the American Institute of Certified Public Accountants issued
Statement of Position No. 98-5 - Reporting on the Costs of
Start-Up Activities ("SOP 98-5"). The provisions of SOP 98-5
are effective for fiscal years beginning after December 15, 1998
and require that the costs associated with start-up activities
(including preopening costs of casinos) be expensed as incurred.
The Company currently capitalizes preopening costs and amortizes
such costs over the 60-day period following opening of the
related facility. As a result, all preopening costs related to
Bellagio, which is scheduled to open in October, should be fully
amortized to expense in the 1998 fourth quarter. As currently
envisioned, the Company plans to adopt the provisions of SOP 98-5
effective January 1, 1999, and all capitalized preopening costs
related to the Beau Rivage and Atlantic City projects, and any
other projects the Company may undertake, will be written off and
reflected as a cumulative effect of change in accounting
principle, net of income tax, in its 1999 first quarter financial
statements.
CERTAIN FORWARD-LOOKING STATEMENTS
Certain information included in this Form 10-Q and other
materials filed or to be filed by the Company with the Securities
and Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the
Company) contains forward-looking statements, within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Such statements include information relating to plans for future
expansion and other business development activities as well as
other capital spending, financing sources and the effects of
regulation (including gaming and tax regulation) and competition.
Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results
in the future and, accordingly, such results may differ from
those expressed in any forward-looking statements made by or on
behalf of the Company. These risks and uncertainties include,
but are not limited to, those relating to development and con-
struction activities, dependence on existing management,
leverage and debt service (including sensitivity to fluctuations
in interest rates), domestic or international economic
conditions, pending litigation, changes in federal or state
tax laws or the administration of such laws and changes in
gaming laws or regulations (including the legalization of gaming
in certain jurisdictions).
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the litigation between the Registrant and
Circus Circus Enterprises, Inc. described under "Legal Proceed-
ings" in Item 3 of the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997. In April 1998, the
New Jersey court denied the Registrant's motion to dismiss or
stay the New Jersey Action and the Nevada court stayed the Nevada
Action for a period of 90 days in deference to the New Jersey
Action. The New Jersey Action is now in the discovery phase.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.1 Second Amendment to Jansen Agreement, dated as of
March 13, 1998, between the Registrant and Avis P.
Jansen, individually, as executrix of the Estate of
Norbert W. Jansen and as Trustee for the Jansen Family
Trust under an Agreement dated July 14, 1993.
10.2 Amendment No. 7, dated as of January 12, 1998, to
Reducing Revolving Loan Agreement, dated as of
December 21, 1994, among Victoria Partners, each Bank
party thereto, The Long-Term Credit Bank of Japan,
Ltd., Los Angeles Agency and Societe Generale, as Co-
Agents, and Bank of America National Trust and Savings
Association, as Administrative Agent (without schedule).
15 Letter from independent public accountants acknowledging
awareness of the use of their report dated May 8, 1998
in the Registrant's registration statements.
27 Financial Data Schedule.
14
<PAGE>
(b) Reports on Form 8-K.
The Registrant filed three Current Reports on Form 8-K
during the three-month period ended March 31, 1998:
(1) In a Form 8-K dated December 22, 1997, under Items 5
and 7, the Registrant reported the execution of a merger
agreement with Boardwalk Casino, Inc. and filed certain
related exhibits.
(2) In a Form 8-K dated January 8, 1998, under Item 5, the
Registrant reported (i) that it had taken title to
certain property in Atlantic City, New Jersey and had
notified Circus Circus Enterprises, Inc. and Boyd
Gaming Corporation of the termination of the
Registrant's previous agreements with each of them, (ii)
certain factors which affected its 1997 fourth quarter
operating results and (iii) a delay in the expected
completion date of Beau Rivage.
(3) In a Form 8-K dated February 2, 1998, under Item 7, the
Registrant filed as exhibits the form of Underwriting
Agreement with respect to the sale of its 6 5/8% notes
and 6 3/4% notes and the form of Supplemental Indenture
governing such notes.
15
<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
May 14, 1998 by: DANIEL R. LEE
-------------- --------------------------------
Date Daniel R. Lee
Senior Vice President - Finance
and Development, Chief Financial
Officer and Treasurer (Principal
Financial Officer)
16
SECOND AMENDMENT TO JANSEN AGREEMENT
This second amendment (the "Second Amendment") to that
certain Agreement (the "Agreement") dated December 22, 1997
between Mirage Resorts, Incorporated, a Nevada corporation
("Parent"), and Avis P. Jansen, a Nevada resident,
individually, as executrix of the Estate of Norbert W.
Jansen, and as Trustee for the Jansen Family Trust (the
"Trust") under an Agreement dated July 14, 1993 (in all such
capacities, "Seller"), as first amended in January, 1998, is
entered into as of this 13th day of March, 1998 between
Parent and Seller with reference to the following fact:
A. The definition of "Gift Shop Lease" contained in
Recital E of the Agreement inadvertently describes the wrong
lease.
In consideration of the foregoing premise, Parent and
Seller hereby amend the Agreement as follows:
1. Clause (iv) in Recital E of the Agreement is
hereby deleted in its entirety and shall be replaced by the
following:
"to amend the term of that certain lease agreement
between Boardwalk Casino, Inc. as Landlord, and
Holiday Gifts, Inc., as Tenant, dated September 1,
1996, which permits Holiday Gifts, Inc. to operate
a gift shop upon the Company's premises (the "Gift
Shop Lease"), to a month-to-month arrangement and
to make certain other modifications thereto."
2. The third sentence of Section 3 of the
Agreement is hereby amended by the deletion of the phrase
"to the Seller" therein and the substitution of the phrase
"to the Lessee" in lieu thereof.
3. Except as expressly amended hereby, the
Agreement and First Amendment thereto remain in full force
and effect, as by their terms set forth.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Amendment as of the date first above set
forth.
PARENT: SELLER:
MIRAGE RESORTS, INCORPORATED
a Nevada corporation
AVIS P. JANSEN
By: DANIEL R. LEE Avis P. Jansen, a Nevada resident,
Daniel R. Lee Individually, as executrix of the
Chief Financial Officer Estate of Norbert W. Jansen, and as
Trustee for the Jansen Family Trust
under an Agreement dated July 14,
1993
EXHIBIT 10.1
AMENDMENT NO. 7 TO REDUCING REVOLVING LOAN AGREEMENT
This Amendment No. 7 to Reducing Revolving Loan
Agreement (this "Amendment") dated as of January 12, 1998 is
entered into with reference to the Reducing Revolving Loan
Agreement dated as of December 21, 1994 among Victoria
Partners, a Nevada general partnership ("Borrower"), the Banks
referred to therein, The Long-Term Credit Bank of Japan, Ltd.,
Los Angeles Agency and Societe Generale, as Co-Agents, and Bank
of America National Trust and Savings Association, as
Administrative Agent (as amended pursuant to Amendments 1
through 6 thereto, the "Loan Agreement"). Capitalized terms
used but not defined herein are used with the meanings set
forth for those terms in the Loan Agreement.
Borrower, the Administrative Agent and the Banks
agree as follows:
1. AMENDMENTS TO SECTION 1.1 - AMENDED DEFINITIONS.
"COMMITMENT" means $100,000,000, MINUS the
amount of any reductions thereto made pursuant to
Sections 2.4 and 2.5, PROVIDED, that the amount of the
Commitment may be increased in the manner contemplated by
Section 2.10. The respective Pro Rata Shares of the Banks
as of the effective date of Amendment No. 6 to this
Agreement are set forth in SCHEDULE 1.1.
"MATURITY DATE" means April 2, 2002 or such
later anniversary thereof to which the Maturity Date may
be extended pursuant to Section 2.11.
2. SECTION 2.5 - SCHEDULED REDUCTIONS OF THE
COMMITMENT. Section 2.5 of the Loan Agreement is amended to
read in full as follows:
"2.5 CONTINGENT REDUCTIONS OF COMMITMENT. If the
amount of the Commitment is hereafter increased pursuant
to Section 2.10 to an amount which is in excess of
$100,000,000, then the Commitment shall automatically and
permanently reduce on the last day of each subsequent
Fiscal Quarter through the then current Maturity Date
(each such date a "REDUCTION DATE") by the "REDUCTION
AMOUNT" (as defined below). The Reduction Amount shall be
determined as of the first Reduction Date, and shall be
the amount, rounded upwards to the nearest integral
multiple of $100,000, which is equal to (a) the difference
between the then effective Commitment MINUS $100,000,000,
DIVIDED BY (b) the then remaining number of Reduction
Dates. The Reduction Amount for each Reduction Date shall
1
EXHIBIT 10.2
<PAGE>
be identical, PROVIDED THAT, as of the date of any
increase in the Commitment pursuant to Section 2.10 or any
extension to the Maturity Date pursuant to Section 2.11,
the Reduction Amount for each subsequent Reduction Date
will be adjusted to reflect such increase or extension in
accordance with the formula set forth in the second
sentence of this paragraph. No reductions shall be
required under this Section in the absence of an increase
to the Commitment under Section 2.10."
3. PARKING LOT EXCHANGE. Pursuant to Amendment No.
6 to the Loan Agreement, the Banks authorized the exchange of
certain land owned by Borrower for certain land owned by
Bellagio on the condition that the land transferred by Borrower
was of the same or lesser acreage than that received by
Borrower. Borrower has informed the Administrative Agent that:
(a) the land to be transferred by Borrower comprises
12.164 acres;
(b) the land to be transferred to Borrower comprises
10.130 acres;
(c) however, of the land to be transferred by Borrower,
an approximately 3.5 acre portion will be dedicated
by Bellagio to Clark County, Nevada for the purpose
of providing a right of way for a service road to be
known as "Resorts Boulevard."
The Banks hereby confirm their authorization of the proposed
parking lot exchange notwithstanding the foregoing variance
from the terms of Amendment No. 6.
4. REPRESENTATION AND WARRANTY. Borrower
represents and warrants to the Administrative Agent and the
Banks that no Default or Event of Default has occurred and
remains continuing, and that Borrower continues to be in
compliance with Section 5.10 of the Loan Agreement (concerning
Hazardous Materials Law).
5. CONFIRMATION. In all other respects, the terms
of the Loan Agreement and the other Loan Documents are hereby
confirmed.
2
<PAGE>
IN WITNESS WHEREOF, Borrower, the Administrative
Agent and the Banks have executed this Amendment as of the date
first written above by their duly authorized representatives.
"Borrower"
VICTORIA PARTNERS, a Nevada general
partnership
By: Gold Strike L.V., managing
general partner
By: Last Chance Investments,
Incorporated, general partner
By: WILLIAM A. RICHARDSON
________________________________
William A. Richardson
President
By: MRGS Corp., a Nevada corporation,
general partner
By: DANIEL R. LEE
________________________________
Daniel R. Lee, Chief
Financial Officer and Treasurer
"Administrative Agent"
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative
Agent
JANICE HAMMOND
By: _________________________________
Janice Hammond, Vice President
"Banks"
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank and as
Swing Line Bank
WILLIAM S. NEWBY
By: _________________________________
Title: Managing Director
3
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., LOS ANGELES AGENCY, as Co-Agent
and a Bank
NOBORU AKAHANE
By: _________________________________
Noboru Akahane
Title: Deputy General Manager
SOCIETE GENERALE, as Co-Agent and a
Bank
DONALD L. SCHUBERT
By: _________________________________
Donald L. Schubert
Title: Vice President
FIRST SECURITY BANK, N.A., as a Bank
DAVID P. WILLIAMS
By: _________________________________
David P. Williams
Title: Vice President
BANK OF SCOTLAND, as a Bank
ANNIE CHIN TAT
By: _________________________________
Annie Chin Tat
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
(successor by merger to MIDLANTIC
BANK, N.A.), as a Bank
DENISE D. KILLEN
By: _________________________________
Denise D. Killen
Title: Vice President
4
<PAGE>
UNITED STATES NATIONAL BANK OF OREGON,
as a Bank
DALE PARSHALL
By: _________________________________
Dale Parshall
Title: Vice President
CREDIT LYONNAIS LOS ANGELES BRANCH,
as a Bank
DIANNE M. SCOTT
By: _________________________________
Dianne M. Scott
Title: Vice President and Manager
BANKERS TRUST COMPANY, as a Bank
PATRICIA HOGAN
By: _________________________________
Patricia Hogan
Title: Principal
CIBC INC., as a Bank
PAUL J. CHAKMAK
By: _________________________________
Paul J. Chakmak
Title: Managing Director
CIBC Oppenheimer Corp., as Agent
5
EXHIBIT 15
May 8, 1998
To Mirage Resorts, Incorporated
We are aware that Mirage Resorts, Incorporated has
incorporated by reference in its Registration Statements on
Form S-8 (File No. 33-16037), on Form S-8 (File No. 33-
48394), on Form S-8 (File No. 33-63804), on Form S-8 (File
No. 33-60183) and on Form S-3 (File No. 333-39029) its Form
10-Q for the quarter ended March 31, 1998 which includes our
report dated May 8, 1998 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 CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998 AND
THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME AND CASH FLOWS FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 139,506
<SECURITIES> 0
<RECEIVABLES> 122,791
<ALLOWANCES> 47,692
<INVENTORY> 29,808
<CURRENT-ASSETS> 334,001
<PP&E> 3,553,495
<DEPRECIATION> 657,433
<TOTAL-ASSETS> 3,583,835
<CURRENT-LIABILITIES> 234,959
<BONDS> 1,612,011
0
0
<COMMON> 940
<OTHER-SE> 1,550,438
<TOTAL-LIABILITY-AND-EQUITY> 3,583,835
<SALES> 0
<TOTAL-REVENUES> 342,604
<CGS> 0
<TOTAL-COSTS> 201,008
<OTHER-EXPENSES> 22,584
<LOSS-PROVISION> 4,638
<INTEREST-EXPENSE> 5,342
<INCOME-PRETAX> 65,423
<INCOME-TAX> 23,823
<INCOME-CONTINUING> 41,600
<DISCONTINUED> 0
<EXTRAORDINARY> (3,521)
<CHANGES> 0
<NET-INCOME> 38,079
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.20
</TABLE>
