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 June 30, 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
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(Exact name of Registrant as specified in its charter)
Nevada 88-0058016
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3400 Las Vegas Boulevard South, Las Vegas, Nevada 89109
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(Address of principal executive offices - Zip Code)
(702) 791-7111
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(Registrant's telephone number, including area code)
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(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, 179,734,592 shares outstanding as of August 12, 1998.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited condensed consolidated financial information as of June 30,
1998 and for the three-month and six-month periods ended June 30, 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 June 30, 1998, and the related condensed consolidated
statements of income for the three-month and six-month periods ended June
30, 1998 and 1997 and the related condensed consolidated statements of cash
flows for the six-month periods ended June 30, 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
August 13, 1998
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<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
BALANCE SHEETS
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At June 30, At December 31,
1998 1997
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(In thousands) (Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 145,831 $ 99,337
Receivables, net of allowance for doubtful
accounts of $46,209 and $42,477 65,805 101,635
Inventories 29,474 29,179
Prepaid expenses and other 119,904 70,771
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Total current assets 361,014 300,922
Property and equipment, net of accumulated
depreciation of $675,634 and $633,563 1,556,154 1,455,125
Construction in progress 1,665,050 1,261,084
Other assets, net 313,520 330,219
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$3,895,738 $3,347,350
========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 116,366 $ 151,993
Accrued expenses 120,626 104,467
Current maturities of long-term debt 1,554 927
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Total current liabilities 238,546 257,387
Long-term debt, net of current maturities 1,862,843 1,396,728
Other liabilities, including deferred income
taxes of $194,204 and $167,415 207,912 180,751
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Total liabilities 2,309,301 1,834,866
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Commitments and contingencies
Stockholders' equity
Common stock: 179,590 and 179,422 shares outstanding 940 940
Additional paid-in capital 735,975 734,547
Retained earnings 1,135,491 1,063,793
Treasury stock, at cost: 55,558 and 55,726 shares (285,969) (286,796)
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Total stockholders' equity 1,586,437 1,512,484
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$3,895,738 $3,347,350
========================================================================================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
STATEMENTS OF INCOME (UNAUDITED)
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Three Months Six Months
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For the periods ended June 30 1998 1997 1998 1997
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(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross revenues $354,157 $373,757 $732,089 $768,156
Less - promotional allowances (31,222) (29,396) (66,550) (61,756)
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322,935 344,361 665,539 706,400
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Costs and expenses
Casino-hotel operations 198,818 198,847 404,573 401,765
General and administrative 39,474 39,956 79,346 78,372
Depreciation and amortization 22,472 22,018 45,056 43,374
Corporate expense 9,607 6,703 18,092 15,315
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270,371 267,524 547,067 538,826
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Operating income 52,564 76,837 118,472 167,574
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Other income (expense)
Interest cost (29,076) (14,477) (58,243) (27,203)
Interest capitalized 25,803 11,934 49,628 21,499
Other, including interest income 3,703 1,364 8,560 1,508
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430 (1,179) (55) (4,196)
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Income before income taxes and
extraordinary item 52,994 75,658 118,417 163,378
Provision for income taxes 19,375 26,757 43,198 57,788
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Income before extraordinary item 33,619 48,901 75,219 105,590
Extraordinary item - loss on early
retirement of debt, net of applicable
income tax benefit - - (3,521) (2,225)
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Net income $ 33,619 $ 48,901 $ 71,698 $103,365
========================================================================================
Income per share before extraordinary item
Basic $ 0.19 $ 0.27 $ 0.42 $ 0.59
Diluted 0.18 0.25 0.39 0.55
Net income per share
Basic $ 0.19 $ 0.27 $ 0.40 $ 0.58
Diluted 0.18 0.25 0.37 0.54
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Weighted-average common shares outstanding
(used in the computation of basic
earnings per share) 179,541 178,668 179,492 178,561
Effect of common stock options under the
treasury stock method 12,464 13,102 12,867 13,312
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Weighted-average common and common
equivalent shares (used in the computation
of diluted earnings per share) 192,005 191,770 192,359 191,873
========================================================================================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
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Six months ended June 30 1998 1997
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(In thousands)
<S> <C> <C>
Cash flows from operating activities
Net income $ 71,698 $ 103,365
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for losses on receivables 10,403 7,284
Depreciation and amortization of property and equipment,
including amounts reported as corporate expense 51,390 47,312
Earnings in excess of distributions from Monte Carlo (5,286) (16,160)
Amortization of debt discount and issuance costs 3,708 7,289
Loss on early retirement of debt 5,418 3,422
Other adjustments 2,744 (5,563)
Changes in components of working capital pertaining to
operating activities, net of effect of Boardwalk acquisition
Decrease in receivables and other current assets 17,776 4,681
Decrease in trade accounts payable and accrued expenses (27,009) (43,962)
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Net cash provided by operating activities 130,842 107,668
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Cash flows from investing activities
Preopening costs (29,064) (8,100)
Capital expenditures (489,166) (461,402)
Proceeds from sales of property and equipment 58,624 3,863
Acquisition of Boardwalk, net of cash acquired (55,562) -
Other investing activities (25,555) 11,455
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Net cash used for investing activities (540,723) (454,184)
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Cash flows from financing activities
Net bank credit facility and commercial paper borrowings 301,231 348,915
Issuance of long-term debt 394,728 -
Retirement of long-term debt (237,110) -
Other financing activities (2,474) 3,961
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Net cash provided by financing activities 456,375 352,876
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Cash and cash equivalents
Increase for the period 46,494 6,360
Balance, beginning of period 99,337 81,908
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Balance, end of period $ 145,831 $ 88,268
===================================================================================================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
NOTES TO CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
FINANCIAL STATEMENTS (UNAUDITED)
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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. Additionally, as discussed below, on June 30, 1998, the
Company acquired the Holiday Inn -Registered Trademark- Casino Boardwalk
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 October 15, 1998 and Beau
Rivage is expected to open in February 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 periods 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.
NOTE 2 - ACQUISITION OF BOARDWALK CASINO, INC.
On June 30, 1998, the Company, through a wholly owned subsidiary, completed
the acquisition of Boardwalk Casino, Inc. ("Boardwalk") and certain related
assets for a total price of approximately $112.0 million in cash.
Approximately $51.9 million of this amount was expended in 1997.
Boardwalk owns and operates the Holiday Inn -Registered Trademark- Casino
Boardwalk located on the Las Vegas Strip between and contiguous to Monte
Carlo and Bellagio. The facility includes 653 hotel rooms and 33,000
square feet of casino space. The Boardwalk acquisition, combined with
previously acquired adjacent land, provides the Company with approximately
40 acres with 817 feet of frontage on the Las Vegas Strip for potential
future development.
-6-
<PAGE>
The Boardwalk acquisition was accounted for pursuant to the purchase
method, with approximately $135.7 million allocated to the assets acquired
and approximately $23.7 million to the liabilities assumed (including $4.1
million of accounts payable and accrued liabilities and $17.5 million of
deferred income taxes) based upon their respective estimated fair values.
NOTE 3 - 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>
<TABLE>
<CAPTION>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 1998
AND 1997
FINANCIAL HIGHLIGHTS
Three months ended June 30 1998 1997
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(Dollars in thousands, except per share and room rate amounts)
<S> <C> <C>
Gross revenues
The Mirage $181,618 $202,159
Treasure Island 100,604 97,890
Golden Nugget 50,397 49,801
Golden Nugget-Laughlin 14,191 15,155
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346,810 365,005
Equity in earnings of Monte Carlo 7,347 8,752
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$354,157 $373,757
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Net revenues
The Mirage $163,812 $185,750
Treasure Island 93,268 90,999
Golden Nugget 45,992 45,372
Golden Nugget-Laughlin 12,516 13,488
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315,588 335,609
Equity in earnings of Monte Carlo 7,347 8,752
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$322,935 $344,361
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Operating profit
The Mirage $ 28,529 $ 47,116
Treasure Island 18,677 19,670
Golden Nugget 6,876 6,545
Golden Nugget-Laughlin 742 1,457
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54,824 74,788
Equity in earnings of Monte Carlo 7,347 8,752
Corporate expense (9,607) (6,703)
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$ 52,564 $ 76,837
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Operating margin (operating profit/net revenues)
The Mirage 17.4% 25.4%
Treasure Island 20.0% 21.6%
Golden Nugget 15.0% 14.4%
Golden Nugget-Laughlin 5.9% 10.8%
Company-wide (before Monte Carlo and corporate expense) 17.4% 22.3%
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Net income $ 33,619 $ 48,901
Net income per share
Basic $ 0.19 $ 0.27
Diluted $ 0.18 $ 0.25
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Other information (excluding Monte Carlo)
Company-wide table games win percentage 16.8% 20.1%
Company-wide occupancy of standard guest rooms 99.3% 99.0%
Average standard guest room rate(a) $ 92 $ 95
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(a) Cash rate (i.e., excluding complimentary accommodations) at the Company's
Las Vegas hotels.
</TABLE>
-8-
<PAGE>
The Company reported 1998 second quarter net income of $33.6 million, or
$0.18 per share, versus $48.9 million, or $0.25 per share, achieved in the
second quarter of 1997. Earnings during the recent quarter were affected
by a lower-than-historical table games win percentage, a decline in the
level of baccarat play and higher staffing and training costs associated
with the Bellagio and Beau Rivage projects. Earnings during the 1998 second
quarter were also impacted by fewer performances by Siegfried & Roy due to
a temporary injury sustained by one of the principal performers. The show
resumed its normal schedule in late June. Partially offsetting these
factors, the Company recorded a pre-tax gain of approximately $5.2 million
during the 1998 second quarter in connection with the sale of 16 acres of
land to the owner of the upscale retail mall adjacent to The Mirage and
Treasure Island. The land was previously used for off-site parking for
employees of both hotel-casinos. To facilitate the land sale, the Company
completed construction in March of an 1,800-space employee parking garage
directly behind The Mirage and Treasure Island. The owner of the mall
intends to use the acquired land for a significant expansion project, which
should prove beneficial to both The Mirage and Treasure Island.
The Company's table games win percentage was 16.8% during the 1998 second
quarter, versus 20.1% in the prior-year period. By comparison, the win
percentage over the past three calendar years averaged 20.3%. Management
estimates that a 3.5-percentage point differential in the quarterly win
percentage translates to approximately $0.04 to $0.05 of net income per
share. The win percentage can be affected by luck, changes in the mix of
table games played and changes in the manner in which customers play the
games.
The difficulties being experienced by the economies of certain Asian
countries is having an impact on the Company's international baccarat
business. The level of baccarat play during the 1998 second quarter
declined by 13% from the prior-year period. The decline in baccarat
activity during the quarter, assuming a normal win percentage and
appropriate profit margin, equates to approximately $0.01 of net income per
share. The other components of the Company's casino activity have
generally equaled or exceeded historical levels. During the 1998 second
quarter, the level of play and win percentage at the Company's other
table games increased over the prior-year period, resulting in a 4% growth
in related revenues. Company-wide slot revenues also increased slightly
over the 1997 second quarter.
The Bellagio and Beau Rivage projects remain on schedule for their
respective October 15, 1998 and February 1999 openings. These
spectacular new resorts, by most measures, will nearly double the size of
the Company. In total, the Company's staffing will increase from
approximately 17,000 employees to 30,000 employees over the next several
months. Many of the positions for Bellagio and Beau Rivage are being
filled through promotion or transfer of employees from the Company's
existing resorts. To ensure a smooth transition, the Company has been
hiring and training replacement employees. Management estimates the higher
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<PAGE>
staffing levels and additional training costs reduced the Company's
earnings by approximately $0.01 per share during the 1998 second quarter,
and will most likely have a similar or greater impact in the third quarter.
Occupancy of the Company's standard guest rooms increased slightly over the
1997 second quarter (99.3% versus 99.0%) and the average daily standard
room rate at its Las Vegas hotels declined by 3%. There was a significant
increase in Las Vegas room inventory during 1996 and 1997, principally
on the Strip, and this has resulted in a decline in city-wide occupancy
and average room rates. Management anticipates continued pressure on
hotel occupancy and room rates during 1998. The Company's hotel occupancy
and average room rates have generally outperformed the Strip averages, and
this continued to be the case in the second quarter.
The Mirage was particularly impacted by the lower table games win per-
centage and the decline in baccarat activity, accounting for most of the
decrease in the resort's 1998 second quarter revenues and operating
income. Excluding baccarat, The Mirage's table games revenues increased
by 3% over the 1997 second quarter. Slot revenues were essentially flat.
The Mirage's net non-casino revenues were down by $4.3 million, or 5%,
versus the 1997 second quarter. Entertainment revenues declined by
$4.2 million, or 30%, primarily reflecting the decrease in the number
of performances by Siegfried & Roy. The average occupancy rate for The
Mirage's standard guest rooms was nearly 100% during both second quarters,
with only a 2% decline in the 1998 quarter's average daily rate. The
Mirage's 50% share of the land sale gain discussed above added $2.6 million
to the resort's revenues and operating income during the quarter. The
higher staffing levels and additional training costs discussed previously
occurred predominantly at The Mirage, contributing to the 8.0-percentage
point decrease in its operating margin. The Company's other properties
are also being affected by these additional staffing efforts, but to a
lesser degree.
The remaining 50% of the land sale gain was recorded by Treasure Island.
Excluding such amount, operating revenues at the resort were substantially
equal to those of the prior-year second quarter. Slot revenues increased
by 5%, offsetting a 4% decline in table games revenues caused by lower
baccarat activity and a decline in the win percentage. Similar to The
Mirage, Treasure Island's standard guest rooms were nearly 100% occupied
during both second quarters. The average daily room rate during the 1998
second quarter, however, was 4% lower than in the prior-year period. Net
revenues for the Cirque du Soleil production grew by 7%, outweighing a
combined 2% decline in Treasure Island's other net non-casino revenues.
The Golden Nugget in downtown Las Vegas achieved a 5% increase in operating
income versus the 1997 second quarter, despite competitive market
conditions. The Company's small Golden Nugget-Laughlin facility experienced
a decline in its revenues and profitability, principally due to competition
from Indian casinos in Arizona and Indian casinos operating largely
illegally in Southern California.
Monte Carlo achieved gross revenues of $67.6 million during the 1998 second
quarter, exceeding any quarter since 1996. Promotional and other operating
expenses at the resort also increased, resulting in a $3.1 million, or 16%,
decline in operating income. Prior to the 1998 second quarter, the joint
venture was using Monte Carlo's operating cash flow principally to reduce
its total debt. At June 30, 1998, outstanding debt totaled $92.6 million,
versus $141.2 million at June 30, 1997. As a result, interest cost was
substantially lower during the 1998 second quarter, partially offsetting
the decline in operating income. During the 1998 second quarter, Monte
Carlo achieved a favorable pricing tier under its bank credit agreement.
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<PAGE>
At that time, the joint venture decided to begin distributing Monte Carlo's
available cash to the partners, which, if continued, should result in the
joint venture's debt remaining at approximately $90 million (offset by
lower debt at the Company than would otherwise be the case).
The increase in interest cost and interest capitalized during the 1998
second quarter primarily reflects the Company's growing investment in
Bellagio and Beau Rivage. The category "Other, including interest income"
increased by $2.3 million over the 1997 second quarter. In the third
quarter of 1997, the Company purchased certain of Boardwalk's previously
issued debt securities as part of the acquisition. As a result, interest
was earned on the securities until Boardwalk became a wholly owned
subsidiary of the Company on June 30. At that date, the note became an
intercompany note and Boardwalk's income thereafter is included in the
Company's consolidated income. The 1998 quarter also includes the earnings
on an escrow account established by the Company in October 1997 to fund its
portion of the cost of certain road improvements in the Marina area of
Atlantic City, New Jersey.
-11-
<PAGE>
<TABLE>
<CAPTION>
COMPARISON OF OPERATING RESULTS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1998
AND 1997
FINANCIAL HIGHLIGHTS
Six months ended June 30 1998 1997
- ------------------------------------------------------------------------------
(Dollars in thousands, except per share and room rate amounts)
<S> <C> <C>
Gross revenues
The Mirage $384,622 $419,161
Treasure Island 201,172 199,204
Golden Nugget 101,716 102,578
Golden Nugget-Laughlin 29,793 31,053
- ------------------------------------------------------------------------------
717,303 751,996
Equity in earnings of Monte Carlo 14,786 16,160
- ------------------------------------------------------------------------------
$732,089 $768,156
- ------------------------------------------------------------------------------
Net revenues
The Mirage $347,906 $384,424
Treasure Island 184,163 185,019
Golden Nugget 92,462 93,120
Golden Nugget-Laughlin 26,222 27,677
- ------------------------------------------------------------------------------
650,753 690,240
Equity in earnings of Monte Carlo 14,786 16,160
- ------------------------------------------------------------------------------
$665,539 $706,400
- ------------------------------------------------------------------------------
Operating profit
The Mirage $ 70,284 $106,252
Treasure Island 35,496 42,199
Golden Nugget 13,631 14,814
Golden Nugget-Laughlin 2,367 3,464
- ------------------------------------------------------------------------------
121,778 166,729
Equity in earnings of Monte Carlo 14,786 16,160
Corporate expense (18,092) (15,315)
- ------------------------------------------------------------------------------
$118,472 $167,574
- ------------------------------------------------------------------------------
Operating margin (operating profit/net revenues)
The Mirage 20.2% 27.6%
Treasure Island 19.3% 22.8%
Golden Nugget 14.7% 15.9%
Golden Nugget-Laughlin 9.0% 12.5%
Company-wide (before Monte Carlo and corporate expense) 18.7% 24.2%
- ------------------------------------------------------------------------------
Income before extraordinary item $ 75,219 $105,590
Net income $ 71,698 $103,365
- ------------------------------------------------------------------------------
Income per share before extraordinary item
Basic $ 0.42 $ 0.59
Diluted 0.39 0.55
Net income per share
Basic $ 0.40 $ 0.58
Diluted 0.37 0.54
- ------------------------------------------------------------------------------
Other information (excluding Monte Carlo)
Company-wide table games win percentage 18.4% 20.0%
Company-wide occupancy of standard guest rooms 98.7% 99.2%
Average standard guest room rate(a) $ 91 $ 94
- ------------------------------------------------------------------------------
(a) Cash rate (i.e., excluding complimentary accommodations) at the Company's
Las Vegas hotels.
</TABLE>
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<PAGE>
The Company reported income before extraordinary item of $75.2 million, or
$0.39 per share, during the first six months of 1998, versus $105.6
million, or $0.55 per share, in the corresponding 1997 period. Both six-
month periods include debt-related extraordinary charges. As discussed in
Note 3 of Notes to Condensed Consolidated Financial Statements, the 1998
period includes a charge of $3.5 million, or $0.02 per share, associated
with the redemption of all $100.0 million principal amount of the Company's
9 1/4% notes. The 1997 period includes a similar charge of $2.2 million, or
$0.01 per share, associated with amending and increasing the size of the
Company's bank credit facility. After deducting such charges, net income
for the 1998 six-month period was $71.7 million, or $0.37 per share,
compared with $103.4 million, or $0.54 per share, for the first half of
1997.
The Company's earnings during the first six months of 1998 were likewise
affected by the decline in international baccarat business and increased
competitive pressures in the Las Vegas market discussed previously in
comparing the three-month periods. The level of baccarat play was down 27%
from the 1997 six-month period. The Company-wide table games win
percentage was also below the 1997 period, 18.4% versus 20.0%. Excluding
baccarat, activity and revenues at the Company's other table games
increased slightly over the prior-year period. Slot revenues also achieved
a small increase. Despite the additional Las Vegas room capacity,
occupancy of the Company's standard guest rooms remained strong at 98.7%,
versus 99.2% in the prior-year period. The Company's standard guest room
rate at its Las Vegas hotels averaged $91, down a modest 3% from the $94
average during the first six months of 1997. The 1998 period includes the
$5.2 million pre-tax land sale gain discussed previously. The 1997 six-
month period includes a similar gain of $3.6 million recorded in the first
quarter related to the sale and exchange of land in Las Vegas. The Company
incurred higher payroll and training costs throughout the entire first half
of 1998 due to the Bellagio and Beau Rivage staffing efforts discussed
previously.
A substantial portion of the decline in the Company's baccarat activity
during 1998 occurred at The Mirage. This, together with a 2.5-percentage
point decline in the table games win percentage, primarily accounts for a
$25.1 million, or 11%, decrease in The Mirage's casino revenues. Revenues
at The Mirage's other table games and slots increased by 3% and 4%,
respectively, over the 1997 six-month period. A 9% decline in net food and
beverage revenues, combined with fewer performances by Siegfried & Roy and
a lower average daily room rate, principally explains an $11.4 million, or
7%, decline in The Mirage's net non-casino revenues. Standard guest room
occupancy at The Mirage exceeded 99% during both six-month periods.
Treasure Island's revenue comparisons, in total, were relatively stable for
the six-month period. A 3% increase in slot revenues substantially offset
a 5% decline in table games revenues resulting primarily from a decline in
the win percentage. Total non-casino revenues were also virtually
unchanged. Net entertainment revenues grew by 5% over the 1997 six-month
period, primarily due to an increase in the average ticket price for
Mystere. Net room revenues, however, were down 6%, mainly due to a decline
in the average daily room rate. Occupancy of Treasure Island's standard
guest rooms, similar to The Mirage, was in excess of 99% during both six-
month periods.
The new resorts and additional room capacity on the Strip have particularly
impacted the downtown Las Vegas market. The Laughlin market is also being
affected by the growth on the Las Vegas Strip, as well as additional
competitive pressures from casinos located on nearby Indian reservations.
As a result, operating comparisons at the Company's two Golden Nugget
properties declined from the 1997 six-month period.
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<PAGE>
The factors discussed previously in comparing the three-month periods had a
similar effect on the Company's net interest expense and interest income
when comparing the six-month periods.
CAPITAL SPENDING, CAPITAL RESOURCES AND LIQUIDITY
The capital required for the Company's significant expansion is being
provided by net operating cash flow, revolving bank credit facility and
commercial paper borrowings and the issuance of long-term unsecured debt.
During the 1998 six-month period, the Company's existing resorts
contributed net operating cash flow (as shown in the Condensed Consolidated
Statements of Cash Flows) of $130.8 million, versus $107.7 million in the
first six months of 1997. As discussed previously, the Monte Carlo joint
venture began making cash distributions of its earnings to the partners
in the second quarter of 1998. The Company's operating cash flow for
the first half of 1998 includes its $9.5 million proportionate share of
such distributions.
Capital expenditures during the 1998 period totaled $489.2 million,
compared with $461.4 million in the 1997 six-month 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. Due primarily to certain design changes and enhancements, manage-
ment now expects Beau Rivage to cost more than, but within approximately
10% of, its earlier estimate of $600 million. Of such amounts, the
Company had incurred approximately $1.25 billion associated with Bellagio
and approximately $352 million associated with Beau Rivage at June 30,
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. The Company sold an additional work of art to an
independent third party in April 1998 for $10.5 million. Also in April
1998, the Company received net cash proceeds of approximately $23.5 million
in connection with the Las Vegas land sale discussed previously.
As discussed in Note 2 of Notes to Condensed Consolidated Financial
Statements, the Company completed the acquisition of Boardwalk on June 30,
1998. The acquisition required total cash outlays (including previously
acquired Boardwalk debt) of approximately $112.0 million. The Company
expended approximately $51.9 million of such amount during 1997. The
Boardwalk 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 a like-kind exchange with Monte
Carlo, would afford the Company an approximately 40-acre site with 817 feet
of frontage on the Las Vegas Strip for potential future development between
and contiguous to Bellagio and Monte Carlo. Plans for any such future
development are still highly uncertain.
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<PAGE>
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 (the "Marina Site") in exchange 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. Assuming receipt of all required
permits, construction of the road improvements is expected to begin in
October 1998.
The Company is currently in the early design stage of its planned Marina
Site hotel-casino (tentatively named "Le Jardin") and a project budget has
not yet been developed. The Company must remediate the Marina Site, which
is a former municipal landfill, before it can begin construction of its
resort. Remediation is expected to commence this fall and require six to
nine months to complete.
In July 1998, the Company and Boyd Gaming Corporation ("Boyd") entered into
an amended and restated joint venture agreement for the development of a
hotel-casino on a 25-acre portion of the Marina Site. The agreement calls
for the development of a $750 million entertainment resort with at least
1,200 hotel rooms to be connected to the Company's planned hotel-casino.
The Company and Boyd each owns 50% of the joint venture. The Company will
design and develop the master plan for the Marina Site and Boyd will over-
see the design and construction of the joint venture resort, as well as
operate it upon completion. Under the terms of the agreement, the Company
will contribute the land and $60 million in cash and Boyd will contribute
$150 million in cash. The partners will attempt to obtain acceptable finan-
cing that will be non-recourse to the Company for the remaining development
cost of the project. If the requisite permits are obtained, management
anticipates that construction of the joint venture resort may commence by
the fall of 1999.
Numerous governmental permits must be received and various other conditions
must be satisfied before construction can commence on the road improvement
project or the hotel-casinos planned by the Company and the joint venture.
Accordingly, there can be no assurance that the Company or the joint
venture will construct a hotel-casino in Atlantic City or as to the timing
or cost of construction.
In February 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. Approximately $237.1 million
of the net proceeds from the offering were effectively used to retire the
zero coupon notes and redeem the 9 1/4% notes discussed previously. At June
30, 1998, bank credit facility borrowings and the face amount of
outstanding commercial paper notes totaled $915.0 million, leaving $835.0
million available.
-15-
<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.
Management believes this accounting treatment is inappropriate for the
hotel-casino industry, as it requires certain costs incurred during the
preopening phase (such as construction-period interest) to be capitalized,
and preopening costs such as the costs of hiring and training new
employees, which are integral to the opening of a new facility, to be ex-
pensed as incurred. The result would be a confusing presentation of net
income during periods when a company has a major project under
construction.
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. If the Company is required to adopt the provisions of SOP 98-5
effective January 1, 1999, 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 construction 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).
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the litigation between the Registrant and Boyd
described under "Legal Proceedings" in Item 3 of the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997. In July
1998, the Registrant and Boyd entered into the amended and restated joint
venture agreement described under "Capital Spending, Capital Resources and
Liquidity" in Item 2 of Part I of this Form 10-Q and thereby settled
such litigation. The litigation was dismissed with prejudice on August 5,
1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Registrant's 1998 Annual Meeting of Stockholders (the
"Meeting") was held on May 21, 1998.
(c) At the Meeting, Stephen A. Wynn and Ronald M. Popeil were re-
elected to serve three-year terms as members of the Board of
Directors. The results of the voting were as follows: Mr. Wynn-
165,877,084 shares for and 1,504,083 shares withheld; Mr.
Popeil-165,923,377 shares for and 1,457,790 shares withheld.
Additionally, at the Meeting the stockholders voted (i) to
approve the Registrant's 1998 Stock Option and Stock
Appreciation Rights Plan by a vote of 104,144,695 shares in
favor and 62,350,847 shares opposed, with 885,625 shares
abstaining and (ii) to ratify the appointment of Arthur Andersen
LLP as the Registrant's independent accountants for 1998 by
a vote of 166,627,444 shares in favor and 207,787 shares
opposed, with 545,936 shares abstaining.
ITEM 5. OTHER INFORMATION
On May 21, 1998, the Securities and Exchange Commission adopted an
amendment to Rule 14a-4 under the Securities Exchange Act of 1934, as
amended (the "Amended Rule"), which governs a company's right to exercise
discretionary proxy voting authority with respect to certain stockholder
proposals presented at a stockholders' meeting. The Amended Rule provides
generally that a company may exercise such authority if it has not received
notice of the proposal by the date which is 45 days before the month and
day corresponding to the date on which the company first mailed its proxy
materials for the prior year's annual meeting of stockholders. In the case
of the Registrant's 1999 Annual Meeting of Stockholders, such date is March
3, 1999. If certain other requirements of the Amended Rule are satisfied,
a company may exercise discretionary voting authority with respect to a
proposal, notwithstanding the receipt of timely advance notice of such
proposal.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.1 Letter agreement dated April 21, 1998 between Bellagio and
Stephen A. Wynn.
10.2 Amendment No. 2 to Amended and Restated Loan Agreement, dated
as of June 19, 1998, among the Registrant, the Banks, Co-
Arrangers, Co-Agents and Documentation Agent referred to therein
and Bank of America National Trust and Savings Association,
as Administrative Agent.
10.3 Agreement Between Owner and Construction Manager for Construc-
tion Management Services, dated as of November 1, 1997,
between Tishman Construction Corporation of New Jersey and MAC,
CORP. Construction.
10.4 Amended and Restated Joint Venture Agreement of Stardust A.C.,
dated as of July 14, 1998, between MAC, CORP. and Boyd
Atlantic City, Inc. Incorporated by reference to Exhibit 10.55
to the Quarterly Report on Form 10-Q of Boyd (Commission File
No. 1-12168) for the fiscal quarter ended June 30, 1998.
15 Letter from independent public accountants acknowledging
awareness of the use of their report dated August 13, 1998 in
the Registrant's registration statements.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The Registrant filed no Current Reports on Form 8-K during the
three-month period ended June 30, 1998.
-18-
<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
August 13, 1998 by: DANIEL R. LEE
- --------------- --------------------------------
Date Daniel R. Lee
Senior Vice President - Finance
and Development, Chief Financial
Officer and Treasurer (Principal
Financial Officer)
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Robert H. Baldwin
President
BELLAGIO
April 21, 1998
Mr. Stephen A. Wynn
Chairman of the Board, President
and Chief Executive Officer
Mirage Resorts, Incorporated
3400 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Dear Steve:
This confirms the agreement this date between Bellagio and you with respect
to the work of fine art entitled "Femme Assise" by Pablo Picasso (1949, oil
on canvas, 51-1/4 x 38-1/4 inches) (the "Work"), which you purchased from
an independent party on April 7, 1998 at a purchase price of $2,500,000.
1. The January 14, 1998 agreement between Bellagio and you, as sub-
sequently amended (the "Original Agreement"), is hereby amended to provide
that, effective this date, the Exhibit `B' Art referenced therein which you
are renting to Bellagio shall include the Work.
2. The terms of the rental of the Work shall be the same as those
set forth in the Original Agreement with respect to the Exhibit `B' Art,
except that the annual rental for the Work, payable in equal monthly
installments in advance, shall be $30,000.
3. The Work shall be maintained on public display and shall be
available for educational purposes in any hotel-casino operated by any
wholly owned subsidiary of Mirage Resorts, Incorporated in conformity with
the requirements of NRS 361.068(k) and NRS 374 and any regulations
promulgated thereunder.
Exhibit 10.1
<PAGE>
Mr. Stephen A. Wynn
Mirage Resorts, Incorporated
April 21, 1998
Page Two
Please sign below to confirm your agreement to the foregoing. My signature
below confirms Bellagio's agreement thereto.
Very truly yours,
BELLAGIO
By: ROBERT H. BALDWIN
-------------------
ROBERT H. BALDWIN
President and Chief Executive Officer
I hereby agree to the foregoing.
STEPHEN A. WYNN
-------------------
STEPHEN A. WYNN
cc: Bruce A. Levin
Peter C. Walsh
James E. Pettis
P.O. BOX 7700, LAS VEGAS, NEVADA 89177-7770
AMENDMENT NO. 2 TO AMENDED AND RESTATED LOAN AGREEMENT
This Amendment No. 2 (the "Amendment") to Amended and Restated Loan
Agreement dated as of June 19, 1998 is entered into with reference to the
Amended and Restated Loan Agreement dated as of March 7, 1997 (as
heretofore amended by an Amendment No. 1 dated as of September 19, 1997,
the "Loan Agreement") among Mirage Resorts, Incorporated, a Nevada corpor-
ation ("Borrower"), the Banks, Co-Arrangers, Co-Agents and Documentation
Agent referred to therein, and Bank of America National Trust and Savings
Association, as Administrative Agent. Capitalized terms used herein are
used with the meanings set forth for those terms in the Loan Agreement.
Borrower and the Administrative Agent (acting with the consent of the
Requisite Banks) agree as follows:
1. AMENDMENTS TO CERTAIN DEFINITIONS. The following definitions in
Section 1.1 of the Loan Agreement are hereby amended to read in full as
follows:
"ADJUSTED EBITDA" means, with respect to any fiscal period,
EBITDA for that fiscal period PLUS any Adjustment Amount for that
fiscal period PLUS, if positive, Monte Carlo Distributable Cash for
that fiscal period.
"ANNUALIZED ADJUSTED EBITDA" means, as of the last day of each
Fiscal Quarter, (a) Adjusted EBITDA for the fiscal period consisting
of that Fiscal Quarter and the three immediately preceding Fiscal
Quarters plus (b) with respect to any such fiscal period in which
Bellagio, Beau Rivage or any New Venture (whichever is applicable,
herein the "Project") is open for business for at least one (1) full
Fiscal Quarter but less than four (4) full Fiscal Quarters, such
amount as is necessary to reflect the annualization of Adjusted EBITDA
attributable to the Project using the following conventions: (i) if
the Project has been open for business for one (1) full Fiscal
Quarter,the Project's Adjusted EBITDA for that Fiscal Quarter shall be
multiplied by four, (ii) if the Project has been open for business for
two (2) full Fiscal Quarters, the Project's Adjusted EBITDA for those
Fiscal Quarters shall be multiplied by two and (iii) if the Project
has been open for business for three (3) full Fiscal Quarters, the
Project's Adjusted EBITDA for those Fiscal Quarters shall be
multiplied by four-thirds (4/3), plus (c) without duplication, to the
extent that Boardwalk Casino is a Subsidiary of Borrower as of the
last day of that Fiscal Quarter and is then open for business, the
Exhibit 10.2
<PAGE>
EBITDA of Boardwalk Casino for the fiscal period consisting of that
Fiscal Quarter and the three immediately preceding Fiscal Quarters
(determined in the same manner as if it had been a Subsidiary of
Borrower for that entire fiscal period).
"AVERAGE QUARTERLY TOTAL DEBT" means, as of the last day of each
Fiscal Quarter, the average of the principal amounts of the out-
standing Total Debt on the last day of each of the calendar months
comprising such Fiscal Quarter, minus (in the case of the Fiscal
Quarters ending June 30, 1998 and September 30, 1998) the Escrow
Amount as of the last day of that Fiscal Quarter.
"NET INCOME" means, with respect to any fiscal period, the con-
solidated net income of Borrower and its Subsidiaries for that period,
determined in accordance with Generally Accepted Accounting Princi-
ples, consistently applied; PROVIDED THAT any net income or net loss
of Victoria Partners shall not be included in the calculation of Net
Income.
2. NEW DEFINITIONS. Section 1.1 of the Loan Agreement is further
amended to add the following terms thereto:
"ATLANDIA" means Atlandia Design and Furnishings, Inc., a New
Jersey corporation which is a wholly-owned Subsidiary of Borrower.
"BOARDWALK CASINO" means Boardwalk Casino, Inc., a Nevada
corporation.
"ESCROW AGREEMENT" means the Escrow Fund Agreement dated as of
October 10, 1997 among CoreStates Bank, N.A., the South Jersey Trans-
portation Authority, the State of New Jersey (acting through the New
Jersey Department of Transportation), and Atlandia.
"ESCROW AMOUNT" means, as of each date of determination, the
amount, not to exceed $101,000,000, which is equal to the funds main-
tained by Atlandia on that date in the escrow established by the
Escrow Agreement, provided that if prior to October 1, 1998, Borrower
or any of its Subsidiaries enter into any amendment, modification or
waiver of the terms of the Escrow Agreement or Road Development Agree-
ment which would adversely affect their termination rights thereunder,
the Escrow Amount shall be zero.
2
<PAGE>
"MONTE CARLO DISTRIBUTABLE CASH" means, for any period,
Borrower's allocable portion of (a) the net income of Victoria
Partners for that period, PLUS (b) any extraordinary loss reflected in
such net income, MINUS (c) any extraordinary gain reflected in such
net income, plus (d) without duplication, the aggregate amount of
federal and state taxes on or measured by income of Victoria Partners
for that period (whether or not payable during that period), PLUS (e)
depreciation, amortization and all other non-cash expenses of Victoria
Partners for that period, MINUS (f) the aggregate amount of all
scheduled payments of principal made by Victoria Partners during that
period with respect to borrowed money, in each case as determined in
accordance with Generally Accepted Accounting Principles, and, in the
case of item (d), only to the extent deducted in the determination of
such net income for that period.
"ROAD DEVELOPMENT AGREEMENT" means the Road Development Agreement
dated as of January 10, 1997 among the State of New Jersey (acting
through the New Jersey Department of Transportation), the South Jersey
Transportation Authority and Borrower, as heretofore amended.
3. CONDITION PRECEDENT. This effectiveness of this Amendment shall
be conditioned upon the receipt by the Administrative Agent of written
consents hereto executed by the Requisite Banks.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
to the Administrative Agent and the Banks that, as of the date of this
Amendment:
(a) Pursuant to the terms of the Escrow Agreement, Borrower and
its Subsidiaries shall become entitled to the unconditional return of
the Escrow Amount in the event that Borrower and its Subsidiaries
have not obtained the Casino Project Permits contemplated by Section
12.1.7.2 of the Road Development Agreement by October 31, 1998; and
(b) no Default or Event of Default has occurred and remains
continuing.
5. AGREEMENT RE INCREMENTAL MARGIN. Borrower agrees that the
applicability (or non-applicability) of the Incremental Margin shall be
determined on the basis of the Leverage Ratio (and its component
definitions) as set forth in the Loan Agreement as originally executed,
and without giving effect to any of the amendments thereto set forth
herein or in Amendment No. 1 to the Loan Agreement.
3
<PAGE>
6. CONFIRMATION. In all other respects, the terms of the Loan
Agreement and the other Loan Documents are hereby confirmed.
IN WITNESS WHEREOF, Borrower and the Administrative Agent have
executed this Amendment as of the date first written above by their duly
authorized representatives.
MIRAGE RESORTS, INCORPORATED
By: DANIEL R. LEE
---------------------------------------
Daniel R. Lee, Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent
By: JANICE HAMMOND
---------------------------------------
Janice Hammond, Vice President
4
AGREEMENT BETWEEN OWNER AND CONSTRUCTION MANAGER
for
CONSTRUCTION MANAGEMENT SERVICES
Agreement (this "Agreement") made as of the 1st day of November 1997,
between Tishman Construction Corporation of New Jersey (hereafter referred
to as "Construction Manager"), a New Jersey corporation, having offices at
19 South Tennessee Avenue, Atlantic City, New Jersey 08401 and MAC,
CORP. Construction, a New Jersey corporation, having offices at 3260 South
Industrial Road, Las Vegas, Nevada 89109 (hereinafter referred to as
"Owner").
WITNESSETH:
WHEREAS, Owner desires to retain Construction Manager in connection
with the construction by Owner of a Hotel/Casino and related infrastructure
and site development including roads which serve the facilities within
the "H-Tract" (hereinafter referred to as the "Improvement" or the
"Project"), on the premises owned by Owner adjacent to Route 30, Huron
Avenue and Brigantine Boulevard in Atlantic City, New Jersey (hereinafter
referred to as "Site"), and Construction Manager desires to be so retained.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Owner and Construction Manager agree as follows:
ARTICLE 1
CONSULTANCY
1.01. All services to be performed by Construction Manager prior
to commencement of construction of the Improvement (hereinafter referred to
as the "Consultancy") shall be performed as agent of Owner.
1.02. Construction Manager, during the Consultancy, shall, using
its best professional efforts, make available to Owner its knowledge,
skills, ideas, experience and abilities with respect to all matters related
to design, development and construction of the Improvement. The Consultancy
shall include consultation on overall site and building planning, guidance
in the preparation of Construction Documents by the project architects and
engineers, review, evaluation and refinement of the work of the architects
and engineers who have been, or are to be, selected by Owner (and in whose
selection Construction Manager will assist Owner as may be
EXHIBIT 10.3
<PAGE>
requested), and preparation of construction schedules and budgets as
documents are developed, with recommendation for changes, where necessary,
to meet Owner objectives. The Consultancy shall commence on the effective
date hereof and shall continue until commencement of construction of
the Improvement.
ARTICLE 2
CONDUCT OF THE WORK
2.01. All services to be performed by Construction Manager
following the Consultancy (hereinafter referred to as the "Services") shall
be performed as agent of Owner.
2.02. Construction Manager, acting as agent for, and on behalf
of, Owner, will arrange to provide for Owner all labor, materials and
services for the general construction of the Improvement, in conformity
with plans and specifications (hereinafter referred to as "Construction
Documents"), prepared or to be prepared by Owner's architects, engineers
and other consultants. In such connection Construction Manager shall,
as directed by Owner, solicit bids, award contracts, purchase materials,
provide or arrange for necessary plant and equipment, employ, supervise,
coordinate and monitor necessary personnel (with power to employ or
discharge, fix and modify wages and compensation), prepare budget
estimates, programs and schedules as required, monitor and coordinate the
progress of work by, and negotiate final settlements (subject to Owner
approval) with all contractors and suppliers.
2.03. Owner shall approve all Costs contained in Section 4.05.
The Owner will establish monetary limits for disbursement of funds by
Construction Manager which will not require specific approval by Owner.
2.04. Construction Manager shall commence and continue the
Services using its best professional efforts with due diligence and in good
faith maintaining at all times sufficient personnel for the proper
prosecution of the Services.
2.05. Construction Manager's performance hereunder shall
terminate after it has completed the Services or upon earlier termination
of this Agreement pursuant to Article 11.
ARTICLE 3
ACCOUNTING AND AUDITING
3.01. Construction Manager will establish procedures for
accounting, auditing and rendering of statements of payment satisfactory
to Owner. Such procedures shall be prepared by the Construction Manager in
2
<PAGE>
writing and submitted to the Owner for approval. The approved procedures
shall be followed during the Consultancy and the Services. All records of
Construction Manager relating to the Consultancy and the Services shall be
open to inspection and audit by Owner and its representatives at all
times. Upon completion of the Services, original copies of all records
(in whatever media prepared) of Construction Manager shall, on request of
Owner, and at Owner's expense, be prepared and delivered to Owner or other-
wise disposed of as Owner may direct.
ARTICLE 4
FEES
4.01. As full compensation to Construction Manager during the
Consultancy, Owner shall pay Construction Manager a fee of $50,000 per
month, adjusted to $125,000 per month following selection by Owner of
the Architect and determination of the Project Schedule (hereinafter
referred to as "Consultancy Fee"). The Consultancy shall commence on the
effective date hereof and shall continue until commencement of construction
of the Improvement. Commencement of construction of the Improvement shall
be defined as commencement of pile and foundation work.
4.02. Owner shall pay Construction Manager a fee equal to 1.80%
of the Cost of the Work for the Services (hereafter referred to as "Fee").
The Fee shall be paid monthly, proportional to the progress of the
Work. The Construction Manager will credit the full amount of the
Consultancy Fee against the payments of the Fee in proportion to work
completed.
4.03 The Fee shall be the entire compensation for Construction
Manager's Services, including main office overhead and items identified in
Section 4.06.
4.04 Items which are paid through or by the Owner and installed
under the direct supervision of Owner shall not be considered part of the
Cost of the Work for purposes of computing the Construction Manager's
Fee. Construction Manager shall coordinate all such work. Such items
include but are not limited to: Architects and Consultants, Owner FF&E,
Separate Contractors, Owner internal costs and overhead, project insurance
premiums, landscaping and other similar items.
4.05. The costs of the Work (hereinafter referred to as "Cost")
shall be paid as follows:
3
<PAGE>
(a) During the Consultancy:
The following items shall be paid at actual cost and
are in addition to the Consultancy Fee:
(1) Compensation of project managers, estimators,
contract and EEO administrators, purchasing agents and
others assigned directly to the job on a full-time basis
as authorized by Owner.
(2) Reimbursable expenses such as blueprints, long
distance and mobile phone calls, travel expenses while in
New York and New Jersey (only during Consultancy), and
other expenses which may be authorized by the Owner.
(3) Expense of lodging and meals while conducting
business outside of New York and New Jersey. When in Las
Vegas, lodging and meals will be provided at hotel
facilities owned by Owner's affiliates.
(b) During the Services:
The following items shall be paid at actual cost and are
not considered Cost of the Work for the purpose of
computing the Construction Manager's Fee.
(1) Compensation of Project Executive.
(2) Relocation expenses (includes temporary subsistence)
incurred by Construction Manager's employees. Relocation
expenses shall be limited to: moving expenses, temporary
lodging and transportation expenses. Meals will not be
reimbursed. Living expenses incurred by Construction
Manager's employees after relocation has been completed
shall not be reimbursed. All relocation expenses must be
pre-approved by the Owner.
(3) Federal, state, municipal or other taxes within New
Jersey based upon labor performed and material furnished,
including, sales, and fees for permits and licenses
(excludes any taxes based on the corporate gross receipts,
profits or net income of Construction Manager and
professional fees).
4
<PAGE>
(4) Premiums on insurance paid by Construction Manager.
All such premiums must be submitted to the Owner for
approval prior to placement of such insurance.
(5) Reimbursable expenses such as telephone service,
telegrams, facsimile, delivery charges, postage, blue-
prints, printing, photographs, field office supplies,
stationery, travel outside of greater New York City and
Atlantic County or Trenton, New Jersey while conducting
business and other expenses which may be authorized by the
Owner.
(6) Expense of lodging and meals while conducting
business outside of greater New York City and Atlantic
County or Trenton, New Jersey. When in Las Vegas, lodging
and meals will be provided at hotel facilities owned by
Owner's affiliates.
(7) Counsel fees and legal expenses incurred by Con-
struction Manager in connection with any matter arising
out of the Services, except for matters related in
any manner to this Agreement or the creation of any
other contracts with the Owner. All fees and expenses must
be pre-approved by Owner.
The following items shall be paid at actual cost and are
considered Cost of the Work for the purpose of computing
the Construction Manager's Fee:
(8) Wages of full-time labor directly on Construction
Manager's field payroll. "Field" for the purpose of this
Agreement is defined to be at or on the Site.
(9) Compensation of Construction Manager's employees
stationed at the field office including project managers,
general superintendents, superintendents, accountants,
estimators, contract and EEO administrators, purchasing
agents and other employees, whose full-time or part-time
services are required at the field office solely for the
purpose of the Project.
(10) Payroll taxes and contributions for Federal old age
benefits, unemployment insurance, disability insurance,
family leave or other employee benefits required by law,
as well as welfare funds, pension funds, individual
medical, dental and hospitalization benefits, bonuses, and
5
<PAGE>
vacation costs proportional to the amount of service
on the Project in that calendar year. All bonuses must
be pre-approved by the Owner.
(11) The net cost of all materials, whether for
permanent or temporary use, including cost of inspection,
testing, transportation, storage and handling.
(12) Tools, equipment and services required for the
Services; water, power and fuel; winter protection;
surveys, soil and other investigations; protection and
repair of adjoining property; rental of property for
storage, field office and other purposes; royalties
for patents that may be involved in the Services.
(13) Rental of tools and equipment or parts thereof,
whether rented from Construction Manager or others; and
transportation of said tools or equipment, including
loading, unloading, installing, dismantling and removal
thereof, made necessary by use on the Improvement. All
tool and equipment rental expenses must be pre-approved by
the Owner.
(14) All contracts and purchase orders let in connection
with the Services.
(15) Reconstruction or repairs resulting from damage to
the Improvement, whether or not covered by insurance.
4.06. Costs shall not include and Construction Manager shall
not be reimbursed for:
(a) Services of Construction Manager's executive management
and compensation thereof (except for Project Executive).
(b) Services of Construction Manager's consulting division
personnel, including architectural, structural mechanical
and department heads and their staffs.
(c) Services of Construction Manager's corporate officers.
(d) Services of Construction Manager's insurance department.
6
<PAGE>
(e) Cost of Construction Manager's payroll robbery and general
fidelity insurance and any losses sustained by Construc-
tion Manager in connection with theft and robbery caused
by the defalcation of Construction Manager's employees.
(f) Cost of payroll preparation, computer services, T-Com
Report or any other corporate expense or service.
(g) Administrative or general overhead expense in connection
with the operation of any of Construction Manager's
offices other than the field office.
4.07. All trade discounts or cash discounts earned through
advance or prompt payment, proceeds from insurance, the sale of
surplus materials and equipment and the fair market value of any
tools, supplies or equipment, and to the extent permitted by law,
fees, commissions and gratuities received by Construction Manager,
or any subsidiary or affiliate, in connection with the Services shall
be for the benefit of Owner and shall reduce the Cost. Request
for payment of discounts may be submitted to the Owner for
reimbursement on an as-needed basis.
4.08. If any liens or encumbrances upon the subject property
shall occur, Owner shall promptly be given notice thereof by
Construction Manager and Owner shall satisfy, contest or discharge
or otherwise provide for same. If a lien or encumbrance has been
made by, or as a result of, a trade contractor or vendor,
Construction Manager shall require such trade contractor or vendor
to promptly satisfy and discharge such lien or encumbrance.
ARTICLE 5
AGENCY BANK ACCOUNT AND MONTHLY PAYMENT
5.01. Within thirty (30) days of commencement of the Services,
Owner will establish an interest-bearing bank account in the name of
Construction Manager as "Agent". All funds (including earnings) shall,
at all times, be the property of Owner and shall be drawn upon and
disbursed by Construction Manager in accordance with the approved
accounting procedures pursuant to Article 3. The purpose of this account
will be to pay all obligations, commitments, costs and liabilities made
or incurred by Owner or on Owner's behalf in connection with the prosecu-
tion of the Services. Such account is hereafter called the "Agency Bank
Account."
5.02. Upon the establishment of the Agency Bank Account,
Owner shall make an initial deposit of $150,000 and shall maintain such
7
<PAGE>
amount until completion of the Services. The Owner shall provide
sufficient funds to enable Construction Manager to pay when due all
obligations incurred by Owner or on Owner's behalf in connection with the
Services. It is understood that Construction Manager shall not be
required to expend its own funds for payment of out-of-pocket costs, fees
or expenses in connection with the Services.
5.03. On or about the tenth (10th) day of each month, Construc-
tion Manager will submit to Owner a requisition in a form satisfactory
to Owner for obligations incurred in connection with the Services up
to the last day of the previous month, including Construction Manager's
Fee. Within fifteen (15) calendar days after receipt of such requisition,
Owner shall make payment to Construction Manager, by payment directly
into the Agency Bank Account, whereupon Construction Manager shall promptly
thereafter make the necessary disbursements of such funds.
5.04. The balance of any Fee or reimbursement for Costs owing
Construction Manager under the terms of this Agreement shall be due and
payable within sixty (60) days after Substantial Completion (including
Final Certificate of Occupancy) of the Improvement, less Fees applicable
to remaining punch list Work.
ARTICLE 6
CONSTRUCTION BUDGET AND CHANGES IN THE WORK
6.01. The Owner and Construction Manager will establish
construction cost limits for the Project (hereafter referred to as
"Construction Budget"). The Construction Manager will use its best
professional efforts and expertise in purchasing and project administra-
tion to maintain the Construction Budget. The Owner acknowledges that
the Construction Budget may change as Construction Documents are developed,
refined and/or revised. All increases in the Construction Budget will
require written approval by the Owner. The Owner shall at all times
designate an individual who is authorized to provide such written approval.
It shall be a condition precedent to the Owner's obligation to pay for any
increases in the Construction Budget that the Construction Manager shall
have obtained prior written authorization from Owner. The Construction
Manager agrees that if it proceeds with any such increases prior to
receiving written authorization to do so, it proceeds at its own risk, cost
and expense.
8
<PAGE>
ARTICLE 7
INSURANCE
7.01. During the Consultancy, the Construction Manager shall
procure and maintain insurance coverage commensurate with the services
performed by the Construction Manager during the Consultancy. The cost
of all such insurance during the Consultancy shall be paid by the
Construction Manager.
7.02. If the Owner has not obtained a "Wrap-Up" Insurance
Policy thirty (30) days prior to commencement of Services, the Construction
Manager shall procure insurance coverage at the limits set forth herein.
Insurance coverage shall be for the benefit of the Owner and Construction
Manager. Premiums shall be paid by the Owner and must be pre-approved by
the Owner prior to placement of such insurance coverage.
A. Commercial General Liability coverage with a
$100,000,000 each occurrence and $100,000,000 Per Location
Aggregate Limit covering the liability of Construction
Manager for Bodily Injury and Property Damage arising as
a result of the construction of the Improvement and the
Services performed hereunder. The coverage shall include:
- Blanket Contractual Liability
- Completed Operations (continued for at least 3 years)
- Broad Form Property Damage
- "XC & U" Coverage
- Personal Injury
- Employees of Construction Manager as Additional
Insureds
- Claims made coverage is not acceptable
B. Worker's Compensation and Employer's Liability
coverage as required by law, covering employees of
Construction Manager performing work on the Improvement.
Coverage to include all subcontractors of every tier with
contracts over $5,000.
C. Automobile Liability coverage with a $100,000,000
Combined Single Limit, covering Owned, Non-Owned and
Hired Vehicles used in connection with the Improvement by
Construction Manager.
9
<PAGE>
D. Contractors Pollution Liability coverage with
$25,000,000 Each Loss and $50,000,000 Aggregate.
a. Bodily Injury, sickness, disease, mental anguish
or shock sustained by any person, including death;
b. Property Damage including physical injury to or
destruction of tangible property including the
resulting loss of use thereof, clean-up costs, and
the loss of use of tangible property that has not
been physically injured or destroyed;
c. Defense including costs, charges and expenses
incurred in the investigation, adjustment or defense
of claims for such compensatory damages;
7.03. In no event shall the limits of coverage be less than that
contained herein unless both parties are unable to secure such limits and
both parties agree to lower limits. In case of property loss, Construction
Manager, on behalf of Owner, will negotiate and settle claims subject to
Owner's approval. Owner and Construction Manager hereby mutually
agree to waive rights of subrogation against each other.
7.04. If requested by Owner, Construction Manager will assist
Owner in obtaining a "Wrap-Up" Insurance Policy relating to commercial
general liability and pollution liability coverage, workers' compensation
and builder's risk coverage to protect the interests of Owner, Owner's
separate contractors, Construction Manager and trade contractors on the
Project. Each individual trade contractor shall provide automobile
liability coverage and disability coverage. All cost associated with the
"Wrap-Up" Insurance Policy shall be paid by the Owner.
7.05. All insurance coverage for the Project shall name Con-
struction Manager, Mirage Resorts, Incorporated, Atlandia Design and
Furnishings Inc., MAC, CORP., MAC, CORP. Construction, New City
Development and their respective parents, and all other subsidiaries,
affiliates, employees, officers, directors and consultants of each of
them, as Additional Insureds named under this agreement.
ARTICLE 8
ASBESTOS AND HAZARDOUS WASTE REMOVAL
8.01. It is the Owner's sole responsibility to directly
contract for the removal, transport, and disposal of all asbestos and
10
<PAGE>
hazardous waste from the Site. Construction Manager shall bid and recommend
to Owner an award for both the asbestos and hazardous waste survey and
monitoring agency, as well as the removal agency. The survey and monitoring
agency shall be directly responsible to the Owner for the monitoring and
supervision of all asbestos and hazardous waste removal. Construction
Manager shall in no way be responsible for supervision and monitoring
or compliance with respect to the Work of removing, transporting, or
disposing of the asbestos or hazardous waste as performed by Owner's
contractor, and Owner shall defend, indemnify and hold Construction
Manager harmless from all claims, if any, resulting from the existence
and/or removal of asbestos and hazardous waste. This indemnification
shall survive termination of this Agreement. All services performed by
Construction Manager for site remediation will be provided under separate
agreement.
ARTICLE 9
ASSIGNMENT
9.01. Neither this Agreement nor any interest herein, nor any
claim hereunder, shall be assigned or transferred by either party without
the written consent of the other party in its sole direction, except that
Owner may assign its interest in this Agreement and all rights accruing
hereunder to a construction lender or affiliated company of Owner and
Construction Manager may assign its interest in this Agreement and all
rights accruing hereunder to its parent, affiliate or subsidiary with the
written approval of the Owner, which approval shall not be unreasonably
withheld.
ARTICLE 10
INDEMNITY
10.01. To the fullest extent permitted by law, the Construction
Manager shall indemnify and hold harmless the Owner, Mirage Resorts,
Incorporated, MAC, CORP., MAC, CORP. Construction, Atlandia Design and
Furnishings Inc., New City Development and all other subsidiaries,
affiliates, employees, officers, directors and consultants of the Owner
from and against claims, damages, losses and expenses, including but not
limited to attorney's fees, arising out of or resulting from performance
of the Work or Construction Manager's services hereunder, provided that
such claim, damage, loss or expense is attributable to bodily injury,
sickness, disease or death, or to injury to or destruction of tangible
property (other than the Work itself), but only to the extent caused by the
negligent acts or omissions of the Construction Manager, anyone directly
11
<PAGE>
or indirectly employed by it (but not including trade Contractors or
Vendors with whom Construction Manager has entered an agreement as Agent of
Owner) or anyone for whose acts it may be liable, regardless of whether or
not such claim, damage, loss or expense is caused in part by a party
indemnified hereunder. Such obligation shall not be construed to negate,
abridge, or reduce other rights or obligations of indemnity which would
otherwise exist as to a party or person described in this Paragraph 10.01.
10.02. To the fullest extent permitted by law, the Owner shall
indemnify and hold harmless the Construction Manager and all subsidiaries,
affiliates, employees, officers, directors and consultants of the Construc-
tion Manager from and against claims, damages, losses and expenses,
including but not limited to attorney's fees, arising out of or resulting
from performance of the Work hereunder, provided that such claim, damage,
loss or expense is attributable to bodily injury, sickness, disease or
death, or to injury to or destruction of tangible property (other than
the Work itself), but only to the extent caused by the negligent acts
or omissions of the Owner, anyone directly or indirectly employed by it
(but not including the Construction Manager, or any of the Construction
Manager's agents or employees) or anyone for whose acts it may be liable,
regardless of whether or not such claim, damage, loss or expense is caused
in part by a party indemnified hereunder. Such obligation shall not be
construed to negate, abridge, or reduce other rights or obligations of
indemnity which would otherwise exist as to a party or person described in
this Paragraph 10.02.
10.03. In claims against any person or entity indemnified under
Article 10 by an employee of the Construction Manager, anyone directly
or indirectly employed by it or anyone for whose acts it may be liable,
the indemnification obligation under Paragraph 10.01 shall not be limited
by a limitation on amount or type of damages, compensation or
benefits payable by or for the Construction Manager under worker's
compensation acts, disability benefit acts or other employee benefit acts.
ARTICLE 11
TERMINATION
11.01. In the event Owner notifies Construction Manager of
its decision not to commence construction of the Improvement, which
decision Owner may make in its sole discretion for any or no reason,
the parties agree as follows: (a) Construction Manager shall discontinue
the Consultancy forthwith, and (b) Owner shall pay to Construction Manager
the cost of all direct expenses (including, without limitation, the items
set forth in Section 4.05(a) hereof) and a pro-rata share of the
Consultancy Fee up to the date of termination.
12
<PAGE>
11.02. If either party shall default in the performance of this
Agreement and shall fail to cure such default within (20) twenty days
(ten days in the case of a default by Owner in the making of timely
payment of Construction Manager's requisitions as provided in Section
5.03) after receipt of notice from the other party specifying the default,
the party not in default, in addition to any other remedies provided here-
under, at law or in equity, including the imposition of liens, may
terminate this Agreement by notice to the defaulting party given within
ten (10) days after the foregoing grace period. Further, Construction
Manager shall be entitled to payment of interest at the rate of 1/2% per
annum above the prime or reference rate of Bank of America, Las Vegas,
Nevada, on all amounts due by Owner to Construction Manager hereunder from
the date when due except for amounts disputed in good faith between Owner
and Construction Manager.
11.03. If either party should be adjudged a bankrupt or should
make a general assignment for the benefit of its creditors or should file
a petition for arrangements with creditors or for reorganization, or if
a receiver should be appointed on account of its insolvency, said event
shall be deemed a default by said party and, in addition to any other
remedies provided hereunder, at law or in equity, including the imposition
of liens, the other party may terminate this Agreement at any time there-
after on notice to the defaulting party.
11.04. Should Owner abandon or discontinue construction of
the Improvement for more than one hundred twenty (120) consecutive days
or should construction of the Improvement be stopped under an order of
any court or other public authority for a period of (6) six consecutive
months through no act or fault of Construction Manager or of any of its
employees or representatives, then notwithstanding Section 11.02, Con-
struction Manager, on (15) fifteen days notice to Owner specifying the
reason therefor, may terminate this Agreement, unless the reason for
such termination is cured within such (15) fifteen day period, except
that if such abandonment or discontinuance of construction is caused by any
strike, riot, act of God, or other event of force majeure or cause beyond
the reasonable control of Owner (financial inability of Owner not
being a cause beyond its control), Construction Manager shall not be
entitled to terminate this Agreement unless a period of (6) six months
shall elapse from the date of the abandonment or discontinuance of
construction. Any such abandonment or discontinuance, for whatever reason,
shall not constitute a default by Owner.
11.05. Upon any termination of this Agreement under Section 11.04
above, or upon default of either party under Section 11.02 or 11.03,
Construction Manager shall:
13
<PAGE>
(a) Discontinue all Services on a date to be agreed upon
and make no further commitments except as may be necessary for completion
of Work to ensure the facilities or the site are free of hazards to the
public.
(b) Cancel to the extent permissible, or if so directed
by Owner, transfer to Owner all commitments and agreements relating to
the Services.
(c) Transfer to Owner, in the manner, to the extent and
at the time directed by it, the completed and uncompleted Work, supplies,
materials and other property produced as a part of or acquired in the
performance of the Services.
(d) Take action as Construction Manager may deem
necessary, or as Owner may direct, for the protection of property
which is in the possession of Construction Manager and in which Owner
has or may acquire any interest.
(e) Deliver to Owner all original files and records.
(f) Deliver to Owner all original construction budgets
and schedules.
11.06. Upon any termination of this Agreement, Owner, or Con-
struction Manager on behalf of Owner, shall pay and satisfy all
obligations which have been made or incurred by Owner or on Owner's behalf
in connection with the Services through the date of such termination.
ARTICLE 12
PROJECT REPRESENTATIVES
12.01 Owner designates Kenneth R. Wynn and William R. Smith as
Owner Representatives under this Agreement. Owner Representatives shall
have the right to act for Owner in all matters relating to this Agreement
and Owner shall be bound by any consents or approvals given by any Owner
Representative. The Owner may designate other Owner Representatives from
time to time by written notice to Construction Manager.
12.02 Construction Manager designates Michael J. Mennella as
Project Executive under this Agreement. The Project Executive shall have
the right to act for Construction Manager in all matters relating to this
Agreement and Construction Manager shall be bound by any consents or
approvals given by the Project Executive. The Project Executive will
be assigned on a full-time basis during the Consultancy and Services per-
forming duties from New York and New Jersey until major trades are
awarded. After such time all duties will be performed at the Construction
Manager's Field Office in New Jersey. The Construction Manager shall not
14
<PAGE>
reassign the Project Executive without prior written approval from the
Owner.
12.03. Construction Manager shall submit a Management Staffing
Plan to the Owner for approval no later than sixty (60) days prior to
commencement of Services. Any revisions to the approved Management
Staffing Plan shall be submitted to the Owner for approval.
ARTICLE 13
MISCELLANEOUS
13.01. All notices required or permitted to be given pursuant to
this Agreement shall be in writing and shall be deemed validly given if
sent by United States certified mail or overnight commercial delivery
service, addressed to the parties as follows:
OWNER: MAC, CORP. Construction
3260 South Industrial Road
Las Vegas, NV 89109
Attn: Kenneth R. Wynn, President or
William R. Smith, Vice President
CONSTRUCTION
MANAGER: Tishman Construction Corporation of New Jersey
666 Fifth Avenue
New York, NY 10103
Attn: Daniel R. Tishman, President or
Michael J. Mennella, Executive Vice President
Notices sent by United States certified mail shall be deemed to
have been received on the fourth day following deposit in a United
States Post Office. Notices sent by overnight commercial delivery service
shall be deemed to have been received on the next business day following
deposit with such delivery service.
13.02 The captions and headings herein contained are for conven-
ience only and shall in no way modify or limit the terms, provisions or
conditions hereof.
13.03. This Agreement constitutes the entire contract between the
parties and supersedes all prior written or oral negotiations and agree-
ments. No provisions of this Agreement shall be changed or modified,
nor shall this Agreement be discharged, in whole or in part, except by
an agreement in writing signed by the party against whom the change,
15
<PAGE>
modification or discharge is claimed or sought to be enforced. No waiver
of any of the conditions or provisions of this Agreement or of any of
the rights of either party hereunder shall be effective or binding unless
such waiver shall be in writing and signed by the party claimed to have
given, consented to or suffered the waiver.
13.04. If Owner requests Construction Manager to perform the
Work of any trade, such as concrete work, and Construction Manager so
agrees, then Owner shall pay to Construction Manager, as a Cost of the
Work, a fee of four percent (4%) of the Cost of such Work plus the extra
cost of insurance, if any, required to be carried by Construction
Manager. Reimbursement shall be made to Construction Manager as though
the monies were due to Construction Manager in the capacity of an
independent trade contractor and Construction Manager shall, with respect
to such Work, additionally have all rights and obligations of an indepen-
dent trade contractor.
13.05. Notwithstanding any other provision in this Agreement to
the contrary, the parties agree that this Agreement shall not be con-
strued, in part or in whole, to give rise to any rights, claims or benefits
to any person, firm or entity other than the signatories to this Agree-
ment. There are no third-party beneficiaries to this Agreement and no
terms or provisions of this Agreement may be enforced by or for the
benefit of any person or party not a signatory to this Agreement. Nothing
contained herein shall be deemed to create any partnership or other
relationship between Owner and Construction Manager other than that of
principal and agent.
13.06. This Agreement shall be governed by the laws of the State
of New Jersey.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered as of the date first above written.
MAC, CORP. Construction (Owner) Tishman Construction Corporation of
New Jersey (Construction Manager)
By: KENNETH R. WYNN By: DANIEL R. TISHMAN
--------------- -----------------
Kenneth R. Wynn Daniel R. Tishman
President President
16
EXHIBIT 15
August 13, 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), on Form S-8 (File No. 333-59455) and on Form S-3
(File No. 333-39029) its Form 10-Q for the quarter ended June 30, 1998
which includes our report dated August 13, 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 JUNE 30, 1998 AND
THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME AND CASH FLOWS FOR
THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 145,831
<SECURITIES> 0
<RECEIVABLES> 112,014
<ALLOWANCES> 46,209
<INVENTORY> 29,474
<CURRENT-ASSETS> 361,014
<PP&E> 3,896,838
<DEPRECIATION> 675,634
<TOTAL-ASSETS> 3,895,738
<CURRENT-LIABILITIES> 238,546
<BONDS> 1,862,843
0
0
<COMMON> 940
<OTHER-SE> 1,585,497
<TOTAL-LIABILITY-AND-EQUITY> 3,895,738
<SALES> 0
<TOTAL-REVENUES> 665,539
<CGS> 0
<TOTAL-COSTS> 394,170
<OTHER-EXPENSES> 45,056
<LOSS-PROVISION> 10,403
<INTEREST-EXPENSE> 8,615
<INCOME-PRETAX> 118,417
<INCOME-TAX> 43,198
<INCOME-CONTINUING> 75,219
<DISCONTINUED> 0
<EXTRAORDINARY> (3,521)
<CHANGES> 0
<NET-INCOME> 71,698
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.37
</TABLE>
