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 September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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
incorporation or organization) No.)
3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109
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(Address of principal executive offices - Zip Code)
(702) 693-7111
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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, 193,194,731 shares outstanding as of
November 8, 1999.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited condensed consolidated financial information as of
September 30, 1999 and for the three-month and nine-month periods ended
September 30, 1999 and 1998 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 September 30, 1999, and the related condensed
consolidated statements of income for the three-month and nine-month
periods ended September 30, 1999 and 1998 and the related condensed
consolidated statements of cash flows for the nine-month periods ended
September 30, 1999 and 1998. 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, 1998, 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
February 22, 1999, 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, 1998, 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
November 4, 1999
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<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
BALANCE SHEETS
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At September 30, At December 31,
1999 1998
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(In thousands) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 101,319 $ 74,814
Trade receivables, net of allowance for doubtful
accounts of $55,727 and $40,480 131,971 118,125
Inventories 95,370 74,195
Preopening costs - 24,718
Deferred income taxes 26,356 23,180
Prepaid expenses and other 73,966 83,445
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Total current assets 428,982 398,477
Property and equipment, net of accumulated
depreciation of $870,694 and $733,032 3,971,595 3,290,189
Construction in progress 92,705 539,530
Other assets, net 238,079 302,006
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$4,731,361 $4,530,202
=========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 106,008 $ 129,592
Construction payables 15,084 42,859
Accrued expenses 178,093 155,675
Current maturities of long-term debt 311 404
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Total current liabilities 299,496 328,530
Long-term debt, net of current maturities 2,117,425 2,378,507
Other liabilities, including deferred income taxes
of $208,987 and $207,063 223,844 221,328
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Total liabilities 2,640,765 2,928,365
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Commitments and contingencies
Stockholders' equity
Common stock: 198,950 and 180,120 shares outstanding 940 940
Additional paid-in capital 1,083,715 738,665
Retained earnings 1,192,481 1,145,497
Treasury stock, at cost: 36,198 and 55,028 shares (186,540) (283,265)
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Total stockholders' equity 2,090,596 1,601,837
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$4,731,361 $4,530,202
=========================================================================================
</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 Nine Months
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For the periods ended September 30 1999 1998 1999 1998
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(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues
Casino $314,126 $188,351 $ 905,914 $ 542,541
Rooms 127,409 69,362 385,683 215,910
Food and beverage 117,607 54,529 339,481 164,665
Entertainment 52,566 26,488 142,723 73,068
Retail 37,221 16,040 104,836 47,369
Other 21,055 11,855 64,583 40,375
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669,984 366,625 1,943,220 1,083,928
Less - promotional allowances (63,502) (34,031) (180,856) (100,581)
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606,482 332,594 1,762,364 983,347
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Operating costs and expenses
Casino-hotel operations 390,819 209,611 1,117,696 614,184
General and administrative 81,131 41,939 238,876 121,285
Depreciation and amortization 54,157 21,650 150,346 66,706
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526,107 273,200 1,506,918 802,175
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Operating profit 80,375 59,394 255,446 181,172
Corporate expense (14,872) (16,718) (37,982) (34,810)
Preopening and related promotional expense (3,415) - (38,990) -
Equity in earnings of Monte Carlo 6,926 5,549 23,506 20,335
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Income from operations 69,014 48,225 201,980 166,697
Interest cost (34,637) (34,376) (109,791) (92,619)
Interest capitalized 5,940 32,340 23,421 81,968
Other, including interest income 1,486 2,677 4,399 11,237
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Income before income taxes, extraordinary item
and cumulative effect of change in accounting
principle 41,803 48,866 120,009 167,283
Provision for income taxes (14,774) (18,762) (42,448) (61,960)
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Income before extraordinary item and cumulative
effect of change in accounting principle 27,029 30,104 77,561 105,323
Extraordinary item - loss on early retirement of debt,
net of applicable income tax benefit of $1,897 - - - (3,521)
Cumulative effect (to January 1, 1999) of change in
method of accounting for preopening costs, net of
applicable income tax benefit of $16,390 - - (30,577) -
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Net income $ 27,029 $ 30,104 $ 46,984 $101,802
=================================================================================================================
Income per share before extraordinary item and
cumulative effect of change in accounting principle
Basic $ 0.14 $ 0.17 $ 0.41 $ 0.59
Diluted 0.13 0.16 0.38 0.55
Net income per share
Basic $ 0.14 $ 0.17 $ 0.25 $ 0.57
Diluted 0.13 0.16 0.23 0.53
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</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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Nine months ended September 30 1999 1998
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(In thousands)
<S> <C> <C>
Cash flows from operating activities
Net income $ 46,984 $ 101,802
Adjustments to reconcile net income to net cash provided by operating
activities
Provision for losses on receivables 20,400 15,340
Depreciation and amortization of property and equipment, including
amounts reported as corporate expense 161,765 77,271
Expensed preopening and related promotional costs 38,990 -
Equity in earnings of Monte Carlo (23,506) (20,335)
Distributions from Monte Carlo 27,500 16,400
Non-recurring charges, before related income tax benefit
Loss on early retirement of debt - 5,418
Cumulative effect of change in method of accounting for pre-
opening costs 46,967 -
Deferred income taxes (1,252) 17,196
Changes in components of working capital pertaining to operating
activities
Increase in trade receivables and other current assets (45,942) (27,628)
Decrease in trade accounts payable and accrued expenses (6,063) (15,030)
Other adjustments 142 1,053
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Net cash provided by operating activities 265,985 171,487
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Cash flows from investing activities
Preopening and related promotional costs (38,990) (66,081)
Capital expenditures (398,867) (920,122)
(Increase) decrease in construction deposits 26,632 (12,040)
Increase (decrease) in preopening and construction payables (22,193) 40,974
Proceeds from sales of property and equipment 16,929 62,071
Boardwalk acquisition costs, net of cash acquired - (55,562)
Other investing activities (3,353) (24,903)
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Net cash used for investing activities (419,842) (975,663)
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Cash flows from financing activities
Net increase (decrease) in bank credit facility and commercial
paper borrowings (260,929) 675,826
Issuance of long-term debt - 394,728
Retirement of long-term debt - (237,110)
Issuance of common stock 415,562 -
Exercise of common stock options, including related income tax benefit 26,284 4,474
Other financing activities (555) (6,110)
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Net cash provided by financing activities 180,362 831,808
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Cash and cash equivalents
Increase for the period 26,505 27,632
Balance, beginning of period 74,814 99,337
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Balance, end of period $ 101,319 $ 126,969
=======================================================================================================
</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 casino-based enter-
tainment resorts. These resorts include Bellagio (which opened on
October 15, 1998), The Mirage, Treasure Island and the Holiday Inn -
Registered Trademark - Casino Boardwalk ("Boardwalk"), all located on
the Las Vegas Strip. The Company also owns the Golden Nugget, located in
downtown Las Vegas, and the Golden Nugget-Laughlin, located along the
Colorado River in Laughlin, Nevada. The Company's newest resort, Beau
Rivage, opened on March 16, 1999. Beau Rivage is a 1,780-guestroom
beachfront resort located on an approximately 36-acre site where Inter-
state 110 meets the Gulf Coast in Biloxi, Mississippi.
The Company is also a 50% partner in a joint venture that owns and
operates the Monte Carlo Resort & Casino on the Las Vegas Strip ("Monte
Carlo").
The accompanying condensed consolidated financial statements have been
prepared in accordance with the accounting policies described in the
Company's 1998 Annual Report on Form 10-K (the "1998 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, 1998 contained herein was derived from
audited financial statements, but does not include all disclosures
included in the 1998 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 1999
interim periods are not necessarily indicative of expected results for
the full year.
Certain amounts in the 1998 condensed consolidated financial statements
have been reclassified to conform with the 1999 presentation. These
reclassifications had no effect on the Company's net income.
NOTE 2 - ISSUANCE OF COMMON STOCK
On May 11, 1999, the Company issued 16,633,663 shares of common stock
in a public offering at $25.00 per share. The net proceeds from the
offering of approximately $415.6 million were used to reduce the
Company's outstanding bank credit facility and commercial paper
borrowings.
NOTE 3 - ACCOUNTING CHANGE
Effective January 1, 1999, the Company adopted Statement of Position No.
98-5 - Reporting on the Costs of Start-Up Activities ("SOP 98-5"). The
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<PAGE>
provisions of SOP 98-5 are effective for fiscal years beginning after
December 15, 1998 and require the costs associated with start-up
activities (including preopening costs of casinos) to be expensed as
incurred. The Company previously capitalized preopening costs and
amortized them to expense over the 60-day period following opening of
the related facility. As required by SOP 98-5, the Company wrote off all
capitalized preopening costs as of January 1, 1999 associated with Beau
Rivage and its development activities in Atlantic City, New Jersey. The
write-off resulted in a charge during the 1999 nine-month period, net of
income tax benefit, of $30.6 million ($0.16 per share basic and
$0.15 per share diluted).
During the three- and nine-month periods ended September 30, 1999, the
Company also incurred and expensed additional preopening and related
promotional costs associated with these projects as follows:
<TABLE>
<CAPTION>
Three Nine
For the periods ended September 30, 1999 Months Months
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(In thousands, except per share amounts)
<S> <C> <C>
Preopening and related promotional expense $ 3,415 $ 38,990
Income tax benefit (1,195) (13,472)
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$ 2,220 $ 25,518
========================================================================
Per share amount, net of income tax benefit
Basic $ 0.01 $ 0.13
Diluted $ 0.01 $ 0.13
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</TABLE>
Under the Company's previous accounting method, all $55.1 million ($36.0
million, $0.19 per share basic and $0.18 per share diluted, net of
income tax benefit) of Beau Rivage's preopening and related promotional
costs would have been amortized to expense during the nine-month period
ended September 30, 1999. There would have been no cumulative effect
adjustment.
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<PAGE>
NOTE 4 - INCOME PER SHARE OF COMMON STOCK
The weighted-average number of common and common equivalent shares used
in the calculation of basic and diluted earnings per share consisted of
the following:
<TABLE>
<CAPTION>
Three Months Nine Months
------------------------- --------------------------
For the periods ended September 30 1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Weighted-average common shares
outstanding (used in the
calculation of basic
earnings per share) 198,936,497 179,720,035 190,234,096 179,568,175
Potential dilution from
the assumed exercise
of common stock options 7,247,230 10,827,834 10,287,996 12,186,918
- ------------------------------------------------------------------------------------------
Weighted-average common and
common equivalent shares
(used in the calculation
of diluted earnings per share) 206,183,727 190,547,869 200,522,092 191,755,093
==========================================================================================
</TABLE>
Stock options with an exercise price higher than the average market
price of the common stock during the period are excluded from the
calculation of diluted earnings per share. As a result, a weighted-
average of 15,453,839 and 7,274,514 stock options was excluded from the
calculation during the three-month periods ended September 30, 1999 and
1998, respectively. The calculation for the nine-month periods excluded
a weighted-average of 5,168,080 stock options in 1999 and 3,694,534 in
1998.
NOTE 5 - REPURCHASE OF COMMON STOCK
On October 7, 1999, the Company repurchased 5,754,836 shares of its
common stock in a privately negotiated transaction at $15.25 per share.
Approximately 3.3 million shares remain authorized under the Company's
previously announced 10 million share repurchase program.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Our two new resorts had a major impact on our operating results during
the 1999 periods. Bellagio opened on October 15, 1998 and Beau Rivage
opened on March 16, 1999.
Including the contribution from these two new resorts, total revenues
for the 1999 third quarter and nine-month period increased by 83% and
79%, respectively, over the prior-year period. Company-wide casino
revenues during the quarter climbed to $314.1 million, representing an
increase of $125.8 million, or 67%, over the same 1998 period. For the
nine-month period, casino revenues totaled $905.9 million, an increase
of $363.4 million, or 67%, over the prior-year period. Company-wide
table games revenues during the quarter increased by 67% over the 1998
period to $160.3 million and slot revenues increased by 68% to $143.2
million. For the 1999 nine-month period, table games revenues totaled
$458.2 million and slot revenues totaled $409.9 million, representing
increases of 70% and 64%, respectively, over the prior-year period.
Our Company-wide table games win percentage was relatively normal
during the third quarters of both years - 19.6% in 1999 and 20.8% in
1998. By comparison, the Company's overall table games win percentage
over the past three calendar years averaged approximately 20%. For
the 1999 nine-month period, the Company-wide table games win
percentage was somewhat below this historical average at 18.9%, versus
19.2% in the same 1998 period.
Total non-casino revenues during the quarter grew to $355.9 million,
nearly doubling the $178.3 million achieved in the 1998 period. For
the 1999 nine-month period, total non-casino revenues reached $1.0
billion, compared with $541.4 million for the same period in 1998.
Company-wide occupancy of available standard guestrooms was 98% during
the 1999 third quarter and the average daily rate was approximately
$97. During the 1998 quarter, standard guestroom occupancy was 99%
and the average daily rate was approximately $84. For the nine-month
periods, standard guestroom occupancy was 97% and the average daily
rate was $103 in 1999, versus 99% and $88 in 1998. The increase in
the average daily room rate during 1999 principally reflects
Bellagio's room rates, which are generally higher than those of our
other resorts.
Our operating results were impacted by several factors during the 1999
periods. In Las Vegas, we completed refurbishing all of the guestrooms
at Treasure Island in late September. The refurbishment program began
in February and resulted in approximately 8% fewer available room
nights at Treasure Island during both the three- and nine-month
periods of 1999 as compared with the same periods in 1998. As a
result of the significant upgrading of the furnishings of its
guestrooms, and in recognition of superior customer service, Treasure
Island was recently awarded the Four Diamond rating by AAA.
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<PAGE>
A much more competitive market environment also impacted our Las Vegas
resorts during 1999. In addition to the opening of Bellagio in October
1998, three major new competing resorts opened on the Strip during 1999,
adding approximately 9,600 guestrooms to the market. We are continuing
to develop and implement strategies to enhance our competitive position
in Las Vegas. Some of these strategies include introducing new restau-
rants and entertainment attractions, refurbishing our guestrooms and
introducing new advertising and marketing programs. We believe that
some of our greatest strengths for dealing with the new competition are
the superior design, condition and locations of our resorts and the
friendliness and professionalism of our employees.
At Beau Rivage, as is common for many new resort hotels, guestroom
occupancy started low and increased gradually. Occupancy of its
standard guestrooms was 83% during the 1999 second quarter (its first
full quarter of operation) and increased to approximately 94% during
the third quarter. The average daily standard room rate at the resort
was approximately $94 during the six-and-one-half-month period since
opening. The earnings contribution from Beau Rivage was also
constrained in the period since opening by additional payroll,
advertising and other costs related to our efforts to establish this
resort's long-term position as the leader in the Gulf Coast market.
The 1999 results were also impacted by a recently issued accounting
statement that requires start-up costs, including preopening costs of
new hotel-casinos, to be expensed as incurred. We previously
capitalized these costs and amortized them to expense over the 60-day
period following opening of the related facility.
As required, we adopted the provisions of this new accounting
statement effective January 1, 1999. As a result, we wrote off all
$47.0 million of previously capitalized preopening costs, including
$24.7 million related to Beau Rivage and $22.3 million related to our
development in Atlantic City. After deducting the related income tax
benefit, the write-off resulted in a cumulative effect charge of $30.6
million. We also incurred and expensed an additional $3.4 million of
preopening costs during the 1999 third quarter, principally relating
to our development activities in Atlantic City. Preopening costs
incurred and expensed during the 1999 nine-month period totaled $39.0
million and largely represented the costs associated with opening Beau
Rivage.
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<PAGE>
The following table presents the impact of these charges on our net
income for the three- and nine-month periods ended September 30, 1999.
All adjustment amounts are shown net of applicable income tax benefit.
<TABLE>
<CAPTION>
Three Months Nine Months
-------------------------- -------------------------
Per Share Per Share
---------------- ---------------
For the periods ended September 30, 1999 Amount Basic Diluted Amount Basic Diluted
- -------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income, as reported $27,029 $0.14 $0.13 $ 46,984 $0.25 $0.23
Cumulative effect (to January 1, 1999)
of accounting change - - - 30,577 0.16 0.15
Preopening and related promotional
costs incurred and expensed 2,220 0.01 0.01 25,518 0.13 0.13
- -------------------------------------------------------------------------------------------------
Income before charges for preopening
and related promotional costs $29,249 $0.15 $0.14 $103,079 $0.54 $0.51
=================================================================================================
</TABLE>
With Bellagio and Beau Rivage now open, our depreciation expense
increased by $32.5 million in the 1999 third quarter and $83.6 million
in the 1999 nine-month period.
Our jointly owned Monte Carlo resort's revenues, operating profit and
net income all increased over the 1998 three- and nine-month periods.
Higher room revenues accounted for most of the increase in the resort's
operating results, reflecting an increase in both occupancy and the
average daily room rate.
With Bellagio and Beau Rivage now complete, we are capitalizing a much
smaller portion of our interest cost. As a result, net interest
expense for the 1999 third quarter was $28.7 million, versus $2.0
million in the prior-year period. For the nine-month comparison, net
interest expense totaled $86.4 million in 1999, versus $10.7 million
in 1998.
The $3.5 million ($0.02 per share basic and diluted) extraordinary
loss in the 1998 nine-month period reflects the early repayment in
March of all $100 million of our 9 1/4% senior subordinated notes. It
was economically advantageous for us to repay the notes using funds
from lower cost borrowings, even after considering the prepayment
penalty that accounted for most of the extraordinary charge. We
incurred no similar charge during the 1999 periods.
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<PAGE>
CAPITAL RESOURCES, CAPITAL SPENDING AND LIQUIDITY
Net cash provided by operating activities (as shown in the Condensed
Consolidated Statements of Cash Flows) totaled $266.0 million during
the 1999 nine-month period, versus $171.5 million during the 1998
period. This increase principally reflects the contribution from
Bellagio and Beau Rivage, as well as additional cash distributions
from Monte Carlo of $11.1 million.
The majority of our operating cash flow during the 1999 nine-month
period was effectively used for the completion of Beau Rivage. After
giving effect to the change in associated deposit and payable amounts,
capital expenditures and preopening and related promotional costs
required net cash of $433.4 million during the 1999 nine-month period.
This amount also includes expenditures associated with the recently
completed guestroom refurbishment program at Treasure Island.
Our purchase of the Boardwalk hotel-casino and related assets was
completed on June 30, 1998. The Boardwalk acquisition, combined with
other land we previously acquired, provides us with approximately 55
acres for future development with over 1,200 feet of frontage on the
Las Vegas Strip between Bellagio and Monte Carlo. We are in the very
early design phase for a potential new hotel-casino resort we expect
to ultimately develop on this site. The design, timing and cost of
the new resort are still highly uncertain and will depend on several
factors. Among these factors is the market's absorption of the new
resorts on the Las Vegas Strip. Because we acquired the Boardwalk and
adjacent land for development of a new resort, interest cost is being
capitalized on the funds used for such purchases. In the interim,
Boardwalk is being accounted for as an incidental operation. Under
this method, Boardwalk's operations are excluded from our consolidated
operating results and its net income, as well as rental income from
the adjacent land, is recorded as a reduction in the carrying value of
the land.
We are progressing with the design and budgeting of our proposed
resort development in the Marina area of Atlantic City. Our
current plans call for a wholly owned hotel-casino resort and construc-
tion of a second resort on a 25-acre portion of our 120-acre site in
partnership with Boyd Gaming Corporation. We have not yet finalized the
design, budget or construction schedule for our wholly owned hotel-
casino. As part of our agreement with the City of Atlantic City to
acquire the land, we are required to remediate environmental contamina-
tion at the Marina site, which was a municipal landfill until 1975. We
began the remediation in November 1998 and had completed approximately
65% of the work at October 31, 1999. Also as part of our agreement with
the City, we have completed demolition of the City-owned facilities pre-
viously located on the site and we recently commenced relocation of on-
site public utilities. Construction is also continuing on the previously
funded joint venture road improvement project with the State of New
Jersey to improve access to the Marina area. The project is scheduled
for completion in May 2001.
Our joint venture agreement with Boyd calls for the development of a
$750 million entertainment resort with at least 1,200 guestrooms on
the Marina site. The joint venture resort, currently named "The
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<PAGE>
Borgata," will be connected to our planned wholly owned hotel-casino.
We are currently designing and will develop the master plan
improvements for the Marina site. Boyd will oversee the design and
construction of The Borgata and operate the resort upon completion.
Under the agreement, subject to the receipt of acceptable financing as
described below, we will contribute the 25 acres of land and $60
million in cash, of which approximately $5 million had been
contributed at September 30, 1999. Boyd will contribute $150 million
in cash. The joint venture will attempt to obtain acceptable
financing for the remaining cost of the project that is non-recourse
to both our Company and Boyd. If the necessary permits and financing
are obtained, construction of The Borgata could begin in the first
half of next year.
Both our Company and the joint venture must apply for and receive
numerous governmental permits and satisfy other conditions before
construction of either hotel-casino can begin. Additionally, a current
Atlantic City hotel-casino operator and others have filed various
lawsuits challenging the validity of our previous agreement with the
City of Atlantic City to acquire the land and seeking to stop the
construction of the road improvements. Our Company has prevailed in all
of these lawsuits that have been adjudicated to date, but a number of
lawsuits are still pending in various stages and others could be filed
in the future. As a result of these factors, we cannot be certain of
the ultimate development or timing of construction of the hotel-casinos
planned for the Marina site.
The $415.6 million net proceeds received from the May 11, 1999
issuance of 16,633,663 shares of our common stock were used to reduce
borrowings outstanding under our $1.75 billion bank credit facility
and commercial paper program. As a result, we achieved a $260.9
million net decrease in these borrowings during the 1999 nine-month
period. We used commercial paper borrowings to fund the October 7,
1999 repurchase of 5,754,836 shares of our common stock at $15.25 per
share. At October 31, 1999, our outstanding bank credit facility and
commercial paper borrowings totaled approximately $1.3 billion, leaving
$480 million combined availability.
We believe our existing cash balances, future operating cash flow and
available borrowing capacity will provide us with sufficient resources
to meet our existing debt obligations and foreseeable capital
expenditure requirements.
YEAR 2000 READINESS DISCLOSURE
BACKGROUND
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive computer software may recognize a date using "00" as the
year 1900 rather than the year 2000. This is generally referred to as
the "Year 2000 issue." If this situation occurs, the potential exists
for computer system failures or miscalculations by computer programs,
which could disrupt operations.
-13-
<PAGE>
RISK FACTORS
We are in many ways engaged in a low-technology business. Nevertheless,
we do use computers extensively to assist our employees in providing
good service to our guests and to assist us in monitoring our oper-
ations.
Computers on occasion fail, irrespective of the Year 2000 issue. For
this reason, where appropriate, we maintain paper and magnetic tape back-
ups and our employees are trained in the use of manual procedures. This
is not to imply that there is no risk to us from the Year 2000 issue.
The risks could be substantial. Most of our guestrooms, for example,
are easily accessed only by elevator, and most elevators incorporate
some computer technology. Likewise, our heating, ventilation, life
safety and air conditioning systems are highly computerized and, of
course, critical to our operations. We are also exposed to the risk
that one or more of our vendors or suppliers could experience Year 2000
problems that may impact their ability to provide us with goods and
services. With respect to the suppliers of many of our goods, we gen-
erally have alternative suppliers. However, the disruption of certain
services, in particular utilities and financial services, could, depend-
ing upon the extent of the disruption, have a material adverse impact on
our operations.
External effects of the Year 2000 issue, such as disruptions in airline
service or other domestic or international economic disruptions
affecting our customers, could also adversely affect our business. Most
of our customers travel in excess of 100 miles to reach our resorts and
many of them travel by air. If there is a breakdown of the Federal
Aviation Administration's ("FAA") air traffic control system, or if fear
of a breakdown discourages customers from traveling, it could impact our
operations. We are not in a position to determine the readiness of the
FAA and the airlines with respect to the Year 2000 issue or the impact
that this would have on our business.
STRATEGY
We have an extensive Year 2000 compliance program and have completed an
inventory of our various systems that may be sensitive to the Year 2000
issue. We prioritized the importance of these systems to our operations
and formed teams and assigned responsibilities to ensure Year 2000
compliance of all critical systems. When inquiry seems reasonable, we
are also contacting third parties that are important to our business to
ascertain their Year 2000 readiness. We are developing alternatives for
those third parties where we perceive there could be a problem.
As of September 30, 1999, about 82% of our systems had been tested by
our personnel or vendor personnel and found to be Year 2000 compliant.
We have identified the remaining systems that are not Year 2000
compliant and believe that any significant risks with respect to those
systems will be mitigated by year-end. We have developed a comprehensive
Year 2000 support strategy and will have appropriate personnel on-site
throughout the transition into the New Year. As previously mentioned,
a number of our critical hotel and casino systems are currently backed
up by manual procedures that we use during times of system malfunctions.
During the New Year transition, these procedures will include more
extensive manual tracking as an added safeguard.
-14-
<PAGE>
COSTS
It is difficult to calculate the cost of ensuring that our systems are
Year 2000 compliant, in part because there are many different solutions
to various Year 2000 situations. In the case of our elevators, for
example, we have requested that the third parties with whom we contract
for our elevator maintenance inspect each elevator system, as part of
its normal maintenance, for any Year 2000 issues. As another example,
we have contracted with a third-party consultant to make our proprietary
casino tracking system Year 2000 compliant. At the same time, however,
and under the same contract, the consultant is also incorporating
several other enhancements to the system.
During the period from 1997 through 1999, we have installed and will be
installing new slot accounting, hotel management and financial
accounting systems. Each of these new systems is Year 2000 compliant
and also has numerous enhancements over our prior systems. The total
cost of installing these new systems is approximately $18 million, of
which we had incurred approximately $13 million through October 31,
1999. We believe that only a small portion of this cost relates direct-
ly to the Year 2000 issue. We also believe that we would have installed
these systems within this time frame irrespective of the Year 2000
issue. The cost of addressing the Year 2000 issue has not been and is
not expected to be material to our financial condition or results of
operations.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains some forward-looking statements. Forward-looking
statements give our current expectations or forecasts of future events.
You can identify these statements by the fact that they do not relate
strictly to historical or current facts. They contain words such as
"anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe," "may," "could," "might" and other words or phrases of similar
meaning in connection with any discussion of future operating or
financial performance. These forward-looking statements involve
important risks and uncertainties that could significantly affect our
anticipated future results and, therefore, our actual results may differ
materially from those described in any forward-looking statement. These
risks and uncertainties include those relating to competition,
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 or future legal proceedings, the effects of the Year
2000 issue, 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). Additional
information concerning potential factors that we think could cause our
actual results to differ materially from expected and historical results
is included under the caption "Factors that May Affect Our Future
Results" in Item 1 of the 1998 Annual Report. This statement is
provided as permitted by the Private Securities Litigation Reform Act of
1995.
-15-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 28, 1999, a former stockholder of the Company's Boardwalk
subsidiary filed a first amended complaint in a purported class action
lawsuit in District Court for Clark County, Nevada against the Company
and certain former directors and principal stockholders of that subsid-
iary. The complaint alleges that the Company induced the other defen-
dants to breach their fiduciary duties to the Boardwalk's minority
shareholders by devising and implementing a scheme by which the Company
acquired Boardwalk at significantly less than the true value of its
shares. The complaint seeks an unspecified amount of compensatory
damages from the Company and compensatory and punitive damages from the
other defendants. We believe that the claims in the complaint are with-
out merit and intend to defend the case vigorously.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.1 Letter agreement, dated August 1, 1999, between Bellagio and
Stephen A. Wynn.
10.2 Letter agreement, dated September 1, 1999, between Bellagio
and Stephen A. Wynn.
10.3 Employment Termination and Settlement Agreement, dated as of
September 7, 1999, between the Company and Daniel R. Lee
(without exhibit).
15 Letter from independent public accountants acknowledging
awareness of the use of their report dated November 4, 1999
in the Company's registration statements.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
On July 2, 1999, the Company filed a Current Report on Form 8-K
dated July 1, 1999. Under Items 5 and 7 of the Form 8-K, the
Company filed its Press Release dated July 1, 1999 reporting
expected earnings for the quarter ended June 30, 1999.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Mirage Resorts, Incorporated
November 10, 1999 by: ROBERT H. BALDWIN
- ----------------- --------------------------------
Date Robert H. Baldwin
Chief Financial Officer and
Treasurer (Principal Financial
Officer)
-17-
Robert H. Baldwin
President
B E L L A G I O
August 1, 1999
Mr. Stephen A. Wynn
Chairman of the Board and
Chief Executive Officer
Mirage Resorts, Incorporated
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Re: Amendment No. 4 to Fine Art Rental Agreement
Dear Steve:
Pursuant to Paragraph 3 of the letter agreement dated December 31, 1998
between Bellagio and you (the "Rental Agreement"), this letter confirms
our agreement that, effective this date, the following works of fine
art shall be added to Exhibit A to the Rental Agreement for the
following monthly rent:
<TABLE>
<CAPTION>
Work Monthly Rent
-------------------------------- ------------
<S> <C>
"Dancer" by Joan Miro (1935, $ 1,813
oil and ripolin enamel on board,
41-3/4 x 29 inches)
"Odalisque (Orientale assise 34,346
par terre)" by Henri Matisse
(1928, oil on canvas, 18-3/16 x
21-11/16 inches)
</TABLE>
P.O. BOX 7700, LAS VEGAS, NEVADA 89177-7700
Exhibit 10.1
<PAGE>
Mr. Stephen A. Wynn
August 1, 1999
Page 2
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
George J. Panek
2
Robert H. Baldwin
President
B E L L A G I O
September 1, 1999
Mr. Stephen A. Wynn
Chairman of the Board and
Chief Executive Officer
Mirage Resorts, Incorporated
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Re: Amendment No. 5 to Fine Art Rental Agreement
Dear Steve:
Pursuant to Paragraph 3 of the letter agreement dated December 31, 1998
between Bellagio and you (the "Rental Agreement"), this letter confirms
our agreement that, effective this date, the following work of fine art
shall be added to Exhibit A to the Rental Agreement for the following
monthly rent:
<TABLE>
<CAPTION>
Work Monthly Rent
---------------------------------- ------------
<S> <C>
"Still Life with Curtain, Pitcher $83,333
and Bowl of Fruit" by Paul Cezanne
(ca. 1893-1894, oil on canvas,
23-1/2 x 28-3/4 inches)
</TABLE>
Please sign below to confirm your agreement to the foregoing. My
signature below confirms Bellagio's agreement thereto.
Very truly yours,
BELLAGIO I hereby agree to the foregoing.
By: ROBERT H. BALDWIN STEPHEN A. WYNN
--------------------------- --------------------------------
ROBERT H. BALDWIN STEPHEN A. WYNN
President and Chief
Executive Officer
cc: Bruce A. Levin
George J. Panek
James E. Pettis
Peter C. Walsh
P.O. BOX 7700, LAS VEGAS, NEVADA 89177-7700
Exhibit 10.2
EMPLOYMENT TERMINATION AND SETTLEMENT AGREEMENT
This Employment Termination and Settlement Agreement (the "Agreement")
is entered into and effective as of September 7, 1999, by and between
Mirage Resorts, Incorporated, a Nevada corporation (the "Company"), and
Daniel R. Lee ("Employee").
WHEREAS, Employee has been employed by the Company as Senior Vice
President-Finance and Development, Chief Financial Officer and
Treasurer pursuant to an Employment Agreement dated as of July 16, 1997
(the "Employment Agreement"); and
WHEREAS, the Company and Employee wish to settle all outstanding issues
between them arising out of that employment relationship;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises contained herein, the parties agree as follows:
1. The Company and Employee represent and warrant to each other
that this Agreement is not in any respect an admission or statement
of liability or wrongdoing by either the Company or Employee.
2. Effective September 7, 1999, Employee shall resign, and the
Company shall permit Employee to resign, as an officer and employee
of the Company and an officer, fiduciary and/or director of all of
the Company's subsidiary corporations, committees and employee
benefit plans and programs. The Employment Agreement shall
terminate and be of no effect on the eighth day after this
Agreement's execution.
3.(a) Employee hereby for himself, his spouse, heirs, executors,
administrators, successors and assigns ("Employee Releasors") fully
and forever releases, acquits and discharges (i) the Company and
its past, present and future parent and subsidiary corporations,
divisions and affiliates, and (ii) the Company's past, present and
future partners, joint venturers, stockholders, predecessors,
successors, assigns, officers, directors, employees, agents,
representatives and any other person, firm or corporation with
whom any of them is now or may hereafter be affiliated (the persons
and entities identified in subparagraphs (i) and (ii) being
referred to as the "Company Releasees"), and each of them, from
and against any and all claims, demands, obligations, causes of
action, liabilities, damages and suits at law or in equity, which
Employee ever had, now has or may hereafter claim to have had
against the Company Releasees, arising out of or in any manner
relating to Employee's employment by the Company, the Employment
Exhibit 10.3
<PAGE>
Agreement or Employee's separation from the Company, whether based
on contract, tort or other legal or equitable theory of recovery
and whether known or unknown, at any time up to and including the
date of execution of this Agreement, but as to the parties
described in subparagraph (ii), they are released only in their
representative capacities acting on behalf of the Company.
(b) The Company hereby for itself, the Company Releasees, its
successors and assigns, fully and forever releases, acquits and
discharges Employee Releasors from and against any and all claims,
demands, obligations, causes of action, liabilities, damages and
suits at law or in equity, which they ever had, now have or may
hereafter claim to have had against Employee Releasors, arising out
of or in any manner relating to Employee's employment by the
Company, the Employment Agreement or Employee's separation from the
Company, whether based on contract, tort or other legal or
equitable theory of recovery and whether known or unknown, at any
time up to and including the date of execution of this Agreement,
excluding, however, any claims, demands, obligations, causes of
action, liabilities, damages and suits at law or in equity which
relate to or arise out of Employee's fraud or criminal conduct.
(c) Excluded from the above releases in subsections (a) and (b)
are any claims arising out of this Agreement.
(d) The parties identified in Section 3(a)(i) jointly, severally
and in the alternative covenant and agree that the Company
Releasees, or any of them, shall not commence any action or suit at
law or in equity against the Employee Releasors or any other
person, corporation, partnership, trust or other entity or make,
institute or prosecute any claim, demand, action or cause of action
of any kind whatsoever for damages, costs, debts, expenses or
losses of any kind whatsoever (including, without limitation,
attorneys' fees) based on or arising from the released matters set
forth herein, or any of them. The parties identified in Section
3(a)(i) agree to indemnify Employee Releasors and each of them
against any damages, costs, debts, expenses and losses, including
without limitation, reasonable attorneys' fees, suffered or
incurred by Employee Releasors, or any of them, as a result of any
breach of the preceding sentence of this section.
(e) Employee Releasors jointly, severally and in the alternative
covenant and agree that the Employee Releasors, or any of them,
shall not commence any action or suit at law or in equity against
the Company Releasees or any other person, corporation, partner-
ship, trust or other entity or make, institute or prosecute any
claim, demand, action or cause of action of any kind whatsoever for
damages, costs, debts, expenses or losses of any kind whatsoever
2
<PAGE>
(including, without limitation, attorneys' fees) based on or
arising from the released matters set forth herein, or any of them.
Employee Releasors agree to indemnify Company Releasees and each of
them against any damages, costs, debts, expenses and losses,
including without limitation, reasonable attorneys' fees, suffered
or incurred by Company Releasees, or any of them, as a result of
any breach of the preceding sentence of this section.
4. Without limiting the generality of Section 3(a), Employee
waives any and all claims arising under the Age Discrimination
in Employment Act of 1967 (the "Act"). Employee understands that
pursuant to the Act, upon his receipt of this Agreement, he has a
period of 21 days within which to consider this Agreement before
signing it, and that for a period of seven additional days
following his signing of this Agreement he may revoke this Agree-
ment by delivery of written notice of revocation to the Company.
Employee further acknowledges that he has carefully read this
Agreement, that he has had the opportunity to have its provisions
fully explained to him, that he has had the opportunity to review
this Agreement with an attorney before signing it and that the
only promises made to Employee to sign this Agreement are those
contained in this Agreement, and Employee is signing this Agreement
voluntarily.
5.(a) From the date of this Agreement through and including
September 7, 2000, the Company shall pay Employee the aggregate
amount of $600,000 (subject to statutory withholding, if any),
payable in substantially equal installments every two weeks in
accordance with the Company's normal payroll procedures.
(b) On or before January 31, 2000, if bonuses comparable in
amount to those paid in prior years are paid to the Company's
officers for the year ending December 31, 1999, the Company shall
pay Employee the aggregate amount of $200,000 (subject to
statutory withholding, if any). If bonuses are paid that are
substantially less in amount than those paid in prior years,
the amount of $200,000 shall be reduced equitably in accordance
with the bonuses paid to the Company's five highest paid officers.
6. Not later than 30 days from the date of this Agreement, the
Company shall for no further consideration transfer ownership to
Employee of the Company's Lexus LX 470 vehicle that Employee is
currently using. Following the transfer of ownership, the Company
shall have no further responsibility or liability with respect to
or arising out of the vehicle.
3
<PAGE>
7.(a) From the date of this Agreement through and including
September 7, 2000, the Company, without cost to Employee, shall
continue to cover Employee and his spouse and dependents under the
Company's executive medical reimbursement plan or shall provide
substantially equivalent medical insurance coverage to Employee and
his spouse and dependents. Notwithstanding the foregoing, such
coverage shall terminate at such time as Employee becomes covered
under another employer-sponsored health or medical insurance plan.
Employee agrees to promptly advise the Company of the effective
date of any such coverage. Upon termination of such coverage,
Employee may elect to continue coverage at Employee's cost for up
to an additional 18 months under the Company's standard employee
health plan in accordance with the requirements of COBRA.
(b) The Company shall continue to cover Employee as an insured
person under its "D & O" insurance policy at no cost to Employee to
the extent permitted by such policy. The Company shall indemnify
and hold Employee harmless to the fullest extent permitted under
Nevada law, including NRS 78.751 and 78.7502, arising from his
services.
8. Within 90 days from the date of this Agreement, upon submission
by Employee of any required forms, the Company shall distribute
to Employee Employee's account balance in the Company's Non-
Qualified Deferred Compensation Plan and shall at Employee's
request either distribute to Employee or transfer to another
qualified plan of Employee Employee's account balance in the
Company's Retirement Savings Voluntary Participation (Section
401(k)) Plan.
9.(a) Employee may exercise any or all of his 889,200 currently
exercisable and vested employee stock options with an exercise
price of $4.85 per share at any time until September 7, 2000.
(b) Commencing on February 24, 2000 and ending on September 7,
2000, Employee may exercise any or all of his 159,912 employee
stock options with an exercise price of $14.375 per share which
were scheduled to become exercisable and vest on February 24, 2000.
(c) Except as provided in this Section 9, which modifies when
Employee may exercise the stock options under Sections 2, 3, 5 and
6 of the Stock Option Agreements between the Company and Employee,
the stock options shall continue to be governed by the terms of
such Stock Option Agreements.
(d) All other stock options held by Employee shall terminate on
the date of this Agreement.
4
<PAGE>
(e) The Company shall take no action to prevent Employee from
exercising such stock options in accordance with the terms of the
applicable Stock Option Agreement, as modified hereby, and the
Company hereby releases any right it might otherwise have to do so
(by way of setoff, counterclaim or otherwise), regardless of any
claims which the Company might have or assert against Employee,
whether or not such claims relate to or arise out of Employee's
breach of this Agreement or any future agreement or relationship
between the Company and Employee. The Company is expressly
reserving any such claims.
10. For nine months from the date of this Agreement, Employee
agrees to reasonably cooperate in good faith with the Company in
order to assist the Company and Employee's successor as Chief
Financial Officer in achieving an orderly transition, including
discussing the transition with the Company's lenders, investment
bankers and securities analysts. Employee also agrees to assist
the Company and its counsel in any litigation or other proceedings,
including providing testimony at deposition and at trial, with
respect to any matters which arose during or after Employee's
employment by the Company and of which Employee has personal
knowledge. Such assistance and cooperation shall not require any
minimum time commitment by Employee and shall be scheduled at
times mutually convenient to Employee and the Company. Employee
shall be reimbursed for all reasonable out-of-pocket costs and
expenses incurred in this assistance and cooperation.
11. For a period of five years from the date of this Agreement,
neither Employee nor the Company (which, in the case of the
Company, shall be deemed to be limited to the Company's directors,
executive officers and the presidents of its subsidiaries), nor
anyone acting on behalf of or with the authorization of Employee
or the Company, shall make any disparaging statements, either oral
or in writing, whether true or untrue, and whether opinion or fact,
to any third party, including but not limited to members of the
media, concerning the other party's or any of its affiliates'
business, services, operations, financial condition, management,
employees or conduct. Notwithstanding the foregoing, either party
may make statements that are necessary to comply with any lawful
process or that are made in the course of any legal proceeding.
Neither party shall directly or indirectly instigate any legal
proceeding for the purpose of evading the prohibition contained
in this Section. The Company (and its directors, executive officers
and presidents of its subsidiaries) agree to answer any inquiries
about Employee's services to the effect that, to the Company's
knowledge, Employee performed his duties with integrity and in good
faith.
5
<PAGE>
12. Except for disclosure to his family and legal and financial
advisors, Employee agrees not to directly or indirectly disclose or
permit the disclosure of the terms or substance of this Agreement
to any person or entity, including without limitation any future
employer, until such time, if any, as the Company has publicly
disclosed all of the material terms of this Agreement. Notwith-
standing the foregoing, Employee may state that a written agreement
was executed resolving his separation from the Company in a manner
satisfactory to all parties and that its terms forbid him from
further commenting upon the Agreement. The parties have prepared
a joint press release which is attached hereto as Exhibit 1, and
the parties agree to make no further statements inconsistent with
the press release.
13. Employee reaffirms and agrees that he will not at any time
disclose any trade secrets or other confidential information
regarding the Company and its services, operations, customers or
financial condition which Employee acquired during his employment
relationship with the Company, or use any such trade secrets or
other confidential information in any manner detrimental to the
Company. "Trade secrets or other confidential information" shall
not include (i) information which, at the time of disclosure, is
in the public domain, (ii) information which Employee can show is
in his possession at the time of disclosure and was not acquired,
directly or indirectly, from the Company or (iii) information
which was received by Employee from a third party having the legal
right to transmit the same. Within five days following the date
of this Agreement, Employee shall return to the Company all
documents, computer printouts, computer media, keys and other
property which belongs to the Company within his possession or
control. Employee agrees that the Company may notify any of
Employee's prospective or future employers of the existence of this
Section.
14. Each party agrees that, in the event of a breach or threatened
breach of the provisions of this Agreement, the other party shall
be entitled, in addition to all other remedies available at law
or in equity, to obtain a temporary or permanent injunction
enjoining the breaching party from any violation or threatened
violation of any of its covenants contained in this Agreement.
15. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors, assigns, heirs and
legal representatives.
16. This Agreement contains the entire understanding and agreement
of the parties relating to the subject matter hereof and supersedes
any and all prior negotiations, discussions and agreements, whether
oral or written, including without limitation the Employment
Agreement. This Agreement may not be amended, nor may any provision
6
<PAGE>
hereof be waived, except in a writing signed by Employee and a
duly authorized representative of the Company.
17.(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada, excluding its
conflict of laws principles. Any litigation relating to or arising
out of this Agreement shall be instituted and maintained
exclusively in state or federal court in Clark County, Nevada,
and the parties hereby consent to the exclusive jurisdiction of
such courts and to such venue. In the event of litigation between
the parties concerning this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and expenses
and court costs from the non-prevailing party.
(b) Upon the demand of either party, whether made before the
institution of any judicial proceeding or not more than 10 days
after service of a complaint, third-party complaint, cross-claim or
counterclaim or any answer thereto or any amendment to any of the
above, any Dispute (as defined below) shall be resolved by binding
arbitration in accordance with the terms of this arbitration
clause. A "Dispute" shall include any dispute or controversy
between the parties arising out of any matters addressed in this
Agreement. Arbitrations conducted pursuant to this Agreement,
including selection of arbitrators, shall be administered in Las
Vegas, Nevada by the American Arbitration Association
("Administrator") pursuant to the Commercial Arbitration Rules of
the Administrator. Any party who fails to submit to binding
arbitration following a lawful demand by the opposing party shall
bear all costs and expenses, including reasonable attorneys' fees,
incurred by the opposing party in compelling arbitration of any
Dispute. Arbitrators may make an award of attorneys' fees and
expenses. An arbitration panel shall be composed of three
arbitrators. The award of the arbitrators shall be in writing and
shall specify the factual and legal basis for the award. To the
maximum extent practicable, the Administrator, the arbitrators and
the parties shall take any action necessary to require that an
arbitration proceeding hereunder be concluded within 80 days of the
filing of the Dispute with the Administrator. The arbitrators
shall be empowered to impose sanctions for any party's failure to
proceed within the times established herein. Each party agrees to
keep all disputes and arbitration proceedings strictly
confidential, except for disclosures of information required in the
ordinary course of business of the parties or as required by
applicable law or regulation. Otherwise the provisions of NRS
38.015-38.205 shall apply.
7
<PAGE>
18. If any term or provision of this Agreement shall be declared by
a court of competent jurisdiction to be invalid or unenforceable,
the remainder of this Agreement shall not be affected thereby.
19. Any and all notices required or permitted to be given here-
under shall be in writing and sent by personal delivery or
registered or certified mail to Employee's last known residence
(as reflected in the Company's personnel file), in the case of
Employee, or to the Company's principal office in Las Vegas,
Nevada, in the case of the Company, or to such other address as
either party may notify the other.
20. Nothing contained herein is intended to prevent, limit,
restrict or interfere with Employee's search for employment, or
employment, including in a similar position in the gaming or
hospitality industry, and Employee's acceptance of such employment
or rendering of services shall not reduce or otherwise limit the
cash payments, stock option rights or other benefits due Employee
hereunder or the Company's rights hereunder.
21. Upon reasonable request by either party, the parties agree to
execute any and all further agreements, instruments or documents,
and to take any and all further action, as may be necessary to
carry out the purposes and intent of this Agreement.
22. The person executing this Agreement on behalf of the Company
warrants that he has full power and authority to so execute this
Agreement and legally bind the Company and that he has been
given all necessary authority, and all corporate actions have been
taken, to make this Agreement binding and enforceable.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement effective as of September 7, 1999.
MIRAGE RESORTS, INCORPORATED
Date: 9/7/99 By: BRUCE A. LEVIN
------ -----------------------------------
Bruce A. Levin
Vice President and General Counsel
Date: 9/7/99 DANIEL R. LEE
------ -----------------------------------
DANIEL R. LEE
8
EXHIBIT 15
November 4, 1999
To Mirage Resorts, Incorporated
We are aware that Mirage Resorts, Incorporated has incorporated by
reference in its Registration Statements on Form S-8 (File No.
33-16037), on Form S-8 (File No. 33-48394), on Form S-8 (File No.
33-63804), on Form S-8 (File No. 33-60183) and on Form S-8 (File No.
333-59455) its Form 10-Q for the quarter ended September 30, 1999 which
includes our report dated November 4, 1999 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 SEPTEMBER
30, 1999 AND THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME AND
CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 101,319
<SECURITIES> 0
<RECEIVABLES> 187,698
<ALLOWANCES> 55,727
<INVENTORY> 95,370
<CURRENT-ASSETS> 428,982
<PP&E> 4,934,994
<DEPRECIATION> 870,694
<TOTAL-ASSETS> 4,731,361
<CURRENT-LIABILITIES> 299,496
<BONDS> 2,117,425
0
0
<COMMON> 940
<OTHER-SE> 2,089,656
<TOTAL-LIABILITY-AND-EQUITY> 4,731,361
<SALES> 0
<TOTAL-REVENUES> 1,762,364
<CGS> 0
<TOTAL-COSTS> 1,097,296
<OTHER-EXPENSES> 150,346
<LOSS-PROVISION> 20,400
<INTEREST-EXPENSE> 86,370
<INCOME-PRETAX> 120,009
<INCOME-TAX> 42,448
<INCOME-CONTINUING> 77,561
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (30,577)
<NET-INCOME> 46,984
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.23
</TABLE>
