UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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)
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, 190,477,297 shares outstanding as of May 1, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited condensed consolidated financial information as of March
31, 2000 and for the three-month periods ended March 31, 2000 and 1999
included in this report was reviewed by Arthur Andersen LLP,
independent public accountants, in accordance with the professional
standards and procedures established for such reviews by the American
Institute of Certified Public Accountants.
<PAGE>
REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------------
To the Directors and Stockholders
of Mirage Resorts, Incorporated
We have reviewed the accompanying condensed consolidated balance sheet
of Mirage Resorts, Incorporated (a Nevada corporation) and subsidiaries
(the "Company") as of March 31, 2000, and the related condensed
consolidated statements of income and cash flows for the three-month
periods ended March 31, 2000 and 1999. 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, 1999, 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 January 24, 2000, 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, 1999,
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
April 24, 2000
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<TABLE>
<CAPTION>
Condensed Consolidated Mirage Resorts, Incorporated
Balance Sheets
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At March 31, At December 31,
2000 1999
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(In thousands) (Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 141,018 $ 139,488
Trade receivables, net of allowance
for doubtful accounts of $57,120
and $46,869 135,444 147,445
Inventories 86,786 94,351
Prepaid expenses and other 68,978 94,418
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Total current assets 432,226 475,702
Property and equipment, net of
accumulated depreciation of
$981,972 and $924,591 4,056,090 4,095,217
Other assets, net 231,366 233,387
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$ 4,719,682 $ 4,804,306
==========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 44,039 $ 51,432
Accrued liabilities 262,263 272,819
Current maturities of long-term debt 204 246
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Total current liabilities 306,506 324,497
Long-term debt, net of current maturities 2,068,440 2,210,033
Other liabilities, including deferred
income taxes of $247,696 and $232,570 261,111 245,874
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Total liabilities 2,636,057 2,780,404
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Commitments and contingencies
Stockholders' equity
Common stock: 190,417 and 189,994
shares outstanding 940 940
Additional paid-in capital 1,084,435 1,083,459
Retained earnings 1,311,670 1,255,888
Treasury stock, at cost: 44,731 and
45,154 shares (313,420) (316,385)
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Total stockholders' equity 2,083,625 2,023,902
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$ 4,719,682 $ 4,804,306
==========================================================================
See notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Condensed Consolidated Mirage Resorts, Incorporated
Statements of Income (Unaudited)
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Three months ended March 31 2000 1999
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(In thousands, except per share amounts)
<S> <C> <C>
Operating revenues
Casino $ 346,472 $ 313,975
Rooms 142,543 123,522
Food and beverage 129,433 105,789
Entertainment 54,816 45,593
Retail 35,258 31,086
Other 21,853 19,240
Equity in earnings of Monte Carlo 7,561 8,858
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737,936 648,063
Less - promotional allowances (74,461) (58,492)
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663,475 589,571
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Operating costs and expenses
Casino-hotel operations 401,731 354,532
General and administrative 74,372 73,365
Depreciation and amortization 55,780 43,832
Corporate expense 9,034 11,258
Preopening and related promotional expense 2,450 31,455
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543,367 514,442
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Operating income 120,108 75,129
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Other income (expense)
Interest cost (36,770) (38,302)
Interest capitalized 7,217 11,722
Merger costs (3,944) -
Other, including interest income 354 1,090
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(33,143) (25,490)
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Income before income taxes and cumulative
effect of change in accounting principle 86,965 49,639
Provision for income taxes (31,183) (17,569)
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Income before cumulative effect of change
in accounting principle 55,782 32,070
Cumulative effect (to January 1, 1999) of
change in method of accounting for pre-
opening costs, net of applicable income
tax benefit of $16,390 - (30,577)
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Net income $ 55,782 $ 1,493
==========================================================================
Income per share before cumulative effect
of change in accounting principle
Basic $ 0.29 $ 0.18
Diluted 0.28 0.17
Net income per share
Basic $ 0.29 $ 0.01
Diluted 0.28 0.01
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See notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Condensed Consolidated Mirage Resorts, Incorporated
Statements of Cash Flows (Unaudited)
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Three months ended March 31 2000 1999
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(In thousands)
<S> <C> <C>
Cash flows from operating activities
Net income $ 55,782 $ 1,493
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for losses on receivables 7,377 6,402
Depreciation and amortization of property
and equipment, including amounts reported
as corporate expense 58,928 46,603
Expensed preopening and related promotional
costs 2,450 31,455
Distributions in excess of earnings from
Monte Carlo 2,439 2,642
Cumulative effect of change in method of
accounting for preopening costs, before
related income tax benefit - 46,967
Deferred income taxes 10,476 (16,796)
Changes in components of working capital
pertaining to operating activities
(Increase) decrease in trade receivables
and other current assets 42,719 (23,891)
Increase (decrease) in trade accounts
payable and accrued liabilities (16,209) 7,114
Other adjustments (4,450) (399)
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Net cash provided by
operating activities 159,512 101,590
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Cash flows from investing activities
Preopening and related promotional costs (2,450) (31,455)
Capital expenditures (60,298) (157,896)
Decrease in preopening and construction
payables (1,740) (4,872)
Proceeds from sales of property and
equipment 45,959 1,919
Other investing activities (1,675) 3,640
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Net cash used for
investing activities (20,204) (188,664)
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Cash flows from financing activities
Net increase (decrease) in bank credit
facility and commercial paper borrowings (141,666) 114,718
Exercise of common stock options,
including related income tax benefit 3,944 16,154
Other financing activities (56) (289)
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Net cash provided by (used
for) financing activities (137,778) 130,583
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Cash and cash equivalents
Increase for the period 1,530 43,509
Balance, beginning of period 139,488 74,814
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Balance, end of period $ 141,018 $ 118,323
==========================================================================
See notes to condensed consolidated financial statements.
</TABLE>
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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
entertainment resorts. These resorts include Bellagio, The Mirage,
Treasure Island and the Holiday Inn -Registered Trademark- Casino
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 luxurious 1,780-guestroom beachfront
resort located on an approximately 41-acre site where Interstate 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 1999 Annual Report on Form 10-K (the "1999 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, 1999 contained herein was
derived from audited financial statements, but does not include all
disclosures included in the 1999 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 2000 interim period are not necessarily indicative of expected
results for the full year.
Certain amounts in the 1999 condensed consolidated financial statements
have been reclassified to conform with the 2000 presentation. These
reclassifications had no effect on the Company's net income.
Note 2 - Pending Merger with MGM Grand, Inc.
On March 6, 2000, the Company signed a definitive merger agreement with
MGM Grand, Inc. ("MGM Grand") under which MGM Grand will acquire all of
the Company's outstanding common stock for $21 per share in cash and
the Company will become a wholly owned subsidiary of MGM Grand. The
merger is subject to the approval of the Company's stockholders and to
the satisfaction of customary closing conditions contained in the
merger agreement, including the receipt of all necessary regulatory
approvals. The merger is not subject to a financing contingency. The
applicable waiting period under federal antitrust law expired on April
14, 2000. The merger is expected to close in 2000. The Company has
commitments to pay investment advisory fees totaling $18.0 million,
contingent upon closing of the merger.
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<PAGE>
Note 3 - 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 ended March 31 2000 1999
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<S> <C> <C>
Weighted-average common shares
outstanding (used in the
calculation of basic earnings
per share) 190,156,309 180,526,308
Potential dilution from the
assumed exercise of common
stock options 8,354,833 10,920,271
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Weighted-average common and common
equivalent shares (used in the
calculation of diluted earnings
per share) 198,511,142 191,446,579
=======================================================================
</TABLE>
Stock options having an exercise price greater than the average market
price of the underlying common stock during the period are excluded
from the calculation of diluted earnings per share. As a result, a
weighted average of 561,694 stock options was excluded from the
calculation during the three months ended March 31, 2000. The number
of stock options excluded from the calculation during the 1999 three-
month period was not material.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Comparison of Operating Results for the Three-Month Periods Ended March
31, 2000 and 1999
Total revenues of $737.9 million for the first quarter of 2000 set a
new quarterly record for the Company, directly following the previous
record of $706.6 million set in the fourth quarter of 1999. Compared
with total revenues of $648.1 million in the 1999 first quarter, the
recent quarter represents an increase of $89.8 million (14%).
Operating income of $120.1 million also set a new quarterly record,
again surpassing the previous record set in the 1999 fourth quarter of
$103.0 million. Operating income during the first quarter of 1999
totaled $75.1 million. The 1999 amount was reduced by $31.5 million of
preopening costs related to Beau Rivage and our development activities
in Atlantic City, New Jersey. Excluding these costs, the year-ago
first quarter represents the Company's previous record for operating
income.
The record results achieved during the 2000 first quarter include a
full quarter of operation for our Beau Rivage resort in Biloxi,
Mississippi, which opened on March 16, 1999. The new resort achieved
total revenues during the quarter of $87.5 million and operating income
of $8.1 million. Casino revenues totaled $49.8 million and non-casino
revenues were $37.7 million. Beau Rivage's operating margin (operating
income as a percentage of net revenues) for the quarter increased to
10.5%. By comparison, its operating margin (before preopening costs)
during nine and one-half months of operation in 1999 was 6.5%.
During its initial 16 days of operation in the 1999 first quarter, Beau
Rivage generated total revenues of $14.2 million. Casino revenues
totaled $9.0 million and total non-casino revenues were $5.2 million.
Like many new resorts, Beau Rivage's operating results were hampered
during its initial start-up period by overstaffing and other
inefficiencies. As a result, Beau Rivage reported an operating loss of
$1.8 million before preopening costs during the 1999 first quarter.
The record quarterly operating results were achieved despite a lower
than historical average table games win percentage and increased
competition in the Las Vegas market. The overall table games win
percentage was 19.0% during the 2000 first quarter, versus our
historical long-term average of approximately 20%. The win percentage
in the 1999 quarter averaged 20.2%. Our room rates and occupancy
levels remained strong during the recent quarter, in the face of the
new Las Vegas competition. Excluding Beau Rivage, our Company-wide
average daily standard room rate increased to approximately $113,
compared with $109 in the 1999 first quarter. On this same-store
basis, occupancy of available standard guestrooms was 98.0%, versus
98.6%. Including Beau Rivage, our Company-wide standard guestroom
occupancy was approximately 98% during the first quarter of both years
at an average daily rate of $107 in 2000 and $108 in 1999.
-8-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OPERATING RESULTS OF WHOLLY-OWNED PROPERTIES
Three months ended March 31 2000 1999 (a)
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(In thousands)
<S> <C> <C>
Gross revenues
Bellagio $ 277,955 $ 282,005
The Mirage 191,692 176,508
Treasure Island 104,874 96,764
Beau Rivage 87,490 14,172
Golden Nugget-Las Vegas 53,045 54,078
Golden Nugget-Laughlin 15,319 15,678
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$ 730,375 $ 639,205
======================================================================
Net revenues
Bellagio $ 249,171 $ 256,130
The Mirage 172,562 161,140
Treasure Island 95,516 88,398
Beau Rivage 77,849 12,506
Golden Nugget-Las Vegas 47,341 48,709
Golden Nugget-Laughlin 13,475 13,830
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$ 655,914 $ 580,713
======================================================================
Operating income (loss)
Bellagio $ 41,276 $ 42,387
The Mirage 45,003 39,270
Treasure Island 20,827 19,524
Beau Rivage (b) 8,145 (1,840)
Golden Nugget-Las Vegas 7,038 8,013
Golden Nugget-Laughlin 1,742 1,630
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$ 124,031 $ 108,984
======================================================================
(a) Beau Rivage opened on March 16, 1999.
(b) Before preopening costs of $28.7 million in 1999.
</TABLE>
SAME-PROPERTY OPERATING RESULTS
Bellagio
Bellagio experienced only a 3% decline in operating income during the
quarter, despite a significantly lower table games win percentage. The
table games win percentage was 17.7%, substantially below the 21.7%
experienced in the 1999 period. The lower table games win percentage
principally accounted for a $21.4 million (16%) decline in Bellagio's
casino revenues.
Bellagio's total non-casino revenues were up sharply over the prior-
year period, substantially offsetting the decline in casino revenues.
Total non-casino revenues grew to $162.5 million, representing an
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<PAGE>
increase of $17.4 million (12%) over the first quarter of 1999. The
revenue growth was experienced across the board. Food and beverage and
room revenues during the quarter were particularly strong, posting year-
over-year increases of 16% and 9%, respectively. The average daily
rate for Bellagio's standard guestrooms rose to $171 during the 2000
first quarter, versus $156 in the prior-year period. Occupancy held
steady at approximately 99% during the first quarter of both years.
Bellagio's operating margin was essentially equal with the 1999 first
quarter.
The Mirage
The Mirage reported its best quarterly results since the third quarter
of 1997. Total revenues increased $15.2 million (9%) and operating
income grew by $5.7 million (15%).
Casino revenues totaled $99.1 million, representing a $10.7 million
(12%) increase over the prior-year period. This increase principally
reflects a 22% increase in table games revenue resulting from a
significantly higher table games win percentage and a 9% increase in
drop. The table games win percentage for the quarter was 24.1%,
compared with 21.5% in the prior-year period.
The Mirage achieved total non-casino revenues during the quarter of
$92.6 million, representing an increase of $4.5 million (5%) over the
year-ago period. Similar to Bellagio, revenue contribution increased
in every non-casino category. Food and beverage revenue increased by
$2.0 million (7%) and room revenue grew by $1.6 million (5%). Lower
cost of sales percentages and other cost containment efforts led to an
improvement in The Mirage's operating margin versus the 1999 first
quarter.
Treasure Island
Treasure Island reported its highest quarterly operating results in
three years. Its total revenues grew by $8.1 million (8%) and its
operating income climbed $1.3 million (7%). Casino revenues increased
by $3.3 million (9%) and non-casino revenues grew by $4.8 million (8%).
Slot play was up substantially over the prior-year quarter, leading to
a $2.8 million (14%) increase in related revenue. Table games revenue
rose by 2%, despite a slight decline in the win percentage.
Total room revenue at Treasure Island grew by $1.9 million (8%) over
the first quarter of 1999. Occupancy of available standard guestrooms
averaged 98.9% during the recently completed quarter, versus 98.1% in
the year-ago period. The resort immediately benefited from the room
refurbishment program completed near the end of the 1999 third quarter.
The program substantially upgraded the quality of the furnishings of
its guestrooms and assisted the property in receiving the Four Diamond
rating from AAA. The refurbishment program began in February 1999 and
resulted in approximately 8% fewer available room nights at the hotel
during the 1999 first quarter compared with the current-year period. An
increase in both occupancy and the average ticket price for the popular
Mystere show principally accounted for a $1.9 million (17%) increase in
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<PAGE>
entertainment revenue. Higher depreciation expense associated with the
completed room refurbishment project accounted for a small decline in
Treasure Island's operating margin compared with the prior-year first
quarter.
Golden Nugget Properties
The additional competition from several major new resorts built on the
Las Vegas Strip in recent years has especially impacted the hotel-
casinos located in downtown Las Vegas and in Laughlin. The hotel-
casinos in Laughlin have experienced additional competitive pressure
from hotel-casinos built on nearby Indian reservations. Nevertheless,
comparisons at the Company's Golden Nugget properties in downtown Las
Vegas and in Laughlin remained fairly stable. At the Golden Nugget-Las
Vegas, both table games and slot play increased over the prior-year
first quarter. A decline in the table games win percentage, however,
principally accounted for a 2% decline in casino revenues. Total room
revenue grew by 3%, representing an increase in average daily room
rates. Standard guestroom occupancy was 97.0%, versus 98.9% in the
1999 first quarter. Small declines in the facility's other the non-
gaming revenue sources resulted in a 2% decrease in its total non-
casino revenues.
Comparisons at the Golden Nugget in Laughlin were essentially flat with
those of the year-ago quarter. Lower table games and slot play
principally accounted for a 2% decline in its total revenues. Similar
to the Golden Nugget in Las Vegas, an increase in average room rates
led to a small improvement in associated revenue. Standard guestroom
occupancy was 97.1% during the 2000 first quarter, compared with 97.6%
in the prior-year period. Reduced promotional costs and depreciation
expense led to an improvement in the property's operating margin and a
small improvement in its operating income.
OTHER FACTORS AFFECTING EARNINGS
Monte Carlo
Our 50% share of the earnings of Monte Carlo contributed $7.6 million
to our pre-tax income during the 2000 first quarter, versus $8.9
million in the prior-year period. Total revenues at the resort
declined by $1.3 million (2%) from the prior-year quarter. Room
revenue grew by $1.3 million (5%), reflecting a 7% increase in the
average daily room rate. Guestroom occupancy was 93.1%, versus 95.5% in
the 1999 first quarter. Entertainment revenue also showed improvement,
increasing by $1.1 million (35%) over the prior-year period. These
increases, however, were more than offset by a $3.1 million (10%)
decrease in casino revenues mostly due to a decline in table games play
and the win percentage.
Preopening and related promotional costs
Our earnings during the first quarter of both 2000 and 1999 were
reduced by charges for preopening and related promotional costs.
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<PAGE>
During the 2000 quarter, preopening costs associated with our
development activities in Atlantic City reduced earnings by $2.5
million ($1.6 million, $0.01 per share, after tax). During the 1999
first quarter, there were two separate components to the charge for
preopening costs. First, we adopted a new method of accounting for
preopening costs that requires such costs to be expensed as incurred.
We previously capitalized preopening costs and amortized them to
expense following opening of the related resort. All previously
capitalized preopening costs remaining at the time of adoption were
required to be written off. As a result, we expensed all previously
capitalized preopening costs associated with Beau Rivage and our
development activities in Atlantic City, resulting in an after-tax
cumulative effect charge of $30.6 million ($0.16 per share). Second,
we incurred and expensed additional preopening costs associated with
these projects during the 1999 first quarter, reducing earnings by an
additional $31.5 million ($20.6 million, $0.11 per share, after tax).
Corporate expense
Corporate expense totaled $9.0 million in the 2000 first quarter,
representing a $2.2 million (20%) decline from $11.3 million in the
prior-year period. This decline reflects reduced expenditures for
payroll, professional fees and contributions, combined with a net gain
of $1.0 million from the sale of corporate aircraft.
Interest and other non-operating items
With Bellagio and Beau Rivage now complete, we have been using a
significant amount of our operating cash flow to reduce outstanding
debt. At March 31, 2000, total outstanding debt was $2.07 billion,
versus $2.21 billion and $2.38 billion at year-end 1999 and 1998,
respectively. With these two resorts now complete, we are also
capitalizing a smaller portion of our interest cost. The combined
effect of these two factors resulted in a $3.0 million (11%) increase
in our net interest expense when compared with the 1999 first quarter.
Our earnings during the recent quarter were also reduced by $3.9
million ($3.6 million, $0.02 per share, after tax) for costs incurred
in connection with our pending merger with MGM Grand.
CAPITAL RESOURCES, CAPITAL SPENDING AND LIQUIDITY
Net cash provided by operating activities (as shown in our Condensed
Consolidated Statements of Cash Flows) totaled $159.5 million for the
first three months of 2000, versus $101.6 million in the same 1999
period. This increase generally coincides with the record earnings we
achieved during the 2000 first quarter. Our operating cash flow in the
recent quarter also includes $25.0 million we received in early January
in connection with our previous evaluation of the possible acquisition
of the gaming operations of a major competitor. The evaluation
occurred in April 1999, and as part of the negotiations it was agreed
that we would receive the $25 million fee as compensation for our
efforts should the operations be sold to another bidder. The
operations were sold to another bidder in late December 1999, and we
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<PAGE>
recorded the receivable for the fee and the associated income net of
related costs in the 1999 fourth quarter.
Our capital spending has declined significantly as a result of the
completion of Bellagio and 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 $63.8
million in the 2000 first quarter, versus $191.3 million in the prior-
year period. Expenditures during the current-year quarter principally
relate to construction projects at The Mirage. These projects include
the new 1,260-seat Danny Gans Theatre and extensive new meeting,
convention and exhibit space, including a new 90,000-square foot
exhibit hall. The popular singer/impersonator Danny Gans began
performing in the new theatre in early April. The new meeting and
convention space is scheduled to be completed in June of this year and
the exhibit hall is expected to open in May 2001. The total cost of
these projects is anticipated to be approximately $100 million. At
March 31, 2000, we had incurred approximately $51 million of this
amount. Capital expenditures during the 1999 first quarter principally
relate to the completion of Beau Rivage and amounts associated with the
room refurbishment project at Treasure Island.
Except for the above-noted projects at The Mirage and our development
activities in Atlantic City, New Jersey, the merger agreement with MGM
Grand generally limits our capital expenditures to $3.0 million for any
individual project or $80.0 million for all projects combined. The
merger agreement does not limit our expenditures for normal maintenance
and repairs.
With respect to our development activities in Atlantic City,
environmental remediation work is ongoing on our 120-acre Marina site
and design of the internal roads and other master plan elements is
underway. 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. Because of the pending merger with
MGM Grand, we cannot be certain of the ultimate design, timing, cost or
construction of our wholly owned hotel-casino resort planned for the
Marina site. Our plans for a new hotel-casino resort on the site of
our existing Boardwalk hotel-casino and adjacent land on the Las Vegas
Strip, as well as our contemplated hotel expansion project at Bellagio,
are also subject to MGM Grand's analysis and approval following the
merger.
The pending merger with MGM Grand is not expected to affect plans for
our existing 50-50 joint venture with Boyd Gaming Corporation, which
call for the development of a hotel-casino resort to be known as "The
Borgata" on a 25-acre portion of our Marina site. We are in
discussions with Boyd concerning increasing the size of The Borgata
from 1,200 rooms to 2,000 rooms. It is currently estimated that the
larger project size would increase the budgeted cost from approximately
$750 million to slightly in excess of $1.0 billion. Each partner's cash
equity contribution would also increase by $57 million, thereby
requiring total cash contributions of $117 million from us and $207
million from Boyd. At March 31, 2000, we had made cash contributions
of approximately $7 million. We would also contribute the 25-acre site
to the joint venture. The joint venture will attempt to obtain
-13-
<PAGE>
acceptable financing for the remaining cost of the project that is non-
recourse to either partner. If the necessary permits and financing are
obtained, construction of The Borgata could begin by the end of this
year.
During the 2000 first quarter, we received proceeds from the sale of
property and equipment of approximately $46 million. Most of this
amount was received from the sale of corporate aircraft mentioned
previously.
The significant decline in our capital spending requirements has
allowed us to use the majority of our free cash flow in recent months
to reduce outstanding debt. During the first three months of 2000, we
utilized $141.7 million to repay borrowings under our bank credit
facility and commercial paper program. All outstanding bank credit
facility and commercial paper borrowings are required to be repaid upon
completion of the merger with MGM Grand. At April 30, 2000, no
borrowings were outstanding under our commercial paper program and we
had $1.09 billion outstanding under our bank credit facility. None of
our remaining debt securities are required to be repaid upon completion
of the merger. The merger agreement limits our aggregate outstanding
indebtedness, net of cash and cash equivalents, to $2.15 billion. At
March 31, 2000, the total outstanding principal amount of our debt, net
of cash and cash equivalents, was approximately $1.93 billion.
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,
leverage and debt service (including sensitivity to fluctuations in
interest rates), domestic or international economic conditions, pending
or future legal proceedings, the effects of 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 1999 Annual
Report. This statement is provided as permitted by the Private
Securities Litigation Reform Act of 1995.
-14-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 28, 2000, a stockholder filed a class action complaint against
us and each of our directors in District Court for Clark County,
Nevada. The complaint alleges that the directors breached their
fiduciary duties to our stockholders in approving the merger agreement
with MGM Grand by failing to maximize the value that stockholders will
receive in the merger. In particular, the complaint alleges that the
merger agreement grants Stephen A. Wynn the right, under certain
circumstances, to purchase fine art from the Company at prices
significantly less than a buyer might pay on the open market. The
complaint seeks injunctive relief, including an "appropriate
evaluation" of the artwork and orders enjoining the defendants from
breaching their fiduciary duties and requiring Mr. Wynn to account to
stockholders for all damages which they may suffer as a result of sales
of Company artwork to him. On April 21, 2000, the plaintiff filed a
motion to impose a constructive trust on the Company's artwork. We
believe that the claims are without merit.
Item 4. Submission of Matters to a Vote of Security Holders
(a) Our 2000 Annual Meeting of Stockholders was held on March
23, 2000.
(c) At the Annual Meeting, Melvin B. Wolzinger, Daniel B. Wayson
and George J. Mason were re-elected to serve three-year terms
as members of the Board of Directors. The results of the
voting were as follows:
<TABLE>
<CAPTION>
Shares
---------------------------
For Withheld
----------- ---------
<S> <C> <C>
Mr. Wolzinger 143,986,586 1,949,013
Mr. Wayson 142,265,985 3,669,614
Mr. Mason 143,992,775 1,942,824
</TABLE>
At the Annual Meeting, the stockholders also ratified the
appointment of Arthur Andersen LLP as the Company's
independent accountants for 2000. The results of the
voting were 144,559,293 shares in favor, 902,197 shares
opposed and 474,109 shares abstaining.
-15-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10.1 Fourth Amendment to Mirage Resorts, Incorporated Non-Qual-
ified Deferred Compensation Plan, dated as of March 4, 2000.
10.2 Fourth Amendment to Mirage Resorts, Incorporated Directors'
Deferred Fee Plan, dated as of March 4, 2000.
15 Letter from independent public accountants acknowledging
awareness of the use of their report dated April 24, 2000 in
the Company's registration statements.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The Company filed no Current Reports on Form 8-K during the three-
month period ended March 31, 2000.
-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
May 3, 2000 by: ROBERT H. BALDWIN
- ----------- ---------------------------
Date Robert H. Baldwin
Chief Financial Officer and
Treasurer (Principal
Financial Officer)
-17-
FOURTH AMENDMENT TO MIRAGE RESORTS, INCORPORATED
NON-QUALIFIED DEFERRED COMPENSATION PLAN
WHEREAS, Mirage Resorts, Incorporated maintains a Non-Qualified
Deferred Compensation Plan effective as of February 1, 1997, as
amended by a First Amendment thereto effective as of February 20,
1997, a Second Amendment thereto effective as of February 1, 1998 and
a Third Amendment thereto effective as of February 15, 1999 (as so
amended, the "Deferred Compensation Plan"); and
WHEREAS, the Board of Directors desires to amend further the terms of
the Deferred Compensation Plan in certain respects as permitted by
Section 8.4 of the Deferred Compensation Plan;
NOW, THEREFORE, it is declared as follows:
1. AMENDMENT TO SECTION 6.5. Section 6.5 of the Deferred
Compensation Plan is amended to add, following the word "appointment"
at the end of the last sentence thereof, the following:
", or (iii) Mirage Resorts, Incorporated consummates a
merger with a wholly owned subsidiary of MGM Grand, Inc., a
Delaware corporation ("MGM"), pursuant to an agreement and
plan of merger approved by the Board of Directors, as a
result of which Mirage Resorts, Incorporated becomes a
subsidiary of MGM."
2. OTHER CAPITALIZED TERMS. Except as otherwise expressly
provided, all capitalized terms used herein shall have the meaning
assigned to such terms in the Deferred Compensation Plan.
3. CONFIRMATION. In all other respects, the terms of the
Deferred Compensation Plan are hereby confirmed and shall remain in
full force and effect.
IN WITNESS WHEREOF, Mirage Resorts, Incorporated has
caused this document to be executed by its duly authorized officer
effective as of March 4, 2000.
MIRAGE RESORTS, INCORPORATED
JAMES E. PETTIS
----------------------------------------
By: James E. Pettis
Title: Vice President - Risk Management
EXHIBIT 10.1
FOURTH AMENDMENT TO MIRAGE RESORTS, INCORPORATED
DIRECTORS' DEFERRED FEE PLAN
WHEREAS, Mirage Resorts, Incorporated maintains a Directors' Deferred
Fee Plan effective as of February 1, 1997, as amended by a First
Amendment thereto effective as of February 28, 1997, a Second
Amendment thereto effective as of February 1, 1998 and a Third
Amendment thereto effective as of February 15, 1999 (as so amended,
the "Deferred Fee Plan"); and
WHEREAS, the Board of Directors desires to amend further the terms of
the Deferred Fee Plan in certain respects as permitted by Section 8.4
of the Deferred Fee Plan;
NOW, THEREFORE, it is declared as follows:
1. AMENDMENT TO SECTION 6.5. Section 6.5 of the Deferred
Fee Plan is amended to add, following the word "appointment" at the
end of the last sentence thereof, the following:
", or (iii) Mirage Resorts, Incorporated consummates a
merger with a wholly owned subsidiary of MGM Grand, Inc., a
Delaware corporation ("MGM"), pursuant to an agreement and
plan of merger approved by the Board of Directors, as a
result of which Mirage Resorts, Incorporated becomes a
subsidiary of MGM."
2. OTHER CAPITALIZED TERMS. Except as otherwise expressly
provided, all capitalized terms used herein shall have the meaning
assigned to such terms in the Deferred Fee Plan.
3. CONFIRMATION. In all other respects, the terms of the
Deferred Fee Plan are hereby confirmed and shall remain in full force
and effect.
IN WITNESS WHEREOF, Mirage Resorts, Incorporated has
caused this document to be executed by its duly authorized officer
effective as of March 4, 2000.
MIRAGE RESORTS, INCORPORATED
JAMES E. PETTIS
----------------------------------------
By: James E. Pettis
Title: Vice President - Risk Management
EXHIBIT 10.2
EXHIBIT 15
May 3, 2000
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 March 31, 2000 which
includes our report dated April 24, 2000 covering the unaudited interim
financial information contained therein. Pursuant to Regulation C of
the Securities Act of 1933, that report is not considered a part of
these registration statements or a report prepared or certified by our
firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000
AND THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME AND CASH
FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 141,018
<SECURITIES> 0
<RECEIVABLES> 192,564
<ALLOWANCES> 57,120
<INVENTORY> 86,786
<CURRENT-ASSETS> 432,226
<PP&E> 5,038,062
<DEPRECIATION> 981,972
<TOTAL-ASSETS> 4,719,682
<CURRENT-LIABILITIES> 306,506
<BONDS> 2,068,440
0
0
<COMMON> 940
<OTHER-SE> 2,082,685
<TOTAL-LIABILITY-AND-EQUITY> 4,719,682
<SALES> 0
<TOTAL-REVENUES> 663,475
<CGS> 0
<TOTAL-COSTS> 394,354
<OTHER-EXPENSES> 55,780
<LOSS-PROVISION> 7,377
<INTEREST-EXPENSE> 29,553
<INCOME-PRETAX> 86,965
<INCOME-TAX> 31,183
<INCOME-CONTINUING> 55,782
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<EPS-BASIC> 0.29
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