<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 10-Q
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-8570
------------------------
MANDALAY RESORT GROUP
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEVADA 88-0121916
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
</TABLE>
3950 LAS VEGAS BOULEVARD SOUTH, LAS VEGAS, NEVADA 89119
(Address of principal executive offices)
(702) 632-6700
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT NOVEMBER 30, 2000
----------------------------------- ---------------------------------
<S> <C>
Common Stock, $.01 2/3 par value 76,272,902 shares
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE NO.
---------
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at October 31, 2000
(Unaudited) and January 31, 2000............................ 3
Condensed Consolidated Statements of Income (Unaudited) for
the Three and Nine Months Ended October 31, 2000 and 1999... 4-5
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended October 31, 2000 and 1999......... 6
Notes to Condensed Consolidated Financial Statements
(Unaudited)................................................. 7-12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 13-19
Item 3. Quantitative and Qualitative Disclosures About Market
Risks....................................................... 19
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 20
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
2000 2000
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 131,289 $ 116,617
Receivables............................................... 81,856 62,167
Inventories............................................... 29,083 28,499
Prepaid expenses and other................................ 62,889 74,256
---------- ----------
Total current assets.................................... 305,117 281,539
PROPERTY, EQUIPMENT AND LEASEHOLD INTERESTS,
at cost, less accumulated depreciation and amortization of
$1,034,871 and $893,776, respectively..................... 3,254,522 3,335,071
EXCESS OF PURCHASE PRICE OVER FAIR MARKET
value of net assets acquired, net......................... 387,931 396,433
NOTES RECEIVABLE............................................ 6,407 1,605
INVESTMENTS IN UNCONSOLIDATED AFFILIATES.................... 240,671 264,995
OTHER ASSETS................................................ 76,443 49,833
---------- ----------
Total Assets............................................ $4,271,091 $4,329,476
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 27,247 $ 13,022
Accounts payable--trade................................... 36,736 40,395
Accounts payable--construction............................ 2,267 33,415
Accrued liabilities....................................... 230,833 157,787
---------- ----------
Total current liabilities............................... 297,083 244,619
LONG-TERM DEBT.............................................. 2,678,644 2,691,292
DEFERRED INCOME TAX......................................... 220,988 210,689
OTHER LONG-TERM LIABILITIES................................. 21,487 20,192
---------- ----------
Total liabilities..................................... 3,218,202 3,166,792
---------- ----------
MINORITY INTEREST........................................... (17,466) (25,096)
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 2/3 par value
Authorized--450,000,000 shares
Issued--113,634,013 shares.............................. 1,894 1,894
Preferred stock, $.01 par value
Authorized--75,000,000 shares........................... -- --
Additional paid-in capital................................ 567,979 565,925
Retained earnings......................................... 1,317,913 1,201,632
Treasury stock (37,369,778 and 23,764,216 shares), at
cost.................................................... (817,431) (581,671)
---------- ----------
Total stockholders' equity.............................. 1,070,355 1,187,780
---------- ----------
Total Liabilities and Stockholders' Equity.............. $4,271,091 $4,329,476
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED OCTOBER 31, ENDED OCTOBER 31,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Casino...................................... $ 312,202 $ 241,739 $ 945,748 $ 693,187
Rooms....................................... 159,592 143,906 474,125 407,516
Food and beverage........................... 108,222 93,245 323,596 264,266
Other....................................... 72,449 71,567 219,225 189,214
Earnings of unconsolidated affiliates....... 29,164 28,790 88,146 75,935
---------- ---------- ---------- ----------
681,629 579,247 2,050,840 1,630,118
Less--complimentary allowances.............. (43,172) (34,045) (125,367) (97,476)
---------- ---------- ---------- ----------
638,457 545,202 1,925,473 1,532,642
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Casino...................................... 173,032 127,655 506,496 363,170
Rooms....................................... 52,774 51,293 157,413 142,218
Food and beverage........................... 76,118 71,944 230,667 207,811
Other....................................... 48,098 52,078 147,983 129,410
General and administrative.................. 105,118 88,532 306,214 247,769
Depreciation and amortization............... 51,928 38,066 155,715 125,617
Corporate general and administrative........ 6,909 8,300 24,206 23,750
Operating lease rent........................ 10,399 9,935 30,001 15,989
Preopening expenses......................... -- 2,110 1,832 39,990
Abandonment loss............................ -- 5,433 -- 5,433
---------- ---------- ---------- ----------
524,376 455,346 1,560,527 1,301,157
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS........................ 114,081 89,856 364,946 231,485
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest, dividend and other income......... 1,713 696 5,947 1,878
Guarantee fees from unconsolidated
affiliate................................. 647 684 1,875 2,115
Interest expense............................ (60,200) (42,328) (163,778) (117,287)
Interest expense from unconsolidated
affiliates................................ (2,922) (2,737) (8,385) (8,332)
---------- ---------- ---------- ----------
(60,762) (43,685) (164,341) (121,626)
---------- ---------- ---------- ----------
MINORITY INTEREST............................. 6,088 -- 14,328 --
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAX........ 47,231 46,171 186,277 109,859
Provision for income tax.................... 17,860 17,414 69,996 40,332
---------- ---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE......................... 29,371 28,757 116,281 69,527
Cumulative effect of change in accounting
principle for preopening expenses, net of
tax benefit of $11,843.................... -- -- -- (21,994)
---------- ---------- ---------- ----------
NET INCOME.................................... $ 29,371 $ 28,757 $ 116,281 $ 47,533
========== ========== ========== ==========
</TABLE>
4
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED OCTOBER 31, ENDED OCTOBER 31,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income before cumulative effect of change in
accounting principle...................... $ .39 $ .32 $ 1.47 $ .76
Cumulative effect of change in accounting
principle................................. $ -- $ -- $ -- $ (.24)
Net income per share........................ $ .39 $ .32 $ 1.47 $ .52
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE
Income before cumulative effect of change in
accounting principle...................... $ .38 $ .31 $ 1.45 $ .76
Cumulative effect of change in accounting
principle................................. $ -- $ -- $ -- $ (.24)
---------- ---------- ---------- ----------
Net income per share........................ $ .38 $ .31 $ 1.45 $ .52
========== ========== ========== ==========
Avg.shares outstanding--basic................. 76,027,729 90,594,951 79,027,654 90,666,879
========== ========== ========== ==========
Avg.shares outstanding--diluted............... 77,757,880 91,848,438 80,420,801 91,943,377
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 31,
---------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 116,281 $ 47,533
--------- ---------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization (including corporate
depreciation)......................................... 163,997 132,183
Loss on disposition of fixed assets..................... 23 2,764
Increase in other current assets........................ (8,906) (65,364)
(Increase) decrease in other noncurrent assets.......... (11,175) 16,818
Increase in interest payable............................ 30,617 10,793
Increase in other current liabilities................... 38,770 40,713
Increase in deferred income tax......................... 10,299 5,708
Decrease in other noncurrent liabilities................ -- (49)
Unconsolidated affiliates' distributions in excess of
earnings.............................................. 24,013 1,890
Minority interest in earnings........................... 14,328 --
--------- ---------
Total adjustments................................... 261,966 145,456
--------- ---------
Net cash provided by operating activities........... 378,247 192,989
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (76,001) (312,470)
Decrease in construction payable.......................... (31,148) (64,631)
Increase in investments in unconsolidated affiliates...... -- (1,889)
Proceeds from sale of equipment and other assets.......... 1,680 390
(Increase) decrease in notes receivable................... (4,802) 10,249
Other..................................................... (349) --
--------- ---------
Net cash used in investing activities............... (110,620) (368,351)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net effect on cash of issuances and payments of debt with
original maturities of three months or less............. (675,514) 199,995
Issuances of debt with original maturities in excess of
three months............................................ 700,000 --
Principal payments of debt with original maturities in
excess of three months.................................. (23,000) (2,705)
Debt issue costs.......................................... (15,332) --
Exercise of stock options................................. 14,965 14,500
Purchases of treasury stock............................... (247,128) (14,115)
Other..................................................... (6,946) 104
--------- ---------
Net cash (used in) provided by financing
activities........................................ (252,955) 197,779
--------- ---------
Net increase in cash and cash equivalents................... 14,672 22,417
Cash and cash equivalents at beginning of period............ 116,617 81,389
--------- ---------
Cash and cash equivalents at end of period.................. $ 131,289 $ 103,806
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized)...................... $ 129,567 $ 103,489
Income tax................................................ $ 30,731 $ 29,925
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999
IS UNAUDITED.)
(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION--
Mandalay Resort Group (the "Company"), which changed its name from Circus
Circus Enterprises, Inc. effective June 18, 1999, was incorporated February 27,
1974. The Company owns and operates hotel and casino facilities in Las Vegas,
Reno, Laughlin, Jean and Henderson, Nevada and a hotel and dockside casino in
Tunica County, Mississippi. In Detroit, Michigan, the Company is the majority
investor in a temporary casino which opened December 14, 1999. It is also an
investor in several unconsolidated affiliates, with operations that include a
riverboat casino in Elgin, Illinois, a hotel/casino in Reno, Nevada, and a
hotel/casino on the Las Vegas Strip.
The condensed consolidated financial statements include the accounts of the
Company, its wholly owned subsidiaries and the Detroit joint venture, which is
required to be consolidated. Material intercompany accounts and transactions
have been eliminated. Investments in 50% or less owned affiliated companies are
accounted for under the equity method.
Minority interest, as reflected on the Condensed Consolidated Financial
Statements, represents the 46.5% interest of the minority partners in MotorCity
Casino in Detroit, Michigan.
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. In
the opinion of management, all adjustments (which include normal recurring
adjustments) necessary for a fair statement of results for the interim periods
have been made. The results for the three and nine month periods are not
necessarily indicative of results to be expected for the full fiscal year.
Certain reclassifications have been made to the financial statements for the
three and nine months ended October 31, 1999 to conform to the financial
statement presentation for the three and nine months ended October 31, 2000.
These reclassifications have no effect on net income.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's annual report on Form
10-K for the year ended January 31, 2000.
7
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999
IS UNAUDITED.)
(2) LONG-TERM DEBT--
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
2000 2000
------------ ------------
<S> <C> <C>
Amounts due under bank credit agreement at floating interest
rates, weighted average of 7.5% and 6.8%.................. $ 800,000 $1,425,000
Amounts due under corporate debt program at floating
interest rates, weighted average of 6.2%.................. -- 50,000
Amounts due under majority-owned joint venture revolving
credit facility at floating interest rates, weighted
average of 8.0% and 7.1%.................................. 127,000 150,000
9 1/4% Senior Subordinated Notes due 2005................... 275,000 275,000
6.45% Senior Notes due 2006 (net of unamortized discount of
$231 and $264)............................................ 199,769 199,736
10 1/4% Senior Subordinated Notes due 2007.................. 500,000 --
9 1/2% Senior Notes due 2008................................ 200,000 --
7 5/8% Senior Subordinated Debentures due 2013.............. 150,000 150,000
6 3/4% Senior Subordinated Notes due 2003 (net of
unamortized discount of $43 and $55)...................... 149,957 149,945
7.0% Debentures due 2036 (net of unamortized discount of
$109 and $119)............................................ 149,891 149,881
6.70% Debentures due 2096 (net of unamortized discount of
$147 and $183)............................................ 149,853 149,817
Other notes................................................. 4,421 4,935
---------- ----------
2,705,891 2,704,314
Less--current portion....................................... (27,247) (13,022)
---------- ----------
$2,678,644 $2,691,292
========== ==========
</TABLE>
On July 24, 2000, the Company issued $500 million principal amount of
10 1/4% Senior Subordinated Notes due August 2007 (the "10 1/4% Notes", with
interest payable each February and August. The 10 1/4% Notes are redeemable
prior to maturity at the option of the Company, in whole but not in part, at
100% of the principal amount plus a make-whole premium. A portion of the 10 1/4%
Notes are also redeemable at the option of the Company prior to August 1, 2003
with the proceeds of a public offering of equity securities. The 10 1/4% Notes
are not subject to any sinking fund requirements. The net proceeds from this
offering were used to repay borrowings under the Company's credit facility.
On August 16, 2000, the Company issued $200 million principal amount of
9 1/2% Senior Notes due August 2008 (the "9 1/2% Notes"), with interest payable
each February and August. The 9 1/2% Notes are redeemable prior to maturity at
the option of the Company, in whole but not in part, at 100% of the principal
amount plus a make-whole premium. The 9 1/2% Notes are not subject to any
sinking fund requirements. The net proceeds from this offering were used to
repay borrowings under the Company's credit facility.
8
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999
IS UNAUDITED.)
(2) LONG-TERM DEBT-- (CONTINUED)
The Company has a policy aimed at managing interest rate risk associated
with its current and anticipated future borrowings. This policy enables the
Company to use any combination of interest rate swaps, futures, options, caps
and similar instruments. To the extent the Company employs such financial
instruments pursuant to this policy, they are accounted for as hedging
instruments. In order to qualify for hedge accounting, the underlying hedged
item must expose the Company to risks associated with market fluctuations and
the financial instrument used must be designated as a hedge and must reduce the
Company's exposure to market fluctuation throughout the hedge period. If these
criteria are not met, a change in the market value of the financial instrument
is recognized as a gain or loss in the period of change. Otherwise, gains and
losses are not recognized except to the extent that the financial instrument is
disposed of prior to maturity. Net interest paid or received pursuant to the
financial instrument is included as interest expense in the period.
The Company has entered into various interest rate swaps, principally with
its bank group, to manage interest expense, which is subject to fluctuation due
to the variable-rate nature of the debt under the Company's corporate debt
program. The Company has interest rate swap agreements under which it pays a
fixed interest rate (weighted average of approximately 6.4%) and receives a
variable interest rate (weighted average of approximately 6.8% at October 31,
2000) on $550 million notional amount of "initial" swaps. The net effect of all
such swaps resulted in a reduction of interest expense of approximately $1.0
million for the nine months ended October 31, 2000. Three of the swaps with a
combined notional amount of $350 million terminate in fiscal 2003. The remaining
swap of $200 million notional amount terminates in fiscal 2004.
As of October 31, 2000, under its most restrictive loan covenant, the
Company was restricted from issuing additional debt in excess of approximately
$497 million. The borrowing capacity under this covenant can fluctuate
substantially from quarter to quarter depending upon the operating cash flow.
(3) LEASE FACILITY--
On October 30, 1998, the Company entered into an operating lease agreement
with a group of financial institutions (the "Lease Facility") to permit the
Company to lease up to $200 million of equipment. As of June 30, 1999, the
Company had utilized the entire $200 million Lease Facility to lease equipment
at Mandalay Bay, and the commitment under the Company's bank credit facility was
permanently reduced to $1.8 billion. The base term of the lease expires
June 30, 2001, but the lease provides for up to two successive one-year renewal
terms. The rent expense related to this lease facility is reported separately on
the income statement as "operating lease rent."
(4) STOCK OPTIONS--
The Company has various stock option plans for executive, managerial and
supervisory personnel as well as the Company's outside directors and
consultants. The plans permit grants of options relating to the Company's common
stock and two of the plans also permit grants of the Company's common stock as
performance share and restricted stock awards. The only awards granted pursuant
to such plans through October 31, 2000 are stock options, which are generally
exercisable in one or more installments beginning not less than six months after
the grant date.
9
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999
IS UNAUDITED.)
(4) STOCK OPTIONS-- (CONTINUED)
Summarized information for stock options granted pursuant to the Company's
plans is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 31, 2000
----------------------------
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at beginning of period................. 6,037,459 $13.70
Granted............................................ 655,500 16.03
Exercised.......................................... (928,060) 16.13
Canceled........................................... -- --
--------- ------
Outstanding at end of period....................... 5,764,899 $13.58
========= ======
Options exercisable at end of period............... 2,399,251 $12.52
Options available for grant at end of period....... 4,749,032
</TABLE>
Options available for grant at October 31, 2000 include 339,500 shares
reserved for issuance only as annual formula awards of 10,000 shares each to
nonemployee directors pursuant to a plan that expires in June 2001.
(5) STOCK RELATED MATTERS--
During the nine months ended October 31, 2000, the Company repurchased 14.5
million shares of its common stock at a cost of $247.1 million.
(6) EARNINGS PER SHARE--
The table below reconciles weighted average shares outstanding used to
calculate basic earnings per share with the weighted average shares outstanding
used to calculate diluted earnings per share. There were no reconciling items
for net income.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<S> <C> <C> <C> <C>
Net income............................................. $29,371 $28,757 $116,281 $47,533
======= ======= ======== =======
Weighted average shares outstanding used in computation
of basic earnings per share.......................... 76,028 90,595 79,028 90,667
Stock options.......................................... 1,730 1,253 1,393 1,276
------- ------- -------- -------
Weighted average shares outstanding used in computation
of diluted earnings per share........................ 77,758 91,848 80,421 91,943
======= ======= ======== =======
Basic earnings per share............................... $ .39 $ .32 $ 1.47 $ .52
======= ======= ======== =======
Diluted earnings per share............................. $ .38 $ .31 $ 1.45 $ .52
======= ======= ======== =======
</TABLE>
(7) INVESTMENTS IN UNCONSOLIDATED AFFILIATES--
The Company has investments in unconsolidated affiliates that are accounted
for under the equity method. Using the equity method, original investments are
recorded at cost and adjusted by the Company's share of earnings or losses of
these entities. The investment balance also includes interest
10
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999
IS UNAUDITED.)
(7) INVESTMENTS IN UNCONSOLIDATED AFFILIATES-- (CONTINUED)
capitalized during construction (net of amortization). Investments in
unconsolidated affiliates consist of the following (in thousands):
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
2000 2000
------------ ------------
<S> <C> <C>
Circus and Eldorado Joint Venture (50%)
(Silver Legacy, Reno, Nevada)........................ $ 71,599 $ 87,150
Elgin Riverboat Resort (50%)
(Grand Victoria, Elgin, Illinois).................... 38,334 40,780
Victoria Partners (50%)
(Monte Carlo, Las Vegas, Nevada)..................... 130,738 137,065
-------- --------
$240,671 $264,995
======== ========
</TABLE>
The above unconsolidated affiliates operate with fiscal years ending on
December 31. Summarized results of operations of the unconsolidated affiliates
are as follows (unaudited, in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Revenues................................................ $646,441 $565,032
Expenses................................................ 471,908 453,139
Operating income........................................ 174,533 111,893
Net income.............................................. 159,727 96,438
</TABLE>
Included in the above are revenues of Grand Victoria of $298,318 and
$233,206 for the nine months ended September 30, 2000 and 1999. The property's
operating margin during those periods was 30% and 26%, respectively.
(8) COMMITMENTS AND CONTINGENT LIABILITIES--
In July 1995, Silver Legacy, a 50/50 joint venture with the Eldorado
Hotel/Casino, opened in downtown Reno, Nevada. As a condition of the joint
venture's $230 million bank credit agreement, the Company is obligated under a
make-well agreement to make additional contributions to the joint venture as may
be necessary to maintain a minimum coverage ratio (as defined).
We have formed a joint venture with the Detroit-based Atwater Casino Group
to build, own and operate a hotel/casino in Detroit, Michigan. This joint
venture is one of three groups which negotiated development agreements with the
city. We had an initial 45% ownership interest in the joint venture. Effective
December 14, 1999, we acquired an additional 8.5% interest at a cost of $38.4
million, thus increasing our total ownership interest to 53.5%.
Pending the development of a permanent hotel/casino, the joint venture
constructed a temporary casino (MotorCity Casino) in downtown Detroit, which
opened December 14, 1999. The cost of the temporary casino, including land and
capitalized interest but excluding preopening expenses, was approximately $150
million. This cost was financed pursuant to the joint venture's $150 million
credit facility, which is secured by the assets associated with the temporary
casino. Mandalay has guaranteed this credit facility subject to the release of
the guaranty if certain performance measures are reached. The joint venture's
operation of the temporary casino is subject to ongoing regulatory oversight,
and its
11
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 2000 AND 1999
IS UNAUDITED.)
(8) COMMITMENTS AND CONTINGENT LIABILITIES-- (CONTINUED)
ability to proceed with a permanent hotel/casino facility is contingent upon the
receipt of all necessary gaming approvals and satisfaction of other conditions.
The Detroit joint venture is planning a $600 million permanent hotel/casino
facility. We have committed to contribute 20% of this amount in the form of
equity, and the joint venture will seek project-specific funding for the balance
of the cost. The development agreement provides that we will guarantee
completion of the permanent facility and will enter into a keep-well guarantee
with the city, pursuant to which we could be required to contribute additional
funds, if and as needed, to continue operation of the project for a period of
two years. This keep-well agreement also applies to the temporary casino.
Mandalay has issued letters of credit totaling $50 million for the benefit of
Bank of America in order to back letters of credit issued by Bank of America for
the same total amount. The Bank of America letters of credit were issued to
secure payments of principal and interest on bonds issued by the Economic
Development Corporation of the City of Detroit. The proceeds of the bonds are to
be used to finance costs associated with activities (including acquisition)
relating to the land on which the permanent facility will be built.
Various lawsuits have been filed in the state and federal courts challenging
the constitutionality of the Detroit Casino Competitive Selection Process and
the Michigan Gaming Control and Revenue Act, and seeking to appeal the issuance
of a certificate of suitability to MotorCity Casino. No assurance can be given
regarding the timing and outcome of these proceedings. An adverse ruling in any
of these lawsuits could adversely impact the status of our joint venture's
operation of the temporary facility, as well as its ability to obtain a
certificate of suitability and a casino license for its permanent facility.
In May 2000, the Company's Board of Directors authorized the repurchase of
up to 15% (or approximately 11.7 million) of the then outstanding shares of
common stock, as market conditions and other factors warrant. As of October 31,
2000, the Company had purchased approximately 1.8 million shares pursuant to
this authorization at a cost of approximately $39.1 million. To facilitate the
Company's purchase of shares pursuant to this authorization, the Company has
also entered into agreements with Bank of America which provide for the
purchase, in accordance with the volume and other limitations of Rule 10b-18, of
up to $100 million of the Company's outstanding common stock by Bank of America
over a period ending not later than January 5, 2001, unless the Company and Bank
of America agree to extend that date. The Company may terminate Bank of
America's continued acquisition of stock pursuant to these agreements at any
time. The agreements provide that the Company will purchase from Bank of America
at its cost (plus accrued fees) the shares acquired pursuant to the agreements
one year following completion of Bank of America's acquisition of the stock. At
the Company's option, it may acquire all or a portion of the shares at an
earlier date, or it may become obligated to acquire the shares at an earlier
date under certain circumstances specified in the agreements. Although the
Company's current intention is to purchase the shares in accordance with the
terms of the agreements, the Company may elect to net settle the obligation in
cash or shares (i.e., pay cash or deliver additional shares or receive cash or
shares). As of October 31, 2000, Bank of America had purchased approximately
587,000 shares pursuant to this agreement at a cost of approximately $14.7
million.
The Company is a defendant in various pending litigation. In management's
opinion, the ultimate outcome of such litigation will not have a material effect
on the results of operations or the financial position of the Company.
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MANDALAY RESORT GROUP AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED)
RESULTS OF OPERATIONS
EARNINGS PER SHARE
For the third quarter ended October 31, 2000, we reported net income of
$29.4 million, or $.38 per diluted share, versus $28.8 million, or $.31 per
diluted share, for the same quarter last year. For the nine months, net income
was $116.3 million, or $1.45 per diluted share, compared to $47.5 million, or
$.52 per diluted share, in the prior year.
The increase in earnings per share for the quarter was due primarily to
lower average shares outstanding, 77.8 million in the current year compared with
91.8 million in the prior year. The lower average shares outstanding reflects
our purchase of 14.5 million shares of our common stock in the current year,
primarily in the first and second quarters. The third quarter also benefitted
from strong operating results at our Las Vegas Strip properties as well as the
contribution from MotorCity Casino, a 53.5%-owned joint venture which opened
December 14, 1999 in Detroit, Michigan. However, these operating gains were
largely offset by weaker operating performances in our secondary markets (Reno,
Laughlin and Jean) and by higher interest expense stemming from higher average
debt outstanding and higher interest rates. See the discussion under "Interest
Expense" for additional details.
NOTE: Results for the prior year third quarter include preopening expenses
of $2.1 million ($.02 per diluted share) related to MotorCity Casino and the
write-off of $5.4 million ($.04 per diluted share) of costs related to a
proposed timeshare resort in Las Vegas which we decided not to pursue.
The increase in earnings per share for the nine months was due primarily to
the performance of our Las Vegas Strip properties and to MotorCity Casino. Share
repurchase also benefitted comparisons for the nine months, as average shares
outstanding decreased to 80.4 million this year from 91.9 million in the prior
year. As with the quarter, higher interest costs mitigated some of this
improvement.
NOTE: Results for the nine months ended October 31, 2000 include preopening
expenses of $1.8 million ($.01 per diluted share) related to the Shark Reef at
Mandalay Bay, which opened June 20, 2000. Prior year results include preopening
expenses of $73.8 million ($.52 per diluted share) related primarily to Mandalay
Bay and MotorCity Casino (including the write-off of $33.8 million of previously
capitalized preopening costs) and the write-off of $5.4 million ($.04 per
diluted share) related the abandoned timeshare project.
REVENUES
Revenues increased $93.3 million, or 17%, for the three months ended
October 31, 2000, and $392.8 million, or 26%, for the nine months, versus the
same periods last year. The overall increase was attributable primarily to
MotorCity Casino, which opened December 14, 1999 and generated revenues or $90.3
million and $255.6 million in the three and nine month periods.
Excluding MotorCity Casino, the growth in the quarter and nine months came
principally from room revenue at our Las Vegas Strip properties. Revenue per
available room (REVPAR) at these properties rose an average $9 in the third
quarter and $10 in the nine months. Mandalay Bay led the way, as its average
room rate for the quarter increased 24% to $153. The growth in REVPAR was driven
by increased demand stemming from the continued rise in the number of visitors
to Las Vegas (up 7% through September).
As noted, our Las Vegas properties were significant contributors to the
increases in revenues. At Luxor, revenues rose $9.3 million, or 10%, for the
quarter, and $26.3 million, or 10%, for the nine
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months. Meanwhile, revenues at Excalibur rose $2.2 million, or 3%, for the
quarter, and $14.9 million, or 7%, for the nine months, while at Circus
Circus-Las Vegas (including Slots-A-Fun), revenues were up $3.4 million, or 5%,
for the quarter, and $10.9 million, or 5%, for the nine months. At Mandalay Bay,
revenues for the quarter decreased $4.1 million, or 3%, though year-to-date
revenues reflected an increase of $73.4 million, or 22%. The decrease in the
quarter was due to an abnormally low hold percentage (i.e., "win") on table
games, while the year-to-date results benefitted from an additional month of
operations versus the prior year (when Mandalay Bay opened March 2, 1999), as
well as increased room revenue as discussed above.
The contribution from the 50%-owned Grand Victoria also increased (up $.7
million, or 5%, for the quarter and $11.1 million, or 33%, for the nine months).
This property benefitted from dockside gaming operations throughout all of the
current year versus cruising operations through June of the prior year.
NOTE: We record our share of the operating income of our unconsolidated
joint ventures (Grand Victoria, Monte Carlo and Silver Legacy) as revenue under
"Earnings of Unconsolidated Affiliates." Results of MotorCity Casino are
consolidated for financial reporting purposes.
INCOME FROM OPERATIONS
For the three and nine months ended October 31, 2000, income from operations
rose $24.2 million, or 27%, and $133.5 million, or 58%, compared to the same
periods a year ago. The composite operating margin was 17.9% and 19.0% for the
three and nine months ended October 31, 2000 versus 16.5% and 15.1% for the
comparable periods in the prior year. A discussion of operating results by
market follows.
NOTE: Income from operations was negatively affected by preopening expenses
of $1.8 million in the nine months ended October 31, 2000, and $2.1 million and
$40.0 million in the three and nine month periods last year. Both prior year
periods were also negatively impacted by the write-off of $5.4 million of costs
associated with our abandoned timeshare project.
LAS VEGAS
Our Las Vegas properties posted an overall increase in operating income of
$8.5 million, or 13%, during the third quarter, and $71.7 million, or 44%, for
the nine months. These increases were driven by an uptrend in the number of
visitors to the Las Vegas Strip, as discussed previously.
NOTE: The year-to-date increase in operating income was negatively impacted
by preopening expenses of $1.8 million in the current year (related to the Shark
Reef at Mandalay Bay) compared to $30.8 million in the previous year (related to
Mandalay Bay).
At Mandalay Bay, operating income decreased $1.0 million in the third
quarter, while rising $35.8 million in the nine months. As noted in the revenue
discussion, Mandalay Bay suffered a low hold percentage on table games in the
quarter, while benefitting from an extra month of operations in the nine month
period. Luxor was a strong contributor in both periods, with operating income
rising $4.6 million, or 24%, in the quarter, and $14.1 million, or 25%, in the
nine months. Operating income at Circus Circus-Las Vegas (including Slots-A-Fun)
rose $2.2 million, or 23%, and $5.8 million, or 17%, in the three and nine month
periods.
Excalibur, meanwhile, posted increases of $1.1 million, or 6%, and $11.6
million, or 22%, in the three and nine months, while Monte Carlo's contribution
to operating income rose $1.0 million, or 12%, and $3.0 million, or 12%.
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RENO
In Reno, our combined operating income (Circus Circus-Reno plus our 50%
interest in Silver Legacy) declined $2.9 million, or 23%, for the third quarter,
although it rose $.5 million, or 2%, for the nine months, compared against the
same periods a year ago.
NOTE: In the prior year, we recorded approximately two-thirds of Silver
Legacy's operating income as a priority return on our investment. In the current
year, we are recording our normal 50% of Silver Legacy's operating income. Had
we recorded 50% (rather than our priority two-thirds) of Silver Legacy's
operating income in the prior year, results for the three and nine months ended
October 31, 2000 would have reflected a decrease of 17% and an increase of 15%
compared to the prior year periods.
Both Circus Circus-Reno and Silver Legacy posted slight decreases in REVPAR
in the third quarter, with casino revenues also experiencing a decline. The Reno
market is experiencing further competitive challenges from Native American
casinos in northern California, which have recently added newer (i.e., more
competitive) slot machines and are in the process of expanding the number of
units as well.
For the nine months, REVPAR and casino revenue comparisons remained
positive. Year-to-date results were boosted by a national bowling tournament
which Reno hosts two out of every three years, and from March through July this
year the city hosted the women's national tournament, while it did not host any
tournament in the prior year.
LAUGHLIN
Our two Laughlin properties, Colorado Belle and Edgewater, posted combined
decreases in operating income of $1.9 million, or 43%, in the third quarter and
$.8 million, or 4% in the nine months. While REVPAR was essentially flat in the
quarter and nine months versus the prior year, casino revenues experienced a
downturn in both periods.
OTHER MARKETS
Our newest property, MotorCity Casino in Detroit, Michigan, delivered
operating income of $16.3 million and $41.0 million in the three and nine months
ended October 31, 2000. See "Financial Position and Capital Resources" for
additional details regarding our Detroit operation.
In Tunica County, Mississippi, operating income at Gold Strike decreased
$1.2 million, or 20%, in the third quarter, while it climbed $1.5 million, or 8%
year-to-date. The quarterly results at this property were negatively impacted by
a low hold percentage on table games.
Our share of income from operations at Grand Victoria (a 50%-owned riverboat
casino in Elgin, Illinois) reflected a $.5 million, or 4%, increase in the
quarter and a $11.1 million, or 37%, increase for the nine months. The current
year periods have benefitted from dockside gaming operations compared against
cruising operations through June of the prior year.
INTEREST EXPENSE
For the three and nine months ended October 31, 2000, interest expense
(excluding unconsolidated joint venture interest expense and before capitalized
interest) rose $14.9 million and $37.0 million versus the prior year periods.
The increase was due to higher average borrowings (approximately $2.8 billion in
the current quarter and nine months against approximately $2.5 billion in the
same periods last year), partly related to the purchase of approximately 14.5
million shares of our common stock during the current year. Average borrowings
also increased due to the inclusion of borrowings associated with MotorCity
Casino, which is consolidated for financial reporting purposes. Interest
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expense also climbed because of higher interest rates stemming from higher short
term rates on our credit line borrowings, as well as the effect of the issuance
of $500 million principal amount of 10 1/4% Senior Subordinated Notes in
July 2000 and the issuance of $200 million principal amount of 9 1/2% Senior
Notes in August 2000. The proceeds from these two offerings were used to pay
down borrowings outstanding under our credit facility. Long-term debt at
October 31, 2000 stood at $2.7 billion (including $127 million of debt related
to MotorCity Casino) compared to $2.5 billion at October 31, 1999.
We also recorded interest expense related to unconsolidated joint ventures
of $2.9 million and $8.4 million in the quarter and nine months ended
October 31, 2000 compared to $2.7 million and $8.3 million in the previous year.
This reflects our 50% share of the interest expense of Silver Legacy and Monte
Carlo.
INCOME TAX
The effective tax rate was approximately 37.8% and 37.6% for the three and
nine months ended October 31, 2000 compared with 37.7% and 36.7% for the same
periods in the prior year. This rate reflects the corporate statutory rate of
35% plus the effect of various nondeductible expenses, primarily the
amortization of goodwill.
FINANCIAL POSITION AND CAPITAL RESOURCES
Mandalay had cash and cash equivalents of $131.3 million at October 31,
2000, representing normal daily operating requirements. For the nine months
ended October 31, 2000, net cash provided by operating activities was $378.2
million versus $193.0 million in the same period a year ago. The increase was
driven primarily by improved operating results as discussed previously.
Income from operations plus depreciation and amortization ("EBITDA"), was
$167.2 million and $528.9 million for the three and nine months ended
October 31, 2000 versus $130.1 million and $363.6 million for the same periods
last year. EBITDA is included because many investors consider it a valuable
measure since it factors out the impact of depreciation and goodwill
amortization, the principal noncash expenses affecting income. EBITDA is not a
GAAP measure of performance and should not be considered an alternative to GAAP
measures of performance.
NOTE: EDITDA was negatively impacted by preopening expenses of $1.8 million
for the nine months ended October 31, 2000, and $2.1 million and $40.0 million
for the three and nine months last year. The prior year periods were also
impacted by the write-off of $5.4 million in costs related to the discontinued
timeshare project.
During the nine months ended October 31, 2000, we purchased 14.5 million
shares of our common stock at a cost of $247.1 million. We used our cash flow to
fund a sizeable portion of this cost. See "Liquidity" for further discussion of
our share repurchase activity. In the prior year, our cash flow was used
primarily to fund construction of Mandalay Bay and other miscellaneous
construction projects.
CAPITAL SPENDING
Capital expenditures for the quarter and nine months ended October 31, 2000
were $12.8 million and $76.0 million, of which $3.7 million and $7.5 million
related to the renovation of a portion of the pyramid rooms at Luxor. For the
nine months, capital expenditures included $22.4 million related to the Shark
Reef at Mandalay Bay, our new saltwater aquarium attraction which opened
June 20, 2000.
RECENT FINANCINGS
On July 24, 2000, the Company issued $500 million principal amount of
10 1/4% Senior Subordinated Notes due August 2007. The notes are not subject to
any sinking fund requirements. The
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net proceeds from this offering were used to repay a portion of the borrowings
under our credit facility.
On August 16, 2000, the Company issued $200 million principal amount of
9 1/2% Senior Notes due August 2008. The notes are not subject to any sinking
fund requirements. The net proceeds from this offering were also used to repay a
portion of the borrowings under our credit facility.
NEW PROJECTS
SHARK REEF AT MANDALAY BAY
On March 2, 1999, we opened Mandalay Bay, a 43-story hotel/casino resort in
Las Vegas, Nevada. Mandalay Bay is part of Masterplan Mile, our development
property with approximately one mile of frontage on the Las Vegas Strip. The
property is the site of our Mandalay Bay, Luxor and Excalibur resorts. Our
development plan for Masterplan Mile includes various core components developed
for cross-marketing to guests at our existing and future hotel/casinos within
this resort complex. These core components include an aquarium exhibit, the
SHARK REEF AT MANDALAY BAY, which opened June 20, 2000. The cost of the aquarium
(excluding land, capitalized interest and preopening expenses) was approximately
$45 million. We may add other core components to our development plan for
Masterplan Mile in the future.
DETROIT
We have formed a joint venture with the Detroit-based Atwater Casino Group
to build, own and operate a hotel/casino in Detroit, Michigan. This joint
venture is one of three groups which negotiated development agreements with the
city. We had an initial 45% ownership interest in the joint venture. Effective
December 14, 1999, we acquired an additional 8.5% interest at a cost of $38.4
million, thus increasing our total ownership interest to 53.5%.
Pending the development of a permanent hotel/casino, the joint venture
constructed a temporary casino (MotorCity Casino) in downtown Detroit, which
opened December 14, 1999. The cost of the temporary casino, including land and
capitalized interest but excluding preopening expenses, was approximately $150
million. This cost was financed pursuant to the joint venture's $150 million
credit facility, which is secured by the assets associated with the temporary
casino. Mandalay has guaranteed this credit facility subject to the release of
the guaranty if certain performance measures are reached. The joint venture's
operation of the temporary casino is subject to ongoing regulatory oversight,
and its ability to proceed with a permanent resort project is contingent upon
the receipt of all necessary gaming approvals and satisfaction of other
conditions.
The Detroit joint venture is planning a $600 million permanent resort
project. We have committed to contribute 20% of this amount in the form of
equity, and the joint venture will seek project-specific funding for the balance
of the cost. The development agreement provides that we will guarantee
completion of the permanent facility and will enter into a keep-well guarantee
with the city, pursuant to which we could be required to contribute additional
funds, if and as needed, to continue operation of the project for a period of
two years. This keep-well agreement also applies to the temporary casino.
Mandalay has issued letters of credit totaling $50 million for the benefit of
Bank of America in order to back letters of credit issued by Bank of America for
the same total amount. The Bank of America letters of credit were issued to
secure payments of principal and interest on bonds issued by the Economic
Development Corporation of the City of Detroit. The proceeds of the bonds are to
be used to finance costs associated with activities (including acquisition)
relating to the land on which the permanent facility is to be built.
Various lawsuits have been filed in the state and federal courts challenging
the constitutionality of the Detroit Casino Competitive Selection Process and
the Michigan Gaming Control and Revenue Act,
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and seeking to appeal the issuance of a certificate of suitability to MotorCity
Casino. No assurance can be given regarding the timing and outcome of these
proceedings. An adverse ruling in any of these lawsuits could adversely impact
the status of our joint venture's operation of the temporary facility, as well
as its ability to obtain a certificate of suitability and a casino license for
its permanent facility.
Our Detroit joint venture recently signed collective bargaining agreements
with a consortium of unions representing a number of employees.
MISSISSIPPI GULF COAST
Some time ago, we announced plans to develop a casino resort on the Bay of
St. Louis, along the Mississippi Gulf Coast. In August 2000, the United States
District Court for the District of Columbia issued an opinion which had the
effect of revoking one of the permits issued for this project and requiring the
Army Corps of Engineers to have an environmental impact statement completed
prior to issuing new permits for the development of casinos in this area. In
light of the estimated time to complete the environmental impact statement and
potential legal challenges that may result from the environmental impact
statement, we have decided not to pursue this development along the Mississippi
Gulf Coast at this time.
LIQUIDITY
Based on our operating cash flows, credit facility and ability to raise
additional funds through debt or equity markets, we believe we have sufficient
capital resources to meet all of our existing cash obligations, fund our capital
commitments on projects under way and strategically purchase shares of our
common stock. As of October 31, 2000, under our most restrictive loan covenant,
we could issue additional debt of approximately $497 million. Our borrowing
capacity under this covenant can fluctuate substantially from quarter to quarter
depending upon our operating cash flow.
In May 2000, our Board of Directors authorized the repurchase of up to 15%
(or approximately 11.7 million) of our then outstanding shares of common stock,
as market conditions and other factors warrant. As of November 30, 2000, we had
purchased approximately 1.8 million shares pursuant to this authorization at a
cost of approximately $39.1 million. To facilitate our purchase of shares
pursuant to this authorization, we have also entered into agreements with Bank
of America which provide for the purchase, in accordance with the volume and
other limitations of Rule 10b-18, of up to $100 million of our outstanding
common stock by Bank of America over a period ending not later than January 5,
2001, unless we and Bank of America agree to extend that date. We may terminate
Bank of America's continued acquisition of stock pursuant to these agreements at
any time. The agreements provide that we will purchase from Bank of America at
its cost (plus accrued fees) the shares acquired pursuant to the agreements one
year following completion of Bank of America's acquisition of the stock. At our
option, we may acquire all or a portion of the shares at an earlier date, or we
may become obligated to acquire the shares at an earlier date under certain
circumstances specified in the agreements. Although our current intention is to
purchase the shares in accordance with the terms of the agreements, we may elect
to net settle our obligation in cash or shares (i.e., pay cash or deliver
additional shares or receive cash or shares). As of November 30, 2000, Bank of
America had purchased approximately 2.2 million shares pursuant to this
agreement at a cost of approximately $46.6 million.
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements which we have based on our
current expectations about future events. They include statements with respect
to our beliefs, plans, objectives, goals, expectations, anticipations,
intentions, financial condition, results of operations, future performance and
business, including statements relating to our business strategy, our current
and future development plans, and statements that include the words "may,"
"could," "should," "would," "believe," "expect,"
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"anticipate," "estimate," "intend," "plan" or similar expressions. These
forward-looking statements are subject to risks, uncertainties, and assumptions
about us and our operations that are subject to change based on various
important factors, some of which are beyond our control. Factors that could
cause our financial performance to differ materially from the goals, plans,
objectives, intentions and expectations expressed in our forward-looking
statements, include the following: (i) our development and construction
activities and those of the joint ventures in which we participate,
(ii) competition, (iii) leverage and debt service (including sensitivity to
fluctuations in interest rates and ratings which national rating agencies assign
to our outstanding debt securities), (iv) domestic and global economic, credit
and capital market conditions, (v) changes in federal or state tax laws or the
administration of these laws, (vi) changes in gaming laws or regulations
(including the legalization or expansion of gaming in certain jurisdictions),
(vii) applications for licenses and approvals under applicable laws and
regulations (including gaming laws and regulations), and (viii) regulatory or
judicial proceedings. 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 our Annual Report on Form 10-K for the fiscal year
ended January 31, 2000. If one or more of the assumptions underlying our
forward-looking statements proves incorrect, then our actual results,
performance or achievements could differ materially from those expressed in, or
implied by, the forward-looking statements contained in this report. Therefore,
we caution you not to place undue reliance on our forward-looking statements.
This statement is provided as permitted by the Private Securities Litigation
Reform Act of 1995.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
As of October 31, 2000 there were no material changes to the information
incorporated by reference in Item 7A of the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 2000.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed as part of this report:
27. Financial Data Schedule for the nine months ended October 31, 2000 as
required under EDGAR.
(b) REPORTS ON FORM 8-K. No report on Form 8-K was filed during the period
covered by this report.
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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.
<TABLE>
<S> <C> <C>
MANDALAY RESORT GROUP
---------------------------------------------
(Registrant)
Date: December 14, 2000 By: /s/ GLENN SCHAEFFER
-----------------------------------------
Glenn Schaeffer
PRESIDENT, CHIEF FINANCIAL OFFICER AND
TREASURER
</TABLE>
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
27. Financial Data Schedule for the nine months ended
October 31, 2000 as required under EDGAR.
</TABLE>
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