<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 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 number 1-8570
------------------------------------------
MANDALAY RESORT GROUP
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0121916
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
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.
Class Outstanding at August 31, 2000
-------------------------------- ------------------------------
Common Stock, $.01-2/3 par value 75,789,269 shares
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
Form 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at
July 31, 2000 (Unaudited) and January 31,
2000 ................................................... 3-4
Condensed Consolidated Statements of Income
(Unaudited) for the Three and Six Months
Ended July 31, 2000 and 1999 ........................... 5-6
Condensed Consolidated Statements of Cash
Flows (Unaudited) for the Six Months Ended
July 31, 2000 and 1999 7-8
Notes to Condensed Consolidated Financial
Statements (Unaudited) ................................. 9-17
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .......... 18-27
Item 3. Quantitative and Qualitative Disclosures
About Market Risks 28
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders ................................................ 29
Item 6. Exhibits and Reports on Form 8-K ....................... 30-31
</TABLE>
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS
July 31, January 31,
2000 2000
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................ $ 122,520 $ 116,617
Receivables.............................. 75,195 62,167
Inventories.............................. 29,196 28,499
Prepaid expenses and other............... 61,575 74,256
--------- ---------
Total current assets................ 288,486 281,539
PROPERTY, EQUIPMENT AND LEASEHOLD INTERESTS,
at cost, less accumulated depreciation
and amortization of $987,411 and
$893,776, respectively................... 3,293,694 3,335,071
EXCESS OF PURCHASE PRICE OVER FAIR MARKET
value of net assets acquired, net........ 388,378 396,433
NOTES RECEIVABLE............................ 5,820 1,605
INVESTMENTS IN UNCONSOLIDATED AFFILIATES.... 238,962 264,995
OTHER ASSETS................................ 70,210 49,833
--------- ---------
Total Assets........................ $4,285,550 $4,329,476
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
July 31, January 31,
2000 2000
----------- ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt................$ 22,754 $ 13,022
Accounts payable - trade ........................ 44,546 40,395
Accounts payable - construction.................. 4,249 33,415
Accrued liabilities ............................. 193,461 157,787
--------- ---------
Total current liabilities ................ 265,010 244,619
LONG-TERM DEBT ...................................... 2,766,190 2,691,292
DEFERRED INCOME TAX ................................. 218,526 210,689
OTHER LONG-TERM LIABILITIES ......................... 21,066 20,192
--------- ---------
Total liabilities ........................ 3,270,792 3,166,792
--------- ---------
MINORITY INTEREST.................................... (20,780) (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 ...................... 565,617 565,925
Retained earnings ............................... 1,288,542 1,201,632
Treasury stock (37,820,709 and 23,764,216 shares),
at cost........................................ (820,515) (581,671)
--------- ---------
Total stockholders' equity ............... 1,035,538 1,187,780
--------- ---------
Total Liabilities and
Stockholders' Equity .................. $4,285,550 $4,329,476
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended July 31, Ended July 31,
------------------ -------------------
2000 1999 2000 1999
------- ------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Casino ......................... $318,887 $234,633 $633,546 $451,448
Rooms .......................... 154,603 133,000 314,533 263,610
Food and beverage .............. 109,872 89,666 215,374 171,021
Other .......................... 77,028 66,694 146,776 117,647
Earnings of unconsolidated
affiliates ................... 29,333 25,151 58,982 47,145
------- ------- --------- ---------
689,723 549,144 1,369,211 1,050,871
Less-complimentary allowances... (42,323) (32,963) (82,195) (63,431)
------- ------- --------- ---------
647,400 516,181 1,287,016 987,440
------- ------- --------- ---------
COSTS AND EXPENSES:
Casino ......................... 171,319 124,996 333,464 235,515
Rooms .......................... 53,995 48,960 104,639 90,925
Food and beverage .............. 77,768 71,733 154,549 135,867
Other .......................... 49,854 42,733 99,885 77,332
General and administrative ..... 101,415 85,929 201,096 159,237
Depreciation and amortization .. 52,210 46,461 103,787 87,551
Corporate general and
administrative ............... 9,390 8,330 17,297 15,450
Operating lease rent ........... 9,922 3,639 19,602 6,054
Preopening expenses ............ 1,577 4,270 1,832 37,880
------- ------- --------- ---------
527,450 437,051 1,036,151 845,811
------- ------- --------- ---------
INCOME FROM OPERATIONS ........... 119,950 79,130 250,865 141,629
------- ------- --------- ---------
OTHER INCOME (EXPENSE):
Interest, dividend and
other income ................. 1,742 660 4,234 1,182
Guarantee fees from uncon-
solidated affiliate .......... 607 716 1,228 1,431
Interest expense ............... (54,091) (41,452) (103,578) (74,959)
Interest expense from
unconsolidated affiliates .... (2,758) (2,793) (5,463) (5,595)
------- ------- -------- --------
(54,500) (42,869) (103,579) (77,941)
------- ------- -------- --------
MINORITY INTEREST ................ 4,649 - 8,240 -
------- ------- -------- --------
INCOME BEFORE PROVISION FOR
INCOME TAX...................... 60,801 36,261 139,046 63,688
Provision for income tax ....... 22,749 12,630 52,136 22,918
------- ------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 38,052 23,631 86,910 40,770
Cumulative effect of change in
accounting principle for
preopening expenses, net of
tax benefit of $11,843 ....... - - - (21,994)
------- ------- ------- --------
NET INCOME ....................... $ 38,052 $ 23,631 $ 86,910 $ 18,776
======= ======= ======= ========
</TABLE>
5
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (continued)
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended July 31, Ended July 31,
------------------ -----------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income before cumulative effect
of change in accounting
principle...................... $ .49 $ .26 $ 1.08 $ .45
Cumulative effect of change
in accounting principle........ $ - $ - $ - $ (.24)
------- ------- ------- -------
Net income per share............ $ .49 $ .26 $ 1.08 $ .21
======= ======= ======= =======
DILUTED EARNINGS PER SHARE
Income before cumulative effect
of change in accounting
principle...................... $ .48 $ .26 $ 1.06 $ .44
Cumulative effect of change
in accounting principle........ $ - $ - $ - $ (.24)
------- ------- ------- -------
Net income per share............ $ .48 $ .26 $ 1.06 $ .20
======= ======= ======= =======
Avg.shares outstanding-basic 77,087,770 90,862,117 80,544,100 90,703,869
========== ========== ========== ==========
Avg.shares outstanding-diluted 78,601,843 92,368,423 81,713,757 91,999,602
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
6
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended July 31,
------------------
2000 1999
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 86,910 $ 18,776
------- -------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 110,797 91,896
Gain on disposition of fixed assets (15) (48)
Increase in other current assets (1,044) (58,218)
(Increase) decrease in other noncurrent assets (20,316) 14,821
Increase (decrease) in interest payable 7,245 (33)
Increase in other current liabilities 32,580 40,694
Increase in deferred income tax 7,837 1,166
Decrease in other noncurrent liabilities - (33)
Unconsolidated affiliates' distributions in
excess of earnings 25,817 6,133
Minority interest in earnings 8,240 -
------- -------
Total adjustments 171,141 96,378
------- -------
Net cash provided by operating activities 258,051 115,154
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (63,209) (279,738)
Decrease in construction payable (29,166) (30,472)
Increase in investments in unconsolidated
affiliates (128) (1,504)
Proceeds from sale of equipment and other assets 51 283
(Increase) decrease in notes receivable (4,215) 10,148
Other 2,154 -
------- --------
Net cash used in investing activities (94,513) (301,283)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net effect on cash of issuances and payments
of debt with original maturities of
three months or less (390,431) 198,404
Issuances of debt with original maturities
in excess of three months 500,000 1,590
Principal payments of debt with original
maturities in excess of three months (25,000) (1,958)
Exercise of stock options 3,578 14,168
Purchases of treasury stock (242,730) (10,493)
Other (3,052) 709
------- -------
Net cash (used in) provided by
financing activities (157,635) 202,420
------- -------
Net increase in cash and cash equivalents 5,903 16,291
Cash and cash equivalents at beginning of period 116,617 81,389
------- -------
Cash and cash equivalents at end of period $122,520 $ 97,680
======= =======
</TABLE>
7
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended July 31,
--------------
2000 1999
---- ----
<S> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period for:
Interest (net of amount capitalized) $ 94,215 $ 73,185
Income tax $ 30,573 $ 29,215
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
8
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All information for the three and six months ended July 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 six 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 six months ended July 31, 1999 to conform to the financial
statement presentation for the three and six months ended July 31, 2000. These
reclassifications have no effect on net income.
9
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(All information for the three and six months ended July 31, 2000 and 1999 is
unaudited.)
(1) Principles of consolidation and basis of presentation (continued)-
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.
2) Long-term debt -
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
July 31, January 31,
2000 2000
--------- -----------
<S> <C> <C>
Amounts due under bank credit
agreement at floating interest
rates, weighted average of 7.6%
and 6.8% $1,075,000 $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% 135,000 150,000
9-1/4% Senior Subordinated Notes
due 2005 275,000 275,000
6.45% Senior Notes due 2006
(net of unamortized discount
of $242 and $264) 199,758 199,736
10-1/4% Senior Subordinated Notes
due 2007 500,000 -
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 $47 and $55) 149,953 149,945
7.0% Debentures due 2036
(net of unamortized
discount of $112 and $119) 149,888 149,881
6.70% Debentures due 2096
(net of unamortized discount
of $159 and $183) 149,841 149,817
Other notes 4,504 4,935
--------- ---------
2,788,944 2,704,314
Less - current portion (22,754) (13,022)
--------- ---------
$2,766,190 $2,691,292
========= =========
</TABLE>
10
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(All information for the three and six months ended July 31, 2000 and 1999 is
unaudited.)
(2) Long-term debt (continued) -
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.
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.
11
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(All information for the three and six months ended July 31, 2000 and 1999 is
unaudited.)
(2) Long-term debt (continued) -
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 July 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 $.4 million
for the six months ended July 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 July 31, 2000, under its most restrictive loan covenant, the
Company was restricted from issuing additional debt in excess of approximately
$665 million. Our borrowing capacity under this covenant can fluctuate
substantially from quarter to quarter depending upon our 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
12
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(All information for the three and six months ended July 31, 2000 and 1999 is
unaudited.)
(4) Stock options (continued) -
performance share and restricted stock awards. The only awards granted pursuant
to such plans through July 31, 2000 are stock options, which are generally
exercisable in one or more installments beginning not less than six months after
the grant date.
Summarized information for stock options granted pursuant to the Company's plans
is as follows:
<TABLE>
<CAPTION>
Six Months Ended
July 31, 2000
----------------------
<S> <C> <C>
Weighted
Average
Exercise
Options Price
--------- --------
Outstanding at beginning of period.. 6,037,459 $13.70
Granted............................. 581,500 14.84
Exercised........................... (317,129) 11.28
Canceled............................ - -
--------- --------
Outstanding at end of period........ 6,301,830 $13.93
========= ========
Options exercisable at end of period 2,995,793 $13.86
Options available for grant at end
of period......................... 4,823,032
</TABLE>
Options available for grant at July 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 six months ended July 31, 2000, the Company repurchased 14.4
million shares of its common stock at a cost of $242.7 million.
13
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(All information for the three and six months ended July 31, 2000 and 1999 is
unaudited.)
(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 Six Months
(in thousands, except Ended July 31, Ended July 31,
earnings per share) --------------------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income $38,052 $23,631 $86,910 $18,776
====== ====== ====== ======
Weighted average shares out-
standing used in computation
of basic earnings per share 77,088 90,862 80,544 90,704
Stock options 1,514 1,506 1,170 1,296
------ ------ ------ ------
Weighted average shares out-
standing used in computation
of diluted earnings per share 78,602 92,368 81,714 92,000
====== ====== ====== ======
Basic earnings per share $ .49 $ .26 $ 1.08 $ .21
====== ====== ====== ======
Diluted earnings per share $ .48 $ .26 $ 1.06 $ .20
====== ====== ====== ======
</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
capitalized during construction (net of amortization). Investments in
unconsolidated affiliates consist of the following (in thousands):
14
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(All information for the three and six months ended July 31, 2000 and 1999 is
unaudited.)
(7) Investments in unconsolidated affiliates (continued) -
<TABLE>
<CAPTION>
July 31, January 31,
2000 2000
------- -------
<S> <C> <C>
Circus and Eldorado Joint Venture (50%)
(Silver Legacy, Reno, Nevada) $ 68,542 $87,150
Elgin Riverboat Resort (50%)
(Grand Victoria, Elgin, Illinois) 37,674 40,780
Victoria Partners (50%)
(Monte Carlo, Las Vegas, Nevada) 132,746 137,065
------- -------
$238,962 $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>
Six Months
Ended June 30,
--------------------
2000 1999
------- ------
<S> <C> <C>
Revenues $426,145 $357,724
Expenses 310,738 290,645
Operating income 115,407 67,079
Net income 105,872 56,584
</TABLE>
Included in the above are revenues of the Grand Victoria of $198,057
and $140,385 for the six months ended June 30, 2000 and 1999. The property's
operating margin during those periods was 30% and 24%, 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).
15
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(All information for the three and six months ended July 31, 2000 and 1999 is
unaudited.)
(8) Commitments and contingent liabilities (continued) -
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 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
16
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(All information for the three and six months ended July 31, 2000 and 1999 is
unaudited.)
(8) Commitments and contingent liabilities (continued) -
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.
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.
17
<PAGE>
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 quarter ended July 31, 2000, we reported net income of $38.1 million, or
$.48 per diluted share, versus $23.6 million, or $.26 per diluted share, for the
same quarter last year. For the six months, net income was $86.9 million, or
$1.06 per diluted share, compared to $18.8 million, or $.20 per diluted share,
in the prior year.
The increases in earnings per share were due primarily to strong operating
results at all of our major properties, most notably our south Las Vegas Strip
properties and Grand Victoria in Elgin, Illinois (a 50%-owned joint venture).
The contribution from MotorCity Casino (a 53.5%-owned joint venture which opened
December 14, 1999 in Detroit, Michigan) was also a factor.
For the second quarter, current year results include preopening expenses of $1.6
million ($.01 per diluted share) related primarily to our new aquarium
attraction, the Shark Reef at Mandalay Bay (which opened June 20), while prior
year results include preopening expenses of $4.3 million ($.03 per diluted
share) related primarily to MotorCity Casino.
For the six months, current year results include preopening expenses of $1.8
million ($.01 per diluted share) related primarily to the Shark Reef at Mandalay
Bay, while prior year results include preopening expenses of $71.7 million ($.51
per diluted share) related primarily to Mandalay Bay and MotorCity Casino
(including the write-off of $33.8 million of previously capitalized preopening
costs).
REVENUES
Revenues increased $131.2 million, or 25%, for the three months ended July 31,
2000, and $299.6 million, or 30%, for the six months, versus the corresponding
periods last year. All of our major wholly owned and joint venture properties
generated higher revenues during the quarter and six months. On a same store
basis, we experienced increases in all major revenue categories, most notably
hotel and casino revenues.
The overall increase was attributable primarily to MotorCity Casino, which
produced $86.8 million in revenues in the quarter and $165.4 million in the six
months, and to Mandalay Bay, whose revenues increased $20.2 million, or 18%, for
the quarter and
18
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited)
(continued)
$77.6 million, or 40%, for the six months. Other significant contributors were
Luxor (up $7.8 million, or 9%, for the quarter, and $17.0 million, or 9%, for
the six months), Excalibur (up $7.4 million, or 10%, for the quarter, and $12.7
million, or 9%, for the six months) and Circus Circus-Las Vegas (up $4.0
million, or 6%, for the quarter, and $6.7 million, or 5%, for the six months).
Meanwhile, the contribution from the 50%-owned Grand Victoria also rose (up $4.1
million, or 39%, for the quarter and $10.4 million, or 54%, for the six months).
The increases in revenues at Mandalay Bay, Luxor, Excalibur and Circus
Circus-Las Vegas were driven by increases in the number of visitors to Las
Vegas. For the six months, Mandalay Bay also benefitted from an additional month
of operations versus the prior year, when it opened March 2, 1999. Meanwhile,
Grand Victoria benefitted from dockside gaming operations this year versus
cruising operations throughout most of the prior year periods.
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 six months ended July 31, 2000, income from operations rose
$40.8 million, or 52%, and $109.2 million, or 77%, compared to the same periods
a year ago. Income from operations was negatively impacted by preopening
expenses of $1.6 million and $1.8 million in the three and six months ended July
31, 2000, and $4.3 million and $37.9 million in the same periods last year. The
composite operating margin was 18.5% and 19.5% for the three and six months
ended July 31, 2000 versus 15.3% and 14.3% for the comparable periods in the
prior year. A discussion of operating results by market follows.
LAS VEGAS
Our Las Vegas properties posted an overall increase in operating income of $20.4
million, or 38%, during the second quarter, and $63.2 million, or 66%, for the
six months. At Mandalay Bay operating income increased $7.3 million in the
second quarter and $36.8 million for the six months. The increases at Mandalay
Bay (as well as our Las Vegas properties as a whole) were impacted by
19
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited)
(continued)
preopening expenses of $1.6 million and $1.8 million for the three and six
months in the current year, compared to $30.8 million in the six months last
year.
Excalibur was a strong contributor with operating income rising $5.6 million, or
35%, in the quarter, and $10.5 million, or 30%, in the six months. Luxor was
also a significant contributor, producing increases of $3.1 million, or 18%, and
$9.5 million, or 25%, in the three and six months. Moreover, operating income at
Circus Circus-Las Vegas rose $2.3 million, or 20%, and $3.2 million, or 14%, in
the three and six month periods, while Monte Carlo's contribution to operating
income rose $1.4 million, or 19%, and $2.0 million, or 12%.
The strong year-over-year increases in operating income at our Las Vegas
properties were driven by an uptrend in the number of visitors to the Las Vegas
Strip. In the second quarter, revenue per available room (REVPAR) rose an
average $13 at our Strip properties, led by Mandalay Bay, whose average room
rate increased 25% to $143, with occupancy rising seven percentage points to
93%. For the year-to-date period, REVPAR at our Strip properties was up an
average of $11.
RENO
In Reno, our combined operating income (Circus Circus-Reno plus our 50% interest
in Silver Legacy) was flat for the second quarter compared against the prior
year, and was up 18% for the six months. In the prior year we recorded
approximately two-thirds of Silver Legacy's operating income as a priority
return on our investment. This priority return is not in effect in the current
year and, consequently, we recorded 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 six
months ended July 31, 2000 would have reflected increases of 18% and 42% from
the prior year. Both Circus Circus-Reno and Silver Legacy posted REVPAR
increases, as well as increases in casino revenue. Reno hosts national bowling
tournaments two out of every three years, and this year the city hosted the
women's national tournament (March through July), while it did not host a
tournament in the prior year.
20
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited)
(continued)
LAUGHLIN
Our two Laughlin properties, Colorado Belle and Edgewater, posted a combined
increase in operating income of 3% in the second quarter and 8% in the six
months. This market has been on a general uptrend over the past few years, as
visitor counts to Laughlin have increased. While these properties experienced
slight increases in REVPAR, the increases in operating income were driven
primarily by lower expenses, stemming from tighter cost controls.
OTHER MARKETS
Our newest property, MotorCity Casino in Detroit, Michigan, delivered operating
income of $13.7 million and $24.7 million in the three and six months ended July
31, 2000. See "Financial Position and Capital Resources" for additional details
regarding our Detroit operation.
In Tunica County, Mississippi, operating income at Gold Strike rose 17% in the
quarter, and 23% year-to-date. Casino revenues grew 10% in the quarter and the
six months, as this property continued to increase its market share.
Our share of income from operations at Grand Victoria (a 50%- owned riverboat
casino in Elgin, Illinois) reflected a $4.1 million increase in the second
quarter and a $10.5 million increase for the six months. The current year
periods have benefitted from dockside gaming compared against cruising
operations for much of the prior-year periods. Dockside gaming was approved in
late June 1999.
INTEREST EXPENSE
For the three and six months ended July 31, 2000, interest expense (excluding
unconsolidated joint venture interest expense and before capitalized interest)
rose $12.2 million and $22.2 million versus the prior year periods. The increase
was due primarily to higher average borrowings (approximately $2.8 billion in
the current quarter and six months against approximately $2.5 billion in the
same periods last year) related to the purchase of approximately 14.4 million
shares of our common stock during the current year and $135 million in
borrowings associated with MotorCity Casino, which is consolidated for financial
reporting purposes. Capitalized
21
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited)
(continued)
interest was $1.3 million and $3.0 million for the three and six months ended
July 31, 2000 versus $1.8 million and $9.5 million a year ago. Long-term debt at
July 31, 2000 stood at $2.8 billion compared to nearly $2.5 billion at July 31,
1999.
We also recorded interest expense related to unconsolidated joint venture
projects of $2.8 million and $5.5 million in the quarter and six months ended
July 31, 2000 compared to $2.8 million and $5.6 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 37.5% for the three and six months
ended July 31, 2000 compared with 34.8% and 37.1% 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 $122.5 million at July 31, 2000,
representing normal daily operating requirements. For the six months ended July
31, 2000, net cash provided by operations was $258.1 million versus $115.2
million in the same period a year ago. The increase was driven primarily by
improved operating results as discussed previously.
Cash flow from operations (EBITDA), was $176.4 million and $361.7 million for
the three and six months ended July 31, 2000 versus $127.8 million and $233.5
million for the same periods last year. EDITDA was negatively impacted by
preopening expenses of $1.6 million and $1.8 million for the three and six
months ended July 31, 2000, and $4.3 million and $37.9 million for the
comparable periods last year. In this context, EBITDA is defined as income from
operations plus depreciation and amortization, and is being 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.
During the six months ended July 31, 2000, we purchased 14.4 million shares of
common stock at a cost of $242.7 million. We used our cash flow to fund a
portion of this cost. See "Liquidity" for further discussion of our share
repurchase
22
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited)
(continued)
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 six months ended July 31, 2000 were
$30.6 million and $63.2 million, of which $7.8 million and $22.4 million related
to the Shark Reef at Mandalay Bay, our new saltwater aquarium attraction which
opened June 20, 2000, and $3.6 million and $3.8 million related to the
renovation of a portion of the pyramid rooms at Luxor.
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 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 which will be
cross-marketed to guests at our existing and future hotel/casinos within this
resort development. 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, all of which had been incurred as of July 31, 2000. We may add
other core components to our development plan for Masterplan Mile in the future.
23
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited)
(continued)
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 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.
24
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Unaudited) (continued)
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.
Our Detroit joint venture, together with MGM Grand Detroit LLC, is
currently negotiating a collective bargaining agreement with the Detroit Casino
Council, a consortium of unions representing a number of the two companies'
Detroit employees. The joint venture has been advised that the Detroit Casino
Council has scheduled an employee meeting to seek an authorization from the
employees to advise management that the employees are willing to strike or take
other economic action in the event that a collective bargaining agreement is not
reached. Negotiations are ongoing and we can give no assurance either that a
contract will be reached or, if reached, will be ratified, or what actions may
be taken if a contract is not ratified (which actions could include a strike,
picketing, and/or temporary or permanent cessation of casino operations).
MISSISSIPPI GULF COAST
We have announced that we plan to develop a hotel-casino resort on the
Mississippi Gulf Coast at the north end of the Bay of St. Louis, near the
DeLisle exit on Interstate 10. It is currently anticipated that the resort will
include as many as 1,500 hotel rooms and require an investment of approximately
$225 million. Certain of the approvals to commence development which we had
previously received have been successfully challenged in federal court. We will
not commence the design and construction of this resort prior to a satisfactory
resolution of all legal actions and our receipt of all necessary permits and
approvals. As presently contemplated, we will own 90% of the resort and a
partner will contribute the land in exchange for the remaining 10% interest.
25
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Unaudited) (continued)
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 July 31, 2000, under our most restrictive loan
covenant, we could issue additional debt of approximately $665 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 the outstanding shares of common stock,
as market conditions and other factors warrant. As of the date hereof, we have
purchased approximately 1.8 million shares pursuant to this authorization at a
cost of approximately $39.1 million. Pursuant to this authorization, we have
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. These agreements further provide that we will
purchase these shares from Bank of America at its cost (plus accrued fees) one
year following completion of the acquisition of the stock by Bank of America. We
may terminate Bank of America's acquisition of stock pursuant to these
agreements at any time. Although our current intention is to purchase the shares
at completion of the agreement, 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).
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," "anticipate," "estimate,"
"intend,"
26
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Unaudited) (continued)
"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.
27
<PAGE>
MANDALAY RESORT GROUP AND SUBSIDIARIES
Item 3. Quantitative and Qualitative Disclosures About Market Risks
As of July 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.
28
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The 2000 Annual Meeting of our stockholders was held on June 15, 2000.
At the meeting, management's nominees, Michael S. Ensign, Glenn W. Schaeffer and
Michael D. McKee, were elected to fill the three available positions as
directors of Mandalay Resort Group. Voting (expressed in number of shares) was
as follows: Mr. Ensign 70,460,719 for, 1,129,211 against or withheld and no
abstentions or broker non-votes; Mr. Schaeffer 70,471,727 for, 1,118,203 against
or withheld and no abstentions or broker non-votes; and Mr. McKee 70,466,820
for, 1,123,110 against or withheld and no abstentions or broker non-votes.
At the meeting, stockholders approved the Mandalay Resort Group 2000
Executive Officers' Bonus Plan by a vote of 68,484,852 shares for, 2,969,126
shares against or withheld and 135,952 abstentions or broker non-votes.
At the meeting, stockholders approved the Mandalay Resort Group 2000
Stock Incentive Plan by a vote of 65,120,393 shares for, 6,347,757 shares
against or withheld and 121,780 abstentions or broker non-votes.
At the meeting, stockholders ratified the appointment of Arthur
Andersen LLP as our independent auditors to examine and report on our financial
statements for the fiscal year ending January 31, 2001, by vote of 70,733,865
shares for, 772,560 shares against or withheld and 83,505 abstentions or broker
non-votes.
29
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this report:
<TABLE>
<S> <C>
4(a). Indenture dated as of July 24, 2000 by and between the
Company and The Bank of New York with respect to $500
million aggregate principal amount of 10 1/4% Senior
Subordinated Notes due 2007. (Incorporated by reference to
Exhibit 4.1 to the Company's Form S-4 Registration Statement
No. 333-44216.)
4(b). Registration Rights Agreement dated as of July 24, 2000 by
and among the Company and Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Banc of America
Securities LLC, Donaldson, Lufkin & Jenrette Securities
Corporation, Deutsche Bank Securities Inc., Commerzbank
Capital Markets Corporation, Credit Suisse First Boston
Corporation, Wasserstein Perella Securities, Inc.,
FleetBoston Robertson Stephens Inc., and SG Cowen Securities
Corporation. (Incorporated by reference to Exhibit 4.2 to
the Company's Form S-4 Registration Statement No.
333-44216.)
4(c). Indenture dated as of August 16, 2000 by and between the
Company and The Bank of New York, with respect to $200
million aggregate principal amount of 9 1/2% Senior Notes
due 2008. (Incorporated by reference to Exhibit 4.1 to the
Company's Form S-4 Registration Statement No. 333-44838.)
4(d). Registration Rights Agreement dated as of August 16, 2000 by
and among the Company and Banc of America Securities LLC,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche
Bank Securities Inc., Salomon Smith Barney Inc., Credit
Lyonnais Securities (USA) Inc., J. P. Morgan Securities Inc.
and Commerzbank Capital Markets Corporation. (Incorporated
by reference to Exhibit 4.2 to the Company's Form S-4
Registration Statement No. 333-44838.)
4(e). Interest Rate Cap Agreement dated June 14, 2000, between the
Registrant and Morgan Guaranty Trust Company of New York.
4(f). Interest Rate Cap Agreement dated June 29, 2000, between the
Registrant and Morgan Guaranty Trust Company of New York.
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
10(a). Stock Purchase Agreement dated as of September 8, 2000 among
the Company, Bank of America, N.A. and MBG Trust.
10(b). Collateral Agreement dated as of September 8, 2000 among the
Company, Bank of America, N.A., MBG Trust and Banc of
America Securities LLC.
10(c). Amended and Restated Trust Agreement dated as of September
8, 2000 between NMS Services (Cayman), Inc. and Wilmington
Trust Company.
10(d). Amendment No. 1 to the Loan Agreement dated June 30, 1999
among Detroit Entertainment, L.L.C., the Banks named therein
and Bank of America National Trust and Savings Association,
as administrative agent for the Banks.
27. Financial Data Schedule for the six months ended July 31,
2000 as required under EDGAR.
</TABLE>
(b) REPORTS ON FORM 8-K. During the period covered by this report, the
Company filed two reports on Form 8-K dated July 19, 2000 and August 9, 2000.
These Form 8-Ks reported information under Item 5.
31
<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.
MANDALAY RESORT GROUP
-----------------------------------------
(Registrant)
Date: September 14, 2000 By GLENN SCHAEFFER
-----------------------------------------
Glenn Schaeffer
President, Chief Financial
Officer and Treasurer
32
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
4(a). Indenture dated as of July 24, 2000 by and between the Company
and The Bank of New York with respect to $500 million
aggregate principal amount of 10 1/4% Senior Subordinated
Notes due 2007. (Incorporated by reference to Exhibit 4.1 to
the Company's Form S-4 Registration Statement No. 333-44216.)
4(b). Registration Rights Agreement dated as of July 24, 2000
by and among the Company and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Banc of America Securities LLC, Donaldson, Lufkin &
Jenrette Securities Corporation, Deutsche Bank
Securities Inc., Commerzbank Capital Markets
Corporation, Credit Suisse First Boston Corporation,
Wasserstein Perella Securities, Inc., FleetBoston
Robertson Stephens Inc., and SG Cowen Securities
Corporation. (Incorporated by reference to Exhibit 4.2
to the Company's Form S-4 Registration Statement No.
333-44216.)
4(c). Indenture dated as of August 16, 2000 by and between the
Company and The Bank of New York, with respect to $200 million
aggregate principal amount of 9 1/2% Senior Notes due 2008.
(Incorporated by reference to Exhibit 4.1 to the Company's
Form S-4 Registration Statement No. 333-44838.)
4(d). Registration Rights Agreement dated as of August 16,
2000 by and among the Company and Banc of America
Securities LLC, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Deutsche Bank Securities Inc., Salomon
Smith Barney Inc., Credit Lyonnais Securities (USA)
Inc., J. P. Morgan Securities Inc. and Commerzbank
Capital Markets Corporation. (Incorporated by
reference to Exhibit 4.2 to the Company's Form S-4
Registration Statement No. 333-44838.)
4(e). Interest Rate Cap Agreement dated June 14, 2000,
between the Registrant and Morgan Guaranty Trust
Company of New York.
4(f). Interest Rate Cap Agreement dated June 29, 2000,
between the Registrant and Morgan Guaranty Trust
Company of New York.
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<CAPTION>
Exhibit
No. Description
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<S> <C>
10(a). Stock Purchase Agreement dated as of September 8, 2000 among
the Company, Bank of America, N.A. and MBG Trust.
10(b). Collateral Agreement dated as of September 8, 2000 among the
Company, Bank of America, N.A., MBG Trust and Banc of America
Securities LLC.
10(c). Amended and Restated Trust Agreement dated as of September 8,
2000 between NMS Services (Cayman), Inc.
and Wilmington Trust Company.
10(d). Amendment No. 1 to the Loan Agreement dated June 30, 1999
among Detroit Entertainment, L.L.C., the Banks named therein
and Bank of America National Trust and Savings Association, as
administrative agent for the Banks.
27. Financial Data Schedule for the six months ended July 31, 2000
as required under EDGAR.
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