<PAGE>
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 MARCH 31, 1994
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[_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from - to -
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Commission File Number: 0-16760
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MGM GRAND, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 88-0215232
- - ------------------------------------ --------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3799 Las Vegas Boulevard South, Las Vegas, Nevada 89109
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(702) 891-3333
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [_] 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 May 2, 1994
- - --------------------------------- ---------------------------------------
Common Stock, $.01 par value 48,181,331 shares
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
FORM 10-Q
I N D E X
Page No.
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations for the three months ended
March 31, 1994 and March 31, 1993.......... 1
Condensed Consolidated Balance Sheets
at March 31, 1994 and December 31, 1993.... 2
Condensed Consolidated Statements of
Cash Flows for the three months ended
March 31, 1994 and March 31, 1993.......... 3
Notes to Condensed Consolidated Financial
Statements................................. 4-8
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations................................. 9-11
Part II. OTHER INFORMATION.......................... 12
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
March 31, March 31,
1994 1993
-------- --------
<S> <C> <C>
REVENUES:
Casino................................ $106,154 $ -
Rooms................................. 25,546 -
Food and beverage..................... 15,470 -
Other hotel/casino.................... 27,788 -
Airline............................... 3,902 4,938
-------- -------
178,860 4,938
-------- -------
EXPENSES:
Casino................................ 47,203 -
Rooms................................. 10,419 -
Food and beverage..................... 16,135 -
Other hotel/casino.................... 29,066 -
Airline............................... 3,576 4,894
Selling, general and administrative... 43,886 1,945
Depreciation and amortization......... 10,896 1,609
-------- -------
161,181 8,448
-------- -------
OPERATING INCOME (LOSS)............. 17,679 (3,510)
-------- -------
NONOPERATING INCOME (EXPENSE):
Interest income....................... 1,127 4,374
Interest expense, net of amounts
capitalized......................... (15,435) (3,589)
Other, net............................ (17) (17)
-------- -------
(14,325) 768
-------- -------
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES................................. 3,354 (2,742)
Provision (benefit) for income taxes.. - -
-------- -------
NET INCOME (LOSS)................... $ 3,354 $(2,742)
======== =======
PER SHARE OF COMMON STOCK:
NET INCOME (LOSS)................... $ .07 $ (.06)
======== =======
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
-1-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1994 1993
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................. $ 141,126 $ 211,305
Accounts receivable, net.................. 48,591 30,516
Prepaid expenses.......................... 10,426 11,755
Inventories............................... 15,275 12,662
----------- -----------
Total current assets................... 215,418 266,238
----------- -----------
PROPERTY AND EQUIPMENT, NET................. 860,557 867,284
----------- -----------
OTHER ASSETS:
Deposits.................................. 1,719 1,330
Licensed rights and trademarks, net....... 1,145 1,154
Deferred organizational costs, net........ 1,813 1,985
Other assets, net......................... 23,395 22,132
----------- -----------
Total other assets..................... 28,072 26,601
----------- -----------
$ 1,104,047 $ 1,160,123
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................... $ 22,906 $ 14,181
Current obligation, capital leases........ 1,958 1,830
Current maturities, long term debt........ 604 1,573
Accrued interest on long term debt........ 23,696 9,472
Construction payables..................... 37,188 96,844
Other accrued liabilities................. 32,950 41,696
----------- -----------
Total current liabilities.............. 119,302 165,596
----------- -----------
DEFERRED REVENUE............................ 10,669 10,784
DEFERRED INCOME TAXES....................... 6,517 6,517
LONG TERM OBLIGATION, CAPITAL LEASES........ 14,216 14,044
LONG TERM DEBT, NET OF CURRENT MATURITIES... 482,348 481,427
COMMITMENTS.................................
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value,
75,000,000 shares authorized,
50,609,537 and 50,579,537 shares
issued)................................ 506 506
Capital in excess of par value............ 662,709 662,365
Common stock in treasury (2,195,306 and
1,734,706 shares)...................... (43,948) (29,490)
Retained earnings (deficit)............... (148,272) (151,626)
----------- -----------
Total stockholders' equity............. 470,995 481,755
----------- -----------
$ 1,104,047 $ 1,160,123
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
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<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
March 31, March 31,
1994 1993
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................... $ 3,354 $ (2,742)
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Depreciation and amortization.......... 10,896 1,649
Amortization of debt offering costs.... 753 672
Aircraft overhaul amortization......... 11 560
Provision for losses on accounts
receivable........................... 10,480 -
Change in assets and liabilities:
Accounts receivable.................. (28,555) (24)
Prepaid expenses..................... 1,329 (271)
Inventories.......................... (2,613) 3
Accounts payable, accrued
liabilities, and other............. 14,088 11,311
Deferred income taxes................ - (101)
--------- ---------
Net cash from operating activities... 9,743 11,057
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........ (4,072) (83,303)
Change in construction payables............ (59,656) (15,870)
Deposits and other assets.................. (2,332) (3,916)
--------- ---------
Net cash from investing activities... (66,060) (103,089)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock................... 344 -
Repurchase of common stock................. (14,458) -
Payments on long term debt and capital
leases................................... 252 -
--------- ---------
Net cash from financing activities... (13,862) -
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ (70,179) (92,032)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD..................................... 211,305 579,963
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD... $ 141,126 $ 487,931
========= =========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
-3-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Basis of Presentation
MGM Grand, Inc. (the "Company") is a Delaware corporation, incorporated on
January 29, 1986. As of March 31, 1994, approximately 73.6% of the outstanding
shares of the Company's common stock were owned by Kirk Kerkorian and Tracinda
Corporation ("Tracinda"), a Nevada corporation wholly-owned by Kirk Kerkorian.
Through its wholly-owned subsidiary, MGM Grand Hotel, Inc., the Company
owns and operates the MGM Grand Hotel, Casino and Theme Park, a hotel/casino and
entertainment complex in Las Vegas. The MGM Grand Hotel, Casino and Theme Park
commenced operations on December 18, 1993.
Through its wholly-owned subsidiary, MGM Grand Air, Inc., the Company
engages in the luxury charter airline business.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto in the 1993 Annual Report included in Form 10-K.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position
as of March 31, 1994, and the results of operations for the three month period
ended. The results of operations for such period are not necessarily indicative
of the results to be expected for the full year.
Certain reclassifications have been made to prior period financial
statements to conform with the 1994 presentation.
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<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Statements of Cash Flows
For the three months ended March 31, 1994 and March 31, 1993, cash payments
made for interest were $416,000 and $816,000, respectively. Capitalized interest
for the first quarter of 1993 was $11,180,000.
Cash payments made for state and federal taxes for the three months ended
March 31, 1994 and March 31, 1993 were $30,000 and $51,000 respectively.
Note 3. Stock Offering
On August 17, 1993, the Company completed a common stock public offering.
Total common stock issued at completion of the offering was 1,955,000 shares at
a price of $37.75 per share, resulting in net proceeds of approximately
$70,600,000. The Company intends to use such funds for general corporate
purposes, including possible additions to the MGM Grand Hotel, Casino and Theme
Park and the exploration of other expansion opportunities.
Note 4. Treasury Stock
On March 9, 1994, the Company announced that it intends to acquire in open
market purchases, from time to time, as many as one million shares of its common
stock. Through March 31, 1994 and May 2, 1994, the Company had acquired 460,600
and 693,500 shares respectively.
-5-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 5. Long Term Debt
On June 6, 1993, Grand Laundry, Inc., a wholly-owned subsidiary of the
Company, obtained a $10,000,000 loan from a financial institution for a laundry
facility in North Las Vegas, Nevada. As of December 31, 1993, $10,000,000 had
been drawn down under the loan. Construction of the facility was completed in
December, 1993. The Laundry provides the laundry and dry cleaning services for
the MGM Grand Hotel.
Long term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
--------- -----------
<S> <C> <C>
11 3/4% First Mortgage Notes due May 1, 1999 $220,000 $220,000
12% First Mortgage Notes due May 1, 2002 253,000 253,000
Laundry Facility Loan 9,952 10,000
-------- --------
482,952 483,000
Less: Current Maturities (604) (1,573)
-------- --------
$482,348 $481,427
======== ========
</TABLE>
Total interest incurred for the first three months of 1994 and 1993 was
$15,435,000 and $14,869,000, of which $11,280,000 was capitalized during the
1993 period. Interest was not capitalized during the 1994 period as a result of
completion of construction and commencement of operations of the MGM Grand
Hotel, Casino and Theme Park.
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<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6. Income Taxes
The Company adopted Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes" ("SFAS 109") effective January 1, 1993. The impact
of adopting this new standard was not material to the consolidated financial
statements of the Company for 1993.
SFAS 109 requires the recognition of deferred tax assets, net of applicable
reserves, related to net operating loss carryforwards and certain temporary
differences. The standard requires recognition of a deferred tax asset to the
extent that realization of such asset is more likely than not. Otherwise, a
valuation allowance is applied. As of March 31, 1994, the Company determined
that $50,061,000 of deferred tax assets did not satisfy the recognition criteria
set forth in the standard because of the Company's prior operating results.
Accordingly, a valuation allowance was recorded to reserve for the applicable
deferred tax assets.
The provision (benefit) for income taxes for the three months ended March
31, 1994 and 1993 is as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
------------------------
1994 1993
--------- ---------
<S> <C> <C>
Current:
Federal...................................... $ - $ -
State........................................ - -
--------- ---------
- -
--------- ---------
Deferred:
Provision for income taxes................... 1,174 -
Reduction in valuation allowance............. (1,174) -
--------- ---------
- -
--------- ---------
Total.......................................... $ - $ -
========= =========
</TABLE>
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<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reconciliation of the Federal income tax rate and the Company's effective
tax rate is as follows:
<TABLE>
<CAPTION>
March 31,
--------------------
1994 1993
-------- --------
<S> <C> <C>
Federal income tax rate 35% 35%
Net operating loss--no benefit recorded -- (35)
Reduction in valuation allowance (35) --
-------- --------
Effective tax rate --% --%
======== ========
</TABLE>
As of March 31, 1994, after having given effect to SFAS 109, the major tax
effected components of the Company's net deferred tax liability is as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
DEFERRED TAX ASSETS $ 75,411
Less: Valuation allowance (50,061)
________
Net deferred tax assets 25,350
DEFERRED TAX LIABILITIES (31,867)
--------
NET DEFERRED TAX LIABILITY $ (6,517)
=========
</TABLE>
At March 31, 1994, the Company had a net operating loss carryforward for
tax purposes of approximately $76,600,000.
Note 7. Earnings (Loss) per Share
Primary and fully diluted earnings (loss) per share has been computed based
on the weighted average number of shares of common stock and common stock
equivalents, if dilutive,outstanding during each period (49,713,907 and
46,803,271 shares for the three month periods ended March 31, 1994 and March 31,
1993).
-8-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operation
The Company operates in two industry segments--the operations of the MGM
Grand Hotel, Casino and Theme Park and MGM Grand Air. The Company commenced
operations of the MGM Grand Hotel, Casino and Theme Park on December 18, 1993.
Prior thereto, the Company was in the construction phase with regard to the
hotel/casino industry segment.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1994 1993
------- -------
(In thousands)
<S> <C> <C>
Operating revenues:
Hotel, Casino and Theme Park.................. $174,958 $ --
Airline....................................... 4,144 4,938
Eliminations.................................. (242) --
-------- -------
$178,860 $ 4,938
======== =======
Operating income (loss):
Hotel/Casino.................................. $ 19,307 $ --
Airline....................................... (280) (2,325)
Corporate expenses............................ (1,348) (1,185)
-------- -------
17,679 (3,510)
Interest income................................... 1,127 4,374
Interest expense.................................. (15,435) (3,589)
Other, net........................................ (17) (17)
Provision (benefit) for income taxes.............. -- --
-------- -------
Net income (loss)................................. $ 3,354 $(2,742)
======== =======
</TABLE>
-9-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
Quarter versus Quarter
Results of Operations
MGM Grand Hotel net revenues for the three months ended March 31, 1994 were
$174,958,000. Casino revenues for the period were $106,154,000 with a table
games win percentage of 20.4%. Room revenue for the period was $25,546,000 with
an occupancy rate of 85%. The occupancy rate was affected by the partial
availability of hotel rooms during January 1994. During February and March, 1994
occupancy rates increased to 91% and 95%, respectively. Operating expenses were
$155,651,000, resulting in operating income of $19,307,000 for the start-up
quarter ended March 31, 1994.
MGM Grand Air revenues for the first quarter of 1994 were $4,144,000 before
eliminations, compared to $4,938,000 for the first quarter of 1993, representing
a decrease of $794,000 (16%). Revenues were lower than in 1993 due to the
termination of a tour program unrelated to its present upscale charter service.
Operating expenses decreased $2,840,000 (39%) due to a $1,553,000 reduction in
depreciation expense resulting from the 1993 aircraft carrying value adjustment,
and a 28% reduction in block hours flown. The operating loss of $280,000 in 1994
compares to an operating loss of $2,325,000 in 1993.
Corporate expenses were $1,348,000 in the first quarter of 1994 compared to
$1,185,000 in the same period last year.
Interest Income was $1,127,000 for the first quarter of 1994 versus
$4,374,000 for the 1993 quarter. Interest income was higher during the 1993
period as a result of short term investment of construction funds.
Interest expense was $15,435,000 for the first quarter of 1994, compared to
$3,589,000 in 1993 which was net of capitalized interest of $11,280,000.
-10-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
Liquidity and Capital Resources --
As of March 31, 1994 and December 31, 1993, the Company held cash and cash
equivalents of $141,126,000 and $211,305,000, respectively. Cash provided by
operating activities for the first three months of 1994 was $9,743,000 versus
$11,057,000 for the first three months of 1993.
Capital expenditures during the first three months of 1994, other than
payments on construction payables of $59,656,000 for the quarter, were
approximately $4,072,000 consisting primarily of $2,824,000 for expenditures
related to the MGM Grand Hotel and Theme Park, $1,201,000 for aircraft parts and
refurbishment, and $47,000 related to furniture, fixtures and equipment.
In addition to final construction expenditures of $37,188,000 accrued at
March 31, 1994, expenditures for 1994 are expected to be up to $19,855,000,
consisting of $15,000,000 at the MGM Grand Hotel and Theme Park for general
property improvements, and $4,855,000 for aircraft refurbishment by MGM Grand
Air, including airframe and engine overhauls and spare parts.
The Company expects to finance operations and capital expenditures through
cash flow from operations, cash on hand, and the bank line of credit.
The Company does not currently provide any post retirement benefits.
Accordingly, the Statement of Financial Accounting Standards No. 106 will have
no effect on the Company's financial position.
-11-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
None of the items 1 through 5 of Part II are applicable.
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.
MGM GRAND, INC.
------------------------------
(Registrant)
Date: May 4, 1994 JOSEPH T. MURPHY
------------------------------
Joseph T. Murphy
Vice President
and Chief Financial Officer
(principal financial
and accounting officer)
Date: May 4, 1994 SCOTT LANGSNER
------------------------------
Scott Langsner
Secretary/Treasurer
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