<PAGE>
UNITED STATES
SECURITIES & 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 JUNE 30, 1995
------------------------------------------------
[_] 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: 0-16760
-------------------------------------------------------
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
- -------------------------------------------------------------------------------
(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. [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 August 4, 1995
- -------------------------------- --------------------------------------
Common Stock, $.01 par value 48,140,911 shares
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
Page No.
--------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations for the three months and
six months ended June 30, 1995 and
June 30, 1994 .............................................. 1
Condensed Consolidated Balance Sheets
at June 30, 1995 and December 31, 1994...................... 2
Condensed Consolidated Statements of
Cash Flows for the six months ended
June 30, 1995 and June 30, 1994 ............................ 3
Notes to Condensed Consolidated Financial Statements........ 4-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 9-13
PART II. OTHER INFORMATION .......................................... 13-14
Signatures.................................................. 15
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Casino $ 85,879 $108,049 $177,205 $214,203
Rooms 40,493 36,221 79,384 66,751
Food and beverage 24,080 23,107 46,874 45,444
Entertainment, retail and other 32,360 32,233 55,010 60,568
-------- -------- -------- --------
182,812 199,610 358,473 386,966
Less: promotional allowances (14,415) (12,764) (28,191) (25,162)
-------- -------- -------- --------
168,397 186,846 330,282 361,804
-------- -------- -------- --------
EXPENSES:
Casino 47,296 48,434 97,028 95,637
Rooms 11,658 11,197 22,482 22,504
Food and beverage 15,386 17,576 30,098 33,800
Entertainment, retail and other 25,183 28,134 44,192 58,570
Provision for doubtful accounts and discounts 19,070 7,107 27,245 17,587
General and administrative 24,447 26,400 48,975 55,320
Depreciation and amortization 13,963 11,628 26,559 22,481
-------- -------- -------- --------
157,003 150,476 296,579 305,899
-------- -------- -------- --------
OPERATING PROFIT BEFORE CORPORATE EXPENSE 11,394 36,370 33,703 55,905
CORPORATE EXPENSE (2,714) (1,944) (4,716) (3,278)
-------- -------- -------- --------
OPERATING INCOME 8,680 34,426 28,987 52,627
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest income 442 1,010 990 2,137
Interest expense (15,784) (15,416) (31,114) (30,851)
Other, net 25 238 25 221
-------- -------- -------- --------
(15,317) (14,168) (30,099) (28,493)
-------- -------- -------- --------
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS (6,637) 20,258 (1,112) 24,134
DISCONTINUED OPERATIONS:
(Loss) from discontinued operations - (63) - (585)
-------- -------- -------- --------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (6,637) 20,195 (1,112) 23,549
Provision for income taxes - - - -
-------- -------- -------- --------
NET INCOME (LOSS) $ (6,637) $ 20,195 $ (1,112) $ 23,549
======== ======== ======== ========
PER SHARE OF COMMON STOCK:
Income (loss) before discontinued operations $ (.14) $ .41 $ (.02) $ .49
Loss from discontinued operations - - - (.01)
-------- -------- -------- --------
Net income (loss) $ (.14) $ .41 $ (.02) $ .48
======== ======== ======== ========
Weighted average shares outstanding (000's) 48,063 48,891 48,000 49,286
======== ======== ======== ========
</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 PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 45,320 $ 75,859
Accounts receivable, net 56,776 82,674
Prepaid expenses 13,473 13,431
Inventories 16,114 17,236
Note receivable 4,657 14,325
---------- ----------
Total current assets 136,340 203,525
---------- ----------
PROPERTY AND EQUIPMENT, NET 869,663 880,023
OTHER ASSETS:
Investments in unconsolidated affiliates 49,787 10,815
Deposits 17,271 2,434
Licensed rights and trademarks, net 1,103 1,120
Deferred organizational costs, net 1,208 1,375
Other assets, net 50,588 41,461
---------- ----------
Total other assets 119,957 57,205
---------- ----------
$1,125,960 $1,140,753
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,470 $ 25,202
Current obligation, capital leases 2,162 2,145
Note payable 15,000 -
Accrued interest on long term debt 9,418 9,429
Other accrued liabilities 58,949 74,597
---------- ----------
Total current liabilities 95,999 111,373
---------- ----------
DEFERRED REVENUES 8,885 8,505
DEFERRED INCOME TAXES 5,942 5,942
LONG TERM OBLIGATION, CAPITAL LEASES 11,495 12,554
LONG TERM DEBT 473,000 473,000
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value,
75,000,000 shares authorized,
48,140,911 and 50,651,016 shares
issued) 481 507
Capital in excess of par value 608,320 663,186
Common stock in treasury (2,726,506 shares) - (57,264)
Retained earnings (deficit) (78,162) (77,050)
---------- ----------
Total stockholders' equity 530,639 529,379
---------- ----------
$1,125,960 $1,140,753
========== ==========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
-2-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,112) $ 23,549
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization 26,559 22,848
Amortization of debt offering costs 1,660 1,456
Provision for doubtful accounts and discounts 27,245 17,587
Change in assets and liabilities:
Accounts receivable (1,347) (34,317)
Prepaid expenses (42) (1,096)
Inventories 580 (2,826)
Accounts payable, accrued liabilities and other (30,172) 5,956
-------- --------
Net cash from operating activities 23,371 33,157
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (14,914) (83,375)
Dispositions of property and equipment 135 292
Payments received on note receivable 9,668 -
Deposits and other assets (66,171) (6,585)
-------- --------
Net cash from investing activities (71,282) (89,668)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under bank line of credit 15,000 -
Issuance of common stock 2,372 344
Repurchase of common stock - (24,422)
-------- --------
Net cash from financing activities 17,372 (24,078)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (30,539) (80,589)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 75,859 211,305
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,320 $130,716
======== ========
</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 June 30, 1995 approximately 74% 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. ("MGM Grand
Hotel"), the Company owns and operates the MGM Grand Hotel/Casino, a
hotel/casino and entertainment complex in Las Vegas, Nevada. The MGM Grand Hotel
commenced operations on December 18, 1993.
On December 28, 1994, the Company and Primadonna Resorts, Inc. executed
definitive agreements for the development of NEW YORK-NEW YORK, a $375,000,000
themed hotel/casino. The project is located on the northwest corner of Tropicana
Avenue and Las Vegas Boulevard, across from the MGM Grand Hotel. Groundbreaking
occurred on March 30, 1995. The plans for NEW YORK-NEW YORK call for the
destination resort to include a 2,100-room hotel and casino, themed
entertainment attractions and restaurant/retail outlets. The Company and
Primadonna Resorts will jointly own, develop and operate NEW YORK-NEW YORK.
The Company and Bally's Las Vegas completed their joint development of the
elevated monorail linking the MGM Grand Hotel with the corner of Flamingo Road
and the Las Vegas Strip. The project, a one-mile, high-capacity, transit-grade
monorail system cost approximately $25,000,000. The project costs were shared
equally with Bally's. The system began operations on June 14, 1995.
The Company operated MGM Grand Air, a scheduled and charter airline
service, through its wholly-owned subsidiary, MGM Grand Air, Inc., from
September 1987 until December 31, 1994, when MGM Grand Air was sold.
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 included in the 1994 Annual Report included in Form 10-K.
-4-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
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 June 30, 1995, and the results of operations for the three month and six
month periods ended June 30, 1995 and June 30, 1994. The results of operations
for such periods 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 1995 presentation.
NOTE 2. STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1995 and June 30, 1994, cash payments
made for interest were $29,464,000 and $29,394,000, respectively.
Cash payments made for state and federal taxes for the six months ended
June 30, 1995 and June 30, 1994 were $560,000 and $90,000, respectively.
On June 5, 1995, the Company retired all shares of common stock held in
Treasury, which thereupon resumed the status of authorized unissued shares, in a
non-cash transaction in the amount of $57,264,000.
NOTE 3. SALE OF MGM GRAND AIR
On December 31, 1994, MGM Grand, Inc. completed the sale of MGM Grand Air
for a note receivable totaling approximately $14,325,000, realizing a pretax
gain of $8,048,000.
The operating results of MGM Grand Air have been accounted for as
discontinued operations, and financial statements for prior periods have been
reclassified.
NOTE 4. ISSUANCE OF COMMON STOCK
On May 24, 1995, the Company and MGM Grand Hotel entered into a Promotion
Agreement with Don King Productions, Inc. ("DKP"), pursuant to which, among
other things: (i) MGM Grand Hotel will have the exclusive right to present Mike
Tyson's fights through September 1997; (ii) MGM Grand Hotel made a non-interest
working capital advance of $15,000,000 to DKP, to be repaid on September 25,
1997; (iii) the Company sold DKP 618,557 treasury shares of
-5-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 4. ISSUANCE OF COMMON STOCK (CONTINUED)
the Company's Common Stock for $15,000,000, evidenced by a non-interest bearing
promissory note to be repaid in three $5,000,000 installments out of the
proceeds of each of the first three Tyson fights; (iv) the Company guaranteed to
DKP that the market value of the shares will equal or exceed $30,000,000 ($48.50
per share) as of September 25, 1997; and (v) the Company and DKP entered into
security agreements and a registration rights agreement with respect thereto.
The $15,000,000 non-interest bearing promissory note is reflected as a stock
subscription receivable and is included in stockholders' equity.
NOTE 5. TREASURY STOCK
On March 9, 1994, the Company announced that it intended to acquire in open
market purchases, from time to time, as many as 1,000,000 shares of its common
stock. Through December 31, 1994, the Company had acquired 991,800 shares of
Company stock. No further purchases of shares have been made or are anticipated.
On June 5, 1995, the Company retired all shares of common stock held in
treasury, which thereupon resumed the status of authorized but unissued shares.
NOTE 6. LONG TERM DEBT AND NOTE PAYABLE
Long term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------- ------------
<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
-------- --------
$473,000 $473,000
======== ========
</TABLE>
Total interest incurred for the first six months of 1995 and 1994 was
$31,114,000 and $30,851,000, respectively.
The Company has a $60,000,000 line of credit with several banks for the MGM
Grand Hotel. As of June 30, 1995, $15,000,000 had been drawn down under the
facility. No amounts were outstanding under the line of credit through 1994.
-6-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 6. LONG TERM DEBT (CONTINUED)
The First Mortgage Notes Indenture and the Bank Line of Credit contain
provisions which generally limit dividend and other restricted payments by MGM
Grand Hotel to the Company unless (1) no default shall have occurred thereunder,
(2) the consolidated net worth of MGM Grand Hotel is greater than $415,000,000,
(3) MGM Grand Hotel meets its indebtedness tests and (4) such dividends and
other restricted payments do not exceed the sum of $25,000,000 plus 50% of
cumulative consolidated net income.
NOTE 7. INCOME TAXES
The Company accounts for income taxes according to Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes" ("SFAS 109"). 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 June 30, 1995, the Company determined that
$34,600,000 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.
There was no provision for income taxes for the six months ended June 30,
1995 and June 30, 1994.
Reconciliation of the Federal income tax rate and the Company's effective
tax rate is as follows:
<TABLE>
<CAPTION>
June 30,
--------------
1995 1994
---- ----
<S> <C> <C>
Federal income tax rate (35)% 35%
Net operating loss - no benefit
recognized 35 -
Reduction in valuation allowance - (35)
---- ----
Effective tax rate --% --%
==== ====
</TABLE>
-7-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 7. INCOME TAXES (CONTINUED)
As of June 30, 1995 and December 31, 1994, after having given effect to
SFAS 109, the major tax-effected components of the Company's net deferred tax
liability are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------- ------------
<S> <C> <C>
DEFERRED TAX ASSETS $ 79,321 $ 67,643
Less: Valuation allowance (34,600) (32,150)
-------- --------
Net deferred tax assets 44,721 35,493
DEFERRED TAX LIABILITIES (50,663) (41,435)
-------- --------
NET DEFERRED TAX LIABILITY $ (5,942) $ (5,942)
======== ========
</TABLE>
At June 30, 1995, the Company had a net operating loss carryforward for
income tax purposes of approximately $153,681,000. At June 30, 1995, the
Company had an Alternative Minimum Tax credit carryover of $1,200,000, and
General Business Credit carryovers of $1,700,000.
NOTE 8. EARNINGS PER SHARE
Earnings per share is based on the weighted average number of shares of
common stock and common stock equivalents, if dilutive, outstanding during each
period (48,063,438 and 48,891,401 shares for the three month periods ended June
30, 1995 and June 30, 1994, respectively, and 48,000,261 and 49,286,347 shares
for the six month periods ended June 30, 1995 and June 30, 1994, respectively).
-8-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company, through its wholly-owned subsidiary, owns and operates the MGM
Grand Hotel/Casino, which commenced operations on December 18, 1993. Airline
operations have been reclassified for the years presented to Discontinued
Operations as a result of the sale of the airline (see Note 3).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Operating revenues:
Hotel/Casino $168,558 $186,846 $330,519 $361,804
Eliminations (161) - (237) -
-------- -------- -------- --------
$168,397 $186,846 $330,282 $361,804
======== ======== ======== ========
Operating income:
Hotel/Casino $ 11,419 $ 35,856 $ 33,752 $ 55,162
Corporate (2,739) (1,955) (4,765) (3,303)
Eliminations - 525 - 768
-------- -------- -------- --------
8,680 34,426 28,987 52,627
Interest income 442 1,010 990 2,137
Interest expense (15,784) (15,416) (31,114) (30,851)
Other, net 25 238 25 221
Loss from discontinued operations - (63) - (585)
Provision for income taxes - - - -
-------- -------- -------- --------
Net income (loss) $ (6,637) $ 20,195 $ (1,112) $ 23,549
======== ======== ======== ========
</TABLE>
The Company has not recorded a provision for income taxes, since future tax
benefits not realized in prior years have offset any provision for the current
period.
-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
MGM GRAND HOTEL net revenues for the three months ended June 30, 1995 were
$168,558,000 compared to $186,846,000 for the same period in 1994. Casino
revenues for the period were $85,879,000 compared to $108,049,000 for the same
period in 1994. The reduction in Casino revenues is principally due to a low
table game win percentage. Room revenues for the period were $40,589,000 on an
occupancy rate of 96.6% versus $36,221,000 on an occupancy rate of 97.1% for the
first quarter 1994. In the 1995 quarter, higher average room rates offset
slightly lower average occupancy rates, resulting in higher room revenues.
Operating expenses were $157,139,000, resulting in operating income of
$11,419,000 for the quarter ended June 30, 1995, compared to operating expenses
of $150,990,000 and operating income of $35,856,000 for the second quarter ended
June 30, 1994. Operating expenses were higher in the second quarter of 1995
primarily due to additional reserves for casino receivables which reflect
changes in anticipated collectibility, partially offset by a reduction in other
operating expenses reflecting cost containment efforts instituted since the
first quarter of 1994.
CORPORATE AND OTHER expenses were $2,739,000 in the second quarter of 1995,
compared to $1,955,000 in the same period last year, largely as a result of
increased personnel costs and a salary accrual for a former officer of the
Company.
INTEREST INCOME was $442,000 for the second quarter of 1995 versus
$1,010,000 for the 1994 quarter. Interest income was higher during the 1994
quarter as a result of short-term investment of the remaining construction fund
balances.
INTEREST EXPENSE was $15,784,000 for the second quarter of 1995 compared to
$15,416,000 in 1994, reflecting increased lease and line of credit costs.
-10-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SIX MONTHS VERSUS SIX MONTHS
MGM GRAND HOTEL net revenues for the six months ended June 30, 1995 were
$330,519,000 compared to $361,804,000 for the same period in 1994. Casino
revenues for the period were $177,205,000 compared to $214,203,000 for the same
period in 1994. The reduction in casino revenues is principally due to a low
table game win percentage. Room revenues for the period were $79,507,000 on an
occupancy rate of 91.7% versus $66,751,000 on an occupancy rate of 91.1% for the
prior year period. Room revenues were higher in the 1995 period as a result of
higher average room rates. Operating expenses were $296,767,000 resulting in
operating income of $33,752,000 for the six months ended June 30, 1995, compared
to operating expenses of $306,642,000 and operating income of $55,162,000 for
the same period in 1994. Operating expenses have decreased principally as a
result of cost containment efforts instituted since the first quarter 1994,
which included significant discretionary start up expenditures, partially offset
by additional reserves for casino receivables which reflect changes in
anticipated collectibility.
CORPORATE AND OTHER expenses were $4,765,000 in the first six months of
1995 compared to $3,303,000 in the same period last year, principally as a
result of increased personnel costs and a salary accrual for a former officer of
the Company.
INTEREST INCOME was $990,000 for the first six months of 1995 versus
$2,137,000 in 1994. Interest income was higher during the 1994 quarter as a
result of short term investment of construction funds.
INTEREST EXPENSE was $31,114,000 for the first six months of 1995, compared
to $30,851,000 in 1994, reflecting increased lease and line of credit costs.
-11-
<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 June 30, 1995 and December 31, 1994, the Company held cash and cash
equivalents of $45,320,000 and $75,859,000, respectively. Cash provided by
operating activities for the first six months of 1995 was $23,371,000 versus
$33,157,000 for the first six months of 1994.
Capital expenditures during the first six months of 1995, other than the
Monorail project and NEW YORK-NEW YORK project of $2,700,000 and $36,300,000,
respectively, were $14,914,000, consisting primarily of expenditures related to
the MGM Grand Hotel for general property improvements and construction of the
Star Lane Shopping Mall. During the first six months of 1995, MGM Grand Hotel
also expended $10,990,000 on the EFX production show, and made a non-interest
bearing working capital advance of $15,000,000 to Don King Productions (see Note
4).
Remaining expenditures for 1995 are expected to be $15,000,000 at the MGM
Grand Hotel for general property improvements and completion of construction of
the Star Lane Shopping Mall.
Construction of the monorail linking the MGM Grand Hotel and Bally's Las
Vegas is complete. The project is a one-mile, high-capacity, transit-grade
system which cost approximately $25,000,000. The project costs were shared
equally with Bally's Las Vegas. As of June 30, 1995, each partner has
contributed $12,500,000 to the joint project. The system commenced operations on
June 14, 1995.
On December 28, 1994, the Company and Primadonna Resorts, Inc.
("Primadonna") executed definitive agreements for the development of NEW YORK-
NEW YORK, a $375,000,000 themed hotel/casino. The plans for NEW YORK-NEW YORK
call for the destination resort to include a 2,100-room hotel and casino, themed
entertainment attractions and restaurant/retail outlets. The Company and
Primadonna will jointly own, develop and operate NEW YORK-NEW YORK, which broke
ground on March 30, 1995. The 18-acre site, located on the busiest intersection
in Nevada, was contributed to the venture by the Company during January 1995,
and on February 1, 1995, NEW YORK-NEW YORK acquired an adjacent two acre parcel.
Completion is scheduled for late 1996. The Company does not anticipate further
equity or capital contributions. The Company expects, as a lender requirement
for the project financing, that both the Company and Primadonna will be required
to enter into a joint and several completion guarantee.
-12-
<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 (CONTINUED)
On March 27, 1995, the Company entered into an agreement to acquire the
Diamond Beach Hotel and Casino in Darwin, Australia, for approximately $75
million, including debt assumption of approximately $13 million. The Company
expects to finance this acquisition through bank financing.
The Company expects to finance operations and capital expenditures through
cash flow from operations, cash on hand, and the bank line of credit.
PART II. OTHER INFORMATION
None of the items 1 through 4 of Part II are applicable.
ITEM 5. OTHER INFORMATION
Item 5(a): Australian Casino Acquisition
On March 27, 1995, the Company entered into an agreement to acquire the
Diamond Beach Hotel and Casino in Darwin, Australia, for approximately $75
million, including debt assumption of approximately $13 million. The Diamond
Beach resort is located on 18 acres of beachfront property on the north central
coast of Australia. The resort includes a public and private casino,
approximately 100 rooms and suites, restaurants, and other facilities. The
Company expects to finance the acquisition through bank financing.
Concurrently with the closing of the transaction, which is anticipated in
the third quarter of 1995, MGM Grand will grant to certain of the sellers an
option to acquire 22-1/2% of the stock of the Company's Australian subsidiary.
The option, which will be granted for a nominal consideration, will be
exercisable at any time during the third and fourth years following the closing,
at an exercise price of approximately $13.8 million, subject to certain
adjustments. The option holders will also grant to the Company two year options
to purchase 25% interests in Aspinall's Club in London, U.K., and Aspinall
Casino SA in Le Touquet, France, with an exercise price in each case based on
the amount of the owners' respective investments in such casinos.
-13-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION (CONTINUED)
Item 5. Other Information (Continued)
Item 5(b): Company Restructuring
On August 1, 1995, the Company announced details of a restructuring plan
designed to reduce costs at the MGM Grand Hotel. The restructuring, which is
described in the press release attached hereto as Exhibit I, and incorporated by
reference, will result in a one-time charge against earnings in the third
quarter, which is not expected to exceed $6 million.
Item 6. Exhibit
27. Financial Data Schedule, Article 5
99. Press release dated August 1, 1995
-14-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
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: August 4, 1995 ALEJANDRO YEMENIDJIAN
-----------------------------------------
Alejandro Yemenidjian
President, Chief Operating Officer, and
Chief Financial Officer
(principal financial officer)
Date: August 4, 1995 SCOTT LANGSNER
-----------------------------------------
Scott Langsner
Secretary/Treasurer
(principal accounting officer)
-15-
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 45,320
<SECURITIES> 0
<RECEIVABLES> 83,103
<ALLOWANCES> (26,327)
<INVENTORY> 16,114
<CURRENT-ASSETS> 18,130
<PP&E> 939,464
<DEPRECIATION> (69,801)
<TOTAL-ASSETS> 1,125,960
<CURRENT-LIABILITIES> 95,999
<BONDS> 0
<COMMON> 481
0
0
<OTHER-SE> 530,158
<TOTAL-LIABILITY-AND-EQUITY> 1,125,960
<SALES> 330,282
<TOTAL-REVENUES> 330,282
<CGS> 0
<TOTAL-COSTS> 296,579
<OTHER-EXPENSES> 4,716
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,114
<INCOME-PRETAX> (1,112)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,112)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,112)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99
[LETTERHEAD OF MGM GRAND, INC.]
FOR IMMEDIATE RELEASE Contact: Shelley Mansholt at MGM Grand, Inc.
- --------------------- (702) 891-3333
MGM GRAND ANNOUNCES COMPANY WIDE
---------------------------------
RESTRUCTURING PLAN
------------------
Las Vegas, Nevada (August 1, 1995)--MGM Grand, Inc. (NYSE:MGG) announced today
details of a restructuring plan designed to reduce costs at the MGM Grand Hotel
& Casino. This restructuring will result in a one-time charge against earnings
in the third quarter, which is not expected to exceed $6 million.
"Today's action is a difficult but necessary step in reshaping our company.
While we are sensitive to the hardships this creates for those leaving, it
enables the company to move forward into a new era of growth and profitability,"
said J. Terrence Lanni, Chairman and Chief Executive Officer of MGM Grand, Inc.,
the parent company of the world's largest hotel/casino.
Several months ago the company's previous management recognized the need to
control expenses and engaged an outside firm to facilitate the process. A group
of employees from throughout the company identified opportunities to integrate
and consolidate functions, improve processes, and lower operating expenses.
"After extensive analysis and months of evaluation by the employee group, today
we are implementing changes to the company's operations," added Lanni. "These
changes have been carefully designed to ensure continuation of our high level of
guest services."
-more-
<PAGE>
MGM Grand Announces Company Wide Restructuring Plan
- --------------------------------------------------
Page 2 of 2
As a result, the company will lease three of its existing owned restaurants
to outside entities, which will result in a reduction of 470 food and beverage
employees. MGM Grand has ensured the individuals affected by this reduction that
they will have the opportunity to be interviewed for employment by the new
restaurant operators.
MGM Grand has also reduced its staff in other areas of the company by 300
employees, for a total reduction of 770 employees.
As required, MGM Grand is providing extended pay and benefits to affected
employees. In addition, the company has established a full-service career
resource center to provide consulting services to affected persons.
###
