<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, 1997
-------------------------------------------------
[ ] 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 11, 1997
- ------------------------------ ------------------------------------
Common Stock, $.01 par value 57,973,527 shares
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
FORM 10-Q
I N D E X
<TABLE>
<CAPTION>
Page No.
--------
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations for the Three Months and Six Months Ended
June 30, 1997 and June 30, 1996.................... 1
Condensed Consolidated Balance Sheets
at June 30, 1997 and December 31, 1996............. 2
Condensed Consolidated Statements of
Cash Flows for the Six Months Ended
June 30, 1997 and June 30, 1996.................... 3
Notes to Condensed Consolidated Financial
Statements......................................... 4-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations... 9-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................. 15
Item 4. Submission of Matters to a Vote of Security
Holders at the Annual Shareholder Meeting Held
on May 6, 1997..................................... 15-16
Item 6. Exhibits and Reports on Form 8-K................... 16
Signatures......................................... 17
</TABLE>
Exhibit I
Exhibit II
<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,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Casino $113,108 $105,489 $220,204 $234,437
Room 43,085 43,624 86,421 87,425
Food and beverage 23,858 19,441 45,427 39,535
Entertainment, retail and other 30,357 33,002 56,231 62,111
Income from unconsolidated
affiliate 14,706 - 29,428 -
-------- -------- -------- ---------
225,114 201,556 437,711 423,508
Less: promotional allowances 16,029 12,319 31,128 26,275
-------- -------- -------- --------
209,085 189,237 406,583 397,233
-------- -------- -------- --------
EXPENSES:
Casino 58,375 49,358 111,532 106,146
Room 11,712 12,449 22,828 23,774
Food and beverage 14,015 12,113 26,254 24,239
Entertainment, retail and other 20,960 20,113 39,602 42,481
Provision for doubtful
accounts and discounts 5,917 4,541 14,330 20,167
General and administrative 24,804 25,140 50,239 49,072
Depreciation and amortization 15,934 15,426 31,392 30,642
-------- -------- -------- --------
151,717 139,140 296,177 296,521
-------- -------- -------- --------
OPERATING PROFIT BEFORE
CORPORATE EXPENSE 57,368 50,097 110,406 100,712
CORPORATE EXPENSE 3,289 1,482 4,778 2,874
-------- -------- -------- --------
OPERATING INCOME 54,079 48,615 105,628 97,838
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest income 381 1,841 580 3,422
Interest expense, net
of amounts capitalized (268) (15,942) (1,242) (31,739)
Interest expense from
unconsolidated affiliate (2,543) - (5,008) -
Other, net (212) (183) (444) (662)
-------- -------- -------- --------
( 2,642) (14,284) (6,114) (28,979)
-------- -------- -------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES 51,437 34,331 99,514 68,859
Provision for income taxes (18,438) (13,696) (36,365) (13,696)
-------- -------- -------- --------
NET INCOME $ 32,999 $ 20,635 $ 63,149 $ 55,163
======== ======== ======== ========
PER SHARE OF COMMON STOCK:
Net income $ 0.56 $ 0.41 $ 1.07 $ 1.11
======== ======== ======== ========
Weighted average shares
outstanding (000's) 58,863 50,160 58,805 49,745
======== ======== ======== ========
</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)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 47,413 $ 61,412
Accounts receivable, net 61,036 80,529
Other receivables 15,000 -
Prepaid expenses and other 11,084 13,208
Inventories 16,259 13,520
Deferred tax asset 23,138 58,039
---------- ----------
Total current assets 173,930 226,708
---------- ----------
PROPERTY AND EQUIPMENT, NET 928,839 884,750
OTHER ASSETS:
Investments in unconsolidated affiliates 97,364 72,896
Deposits 423 15,255
Excess of purchase price over fair market value of net assets
acquired, net 39,110 39,622
Other assets, net 53,034 48,458
---------- ----------
Total other assets 189,931 176,231
---------- ----------
$1,292,700 $1,287,689
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 28,528 $ 32,995
Income taxes payable - 23,653
Current obligation, capital leases 2,327 2,769
Current obligation, long term debt 12,173 12,906
Other accrued liabilities 103,779 118,448
---------- ----------
Total current liabilities 146,807 190,771
---------- ----------
DEFERRED REVENUES 6,661 6,712
DEFERRED INCOME TAXES 28,414 38,477
LONG TERM OBLIGATION, CAPITAL LEASES 6,704 7,862
LONG TERM DEBT 60,396 70,485
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value, 75,000,000 shares authorized,
57,968,919 and 57,883,766 shares issued) 580 579
Capital in excess of par value 966,039 963,688
Retained earnings 76,370 13,221
Currency translation adjustment 729 (4,106)
---------- ----------
Total stockholders' equity 1,043,718 973,382
---------- ----------
$1,292,700 $1,287,689
========== ==========
</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,
----------------------
1997 1996
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 63,149 $ 55,163
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 31,462 30,701
Amortization of debt offering costs 842 1,387
Provision for doubtful accounts and discounts 14,330 20,167
Income from unconsolidated affiliate, net (24,420) -
Change in assets and liabilities:
Accounts receivable 5,163 13,045
Inventories (3,285) 626
Prepaid expenses and other 2,124 (1,850)
Income taxes payable and deferred income taxes 1,184 (8,495)
Accounts payable, accrued liabilities and other (20,816) (2,277)
Currency translation adjustment 263 (2)
-------- --------
Net cash from operating activities 69,996 108,465
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (70,622) (23,202)
Disposition of property and equipment, net 123 277
Investments in unconsolidated affiliates (7,183) (3,033)
Distributions from unconsolidated affiliate 6,720 -
Deposits and other assets, net (9,134) 879
-------- --------
Net cash from investing activities (80,096) (25,079)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments to banks and others (6,251) -
Borrowings under bank line of credit 15,000 4,262
Repayments of bank line of credit (15,000) (2,294)
Issuance of common stock 2,352 14,823
-------- --------
Net cash from financing activities (3,899) 16,791
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,999) 100,177
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 61,412 110,017
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 47,413 $210,194
======== ========
</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, 1997, approximately 61.4% 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 ("MGM Grand Las Vegas"), a
hotel/casino and entertainment complex in Las Vegas, Nevada. MGM Grand Hotel
Finance Corp. ("MGM Finance"), a wholly-owned subsidiary of the Company, was
formed to issue First Mortgage Notes to the public, to incur bank debt and to
lend the aggregate proceeds thereof to MGM Grand Hotel, Inc. to finance the
construction and opening of MGM Grand Las Vegas. See Note 3 regarding
defeasance of MGM Finance First Mortgage Notes.
Through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., the
Company owns and operates the MGM Grand Hotel/Casino ("MGM Grand Australia"), a
hotel/casino resort in Darwin, Australia. MGM Grand Australia was acquired and
commenced operations on September 7, 1995.
The Company and Primadonna Resorts, Inc. ("Primadonna") each owns 50% of
New York-New York Hotel and Casino, LLC ("NYNY LLC"), which completed
development of the $460,000,000 themed destination resort called New York-New
York Hotel and Casino ("NYNY") in Las Vegas, Nevada in December 1996. NYNY
commenced operations on January 3, 1997. NYNY is located on approximately 20
acres at the northwest corner of Tropicana Avenue and Las Vegas Boulevard,
across from MGM Grand Las Vegas.
Through its wholly-owned subsidiary, MGM Grand Atlantic City, Inc., the
Company intends to construct and operate a destination resort hotel/casino,
entertainment and retail facility in Atlantic City, New Jersey, at an
approximate cost of at least $700,000,000. On July 9, 1996, the Company entered
into an agreement with FC Atlantic City Associates, L.P. (an affiliate of the
Forest City Ratner Company) to develop approximately 35 acres of land on the
Atlantic City Boardwalk. Construction of the project is subject to the receipt
of various governmental approvals. On July 24, 1996, the Company was found
suitable for licensing by the New Jersey Casino Control Commission.
Certain information and footnote disclosures normally included in the
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 consolidated
financial statements and notes thereto included in the 1996 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 June 30, 1997, and the results of operations for the three month and six
month periods ended June 30, 1997 and 1996. 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 1997 presentation.
- 4 -
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1997 and June 30, 1996, cash payments
made for interest were $4,087,000 and $32,535,000, respectively.
Cash payments made for state and federal taxes for the six months ended
June 30, 1997 and June 30, 1996 were $36,090,000 and $2,350,000, respectively.
NOTE 3. LONG TERM DEBT AND NOTES PAYABLE
Long term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- -------------
<S> <C> <C>
Australian Hotel/Casino Loan $ 72,569 $ 83,391
Less: Current Maturities (12,173) (12,906)
-------- --------
$ 60,396 $ 70,485
======== ========
</TABLE>
Total interest incurred for the first six months of 1997 and 1996 was
$4,926,000 and $33,972,000, respectively, of which $3,684,000 and $2,233,000
was capitalized in the 1997 and 1996 periods, respectively. During the first
six months of 1997, the Company recognized interest expense from unconsolidated
affiliate of $5,008,000.
On July 3, 1996, the Company deposited $523,231,000 (the "Defeasance
Deposit") with the Trustee, U.S. Trust of California, to fund the defeasance of
MGM Grand Hotel Finance Corp. First Mortgage Notes ("FMN's") in accordance with
the terms of the bond indenture. The Defeasance Deposit was made in the form of
U.S. Government securities and was used to fund interest payments on the FMN's
through May 1, 1997, at which date the 11-3/4% and 12% FMN's were called at
101.958% and 105.333% of their outstanding principal, respectively. On October
29, 1996, the liens on the assets of MGM Grand Hotel, Inc. were released and
accordingly, the defeasance was finalized.
On July 1, 1996, the Company secured a new $500,000,000 Senior Reducing
Revolving Credit Facility with BA Securities (the "Facility"), an affiliate of
Bank of America NT&SA. In August 1996, the Facility was increased to
$600,000,000. During the six months ended June 30, 1997, $15,000,000 was drawn
down, and repaid against the Facility, and no amounts remained outstanding as of
June 30, 1997. In July 1997, the Facility was amended, extended and increased to
$1,250,000,000, (the "New Facility") with provisions to allow an increase of the
New Facility to $1,500,000,000 as well as to allow additional pari passu debt
financing up to $500,000,000. As a result of the New Facility, the Company
anticipates a write-off of approximately $6.6 million (before income tax
benefit) of unamortized debt costs from the Facility during the third quarter of
1997. The New Facility contains various restrictive covenants on the Company
which include the maintenance of certain financial ratios and limitations on
additional debt, dividends, capital expenditures and disposition of assets. The
New Facility also restricts certain acquisitions and similar transactions.
Interest on the New Facility is based on the bank reference rate or Eurodollar
rate. The New Facility matures in December 2002, with the opportunity to extend
the maturity for successive one year periods.
- 5 -
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 3. LONG TERM DEBT AND NOTES PAYABLE (CONT.)
The Australian bank facility originally provided a total availability of
approximately $78,656,000 (AUD$105,000,000), which was reduced by principal
payments totaling $6,251,000 (AUD$8,125,000) made in accordance with the terms
of the bank facility, and as of June 30, 1997, $72,569,000 (AUD$96,875,000)
remained outstanding. The facility includes funding for general corporate
purposes. Interest on the facility is based on the Australian Bank Bill rate.
The loan agreement contains various restrictive covenants on MGM Grand
Australia, including limitations on additional debt, dividends, and disposition
of assets. The loan agreement also restricts certain acquisitions and similar
transactions. The indebtedness, which matures in December 2000, has been wholly
guaranteed by the Company.
MGM Grand Australia has a $14,982,000 (AUD$20,000,000) uncommitted
standby line of credit, with a funding period of 91 days for working capital
purposes. No amount was outstanding during the six months ended June 30, 1997,
and $4,262,000 was borrowed with $2,294,000 repaid during the six months ended
June 30, 1996 and $1,968,000 remained outstanding under the line of credit at
June 30, 1996.
Upon commencement of operations of NYNY on January 3, 1997 (see Note 1),
the $285,000,000 non-revolving construction line of credit converted to a five-
year reducing revolver. The Company and Primadonna (the "Partners") have
executed a joint and several unlimited Keep-Well Agreement, which provides that
in the event of insufficient cash flow from NYNY to comply with financial
covenants, the Partners will make cash infusions which are sufficient to bring
NYNY LLC into compliance with the financial covenants. During the first six
months of 1997, $10,000,000 in voluntary principal repayments were made by NYNY
LLC. As of June 30, 1997 and December 31, 1996, a total of $275,000,000 and
$285,000,000 were outstanding, respectively. On January 21, 1997, NYNY LLC
completed an additional $20,000,000 equipment financing with a financial
institution.
NOTE 4. ISSUANCE OF COMMON STOCK
On May 7, 1996, the Company made a commitment to grant 15 shares of
Company Common Stock to each of its employees in exchange for continued active
employment through the one year anniversary date of the commitment. As a result
of the stock grant commitment, deferred compensation in the amount of $4,982,000
was charged to stockholders' equity and amortized monthly to compensation
expense over the one year commitment period. On May 7, 1997, 98,970 shares were
issued to employees as a result of the commitment. Over the life of the
commitment, approximately $3,962,000 has been amortized to expense, of which
$1,143,000 of such expense was recognized during the six months ended June 30,
1997.
On May 24, 1995, and as amended on November 27, 1995, the Company and
MGM Grand Hotel, Inc. entered into a Promotion Agreement with Don King
Productions, Inc. ("DKP"), pursuant to which, among other things, MGM Grand Las
Vegas has the exclusive right to present six of Mike Tyson's fights. In
addition, MGM Grand Hotel, Inc. made a non-interest bearing working capital
advance of $15,000,000 to DKP which calls for repayment on January 25, 1998, and
the Company sold DKP 618,557 treasury shares of the Company's Common Stock (the
"Shares") for $15,000,000 in exchange for a non-interest bearing promissory
note. Through June 30, 1997, five fights have occurred pursuant to the
agreement, and the stock promissory note has been paid. The original agreement
was amended by a Trust Agreement dated October 23, 1996, in which the Shares
were placed in the name of, and held by, an independent trustee, pending
disposition at the direction of the Company. The Trust Agreement extended the
payment date of the working capital advance and the guaranteed share price of
$48.50 to March 31, 1998. As of June 30, 1997, the Company has expensed
approximately $5,928,000 over the life of the agreement. On July 23, 1997, the
Company notified DKP of its breach of the Promotion Agreement
- 6 -
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 4. ISSUANCE OF COMMON STOCK (CONT.)
as a result of the revocation of Mike Tyson's Nevada boxing license. As a
result of such breach, the Company notified DKP that the Promotion Agreement and
guarantee are terminated, that the working capital advance is due and payable,
and that the Company is reserving all of its rights and remedies. DKP has
disputed the Company's contentions. The outcome of this matter is as yet
undetermined.
NOTE 5. EARNINGS PER SHARE
The Company calculates earnings per share ("EPS") in accordance with
Accounting Principles Board Opinion 15, "Earnings per Share" ("APB 15").
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.
Such amounts were approximately 58,863,000 and 50,160,000 shares for the three
month periods ended June 30, 1997 and 1996, respectively, and 58,805,000 and
49,745,000 shares for the six month periods ended June 30, 1997 and 1996,
respectively.
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"),
which upon adoption will supersede APB 15 and is intended to simplify and
harmonize the EPS calculations in the United States with those common in other
countries and to present two EPS calculations: (i) basic earnings per common
share which is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the periods presented, and (ii)
diluted earnings per common share which is determined on the assumptions that
options issued to employees are exercised and repurchased at the average price
for the periods presented. SFAS 128 is effective for financial statements for
the year ended December 31, 1997, and although early application is prohibited,
the following reflects the expected effect of SFAS 128 for the periods presented
(in thousands except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $32,999 $20,635 $63,149 $55,163
======= ======= ======= =======
Weighted Average Basic Shares 57,927 48,503 57,882 48,418
======= ======= ======= =======
Basic Earnings per Share $ 0.57 $ 0.43 $ 1.09 $ 1.14
======= ======= ======= =======
Weighted Average Diluted Shares 58,808 50,163 58,791 49,746
======= ======= ======= =======
Diluted Earnings per Share $ 0.56 $ 0.41 $ 1.07 $ 1.11
======= ======= ======= =======
</TABLE>
Weighted average diluted shares include the following: options to purchase
844,000 and 1,245,000 shares issued to employees for the three month periods
ended June 30, 1997 and 1996, respectively, and 852,000 and 999,000 for the six
month periods ended June 30, 1997 and 1996, respectively; employee grant shares
(see Note 4) of 37,000 and 3,000 for the three month periods ended June 30, 1997
and 1996, respectively, and 57,000 and 2,000 for the six month periods ended
June 30, 1997 and 1996, respectively; and DKP shares (see Note 4) of 412,000 for
the three months ended June 30, 1996, and 327,000 for the six months ended June
30, 1996.
- 7 -
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. INVESTMENT IN UNCONSOLIDATED AFFILIATE
On December 28, 1994 the Company and Primadonna formed a joint venture to
own and operate the New York-New York Hotel and Casino (see Note 1). The
hotel/casino opened to the public on January 3, 1997. The Company holds a 50%
share interest in the joint venture. The Company has contributed land on which
the property is located and cash totaling $70,700,000. During the six months
ended June 30, 1997, the Company received income tax distributions from the
joint venture of $6,720,000. The joint venture has secured bank financing of
$285,000,000, and term loan financing of $20,000,000 (see Note 3). The joint
venture partners have executed Keep-Well Agreements in conjunction with the
financing.
Summary condensed financial information for the joint venture is as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
1997 1997
------------ ------------
<S> <C> <C>
Net Revenues $ 67,401 $135,269
======== ========
Operating Income $ 29,573 $ 58,834
======== ========
Interest Expense, net $ 5,086 $ 10,016
======== ========
Net Income $ 24,487 $ 48,818
======== ========
As of As of
June 30, December 31,
1997 1996
---------- ------------
Total Assets $478,709 $457,091
======== ========
Long-term Debt $262,385 $285,829
======== ========
Members' Equity $161,042 $111,664
======== ========
</TABLE>
- 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 subsidiaries, owns and operates
MGM Grand Las Vegas and MGM Grand Australia (see Note 1). The Company also owns
50% of New York-New York Hotel and Casino, which commenced operations on January
3, 1997 (see Note 1).
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(in thousands)
Net revenues:
MGM Grand Las Vegas $185,832 $180,815 $361,219 $380,133
MGM Grand Australia 8,756 8,575 16,522 17,372
Income from unconsolidated affiliate 14,706 - 29,428 -
Eliminations and other (209) (153) (586) (272)
-------- -------- -------- --------
$209,085 $189,237 $406,583 $397,233
======== ======== ======== ========
Operating profit (loss):
MGM Grand Las Vegas $ 41,747 $ 51,457 $ 80,321 $103,883
MGM Grand Australia 915 (1,360) 657 (3,171)
Income from unconsolidated affiliate 14,706 - 29,428 -
-------- -------- -------- --------
57,368 50,097 110,406 100,712
Corporate expense (3,289) (1,482) (4,778) (2,874)
-------- -------- -------- --------
Operating income 54,079 48,615 105,628 97,838
Interest income 381 1,841 580 3,422
Interest expense, net of amounts capitalized (268) (15,942) (1,242) (31,739)
Interest expense from unconsolidated affiliate (2,543) - (5,008) -
Other, net (212) (183) (444) (662)
-------- -------- -------- --------
Income before provision for income taxes 51,437 34,331 99,514 68,859
Provision for income taxes (18,438) (13,696) (36,365) (13,696)
-------- -------- -------- --------
Net income $ 32,999 $ 20,635 $ 63,149 $ 55,163
======== ======== ======== ========
</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
Net revenues for the second quarter of 1997 were $209,085,000,
representing an increase of $19,848,000 (10.5%) when compared with $189,237,000
during the same period last year. The increase in net revenues was largely due
to higher casino and food and beverage revenue in the 1997 period, and income
from the Company's 50% ownership in NYNY (see Note 1).
Consolidated casino revenues for the second quarter of 1997 were
$113,108,000, representing an increase of $7,619,000 (7.2%) when compared with
$105,489,000 during the same period in the prior year. MGM GRAND LAS VEGAS
casino revenues were $106,448,000, representing an increase of $7,625,000 (7.7%)
when compared with $98,823,000 during the same period in the prior year. The
increase in casino revenues at MGM Grand Las Vegas was a result of higher volume
and win during the 1997 period when compared with the 1996 period. MGM GRAND
AUSTRALIA reported casino revenues of $6,660,000 in the second quarter of 1997
which were consistent with the $6,667,000 reported in 1996.
Consolidated room revenues were $43,085,000 for the second quarter of
1997 compared with $43,624,000 in the prior year's second quarter, representing
a decrease of $539,000 (1.2%). MGM GRAND LAS VEGAS room revenues were
$42,579,000 representing a decrease of $491,000 (1.1%) when compared with
$43,070,000 in the same period of the prior year. The decrease was primarily due
to a lower occupancy of 95.2% for the second quarter of 1997 when compared with
99.5% in the same period of the prior year, which was partially offset by an
increase in the average room rate for the 1997 second quarter to $101 from $97
for the 1996 second quarter. MGM GRAND AUSTRALIA room revenues were $588,000 for
the 1997 second quarter, consistent with the prior year's quarter of $582,000.
Consolidated food and beverage revenues were $23,858,000 in the second
quarter of 1997, representing an increase of $4,417,000 (22.7%) when compared
with $19,441,000 in the second quarter of the prior year. The increase was
attributable to MGM GRAND LAS VEGAS which had food and beverage revenues of
$22,092,000 during the second quarter of 1997, an increase of $4,264,000 (23.9%)
when compared with $17,828,000 in the second quarter of 1996. This increase
resulted from the Company's decision to operate the Studio Cafe, which had been
a leased facility during the 1996 period. MGM GRAND AUSTRALIA reported food
and beverage revenues of $1,867,000, representing an increase of $246,000
(15.2%) when compared with $1,621,000 during the same period in the prior year.
Consolidated entertainment, retail and other revenues decreased
$2,645,000 (8.0%) from $33,002,000 in the 1996 period to $30,357,000 in the 1997
period. The decrease in entertainment, retail and other revenues is a result of
lower EFX revenues, lower theme park revenues, and lower midway/arcade revenues
due to downsizing of the facility. These decreases were partially offset by
increases in MGM Grand Garden Arena revenues and increased revenues from the
SkyScreamer thrill ride which was not operational during the 1996 period.
Income from unconsolidated affiliate was $14,706,000 for the second
quarter of 1997, representing the Company's 50% share of NYNY's operating
income. The operating results from NYNY were not consolidated with those of the
Company since consolidation is required only with greater than 50% ownership
(see Note 1).
Consolidated operating expenses were $151,717,000 in the second quarter
of 1997, representing an increase of $12,577,000 (9.0%) when compared with
$139,140,000 for the same period last year. The
- 10 -
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
QUARTER VERSUS QUARTER (CONTINUED)
overall increase was attributable to MGM GRAND LAS VEGAS which had increased
casino expenses in the 1997 period as a result of higher casino taxes due to
increased casino revenues, higher casino marketing costs associated with the
Tyson/Holyfield event, and higher food and beverage expenses as a result of the
Company's operation of the Studio Cafe, partially offset by lower expenses
related to EFX. Additionally, the provision for doubtful accounts and discounts
increased by $1,376,000 (30.3%) at MGM Grand Las Vegas as a result of higher
reserves relating to higher casino volume and win in the 1997 period when
compared with the 1996 period. MGM GRAND AUSTRALIA operating expenses decreased
$2,096,000 (21.1%) from $9,936,000 in the 1996 period to $7,840,000 in the 1997
period as a result of continuing cost containment efforts.
Interest income of $381,000 for the three months ended June 30, 1997
decreased by $1,460,000 from $1,841,000 in the second quarter of 1996. The
decrease was attributable to lower invested cash balances at MGM Grand Las Vegas
during the second quarter of 1997.
Interest expense in the second quarter of 1997 of $268,000 (net of
amounts capitalized) decreased by $15,674,000 when compared with $15,942,000 in
the same period of 1996. The decrease in the second quarter of 1997 was
primarily due to the defeasance of the MGM Grand Hotel Finance Corp. First
Mortgage Notes (see Note 3) in the third quarter of 1996. Also, the company
recognized interest expense from unconsolidated affiliate of $2,543,000 during
the 1997 period.
Income tax provision of $18,438,000 has been recorded at a rate of 35.8%
for the three months ended June 30, 1997, compared with $13,696,000 at a rate of
39.9% in the prior year.
SIX MONTHS VERSUS SIX MONTHS
Net revenues for the six months ended June 30, 1997 were $406,583,000,
representing an increase of $9,350,000 (2.4%) when compared with $397,233,000
during the same period last year. The increase in net revenues was largely due
to income from the Company's 50% ownership in NYNY (see Note 1) partially offset
by decreased casino, and entertainment, retail and other revenues.
Consolidated casino revenues for the six months ended June 30, 1997 were
$220,204,000, representing a decrease of $14,233,000 (6.1%) when compared with
$234,437,000 during the same period in the prior year. MGM GRAND LAS VEGAS
casino revenues were $207,395,000, representing a decrease of $12,866,000 (5.8%)
when compared with $220,261,000 during the same period in the prior year. The
reduction in casino revenues at MGM Grand Las Vegas was a result of lower table
games win percentages, despite an overall increase in table games volume when
compared with the prior year period. MGM GRAND AUSTRALIA reported casino
revenues of $12,809,000, which decreased $1,367,000 (9.6%) when compared with
$14,176,000 during the same period in the prior year, primarily attributable to
lower volume and win percentages in table games partially offset by an increase
in slot win.
Consolidated room revenues for the period were $86,421,000 compared with
$87,425,000 for the same period in 1996, representing a decrease of $1,004,000
(1.1%). MGM GRAND LAS VEGAS room revenues were $85,540,000 representing a
decrease of $1,053,000 (1.2%) when compared with $86,593,000 in the same period
of the prior year. The decrease was primarily due to a lower occupancy
- 11 -
<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 (CONTINUED)
of 93.6% for the 1997 period when compared with 96.4% in the same period of the
prior year, which was partially offset by an increase in the average room rate
for the 1997 period to $103 from $99 in 1996. MGM GRAND AUSTRALIA room revenues
were $1,005,000 for the six months ended June 30, 1997 representing an increase
of $100,000 (11.0%) when compared with $905,000 for the prior year period.
Consolidated food and beverage revenues for the period were $45,427,000,
representing an increase of $5,892,000 (14.9%) when compared with $39,535,000
for the same period of the prior year. The increase was attributable to MGM
GRAND LAS VEGAS which had food and beverage revenues of $42,124,000 during the
current period, an increase of $5,429,000 (14.8%) when compared with $36,695,000
in the same period of 1996. This increase resulted from the Company's decision
to operate the Studio Cafe, which had been a leased facility during the 1996
period. MGM GRAND AUSTRALIA reported food and beverage revenues of $3,442,000,
representing an increase of $578,000 (20.2%) when compared with $2,864,000
during the same period in the prior year.
Consolidated entertainment, retail and other revenues decreased
$5,880,000 (9.5%) from $62,111,000 in the 1996 period to $56,231,000 in the 1997
period. The decrease in entertainment, retail and other revenues is a result of
lower EFX revenues, lower theme park revenues and lower midway/arcade revenues
due to downsizing the facility. These decreases were partially offset by
increases in MGM Grand Garden Arena revenues and increased revenues from the
SkyScreamer thrill ride which was not operational during the 1996 period.
Income from unconsolidated affiliate was $29,428,000 for the six months
ended June 30, 1997, representing the Company's 50% share of NYNY's operating
income. The operating results from NYNY were not consolidated with those of the
Company since consolidation is required only with greater than 50% ownership
(see Note 1).
Consolidated operating expenses for the 1997 period were $296,177,000,
representing a decrease of $344,000 when compared with $296,521,000 for the
same period last year. The overall decrease was due to MGM Grand Australia
offset by increases in MGM Grand Las Vegas. The increases at MGM GRAND LAS
VEGAS were due to increased casino expenses related to the Tyson/Holyfield
event and the slot club, increased food and beverage expenses and advertising
expenses offset by lower expenses related to EFX and lower midway/arcade
expenses. Additionally, the provision for doubtful accounts and discounts
decreased by $5,884,000 at MGM Grand Las Vegas as a result of changes in
anticipated collectibility and collections made on previously reserved
receivable balances. MGM GRAND AUSTRALIA operating expenses decreased
$4,680,000 (22.8%) from $20,544,000 in the 1996 period to $15,864,000 in the
1997 period as a result of continuing cost containment efforts.
Interest income of $580,000 for the period ended June 30, 1997 decreased
by $2,842,000 from $3,422,000 in the same period of 1996. The decrease was
attributable to lower invested cash balances at MGM Grand Las Vegas during the
1997 period.
Interest expense for the six months ended June 30, 1997 of $1,242,000
(net of amounts capitalized) decreased by $30,497,000 when compared with
$31,739,000 in the same period of 1996. The decrease in the 1997 period was
primarily due to the defeasance of the MGM Grand Hotel Finance Corp. First
Mortgage Notes (see Note 3) in the third quarter of 1996. Also, the Company
recognized interest expense from unconsolidated affiliate of $5,008,000 during
the 1997 period.
- 12 -
<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 (CONTINUED)
Income tax provision of $36,365,000 has been recorded at a rate of 36.5%
for the six months ended June 30, 1997, compared with $13,696,000 in 1996 at a
rate of 19.9% since no provision was recorded in the first quarter due to the
benefit resulting from the reduction of the valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997 and December 31, 1996, the Company held cash and
cash equivalents of $47,413,000 and $61,412,000, respectively. Cash provided by
operating activities for the first six months of 1997 was $69,996,000 compared
with $108,465,000 for the same period of 1996.
On May 6, 1996, MGM Grand Las Vegas announced details of a 30-month,
$250,000,000 Master Plan designed to transform the facility into "The City of
Entertainment." The Master Plan, which on June 3, 1997 was enhanced and
increased to more than $700,000,000, calls for a new 1,500-room "Marriott
Marquis at the MGM Grand"; expansion of the resort's casino capacity by nearly
20 percent to more than 200,000 square feet; a "Mansion at the MGM Grand"
offering 30 exclusive suites and villas; a 380,000 square foot state-of-the-art
conference center; a 6.6-acre Shangri-La pool and spa complex; significantly
expanded and improved parking facilities; and a new 45-foot polished bronze lion
sculpture on a 25-foot pedestal, which will be the resort's signature, adjoining
a re-themed entertainment casino that will include a Rainforest Cafe and a
nightclub. The Company also announced that by the year 2000, it plans to begin
construction of a 500-room Ritz-Carlton Hotel at MGM Grand Las Vegas -- The City
of Entertainment. The Marriott Marquis and the Ritz-Carlton Hotel at the MGM
Grand Las Vegas are contingent upon the signing of definitive agreements. As a
result of the increased expansion plans, the Company anticipates the disposition
of assets in the third quarter of 1997 of approximately $28,000,000 before any
income tax benefit. Approximately $195,624,000 is expected to be expended
during 1997 related to the Master Plan, of which $37,597,000 has been expended
through June 30, 1997.
Capital expenditures during the first six months of 1997 were
$70,622,000, consisting primarily of $19,363,000 related to MGM Grand Las Vegas
for general property improvements, $37,597,000 for the Master Plan project,
$1,680,000 at MGM Grand Australia for general property improvements and
$11,982,000 for MGM Grand Atlantic City land purchases and pre-construction
activities. The total capital expenditures remaining for 1997 related to general
property improvements are approximately $32,231,000 for MGM Grand Las Vegas and
approximately $1,043,000 for MGM Grand Australia. During the remainder of 1997,
the Company also anticipates capital expenditures of approximately $37,003,000
related to land acquisitions and pre-construction activities for MGM Grand
Atlantic City.
The Company made a capital contribution of $7,000,000 to NYNY LLC during
the first six months of 1997. As a lender requirement for the project
financing, both the Company and Primadonna were required to enter into a joint
and several Keep-Well Agreement (see Note 3). The Company also received
$6,720,000 in income tax distributions from NYNY LLC during the six months ended
June 30, 1997.
The Company expects to finance operations and capital expenditures
through cash flow from operations, cash on hand and the bank lines of credit.
SAFE HARBOR PROVISION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
report contains statements that are forward-looking, such
- 13 -
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
SAFE HARBOR PROVISION (CONTINUED)
as statements relating to plans for future expansion and other business
development activities, as well as other capital spending, financing sources,
the effects of regulation (including gaming and tax regulations) and
competition. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ from those expressed in any forward-
looking statements made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, those relating to development and
construction activities, dependence on existing management, leverage and debt
service (including sensitivity to fluctuations in interest rates), domestic or
global economic conditions (including sensitivity to fluctuations in foreign
currencies), changes in federal or state tax laws or the administration of such
laws, changes in gaming laws or regulations (including the legalization of
gaming in certain jurisdictions) and application for licenses and approvals
under applicable jurisdictional laws and regulations (including gaming laws and
regulations).
- 14 -
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Items 2, 3 and 5 of Part II are not applicable.
ITEM 1. LEGAL PROCEEDINGS
On April 5, 1996, a lawsuit was filed in the Superior Court of
California, County of Los Angeles by Sheldon Gordon and Randy Brant against the
Company. The suit alleges that the Company breached an oral joint venture
agreement to have real estate developers Gordon/Brant design and develop a
retail and entertainment center at the portion of the hotel/casino which fronts
the Strip. They are suing for $350,000 in costs advanced in anticipation of the
project being constructed, as well as for damages in excess of $100,000,000 from
lost profits that would have resulted from the project, and damage to their
reputations. Management believes that the claims are totally without merit and
does not expect that the lawsuit will have a material adverse effect on the
Company's financial condition or results of operations. On July 8, 1996, the
jurisdiction of the lawsuit was transferred to the U.S. District Court for the
District of Nevada.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS AT THE ANNUAL
SHAREHOLDER MEETING HELD ON MAY 6, 1997.
<TABLE>
<CAPTION>
(A) The following persons were elected Directors: Share Voting Results
----------------------------------
For Withheld/Not Voted
---------- ---------------------
<S> <C> <C>
James D. Aljian 53,838,960 332,582
Fred Benninger 53,862,065 309,477
Terry Christensen 53,888,765 282,777
Glenn A. Cramer 53,862,650 308,892
Willie D. Davis 53,888,517 283,025
Alexander M. Haig, Jr. 53,833,907 337,635
Kirk Kerkorian 53,835,121 336,421
J. Terrence Lanni 53,863,535 308,007
Walter M. Sharp 53,864,965 306,977
Alex Yemenidjian 53,863,120 308,422
Jerome B. York 53,837,960 333,582
</TABLE>
(B) Approval of an amendment of the Company's Certificate of Incorporation.
<TABLE>
<CAPTION>
Share Voting Results:
<S> <C>
For 54,098,862
Against 41,407
Abstain 31,273
</TABLE>
(C) Approval of the Proposed Annual Performance Base Incentive Plan for
Executive Officers.
<TABLE>
<CAPTION>
Share Voting Results:
<S> <C>
For 53,907,009
Against 218,258
Abstain 46,275
</TABLE>
- 15 -
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION (CONTINUED)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS AT THE ANNUAL
SHAREHOLDER MEETING HELD ON MAY 6, 1997 (CONT.).
(D) Approval for an amendment to the Company's Nonqualified Stock Option
Plan.
<TABLE>
<CAPTION>
Share Voting Results:
<S> <C>
For 49,921,863
Against 4,197,424
Abstain 52,255
</TABLE>
(E) Ratification of the selection of Arthur Andersen LLP as independent
auditors.
<TABLE>
<CAPTION>
Share Voting Results:
<S> <C>
For 54,131,045
Against 16,808
Abstain 23,689
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
EX99.1 Press Release dated June 3, 1997
EX99.2 Press Release dated July 23, 1997
(B) Reports on Form 8-K
Bank of America Senior Secured $1,250,000,000 Credit Facility dated July
17, 1997. A report on Form 8-K dated July 23, 1997 was filed with
respect to the amended, restated and extended $1,250,000,000 Senior
Secured Bank Credit Facility.
- 16 -
<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 11, 1997 /s/ Alejandro Yemenidjian
-------------------------------------
Alejandro Yemenidjian
President, Chief Operating
Officer, and Chief Financial Officer
(principal financial officer)
Date: August 11, 1997 /s/ Scott Langsner
-------------------------------------
Scott Langsner
Secretary/Treasurer
(principal accounting officer)
- 17 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 0 47,413
<SECURITIES> 0 0
<RECEIVABLES> 0 101,135
<ALLOWANCES> 0 (25,099)
<INVENTORY> 0 16,259
<CURRENT-ASSETS> 0 173,930
<PP&E> 0 1,097,065
<DEPRECIATION> 0 (168,226)
<TOTAL-ASSETS> 0 1,292,700
<CURRENT-LIABILITIES> 0 146,807
<BONDS> 0 0
0 0
0 0
<COMMON> 0 580
<OTHER-SE> 0 1,043,138
<TOTAL-LIABILITY-AND-EQUITY> 0 1,292,700
<SALES> 225,114 437,711
<TOTAL-REVENUES> 209,085 406,583
<CGS> 0 0
<TOTAL-COSTS> 145,800 281,847
<OTHER-EXPENSES> 3,289 4,778
<LOSS-PROVISION> 5,917 14,330
<INTEREST-EXPENSE> 2,811 6,250
<INCOME-PRETAX> 51,437 99,514
<INCOME-TAX> 18,438 36,365
<INCOME-CONTINUING> 32,999 63,149
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 32,999 63,149
<EPS-PRIMARY> 0.56 1.07
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
[LETTERHEAD OF MGM GRAND, INC.]
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE CONTACT: Alex Yemenidjian
- --------------------- President, COO&CFO
(702) 891-3300
MGM GRAND INCREASES EXPANSION PLAN
----------------------------------
FOR "CITY OF ENTERTAINMENT" TO MORE THAN $700 MILLION
-----------------------------------------------------
ANNOUNCES PLANS FOR ADDITIONS TO LAS VEGAS RESORT
-------------------------------------------------
THAT INCLUDE MARRIOTT MARQUIS AND RITZ-CARLTON HOTELS
-----------------------------------------------------
LAS VEGAS, NEVADA, JUNE 3, 1997 -- MGM Grand, Inc. (NYSE:MGG) today announced
significant additions and enhancements that will increase its investment to more
than $700 million for the ongoing transformation of the 114-acre MGM Grand
Hotel/Casino resort in Las Vegas into "The City of Entertainment." The company
had previously announced a $250 million master plan.
The plans call for a new 1,500-room "Marriott Marquis at the MGM Grand;"
expansion of the resort's casino capacity by nearly 20 percent to more than
200,000 square feet; a "Mansion at the MGM Grand" offering 30 exclusive suites
and villas; a 380,000-square-foot state-of-the-art conference center; a 6.6-acre
Shangri-La pool and spa complex; significantly expanded and improved parking
facilities; and a new 45-foot polished bronze lion sculpture on a 25-foot
pedestal -- which will be the resort's signature -- adjoining a re-themed
entertainment casino that will include a Rainforest Cafe and a nightclub. The
company also announced that by the year 2000, it plans to begin construction of
a 500-room Ritz-Carlton Hotel at MGM Grand Las Vegas -- The City of
Entertainment.
MGM Grand, Marriott International, Inc. and The Ritz-Carlton Hotel Company,
L.L.C., have agreed in principle, subject to the negotiation of definitive
agreements, to develop the Marriott Marquis and Ritz-Carlton hotels. MGM Grand
will be the owner of the hotels with Marriott and Ritz-Carlton, respectively,
serving as the management operators.
-more-
<PAGE>
2-2-2-2
J. Terrence Lanni, MGM Grand, Inc.'s chairman and chief executive officer,
said, "Our affiliation with the Marriott and Ritz-Carlton organizations will
afford us access to the world's most extensive marketing and reservation
system."
Marriott's reservation system generates 33 million reservations annually
and is staffed by more than 1,600 sales professionals throughout the world. It
provides toll-free, 24-hour-per-day access and a distribution network of more
than 19,000 user terminals. Marriott International, Inc. is the world's leading
hospitality company with operations in the U.S. and 50 other countries and
territories.
Alex Yemenidjian, MGM Grand, Inc.'s president, chief operating officer and
chief financial officer, said, "Other than the Ritz-Carlton, the entire City of
Entertainment will be completed by the end of 1999. We expect that
approximately $500 million of the project will be financed from the company's
free cash flow, while the remaining amount will be drawn from the company's $1
billion credit line."
Lanni and Yemenidjian also emphasized that, due to the locations where most
of the construction will take place, the company expects very minor, if any,
construction disruption.
Timetables and other key aspects of the MGM Grand's new master plan are as
follows:
MARRIOTT MARQUIS AT THE MGM GRAND
- ---------------------------------
The Marriott Marquis at the MGM Grand is scheduled for completion by the
Fall of 1999. In addition to its 1,500 room accommodations, the hotel will
feature 40,000 square feet of meeting space, a business center, two restaurants
and lounges. It will be located adjacent to the new conference center, a new
casino and the Shangri-La pool and spa complex.
NEW CASINO FACILITIES
- ---------------------
A new 30,000-square-foot casino will be built adjacent to the new Marriott
Marquis at the MGM Grand, bringing total casino capacity at the MGM Grand to
more than 200,000 square feet.
-more-
<PAGE>
3-3-3-3
THE MANSION AT THE MGM GRAND
- ----------------------------
The Mansion at the MGM Grand, featuring 30 private suites and villas, will
be offered exclusively to select MGM Grand casino guests. Inspired by Tuscan
architecture, these private suites and villas will range from 3,000 to 14,000
square feet. The Mansion will feature exquisite villas and suites which will
be entirely enclosed by an atrium highlighted by formal gardens. Both indoor and
outdoor pools will be featured at The Mansion. Construction of The Mansion at
the MGM Grand will begin this year and is scheduled for completion in late 1998.
LION SCULPTURE/ENTERTAINMENT CASINO
- -----------------------------------
The front of the MGM Grand property on Las Vegas Blvd. (Strip) and
Tropicana Ave. is currently being re-themed. A regal 45-foot polished bronze
lion will rest atop a 25-foot pedestal at the corner of the Strip and Tropicana
Ave. This lion, weighing 50 tons, will be the largest bronze sculpture in the
United States. The sculpture will be framed by water fountains and extensive
landscaping. Video display screens at the exterior and interior of the Strip
entry will be among the largest ever constructed. Fifteen exterior screens
ranging in sizes up to 60-feet high will be used to create the exterior facade.
There will also be two high-resolution screens over the pedestrian walkways
connecting the New York-New York and Tropicana hotel/casinos to the MGM Grand.
The new entertainment casino, formerly the location of Emerald City, will
include additional slot machines and table games, three giant entertainment
screens, a new yet-to-be-named nightclub, a Rainforest Cafe, and a remodeled
buffet.
CONFERENCE CENTER
- -----------------
The conference center is currently under construction and will open in
March of 1998. This 380,000-square-foot facility will include a
63,000-square-foot exhibit hall and a 50,000-square-foot column-free ballroom
space, both of which can be divided into multiple meeting rooms. There will also
be 93,000 square feet of pre-function space, a full-service kitchen, and many
other features that will combine to provide an unequaled conference facility.
Meeting rooms on the center's mezzanine level will provide an unparalleled view
of the Shangri-La pool and spa. The conference facility has been designed to be
the most upscale of its kind, and already enjoys a significant amount of advance
bookings.
-more-
<PAGE>
4-4-4-4
SHANGRI-LA POOL AND SPA COMPLEX
- -------------------------------
Located on 6.6 acres of land and currently under construction, the
Shangri-La pool and spa complex is designed to be the most elegant swimming and
sunbathing experience in the world. Set in a lavish environment with a system
of connected pools and tributaries, the complex will feature several pools,
lush landscaping, rivers, bridges, fountains and waterfalls.
PARKING FACILITIES
- ------------------
The construction of an employee parking garage as well as the widening of
existing spaces in the current guest parking facility will address the
anticipated demand for the entire City of Entertainment. Speed ramps will be
featured in both parking garages to ease ingress and egress. Construction of the
employee parking garage will begin this Summer and will be located immediately
north of the Grand Garden Arena. The total number of parking spaces at the MGM
Grand will increase to 13,300.
OTHER CITY OF ENTERTAINMENT FEATURES
- ------------------------------------
Other features of The City of Entertainment currently underway include
upgrades to the MGM Grand's casino areas and room accommodations; major
improvements and additions to the MGM Grand Adventures theme park; and
redecoration of the resort's 52 penthouse luxury suites.
MGM Grand, Inc. is an entertainment, hotel and gaming company headquartered
in Las Vegas, Nevada. The company owns and operates the MGM Grand hotel/casino
in Las Vegas, the MGM Grand hotel/casino in Darwin, Australia, and a 50%
interest in the New York-New York hotel/casino in Las Vegas.
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<PAGE>
[LETTERHEAD OF MGM GRAND, INC.]
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE CONTACT: ALEX YEMENIDJIAN
- --------------------- PRESIDENT, COO & CFO
(702) 891-3300
MGM GRAND ANNOUNCES ARRANGEMENTS FOR UP
---------------------------------------
TO $2 BILLION IN FINANCING
--------------------------
LAS VEGAS, NEVADA, JULY 23, 1997 - MGM Grand, Inc. (NYSE:MGG) today announced
that it has amended, increased and extended its bank facility, and has filed a
"shelf" registration statement with the Securities and Exchange Commission for
the potential statement with the Securities and Exchange Commission for the
potential issuance of debt and equity securities.
The Company's credit facility has been increased to $1.25 billion. In addition,
the Company has the right to increase the facility to $1.5 billion, and is
allowed to incur additional pari passu debt financing up to $500 million, and
unlimited subordinated debt, subject to satisfying certain financial covenants.
In total, the Company will have the ability to borrow up to $2 billion plus
unlimited subordinated debt.
MGM Grand enjoys investment grade ratings from both Moody's and Standard and
Poor's. Although the credit facility can become unsecured at the Company's
option upon the unsecured facility receiving equivalent ratings, the company
initially intends to maintain the facility secured. The expanded credit facility
matures in December 2002, with the opportunity to extend the maturity for
successive one year periods. Currently, the Company can borrow from the facility
at a rate of approximately 6.25%.
The financing, along with free cash flow from operations, may be used to
complete the City of Entertainment Master Plan at MGM Grand Las Vegas, to fund
MGM Grand's currently planned projects in other jurisdictions and for general
corporate purposes, including additional development opportunities and potential
acquisitions.
The bank syndication was led by BA securities, Inc. and the group consists of 26
banks, with Bank of America National Trust and Savings Association as
Administrative Agent, and Societe Generale, The Bank of Nova Scotia, Bank of
Scotland, Bankers Trust Company, CIBC Inc., Commerzbank AG-Los Angeles Branch,
The Long Term Credit Bank of Japan Ltd.-Los Angeles Agency, PNC Bank, National
Association and Wells Fargo Bank, N.A. as Managing Agents, and Fleet Bank, N.A.
as Co-Agent.
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<PAGE>
Upon the shelf registration becoming effective, the Company will be able to
issue up to $600 million of debt and equity securities on terms and conditions
to be determined at the time of sale. Such securities will be offered only by
means of a prospectus which will set forth in detail the terms of the securities
to be sold.
J. Terrence Lanni, the Company's Chairman and Chief Executive Officer said, "The
$2 billion financing package, when combined with our strong cash flow from
existing operations, will give us the resources and flexibility to roll out our
previously announced expansion projects and take advantage of other
opportunities."
Alex Yemenidjian, the Company's President, Chief Operating Officer and Chief
Financial Officer said, "Our strong operations and balance sheet have made these
new financing arrangements possible. This is an important step in positioning
MGM Grand as the premier name in gaming entertainment."
MGM Grand, Inc. is an entertainment, hotel and gaming company headquartered in
Las Vegas, Nevada. The Company owns and operates the MGM Grand Hotel/Casino in
Las Vegas, the MGM Grand Hotel/Casino in Darwin, Australia, and a 50% interest
in the New York-New York Hotel/Casino in Las Vegas.
A registration statement relating to the securities covered by the "shelf"
registration statement has been filed with the Securities and Exchange
Commission but has not yet become effective. These securities may not be sold
nor may offers to buy to be accepted prior to the time the registration
statement becomes effective. This press release does not constitute an offer to
sell or the solicitation of any offer to buy, nor shall there be any sale of the
securities covered by the "shelf" registration statement in any State wherein
such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of such State.
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