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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
(Amendment No. )
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MGM GRAND, INC.
(Name of Issuer and Person Fling Statement)
Common Stock, par value $.01 per share
(Title of Class of Securities)
552953101
(CUSIP Number of Class of Securities)
Scott Langsner
Secretary/Treasurer
MGM Grand, Inc.
3799 Las Vegas Blvd. South
Las Vegas, Nevada 89109
(702) 891-3333
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person Fiing Statement)
Copy to:
Janet S. McCloud, Esq.
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP
2121 Avenue of the Stars, 18th Foor
Los Angeles, California 90067
(310) 553-3000
June 17, 1999
(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee
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$300,000,000 $60,000
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* Calculated solely for purposes of determining the filing fee. Determined
pursuant to Rule 0-11(b)(1), based upon the purchase of 6,000,000 shares at
$50.00 per share.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
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This Issuer Tender Offer Statement on Schedule 13E-4 (the "Statement")
relates to the tender offer by MGM Grand, Inc., a Delaware corporation, to
purchase up to 6,000,000 shares of common stock, par value $.01 per share (the
"Common Stock"), at a price, net to the seller in cash, of $50.00 per share,
upon the terms and subject to the conditions set forth in the offer to
purchase, dated June 17, 1999 (the "offer to purchase") and the related letter
of transmittal, which are herein collectively referred to as the "offer."
Copies of such documents are filed as Exhibits (a)(1) and (a)(2),
respectively, to this Statement.
Item 1. Security And Issuer.
(a) The name of the issuer is MGM Grand, Inc., a Delaware corporation. The
address of its principal executive offices is 3799 Las Vegas Boulevard South,
Las Vegas, Nevada 89109 (telephone number (702) 891-3333).
(b) The information set forth in "Introduction," "Section 1. Number of
Shares; Proration" and "Section 9. Interests of Directors and Executive
Officers; Transactions and Arrangements Concerning the Shares" in the offer to
purchase is incorporated herein by reference. The offer is being made to all
holders of shares of the Common Stock, including officers, directors and
affiliates of the company. MGM Grand has been advised that while most of its
directors and senior executive officers do not intend to tender shares in the
offer, some may tender shares they own as well as shares subject to
exercisable options held by them. MGM Grand is further advised that Kirk
Kerkorian and Tracinda Corporation, a Nevada corporation wholly owned by
Mr. Kerkorian, its principal stockholders, do not intend to tender any of
their shares pursuant to the offer. However, Mr. Kerkorian has requested MGM
Grand to register for sale by him of up to 3,894,406 shares of its common
stock, which is the number of shares he owns directly and is the approximate
number of shares he and Tracinda could have sold in the tender offer had they
elected to participate and assuming full participation by all stockholders.
Any such shares will only be sold by means of a prospectus after completion of
the tender offer in the open market or through privately negotiated
transactions as market conditions warrant and as he may determine.
(c) The information set forth in "Introduction" and "Section 7. Price Range
of Shares; Dividends" in the offer to purchase is incorporated herein by
reference.
(d) Not applicable.
Item 2. Source and Amount of Funds or Other Consideration.
(a)-(b) The information set forth in "Section 10. Source and Amount of
Funds" in the offer to purchase is incorporated herein by reference.
Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer.
(a)-(j) The information set forth in "Introduction," "Section 8. Background
and Purpose of the Offer; Certain Effects of the Offer," "Section 9. Interests
of Directors and Executive Officers; Transactions and Arrangements Concerning
the Shares," "Section 10. Source and Amount of Funds" and "Section 12. Effects
of the Offer on the Market for Shares; Registration Under the Exchange Act" in
the offer to purchase is incorporated herein by reference.
Item 4. Interest in Securities of the Issuer.
The information set forth in "Section 9. Interests of Directors and
Executive Officers; Transactions and Arrangements Concerning the Shares" and
"Schedule I--Certain Transactions Involving Shares" in the offer to purchase
is incorporated herein by reference.
Item 5. Contracts, Arrangements, Understandings or Relationships with Respect
to the Issuer's Securities.
The information set forth in "Introduction," "Section 8. Background and
Purpose of the Offer; Certain Effects of the Offer" and "Section 9. Interests
of Directors and Executive Officers; Transactions and Arrangements Concerning
the Shares" in the offer to purchase is incorporated herein by reference.
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Item 6. Persons Retained, Employed or to Be Compensated.
The information set forth in "Introduction" and "Section 16. Fees and
Expenses" in the offer to purchase is incorporated herein by reference.
Item 7. Financial Information.
(a)-(b) The information set forth in "Section 11. Certain Information About
MGM Grand" in the offer to purchase is incorporated herein by reference. The
information set forth (i) on pages 29 through 49 in Exhibit 13 to MGM Grand's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed
as Exhibit (g)(1) hereto; and (ii) on pages 2 through 14 of MGM Grand's
Quarterly Report on Form 10-Q for the period ended March 31, 1999, filed as
Exhibit (g)(2) hereto, in each case, is incorporated herein by reference.
Item 8. Additional Information.
(a) Not applicable.
(b) The information set forth in "Section 13. Certain Legal Matters" in the
offer to purchase is incorporated herein by reference.
(c) The information set forth in "Section 12. Effects of the Offer on the
Market for Shares; Registration Under the Exchange Act" in the offer to
purchase is incorporated herein by reference.
(d) Not applicable.
(e) The information set forth in the offer to purchase and the related
letter of transmittal, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively, is incorporated herein by reference.
Item 9. Material to Be Filed as Exhibits.
<TABLE>
<C> <S>
(a)(1) Form of offer to purchase dated June 17, 1999.
(a)(2) Form of letter of transmittal.
(a)(3) Form of notice of guaranteed delivery.
(a)(4) Form of letter to brokers, dealers, commercial banks, trust companies
and other nominees.
(a)(5) Form of letter to clients for use by brokers, dealers, commercial
banks, trust companies and other nominees.
(a)(6) Press release issued by MGM Grand dated June 10, 1999.
(a)(7) Form of summary advertisement dated June 17, 1999.
(a)(8) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(9) (1) Form of Memorandum dated June 17, 1999 to holders of MGM Grand
options; (2) Instructions for tender of options; and (3) Option
election form.
(b) Amended and Restated Loan Agreement, dated as of July 17, 1997, as
amended, between MGM Grand, as borrower, MGM Grand Atlantic City,
Inc., as co-borrower, Bank of America NT&SA, as administrative agent,
and the banks named therein (incorporated by reference to Exhibit 10
to MGM Grand's Current Report on Form 8-K dated July 23, 1997 and
Exhibits 10(3)(a) and 10(3)(b) to MGM Grand's Annual Report on Form
10-K for the fiscal year ended December 31, 1997).
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Pages 29 through 49 of Exhibit 13 to MGM Grand's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998.
(g)(2) Pages 2 through 14 of MGM Grand's Quarterly Report on Form 10-Q for
the period ended March 31, 1999.
(g)(3) Consent of independent public accountants.
</TABLE>
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
MGM GRAND, INC.
By: /s/ SCOTT LANGSNER
-----------------------------------
Scott Langsner
Secretary/Treasurer
Dated: June 17, 1999
4
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INDEX TO EXHIBITS
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Item Description Page
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<C> <S> <C>
(a)(1) Form of offer to purchase dated June 17, 1999.
(a)(2) Form of letter of transmittal.
(a)(3) Form of notice of guaranteed delivery.
(a)(4) Form of letter to brokers, dealers, commercial banks, trust
companies and other nominees.
(a)(5) Form of letter to clients for use by brokers, dealers,
commercial banks, trust companies and other nominees.
(a)(6) Press release issued by MGM Grand dated June 10, 1999.
(a)(7) Form of summary advertisement dated June 17, 1999.
(a)(8) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(9) (1) Form of Memorandum dated June 17, 1999 to holders of MGM
Grand options; (2) Instructions for tender of options; and (3)
Option election form.
(b) Amended and Restated Loan Agreement, dated as of July 17, 1997,
as amended, between MGM Grand, as borrower, MGM Grand Atlantic
City, Inc., as co-borrower, Bank of America NT&SA, as
administrative agent, and the banks named therein (incorporated
by reference to Exhibit 10 to MGM Grand's Current Report on Form
8-K dated July 23, 1997 and Exhibits 10(3)(a) and 10(3)(b) to
MGM Grand's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997).
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Pages 29 through 49 of Exhibit 13 to MGM Grand's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998.
(g)(2) Pages 2 through 14 of MGM Grand's Quarterly Report on Form 10-Q
for the period ended March 31, 1999.
(g)(3) Consent of independent public accountants.
</TABLE>
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EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
by
MGM GRAND, INC.
UP TO 6,000,000 SHARES OF ITS COMMON STOCK AT A PURCHASE
PRICE OF $50.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, JULY 23, 1999
UNLESS THE OFFER IS EXTENDED.
MGM Grand, Inc., a Delaware corporation, invites its stockholders to tender
shares of its common stock, par value $.01 per share, to the company at a
price of $50.00 per share in cash, upon the terms and subject to the
conditions set forth in this offer to purchase, the related letter of
transmittal and the option election form and related instructions, which
together constitute the offer. As part of the offer, MGM Grand is permitting
tenders of shares in connection with the conditional exercise by holders of
exercisable stock options granted under our stock option plans having exercise
prices below $50.00. We will pay $50.00 per share, net to the seller in cash,
or, in the case of option shares, $50.00 less the exercise price and
applicable withholding taxes, for up to 6,000,000 shares validly tendered and
not withdrawn, upon the terms and subject to the conditions of the offer,
including the proration terms. MGM Grand reserves the right, in its sole
discretion, to purchase more than 6,000,000 shares pursuant to the offer.
The offer is not conditioned on any minimum number of shares being tendered.
The offer is, however, subject to certain other conditions. See Section 6.
The common stock is listed and principally traded on the New York Stock
Exchange, Inc. under the symbol "MGG." On June 10, 1999, the last full trading
day on the NYSE prior to the announcement by the company of the offer,
including the price and number of shares sought, the closing per share sales
price as reported on the NYSE Composite Tape was $43.125. Stockholders are
urged to obtain current market quotations for the shares. See Section 7.
The board of directors of MGM Grand has approved the offer. However,
stockholders must make their own decisions whether to tender shares and, if
so, how many shares to tender. Neither MGM Grand nor its board of directors
makes any recommendation as to whether to tender or refrain from tendering
shares. MGM Grand has been advised that while most of its directors and senior
executive officers do not intend to tender shares in the offer, some may
tender shares they own as well as shares subject to exercisable options held
by them. MGM Grand has been further advised that Kirk Kerkorian and Tracinda
Corporation, a Nevada corporation wholly owned by Mr. Kerkorian, its principal
stockholders, do not intend to tender any shares. However, Mr. Kerkorian has
requested MGM Grand to register for sale by him up to 3,894,406 shares, which
is the number of shares he owns directly and which is the approximate number
of shares he and Tracinda could have sold in the offer had they elected to
participate assuming full participation by all stockholders. Any such shares
will only be sold by means of a prospectus after completion of the offer in
the open market or through privately negotiated transactions as market
conditions warrant and as he may determine.
THE DEALER MANAGER FOR THE OFFER IS:
Donaldson, Lufkin & Jenrette
The Date of this Offer to Purchase is June 17, 1999.
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TABLE OF CONTENTS
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Section Page
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Summary................................................................... 4
Introduction.............................................................. 5
The Offer................................................................. 6
1. Number of Shares; Proration........................................... 6
2. Tenders by Owners of Fewer than 100 Shares............................ 8
3. Procedure for Tendering Shares........................................ 8
4. Withdrawal Rights..................................................... 13
5. Purchase of Shares and Payment of Purchase Price...................... 14
6. Certain Conditions of the Offer....................................... 15
7. Price Range of Shares................................................. 17
8. Background and Purpose of the Offer; Certain Effects of the Offer..... 17
9. Interests of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares..................................... 18
10. Source and Amount of Funds............................................ 19
11. Certain Information about MGM Grand................................... 20
12. Effect of the Offer on the Market for Shares; Registration under the
Securities Exchange Act................................................ 27
13. Certain Legal Matters................................................. 28
14. Certain United States Federal Income Tax Consequences................. 28
15. Extension of the Offer; Termination; Amendments....................... 32
16. Fees and Expenses..................................................... 33
17. Miscellaneous......................................................... 34
SCHEDULE I--Certain Transactions Involving Shares......................... 35
</TABLE>
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IMPORTANT
General
Except as described below, any MGM Grand stockholder desiring to accept the
offer should either:
(1) complete and sign the letter of transmittal or a facsimile thereof in
accordance with the instructions in the letter of transmittal, mail or deliver
it with any required signature guarantee and any other required documents to
ChaseMellon Shareholder Services, LLC as depositary, and either mail or
deliver the stock certificates for such shares to the depositary, with all
such other documents, or follow the procedure for book-entry delivery set
forth in Section 3, or
(2) request the stockholder's broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for him or her.
An MGM Grand stockholder having shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact that
broker, dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such shares. Stockholders who desire to tender
shares and whose certificates for such shares are not immediately available or
who cannot comply with the procedure for book-entry transfer on a timely basis
or whose other required documentation cannot be delivered to the depositary,
in any case, by the expiration of the offer should tender such shares by
following the procedures for guaranteed delivery set forth in Section 3. For
shares to be properly tendered, the depositary must timely receive a properly
completed letter of transmittal.
If you have any questions or requests for assistance or for additional
copies of this offer to purchase, the letter of transmittal or the notice of
guaranteed delivery, please direct them to ChaseMellon Shareholder Services,
LLC, as information agent, at its address and telephone number set forth on
the back cover of this offer to purchase.
Special Instructions for Holders of Exercisable Options
Holders of exercisable options who wish to participate in the offer by
conditionally tendering the options must follow the instructions and
procedures set forth in the documents described below. These documents are
also part of the terms of the offer.
. Holders of exercisable options should read this offer to purchase, the
related letter of transmittal and the option election form and related
instructions, as they contain the terms of the offer. The special
instructions in the documents referred to below supplement the
information contained in this offer to purchase and the related letter
of transmittal. Holders of exercisable options should also see "Certain
United States Federal Income Tax Consequences--Tax Considerations for
Holders of Option Shares" in Section 14 for information about tax
considerations and Section 5 for special payment procedures that apply
to such holders if they participate in the offer.
. Holders of exercisable options who wish to tender option shares in the
offer should review the information and must follow the instructions
contained in the materials printed on green paper.
We have not authorized any person to make any recommendation on behalf of us
as to whether stockholders should tender or refrain from tendering shares
pursuant to the offer. We have not authorized any person to give any
information or to make any representation in connection with the offer on our
behalf other than those contained in this offer to purchase or in the letter
of transmittal. Do not rely on any such recommendation or any such information
or representations, if given or made, as having been authorized by us.
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SUMMARY
This general summary is provided for your convenience and is qualified in
its entirety by reference to the full text and more specific details of this
offer to purchase.
<TABLE>
<C> <S>
Number of Shares to be Purchased 6,000,000 shares, including option shares.
Purchase Price $50.00 net to the seller in cash or, in the
case of option shares, $50.00 less the per
share exercise price and the applicable
withholding tax amount.
How to Tender Shares See Section 3. Call the information agent
(ChaseMellon Shareholder Services, LLC) at
(800) 774-5469 or consult your broker for
assistance.
Brokerage Commissions None.
Stock Transfer Tax None, if payment is made to the registered
holder.
Expiration and Proration Dates Friday, July 23, 1999, at 5:00 p.m., New York
City time, unless extended by us.
Payment Date As soon as practicable after the expiration
date.
Position of the Company Neither we nor our board of directors makes
any recommendation to any stockholder as to
whether to tender or refrain from tendering
shares.
Withdrawal Rights Tendered shares may be withdrawn at any time
until 5:00 p.m., New York City time, on
Friday, July 23, 1999 (unless the offer is
extended by the company) and, unless
previously purchased, at any time after 12:00
midnight, New York City time, on Wednesday,
August 11, 1999. See Section 4.
Odd Lots There will be no proration of shares tendered
by any stockholder owning beneficially fewer
than 100 shares in the aggregate (excluding
shares attributable to individual accounts
under the MGM Grand savings plan but
including shares held in the MGM Grand
purchase plan) as of the close of business on
June 15, 1999 and as of the expiration date,
who tenders all such shares prior to the
expiration date and who checks the "Odd Lots"
box in the letter of transmittal.
Further Developments Call the information agent or consult your
broker.
</TABLE>
4
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To the holders of shares of common stock of
MGM Grand, Inc.:
INTRODUCTION
We invite the stockholders of MGM Grand, Inc., a Delaware corporation, to
tender to the company shares of its common stock, par value $.01 per share, at
a price of $50.00 per share in cash, or, in the case of option shares, $50.00
less the per share exercise price and the applicable withholding tax amount,
upon the terms and subject to the conditions set forth in this offer to
purchase and the related letter of transmittal, which together constitute the
"offer." As part of the offer, we invite tenders of shares subject to
exercisable options in connection with the conditional exercise by holders of
exercisable options granted under our stock option plans having an exercise
price of less than $50.00 per share.
We will pay $50.00, net to the seller in cash, or, in the case of option
shares, $50.00 less the per share exercise price and the applicable
withholding tax amount, for up to 6,000,000 shares validly tendered prior to
the expiration date, as defined in Section 1, and not withdrawn, upon the
terms and subject to the conditions of the offer, including the proration
terms described below. We reserve the right, in our sole discretion, to
purchase more than 6,000,000 shares pursuant to the offer.
If, before the expiration date, more than 6,000,000 shares, or such greater
number of shares as the company may decide to purchase, are validly tendered
and not withdrawn, we will, upon the terms and subject to the conditions of
the offer, purchase shares first from all odd lot owners, that is owners of
fewer than 100 shares of the common stock (excluding shares attributable to
individual accounts under the MGM Grand savings plan but including shares held
in the MGM Grand purchase plan) as of June 15, 1999, who validly tender all
their shares and then on a pro rata basis from all other stockholders who
validly tender shares and do not withdraw them prior to the expiration date.
We will return at our own expense all shares not purchased pursuant to the
offer, including shares not purchased because of proration.
The $50.00 purchase price will be paid net to the tendering stockholder in
cash for all shares purchased, except that holders of exercisable options
granted under our stock option plans will be permitted to tender in connection
with the conditional "cashless" exercises of such options and receive the
difference between $50.00 and the exercise price, less applicable withholding
taxes, for each option share purchased by us. Tendering stockholders will not
be obligated to pay brokerage commissions, solicitation fees or, subject to
instruction 7 of the letter of transmittal, stock transfer taxes on the
company's purchase of shares pursuant to the offer. However, any tendering
stockholder or other payee who fails to complete, sign and return to the
depositary the Substitute Form W-9 that is included with the letter of
transmittal may be subject to required backup federal income tax withholding
of 31% of the gross proceeds payable to such stockholder or other payee
pursuant to the offer. See Section 3.
On June 10, 1999, we announced our intention to make an offer to purchase up
to 6,000,000 shares at $50.00 per share as the second half of our 12,000,000
share repurchase program, with the offer to commence on June 17, 1999. We are
making the offer because we believe:
(1) the shares are significantly undervalued in the public market;
(2) in light of our strong financial position, investing in our shares
represents an attractive use of our capital and an efficient way to
provide value to our stockholders; and
(3) the offer will afford to those stockholders who desire liquidity an
opportunity to sell all or a portion of their shares without the usual
transaction costs associated with open market sales.
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After the offer is completed, we expect to have sufficient cash flow and
access to other sources of capital to fund our operations and capital
projects, including completing the transformation of MGM Grand Las Vegas into
the City of Entertainment and developing our proposed hotel/casino projects in
Detroit, Michigan and Atlantic City, New Jersey.
Stockholders who are participants in our employee stock purchase plan may
instruct ChaseMellon Shareholder Services, LLC, as administrator of the
purchase plan, to tender part or all of the shares credited to a participant's
account in the purchase plan by following the instructions set forth in
"Procedure for Tendering Shares--Employee Stock Purchase Plan" in Section 3.
As of June 15, 1999, there were 62,217,545 shares outstanding, net of
treasury shares, and 5,221,901 shares issuable upon exercise of all
outstanding stock options of which 1,875,001 and 2,240,961 shares are
exercisable as of June 15, 1999 and July 23, 1999, respectively. The 6,000,000
shares that we are offering to purchase represent approximately 10% of the
outstanding shares and approximately 9% assuming the exercise of all
outstanding options. The shares are listed on the New York Stock Exchange,
Inc. under the symbol "MGG." On June 10, 1999, the last full trading day on
the NYSE prior to our announcement of the offer, including the purchase price
and number of shares sought, the closing per share sales price, as reported on
the NYSE composite tape, was $43.125. We urge stockholders to obtain current
quotations on the market price of the shares.
THE OFFER
1. Number of Shares; Proration
Upon the terms and subject to the conditions of the offer, we will accept
for payment 6,000,000 shares or such lesser number of shares as are validly
tendered before the expiration date, and not withdrawn in accordance with
Section 4, at a net cash price of $50.00 per share. Holders of exercisable
options granted under our stock option plans having exercise prices below
$50.00 will be permitted to tender in connection with conditional "cashless"
exercises of such options and will receive the difference between $50.00 and
the exercise price less applicable withholding taxes for each option share
purchased by us. The term "expiration date" means 5:00 p.m., New York City
time, on Friday, July 23, 1999, unless and until we in our sole discretion
extend the period of time during which the offer is open, in which event the
term "expiration date" shall refer to the latest time and date at which the
offer, as so extended by us, is scheduled to expire. See Section 15 for a
description of our right to extend the time during which the offer is open and
to delay, terminate or amend the offer. Subject to Section 2 below, if the
offer is oversubscribed, shares tendered and not withdrawn before the
expiration date will be eligible for proration. The shares and option shares
tendered on or prior to the expiration date are the shares subject to
proration.
We reserve the right, in our sole discretion, to purchase more than
6,000,000 shares pursuant to the offer. See Section 15. In accordance with
applicable regulations of the Securities and Exchange Commission, we may
purchase pursuant to the offer an additional number of shares not to exceed 2%
of the outstanding shares without extending the offer. If
(a)(1) we increase or decrease the price to be paid for shares,
(2) we increase or decrease the fee of Donaldson, Lufkin & Jenrette
Securities Corporation, as dealer manager,
(3) we increase the number of shares being sought and such increase in the
number of shares being sought exceeds 2% of the outstanding shares, or
(4) we decrease the number of shares being sought, and
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(b) the offer is scheduled to expire at any time earlier than the expiration
of a period ending on the tenth business day from, and including, the date
that notice of such increase or decrease is first published, sent or given
as specified in Section 15,
then we will extend the offer until the expiration of such ten business day
period. For purposes of the offer, a "business day" means any day that is not
a Saturday, Sunday or federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
The offer is not conditioned on any minimum number of shares being tendered.
The offer is, however, subject to certain other conditions. See Section 6.
We will pay the $50.00 purchase price, or, in the case of option shares,
$50.00 less the exercise price and the applicable withholding tax amount, for
all shares validly tendered prior to the expiration date and not withdrawn,
upon the terms and subject to the conditions of the offer. We will return, at
our expense, as promptly as practicable following the expiration date all
shares which we do not purchase in the offer, including shares we do not
purchase because of proration and all of the options that are not exercised
because of proration.
If the number of shares validly tendered and not withdrawn prior to the
expiration date is less than or equal to 6,000,000 shares (or such greater
number of shares as we may elect to purchase), we will, upon the terms and
subject to the conditions of the offer, purchase at the purchase price all
shares so tendered.
Priority. Upon the terms and subject to the conditions of the offer, in the
event that prior to the expiration date more than 6,000,000 shares (or such
greater number of shares as we may elect to purchase in the offer) are validly
tendered and not withdrawn, we will purchase such validly tendered shares in
the following order of priority:
(1) all shares validly tendered and not withdrawn prior to the expiration
date by any odd lot owner who:
(a) tenders all shares (excluding shares attributable to individual
accounts under the MGM Grand savings plan but including shares
held in the MGM Grand purchase plan) beneficially owned by such
odd lot owner (partial tenders will not qualify for this
preference); and
(b) completes the box captioned "Odd Lots" on the letter of
transmittal and, if applicable, on the notice of guaranteed
delivery; and
(2) after purchase of all of the foregoing shares, all other shares
validly tendered and not withdrawn prior to the expiration date on a
pro rata basis.
Proration. In the event that proration is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Proration for each stockholder tendering shares, other than odd lot owners,
shall be based on the ratio of the number of shares tendered by such
stockholder to the total number of shares tendered by all stockholders, other
than odd lot owners. This ratio will be applied to stockholders tendering
shares, other than odd lot owners, to determine the number of shares that we
will purchase from each such stockholder in the offer. Although we do not
expect to be able to announce the final results of such proration until
approximately seven business days after the expiration date, we will announce
preliminary results of proration by press release as promptly as practicable
after the expiration date. Such preliminary information can be obtained from
the information agent and may be available from a stockholder's broker.
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The same proration factor will be separately applied to option shares which
are tendered, provided that we will purchase option shares in the order in
which the holder of such options indicates on the notice of conditional
exercise.
As described in Section 14, the number of shares that we will purchase from
a stockholder may affect the United States federal income tax consequences to
the stockholder of such purchase and therefore may be relevant to a
stockholder's decision whether to tender shares. The letter of transmittal
affords each tendering stockholder the opportunity to designate the order of
priority in which shares tendered are to be purchased in the event of
proration.
We will mail this offer to purchase and the related letter of transmittal to
record holders of shares as of June 15, 1999 and furnish to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on our
stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of shares.
2. Tenders by Owners of Fewer Than 100 Shares
Upon the terms and subject to the conditions of the offer, we will accept
for purchase, without proration, all shares validly tendered and not withdrawn
on or prior to the expiration date by or on behalf of odd lot owners, that is
stockholders who beneficially owned as of the close of business on June 15,
1999, and continue to beneficially own as of the expiration date, an aggregate
of fewer than 100 shares, excluding shares attributable to individual accounts
under the MGM Grand savings plan, but including shares held in the MGM Grand
purchase plan. To avoid proration, however, an odd lot owner must validly
tender all such shares that such odd lot owner beneficially owns; partial
tenders will not qualify for this preference. This preference is not available
to partial tenders or to owners of 100 or more shares in the aggregate, even
if such owners have separate stock certificates for fewer than 100 such
shares. Any odd lot owner wishing to tender all such shares beneficially owned
by such stockholder in this offer must complete the box captioned "Odd Lots"
in the letter of transmittal and, if applicable, on the notice of guaranteed
delivery. See Section 3 below. Stockholders owning an aggregate of less than
100 shares whose shares are purchased pursuant to the offer will avoid both
the payment of brokerage commissions and any applicable odd lot discounts
payable on a sale of their shares in transactions on the NYSE.
We also reserve the right, but will not be obligated, to purchase all shares
duly tendered by any stockholder who tendered all shares beneficially owned
and who, as a result of proration, would then beneficially own an aggregate of
fewer than 100 shares. If we exercise this right, we will increase the number
of shares that we are offering to purchase in the offer by the number of
shares we purchase through the exercise of such right.
3. Procedure for Tendering Shares
Proper Tender of Shares. For shares, other than option shares, to be validly
tendered pursuant to the offer:
(1) the certificates for such shares, or confirmation of receipt of such
shares pursuant to the procedures for book-entry transfer set forth
below, together with a properly completed and duly executed letter of
transmittal, or manually signed facsimile thereof, with any required
signature guarantees, and any other documents required by the letter of
transmittal, must be received prior to 5:00 p.m., New York City time,
on the expiration date by the depositary at its address set forth on
the back cover of this offer to purchase; or
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(2) the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
Holders of options should not complete the letter of transmittal but should
follow the instructions for tendering shares discussed in the instructions
referred to below. See "--Tenders by Holders of Options." In addition, odd lot
owners who tender all shares must complete the section entitled "Odd Lots" on
the letter of transmittal in order to qualify for the preferential treatment
available to odd lot owners as set forth in Section 2 above.
Tenders by Holders of Exercisable Options. Holders of exercisable options
granted under our stock option plans who wish to participate by conditionally
exercising options and tendering the underlying shares should not complete the
letter of transmittal. They should complete the form discussed in the document
referred to below. In addition, holders of exercisable options who wish to
participate in the offer by conditionally tendering their exercisable options
must follow the instructions and procedures set forth in the documents
described below. These documents are also part of the terms of the offer.
Holders of exercisable options should read this offer to purchase, the
related letter of transmittal and the option election form and related
instructions, as they contain the terms of the offer. Holders of options
should also see "Certain United States Federal Income Tax Consequences--Tax
Considerations for Holders of Options" in Section 14 for information about tax
considerations and Section 5 for special payment procedures that apply to such
holders if they participate in the offer.
Holders of exercisable options who wish to tender option shares in the offer
should review the information and must follow the instructions contained in
the option election form and related instructions printed on green paper. See
Section 5 below "Purchases of Shares and Payment of Purchase Price--Special
Procedures for Holders of Options." In addition, holders of exercisable
options who also hold shares directly may participate in the offer by
following the instructions in this offer to purchase and the letter of
transmittal.
Signature Guarantees and Method of Delivery. No signature guarantee is
required on the letter of transmittal if:
(1) The letter of transmittal is signed by the registered holder of the
shares tendered and payment and delivery are to be made directly to
such registered holder. Registered holder, for purposes of this Section
3, includes any participant in The Depository Trust Company, as the
book-entry transfer facility, whose name appears on a security position
listing as the holder of the shares, or
(2) Shares are tendered for the account of an eligible institution, that is
a member firm of a registered national securities exchange, a member of
the National Association of Securities Dealers, Inc. or a commercial
bank or trust company, not a savings bank or savings and loan
association, having an office, branch or agency in the United States.
In all other cases, all signatures on the letter of transmittal must be
guaranteed by an eligible institution. See Instruction 1 of the letter of
transmittal.
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If a certificate representing shares is registered in the name of a person
other than the signer of a letter of transmittal, or if payment is to be made,
or shares not purchased or tendered are to be issued, to a person other than
the registered holder, the certificate must be endorsed or accompanied by an
appropriate stock power, in either case signed exactly as the name of the
registered holder appears on the certificate, with the signature on the
certificate or stock power guaranteed by an eligible institution. In this
regard, see Section 5 for information with respect to applicable stock
transfer taxes. In all cases, payment for Shares tendered and accepted for
payment pursuant to the offer will be made only after timely receipt by the
depositary of certificates for such shares, or a timely confirmation of a
book-entry transfer of such shares into the depositary's account at the book-
entry transfer facility as described above, a properly completed and duly
executed letter of transmittal, or manually signed facsimile thereof, and any
other documents required by the letter of transmittal.
The method of delivery of all documents, including share certificates, the
letter of transmittal and any other required documents, is at the election and
risk of the tendering stockholder. If you decide to make delivery by mail, we
recommend you use registered mail with return receipt requested, properly
insured.
Book-Entry Delivery. The depositary will establish an account with respect
to the shares at the book-entry transfer facility for purposes of the offer
within two business days after the date of this offer to purchase. Any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of the shares by causing such
facility to transfer such shares into the depositary's account in accordance
with such facility's procedure for such transfer. Even though delivery of
shares may be effected through book-entry transfer into the depositary's
account at the book-entry transfer facility, a properly completed and duly
executed letter of transmittal, or manually signed facsimile thereof, with any
required signature guarantees and other required documents must, in any case,
be transmitted to and received by the depositary at one of its addresses set
forth on the back cover of this offer to purchase prior to the expiration
date. Delivery of the letter of transmittal and any other required documents
to the book-entry transfer facility does not constitute delivery to the
depositary.
Guaranteed Delivery. If a stockholder desires to tender shares pursuant to
the offer and such stockholder's share certificates cannot be delivered to the
depositary prior to the expiration date (or the procedures for book-entry
transfer cannot be completed on a timely basis) or time will not permit all
required documents to reach the depositary before the expiration date, such
shares may nevertheless be tendered provided that all of the following
conditions are satisfied:
(i) such tender is made by or through an eligible institution;
(ii) The depositary receives (by hand, mail, overnight courier, telegram or
facsimile transmission), on or prior to the expiration date, a
properly completed and duly executed notice of guaranteed delivery
substantially in the form MGM Grand has provided with this offer to
purchase, including (where required) a signature guarantee by an
eligible institution in the form set forth in such notice of
guaranteed delivery; and
(iii) the certificates for all tendered shares in proper form for transfer
(or confirmation of book-entry transfer of such shares into the
depositary's account at the book-entry transfer facility), together
with a properly completed and duly executed letter of transmittal (or
manually signed facsimile thereof) and any required signature
guarantees or other documents required by the letter of transmittal,
are received by the depositary within three NYSE trading days after
the date the depositary receives such notice of guaranteed delivery.
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If any tendered shares are not purchased, or if less than all shares
evidenced by a stockholder's certificates are tendered, certificates for
unpurchased shares will be returned as promptly as practicable after the
expiration or termination of the offer or, in the case of shares tendered by
book-entry transfer at the book-entry transfer facility, such shares will be
credited to the appropriate account maintained by the tendering stockholder at
the book-entry transfer facility, in each case without expense to such
stockholder.
Return of Certificates. If we do not purchase all of the tendered shares, or
if less than all shares evidenced by a stockholder's certificates are
tendered, certificates for unpurchased shares will be returned at our expense
as promptly as practicable after the expiration or termination of the offer.
If shares are tendered by book-entry transfer at the book-entry transfer
facility, such shares will be credited to the appropriate account maintained
by the tendering stockholder at the book-entry transfer facility, without
expense to such stockholder.
Backup Federal Income Tax Withholding. Under the United States federal
income tax backup withholding rules, unless an exemption applies under the
applicable law and regulations, 31% of the gross proceeds payable to a
stockholder or other payee pursuant to the offer must be withheld and remitted
to the United States Treasury, unless the stockholder or other payee provides
such person's taxpayer identification number, employer identification number
or social security number, to the depositary and certifies under penalties of
perjury that such number is correct. Therefore, each tendering stockholder
should complete and sign the Substitute Form W-9 included as part of the
letter of transmittal so as to provide the information and certification
necessary to avoid backup withholding, unless such stockholder otherwise
establishes to the satisfaction of the depositary that the stockholder is not
subject to backup withholding. Certain stockholders, including, among others,
all corporations and certain foreign stockholders, in addition to foreign
corporations, are not subject to these backup withholding and reporting
requirements. In order for a foreign stockholder to qualify as an exempt
recipient, that stockholder must submit an IRS Form W-8 or a Substitute Form
W-8, signed under penalties of perjury, attesting to that stockholder's exempt
status. Such statements can be obtained from the depositary. See Instructions
10 and 11 of the letter of transmittal.
To prevent backup federal income tax withholding equal to 31% of the gross
payments made to stockholders for shares purchased pursuant to the offer, each
stockholder who does not otherwise establish an exemption from such
withholding must provide the depositary with the stockholder's correct
taxpayer identification number and provide certain other information by
completing the Substitute Form W-9 included with the letter of transmittal.
For a discussion of certain United States federal income tax consequences to
tendering stockholders, see Section 14.
Withholding For Foreign Stockholders. Even if a foreign stockholder has
provided the required certification to avoid backup withholding, the
depositary will withhold United States federal income taxes equal to 30% of
the gross payments payable to a foreign stockholder or his or her agent unless
the depositary determines that a reduced rate of withholding is available
pursuant to a tax treaty or that an exemption from withholding is applicable
because such gross proceeds are effectively connected with the conduct of a
trade or business within the United States. For this purpose, a foreign
stockholder is any stockholder that is not (1) a citizen or resident of the
United States, (2) a corporation, partnership, or other entity created or
organized in or under the laws of the United States, any State or any
political subdivision thereof, (3) an estate, the income of which is subject
to United States federal income taxation regardless of the source of such
income or (4) a trust if a court within
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the United States is able to exercise primary supervision over the
administration of the trust and one or more United States trustees have the
authority to control all substantial decisions relating to the trust. In order
to obtain a reduced rate of withholding pursuant to a tax treaty, a foreign
stockholder must deliver to the depositary before the payment a properly
completed and executed IRS Form 1001. In order to obtain an exemption from
withholding on the grounds that the gross proceeds paid pursuant to the offer
are effectively connected with the conduct of a trade or business within the
United States, a foreign stockholder must deliver to the depositary a properly
completed and executed IRS Form 4224. The depositary will determine a
stockholder's status as a foreign stockholder and eligibility for a reduced
rate of, or exemption from, withholding by reference to any outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding, e.g., IRS Form 1001 or IRS Form 4224, unless
facts and circumstances indicate that such reliance is not warranted. A
foreign stockholder may be eligible to obtain a refund of all or a portion of
any tax withheld if such stockholder meets the "complete redemption,"
"substantially disproportionate" or "not essentially equivalent to a dividend"
test described in Section 14 or is otherwise able to establish that no tax or
a reduced amount of tax is due. Foreign stockholders are urged to consult
their own tax advisors regarding the application of United States federal
income tax withholding, including eligibility for a withholding tax reduction
or exemption, and the refund procedure. See Instructions 10 and 11 of the
letter of transmittal.
Employee Stock Purchase Plan. As of June 15, 1999, the purchase plan owned
39,303 shares. Shares credited to participants' accounts under the purchase
plan will be tendered by ChaseMellon Stockholder Services, LLC, as
administrator, according to instructions provided to the administrator from
participants in the purchase plan. Shares for which the administrator has not
received timely instructions from participants will not be tendered. The
administrator will make available to the participants whose accounts are
credited with shares under the purchase plan all documents furnished to
stockholders generally in connection with the offer. Each participant may
direct that all, some or none of the shares credited to the participant's
account under the purchase plan be tendered. Participants in the purchase plan
are urged to read the letter of transmittal and related materials carefully.
Tendering Stockholder's Representation and Warranty; MGM Grand's Acceptance
Constitutes an Agreement. It is a violation of Rule 14e-4 under the Securities
Exchange Act of 1934 for a person acting alone or in concert with others,
directly or indirectly, to tender shares for such person's own account unless
at the time of tender and at the expiration date such person (1) has a "net
long position" equal to or greater than the number of shares tendered and will
deliver or cause to be delivered such shares for the purpose of tender to us
within the period specified in the offer, or (2) is the beneficial owner of
equivalent securities (that is other securities immediately convertible into,
exercisable for or exchangeable into shares) and, upon the acceptance of such
tender, will acquire such shares by conversion, exchange or exercise of such
equivalent securities to the extent required by the terms of the offer and
will deliver or cause to be delivered such shares so acquired for the purpose
of tender to us within the period specified in the offer. Rule 14e-4 also
provides a similar restriction applicable to the tender on behalf of another
person. A tender of shares made pursuant to any method of delivery permitted
by the offer will constitute the tendering stockholder's representation and
warranty to us that (1) such stockholder has a "net long position" in shares
or equivalent securities being tendered within the meaning of rule 14e-4, and
(2) such tender of shares complies with Rule 14e-4. Our acceptance for payment
of shares tendered pursuant to the offer will constitute a binding agreement
between the tendering stockholder and us upon the terms and subject to the
conditions of the offer.
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Determinations of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. We will determine, in our sole
discretion, all questions as to the number of shares to be accepted, the price
to be paid therefor and the validity, form, eligibility, including time of
receipt, and acceptance for payment of any tender of shares. Our determination
will be final and binding on all parties. We reserve the absolute right to
reject any or all tenders we determine not to be in proper form or the
acceptance of or payment for which may, in the opinion of our counsel, be
unlawful. We also reserve the absolute right to waive any of the conditions of
the offer and any defect or irregularity in the tender of any particular
shares or any particular stockholder. No tender of shares will be deemed to be
properly made until all defects or irregularities have been cured or waived.
None of MGM Grand, the dealer manager, the depositary, the information agent
or any other person is or will be obligated to give notice of any defects or
irregularities in tenders, and none of them will incur any liability for
failure to give any such notice.
Certificates for shares, together with a properly completed letter of
transmittal and any other documents required by the letter of transmittal,
must be delivered to the depositary and not to the company. Any such documents
delivered to the company will not be forwarded to the depositary and therefore
will not be deemed to be validly tendered.
4. Withdrawal Rights
Except as otherwise provided in this Section 4, tenders of shares pursuant
to the offer are irrevocable. Shares tendered pursuant to the offer may be
withdrawn at any time before the expiration date and, unless the company has
accepted the shares, including option shares, for payment as provided in this
offer to purchase, may also be withdrawn after 12:00 midnight, New York City
time, on Wednesday, August 11, 1999.
For a withdrawal as to shares other than option shares to be effective, the
depositary must receive, at its address set forth on the back cover of this
offer to purchase, a notice of withdrawal in written, telegraphic or facsimile
transmission form on a timely basis. Such notice of withdrawal must specify
the name of the person who tendered the shares to be withdrawn, the number of
shares tendered, the number of shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
shares. If the certificates have been delivered or otherwise identified to the
depositary, then, prior to the release of such certificates, the tendering
stockholder must also submit the serial numbers shown on the particular
certificates evidencing the shares and the signature on the notice of
withdrawal must be guaranteed by an eligible institution, except in the case
of shares tendered by an eligible institution. If shares have been tendered
pursuant to the procedure for book-entry transfer set forth in Section 3, the
notice of withdrawal must specify the name and the number of the account at
the book-entry transfer facility to be credited with the withdrawn shares and
otherwise comply with the procedures of such facility. Holders of exercisable
options must comply with the withdrawal procedures set forth in the
instructions for such holders.
We will determine, in our sole discretion, all questions as to the form and
validity, including time of receipt, of notices of withdrawal. Our
determination will be final and binding on all parties. None of the company,
the dealer manager, the depositary, the information agent or any other person
is or will be obligated to give any notice of any defects or irregularities in
any notice of withdrawal, and none of them will incur any liability for
failure to give any such notice. Withdrawals may not be rescinded, and any
shares properly withdrawn will thereafter be deemed not tendered for purposes
of the offer. However, withdrawn shares may be retendered before the
expiration date by again following any of the procedures described in Section
3.
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If we extend the offer, or if we are delayed in our purchase of shares or
are unable to purchase shares in the offer for any reason, then, without
prejudice to our rights under the offer, the depositary may, subject to
applicable law, retain on our behalf all tendered shares, and such shares may
not be withdrawn except to the extent tendering stockholders are entitled to
withdrawal rights as described in this Section 4.
5. Purchase of Shares and Payment of Purchase Price
Upon the terms and subject to the conditions of the offer, we will purchase
and pay the $50.00 purchase price for all of the shares we accept for payment
in the offer, or, in the case of option shares, $50.00 less the exercise price
and the applicable withholding tax amount, as soon as practicable after the
expiration date. In all cases, we will make prompt payment for shares tendered
and accepted for payment in the offer, subject to possible delay in the event
of proration, but only after the depositary timely receives certificates for
shares, or timely confirmation of a book-entry transfer of such shares into
the depositary's account at one of the book-entry transfer facilities, a
properly completed and duly executed letter of transmittal, or manually signed
facsimile thereof, and any other required documents.
We will pay for the shares, other than option shares, purchased in the offer
by depositing the aggregate purchase price therefor with the depositary, which
will act as agent for tendering holders of such shares for the purpose of
receiving payment from us and transmitting payment to the tendering
stockholders. In the event of proration, we will determine the proration
factor and pay for those tendered shares, including option shares, accepted
for payment as soon as practicable after the expiration date. However, we do
not expect to be able to announce the final results of any such proration
until approximately seven business days after the expiration date. Under no
circumstances will we pay interest on the purchase price including, without
limitation, by reason of any delay in making payment. Certificates for all
shares not purchased, including all shares not purchased due to proration,
will be returned, or, in the case of shares tendered by book-entry transfer,
such shares will be credited to the account maintained with the book-entry
transfer facility by the participant who so delivered such shares, as promptly
as practicable following the expiration date or termination of the offer
without expense to the tendering stockholder. In addition, if certain events
occur, we may not be obligated to purchase shares in the offer. See Section 6.
We will pay all stock transfer taxes, if any, payable on the transfer to us
of shares purchased pursuant to the offer; provided, however, that if payment
of the purchase price is to be made to, or, in the circumstances permitted by
the offer, if unpurchased shares are to be registered in the name of, any
person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person signing the letter
of transmittal, the amount of all stock transfer taxes, if any, whether
imposed on the registered holder or such other person, payable on account of
the transfer to such person will be deducted from the purchase price unless
evidence satisfactory to us of the payment of such taxes or exemption
therefrom is submitted. See Instruction 7 of the letter of transmittal.
Any tendering stockholder or other payee who fails to complete fully, sign
and return to the depositary the Substitute Form W-9 included with the letter
of transmittal may be subject to required backup federal income tax
withholding of 31% of the gross proceeds paid to such stockholder or other
payee pursuant to the offer. See Section 3. Also see Section 3 regarding
federal income tax consequences for foreign stockholders.
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Special Procedures for Holders of Exercisable Options
Holders of exercisable options to purchase shares granted under the
company's stock option plans may tender option shares in connection with the
conditional exercise of exercisable options having exercise prices below
$50.00 per share as part of the offer. Such option holders will instruct the
company, as their agent, to tender part or all of the option shares resulting
from the conditional exercise.
This exercise of options will be "conditional" because the option holder is
deemed to exercise the option only if, and to the extent that, the company
actually purchases the option shares in the offer. If, after taking into
account proration, the company purchases less than all of a holder's option
shares, the options will be exercised, and the option shares purchased, in the
order designated by the holder in the option election form, and the remaining
options will not be considered to have been exercised and will remain
outstanding.
As an accommodation to option holders planning to tender option shares in
the offer, the company will permit a "cashless" exercise of the options for
shares purchased in the offer. In this event, the option holder will not be
required to pay cash for the exercise price, and the consideration received by
the holder whose option shares are purchased in the offer will be the
difference between $50.00 per share and the exercise price per share relating
to the option shares so purchased (less the applicable tax withholding
amount). Option holders who have not exercised their options for cash and
received shares may not use the letter of transmittal to direct the tender of
the option shares. Instead, such holders must follow the procedures for tender
described in the option election form and related instructions on green paper
included with this offer to purchase.
6. Certain Conditions of the Offer
Notwithstanding any other provision of the offer, we shall not be required
to accept for payment, purchase or pay for any shares tendered, and may
terminate or amend the offer or may postpone the acceptance for payment of, or
the purchase of and the payment for shares tendered, subject to Rule 13e-4(f)
promulgated under the Exchange Act, if at any time on or after June 17, 1999
and prior to the time of payment for any such shares, whether any shares have
theretofore been accepted for payment, purchased or paid for pursuant to the
offer, any of the following events occur, or are determined by us to have
occurred, that, in our sole judgment in any such case and regardless of the
circumstances giving rise thereto, including any action or omission to act by
us, makes it inadvisable to proceed with the offer or with such acceptance for
payment or payments:
(a) any action, suit or proceeding by any government or governmental,
regulatory or administrative agency or authority or by any other person,
domestic or foreign is threatened, instituted or pending before any court,
agency, authority or other tribunal, or any judgment, order or injunction
is entered, enforced or deemed applicable by any such court, authority,
agency or tribunal, which (1) challenges or seeks to make illegal, or to
delay or otherwise directly or indirectly to restrain, prohibit or
otherwise affect the making of the offer, the acquisition of shares
pursuant to the offer or is otherwise related in any manner to, or
otherwise affects, the offer; or (2) could, in our sole judgment,
materially affect our business, condition, financial or other, income,
operations or prospects, taken as a whole, or otherwise materially impair
in any way the contemplated future conduct of our business, taken as a
whole, or materially impair the offer's contemplated benefits to us;
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(b) any action is threatened or taken, or any approval is withheld, or any
statute, rule or regulation is invoked, proposed, sought, promulgated,
enacted, entered, amended, enforced or deemed to be applicable to the
offer or us or any of our subsidiaries, by any government or governmental,
regulatory or administrative authority or agency or tribunal, domestic or
foreign, which, in our sole judgment, would or might directly or
indirectly result in any of the consequences referred to in clause (1) or
(2) of paragraph (a) above;
(c) the declaration of any banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory);
(d) any general suspension of trading in, or limitation on prices for,
securities on any United States national securities exchange or in the
over-the-counter market;
(e) the commencement of a war, armed hostilities or any other national or
international crisis directly or indirectly involving the United States;
(f) any limitation (whether or not mandatory) by any governmental, regulatory
or administrative agency or authority on, or any event which, in our sole
judgment, might materially affect, the extension of credit by banks or
other lending institutions in the United States;
(g) any significant decrease in the market price of the shares or in the
market prices of equity securities generally in the United States or any
change in the general political, market, economic or financial conditions
or in the commercial paper markets in the United States or abroad that
could have in our sole judgment a material adverse effect on our business,
condition, financial or otherwise, income, operations or prospects, taken
as a whole, or on the trading in the shares or on the proposed financing
for the offer;
(h) in the case of any of the foregoing existing at the time of the
announcement of the offer, a material acceleration or worsening thereof;
(i) any decline in either the Dow Jones Industrial Average or the S&P 500
Composite Index by an amount in excess of 10% measured from the close of
business on June 17, 1999;
(j) any change occurs or is threatened in our business, condition, financial
or other, income, operations or prospects, taken as a whole, which in our
sole judgment is or may be material to us;
(k) a tender or exchange offer with respect to some or all of our outstanding
shares, other than the offer, or a merger or acquisition proposal for us,
is proposed, announced or made by another person or is publicly disclosed,
or we learn that (1) any person or "group," within the meaning of
Section 13(d)(3) of the Exchange Act, has acquired or proposes to acquire
beneficial ownership of more than 5% of the outstanding shares, or any new
group is formed that beneficially owns more than 5% of our outstanding
shares; or
(l) any person or group files a Notification and Report Form under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 reflecting an intent to
acquire us or any of our shares.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition, including
any action or inaction by us, or may be waived by us in whole or in part. Our
failure at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, and each such right shall be deemed an on-
going right that may be asserted by us at any time and from time to time. Our
determination concerning the events described above and any related judgment
or decision by us regarding the inadvisability of proceeding with the purchase
of or payment for any shares tendered will be final and binding on all
parties.
16
<PAGE>
7. Price Range of Shares
The shares are listed on the NYSE. The high and low closing sales prices per
share on the NYSE Composite Tape as compiled from published financial sources
for the periods indicated are listed below:
<TABLE>
<CAPTION>
High Low
-------- --------
<S> <C> <C>
Fiscal 1997
1st Quarter.............................................. $40.00 $32.875
2nd Quarter.............................................. 40.125 32.375
3rd Quarter.............................................. 43.75 32.9375
4th Quarter.............................................. 44.8125 34.50
Fiscal 1998
1st Quarter.............................................. $39.1875 $33.625
2nd Quarter.............................................. 35.125 26.625
3rd Quarter.............................................. 33.4375 23.0625
4th Quarter.............................................. 29.0625 22.9375
Fiscal 1999
1st Quarter.............................................. $39.625 27.75
2nd Quarter (through June 16, 1999)...................... 49.3125 33.3125
</TABLE>
On June 10, 1999, the last full trading day on the NYSE prior to our
announcement of the purchase price and the number of shares sought in the
offer, the closing per share price on the NYSE was $43.125. We urge
stockholders to obtain current quotations of the market price of the shares.
8. Background and Purpose of the Offer; Certain Effects of the Offer
On June 10, 1999, we announced our intention to make an offer to purchase up
to 6,000,000 shares at $50.00 per share as the second half of our 12,000,000
share repurchase program, with the offer to commence on June 17, 1999. We are
making the offer because we believe:
(1) the shares are significantly undervalued in the public market;
(2) in light of our strong financial position, investing in our shares
represents an attractive use of our capital and an efficient way to
provide value to our stockholders; and
(3) the offer will afford to those stockholders who desire liquidity an
opportunity to sell all or a portion of their shares without the usual
transaction costs associated with open market sales.
After the offer is completed, we expect to have sufficient cash flow and
access to other sources of capital to fund our operations and capital
projects, including completing the transformation of the MGM Grand
Hotel/Casino in Las Vegas, Nevada into the City of Entertainment and
developing our proposed hotel/casino projects in Detroit, Michigan and
Atlantic City, New Jersey.
The offer provides stockholders who are considering a sale of all or a
portion of their shares the opportunity to sell their shares to us at $50.00
per share. Any odd lot owners whose shares are purchased pursuant to the offer
will avoid both the payment of brokerage commissions and any applicable odd
lot discounts payable on sales of odd lots. To the extent the purchase of
shares in the offer results in a reduction in the number of record or
beneficial holders of shares, the costs to us for services to stockholders
will be reduced. Stockholders who determine not to accept the offer will
increase their proportionate interest in our equity, and thus in our future
earnings and assets, subject to our right to issue additional shares and other
equity securities in the future.
17
<PAGE>
Our board of directors has approved the offer. However, stockholders must
make their own decisions whether to tender shares and, if so, how many shares
to tender. Neither we nor our board of directors makes any recommendation to
any stockholder as to whether to tender or refrain from tendering shares and
neither we nor our board of directors has authorized any person to make any
such recommendation. We have been advised that while most of our directors and
senior executive officers do not intend to tender shares in the offer, some
may tender shares they own as well as shares subject to exercisable options
held by them. We are further advised that Kirk Kerkorian and Tracinda
Corporation, a Nevada corporation wholly owned by Mr. Kerkorian, our principal
stockholders, do not intend to tender any shares. However, Mr. Kerkorian has
requested us to register for sale by him up to 3,894,406 shares, which is the
number of shares he owns directly and is the approximate number of shares he
and Tracinda could have sold in the offer had they elected to participate
assuming full participation by all stockholders. Any such shares will only be
sold by means of a prospectus after completion of the tender offer in the open
market or through privately negotiated transactions as market conditions
warrant and as he may determine.
As set forth in our press release dated June 10, 1999 and under "Certain
Information about the Company," the offer is part of our program to repurchase
a total of 12,000,000 shares. We purchased 6,000,000 shares in 1998 in a
$35.00 per share tender offer. We may in the future repurchase additional
shares in the open market, in private transactions, through tender offers or
otherwise, although no such purchases are presently contemplated. Any such
purchases may be on the same terms as, or on terms that are more or less
favorable to stockholders than, the terms of the offer. However, Rule 13e-4
under the Exchange Act generally prohibits us and our affiliates from
purchasing any shares, other than through the offer, until at least ten
business days after the expiration or termination of the offer. Any possible
future purchases by us will depend on many factors, including the market price
of the shares, the results of the offer, our business and financial position
and general economic and market conditions.
Except as required by applicable law or, if retired, the rules of any
securities exchange on which shares are listed, shares we acquire pursuant to
the offer will be retained as treasury stock by us, unless and until we
determine to retire such shares, and will be available for us to issue without
further stockholder action, for purposes including, but not limited to, the
acquisition of other businesses, the raising of additional capital for use in
our business and the satisfaction of obligations under existing or future
employee benefit plans. We have no current plans for issuance of the shares
repurchased pursuant to the offer.
9. Interests of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares
As of June 15, 1999, there were 62,217,545 shares outstanding, net of
treasury stock, and 5,221,901 shares issuable upon exercise of all outstanding
options. As of June 15, 1999, our directors and executive officers as a group
(17 persons) beneficially owned 42,659,284 shares, including 1,630,600 shares
issuable to such persons upon exercise of options exercisable within sixty
days of such date, which constituted approximately 63% of the outstanding
shares, including shares issuable if all exercisable options were exercised at
such time. Included in the foregoing is an aggregate of 38,005,122 shares
which are held by Kirk Kerkorian and Tracinda, representing approximately 61%
of the outstanding shares.
If we purchase 6,000,000 shares in the offer and no director or executive
officer tenders shares, then after the purchase of such 6,000,000 shares, our
directors and executive officers as a group would beneficially own
approximately 69% of the outstanding shares, including the 1,630,600 shares
issuable
18
<PAGE>
on exercise of exercisable options held by directors and executive officers,
and Mr. Kerkorian and Tracinda would beneficially own approximately 69% of the
outstanding shares. Mr. Kerkorian has requested us to register for sale by him
of up to 3,894,406 shares. If all of such shares were sold, then Mr. Kerkorian
and Tracinda would beneficially own approximately 61% of the outstanding
shares, which is approximately the same percentage they currently own.
Except as set forth in this offer to purchase and in Schedule I hereto,
based upon our records and upon information provided to us by our directors,
executive officers, associates and subsidiaries, neither we nor any of our
associates or subsidiaries or persons controlling us nor, to the best of our
knowledge, any of our directors or executive officers or any of our
subsidiaries, nor any associates or subsidiaries of any of the foregoing, has
effected any transactions in the shares during the 40 business days prior to
the date hereof.
Except as set forth in this offer to purchase, neither we nor any person
controlling us nor, to our knowledge, any of our directors or executive
officers, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
offer with respect to any of our securities, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or
the giving or withholding of proxies, consents or authorizations.
10. Source and Amount of Funds
Assuming that we purchase 6,000,000 shares in the offer at a purchase price
of $50.00 per share, we expect the maximum aggregate cost, including all fees
and expenses applicable to the offer, to be approximately $600,000. We
estimate that substantially all of the funds necessary to pay such amounts
will come from available cash, cash flow from operations and, to the extent
necessary, the existing credit facility.
Our Bank Credit Facility
Since 1996, we have had available to us a credit facility from a syndicate
of banks led by Bank of America NT&SA. On July 23, 1997, we amended our
syndicated bank credit facility to make it a $1.25 billion senior revolving
credit facility which may be increased to $1.5 billion under its existing
terms. The facility has subsequently been amended several times in less
significant ways. The following description is a summary of the material
provisions of the Amended and Restated Loan Agreement, dated as of July 17,
1997. It does not restate the agreement in its entirety. We urge you to read
the agreement. We have filed copies of the agreement with the Securities and
Exchange Commission. See Section 11.
The facility is available:
(1) to finance capital improvements at MGM Grand Las Vegas in accordance
with our master plan with respect to that property, up to $850 million;
(2) to fund development costs for MGM Grand Atlantic City or other casino,
resort and hotel projects, or to invest in casino, resort and hotel
companies or projects, up to $1.0 billion;
(3) to fund the proposed project in Detroit, Michigan, up to $750 million;
and
(4) for general corporate purposes, including repurchases of our own common
stock, investments in qualified investments and other capital
expenditures, up to $750 million.
19
<PAGE>
Availability under the facility will decline in quarterly increments of the
greater of $62.5 million or 5% of the commitment amount under the facility,
commencing on December 31, 2001, with the balance due on December 31, 2002. We
have the right to request one-year extensions, subject to the consent of the
lenders, which would have the effect of deferring scheduled reductions in
availability.
Interest on outstanding balances and commitment fees on unutilized
availabilities under the facility are determined by a formula based either on
our leverage ratio (which is the ratio of our total debt to annualized cash
flow) or the facility rating (which is the credit rating then applicable to
the facility), and in the case of interest rates, on the basis of the
Eurodollar or base rate existing at the time of determination. As our leverage
ratio declines, the interest rate and commitment fees will also decline. We
will also pay certain underwriting and agency fees in connection with the
facility.
The facility is unconditionally guaranteed by each of our subsidiaries
except New York-New York and Primadonna Resorts, Inc. and their subsidiaries,
MGM Grand Detroit II, LLC, MGM Grand-Bally's Monorail Limited Liability
Company, MGM Grand Australia, Inc. and our non-U.S. subsidiaries and their
U.S. holding companies which have no other assets or operations. Our
subsidiaries which do not guarantee the facility are called the
"nonguarantors" below. The facility is secured by pledges of substantially all
of our assets, including the stock of MGM Grand Hotel, Inc. and MGM Grand
Atlantic City, Inc., but not our interest in any nonguarantor, and the assets
of our subsidiaries other than the nonguarantors. The guaranty given by MGM
Grand Detroit, LLC, and the pledge of its assets, are limited to the amount
borrowed under the facility which is made available to MGM Grand Detroit, LLC.
The facility can become unsecured, at our option, if it receives investment
grade ratings as unsecured debt from both Moody's and Standard & Poor's.
The facility contains certain customary events of default and agreements,
including limitations on additional debt, dividends, mergers and asset sales
and capital expenditures. It also restricts acquisitions and similar
transactions. As of June 15, 1999, approximately $360 million was outstanding
under the facility. Also, during May 1999, two letters of credit were issued
under the facility totaling approximately $50 million, which support municipal
financing used to acquire land for a permanent casino in Detroit.
Although we currently do not have specific plans, we may, depending on
business and market conditions, refinance or replace all or a portion of the
cash used to purchase shares in the offer with proceeds from sales of debt or
equity securities or such other financing as we deem appropriate.
11. Certain Information about MGM Grand
We are a leading operator of first class casino and hotel properties with an
emphasis on the total gaming and entertainment experience. We own and operate
the MGM Grand Las Vegas and the New York-New York Hotel and Casino, two of the
most prominent hotel/casinos on the Las Vegas Strip. We believe the MGM Grand
Las Vegas is one of the largest hotel/casinos in the world with approximately
5,000 rooms, 171,500 square feet of gaming space and one of the largest arenas
in Las Vegas. We have nearly completed an approximate $570 million master plan
to expand and transform the MGM Grand Las Vegas into The City of
Entertainment. Our New York-New York property has 2,033 hotel rooms and
84,000 square feet of casino space. In Primm, Nevada, we own and operate the
three hotel/casinos that travelers first encounter on the principal route from
Southern California. We also own and operate the MGM Grand Australia in
Darwin, Australia and operate three casinos in South Africa. We expect to open
an interim casino resort in Detroit in the fall of this year
20
<PAGE>
while a permanent property is under development, and also have announced plans
to develop a casino resort in Atlantic City, New Jersey.
<TABLE>
<CAPTION>
Casino Number Number
Number of Square of of Table
Location/Property Rooms/Suites Footage Slots Games
----------------- ------------ ------- ------ --------
<S> <C> <C> <C> <C>
Las Vegas, Nevada
MGM Grand City of Entertainment.......... 5,034 171,500 3,566 153
New York-New York Hotel and Casino....... 2,033 84,000 2,292 71
Primm, Nevada
Primm Valley Resort...................... 623 38,000 1,446 33
Buffalo Bills............................ 1,240 62,000 1,585 39
Whiskey Petes............................ 777 36,400 1,374 30
Detroit, Michigan
MGM Grand Detroit (interim casino)(1).... -- 73,000 2,300 80
Australia
MGM Grand Australia...................... 96 28,000 360 32
South Africa (operated properties)
Johannesburg............................. -- 58,000 1,700 50
Nelspruit................................ -- 10,500 275 10
Witbank.................................. -- 15,500 375 13
</TABLE>
- --------
(1) Under construction, expected to open Fall of 1999.
We were incorporated in the state of Delaware in January 1986. Our executive
offices are located at 3799 Las Vegas Boulevard South, Las Vegas, Nevada
89109. Our mailing address is P.O. Box 98655, Las Vegas, Nevada 89193, and our
telephone number is (702) 891-3333.
Historical Financial Information. The table below sets forth summary
historical consolidated financial information of the company and its
subsidiaries. The historical financial information for fiscal years 1997 and
1998 (other than the ratios of earnings to fixed charges) has been derived
from, and should be read in conjunction with, our audited consolidated
financial statements as reported in our Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, which, together with our interim
unaudited consolidated financial statements as reported in our Quarterly
Report on Form 10-Q for the period ended March 31, 1999, is hereby
incorporated herein by reference. The summary historical financial information
should be read in conjunction with, and is qualified in its entirety by
reference to, the audited financial statements and the related notes thereto
from which it has been derived. Copies of the company's periodic reports may
be inspected or obtained from the Securities and Exchange Commission in the
manner specified in "Additional Information" below.
21
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended Three Months Ended
December 31, March 31,
---------------------- ----------------------
1997 1998 1998 1999
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Gross revenue................ $ 891,330 $ 840,082 $ 195,610 $ 273,845
Less promotional allowances.. 63,733 66,219 15,763 22,478
---------- ---------- ---------- ----------
Net Revenue................ 827,597 773,863 179,847 251,367
---------- ---------- ---------- ----------
Expenses:
Operating expenses........... 540,533 555,316 132,334 178,629
Depreciation and
amortization................ 64,104 76,284 16,904 20,892
---------- ---------- ---------- ----------
604,637 631,600 149,238 199,521
---------- ---------- ---------- ----------
Operating Profit Before Master
Plan Asset Disposition,
Preopening and Other and
Corporate Expense............. 222,960 142,263 30,609 51,846
Master Plan Asset Disposition,
Preopening and Other.......... 28,566 -- -- 8,810
Corporate expense.............. 3,424 10,689 2,451 5,094
---------- ---------- ---------- ----------
Operating Income............... 190,970 131,574 28,158 37,942
---------- ---------- ---------- ----------
Other Income (Expense):
Interest and other, net...... (10,669) (22,046) (2,749) (9,118)
---------- ---------- ---------- ----------
Income Before Income Taxes,
Extraordinary Item and
Cumulative Effect of
Accounting Change............. 180,301 109,528 25,409 28,824
Provision for income taxes... (65,045) (40,580) (9,147) (10,333)
---------- ---------- ---------- ----------
Income Before Extraordinary
Item and Cumulative Effect of
Accounting Change............. 115,256 68,948 16,262 18,491
Extraordinary loss on early
extinguishment of debt, net
of income tax benefits of
$2,333 and $484............. (4,238) -- -- (898)
Cumulative effect of change
in accounting for
preopening, net of income
tax benefit of $4,399....... -- -- -- (8,168)
---------- ---------- ---------- ----------
Net Income..................... $ 111,018 $ 68,948 $ 16,262 $ 9,425
========== ========== ========== ==========
Basic Income Per Share of
Common Stock:
Income before extraordinary
item and cumulative effect
of accounting change........ $ 2.00 $ 1.24 $ 0.28 $ 0.34
Extraordinary item, net...... (0.07) -- -- (0.02)
Cumulative effect of
accounting change, net...... -- -- -- (0.15)
---------- ---------- ---------- ----------
Net income per share......... $ 1.93 $ 1.24 $ 0.28 $ 0.17
========== ========== ========== ==========
Weighted Average Shares
Outstanding................... 57,475 55,678 57,990 55,376
========== ========== ========== ==========
Diluted Income Per Share of
Common Stock:
Income before extraordinary
item and cumulative effect
of accounting change........ $ 1.96 $ 1.22 $ 0.28 $ 0.33
Extraordinary item, net...... (0.07) -- -- (0.02)
Cumulative effect of
accounting change, net...... -- -- -- (0.14)
---------- ---------- ---------- ----------
Net income per share......... $ 1.89 $ 1.22 $ 0.28 $ 0.17
========== ========== ========== ==========
Weighted Average Shares
Outstanding................... 58,835 56,342 58,775 56,646
========== ========== ========== ==========
Selected Balance Sheet
Information:
<CAPTION>
At December 31, At March 31,
---------------------- ----------------------
1997 1998 1998 1999
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Working capital................ $ (10,699) $ 18,715 $ 398,898 $ (13,447)
Total assets................... 1,398,374 1,773,794 1,872,259 2,538,855
Total assets less excess of
purchase price over fair
market value of net assets
acquired, net................. 1,359,776 1,736,220 1,833,917 2,501,537
Current and long-term
indebtedness.................. 68,365 552,827 566,037 1,012,117
Shareholders' equity........... 1,101,622 964,381 1,117,248 1,222,306
</TABLE>
22
<PAGE>
Pro Forma Financial Information. The following summary unaudited condensed
consolidated pro forma financial information gives effect to our purchase of
6,000,000 shares in the offer and the acquisition of Primadonna Resorts, Inc.,
based on certain assumptions described in the Notes to Summary Unaudited
Consolidated Pro Forma Financial Information, as if both had occurred on
January 1, 1998 and January 1, 1999, with respect to income statement data,
and on December 31, 1998 and March 31, 1999, with respect to balance sheet
data. The pro forma financial information should be read in conjunction with
the historical consolidated financial information incorporated herein by
reference and does not purport to be indicative of the results that would
actually have been obtained had the purchase of the shares pursuant to the
offer and the acquisition been completed at the dates indicated or that may be
obtained in the future.
23
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
PRO FORMA SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Year Ended Three Months Ended
December 31, 1998 March 31, 1999
--------------------- ---------------------
As As
Actual Adjusted(1) Actual Adjusted(1)
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Revenues:
Gross revenue.................. $840,082 $1,278,831 $273,845 $345,168
Less promotional allowances.... 66,219 90,119 22,478 26,703
-------- ---------- -------- --------
Net Revenue.................. 773,863 1,188,712 251,367 318,465
-------- ---------- -------- --------
Expenses:
Operating expenses............. 555,316 858,930 178,629 226,829
Depreciation and amortization.. 76,284 132,449 20,892 29,934
-------- ---------- -------- --------
631,600 991,379 199,521 256,763
-------- ---------- -------- --------
Operating Profit Before
Preopening and Other and
Corporate Expense............... 142,263 197,333 51,846 61,702
Preopening and other............. -- -- 8,810 8,810
Corporate expense................ 10,689 10,689 5,094 5,094
-------- ---------- -------- --------
Operating Income................. 131,574 186,644 37,942 47,798
-------- ---------- -------- --------
Other Income (Expense):
Interest and other, net........ (22,046) (64,645) (9,118) (17,257)
-------- ---------- -------- --------
Income Before Income Taxes,
Extraordinary Item and
Cumulative Effect of Accounting
Change.......................... 109,528 121,999 28,824 30,541
Provision for income taxes..... (40,580) (46,601) (10,333) (11,058)
-------- ---------- -------- --------
Income Before Extraordinary Item
and Cumulative Effect of
Accounting Change............... 68,948 75,398 18,491 19,483
Extraordinary loss on early
extinguishment of debt, net of
income tax benefit of $484.... -- -- (898) (898)
Cumulative effect of change in
accounting for preopening, net
of income tax benefit of
$4,399........................ -- -- (8,168) (8,168)
-------- ---------- -------- --------
Net Income....................... $ 68,948 $ 75,398 $ 9,425 $ 10,417
======== ========== ======== ========
Basic Income Per Share of Common
Stock:
Income before extraordinary
item and cumulative effect of
accounting change............. $ 1.24 $ 1.27 $ 0.34 $ 0.36
Extraordinary item, net........ -- -- (0.02) (0.02)
Cumulative effect of accounting
change, net................... -- -- (0.15) (0.15)
-------- ---------- -------- --------
Net income per share........... $ 1.24 $ 1.27 $ 0.17 $ 0.19
======== ========== ======== ========
Weighted Average Shares
Outstanding..................... 55,678 59,221 55,376 55,610
======== ========== ======== ========
Diluted Income Per Share of
Common Stock:
Income before extraordinary
item and cumulative effect of
accounting change............. $ 1.22 $ 1.26 $ 0.33 $ 0.34
Extraordinary item, net........ -- -- (0.02) (0.02)
Cumulative effect of accounting
change, net................... -- -- (0.14) (0.14)
-------- ---------- -------- --------
Net income per share........... $ 1.22 $ 1.26 $ 0.17 $ 0.18
======== ========== ======== ========
Weighted Average Shares
Outstanding..................... 56,342 59,901 56,646 56,973
======== ========== ======== ========
</TABLE>
24
<PAGE>
Pro Forma Selected Balance Sheet Information:
<TABLE>
<CAPTION>
At December 31, 1998 At March 31, 1999
---------------------------- --------------------------
Actual As Adjusted(2)(3) Actual As Adjusted(2)
---------- ----------------- ---------- --------------
<S> <C> <C> <C> <C>
Working capital......... $ 18,715 $ 2,705 $ (13,447) $ (13,447)
Total assets............ 1,773,794 2,538,848 2,538,855 2,538,855
Total assets less excess
of purchase price over
fair market value of
net assets acquired,
net.................... 1,736,220 2,501,274 2,501,537 2,501,537
Current and long-term
indebtedness........... 552,827 1,279,683 1,012,117 1,312,717
Shareholders' equity.... 964,381 907,248 1,222,306 921,706
Other Data:
Book value per share
(4).................... $ 18.53 $ 16.33 $ 19.78 $ 16.52
</TABLE>
- --------
(1) Assumes the following transactions occurred as of the beginning of each
period presented: (a) the acquisition of Primadonna Resorts, Inc. for
approximately 9.5 million shares of MGM Grand, Inc. stock and the
assumption of approximately $315 million of debt (including 50% of New
York- New York debt) accounted for as a purchase, (b) the reallocation of
revenues and expenses from unconsolidated affiliate since New York-New
York became a wholly-owned consolidated subsidiary of MGM Grand, Inc. as
a result of the Primadonna acquisition, (c) the elimination of income and
expenses related to activity between MGM Grand, Inc. and New York-New
York, (d) interest expense associated with the additional draw downs
under the company's senior reducing revolving credit facility of $300.6
million used to finance the repurchase of 6,000,000 shares at the
company's borrowing rate of 6% and using a statutory tax rate of 35%, and
(e) the impact on the provision for income taxes of the transactions
above. Summary financial information for Primadonna and New York-New York
used in the pro forma summary consolidated financial information above is
as follows:
<TABLE>
<CAPTION>
Primadonna Resorts, Inc. New York-New York
------------------------- -------------------------
For the For the
For the year three months For the year three months
ended ended ended ended
December 31, March 31, December 31, March 31,
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Revenues............. 272,866 64,392 219,107 54,915
Operating Income......... 55,213 13,874 76,628 17,274
Net Income............... 18,143 5,877 60,066 11,497
</TABLE>
Primadonna Resorts, Inc. historical financial information includes revenue
of $38,409 and $6,099, respectively, and interest expense of $8,376 and
$1,058, respectively, recognized by Primadonna related to Primadonna's 50%
ownership interest of New York-New York.
MGM historical financial information includes revenue of $38,362 and
$6,084, respectively, interest expense of $8,376 and $1,058, respectively
related to MGM's 50% ownership of New York-New York.
The acquisition of Primadonna Resorts, Inc. and the remaining 50% of New
York-New York was effective March 1, 1999. Accordingly, net revenues,
operating income, and net income for the month of March for Primadonna
Resorts, Inc. included in the MGM historical financial statements as of
March 31, 1999 were $20,305, $4,022 and $1,829, respectively. Net revenues,
operating income, and net income for the month of March for New York-New
York included in the MGM historical financial statements as of March 31,
1999 were $19,738, $5,069 and $1,734, respectively.
25
<PAGE>
(2) The pro forma balance sheet amounts for both periods were adjusted for
the 6,000,000 share repurchase at an approximate cost of $300.6 million,
including transaction fees, financed by a drawdown under the company's
credit facility.
(3) The pro forma balance sheet for December 31, 1998 was adjusted to include
the merger with Primadonna Resorts, Inc.
(4) Book value per share was calculated by dividing total stockholders'
equity by the number of shares outstanding. The pro forma book value per
share amounts for both periods were adjusted for the 6,000,000 share
repurchase at an approximate cost of $300.6 million, including
transaction fees.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the company for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended March 31,
------------------------------- -------------------------------
1997 1998 1998 1998 1999 1999
------ ------ ----------------- ------ ------ -----------------
Actual Actual As Adjusted(2)(3) Actual Actual As Adjusted(2)(3)
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges (1)...... 10.11 2.40 1.81 3.26 2.33 1.88
</TABLE>
- --------
(1) For purposes of computing the foregoing ratios: (i)"Earnings" consist of
income from continuing operations before income taxes and fixed charges,
adjusted to exclude earnings in excess of distributions from New York-New
York, capitalized interest, and (ii)"Fixed Charges" consist of interest,
whether expensed or capitalized, amortization of debt discount and
issuance costs, the company's proportionate share of the interest cost of
50% owned joint ventures (such as the limited liability company which
owns New York-New York) and the estimated interest component of rental
expense.
(2) Interest expense, capitalized interest and the provision for income taxes
have been adjusted as if the repurchase of 6,000,000 shares for
approximately $300.6 million occurred on January 1, 1998 and January 1,
1999, respectively, and the repurchase was financed by a drawdown under
the company's credit facility.
(3) The pro forma Ratio of Earnings to Fixed Charges for the year ended
December 31, 1998 and the three months ended March 31, 1999 was adjusted
to include the merger with Primadonna Resorts, Inc. and the effects of
the share repurchase.
26
<PAGE>
Additional Information. We are subject to the informational filing
requirements of the Securities Exchange Act of 1934 and, in accordance
therewith, are obligated to file reports and other information with the
Securities and Exchange Commission relating to our business, financial
condition and other matters. Information, as of particular dates, concerning
our directors and officers, their remuneration, options granted to them, the
principal holders of our securities and any material interest of such persons
in transactions with us is required to be disclosed in proxy statements
distributed to our stockholders and filed with the Commission. Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 2120, Washington D.C. 20549; at its regional offices located at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World
Trade Center, New York, New York 10048. Copies of such material may also be
obtained by mail, upon payment of the Commission's customary charges, from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549. The Commission also maintains a web site
on the World Wide Web at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Such reports, proxy statements and other
information concerning us also can be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005, on which the shares are listed.
Forward-Looking Statements. The Private Securities Litigation Reform Act of
1995 provides a "safe harbor" for forward-looking statements. Certain
information included or incorporated by reference in this offer to purchase
contains statements that are forward-looking, such 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 legalization of gaming
in certain jurisdictions; and
- The requirement to apply for licenses and approvals under applicable
jurisdictional laws and regulations (including gaming laws and
regulations).
12. Effect of the Offer on the Market for Shares; Registration under the
Securities Exchange Act
Our purchase of shares in the offer will reduce the number of shares that
might otherwise trade publicly and is likely to reduce the number of
stockholders. Nonetheless, there will still be a sufficient number of shares
outstanding and publicly traded following the offer to ensure a continued
trading market in the shares. Based on the published guidelines of the NYSE,
we do not believe that our
27
<PAGE>
purchase of shares pursuant to the offer will cause our remaining shares to be
delisted from such exchange.
The shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the shares. The company believes that,
following the purchase of shares pursuant to the offer, the shares will
continue to be "margin securities" for purposes of the Federal Reserve Board's
margin regulations.
The shares are registered under the Securities Exchange Act, which requires,
among other things, that we furnish certain information to our stockholders
and to the Commission and comply with the Commission's proxy rules in
connection with meetings of our stockholders. We believe that our purchase of
shares in the offer will not result in the shares becoming eligible for
deregistration under the Securities Exchange Act.
13. Certain Legal Matters
We are not aware of any license or regulatory permit that appears to be
material to our business that might be adversely affected by our acquisition
of shares as contemplated in the offer or of any approval or other action by
any government or governmental, administrative or regulatory authority or
agency, domestic or foreign, that would be required for our acquisition or
ownership of shares as contemplated by the offer. Should any such approval or
other action be required, we currently contemplate that we will seek such
approval or other action. We cannot predict whether we may determine that we
are required to delay the acceptance for payment of, or payment for, shares
tendered in the offer pending the outcome of any such matter. There can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions or that the failure to
obtain any such approval or other action might not result in adverse
consequences to our business. Our obligations under the offer to accept for
payment and pay for shares are subject to certain conditions. See Section 6.
14. Certain United States Federal Income Tax Consequences
In General. The following summary describes certain United States federal
income tax consequences relevant to the offer. The discussion contained in
this summary is based upon the Internal Revenue Code of 1986, existing and
proposed United States Treasury regulations promulgated thereunder, rulings,
administrative pronouncements and judicial decisions, changes to which could
materially affect the tax consequences described herein and could be made on a
retroactive basis. As discussed below, depending upon a stockholder's
particular circumstances, our purchase of such stockholder's shares pursuant
to the offer may be treated either as a sale or a dividend for United States
federal income tax purposes. Accordingly, such a purchase generally will be
referred to in this section of the offer to purchase as an "exchange" of
shares for cash.
Scope. This summary does not apply to shares acquired as compensation,
including shares acquired upon the exercise of options or which were or are
subject to forfeiture restrictions. The summary also does not address the
state, local or foreign tax consequences of participating in the offer. The
summary discusses only shares held as capital assets, within the meaning of
Section 1221 of the Code, and does not address all of the tax consequences
that may be relevant to particular stockholders in light of their personal
circumstances, or to certain types of stockholders, such as certain financial
institutions, dealers in securities or commodities, insurance companies, tax-
exempt organizations or persons who hold shares as a position in a "straddle"
or as a part of a "hedging" or "conversion"
28
<PAGE>
transaction for United States federal income tax purposes. In particular, the
discussion of the consequences of an exchange of shares for cash pursuant to
the offer applies only to a United States stockholder. For purposes of this
summary, a "stockholder" is a holder of shares that is (1) a citizen or
resident of the United States, (2) a corporation, partnership or other entity
created or organized in or under the laws of the United States, any state or
any political subdivision thereof, or (3) an estate, the income of which is
subject to United States federal income taxation regardless of its source or
(4) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
trustees have the authority to control all substantial decisions relating to
the trust. This discussion does not address the tax consequences to foreign
stockholders who will be subject to United States federal income tax on a net
basis on the proceeds of their exchange of shares pursuant to the offer
because such income is effectively connected with the conduct of a trade or
business within the United States. Such stockholders are generally taxed in a
manner similar to United States holders; however, certain special rules apply.
Foreign stockholders who are not subject to United States federal income tax
on a net basis should see Section 3 for a discussion of the applicable United
States withholding rules and the potential for obtaining a refund of all or a
portion of the tax withheld. Each stockholder should consult such
stockholder's tax advisor as to the particular consequences of participation
in the offer.
Characterization of the Sale. An exchange of shares by a stockholder
pursuant to the offer will be a taxable transaction for United States federal
income tax purposes and may also be a taxable transaction under any applicable
state, local and foreign tax laws. The United States federal income tax
consequences of such exchange to a stockholder may vary depending upon the
stockholder's particular facts and circumstances. Under Sections 302 and 304
of the Code, an exchange of shares by a stockholder to the company pursuant to
the offer will be treated as a "sale or exchange" of such shares for United
States federal income tax purposes, rather than as a deemed distribution by
the company with respect to shares continued to be held, or deemed to be held,
by the tendering stockholder, if the receipt of cash upon such exchange (1) is
"substantially disproportionate" with respect to the stockholder, (2) results
in a "complete termination" of the stockholder's interest in the company, or
(3) is "not essentially equivalent to a dividend" with respect to the
stockholder. These Section 302 tests are explained more fully below.
If any of the Section 302 tests are satisfied, and the sale of the tendered
shares is therefore treated as a "sale or exchange" of such shares for United
States federal income tax purposes, the tendering stockholder will recognize
capital gain or loss equal to the difference between the amount of cash
received by the stockholder pursuant to the offer and the stockholder's
adjusted tax basis in the shares sold pursuant to the offer. Any such gain or
loss recognized by individuals, trusts or estates will be long-term capital
gain or loss if the shares have been held for more than 12 months.
If none of the Section 302 tests are satisfied, then, to the extent our
current and accumulated earnings and profits, the tendering stockholder will
be treated as having received a dividend taxable as ordinary income in an
amount equal to the entire amount of cash received by the stockholder pursuant
to the offer, without reduction for the adjusted tax basis of the shares sold
pursuant to the offer, no loss will be recognized, and, subject to reduction
as described below for corporate stockholders eligible for the dividends-
received deduction, the tendering stockholder's adjusted tax basis in the
shares exchanged pursuant to the offer will be added to such stockholder's
adjusted tax basis in its remaining shares, if any. No assurance can be given
that any of the Section 302 tests will be satisfied as to any particular
stockholder, and thus no assurance can be given that any particular
stockholder will not be treated as having received a dividend taxable as
ordinary income. If the exchange of shares by a
29
<PAGE>
stockholder is not treated as a sale or exchange for federal income tax
purposes, any cash received for shares pursuant to the offer in excess of our
current and accumulated earnings and profits will be treated, first, as a
nontaxable return of capital to the extent of the stockholder's shares, and
thereafter, as taxable capital gain, to the extent the cash received exceeds
such basis.
Constructive Ownership of Stock. In determining whether any of the Section
302 tests are satisfied, a stockholder must take into account not only the
shares which are actually owned by the stockholder, but also shares which are
constructively owned by the stockholder by reason of the attribution rules
contained in Section 318 of the Code, as modified by Section 304 of the Code.
Under Section 318 of the Code, as so modified, a stockholder may be treated as
owning (1) shares that are actually owned, and in some cases constructively
owned, by certain related individuals or entities in which the stockholder
owns an interest, or, in the case of stockholders that are entities, by
certain individuals or entities that own an interest in the stockholder, and
(2) shares which the stockholder has the right to acquire by exercise of an
option or a conversion right contained in another instrument held by the
stockholder. Contemporaneous dispositions or acquisitions of shares by a
stockholder or related individuals or entities may be deemed to be part of a
single integrated transaction which will be taken into account in determining
whether any of the Section 302 tests have been satisfied in connection with
shares sold pursuant to the offer. Each stockholder should be aware that
because proration may occur in the offer, even if all the shares actually and
constructively owned by a stockholder are tendered pursuant to the offer, we
may purchase fewer than all of such shares. Thus, proration may affect whether
a sale by a stockholder pursuant to the offer will meet any of the Section 302
tests.
Section 302 Tests. One of the following tests must be satisfied in order for
the exchange of shares pursuant to the offer to be treated as a sale or
exchange for federal income tax purposes.
a. Substantially Disproportionate Test. The receipt of cash by a stockholder
will be "substantially disproportionate" if the percentage of the
outstanding shares actually and constructively owned by the stockholder
immediately following the exchange of shares pursuant to the offer,
treating as not being outstanding all shares purchased pursuant to the
offer, is less than 80% of the percentage of the outstanding shares
actually and constructively owned by such stockholder immediately before
the exchange of shares pursuant to the offer, treating as outstanding all
shares purchased pursuant to the offer. Stockholders should consult their
own tax advisors with respect to the application of the "substantially
disproportionate" test to their particular situation and circumstances.
b. Complete Termination Test. The receipt of cash by a stockholder will be a
"complete termination" of the stockholder's interest in the company if
either (1) all of the shares actually and constructively owned by the
stockholder are exchanged pursuant to the offer, or (2) all of the shares
actually owned by the stockholder are exchanged pursuant to the offer and,
with respect to the shares constructively owned by the stockholder which
are not exchanged pursuant to the offer, the stockholder is eligible to
waive (and effectively waives) constructive ownership of all such shares
under procedures described in Section 302(c) of the Code. Stockholders
considering making such a waiver should do so in consultation with their
own tax advisors.
c. Not Essentially Equivalent to a Dividend Test. Even if the receipt of cash
by a stockholder fails to satisfy the "substantially disproportionate" test
and the "complete termination" test, a stockholder may nevertheless satisfy
the "not essentially equivalent to a dividend" test if the stockholder's
exchange of shares pursuant to the offer results in a "meaningful
reduction" in the stockholder's proportionate interest in the company.
Whether the receipt of cash by a stockholder
30
<PAGE>
who exchanges shares pursuant to the offer will be "not essentially
equivalent to a dividend" will depend upon the stockholder's particular
facts and circumstances. The IRS has indicated in published Revenue Rulings
that even a small reduction in the proportionate interest of a small
minority stockholder in a publicly held corporation who exercises no
control over corporate affairs may constitute such a "meaningful
reduction." The IRS held, for example, in Rev. Rul. 76-385, 1976-2 C.B. 92,
that a reduction in the percentage ownership interest of a stockholder in a
publicly held corporation from .0001118% to .0001081% (a reduction of only
3.3% in the stockholder's prior percentage ownership interest) would
constitute a "meaningful reduction." Stockholders expecting to rely on the
"not essentially equivalent to a dividend" test should consult their own
tax advisors as to its application to their particular situation and
circumstances.
If a stockholder sells shares to persons other than the company at or about
the time such holder also exchanges shares pursuant to the offer, and the
various sales effected by the holder are part of an overall plan to reduce or
terminate such holder's proportionate interest in the company, then the sales
to persons other than the company may, for United States federal income tax
purposes, be integrated with the holder's exchange of shares pursuant to the
offer and, if integrated, should be taken into account in determining whether
the holder satisfies any of the three tests described above.
Corporate Stockholder Dividend Treatment. If an exchange of shares pursuant
to the offer by a corporate stockholder is treated as a dividend, the
corporate stockholder may be entitled to claim a deduction in an amount equal
to 70% of the gross dividend under Section 243 of the Code, subject to
applicable limitations. Corporate stockholders should consider the effect of
Section 246(c) of the Code, which disallows the 70% dividends-received
deduction with respect to any dividend on any share of stock that is held for
45 days or less during the 90-day period beginning on the date which is 45
days before the date on which such share becomes ex-dividend with respect to
such dividend. For this purpose, the length of time a taxpayer is deemed to
have held stock may be reduced by periods during which the taxpayer's risk of
loss with respect to the stock is diminished by reason of the existence of
certain options or other hedging transactions. Moreover, under Section 246A of
the Code, if a corporate stockholder has incurred indebtedness directly
attributable to an investment in shares, the 70% dividends-received deduction
may be reduced by a percentage generally computed based on the amount of such
indebtedness and the stockholder's total adjusted tax basis in the shares.
In addition, any amount received by a corporate stockholder pursuant to the
offer that is treated as a dividend will constitute an "extraordinary
dividend" under Section 1059 of the Code. Generally, an "extraordinary
dividend" is a dividend that (1) equals or exceeds 10% of the stockholder's
tax basis in its shares (treating all dividends having ex-dividend dates
within an 85-day period as a single dividend) or (2) exceeds 20% of the
stockholder's adjusted tax basis in the shares (treating all dividends having
ex-dividend dates within a 365-day period as a single dividend). Accordingly,
a corporate stockholder would be required under Section 1059(a) of the Code to
reduce its adjusted tax basis, but not below zero, in its shares by the non-
taxed portion of the extraordinary dividend, i.e., the portion of the dividend
for which a deduction is allowed, and, if such portion exceeds the
stockholder's adjusted tax basis in its shares, to treat the excess as gain
from the sale of such shares in the year in which the dividend is received.
These basis reduction and gain recognition rules would be applied by taking
account only of the stockholder's adjusted tax basis in the shares that were
sold, without regard to other shares that the stockholder may continue to own.
Corporate stockholders should consult their own tax advisors as to the
application of Section 1059 of the Code to the offer, and to any dividends
which may be treated as paid with respect to shares sold pursuant to the
offer.
We cannot predict whether or to what extent the offer will be
oversubscribed. If the offer is oversubscribed, proration of the tenders
pursuant to the offer will cause us to accept fewer shares than
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<PAGE>
are tendered. Therefore, a stockholder can be given no assurance that a
sufficient number of such stockholder's shares will be exchanged pursuant to
the offer to ensure that such exchange will be treated as a sale, rather than
as a dividend, for United States federal income tax purposes pursuant to the
rules discussed above.
If a stockholder who exchanges shares pursuant to the offer is not treated
under Section 302 of the Code as having sold such holder's shares for cash,
the entire amount of cash received by such stockholder will be treated as a
dividend to the extent of our current and accumulated earnings and profits,
which we anticipate will be sufficient to cover the amount of any such
dividend and will be includible in the stockholder's gross income as ordinary
income in its entirety, without reduction for the tax basis of the shares
exchanged. No loss will be recognized. The stockholder's tax basis in the
shares exchanged generally will be added to such holder's tax basis in such
holder's remaining shares. To the extent that cash received in exchange for
shares is treated as a dividend to a corporate stockholder, such stockholder
will be, (1) eligible for a dividends-received deduction (subject to
applicable limitations) and (2) subject to the "extraordinary dividend"
provisions of the Code. To the extent, if any, that the cash received by a
stockholder exceeds our current and accumulated earnings and profits, it will
be treated first as a tax-free return of such holder's tax basis in the shares
and thereafter as capital gain.
Backup Withholding. See Section 3 with respect to the application of United
States federal income tax backup withholding.
Tax Considerations for Holders of Option Shares. A holder of a non-qualified
stock option (or an incentive stock option that as a result of the holder's
participation in the offer constitutes a disqualifying disposition of said
option) who receives cash in the offer in exchange for option shares will be
treated as receiving compensation income per share sold equal to the excess of
$50.00 over the exercise price per share of the relevant option. Such income
will be taxed to the option holder at ordinary income rates and will be
subject to withholding for income and employment taxes. A holder of shares
received with respect to the exercise of an incentive stock option more than
12 months prior to the date the shares were purchased will be taxed as
described under the heading "characterization of the sale" if any of the
Section 302 tests are satisfied and as described under the heading
"characterization of the sale" if none of the Section 302 tests are satisfied.
The tax consequences of a sale of shares in the offer may vary depending
upon, among other things, the particular situation and circumstances of the
tendering stockholder. No information is provided herein as to the state,
local or foreign tax consequences of the transaction contemplated by the
offer. Stockholders are urged to consult their own tax advisors to determine
the specific federal, state, local, foreign and other tax consequences of
sales made by them pursuant to the offer, including the effect of the stock
ownership attribution rules mentioned above.
15. Extension of the Offer; Termination; Amendment
We expressly reserve the right, in our sole discretion, at any time and from
time to time, and regardless of whether or not any of the events set forth in
Section 6 occur or are deemed by us to have occurred, to extend the period of
time during which the offer is open and thereby delay acceptance for payment
of, and payment for, any shares by giving oral or written notice of such
extension to the depositary and making a public announcement of the extension.
We also expressly reserve the right, in our sole discretion, to terminate the
offer and not accept for payment or pay for any shares not already accepted
for payment or paid for or, subject to applicable law, to postpone payment for
shares
32
<PAGE>
upon the occurrence of any of the conditions specified in Section 6 by giving
oral or written notice of such termination or postponement to the depositary
and making a public announcement of the termination or postponement. Our
reservation of the right to delay payment for shares which we have accepted
for payment is limited by Rule 13e-4(f)(5) under the Securities Exchange Act,
which requires that we must pay the consideration offered or return the shares
tendered promptly after termination or withdrawal of a tender offer.
Subject to compliance with applicable law, we further reserve the right, in
our sole discretion, and regardless of whether any of the events set forth in
Section 6 shall occur or are deemed by us to have occurred, to amend the offer
in any respect, including, without limitation, by decreasing or increasing the
consideration offered in the offer to holders of shares or by decreasing or
increasing the number of shares being sought in the offer. Amendments to the
offer may be made at any time and from time to time effected by public
announcement. Such announcement, in the case of an extension, shall be issued
no later than 9:00 a.m., New York city time, on the next business day after
the last previously scheduled or announced expiration date. Any public
announcement made pursuant to the offer will be disseminated promptly to
stockholders in a manner reasonably designated to inform stockholders of such
change. Without limiting the manner in which we may choose to make any public
announcement, except as provided by applicable law, including Rule 13e-4(e)(2)
promulgated under the Securities Exchange Act, we shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
If we make a material change in the terms of the offer or the information
concerning the offer, or if we waive a material condition of the offer, we
will extend the offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) under the Securities Exchange Act, which require that the minimum
period during which an offer must remain open following material changes in
the terms of the offer or information concerning the offer, other than a
change in price or a change in percentage of securities sought, will depend
upon the facts and circumstances, including the relative materiality of such
terms or information. If (1) we increase or decrease the price to be paid for
shares, we increase or decrease the dealer manager's soliciting fee, we
increase the number of shares being sought and such increase in the number of
shares being sought exceeds 2% of the outstanding shares, or we decrease the
number of shares being sought, and (2) the offer is scheduled to expire at any
time earlier than the expiration of a period ending on the tenth business day
from, and including, the date that notice of such increase or decrease is
first published, sent or given, we will extend the offer until the expiration
of such period of ten business days.
16. Fees and Expenses
We have retained Donaldson, Lufkin & Jenrette Securities Corporation to act
as the dealer manager in connection with the offer. Donaldson, Lufkin &
Jenrette Securities Corporation will receive reasonable and customary
compensation for its services as dealer manager. We have agreed to indemnify
Donaldson, Lufkin & Jenrette Securities Corporation against certain
liabilities in connection with the offer, including certain liabilities under
the federal securities laws. Donaldson, Lufkin & Jenrette Securities
Corporation has rendered various investment banking and other advisory
services to the company in the past, for which they have received customary
compensation, and can be expected to render similar services to the company in
the future.
We have retained ChaseMellon Shareholder Services, LLC as information agent
and as depositary in connection with the offer, which will receive reasonable
and customary compensation for its
33
<PAGE>
services. We will also reimburse the information agent and the depositary for
out-of-pocket expenses and have agreed to indemnify the information agent and
the depositary against certain liabilities in connection with the offer,
including certain liabilities under the federal securities laws. The dealer
manager and information agent may contact stockholders by mail, telephone,
telex, telegraph and personal interviews, and may request brokers, dealers and
other nominee stockholders to forward materials relating to the offer to
beneficial owners. Neither the information agent nor the depositary has been
retained to make solicitations or recommendations in connection with the
offer.
We will not pay fees or commissions to any broker, dealer, commercial bank,
trust company or other person, other than the dealer managers, for soliciting
any shares pursuant to the offer. We will, however, on request, reimburse such
persons for customary handling and mailing expenses incurred in forwarding
materials in respect of the offer to the beneficial owners for which they act
as nominees. No such broker, dealer, commercial bank or trust company has been
authorized to act as our agent for purposes of the offer. We will pay, or
cause to be paid, any stock transfer taxes on its purchase of shares, except
as otherwise provided in instruction 7 of the letter of transmittal.
17. Miscellaneous
We are not aware of any jurisdiction where the making of the offer is not in
compliance with applicable law. If we become aware of any jurisdiction where
the making of the offer is not in compliance with any valid applicable law, we
will make a good faith effort to comply with such law. If, after such good
faith effort, we cannot comply with such law, we will not make the offer to,
nor will we accept tenders from or on behalf of, the holders of shares
residing in such jurisdiction. In any jurisdiction where the securities or
blue sky laws of which require the offer to be made by a licensed broker or
dealer, the offer is being made on our behalf by the dealer managers or one or
more registered brokers or dealers licensed under the laws of such
jurisdiction.
Pursuant to Rule 13e-4 promulgated under the Securities Exchange Act, we
have filed with the Commission an Issuer Tender Offer Statement on Schedule
13E-4 which contains additional information with respect to the offer. The
Schedule 13E-4, including the exhibits and any amendments thereto, may be
examined, and copies may be obtained, at the same places and in the same
manner as is set forth in Section 11 with respect to information concerning
us.
No person has been authorized to give any information or make any
representation on behalf of us or the dealer manager in connection with the
offer other than those contained in this offer to purchase or in the related
letter of transmittal. If given or made, such information or representation
must not be relied upon as having been authorized by us or the dealer manager.
MGM GRAND, INC.
June 17, 1999
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<PAGE>
SCHEDULE I
CERTAIN TRANSACTIONS INVOLVING SHARES
Except as set forth below, based upon the records of MGM Grand, Inc. and
upon information provided to the company by its directors, executive officers,
associates and subsidiaries, neither the company nor any of its associates or
subsidiaries or persons controlling the company nor, to the best of the
company's knowledge, any of the directors or executive officers of the
company, nor any associates or subsidiary of any of the foregoing, has
effected any transactions in the company's common stock during the 40 business
days prior to June 17, 1999.
<TABLE>
<CAPTION>
Date of Type of Number Price
Name & Title Transaction Transaction of Shares Per Share
------------ ----------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
Fred Benninger 5/11/99 Option Exercise 50,000 $ 26.00
Director 5/11/99 Open Market Sale 50,000 48.00
Daniel Wade 5/6/99 Option Exercise 15,000 $ 19.125
Executive Vice President 5/6/99 Option Exercise 27,500 24.00
& Chief Operating Officer 5/6/99 Option Exercise 15,000 26.00
5/6/99 Option Exercise 14,000 25.00
5/6/99 Open Market Sale 71,500 46.50
Scott Langsner 4/26/99 Option Exercise 25,000 $ 11.50
Secretary/Treasurer 4/26/99 Open Market Sale 25,000 43.0625
Edward Jenkins 4/30/99 Open Market Sale 300 $ 44.00
Vice President 4/26/99 Option Exercise 15,000 24.00
4/26/99 Open Market Sale 15,000 43.0625
</TABLE>
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<PAGE>
Facsimile copies of the letter of transmittal will be accepted. A holder of
shares, other than option shares, or such stockholder's broker, dealer,
commercial bank, trust company or other nominee should properly complete and
send or deliver the letter of transmittal and certificates for the shares and
any other required documents to the depositary at its address set forth below:
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, LLC
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, N.J. 07606 Mail Drop-Reorg New York, N.Y. 10271
Attn: Reorganization Dept. Ridgefield Park, N.J. 07660 Attn: Reorganization Dept.
Attn: Reorganization Dept.
</TABLE>
By Facsimile Transmission: (201) 296-4293
Confirm Receipt of Notice of Guaranteed Delivery by Telephone (collect): (201)
296-4860
Any questions or requests for assistance or for additional copies of this
offer to purchase, the letter of transmittal or the notice of guaranteed
delivery may be directed to the information agent, at the telephone number and
address below. Stockholders may also contact their broker, dealer, commercial
bank or trust company for assistance concerning the offer. To confirm delivery
of shares, stockholders are directed to contact the depositary.
The Information Agent for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, LLC
450 West 33rd Street
14th Floor
New York, New York 10001
(800) 774-5469
Banks and Brokers Call(collect): (212) 273-8080
The Dealer Manager for the Offer is:
Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, New York 10172
(212) 892-3000 (call collect)
June 17, 1999
36
<PAGE>
EXHIBIT (a)(2)
MGM GRAND, INC.
Letter of Transmittal
for
Tender of Shares of Common Stock
Pursuant to Offer to Purchase Dated June 17, 1999
- -------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON JULY 23, 1999, UNLESS THE OFFER IS EXTENDED
(THE "EXPIRATION DATE").
- -------------------------------------------------------------------------------
The Depositary For The Offer Is:
CHASEMELLON SHAREHOLDER SERVICES, LLC
<TABLE>
<CAPTION>
By Mail: By Overnight Courier: By Hand:
<S> <C> <C>
P.O. Box 3301 85 Challenger Road-- 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Drop--Reorg. New York, NY 10271
Attn: Reorganization Dept. Ridgefield Park, NJ 07660 Attn: Reorganization Dept.
Attn: Reorganization Dept.
</TABLE>
Facsimile Transmissions
(Eligible Institutions Only):
(201) 296-4293
To Confirm Receipt
of Facsimile Only:
(201) 296-4860
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. DELIVERIES
TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT
CONSTITUTE VALID DELIVERY. DELIVERIES TO THE BOOK-ENTRY TRANSFER FACILITY WILL
NOT CONSTITUTE VALID DELIVERY TO THE DEPOSITARY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED. FOR ASSISTANCE COMPLETING THIS LETTER OF
TRANSMITTAL, PLEASE CALL THE INFORMATION AGENT AT (800) 774-5469.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ
THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY.
Stockholders who cannot deliver their Share certificates and any other
required documents to the Depositary by the Expiration Date must tender their
Shares using the guaranteed delivery procedure set forth in Section 3 of the
Offer to Purchase. See Instruction 2.
All Tendering Holders Complete This Box If Any Of The Information Is Left
Blank:
- -------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and Address(es) of Registered Holder(s) Certificate(s) Enclosed
(Please Fill in if Blank) (Attach Signed List if Necessary)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Number of
Shares Number of
Certificate Represented by Shares
Number(s)(1) Certificate(s)(1) Tendered(2)
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Total Shares
</TABLE>
- --------------------------------------------------------------------------------
Indicate in this box the order (by certificate number) in which Shares are
to be purchased in the event of proration. (3) (Attach additional signed
list if necessary.)
1st: 2nd: 3rd: 4th: 5th:
- --------------------------------------------------------------------------------
(1) Need not be completed by stockholders tendering by book-entry transfer.
(2) Unless otherwise indicated, it will be assumed that all Shares
described above are being tendered. See Instruction 4.
(3) If you do not designate an order, then in the event less than all
Shares tendered are purchased due to proration, Shares will be selected
for purchase by the Depositary. See Instruction 13.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE DEPOSITARY TRUST
COMPANY ("THE BOOK-ENTRY TRANSFER FACILITY") AND COMPLETE THE
FOLLOWING:
DTC Account No. ____________________________________________________
Transaction Code No. _______________________________________________
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________
Date of Execution of Notice of Guaranteed Delivery _________________
Name of Institution that Guaranteed Delivery _______________________
If delivery is by book-entry transfer:
Name of Tendering Institution ______________________________________
DTC Account No. ____________________________________________________
Transaction Code No. _______________________________________________
- -------------------------------------------------------------------------------
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to MGM Grand, Inc., a Delaware corporation
(the "Company"), the above-described shares of its common stock, par value
$.01 per share (the "Shares"), at $50.00 per Share (the "Purchase Price"), net
to the seller in cash, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated June 17, 1999 (the "Offer to Purchase"),
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Offer").
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to all the Shares that are being tendered
hereby or orders the registration of such Shares tendered by book-entry
transfer that are purchased pursuant to the Offer to or upon the order of the
Company and hereby irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares, with full power of substitution (such power of attorney being
deemed to be irrevocable power coupled with an interest), to:
(i) deliver certificates for such Shares, or transfer ownership of such
Shares on the account books maintained by the Book-Entry Transfer Facility,
together, in any such case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Company upon receipt by the
Depositary, as the undersigned's agent, of the Purchase Price with respect
to such Shares;
(ii) present certificates for such Shares for cancellation and transfer
on the books of the Company; and
(iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, all in accordance with the terms of
the Offer.
The undersigned hereby represents and warrants to the Company that the
undersigned has full power and authority to tender, sell, assign and transfer
the Shares tendered hereby and that, when and to the extent the same are
accepted for payment by the Company, the Company will acquire good, marketable
and unencumbered title thereto, free and clear of all liens, restrictions,
charges, encumbrances, conditional sales agreements or other obligations
relating to the sale or transfer thereof, and the same will not be subject to
any adverse claims. The undersigned will, upon request, execute and deliver
any additional documents deemed by the Depositary or the Company to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby.
The undersigned represents and warrants to the Company that the undersigned
has read and agrees to all of the terms of the Offer. All authority herein
conferred or agreed to be conferred shall not be affected by and shall survive
the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Except as stated
in the Offer, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
Instructions will constitute the undersigned's representation and warranty to
the Company that (i) the undersigned has a net long position in the Shares or
equivalent securities being tendered within the meaning of Rule 14e-4
promulgated under the Securities Exchange Act of 1934, as amended, and (ii)
the tender of such Shares complies with Rule 14e-4. The Company's acceptance
for payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the undersigned and the Company upon the terms and subject
to the conditions of the Offer.
The names and addresses of the registered holders should be printed, if they
are not already printed above, exactly as they appear on the certificates
representing Shares tendered hereby. The certificate numbers, the number of
Shares represented by such certificates and the number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes on
this Letter of Transmittal.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may,
subject to applicable law, postpone the acceptance for payment of, or the
payment for,
3
<PAGE>
Shares tendered or may not be required to purchase any of the Shares tendered
hereby or may accept for payment fewer than all of the Shares tendered hereby.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the Purchase Price of any Shares purchased, and/or return
any Shares not tendered or not purchased, in the name(s) of the undersigned
(and, in the case of Shares tendered by book-entry transfer, by credit to the
account at the Book-Entry Transfer Facility). Similarly, unless otherwise
indicated under "Special Delivery Instructions," please mail the check for the
Purchase Price of any Shares purchased and/or any certificates for Shares not
tendered or not purchased (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In the
event that both "Special Payment Instructions" and "Special Delivery
Instructions" are completed, please issue the check for the Purchase Price of
any Shares purchased and/or return any Shares not tendered or not purchased in
the name(s) of, and mail such check and/or any certificates to, the person(s)
so indicated. The undersigned recognizes that the Company has no obligation,
pursuant to the "Special Payment Instructions," to transfer any Shares from
the name of the registered holder(s) thereof if the Company does not accept
for payment any of the Shares so tendered.
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
- -------------------------------------------------------------------------------
STOCK PURCHASE PLAN
(See Instruction 14)
This section is to be completed ONLY if Shares held in the Company's
Employee Stock Purchase Plan (the "Stock Purchase Plan") are to be tendered.
[ ] By checking this box, the undersigned represents that the undersigned is
a participant in the Stock Purchase Plan and hereby instructs ChaseMellon
Shareholder Services, LLC, the administrator of the Stock Purchase Plan,
to tender on behalf of the undersigned the following number of Shares
credited to the Stock Purchase Plan account of the undersigned. (1)
Number of Shares to be tendered:___________________________.
(1) The undersigned understands and agrees that all Shares held in the
undersigned's Stock Purchase Plan account will be tendered if the above
box is checked and the space above is left blank. If the box captioned
"Odd Lots" in this Letter of Transmittal is completed, all Shares held by
the Odd Lot Owner, including Shares held in the Stock Purchase Plan, will
be tendered regardless of whether this section is otherwise completed.
- -------------------------------------------------------------------------------
4
<PAGE>
- ----------------------------------- ------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 2, 5 and 7) (See Instructions 2, 5 and 7)
To be completed ONLY if the To be completed ONLY if the
check for the aggregate Purchase check for the aggregate Purchase
Price of Shares purchased and/or Price of Shares purchased and/or
certificates for Shares not certificates for Shares not
tendered or not purchased are to tendered or not purchased are to
be issued in the name of someone be mailed to someone other than
other than the undersigned. the undersigned or to the
undersigned at an address other
Issue [_] Check and/or than that shown below the
[_] Certificate(s) to: undersigned's signature(s).
Name _____________________________ Mail [_] Check and/or
(Please Print) [_] Certificate(s) to:
Address __________________________ Name______________________________
__________________________________ (Please Print)
(Include Zip Code) Address __________________________
__________________________________ __________________________________
(Tax Identification or Social (Include Zip Code)
Security Number(s)) __________________________________
(Tax Identification or Social
Security Number(s))
- ------------------------------------ ------------------------------------
- ------------------------------------------------------------------------------
ODD LOTS
(See Instruction 8)
This section is to be completed ONLY if Shares are being tendered by or
on behalf of a person who owned beneficially, as of the close of business
on June 15, 1999, and who continues to own beneficially as of the
Expiration Date, an aggregate of fewer than 100 Shares.
The undersigned either (check one box):
[_] owned beneficially, as of the close of business on June 15, 1999, and
continues to own beneficially as of the Expiration Date, an aggregate of
fewer than 100 Shares (excluding Shares attributable to the
undersigned's account, if any, under the MGM Grand savings plan but
including Shares held in the Stock Purchase Plan), all of which are
being tendered, or
[_] is a broker, dealer, commercial bank, trust company or other nominee
that (i) is tendering, for the beneficial owners thereof, Shares with
respect to which it is the record owner, and (ii) believes, based upon
representations made to it by each such beneficial owner, that such
beneficial owner owned beneficially, as of the close of business on June
15, 1999, and continues to own beneficially as of the Expiration Date,
an aggregate of fewer than 100 Shares (excluding Shares atrtributable to
individual accounts under the MGM Grand savings plan but including
Shares held in the Stock Purchase Plan) and is tendering all of such
Shares.
5
<PAGE>
- -------------------------------------------------------------------------------
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 1, 5 AND 7)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 11)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 1)
............................................................................
............................................................................
(Signature(s) of Holder(s))
Date: , 1999
Name(s): ...................................................................
............................................................................
(Please Print)
Capacity (full title): .....................................................
Address: ...................................................................
............................................................................
(Include Zip Code)
Area Code and Telephone Number: ............................................
............................................................................
(Tax Identification or Social Security Number(s))
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please set
forth full title and see Instruction 5.)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS)
............................................................................
(Authorized Signature)
Date: , 1999
Name of Firm: ..............................................................
Capacity (full title): .....................................................
(Please Print)
Address: ...................................................................
............................................................................
............................................................................
(Include Zip Code)
Area Code and Telephone Number: ............................................
- -------------------------------------------------------------------------------
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm that is
a recognized member of an eligible institution, as set forth in the Offer to
Purchase, unless (i) this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in the Book-Entry Transfer Facility) tendered herewith
and such holder(s) have not completed the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on this
Letter of Transmittal, or (ii) such Shares are tendered for the account of an
eligible institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates; Guaranteed
Delivery Procedures. This Letter of Transmittal is to be used either if Share
certificates are to be forwarded herewith or if delivery of Shares is to be
made by book-entry transfer pursuant to the procedures set forth in Section 3
of the Offer to Purchase. Certificates for all physically delivered Shares, or
a confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of all Shares delivered electronically, as well
as a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the front page of this Letter of Transmittal prior to the Expiration
Date. If certificates are forwarded to the Depositary in multiple deliveries,
a properly completed and duly executed Letter of Transmittal must accompany
each such delivery.
Stockholders whose Share certificates are not immediately available, who
cannot deliver their Shares and all other required documents to the Depositary
or who cannot complete the procedure for delivery by book-entry transfer prior
to the Expiration Date may tender their Shares pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant
to such procedure: (i) such tender must be made by or through an Eligible
Institution; (ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Company (with any required
signature guarantees) must be received by the Depositary prior to the
Expiration Date; and (iii) the certificates for all physically delivered
Shares in proper form for transfer by delivery, or a confirmation of a book-
entry transfer into the Depositary's account at the Book-Entry Transfer
Facility of all Shares delivered electronically, in each case together with a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange, Inc. trading days after the date the Depositary receives such Notice
of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative or contingent tenders will be accepted. By executing this
Letter of Transmittal (or facsimile thereof), the tendering stockholder waives
any right to receive any notice of the acceptance for payment of the Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule and attached to this Letter of Transmittal.
4. Partial Tenders (Not Applicable to Stockholders who Tender by Book-Entry
Transfer). If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
that are to be tendered in the box entitled "Number of Shares Tendered." In
such case, a new certificate for the remainder of the Shares represented by
the old certificate will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the "Special Payment Instructions"
or "Special Delivery Instructions" boxes on this Letter of Transmittal, as
promptly as practicable following the expiration or termination of the Offer.
All Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
7
<PAGE>
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signatures(s) must correspond with the name(s) as written
on the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or manually signed facsimiles thereof)
as there are different registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder(s), in which case the certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such certificates. Signatures on any such
certificates or stock powers must be guaranteed by an Eligible Institution.
See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates evidencing
the Shares tendered hereby must be endorsed or accompanied by appropriate
stock powers, in either case, signed exactly as the name(s) of the registered
holder(s) appear(s) on such certificate(s). Signature(s) on any such
certificates or stock powers must be guaranteed by an Eligible Institution.
See Instruction 1.
If this Letter of Transmittal or any certificate or stock power is signed by
a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory
to the Company of the authority of such person so to act must be submitted.
6. Stock Transfer Taxes. The Company will pay or cause to be paid any stock
transfer taxes with respect to the sale and transfer of any Shares to it or
its order pursuant to the Offer. If, however, payment of the aggregate
Purchase Price is to be made to, or Shares not tendered or not purchased are
to be registered in the name of, any person other than the registered
holder(s), or if tendered Shares are registered in the name of any person
other than the person(s) signing this Letter of Transmittal, the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such person will be
deducted from the purchase price unless satisfactory evidence of the payment
of such taxes, or exemption therefrom, is submitted. See Section 5 of the
Offer to Purchase. Except as provided in this Instruction 6, it will not be
necessary to affix transfer tax stamps to the certificates representing Shares
tendered hereby.
7. Special Payment and Delivery Instructions. If a check for the Purchase
Price of any Shares tendered hereby is to be issued in the name of, and/or any
Shares not tendered or not purchased are to be returned to, a person other
than the person(s) signing this Letter of Transmittal, or if the check and/or
any certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to an
address other than that shown above in the box captioned "Description of
Shares Tendered," then the boxes captioned "Special Payment Instructions"
and/or "Special Delivery Instructions" on this Letter of Transmittal should be
completed. Stockholders tendering Shares by book-entry transfer will have any
Shares not accepted for payment returned by crediting the account maintained
by such shareowner at the Book-Entry Transfer Facility.
8. Odd Lots. As described in Section 1 and Section 2 of the Offer to
Purchase, if fewer than all Shares validly tendered at and not withdrawn prior
to the Expiration Date are to be purchased, the Shares purchased first will
consist of all Shares tendered by any stockholder who owned beneficially, as
of the close of business on June 15, 1999, and continues to own beneficially
as of the Expiration Date, an aggregate of fewer than 100 Shares (excluding
Shares attributable to individual accounts under the MGM Grand savings plan
but including Shares held in the Stock Purchase Plan) and who validly tendered
all such Shares. Partial tenders of Shares will not qualify for this
preference and this preference will not be available unless the box captioned
"Odd Lots" in this Letter of Transmittal and the Notice of Guaranteed
Delivery, if any, is completed.
8
<PAGE>
9. Substitute Form W-9 and Form W-8. Under the United States federal income
tax backup withholding rules, unless an exemption applies under the applicable
laws and regulations, 31% of the gross proceeds payable to a stockholder or
other payee pursuant to the Offer must be withheld and remitted to the United
States Treasury, unless the stockholder or other payee provides such person's
taxpayer identification number (employer identification number or social
security number) to the Depositary and certifies that such number is correct.
Therefore, each tendering stockholder should complete and sign the Substitute
Form W-9 included as part of this Letter of Transmittal so as to provide the
information and certification necessary to avoid backup withholding, unless
such stockholder otherwise establishes to the satisfaction of the Depositary
that it is not subject to backup withholding. Certain stockholders, including,
among others, all corporations and certain foreign stockholders (in addition
to foreign corporations), are not subject to these backup withholding and
reporting requirements. In order for a foreign stockholder to qualify as an
exempt recipient, that stockholder must submit an IRS Form W-8 or a Substitute
Form W-8, signed under penalties of perjury, attesting to that stockholder's
exempt status. Such statements may be obtained from the Depositary.
10. Withholding on Foreign Stockholders. Even if a foreign stockholder has
provided the required certification to avoid backup withholding, the
Depositary will withhold United States federal income taxes equal to 30% of
the gross payments payable to a foreign stockholder or his or her agent unless
the Depositary determines that a reduced rate of withholding is available
pursuant to a tax treaty or that an exemption from withholding is applicable
because such gross proceeds are effectively connected with the conduct of a
trade or business in the United States. For this purpose, a foreign
stockholder is any stockholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States, any State or any
political subdivision thereof, (iii) an estate, the income of which is subject
to United States federal income taxation regardless of the source of such
income or (iv) a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust, and one or more U.S. trustees have the authority to control all
substantial decisions relating to the trust. In order to obtain a reduced rate
of withholding pursuant to a tax treaty, a foreign stockholder must deliver to
the Depositary a properly completed IRS Form 1001. In order to obtain an
exemption from withholding on the grounds that the gross proceeds paid
pursuant to the Offer are effectively connected with the conduct of a trade or
business within the United States, a foreign stockholder must deliver to the
Depositary a properly completed IRS From 4224. The Depositary will determine a
stockholder's status as a foreign stockholder and eligibility for a reduced
rate of, or an exemption from, withholding by reference to outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding (e.g., IRS Form 1001 or IRS From 4224) unless
facts and circumstances indicate that such reliance is not warranted. A
foreign stockholder may be eligible to obtain a refund of all or a portion of
any tax withheld if such stockholder meets the "complete redemption,"
"substantially disproportionate" or "not essentially equivalent to a dividend"
test described in Section 14 of the Offer to Purchase or is otherwise able to
establish that no tax or a reduced amount of tax is due. Foreign stockholders
are urged to consult their tax advisors regarding the application of United
States federal income tax withholding, including eligibility for a withholding
tax reduction or exemption and refund procedures.
11. Requests for Assistance or Additional Copies. Any questions or requests
for assistance may be directed to the Information Agent at its telephone
number and address listed below. Requests for additional copies of the Offer
to Purchase, this Letter of Transmittal or other tender offer materials may be
directed to the Information Agent, and such copies will be furnished promptly
at the Company's expense. Stockholders may also contact their local broker,
dealer, commercial bank or trust company for documents relating to, or
assistance concerning, the Offer.
12. Irregularities. All questions as to the number of Shares to be accepted,
the price to be paid therefor and the validity, form, eligibility (including
time of receipt) and acceptance for payment of any tender of Shares will be
determined by the Company, in its sole discretion, which determination shall
be final and binding on all parties. The Company reserves the absolute right
to reject any or all tenders it determines not to be in proper form or the
acceptance of or payment for which may, in the opinion of the Company's
counsel, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Shares by any particular stockholder. No tender of
Shares will be deemed to be validly made until all defects or irregularities
have been cured or waived. None of the Company, the Dealer Manager, the
Depositary, the Information Agent or any other person is or will be obligated
to give notice of any defects or irregularities in tenders, and none of them
will incur any liability for failure to give any such notice.
9
<PAGE>
13. Order of Purchase in Event of Proration. As described in Section 1 of the
Offer to Purchase, stockholders may designate the order in which their Shares
are to be purchased in the event of proration. The order of purchase may have
an effect on the United States federal income tax classification of any gain
or loss on the Shares purchased. See Sections 1 and 14 of the Offer to
Purchase.
14. Stock Purchase Plan. If a stockholder desires to have tendered pursuant
to the Offer Shares credited to the stockholder's account under the Stock
Purchase Plan, the box captioned "Stock Purchase Plan" in this Letter of
Transmittal should be completed. If a stockholder authorizes a tender of
Shares held in the Stock Purchase Plan, all such Shares credited to such
stockholder's account, including fractional Shares, will be tendered, unless
otherwise specified in the appropriate space in the box captioned "Stock
Purchase Plan." In the event that the box captioned "Stock Purchase Plan" is
not completed, no Shares held in the tendering stockholder's Stock Purchase
Plan account will be tendered unless the stockholder has otherwise completed
the box captioned "Odd Lots" in this Letter of Transmittal, in which case, all
Shares held in the Odd Lot owner's Stock Purchase Plan account will be
tendered regardless of whether the box captioned "Stock Purchase Plan" is
completed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE
THEREOF) TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY,
OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR
TO THE EXPIRATION DATE. STOCKHOLDERS ARE ENCOURAGED TO RETURN A COMPLETED
SUBSTITUTE FORM W-9 WITH THEIR LETTER OF TRANSMITTAL.
10
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS (SEE INSTRUCTION 8)
PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, LLC
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Part 1--PLEASE PROVIDE YOUR TIN IN
SUBSTITUTE THE BOX AT RIGHT AND CERTIFY BY -----------------------------------
Form W-9 SIGNING AND DATING BELOW. Social security number
OR
-----------------------------------
Employer identification number
-----------------------------------------------------------------------------------------------------
Part 2--Certification--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am
Department of the waiting for a number to be issued to me);
Treasury (2) I am not subject to backup withholding either because (i) I am exempt from backup
Internal Revenue Service withholding, (ii) I have not been notified by the Internal Revenue Service ("IRS") that I
am subject to backup withholding as a result of a failure to report all interest or
dividends, or (iii) the IRS has notified me that I am no longer subject to backup
withholding; and
(3) any other information provided on this form is true and correct.
-----------------------------------------------------------------------------------------------------
Certification Instructions-- You must cross out all of Part 2 above
Payer's Request for Taxpayer if you have been notified by the IRS that you are subject to
Identification Number (TIN) backup withholding because of underreporting interest or
and Certification dividends on your tax return and you have not been notified by the
IRS that you are no longer subject to backup withholding. Part 3
Awaiting TIN [_]
Signature: _______________________________ Date: ___________________
Name (Please Print):
</TABLE>
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT
TO THE OFFER.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 ("AWAITING TIN") OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all payments made to me on account of the Shares shall
be retained until I provide a taxpayer identification number to the Depositary
and that, if I do not provide my taxpayer identification number within 60
days, such retained amounts shall be remitted to the Internal Revenue Service
as backup withholding and 31% of all reportable payments made to me thereafter
will be withheld and remitted to the Internal Revenue Service until I provide
a taxpayer identification number.
Signature(s): ____________________________ Date: ____________________________
11
<PAGE>
The Information Agent for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, LLC
450 West 33rd Street
14th Floor
New York, New York 10001
(800) 953-2497
Banks and Brokers call: (212) 273-8080
The Dealer Manager for the Offer is:
Donaldson, Lufkin & Jenrette
SECURITIES CORPORATION
277 Park Avenue
New York, NY 10172
(212) 892-3000
12
<PAGE>
EXHIBIT (a)(3)
MGM GRAND, INC.
NOTICE OF GUARANTEED DELIVERY
OF SHARES OF COMMON STOCK
This form, or a form substantially equivalent to this form, must be used to
accept the Offer (as defined below) if certificates for the Shares of common
stock of MGM Grand, Inc. are not immediately available, if the procedure for
book-entry transfer cannot be completed on a timely basis, or if time will not
permit all other documents required by the Letter of Transmittal to be
delivered to the Depositary (as defined below) prior to the "expiration date"
(as set forth in Section 1 of the Offer to Purchase defined below). This form
may be delivered by hand or transmitted by mail or overnight courier, or (for
Eligible Institutions only) by facsimile transmission, to the Depositary. See
Section 3 of the Offer to Purchase. THE ELIGIBLE INSTITUTION WHICH COMPLETES
THIS FORM MUST COMMUNICATE THE GUARANTEE TO THE DEPOSITARY AND MUST DELIVER
THE LETTER OF TRANSMITTAL AND CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN
THE TIME SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO
SUCH ELIGIBLE INSTITUTION.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, LLC
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
P.O. Box 3301 85 Challenger Road-Mail Drop-Reorg. 120 Broadway, 13th Floor
South Hackensack, N.J. 07606 Ridgefield Park, N.J. 07660 New York, N.Y. 10271
Attn: Reorganization Dept. Attn: Reorganization Dept. Attn: Reorganization Dept.
</TABLE>
Facsimile Transmissions (Eligible Institutions Only): (201) 296-4293
To Confirm Receipt of Facsimile Only: (201) 296-4860
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A
FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to MGM Grand, Inc., a Delaware corporation
(the "Company"), upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated June 17, 1999 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer"), receipt
of which is hereby acknowledged, the number of shares of common stock, par
value $.01 per share (the "Shares"), of the Company listed below, pursuant to
the guaranteed delivery procedure set forth in Section 3 of the Offer to
Purchase.
<TABLE>
<S> <C>
Number of Shares: SIGN HERE:
________________________________________________ ________________________________________________
Certificate Nos.: (if available) Name(s) (Please Print)
________________________________________________ ________________________________________________
________________________________________________ ________________________________________________
Area Code and Telephone Number (Address)
Account No. ____________________________________ ________________________________________________
at The Depository Trust Company Signature(s)
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
ODD LOTS
This section is to be completed ONLY if Shares are being tendered by or on
behalf of a person who owned beneficially, as of the close of business on
June 15, 1999, and who continues to own beneficially as of the expiration
date, an aggregate of fewer than 100 Shares (excluding Shares attributable to
individual accounts under the MGM Grand savings plan but including Shares
held in the MGM Grand purchase plan).
The undersigned either (check one box):
[_] owned beneficially, as of the close of business on June 15, 1999 and
continues to own beneficially as of the expiration date, an aggregate of
fewer than 100 Shares (excluding Shares attributable to the undersigned's
account under the MGM Grand savings plan but including Shares held in the
MGM Grand purchase plan), all of which are being tendered, or
[_] is a broker, dealer, commercial bank, trust company or other nominee that
(i) is tendering, for the beneficial owners thereof, Shares with respect
to which it is the record owner, and (ii) believes, based upon
representations made to it by each such beneficial owner, that such
beneficial owner owned beneficially, as of the close of business on June
15, 1999, and continues to own beneficially as of the expiration date, an
aggregate of fewer than 100 Shares (excluding Shares attributable to
individual accounts under the MGM Grand savings plan but including Shares
held in the MGM Grand purchase plan) and is tendering all of such Shares.
- -------------------------------------------------------------------------------
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company (not a savings bank or savings and loan
association) having an office, branch or agency in the United States hereby
guarantees (i) that the above-named person(s) has a net long position in the
Shares being tendered within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended, (ii) that such tender of Shares
complies with Rule 14e-4, and (iii) to deliver to the Depositary at one of its
addresses set forth above certificate(s) for the Shares tendered hereby, in
proper form for transfer, or a confirmation of the book-entry transfer of the
Shares tendered hereby into the Depositary's account at The Depository Trust
Company in each case together with a properly completed and duly executed
Letter(s) of Transmittal (or facsimile(s) thereof), with any required
signature guarantee(s) and any other required documents, all within three New
York Stock Exchange, Inc. trading days after the date hereof.
<TABLE>
<S> <C>
________________________________________________ ________________________________________________
Name of Firm Authorized Signature
________________________________________________ ________________________________________________
Address Name
________________________________________________ ________________________________________________
City, State, Zip Code Title
Dated: ___________________________________, 1999 ________________________________________________
Area Code and Telephone Number
</TABLE>
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. YOUR SHARE CERTIFICATES MUST
BE SENT WITH THE LETTER OF TRANSMITTAL.
2
<PAGE>
EXHIBIT (a)(4)
Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, NY 10172
Offer to Purchase for Cash
Up to 6,000,000 Shares of Common Stock
of
MGM GRAND, INC.
at
$50.00 Net Per Share
- -------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON FRIDAY, JULY 23, 1999, UNLESS EXTENDED.
- -------------------------------------------------------------------------------
To Brokers, Dealers, Commercial Banks,
Trust Companies and other Nominees:
We are enclosing the material listed below relating to the offer by MGM
Grand, Inc., a Delaware corporation (the "Company"), to purchase up to
6,000,000 shares of its Common Stock, par value $.01 per share (the "Shares"),
at $50.00 per Share, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated June 17, 1999 and the
related Letter of Transmittal (which together constitute the "Offer").
We have been engaged by the Company to act as Dealer Manager with respect to
the Offer. We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee) or who hold Shares
registered in their own names. Please bring the Offer to their attention as
promptly as possible. No fees or commissions will be payable to brokers,
dealers or other persons for soliciting tenders of Shares pursuant to the
Offer. The Company will, however, upon request, reimburse you for customary
mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Company will pay all transfer taxes on
its purchase of Shares, subject to Instruction 6 of the Letter of Transmittal.
Enclosed herewith are copies of the following documents:
1. Offer to Purchase dated June 17, 1999;
2. Letter of Transmittal;
3. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9;
4. Notice of Guaranteed Delivery;
5. Form of letter which may be sent to your clients for whose account you
hold Shares in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
and
6. Return envelope addressed to the Depositary.
We urge you to contact your clients promptly. Please note that, unless
extended, the Offer, the proration period and withdrawal rights will expire at
5:00 p.m., New York City time, on Friday, July 23, 1999.
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of, holders of Shares residing in any jurisdiction in which the making
or acceptance thereof would not be in compliance with the laws of such
jurisdiction.
As described in the Offer to Purchase, if more than 6,000,000 Shares are
validly tendered and not withdrawn prior to the "expiration date," as defined
in Section 1 of the Offer to Purchase, the Company will accept Shares for
purchase in the following order of priority: (i) all Shares validly tendered
and not withdrawn prior to the expiration date by any stockholder who owned
beneficially, as of the close of business on June 15, 1999, and who continues
to own beneficially as of the expiration date, an aggregate of fewer than 100
Shares and who validly tenders all of such Shares (partial tenders will not
qualify for this preference) and completes the box captioned "Odd Lots" in the
Letter of Transmittal; and (ii) after purchase of all of the foregoing Shares,
all other Shares validly tendered and not withdrawn prior to the expiration
date on a pro rata basis.
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS
MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING SHARES. THE COMPANY HAS BEEN ADVISED THAT WHILE MOST OF ITS
DIRECTORS AND SENIOR EXECUTIVE OFFICERS DO NOT INTEND TO TENDER SHARES IN THE
OFFER, SOME MAY TENDER SHARES THEY OWN AS WELL AS SHARES SUBJECT TO
EXERCISABLE OPTIONS HELD BY THEM. THE COMPANY HAS BEEN FURTHER ADVISED THAT
KIRK KERKORIAN AND TRACINDA CORPORATION, A NEVADA CORPORATION WHOLLY OWNED BY
MR. KERKORIAN, ITS PRINCIPAL STOCKHOLDERS, DO NOT INTEND TO TENDER ANY SHARES.
HOWEVER, MR. KERKORIAN HAS REQUESTED MGM GRAND TO REGISTER FOR SALE BY HIM UP
TO 3,894,406 SHARES, WHICH IS THE NUMBER OF SHARES HE OWNS DIRECTLY AND WHICH
IS THE APPROXIMATE NUMBER OF SHARES HE AND TRACINDA COULD HAVE SOLD IN THE
OFFER HAD THEY ELECTED TO PARTICIPATE AND ASSUMING FULL PARTICIPATION BY ALL
STOCKHOLDERS. ANY SUCH SHARES WILL ONLY BE SOLD BY MEANS OF A PROSPECTUS AFTER
COMPLETION OF THE OFFER IN THE OPEN MARKET OR THROUGH PRIVATELY NEGOTIATED
TRANSACTIONS AS MARKET CONDITIONS WARRANT AND AS HE MAY DETERMINE.
Additional copies of the enclosed material may be obtained from the
undersigned or the Information Agent. Any questions you may have with respect
to the Offer should be directed to the Information Agent or the undersigned at
their respective addresses and telephone numbers set forth on the back cover
of the enclosed Offer to Purchase.
Very truly yours,
Donaldson, Lufkin & Jenrette
Securities Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
AS THE AGENT OF THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE
DEPOSITARY, OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON
THEIR BEHALF IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED
HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
EXHIBIT (a)(5)
Offer to Purchase for Cash
Up to 6,000,000 Shares of Common Stock
of
MGM GRAND, INC.
at
$50.00 Net Per Share
- -------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON FRIDAY, JULY 23, 1999, UNLESS EXTENDED.
- -------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated June 17, 1999
and the related Letter of Transmittal (which together constitute the "Offer")
relating to an offer by MGM Grand, Inc., a Delaware corporation (the
"Company"), to purchase up to 6,000,000 shares of its Common Stock, par value
$.01 per share (the "Shares"). We are the holder of record of Shares held by
us for your account. A tender of any such Shares can be made only by us as the
holder of record and pursuant to your instructions. THE LETTER OF TRANSMITTAL
IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO
TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any or all such
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is invited to the following:
1. The tender price is $50.00 per Share, net to you in cash.
2. The Offer is being made for up to 6,000,000 Shares, including Shares
underlying exercisable stock options with exercise prices below $50.00. The
Company reserves the right to purchase additional shares of Common Stock in
the Offer.
3. The Offer is not conditioned upon any minimum number of shares of
Common Stock being tendered.
4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal,
transfer taxes in connection with the purchase of Shares by the Company.
5. As described in the Offer to Purchase, if more than 6,000,000 Shares
have been validly tendered and not withdrawn prior to the "expiration
date," as defined in Section 1 of the Offer to Purchase, the Company will
accept Shares for purchase in the following order of priority: (i) all
Shares validly tendered and not withdrawn prior to the expiration date by
any stockholder who owned beneficially, as of the close of business on June
15, 1999, and who continues to own beneficially as of the expiration date,
an aggregate of fewer than 100 Shares (excluding Shares attributable to
individual accounts under the MGM Grand savings plan but including shares
held in the MGM Grand purchase plan) and who validly tenders all of such
Shares (partial tenders will not qualify for this preference) and completes
the box captioned "Odd Lots" in the Letter of Transmittal and, if
applicable, the Notice of Guaranteed Delivery; and (ii) after purchase of
all of the foregoing Shares, all other Shares validly tendered and not
withdrawn prior to the expiration date on a pro rata basis.
6. In the event that proration of tendered Shares is required, because of
the difficulty of determining the precise number of Shares properly
tendered (due in part to the guaranteed delivery procedure described in the
Offer), the Company does not expect to be able to announce the final
results of such proration or pay for any Shares which are accepted for
payment until approximately seven business days after the expiration date.
Preliminary results of proration will be announced by a press release as
soon as practicable after the expiration date. Holders of Shares may obtain
preliminary information from the Dealer Manager or the Information Agent
and may be able to obtain such information from their brokers.
<PAGE>
7. The Offer, proration period and withdrawal rights will expire at 5:00
p.m., New York City time, on Friday, July 23, 1999, unless extended.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form set forth
below. An envelope to return your instructions to us is enclosed.
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of, holders of Shares residing in any jurisdiction in which the making
or acceptance thereof would not be in compliance with the laws of such
jurisdiction.
INSTRUCTIONS
The undersigned acknowledges receipt of your letter enclosing the Offer to
Purchase dated June 17, 1999 of MGM Grand, Inc. and the related Letter of
Transmittal, relating to shares of its Common Stock, par value $.01 per share
(the "Shares").
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned, pursuant to the terms and
conditions set forth in the Offer to Purchase and the related Letter of
Transmittal.
DATED: , 1999
--------------
_____________________________________
_____________________________________
Signature(s)
_____________________________________
(Please Print Name(s) and
Address(es) Here)
_____________________________________
_____________________________________
Number of Shares of Common Stock
to Be Tendered*
*Unless otherwise indicated, it
will be assumed that all your
shares are to be tendered.
Account No.
2
<PAGE>
[LETTERHEAD OF MGM GRAND, INC.]
EXHIBIT (a)(6)
- --------------------------------------------------------------------------------
MGM Grand Announces $50 Per Share Cash Tender Offer for Up to 6 Million Shares
To Complete its 12 Million Share Stock Repurchase Program
LAS VEGAS. June 10/PRNewswire/ -- MGM Grand, Inc. (NYSE: MGG) announced
today that its Board of Directors has authorized the Company to purchase up to
6,000,000 shares of MGM Grand common stock at $50 per share, representing
approximately 10% of the outstanding shares, exclusive of treasury shares. The
tender offer will complete the 12,000,000 share repurchase program which was
previously announced in June, 1998. The offer is expected to commence on June
17, 1999 and to expire at 5:00 p.m., New York City time, July 23, 1999, unless
extended by the Company. As of June 9, 1999, MGM Grand had 62,217,548 shares
outstanding, exclusive of treasury shares. The New York Stock Exchange closing
price for MGM Grand stock on June 10, 1999 was $43.125 per share.
The tender offer will only be made pursuant to the offering materials to be
distributed to MGM Grand's stockholders. Under the terms of the tender offer,
MGM Grand's stockholders will be given the opportunity to sell up to 6,000,000
shares of MGM Grand, Inc. common stock at $50 per share.
If more than 6,000,000 shares are tendered, and MGM Grand does not elect to
acquire such additional shares, there will be a proration. The tender offer will
not be contingent upon any minimum number of shares being tendered.
The Board of Directors of MGM Grand is not making any recommendation to
stockholders as to whether or not they should tender any shares pursuant to the
offer.
MGM Grand has been informed that its principal stockholders, Tracinda
Corporation and Kirk Kerkorian do not intend to participate in the tender offer.
However, Mr. Kerkorian has requested MGM Grand to register for sale by him up to
3,894,406 shares of MGM Grand stock, which he owns directly and which is
approximately the number of shares Tracinda and Mr. Kerkorian could have sold in
the tender offer had they elected to participate and assuming full
participation. The potential sale of shares by Mr. Kerkorian will be made only
pursuant to a prospectus. Any such shares will only be sold after completion of
the tender offer in the open market or through privately negotiated transactions
as market conditions warrant.
Assuming the repurchase of 6,000,000 shares by MGM Grand and the public
sale by Mr. Kerkorian of 3,894,406 shares, Tracinda and Mr. Kerkorian would
collectively own approximately 61% of the outstanding MGM Grand common stock,
which is approximately the same percentage they currently own.
MGM Grand will finance the tender offer through available cash, cash flow
from operations and, to the extent necessary, its existing credit facility.
(more)
<PAGE>
-2-
J. Terrence Lanni, Chairman and Chief Executive Officer, said: "We
continue to experience strong operating results and maintain one of the
strongest balance sheets in the industry. By implementing the final part of our
12,000,000 share repurchase program, we are providing value to those
shareholders who wish to dispose of a portion of their holdings. At the same
time, we have the financial strength to continue to execute our aggressive
growth strategy."
Alex Yemenidjian, President, said: "Our substantial capital investments in
'The City of Entertainment' in Las Vegas and in our interim casino in Detroit
are substantially complete and, consequently, we anticipate generating
significant free cash flow from our Nevada and Detroit operations beginning in
the fall of this year."
MGM Grand, Inc. is an entertainment, hotel and gaming company headquartered
in Las Vegas, Nevada. MGM Grand, Inc. owns and operates: the MGM Grand Hotel and
Casino and New York - New York Hotel and Casino in Las Vegas; Whiskey Pete's,
Buffalo Bill's and the Primm Valley Resort in Primm, Nevada at the
California/Nevada border; two championship golf courses in California; the MGM
Grand Hotel and Casino in Darwin, Australia; and manages casinos in Nelspruit,
Witbank and Johannesburg, Republic of South Africa. MGM Grand is developing an
interim casino in Detroit, Michigan, which is anticipated to open in the fall of
1999, followed by the permanent hotel and casino resort thereafter. The Company
also has announced plans to develop a hotel and casino resort in Atlantic City,
New Jersey.
Statements in this release which are not historical facts are "forward
looking" statements and "safe harbor statements" under the Private Securities
Litigation Reform Act of 1995 that involve risks and/or uncertainties, including
risks and/or uncertainties as described in the Company's public filings with the
Securities and Exchange Commission.
SOURCE MGM Grand, Inc.
-0- 06/10/99
/CONTACT: James J. Murren, Chief Financial Officer of MGM Grand, Inc.,
702-891-3344/
/Company News On-Call: http://www.prnewswire.com/comp/000725.html or fax,
800-758-5804, ext. 000725/
(MGG)
-0-
<PAGE>
EXHIBIT (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase, dated June
17, 1999, and the related Letter of Transmittal. Capitalized terms not defined
in this announcement have the respective meanings ascribed to such terms in the
Offer to Purchase. The Offer is not being made to, nor will the Company accept
tenders from, holders of Shares in any jurisdiction in which the Offer or its
acceptance would violate that jurisdiction's laws. The Company is not aware of
any jurisdiction in which the making of the Offer or the lender of Shares would
not be in compliance with the laws of such jurisdiction. In jurisdictions whose
laws require that the Offer be made by a licensed broker or dealer, the Offer
shall be deemed to be made on the Company's behalf by Donaldson, Lufkin &
Jenrette, or by one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
Notice of Offer to Purchase for Cash by
[LOGO OF MGM GRAND, INC.]
Up to 6,000,000 Shares of its Common Stock
at a Purchase Price of $50.00 Per Share
MGM Grand, Inc., a Delaware corporation (the "Company"), invites its
stockholders to tender up to 6,000,000 shares of its common stock, par value
$.01 per share (the "Shares"), to the Company at $50.00 per Share, net to the
seller in cash (the "Purchase Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase dated June 17, 1999 (the "Offer to
Purchase"), and the related Letter of Transmittal (which together constitute the
"Offer"). The Offer is not conditioned on any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions set forth
in the Offer to Purchase.
----------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON FRIDAY, JULY 23, 1999, UNLESS THE OFFER IS
EXTENDED. THERE IS NO GUARANTEED DELIVERY. ALL SHARES MUST BE RECEIVED
BY THE DEPOSITARY PRIOR TO THE EXPIRATION OF THE OFFER.
----------------------------------------------------------------------
The Board of Directors of the Company has approved the Offer. However,
stockholders must make their own decisions whether to tender Shares and, if so,
how many Shares to tender. Neither the Company nor its Board of Directors makes
any recommendation to any stockholder as to whether to tender or refrain from
tendering Shares. [Copy TK] However, its principal stockholder has requested
that the company register for sale by him up to 3,894,406 Shares, which is the
number of Shares he owns directly and which is the number of Shares he and his
wholly owned corporation could have sold in the Offer had they participated. Any
such sales will only be made by prospectus after the Offer is completed.
The Company will pay the Purchase Price for all Shares validly tendered
prior to the Expiration Date (as defined below) and not withdrawn, upon the
terms and subject to the conditions of the Offer, including the proration terms
described below. The term "Expiration Date" means 5:00 P.M., New York City time,
on Friday, July 23, 1999, unless and until the Company in its sole discretion
shall have extended the period of time during which the Offer is open, in which
event the term "Expiration Date" shall refer to the latest time and date at
which the Offer, as so extended by the Company, shall expire. The Company
reserves the right, in its sole discretion, to purchase more than 6,000,000
Shares pursuant to the Offer. For purposes of the Offer, the Company will be
deemed to have accepted for payment (and therefore purchased), subject to
proration, Shares that are validly tendered and not withdrawn when, as and if it
gives oral or written notice to ChaseMellon Shareholder Services, LLC (the
"Depositary") of its acceptance of such Shares for payment pursuant to the
Offer. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made promptly (subject to possible delay in the
event of proration) but only after timely receipt by the Depositary of
certificates for such Shares (or a timely confirmation of a book-entry transfer
of such Shares into the Depositary's account at The Depository Trust Company
(the "Book-Entry Transfer Facility")), a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof) and any other
required documents.
Upon the terms and subject to the conditions of the Offer, in the event
that prior to the Expiration Date more than 6,000,000 Shares (or such greater
number of Shares as the Company may elect to purchase pursuant to the Offer) are
validly tendered and not withdrawn, the Company will purchase such validly
tendered Shares in the following order of priority: (i) all Shares validly
tendered and not withdrawn prior to the Expiration Date by any Odd Lot Owner who
tenders all such Shares beneficially owned by such Odd Lot Owner (partial
tenders will not qualify for this preference) and who completes the box
captioned "Odd Lots" on the Letter of Transmittal and (ii) after purchase of all
of the foregoing Shares, all other Shares validly tendered and not withdrawn on
a pro rata basis.
The Company is making the Offer because it believes: (i) the Shares are
significantly undervalued in the public market; (ii) in light of the Company's
strong financial position, investing in the Company's Shares represents an
attractive use of the Company's capital and an efficient way to provide value to
the Company's stockholders; and (iii) the Offer will afford to those
stockholders who desire liquidity an opportunity to sell all or a portion of
their Shares without the usual transaction costs associated with open market
sales. After the Offer is completed, the Company expects to have sufficient
cash, cash flow and access to other sources of capital to fund its operations
and capital projects, including completing the transformation of MGM Grand Las
Vegas into the City of Entertainment and developing our proposed hotel/casino
projects in Detroit, Michigan and Atlantic City, New Jersey.
The Company expressly reserves the right, at any time or from time to time,
in its sole discretion, to extend the period of time during which the Offer is
open by giving notice of such extension to the Depositary and making a public
announcement thereof. Subject to certain conditions set forth in the Offer to
Purchase, the Company also expressly reserves the right to terminate the Offer
and not accept for payment any Shares not theretofore accepted for payment.
Shares tendered pursuant to the Offer may be withdrawn at any time before
the Expiration Date and, unless accepted for payment by the Company as provided
in the Offer to Purchase, may also be withdrawn after 12:00 Midnight, New York
City time, on Wednesday, August 11, 1999. For a withdrawal to be effective as to
shares other than option shares, the Depositary must receive a notice of
withdrawal in written, telegraphic or facsimile transmission form on a timely
basis. Such notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares tendered, the number
of Shares to be withdrawn and the name of the registered holder, if different
from that of the person who tendered such Shares. If the certificates have been
delivered or otherwise identified to the Depositary, then, prior to the release
of such certificates, the tendering stockholder must also submit the serial
numbers shown on the particular certificates evidencing the Shares and the
signature on the notice of withdrawal must be guaranteed by the Eligible
Institution (except in the case of Shares tendered by an Eligible Institution).
If Shares have been tendered pursuant to the procedure for book-entry transfer,
the notice of withdrawal must specify the name and the number of the account at
the Book-Entry Transfer Facility to be credited with the withdrawn Shares and
otherwise comply with the procedures of such facility.
The Offer to Purchase and the Letter of Transmittal contain important
information which should be read carefully before stockholders decide whether to
accept or reject the Offer. These materials are being mailed to record holders
of Shares and are being furnished to brokers, banks and similar persons whose
names, or the names of whose nominees, appear on the Company's stockholder list
or, if applicable, who are listed as participants in a clearing agency's
security position listing for transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 13e-4(d)(1) under the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated by reference herein.
Additional copies of the Offer to Purchase and the Letter of Transmittal
may be obtained from the Information Agent and will be furnished at the
Company's expense. Questions and requests for assistance may be directed to the
Information Agent as set forth below:
<TABLE>
<S> <C>
The Information Agent for the Offer is: The Depositary for the Offer is:
[LOGO OF CHASEMELLON SHAREHOLDER SERVICES] [LOGO OF CHASEMELLON SHAREHOLDER SERVICES]
Banks and Brokers Call Collect: (212) 273-8080 P.O. Box 3301
All Others Call Toll Free: (800) 774-5469 South Hackensack, NJ 07606
</TABLE>
The Dealer Manager for the Offer is:
Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, New York 10172
(212) 892-3000 (Call Collect)
July 2, 1999
<PAGE>
EXHIBIT (a)(8)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social security numbers have nine digits separated by two hyphens: i.e. 000-
00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
- ---------------------------------------------
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ---------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4.a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust The actual
account that is not a owner(1)
legal or valid trust
under State law
5. Sole proprietorship The owner(3)
account
- ----------------------------------------------
<CAPTION>
- ----------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ----------------------------------------------
<S> <C>
6. Sole proprietorship The owner
account
7. A valid trust, estate, The legal entity
or pension trust (Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(4)
8. Corporate account The corporation
9. Partnership account The partnership
held in the name of
the business
10. Association, club, The organization
religious, charitable,
or other tax-exempt
organization
11. A broker or registered The broker or
nominee nominee
12. Account with the The public
Department of entity
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
- ----------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. The name of the business or the "doing
business as" name may also be entered. Either the social security number
or the employer identification number may be used.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number ("TIN") or you don't know
your number, obtain Form SS-5, Application for a Social Security Number Card,
or Form SS-4, Application for Employer Identification Number, at the local
office of the Social Security Administration or the Internal Revenue Service
and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on all dividend and
interest payments and on broker transactions include the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodian account under Section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding including the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including the exempt-interest dividends
under section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments described in section 6049(b)(6) to nonresident aliens.
. Payments of tax-exempt interest (including the exempt-interest dividends
under section 859).
. Payments described in section 6049(b)(7) to resident aliens.
. Payments on tax-free covenant bonds under section 1466.
. Payments made to a nominee.
Exempt payees described above should file the Substitute Form W-9 to avoid
possible erroneous backup withholding. Complete the Substitute Form W-9 as
follows:
ENTER YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ACROSS THE FACE OF
THE FORM, SIGN, DATE, AND RETURN THE FORM TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup with-
holding. For details, see the sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A and 6050N and the regulations thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of tax reforms. Payers must be given
the numbers whether or not recipients are required to file tax returns. Payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your correct taxpayer identification number to a payer, you
are subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a
false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TAXPAYER IDENTIFICATION NUMBERS.--If the payer discloses or uses
taxpayer identification numbers in violation of Federal law, the payer may be
subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (a)(9)
MEMORANDUM TO HOLDERS OF MGM GRAND STOCK OPTIONS
------------------------------------------------
TO: Holders of MGM Grand Stock Options
FROM: MGM Grand, Inc.
DATE: June 17, 1999
RE: Tender of Option Shares in the Company's Tender Offer
We have prepared the following questions and answers for your convenience.
Please review this information together with the Offer to Purchase and other
documents printed on green paper. If, after reviewing the information
provided, you have additional questions, please call ChaseMellon Shareholder
Services, LLC at (800) 774-5469.
1. WHAT IS THE OFFER?
We are offering to purchase 6,000,000 shares of our common stock ("Shares")
at $50.00 per Share. This offer will be open until it expires at 5:00 p.m.,
New York City time, on July 23, 1999, unless extended by us.
In connection with this offer, we are allowing you, at your election, to
exercise your vested options that have exercise prices below $50.00 per Share
and sell the Shares you acquire upon such exercise ("Option Shares") in the
offer. If we do not purchase your Option Shares because of proration, the
portion of your Option Shares that we purchase will be in the order designated
by you in the enclosed Option Election Form. The remaining portion of your
options will continue to be outstanding. The options that may be exercised are
those that we granted under the MGM Grand, Inc. nonqualified and incentive
stock option plans.
You must complete and deliver to the Company the Option Election Form in
order to tender part or all of your Option Shares resulting from a conditional
exercise of such options. This exercise of your options is "conditional"
because you can exercise the option only if, and to the extent, that the
Company actually purchases the Option Shares in the offer.
The offer. which is subject to a number of other conditions, is described
in the Offer to Purchase dated June 17, 1999, and related Letter of
Transmittal provided to you. Please read these documents carefully, together
with the following materials also printed on green paper:
. Option Election Form and
. Instructions for Tender of Options.
Please remember that neither the Company nor its Board of Directors is
making any recommendation as to whether stockholder or option holders should
participate in the offer. You must make your own decision. You must carefully
follow the instructions below and in the enclosed Instructions for Tender of
Options and Option Election Form if you want to participate in our offer.
Failure to follow such instructions may make you ineligible to tender your
Option Shares in our offer.
2. MUST I ACTUALLY EXERCISE MY OPTIONS IN ORDER TO PARTICIPATE IN THE
OFFER?
No. As a holder of unexercised options we are allowing you to
"conditionally" exercise all or part of your options and tender the Option
Shares you would be entitled to receive upon such exercise.
<PAGE>
This exercise of options is "conditional" because you are deemed to exercise
the option only if, and to the extent that, we actually purchase the Option
Shares in the offer.
3. DO I HAVE TO PAY THE EXERCISE PRICE WITH CASH?
No. In order to facilitate your participation in the offer, we are allowing
you to conditionally exercise your options without paying the exercise price
in cash. This is called a "cashless exercise." This means that your options
will be exercised and the Option Shares will be tendered, and the amount of
cash you receive for each Option Share purchased will equal the difference
between $50.00 per Share and the option exercise price per Share, less
withholding taxes. You do not need to send any money with your Option Election
Form.
4. IF MY OPTIONS ARE NOT VESTED MAY I STILL TENDER OPTION SHARES UNDERLYING
THEM?
No. You may only tender Option Shares that are subject to vested options.
5. WILL ALL OF THE OPTION SHARES THAT I TENDER BE PURCHASED IN THE OFFER?
Probably not. In the offer, the Company is offering to purchase a total of
6,000,000 Shares at a per share price of $50.00. If more than 6,000,000 Shares
are tendered, we will reduce on a pro rata basis the number of Shares we
purchase from each person who tenders Shares. This means that we will not
purchase all of the Option Shares you tender under these circumstances. In
addition, if you tender Shares you already own as well as Option Shares and
the offer is oversubscribed, then the Shares and the Option Shares you tender
will be subject to proration. We currently do not know how many Shares will be
tendered in the offer. If, after taking into account proration, we purchase
only a portion of your Option Shares, your remaining options relating to
Option Shares will not be considered to have been exercised and will remain
outstanding. You may designate the order in which the Option Shares are
purchased by the Company in the Option Election Form.
6. WHAT WILL HAPPEN TO MY OPTIONS IF THE OPTION SHARES ARE NOT PURCHASED?
We will return to you any options for Option Shares that we do not
purchase.
7. HOW WILL I KNOW IF MY OPTION SHARES HAVE BEEN PURCHASED AND WHEN WILL I
BE PAID?
After the offer expires, all tenders submitted in the offer will be
tabulated. This may take up to seven business days. Soon thereafter, you will
be advised by the Depositary, of the number, if any, of your Option Shares
that were purchased in the offer. You will receive a check for the purchase
price of all of your Option Shares purchased in the offer (less the applicable
exercise price or prices and applicable withholding taxes) promptly
thereafter.
8. WILL I BE TAXED ON THE MONEY I RECEIVE?
Yes. You will be treated as receiving compensation income for each Option
Share sold equal to the excess of $50.00 over the exercise price for each
Option Share. Such income will be taxed to the option holder at ordinary
income rates, not capital gains rates, and will be subject to withholding for
income and employment taxes. See Sections 3 and 14 of the Offer to Purchase.
2
<PAGE>
9. WHAT WILL HAPPEN TO ANY OPTIONS I STILL HOLD AFTER THE OFFER?
If, after taking into account proration, we do not purchase all of your
Option Shares, the remaining Options will not be considered to have been
exercised and will remain outstanding.
10. HOW DO I TENDER MY OPTION SHARES IN THE OFFER?
The only way that you can tender Option Shares in the offer is by
completing the Option Election Form on green paper, signing the form, and
returning it to the Company, which will transmit it to the Depositary. The
Option Election Form must be received by the Company before 5:00 p.m., New
York City time, on July 23, 1999.
On this form, you will conditionally exercise your options and tender your
Option Shares in the offer. This is a "conditional" exercise, which means that
if some or all of the Option Shares are not purchased in the offer because of
the proration process described below and in the Offer to Purchase (or for any
other reason), the options will be returned to you as unexercised options. If
you would prefer to actually exercise your vested options and tender the
Shares you receive in the Offer, you can do so. If you do exercise options,
you should follow the same procedures applicable to all of our other
stockholders. If you decide to exercise your options in order to receive
Shares to tender in the Offer, you will need to exercise such options in
sufficient time to deliver Option Shares to the Depositary before the
Expiration Date for the offer, 5:00 p.m., New York City time, on July 23,
1999.
Please return our Option Election Form PROMPTLY. If you use the United
States mail, we recommend using registered mail, return receipt requested. You
may mail your Option Election Form to the Company in the preaddressed envelope
that has been provided for your reply or send it by an alternate, faster means
(such as hand delivery or overnight courier). Please remember that in all
events the materials must be received by the Company before 5:00 p.m., New
York City time, on July 23, 1999.
11. WHAT IF I HOLD SHARES OF MGM GRAND COMMON STOCK IN ADDITION TO MY STOCK
OPTIONS?
If you have actual Shares in your possession (or at a brokerage firm), you
may tender those Shares as well. In this case, you may receive two or more
sets of offer materials. You should be careful to follow the separate
directions that apply to Shares and Option Shares. In the event that we must
reduce on a pro rata basis the number of Shares and Option Shares that we
purchase from each stockholder, the total number of Shares, including Option
Shares, that you tender will be reduced independently.
12. CAN I CHANGE MY MIND AND WITHDRAW OPTION SHARES THAT I DIRECTED TO BE
TENDERED?
Yes, but only if you perform the following steps:
. You must send a signed notice of withdrawal to the Company, and it must
be received by the Company before 5:00 p.m., New York City time, on July
23, 1999.
. The notice of withdrawal must be in writing. You may fax your notice of
withdrawal to (702) 891-1114.
. The notice of withdrawal must state your name and social security number
and the number of Option Shares that you wish to withdraw from the
offer.
3
<PAGE>
The withdrawal procedures are described in the Instructions for Tender of
Options. You must follow these instructions carefully.
You are entitled to retender Option Shares after withdrawal, provided that
all resubmitted materials are completed properly and delivered on time in
accordance with the instructions applicable to the original submission.
13. WHAT DO I DO IF I HAVE ANY QUESTIONS ABOUT THE TENDER OFFER?
If you have questions about the offer or need help in properly responding
to the offer, you may call the Secretary of MGM Grand, Inc. at (702) 891-3333.
******
This memorandum is intended to help you understand the offer and how
options will be handled in the offer. The Offer to Purchase and Letter of
Transmittal contain the legal terms of the offer, and are controlling. We urge
you to carefully read these documents, which explain our offer in detail.
4
<PAGE>
INSTRUCTIONS FOR TENDER OF OPTIONS
(Note: Before completing the Option Election Form, you should read the
attached memorandum from MGM Grand, Inc., as well as the Offer to Purchase and
related Letter of Transmittal.)
THE OPTION ELECTION FORM MUST BE RECEIVED BY THE COMPANY (WHICH WILL
TRANSMIT IT TO THE DEPOSITARY) BEFORE 5:00 P.M. NEW YORK CITY TIME, ON JULY
23, 1999. YOU MUST SIGN AND COMPLETE THIS FORM FOR YOUR DIRECTION TO BE VALID.
Send the Option Election Form to:
<TABLE>
<S> <C>
By Mail: By Overnight Courier or By Hand:
MGM Grand, Inc. MGM Grand, Inc.
P.O. Box 98655 3799 Las Vegas Blvd. South
Las Vegas, NV 89193-8655 Las Vegas, NV 89109
Attn: Secretary/Treasurer Attn: Secretary/Treasurer
</TABLE>
By Facsimile Transmission: (702) 891-1114
Note: Delivery of the form to an address other than as set forth above will
not constitute a valid delivery.
By signing the Option Election Form, you acknowledge receipt of the
materials relating to the Offer to Purchase dated June 17, 1999 (the "Offer to
Purchase") and the related Letter of Transmittal with respect to an offer by
MGM Grand, Inc., a Delaware corporation (the "Company"), for 6,000,000 shares
of common stock (the "Shares"), at a price of $50.00 per Share. The number of
Shares the Company is offering to purchase includes Shares that may be
tendered upon the exercise of vested options under the Company's nonqualified
and incentive stock option plans with exercise prices below $50.00 per Share
("Option Shares"). The offer is not being made for Option Shares if the
exercise price of the option is $50.00 per Share or greater.
1. You should complete the Option Election Form to tender, at the $50.00
per Share purchase price set forth in the Offer to Purchase, the Option Shares
that you are entitled to receive upon exercise, pursuant to the terms and
conditions set forth in the Offer to Purchase furnished to you. By signing the
Option Election Form, you agree that if any Option Shares you validly tendered
are accepted, you will receive a cash payment equal to (a) the number of
Option Shares that are accepted for purchase, multiplied by (b) the difference
between the applicable option exercise price(s) and the $50.00 purchase price,
less (c) any taxes required to be withheld, and you further agree to be bound
by the terms and conditions set forth herein and in the Offer to Purchase and
Letter of Transmittal.
2. By signing the Option Election Form, you acknowledge that the Company is
allowing you to conditionally exercise your options for the purpose of
allowing you to tender Option Shares in the Company's offer. Further, by
signing the Option Election Form, you acknowledge that if, after taking into
account proration, the Company purchases less than all of your Option Shares,
your remaining Options will not be considered to have been exercised and will
remain outstanding. In addition, you acknowledge that the order of the Options
purchased by the Company will be as designated by you in the Option Election
Form.
5
<PAGE>
3. Option Shares tendered pursuant to the Offer to Purchase may be
withdrawn at any time prior to 5:00 p.m., New York City time, on July 23,
1999. After that, Option Shares may be withdrawn if they have not been
accepted for payment by the Company as provided in the Offer to Purchase by
12:00 Midnight, New York City time, on Wednesday, August 11, 1999. Prior to
the expiration of the offer, an option holder must submit a written,
telegraphic or facsimile transmission notice of withdrawal so that it is
received by the Company at the address indicated above before 5:00 p.m., New
York City time, on July 23, 1999. After 12:00 midnight, New York City time, on
Wednesday, August 11, 1999, an option holder must submit such a notice of
withdrawal to the Depositary at the address indicated on page 36 of the Offer
to Purchase. Any such notice of withdrawal must specify the name and social
security number of the option holder who tendered the Option Shares to be
withdrawn and the number of Option Shares to be withdrawn. All questions as to
the form and validity (including time of receipt) of notices of withdrawal
will be determined by the Company, in its sole discretion, which determination
shall be final and binding. None of the Company, Donaldson, Lufkin & Jenrette,
Securities Corporation, ChaseMellon Shareholder Services, LLC or any other
person shall be obligated to give any notice of any defects or irregularities
in any notice of withdrawal and none of them shall incur any liability for
failure to give any such notice. Any Option Shares properly withdrawn will
thereafter be deemed not tendered for purposes of the Offer to Purchase.
However, withdrawn Option Shares may be retendered by the Expiration Date by
again following the procedures for properly tendering Option Shares.
The Option Election Form must be received by the Company (for transmission
to the Depositary) before 5:00 p.m., New York City time, on July 23, 1999. You
must sign and complete this form for your direction to be valid.
General Terms and Conditions of the Offer Applicable to Option Share
Tenders:
NOTE: BY SIGNING THE OPTION ELECTION FORM, YOU ALSO AGREE TO THE FOLLOWING
TERMS AND CONDITIONS WHICH SHALL NOT BE CONSTRUED TO LIMIT IN ANY WAY THE
TERMS AND CONDITIONS SET FORTH IN THE OFFER TO PURCHASE.
1. You will, upon request, execute and deliver any additional documents
deemed by ChaseMellon Shareholder Services, LLC or the Company to be necessary
or desirable to complete the sale, assignment and transfer of the Option
Shares tendered hereby and have read, understand and agree with all of the
terms of the Offer to Purchase.
2. You understand that tenders of Option Shares pursuant to the procedures
described in the Offer to Purchase and in the Instructions for Tender of
Options will constitute an agreement between you and the Company upon the
terms and subject to the conditions of the Offer to Purchase.
3. All authority herein conferred or agreed to be conferred shall survive
your death or incapacity and your obligation hereunder shall be binding upon
your heirs, personal representatives, successors and assigns. Except as stated
herein or in the Offer to Purchase, this tender is irrevocable.
4. The Company will pay any stock transfer taxes with respect to the sale
and transfer of any Option Shares to it or its order pursuant to the Offer to
Purchase. You understand that (a) the purchase price will be paid to you (you
cannot elect to have the purchase price paid to another person); and (b) you
will be responsible for paying federal and state income taxes arising from the
sale of the Option Shares in the Offer (a portion of which will be withheld as
described in Instruction 5 below).
6
<PAGE>
5. Under the U.S. federal income tax laws, the Company will be required to
withhold income and employment taxes from the amount of any payments made to
option holders pursuant to the Offer to Purchase. See Section 14 of the Offer
to Purchase.
6. All questions as to the number of Option Shares accepted, the form of
documents and the validity, eligibility (including time of receipt) and
acceptance for payment of any tender of Option Shares will be determined by
the Company in its sole discretion, which determinations shall be final and
binding on all parties. The Company reserves the absolute right to reject any
or all tenders of Option Shares it determines not to be in proper form or the
acceptance of which or payment for which may, in the opinion of the Company's
counsel, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Options Shares, and the Company's interpretation of
the terms of the Offer to Purchase (including these Instructions for Tender of
Options) will be final and binding on all parties. No tender of Option Shares
will be deemed to be properly made until all defects and irregularities have
been cured or waived. Unless waived, any defects or irregularities in
connection with tenders must be cured within such time as the Company shall
determine. None of the Company, Donaldson, Lufkin & Jenrette Securities
Corporation, ChaseMellon Shareholder Services, LLC or any other person is or
will be obligated to give notice of any defects or irregularities in tenders
and none of them will incur any liability for failure to give any such notice.
7. If the Option Election Form is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary capacity, such person should so indicate when
signing, and proper evidence satisfactory to the Company of the authority of
such person so to act must be submitted with the Option Election Form.
8. Questions and requests for assistance or additional copies of the Offer
to Purchase and these Instructions for the Tender of Options should be
directed to the Secretary of MGM Grand, Inc. at (702) 891-3333.
7
<PAGE>
OPTION ELECTION FORM
------------------------------------------
Name
------------------------------------------
------------------------------------------
Address
(Please Print)
1. I hereby conditionally exercise vested options, for the amount of Shares set
forth herein ("Option Shares"), granted to me by the Company under one of the
Company's nonqualified or incentive stock option plans.
My exercise of options hereunder is subject to the condition that any
options for Option Shares tendered but not purchased by the Company because of
proration, shall be deemed not to have been exercised. None of the options
underlying any of the Option Shares tendered has an exercise price of $50.00
or greater.
2. I hereby elect as follows with respect to my options:
(Choose only one)
[_] I wish to conditionally exercise and tender Option Shares underlying ALL
of my vested options that have an exercise price of less than $50.00 per
Share.
[_] I wish to conditionally exercise and tender Option Shares underlying
---
my vested options that have an exercise price of less than $50.00 per Share.
I understand that options will be exercised as accepted in the tender in
the order which I designate below:
1. Option for Shares; grant date ; and per share exercise price $
---- --- ----
2. Option for Shares; grant date ; and per share exercise price $
---- --- ----
3. Option for Shares; grant date ; and per share exercise price $
---- --- ----
4. Option for Shares; grant date ; and per share exercise price $
---- --- ----
8
<PAGE>
ATTACH ADDITIONAL PAGE IF NEEDED.
SIGN HERE
- ------------------------------------- -------------------------------------
Signature(s) of Option Holder Date
- ------------------------------------- -------------------------------------
Name(s) Please Print Capacity (Full title)
- --------------------------------------------------------------------------------
Address (if different from that shown on the cover page)
- -------------------------------------
Daytime Telephone Number
9
<PAGE>
EXHIBIT (g)(1)
Consolidated Statements
-----------------------
of Operations
-------------
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
FOR THE YEARS ENDED DECEMBER 31,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
CASINO ............................................................. $ 410,605 $ 457,206 $ 476,685
ROOMS .............................................................. 171,292 171,272 174,440
FOOD AND BEVERAGE .................................................. 105,875 92,594 78,438
ENTERTAINMENT, RETAIL AND OTHER .................................... 113,948 116,458 126,875
INCOME FROM UNCONSOLIDATED AFFILIATE ............................... 38,362 53,800 -
----------- ----------- -----------
840,082 891,330 856,438
LESS: PROMOTIONAL ALLOWANCES ....................................... 66,219 63,733 56,249
----------- ----------- -----------
773,863 827,597 800,189
----------- ----------- -----------
Expenses:
CASINO ............................................................. 221,439 225,896 221,268
ROOMS .............................................................. 47,767 45,848 46,639
FOOD AND BEVERAGE .................................................. 67,101 55,124 46,590
ENTERTAINMENT, RETAIL AND OTHER .................................... 75,192 79,605 88,214
PROVISION FOR DOUBTFUL ACCOUNTS AND DISCOUNTS ...................... 40,455 31,814 38,635
GENERAL AND ADMINISTRATIVE ......................................... 103,362 102,246 100,062
DEPRECIATION AND AMORTIZATION ...................................... 76,284 64,104 62,196
----------- ----------- -----------
631,600 604,637 603,604
----------- ----------- -----------
OPERATING PROFIT BEFORE MASTER PLAN ASSET DISPOSITION,
PREOPENING AND CORPORATE EXPENSE ........................... 142,263 222,960 196,585
MASTER PLAN ASSET DISPOSITION ...................................... - 28,566 49,401
PREOPENING AND OTHER - UNCONSOLIDATED AFFILIATE .................... - - 7,868
CORPORATE EXPENSE .................................................. 10,689 3,424 10,022
----------- ----------- -----------
OPERATING INCOME ........................................... 131,574 190,970 129,294
----------- ----------- -----------
Nonoperating Income (Expense):
INTEREST INCOME .................................................... 12,997 1,268 4,247
INTEREST EXPENSE, NET OF AMOUNTS CAPITALIZED ....................... (24,613) (1,242) (33,778)
INTEREST EXPENSE FROM UNCONSOLIDATED AFFILIATE ..................... (8,376) (9,891) -
OTHER, NET ......................................................... (2,054) (804) (612)
----------- ----------- -----------
(22,046) (10,669) (30,143)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM .............. 109,528 180,301 99,151
PROVISION FOR INCOME TAXES ......................................... (40,580) (65,045) (24,634)
----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM ............................... 68,948 115,256 74,517
Extraordinary Item:
LOSS ON EARLY EXTINGUISHMENT OF DEBT, NET OF INCOME
TAX BENEFITS OF $ 2,333 AND $ 17,710 ........................... - (4,238) (30,811)
----------- ----------- -----------
NET INCOME ......................................................... $ 68,948 $ 111,018 $ 43,706
=========== =========== ===========
Basic Income Per Share of Common Stock:
INCOME BEFORE EXTRAORDINARY ITEM ................................... $ 1.24 $ 2.00 $ 1.41
EXTRAORDINARY ITEM - LOSS ON EARLY EXTINGUISHMENT
OF DEBT, NET OF INCOME TAX BENEFIT ............................. - (0.07) (0.58)
----------- ----------- -----------
NET INCOME PER SHARE ............................................... $ 1.24 $ 1.93 $ 0.83
=========== =========== ===========
Weighted Average Shares Outstanding .................................... 55,678,000 57,475,000 52,759,000
=========== =========== ===========
Diluted Income Per Share of Common Stock:
INCOME BEFORE EXTRAORDINARY ITEM ................................... $ 1.22 $ 1.96 $ 1.38
EXTRAORDINARY ITEM - LOSS ON EARLY EXTINGUISHMENT
OF DEBT, NET OF INCOME TAX BENEFIT ............................. - (0.07) (0.57)
----------- ----------- -----------
NET INCOME PER SHARE ............................................... $ 1.22 $ 1.89 $ 0.81
=========== =========== ===========
Weighted Average Shares Outstanding .................................... 56,342,000 58,835,000 54,257,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE>
Consolidated Balance
--------------------
Sheets
------
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
AS OF DECEMBER 31, 1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
CASH AND CASH EQUIVALENTS ...................................... $ 81,956 $ 34,606
ACCOUNTS RECEIVABLE, NET ....................................... 69,116 78,977
PREPAID EXPENSES ............................................... 11,829 10,452
INVENTORIES .................................................... 11,081 16,462
DEFERRED TAX ASSET ............................................. 34,098 30,294
----------- -----------
TOTAL CURRENT ASSETS ................................... 208,080 170,791
----------- -----------
Property and Equipment, net ............................................ 1,327,722 1,032,708
Other Assets:
INVESTMENT IN UNCONSOLIDATED AFFILIATES ........................ 134,025 108,121
EXCESS OF PURCHASE PRICE OVER FAIR MARKET VALUE
OF NET ASSETS ACQUIRED, NET ............................ 37,574 38,598
DEPOSITS AND OTHER ASSETS, NET ................................. 66,393 48,156
----------- -----------
TOTAL OTHER ASSETS ..................................... 237,992 194,875
----------- -----------
$ 1,773,794 $ 1,398,374
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
ACCOUNTS PAYABLE ............................................... $ 23,931 $ 20,484
CONSTRUCTION PAYABLE ........................................... 17,403 33,376
INCOME TAXES PAYABLE ........................................... 2,457 --
CURRENT OBLIGATION, CAPITAL LEASES ............................. 5,086 6,088
CURRENT OBLIGATION, LONG TERM DEBT ............................. 10,077 10,589
ACCRUED INTEREST ............................................... 14,630 --
OTHER ACCRUED LIABILITIES ...................................... 115,781 110,953
----------- -----------
TOTAL CURRENT LIABILITIES .............................. 189,365 181,490
----------- -----------
Deferred Revenues ...................................................... 5,219 4,743
Deferred Income Taxes .................................................. 77,165 58,831
Long Term Obligation, Capital Leases ................................... 2,867 4,447
Long Term Debt ......................................................... 534,797 47,241
Commitments and Contingencies
Stockholders' Equity:
COMMON STOCK ($.01 PAR VALUE, 75,000,000 SHARES AUTHORIZED,
58,033,094 AND 57,984,873 SHARES ISSUED AND OUTSTANDING) 580 580
CAPITAL IN EXCESS OF PAR VALUE ................................. 968,199 966,487
TREASURY STOCK, AT COST (6,000,000 SHARES) ..................... (210,589) --
RETAINED EARNINGS .............................................. 193,187 124,239
OTHER COMPREHENSIVE INCOME ..................................... 13,004 10,316
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ............................. 964,381 1,101,622
----------- -----------
$ 1,773,794 $ 1,398,374
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE>
Consolidated Statements of
--------------------------
Cash Flows
----------
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31 1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
NET INCOME .......................................................................... $ 68,948 $ 111,018 $ 43,706
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
FROM OPERATING ACTIVITIES:
LOSS ON EARLY EXTINGUISHMENT OF DEBT ................................ -- 6,571 48,521
MASTER PLAN ASSET DISPOSITION ....................................... -- 28,566 49,401
AMORTIZATION OF DEBT OFFERING COSTS ................................. 1,849 1,127 2,191
DEPRECIATION AND AMORTIZATION ....................................... 76,712 64,244 62,323
PROVISION FOR DOUBTFUL ACCOUNTS AND DISCOUNTS ....................... 40,455 31,814 38,635
PREOPENING AND OTHER - UNCONSOLIDATED AFFILIATE ..................... -- -- 7,868
DEFERRED INCOME TAXES ............................................... 14,530 48,100 (27,696)
UNCONSOLIDATED AFFILIATE, EARNINGS IN EXCESS OF DISTRIBUTIONS........ (25,866) (28,749) --
CHANGE IN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE ......................................... (30,594) (30,262) (40,605)
PREPAID EXPENSES ............................................ (1,377) 2,756 (551)
INVENTORIES ................................................. 4,314 (4,035) (3,283)
INCOME TAXES PAYABLE ........................................ 2,457 (23,653) 21,302
ACCOUNTS PAYABLE, ACCRUED LIABILITIES, AND OTHER............. 20,799 (24,185) 43,209
CURRENCY TRANSLATION ADJUSTMENT ............................. (547) 700 130
--------- --------- ---------
NET CASH PROVIDED FROM OPERATING ACTIVITIES ......................... 171,680 184,012 245,151
--------- --------- ---------
Cash Flows from Investing Activities:
PURCHASES OF PROPERTY AND EQUIPMENT ......................................... (361,942) (227,756) (84,775)
DISPOSITIONS OF PROPERTY AND EQUIPMENT, NET ................................. 599 202 322
CHANGE IN CONSTRUCTION PAYABLES ............................................. (15,973) 32,418 (809)
INVESTMENT IN UNCONSOLIDATED AFFILIATES ..................................... (800) (7,190) (27,153)
DEPOSITS AND OTHER ASSETS ................................................... (27,617) 548 (8,400)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES ............................... (405,733) (201,778) (120,815)
--------- --------- ---------
Cash Flows from Financing Activities:
DEFEASANCE OF FIRST MORTGAGE NOTES .......................................... -- -- (523,231)
ISSUANCE OF LONG TERM DEBT .................................................. 500,000 -- --
REPAYMENTS TO BANKS AND OTHERS .............................................. (9,720) (11,839) --
BORROWINGS UNDER LINES OF CREDIT ............................................ 31,000 25,500 65,262
REPAYMENTS OF LINES OF CREDIT ............................................... (31,000) (25,500) (65,262)
PURCHASE OF TREASURY STOCK .................................................. (210,589) -- --
ISSUANCE OF COMMON STOCK .................................................... 1,712 2,799 350,290
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ........................... 281,403 (9,040) (172,941)
--------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents ................................ 47,350 (26,806) (48,605)
Cash and Cash Equivalents at Beginning of Year ...................................... 34,606 61,412 110,017
--------- --------- ---------
Cash and Cash Equivalents at End of Year ............................................ $ 81,956 $ 34,606 $ 61,412
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE>
Consolidated Statements
-----------------------
of Stockholders' Equity
-----------------------
<TABLE>
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS) COMMON CAPITAL IN RETAINED TOTAL
FOR THE YEARS ENDED DECEMBER 31, STOCK COMMON EXCESS OF TREASURY EARNINGS STOCKHOLDERS'
1998, 1997, AND 1996 OUTSTANDING STOCK PAR VALUE STOCK (DEFICIT) OTHER EQUITY
----------- ------ ---------- --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995............... 48,774,856 $ 488 $ 623,489 $ - $ (30,485) $ (8,944) $ 584,548
PAYMENT RECEIVED FROM NOTE RECEIVABLE...... - - - - - 10,000 10,000
ISSUANCE OF COMMON STOCK
PURSUANT TO EMPLOYEE STOCK OPTIONS..... 413,670 4 4,929 - - - 4,933
ISSUANCE OF COMMON STOCK................... 8,625,000 86 326,735 - - - 326,821
EMPLOYEE STOCK INCENTIVE ACCRUAL........... 70,240 1 2,817 - - - 2,818
TAX BENEFIT FROM STOCK OPTION EXERCISES.... - - 5,718 - - - 5,718
NET INCOME................................. - - - - 43,706 - 43,706
CURRENCY TRANSLATION ADJUSTMENT............ - - - - - (5,162) (5,162)
----------- ------ ---------- --------- ---------- -------- ------------
Balance at December 31, 1996............... 57,883,766 579 963,688 - 13,221 (4,106) 973,382
ISSUANCE OF COMMON STOCK PURSUANT
TO EMPLOYEE STOCK OPTIONS.............. 72,302 1 1,093 - - - 1,094
EMPLOYEE STOCK INCENTIVE ISSUANCE...... 28,805 - 1,142 - - - 1,142
TAX BENEFIT FROM STOCK OPTION EXERCISES.... - - 564 - - - 564
NET INCOME................................. - - - - 111,018 - 111,018
CURRENCY TRANSLATION ADJUSTMENT............ - - - - - 14,422 14,422
----------- ------ ---------- --------- ---------- -------- ------------
Balance at December 31, 1997............... 57,984,873 580 966,487 - 124,239 10,316 1,101,622
ISSUANCE OF COMMON STOCK PURSUANT TO
EMPLOYEE STOCK OPTIONS................. 48,221 - 1,315 - - - 1,315
TREASURY STOCK............................. - - - (210,589) - - (210,589)
TAX BENEFIT FROM STOCK OPTION EXERCISES.... - - 397 - - - 397
NET INCOME................................. - - - - 68,948 - 68,948
CURRENCY TRANSLATION ADJUSTMENT............ - - - - - 2,688 2,688
----------- ------ ---------- --------- ---------- -------- ------------
Balance at December 31, 1998............... 58,033,094 $ 580 $ 968,199 $(210,589) $ 193,187 $ 13,004 $ 964,381
=========== ====== ========== ========= ========== ======== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
32
<PAGE>
Notes to 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 December 31, 1998, approximately 73% 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 ("FMN") 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 9 regarding
defeasance of the FMN.
Through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., the
Company owns and operates the MGM Grand Hotel/Casino in Darwin, Australia ("MGM
Grand Australia"), which is located on 18 acres of beachfront property on the
north central coast of Australia. The Company acquired MGM Grand Australia on
September 7, 1995.
The Company and Primadonna Resorts, Inc. ("Primadonna") each owned 50% of
New York-New York Hotel and Casino, LLC ("NYNY LLC"), which completed
development of the $460 million 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, and 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 South Africa, Inc., the
Company manages three temporary casinos throughout various provinces of the
Republic of South Africa. The casino in Nelspruit began operations on October
15, 1997, the casino in Witbank began operations on March 10, 1998 and the
casino in Johannesburg began operations on September 28, 1998. The Company
receives development and management fees from its partner, Tsogo Sun Gaming &
Entertainment, which is responsible for providing all project costs.
Through its wholly-owned subsidiary, MGM Grand Detroit, Inc., the Company
and its local partners in Detroit, Michigan, formed MGM Grand Detroit, LLC to
develop a hotel/casino and entertainment complex at an approximate cost of $800
million. On November 20, 1997, MGM Grand Detroit, LLC was chosen as a finalist
for a development agreement to construct, own and operate one of Detroit's three
new casinos. On April 9, 1998, the Detroit City Council approved MGM Grand
Detroit LLC's development agreement with the City of Detroit. Construction of
the project is subject to the receipt of various governmental approvals. The
plans for the permanent facility call for an 800-room hotel, a 100,000 square-
foot casino, signature restaurants and retail outlets, a showroom and other
entertainment venues. On July 22, 1998, the Michigan Gaming Control Board
adopted a resolution which allows the issuance of casino licenses to conduct
gaming operations in temporary facilities. Pending receipt of a license, MGM
Grand Detroit, LLC anticipates the opening of the temporary gaming facility,
which will contain approximately 73,000 square feet of casino space, 2,300 slot
machines, 80 table games and signature restaurants and bars, in the third
quarter of 1999.
Through its wholly-owned subsidiary, MGM Grand Atlantic City, Inc., the
Company intends to construct, own and operate a destination resort hotel/casino,
entertainment and retail facility in Atlantic City, New Jersey, at an
approximate cost of $700 million, on 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.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------
a. Principles of Consolidation-- The consolidated financial statements
include the accounts of the Company and its subsidiaries. Investments in
unconsolidated affiliates which are 50% or less owned are accounted for under
the equity method. All significant intercompany balances and transactions have
been eliminated in consolidation.
b. Management's Use of Estimates-- The consolidated
33
<PAGE>
financial statements have been prepared in conformity with generally accepted
accounting principles. Those principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
c. Cash and Cash Equivalents-- Cash and cash equivalents consist of
investments in bank certificates of deposit and other interest bearing
instruments with initial maturities of three months or less. Such investments
are carried at cost which approximate market value.
d. Accounts Receivable-- Accounts receivable are due within one year and
are recorded net of amounts estimated to be uncollectible.
e. Inventories -- Inventories are stated at the lower of cost or market.
Cost is determined by the first-in, first-out method.
f. Property and Equipment -- Property and equipment are stated at cost.
Maintenance and repairs that neither materially add to the value of the property
nor appreciably prolong its life are charged to expense as incurred. Gains or
losses on dispositions of property and equipment are included in the
determination of income. Depreciation and amortization are provided on a
straight-line basis over the estimated useful lives of the assets as follows:
Buildings and improvements ..................................... 15 to 40 years
Equipment, furniture and fixtures .............................. 3 to 7 years
Land improvements .............................................. 10 years
Leasehold improvements ......................................... 5 to 20 years
g. Excess of Purchase Price over Fair Market Value of Net Assets
Acquired--The excess of purchase price over fair market value of net assets
acquired is amortized on a straight-line basis over 40 years.
h. Other Assets-- The cost of normal hotel operating quantities of china,
silverware, glassware and utensils is recorded as an asset and is depreciated.
Direct costs related to the debt offering and bank financing are being deferred
and amortized over the debt repayment periods. Organizational costs are
amortized on a straight-line basis over 60 months.
i. Casino Revenues and Promotional Allowances --Casino revenue is the
aggregate of gaming wins and losses. The retail value of accommodations, food
and beverage, and other services furnished to hotel/casino guests without charge
is included in gross revenue and then deducted as promotional allowances. The
estimated retail value of these promotional allowances was $66.2 million, $63.7
million and $56.2 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The estimated cost of providing such promotional allowances was
included in casino expenses as follows:
PROMOTIONAL ALLOWANCES
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEARS ENDED DECEMBER 31, 1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
ROOMS ............................................ $11,304 $ 9,841 $ 9,487
FOOD AND BEVERAGE ................................ 26,826 28,436 23,224
OTHER ............................................ 4,011 2,235 2,175
------- ------- -------
$42,141 $40,512 $34,886
======= ======= =======
</TABLE>
j. Currency Translation -- The Company accounts for currency translation
in accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation." The Australian results of operations and the balance
sheet are translated from Australian dollars to US dollars. Certain fixed assets
and intangibles are valued at historical exchange rates, while other balance
sheet accounts are translated at the exchange rate in effect at each year end.
Income accounts are translated at the average rate of exchange prevailing during
the year.
k. Net Income Per Common Share-- Basic income per share of common stock
is computed based on the weighted average number of shares of common stock
outstanding during the period. Diluted income per share of common stock is
computed based on the assumption that options
34
<PAGE>
issued to employees are exercised and repurchased at the average price for the
periods presented (see Note 13).
l. Capitalized Interest -- The Company capitalizes interest costs
associated with debt incurred in connection with major construction and
development projects. The Company capitalizes interest on amounts expended on
the project at the Company's weighted average cost of the borrowed funds (see
Note 9), and based upon the weighted average amount of the Company's outstanding
borrowings. Capitalization of interest ceases when the project is completed.
m. Corporate Expense -- Corporate expense represents unallocated payroll
costs, professional fees, and various other expenses not directly related to the
Company's hotel/casino operations. In addition, corporate expense includes the
costs associated with the Company's evaluation and pursuit of new business
opportunities, which are expensed as incurred until development of a specific
project has become relatively certain.
n. Reclassifications-- The consolidated financial statements for prior
years reflect certain reclassifications to conform with the current year
presentation, which have no effect on previously reported net income.
o. Recently issued Statement of Position - In April 1998, the American
Institute of Certified Public Accountants issued SOP 98-5, "Reporting on the
Costs of Start-up Activities." The new standard requires that all companies
expense costs of start-up activities as those costs are incurred. The term
"start-up" includes pre-opening, pre-operating and organization activities.
Previously, the Company had capitalized these items until the development of the
property was substantially complete and ready to open, at which time the
cumulative costs were expensed. As of December 31, 1998, the Company capitalized
"start-up" costs of $.7 million related to Atlantic City and $11.6 million
related to Detroit. The Company will adopt SOP 98-5 in the first quarter of
fiscal year 1999.
NOTE 3. STATEMENTS OF CASH FLOWS
--------------------------------
The following supplemental disclosures are provided for the Consolidated
Statements of Cash Flows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEARS ENDED DECEMBER 31, ........................ 1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Cash payments made for:
INTEREST, NET OF AMOUNTS CAPITALIZED ....... $23,680 $ 7,916 $48,155
======= ======= =======
STATE AND FEDERAL INCOME TAXES ............. $15,900 $43,159 $ 3,660
======= ======= =======
</TABLE>
During 1997, the Company completed equipment lease financing for approximately
$3.1 million at MGM Grand Las Vegas.
NOTE 4. ACCOUNTS RECEIVABLE
---------------------------
Components of accounts receivable were as follows:
(IN THOUSANDS)
AT DECEMBER 31,
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
CASINO .................................................... $89,681 $87,442
HOTEL ..................................................... 12,679 11,229
INCOME TAX RECEIVABLE ..................................... - 6,776
OTHER ..................................................... 3,587 553
------- -------
105,947 106,000
LESS: ALLOWANCE FOR DOUBTFUL ACCOUNTS AND DISCOUNTS ....... (36,831) (27,023)
------- -------
$69,116 $78,977
======= =======
</TABLE>
35
<PAGE>
Credit is issued in exchange for gaming chips at MGM Grand Las Vegas as
permitted by the regulations of the Nevada Gaming Commission and the Nevada
State Gaming Control Board. The Company extends credit, following an evaluation
of credit worthiness, to certain casino patrons, a substantial portion of whom
reside in countries other than the United States. The Company maintains an
allowance for doubtful accounts and discounts which is based on management's
estimate of the amount expected to be uncollectible considering historical
experience and the information management obtains regarding the credit
worthiness of the customer. The collectibility of these receivables could be
affected by future business or economic trends or other significant events in
the countries in which such customers reside. Although management believes the
allowance is adequate, it is possible that the estimated amount of cash
collections with respect to the casino accounts receivable could change.
NOTE 5. PROPERTY AND EQUIPMENT, NET
-----------------------------------
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
AT DECEMBER 31, 1998 1997
---------- ----------
<S> <C> <C>
LAND.............................................................. $ 107,613 $ 105,813
BUILDINGS AND IMPROVEMENTS........................................ 929,980 663,832
EQUIPMENT, FURNITURE, FIXTURES AND LEASEHOLD IMPROVEMENTS......... 304,239 217,723
EQUIPMENT UNDER CAPITAL LEASE..................................... 18,053 18,053
CONSTRUCTION IN PROGRESS.......................................... 223,772 216,898
---------- ----------
1,583,657 1,222,319
LESS: ACCUMULATED DEPRECIATION AND AMORTIZATION................... (255,935) (189,611)
---------- ----------
$1,327,722 $1,032,708
========== ==========
</TABLE>
NOTE 6. DEVELOPMENT PROJECTS
----------------------------
The Company, along with its local partners in Detroit, Michigan, plans to
develop a permanent hotel/casino and entertainment complex at an approximate
cost of $800 million. On November 20, 1997, MGM Grand Detroit, LLC was chosen as
a finalist for a development agreement to construct, own and operate one of
Detroit's three new casinos. On April 9, 1998, the Detroit City Council approved
MGM Grand Detroit, LLC's development agreement with the City of Detroit.
Construction of the project is subject to the receipt of various governmental
approvals. The plans for the permanent facility call for an 800-room hotel, a
100,000 square-foot casino, signature restaurants and retail outlets, a showroom
and other entertainment venues. On July 22, 1998, the Michigan Gaming Control
Board adopted a resolution which allows the issuance of casino licenses to
conduct gaming operations in temporary facilities. During November 1998, MGM
Grand Detroit, LLC commenced construction activities on its temporary casino
which will consist of approximately 73,000 square feet of casino space, 2,300
slot machines, 80 table games, as well as signature restaurants and bars at an
approximate cost of $200 million. Pending the receipt of its license, MGM Grand
Detroit, LLC anticipates the opening of the temporary facility in the third
quarter of 1999. Through December 31, 1998, approximately $26.3 million was
expended and capitalized by the Company for licensing, design and construction
costs for the permanent and temporary facilities.
The Company plans to develop a hotel/casino and entertainment complex in
Atlantic City, New Jersey, at a minimum approximate cost of $700 million, on
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. Through December 31, 1998, the Company has expended and
capitalized approximately $53.1 million relating primarily to land acquisition
and pre-construction activities.
36
<PAGE>
NOTE 7. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
------------------------------------------------
On December 28, 1994, the Company and Primadonna formed a joint venture to
construct, 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% interest in the joint venture (see Note 20). As of December 31, 1998, the
Company has contributed land valued at $41.2 million with a cost basis of $37.6
million on which the property is located and cash totaling $29.5 million. During
the years ended December 31, 1998, and December 31, 1997, the Company received
distributions of $4.1 million and $15.2 million, respectively from the joint
venture to pay taxes on its allocated share of income. The joint venture secured
bank financing of $285 million, which was subsequently amended and reduced to
$210 million, and term loan financing of $20 million (see Note 9). In addition,
the joint venture Partners' executed a joint and several unlimited Keep-Well
Agreement in conjunction with the financing.
Summary condensed financial information for New York-New York Hotel and
Casino, LLC is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEARS ENDED DECEMBER 31, 1998 1997
-------- --------
<S> <C> <C>
NET REVENUES................................................... $219,107 $255,253
======== ========
OPERATING INCOME............................................... $ 76,628 $107,431
======== ========
INTEREST EXPENSE, NET.......................................... $(16,562) $(19,425)
======== ========
NET INCOME..................................................... $ 60,066 $ 88,006
======== ========
(IN THOUSANDS)
AT DECEMBER 31, 1998 1997
-------- --------
TOTAL ASSETS................................................... $451,496 $470,252
======== ========
LONGTERM DEBT.................................................. $189,361 $246,403
======== ========
MEMBERS' EQUITY................................................ $235,176 $183,350
======== ========
</TABLE>
Effective December 10, 1993, the Company through its wholly owned subsidiary,
MGM Grand Hotel, Inc., and Bally's Grand Inc. ("Bally's") formed a 50/50 joint
venture, MGM Grand-Bally's Monorail, LLC. The joint venture was intended to
construct, own and operate the MGM Grand-Bally's Monorail. The Company
contributed $2 million, $1.5 million, and $1.3 million to the joint venture as
part of its operating contribution during 1998, 1997 and 1996, respectively.
The Company has investments in unconsolidated affiliates that are accounted
for under the equity method. Under the equity method, original investments are
recorded at cost, and are adjusted by the Company's share of earnings, losses
and distributions received from and made to these companies. The investment
balance also includes interest and certain development costs capitalized during
construction. Investments in unconsolidated affiliates consisted of the
following:
(IN THOUSANDS)
AT DECEMBER 31,
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
NEW YORK - NEW YORK HOTEL AND CASINO, LLC........................ $122,861 $ 96,949
MGM GRAND - BALLY'S MONORAIL, LLC................................ 11,164 11,172
-------- --------
$134,025 $108,121
======== ========
</TABLE>
37
<PAGE>
The changes in the Company's investments in unconsolidated affiliates were as
follows:
(IN THOUSANDS)
New York - New York Hotel and Casino, LLC 1998 1997
---------- ---------
INVESTMENT AT JANUARY 1,............................ $ 96,949 $ 60,943
EARNINGS............................................ 30,032 44,003
DISTRIBUTIONS RECEIVED.............................. (4,120) (15,160)
ADDITIONAL INVESTMENTS.............................. - 7,000
OTHER, NET.......................................... - 163
---------- ---------
INVESTMENT AT DECEMBER 31,.......................... $ 122,861 $ 96,949
========== =========
(IN THOUSANDS)
MGM Grand-Bally's Monorail, LLC 1998 1997
---------- ---------
INVESTMENT AT JANUARY 1,............................ $ 11,172 $ 11,953
COSTS OF OPERATIONS................................. (808) (808)
ADDITIONAL INVESTMENT............................... 800 27
---------- ---------
INVESTMENT AT DECEMBER 31,.......................... $ 11,164 $ 11,172
========== =========
NOTE 8. OTHER ACCRUED LIABILITIES
---------------------------------
Other accrued liabilities consisted of the following:
(IN THOUSANDS)
AT DECEMBER 31, 1998 1997
---------- ---------
ACCRUED SALARIES AND RELATED........................ $ 38,422 $ 35,115
CASINO FRONT MONEY.................................. 24,945 26,393
CASINO CHIP LIABILITY............................... 12,198 17,204
OTHER LIABILITIES................................... 40,216 32,241
---------- ---------
$ 115,781 $ 110,953
========== =========
NOTE 9. LONG TERM DEBT
-----------------------
Long term debt consisted of the following:
(IN THOUSANDS)
AT DECEMBER 31, 1998 1997
-------- --------
6.95% SENIOR COLLATERALIZED NOTES DUE FEBRUARY 1, 2005.... $300,000 $ -
6.875% SENIOR COLLATERALIZED NOTES DUE FEBRUARY 6, 2008... 200,000 -
AUSTRALIAN HOTEL/CASINO LOAN DUE DECEMBER 1, 2002......... 44,874 57,830
SENIOR REDUCING REVOLVING CREDIT FACILITY................. - -
-------- --------
544,874 57,830
LESS: CURRENT MATURITIES.................................. (10,077) (10,589)
-------- --------
$534,797 $ 47,241
======== ========
Total interest incurred during 1998, 1997 and 1996 was $40.1 million, $9 million
and $40.8 million, respectively, of which $15.5 million, $7.8 million and $7
million were capitalized in 1998, 1997 and 1996, respectively.
On July 3, 1996, the Company deposited $523.2 million (the "Defeasance
Deposit") with the Trustee, U.S. Trust of California, to fund the defeasance of
FMN 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 through May 1, 1997, at which date the 11.75% and 12% FMN
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. The early
extinguishment of
38
<PAGE>
the FMN resulted in an extraordinary loss of approximately $30.8 million, net of
income tax benefits.
On July 1, 1996, the Company secured a $500 million 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
million. In July 1997, the Facility was amended, extended and increased to $1.25
billion (the "New Facility"), with provisions to allow an increase of the New
Facility to $1.5 billion as well as to allow additional pari passu debt
financing up to $500 million. As a result of the New Facility, the Company
recognized an extraordinary loss of approximately $4.2 million, net of income
tax benefits, due to the write-off of unamortized debt costs from the Facility
during 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 and as of December 31, 1998, the Company's borrowing rate was
approximately 5.8%. The New Facility matures in December 2002, with the
opportunity to extend the maturity for successive one-year periods. During the
year ended December 31, 1998, $31 million was drawn down and repaid against the
New Facility and no amounts remained outstanding as of December 31, 1998.
The Company filed a Shelf Registration Statement with the Securities and
Exchange Commission which became effective on August 4, 1997. The Shelf
Registration Statement allows the Company to issue up to $600 million of debt
and equity securities. On February 2 and February 6, 1998, the Company completed
public offerings totaling $500 million of Senior Collateralized Notes in
tranches of 7 and 10 years. The 7-year tranche of $300 million carries a coupon
of 6.95%, while the 10-year tranche of $200 million carries a coupon of 6.875%.
Both tranches are initially secured equally and ratably with the New Facility
and security may be removed equally with the New Facility at the Company's
option, and upon the occurrence of certain events, including the maintenance of
investment grade ratings. These Senior Collateralized Notes are pari passu with
the New Facility and contain various restrictive covenants as does the New
Facility. The Senior Collateralized Notes and the New Facility are
collateralized by substantially all the assets of the Company except for assets
of certain unrestricted subsidiaries. Based on the quoted market value of the
Senior Collateralized Notes at December 31, 1998, the fair value of the 7-year
and 10-year tranches were $280.5 million and $179.9 million, respectively.
On September 7, 1995, the Company completed the acquisition of MGM Grand
Australia (formerly the Diamond Beach Hotel/Casino) in Darwin, Australia. The
acquisition cost was financed by an Australian bank facility which provided a
total availability of approximately $64.4 million (AUD $105 million) and
includes funding for general corporate purposes. During 1998, the facility was
reduced by principal payments totaling $9.7 million (AUD $15.6 million) made in
accordance with the terms of the bank facility, and as of December 31, 1998,
$44.9 million (AUD $73.2 million) remained outstanding. Interest on the
Australian facility is based on the bank bill rate and was approximately 5.3%
and 5.8% as of December 31, 1998 and 1997, respectively. The facility matures in
December 2002, and the indebtedness has been guaranteed by the Company.
MGM Grand Australia has a $12.3 million (AUD $20 million) uncommitted
standby line of credit, with a funding period of 91 days for working capital
purposes. During the year ended December 31, 1998, no amounts were borrowed
under the line of credit and no amounts were outstanding as of December 31,
1998, and 1997, respectively. Maturities of the Company's long-term debt are as
follows:
(IN THOUSANDS)
YEARS ENDING DECEMBER 31
1999.................................. $ 10,077
2000.................................. 10,077
2001.................................. 10,151
2002.................................. 14,569
THEREAFTER............................ 500,000
--------
TOTAL................................. $544,874
========
39
<PAGE>
On September 15, 1995, NYNY LLC completed its bank financing for up to $225
million (see Note 1), which was increased to $285 million during September 1996.
The non-revolving construction line of credit converted to a five-year reducing
revolver upon completion of construction and commencement of operations of NYNY
on January 3, 1997. On October 8, 1998, the NYNY LLC five-year reducing revolver
was amended and reduced to $210 million. The Company and Primadonna (the
"Partners") guaranteed completion of the project as a condition to facility
availability, and 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.
The first draw down occurred on September 30, 1995, and as of December 31, 1998,
$178.5 million was outstanding under the facility. During 1998, $66.6 million in
principal repayments were made by NYNY LLC. On January 21, 1997, NYNY LLC
completed an additional $20 million equipment financing with a financial
institution. As of December 31, 1998, $14.4 million remained outstanding related
to the equipment financing.
As of December 31,1998, the Company was in compliance with all covenant
provisions associated with the aforementioned obligations.
NOTE 10. COMMITMENTS AND CONTINGENCIES
---------------------------------------
The Company and its subsidiaries lease buildings and equipment under non-
cancelable operating lease agreements which expire at various times through the
year 2003. The leases generally provide that the Company pay taxes, insurance
and maintenance expenses related to leased assets.
At December 31, 1998, the Company was obligated under non-cancelable
operating leases and capital leases to make future minimum lease payments as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEARS ENDING DECEMBER 31, OPERATING CAPITAL
LEASES LEASES
--------- ----------
<S> <C> <C>
1999................................................ $ 643 $ 5,372
2000................................................ 519 3,047
2001................................................ 429 -
2002................................................ 429 -
2003................................................ 429 -
THEREAFTER - -
--------- ----------
TOTAL MINIMUM LEASE PAYMENT......................... $ 2,449 8,419
=========
AMOUNT REPRESENTING INTEREST........................................ (466)
----------
TOTAL OBLIGATION UNDER CAPITAL LEASES............................... 7,953
LESS: AMOUNT DUE WITHIN ONE YEAR................................... (5,086)
----------
AMOUNT DUE AFTER ONE YEAR........................................... $ 2,867
==========
</TABLE>
Rental expense on the non-cancelable operating leases was $1.7 million, $2.5
million and $3.7 million for the years ended December 31, 1998, 1997 and 1996,
respectively.
40
<PAGE>
NOTE 11. STOCKHOLDERS' EQUITY
------------------------------
On July 2, 1996, the Company completed a public offering (the "Offering") of 8.6
million shares of commom stock (including an underwriter's over allotment option
to purchase 1.1 million shares of commom stock). Based on an Offering price of
$39.50 per share and associated costs incurred, the net proceeds were
approximately $327 million. The net proceeds from the Offering were used for the
defeasance of the MGM Grand Hotel Finance Corp. FMN (see Note 9).
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 was charged to
stockholders' equity and amortized monthly to compensation expense over the one-
year commitment period. On May 7, 1997, 99,045 shares were issued to employees
as a result of the commitment. Over the life of the commitment, approximately $4
million was amortized to expense, of which $1.2 million and $2.8 million of such
expense were recognized during the years ended December 31, 1997 and 1996,
respectively.
On May 24, 1995, and as amended, the Company entered into an agreement
with Don King Productions, Inc. ("DKP") to present six of Mike Tyson's fights.
Pursuant to the agreement, the Company made a non-interest bearing working
capital advance of $15 million to DKP, sold to DKP 618,557 treasury shares of
the Company's Common Stock (the "Shares") for $15 million in exchange for a non-
interest bearing promissory note which was repaid, and provided a guaranteed
future share price of $48.50. 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 Company and DKP determined to terminate the agreement, and on
September 25, 1997, after solicitation of competitive bids, the Shares held by
the Trustee were sold to Tracinda at the price of $44.50 per share for an
aggregate consideration of $27.5 million. The Company was repaid the $15 million
working capital advance and the remaining consideration in the amount of $12.5
million was paid to DKP. As a result of this transaction, the Company reversed
approximately $5.9 million of previously expensed stock price guarantee
amortization during 1997.
On June 23, 1998, the Company announced a $35.00 per share cash tender
offer for up to 6 million shares of Company commom stock as part of a 12 million
share repurchase program. The offer commenced on July 2, 1998 and expired on
July 31, 1998. Based upon final results, 10.8 million shares of the Company's
common stock were tendered, and accordingly, the shares were prorated. The total
acquisition cost of the tendered shares was approximately $210.6 million. The
company anticipates that, depending on market conditions, the remaining 6
million shares in the repurchase program may be acquired in the open market, in
private transactions, through a tender offer, offers otherwise.
NOTE 12. COMPREHENSIVE INCOME
------------------------------
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting
Comprehensive Income, requires that the Company disclose comprehensive income
and its components. The objective of SFAS 130 is to report a measure of all
changes in equity of a company that result from transactions and other economic
events of the period other than transactions with stockholders. Comprehensive
income is the total of net income and all other non-stockholder changes in
equity ("Other Comprehensive Income").
The Company has recorded currency translation adjustments as Other
Comprehensive Income in the accompanying financial statements. Comprehensive
income is calculated as follows:
(IN THOUSANDS)
YEARS ENDED DECEMBER 31, 1998 1997
--------- ---------
NET INCOME ................................. $ 68,948 $ 111,018
CURRENCY TRANSLATION ADJUSTMENT ............ 2,688 14,422
--------- ---------
COMPREHENSIVE INCOME ....................... $ 71,636 $ 125,440
========= =========
41
<PAGE>
NOTE 13. EARNINGS PER SHARE
----------------------------
The Company accounts for Earnings per Share according to Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128
presents two EPS calculations: (i) basic earnings per common stock 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 assumption that options issued
pursuant to the Company's stock option plans (see Note 14) are exercised and
repurchased at the average price for the periods presented.
(IN THOUSANDS EXCEPT SHARE DATA)
YEARS ENDED DECEMBER 31, 1998 1997 1996
--------- --------- ---------
NET INCOME ............................... $ 68,948 $ 111,018 $ 43,706
========= ========= =========
WEIGHTED AVERAGE BASIC SHARES ............ 55,678 57,475 52,759
========= ========= =========
BASIC EARNINGS PER SHARE ................. $ 1.24 $ 1.93 $ 0.83
========= ========= =========
WEIGHTED AVERAGE DILUTED SHARES .......... 56,342 58,835 54,257
========= ========= =========
DILUTED EARNINGS PER SHARE ............... $ 1.22 $ 1.89 $ 0.81
========= ========= =========
Weighted average diluted shares include the following: options to purchase
approximately 664,000, 877,000, and 962,000 shares issued pursuant to the
Company's stock option plans (see Note 14) for the years ended December 31,
1998, 1997 and 1996, respectively; employee grant shares of approximately 29,000
and 22,000 for the years ended December 31, 1997 and 1996, respectively (see
Note 11); and DKP shares of approximately 454,000 and 514,000 for the years
ended December 31, 1997 and 1996, respectively (see Note 11).
NOTE 14. STOCK OPTION PLANS
---------------------------
The Company has adopted nonqualified stock option plans and incentive stock
plans which provide for the granting of stock options pursuant to the applicable
provisions of the Internal Revenue Code and regulations. The aggregate options
available under the plans are 6.5 million shares. The Company had granted
options of approximately 5.6 million shares through December 31, 1998.
The plans are administered by the Compensation and Stock Option
Committee of the Board of Directors. Salaried officers and other key employees
of the Company and its subsidiaries are eligible to receive options. The
exercise price in each instance is 100% of the fair market value of the
Company's common stock on the date of grant. The options have ten-year terms and
are exercisable in four and five annual installments.
On March 26, 1996, the Compensation and Stock Option Committee of the
Board of Directors determined to adjust the vesting provision of the Company's
Non-Qualified Stock Option Plan and Incentive Stock Option Plan to provide for
the vesting of future stock option grants under the plans at 20% on each of the
first four anniversary dates of the grant, with full vesting on the fifth
anniversary date of the grant. The Compensation and Stock Option Committee also
determined that pro-rata vesting at times other than successive anniversary
dates of the date of the grant are no longer applicable. Stock option holders
with grants dated prior to March 26, 1996 were given the opportunity to accept
or decline the new vesting provisions with regard to their existing grants.
On June 22, 1998, the Compensation and Stock Option Committee of the
Board of Directors approved an offer to employees to reprice their out-of-the-
money options (covering an aggregate of 1,820,950 shares). The original options
had exercise prices ranging from $33.1875 to $44.125, and the new options have
an exercise price of $26.625. For holders who accepted the new price, certain
conditions were adopted including (1) commencement of a new holding period for
vesting of options (whether or not the initial options had vested) and (2) a
one-year extension of employee employment contracts, at the Company's option,
where applicable. The repricing offer was not made to the Company's outside
directors. Such repricing did not affect options held by the Chairman or the
President of the Company.
Had the Company accounted for these plans under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), the Company's net income and earnings per share would have been reduced
to the following pro forma amounts:
42
<PAGE>
(IN THOUSANDS) 1998 1997 1996
---------- ----------- ----------
Net income:
AS REPORTED ................. $ 68,948 $ 111,018 $ 43,706
========= ========== ==========
PRO FORMA ................... $ 66,047 $ 110,235 $ 34,981
========= ========== ==========
Basic earnings per share:
AS REPORTED ................. $ 1.24 $ 1.93 $ 0.83
========= ========== ==========
PRO FORMA ................... $ 1.19 $ 1.92 $ 0.66
========= ========== ==========
Diluted earnings per share:
AS REPORTED ................. $ 1.22 $ 1.89 $ 0.81
========= ========== ==========
PRO FORMA ................... $ 1.17 $ 1.87 $ 0.64
========= ========== ==========
A summary of the status of the Company's fixed stock option plan for each of the
years in the period ended December 31, 1998, 1997 and 1996 is presented below
(there are no options outstanding under the Incentive Stock Option Plan):
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- --------------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
(000'S) PRICE (000'S) PRICE (000'S) PRICE
-------- ----------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING AT BEGINNING OF THE YEAR.. 3,642 $28.82 3,213 $27.26 3,102 $22.67
GRANTED....................... 3,167 $29.21 727 $36.26 765 $35.12
EXERCISED..................... (49) $27.11 (72) $15.09 (414) $11.92
FORFEITED..................... (2,059) $36.41 (226) $35.19 (240) $26.35
EXPIRED....................... - $ - - $ - - $ -
------- ----- -----
OUTSTANDING AT END OF THE YEAR........ 4,701 $25.78 3,642 $28.82 3,213 $27.26
======= ===== =====
EXERCISABLE AT END OF THE YEAR........ 1,359 $23.89 783 $24.24 220 $14.38
======= ===== =====
WEIGHTED AVERAGE FAIR VALUE
OF OPTIONS GRANTED............ $13.61 $16.98 $22.89
====== ====== ======
</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ---------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICES AT 12/31/1998 LIFE (YEARS) PRICE AT 12/31/1998 PRICE
-------------- ------------ --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
$10.25 -$20.00 ........... 241,700 2.5 $ 12.82 233,700 $ 12.61
$20.01 -$25.00 ........... 626,350 8.0 $ 24.41 144,900 $ 24.40
$25.01 -$30.00 ........... 3,639,800 8.2 $ 26.39 945,100 $ 26.09
$30.01 -$35.00 ........... 109,100 8.6 $ 32.99 4,000 $ 34.25
$35.01 -$40.00 ........... 56,425 7.9 $ 35.49 14,825 $ 35.63
$40.01 -$45.00 ........... 27,400 6.1 $ 40.84 16,200 $ 40.95
---------- -------- -------- --------- --------
4,700,775 7.9 $ 25.78 1,358,725 $ 23.89
========== -------- ======== ========= ========
</TABLE>
43
<PAGE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996, respectively; risk-free
interest rates 6%, 6%, and 6.1%, respectively; no expected dividend yields for
the years presented; expected lives of 6 years for all years; and expected
volatility of 36% for 1998, 38% for 1997, and 39% for 1996.
The Company has agreements with 138 executives which provide that, upon
a change of control, any unvested stock options covered by such agreements
become exercisable. The total number of stock options subject to such agreements
is 4.7 million, of which 4.6 million options become immediately exercisable, and
the remaining .1 million options become exercisable if employment status is
diminished within twelve months following a change in control.
NOTE 15. EMPLOYEE PENSION AND SAVINGS PLANS
-------------------------------------------
Participation in the MGM Grand Hotel, Inc. 401(k) employee savings plan is
available for all full time employees. The savings plan allows participants to
defer, on a pre-tax basis, a portion of their salary and accumulate tax deferred
earnings as a retirement fund. MGM Grand Hotel, Inc. matches 25% of employee
contributions up to a maximum of 1% of participating employee's eligible gross
wages. Additionally, MGM Grand Hotel, Inc. makes contributions to the employees'
savings plan based on length of service, which vest over a five-year period. For
the periods ended December 31, 1998, 1997 and 1996, MGM Grand Hotel, Inc.
contributions under this arrangement were $4.1 million, $3.4 million, and $3.1
million, respectively.
Effective November 1994, the Company and MGM Grand Hotel, Inc. adopted a
Nonqualified Deferred Retirement Plan for certain key employees not a part of a
collective bargaining unit. The Nonqualified Deferred Retirement Plan allows
participants to defer, on a pre-tax basis, a portion of their salary and
accumulate tax deferred earnings, plus interest, as a retirement fund. These
deferrals are in addition to those allowed under the MGM Grand Hotel, Inc.
401(k) savings plan. All deferred amounts vest immediately. There are no
employer matching contributions made under this plan. The full amount vested in
a participant's account will be distributed to a participant following
termination of employment, normal retirement or in the event of disability or
death.
Effective with the September 1995 acquisition of MGM Grand Australia
(see Note 1), an Australian employee retirement fund was acquired. The fund is
subject to the Superannuation Industry (Supervision) Act of 1993, imposing a
legal obligation on MGM Grand Australia to contribute to all employees. MGM
Grand Australia maintains two categories for the plan, depending on employment
status: category (A) for executive employees and category (B) for staff. Death
and Disablement benefits are provided for all members; however, category (A)
members receive increased coverages under both benefits. MGM Grand Australia
contributes 6% of salary to satisfy the Superannuation Guarantee Legislation,
and allows participants to defer, on a pre-tax basis, a portion of their salary
and accumulate tax deferred earnings as a retirement fund. The full amount
vested in members' retirement accounts is payable to the member following
termination of employment, under certain circumstances or normal retirement.
During 1998, MGM Grand Australia contributed under these arrangements $269,000
and $547,000 for the executive employees and staff, respectively. During 1997,
MGM Grand Australia contributed under these arrangements $154,000 and $458,000
for the executive employees and staff, respectively. During 1996, MGM Grand
Australia contributed under these arrangements $196,000 and $617,000 for the
executive employees and staff, respectively.
44
<PAGE>
NOTE 16. MASTER PLAN ASSET DISPOSITION
--------------------------------------
During 1997, the Company enhanced and increased the Master Plan to approximately
$570 million, and wrote off assets with a net book value of $28.6 million (pre-
tax) which included the original swimming pool facility, to be replaced by the
Mansion at the MGM Grand consisting of 29 exclusive suites and villas, and
certain theme park assets. During September 1996, the Company determined to
write off various assets with a net book value of $49.4 million (pre-tax) as a
result of the MGM Grand Las Vegas $250 million Master Plan property construction
enhancements associated with the transformation of the facility into "The City
of Entertainment." The affected areas included certain assets related to the
theme park which totaled approximately $39.6 million to make way for the newly
completed Conference Center and pool and spa complex; approximately $8.6 million
related to the removal of the lion entrance and Emerald City which has been
replaced with a new mezzanine entry, a Rainforest Cafe, Studio 54 nightclub and
a remodeled Entertainment casino among other attractions; and approximately $1.2
million representing certain food court and midway/arcade areas which have been
transformed into the Studio Walk, a replica of a sound stage featuring Hollywood
landmarks.
NOTE 17. INCOME TAXES
---------------------
The Company accounts for Income Taxes according to Statement of Financial
Accounting Standards 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 future tax benefit to the extent that
realization of such benefit is more likely than not. Otherwise, a valuation
allowance is applied. At December 31, 1998, the Company believes that it is more
likely than not that its deferred tax assets are fully realizable because of the
future reversal of existing taxable temporary differences and future projected
taxable income. Accordingly, there is no valuation allowance at December 31,
1998.
The provision for income taxes and income from continuing operations
before extraordinary item for the years ended December 31, 1998, 1997 and 1996
is as follows:
(IN THOUSANDS)
YEARS ENDED DECEMBER 31, 1998 1997 1996
---------- ----------- ----------
CURRENT - FEDERAL.................. $ 24,791 $ 14,207 $ 31,014
DEFERRED - FEDERAL................. 15,789 50,838 (6,380)
---------- ----------- ----------
PROVISION FOR INCOME TAXES..... $ 40,580 $ 65,045 $ 24,634
========== =========== ==========
Reconciliation of the Federal income tax rate and the Company's effective tax
rate is as follows:
YEARS ENDED DECEMBER 31, 1998 1997 1996
---- ---- ----
FEDERAL INCOME TAX RATE ........... 35.0% 35.0% 35.0%
PERMANENT AND OTHER ITEMS.......... 2.0 1.1 6.2
CHANGES IN VALUATION ALLOWANCE..... - - (16.4)
---- ---- ----
EFFECTIVE TAX RATE................. 37.0% 36.1% 24.8%
==== ==== ====
45
<PAGE>
As of December 31, 1998, the major tax affected components of the Company's net
deferred tax liability are as follows:
(IN THOUSANDS) 1998 1997
------ --------
Deferred Tax Assets
NET OPERATING LOSS CARRYFORWARD.... $ - $ 1,929
BAD DEBT RESERVE................... 12,234 6,586
HOTEL PREOPENING EXPENSES.......... - 2,781
TAX CREDIT CARRYFORWARDS........... 29,492 27,219
-------- --------
41,726 38,515
-------- --------
Deferred Tax Liabilities
DEPRECIATION AND AMORTIZATION...... (75,532) (65,144)
ACCRUALS, RESERVES AND OTHER....... (9,261) (1,908)
-------- --------
(84,793) (67,052)
-------- --------
Net Deferred Tax (Liability) Asset......... $(43,067) $(28,537)
======== ========
For U.S. Federal income tax return purposes, the Company has an alternative
minimum tax credit carryforward of $26 million which does not expire, and a
general business tax credit carryforward of $3.5 million which expires in
different periods through 2012.
NOTE 18. RELATED-PARTY TRANSACTIONS
-----------------------------------
In conjunction with the Company's 50% interest in the MGM Grand-Bally's
Monorail, LLC, the Company, through its wholly-owned subsidiary, MGM Grand
Hotel, Inc., contributed approximately $2 million, $1.5 million, and $1.3
million to the joint venture as part of its operating contribution during 1998,
1997 and 1996, respectively.
The Company, through its wholly-owned subsidiary MGM Grand Hotel, Inc.,
has entered into an agreement to lease space in NYNY to operate a race book and
sports pool. The terms of the lease are for ten years from the commencement date
of January 3, 1997, with an option for an additional term of ten years. MGM
Grand Hotel, Inc. is obligated to pay to NYNY the greater of a minimum annual
rent of $.2 million or percentage rent based upon gross revenue, as defined by
the Nevada Gaming Authorities. The percentage rent is based on a graduated scale
of gross revenue at percentages ranging from 12 to 15%. During 1998 and 1997,
approximately $.4 million and $.5 million, respectively, were paid under this
agreement. Additionally, MGM Grand Hotel, Inc. leased office facilities to NYNY
during 1996 for which it received rental payments of approximately $.1 million,
and provided various other hotel goods and services for which NYNY paid
approximately $.1 million and $.2 million during 1998 and 1997, respectively. On
September 4, 1996, the Company also entered into an agreement with NYNY to
provide exclusive floral services through its wholly-owned subsidiary, MGM Grand
Merchandising, Inc., at rates generally comparable to those offered by third
parties. Payments were made by NYNY totaling $.1 million under the floral
service contract for each of 1998 and 1997. The Company and NYNY have entered
into various other transactions and
46
<PAGE>
arrangements which, individually and in the aggregate, are not material.
For the years ended December 31, 1998, and 1997, the Company and its
subsidiaries rented aircraft from Tracinda for various business purposes. The
aggregate amount of rental payments were $.3 million and $.5 million,
respectively, and the rent payments were at rates which management believes are
generally below those offered by third parties. The Company and Tracinda have
entered into various other transactions and arrangements which, individually and
in the aggregate, are not material.
During 1998, the Company made no additional contributions to NYNY LLC,
compared with $7 million during 1997. The Company received approximately $4.1
million and $15.2 million in distributions from NYNY LLC during 1998 and 1997,
respectively, to pay taxes on its allocated share of income.
In August 1998, Tracinda agreed to sell its building and land
(approximately .56 acre located in Las Vegas, Nevada) to the Company's
subsidiary, MGM Grand Hotel, Inc., for $1.8 million. The Company, based on
appraisals it received, believes that this purchase was on terms comparable to
what it could have obtained for the land and building on an arms-length basis in
an equivalent transaction with a third party.
Pursuant to an agreement dated December 23, 1996, between MGM Grand Hotel,
Inc. and MGM Home Entertainment, Inc. ("MGM-HE"), a California-based motion
picture studio in which Tracinda has an approximate 89.6% ownership interest,
MGM Grand Hotel, Inc. can utilize key art and still photographs from certain
Metro Goldwyn Mayer, Inc. and United Artists Corporation motion pictures for the
period commencing on December 27, 1996 and ending on July 1, 1997, which was
subsequently extended to December 31, 1997. In exchange, MGM Grand Hotel, Inc.
agreed to promote MGM-HE motion picture video cassettes for availability in one
or more retail venues. During 1998 and 1997, MGM Grand Hotel, Inc. purchased
video cassettes and other MGM-HE merchandise of approximately $.1 million and
$.3 million, respectively, at rates which management believes are generally
comparable to those offered to third parties. In addition, MGM Grand Hotel, Inc.
provided various goods and services during 1998 to MGM-HE which, individually
and in the aggregate, are not material.
Pursuant to a License Agreement between a predecessor in interest to the
Company and Metro Goldwyn Mayer Film Co. dated February 29, 1980, the Company
has an exclusive royalty-free license in perpetuity to use certain trademarks,
trade names and logos in and in connection with the Company's hotel/gaming
business and other businesses, excluding the film entertainment business.
During the three-year periods ended December 31, 1998, 1997 and 1996, the
Company and MGM-HE have entered into various other transactions and arrangements
which, individually and in the aggregate, are not material.
NOTE 19. PROPERTY PERFORMANCE
-----------------------------
The Company operates in the hotel/casino industry through the operations of MGM
Grand Las Vegas, which commenced operations on December 18, 1993, MGM Grand
Australia, which was acquired on September 7, 1995 (see Note 1), its 50%
interest in NYNY LLC, which commenced operations on January 3, 1997 (see Notes 1
and 20), MGM Grand South Africa manages three temporary casinos one each in
Nelspruit (opened on October 15, 1997), Witbank (opened on March 10, 1998) and
Johannesburg (opened on September 28, 1998) (see Note 1). Sales between
properties are immaterial and generally at prices approximately equal to those
charged to unaffiliated customers.
47
<PAGE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues:
HOTEL/CASINO............................................ $ 735,501 $ 773,797 $ 800,189
INCOME FROM UNCONSOLIDATED AFFILIATE.................... 38,362 53,800 -
----------- ----------- -----------
$ 773,863 $ 827,597 $ 800,189
=========== =========== ===========
Operating income (loss):
HOTEL/CASINO............................................ $ 103,901 $ 169,160 $ 196,585
INCOME FROM UNCONSOLIDATED AFFILIATE.................... 38,362 53,800 -
MASTER PLAN ASSET DISPOSITION........................... - (28,566) (49,401)
CORPORATE EXPENSE....................................... (10,689) (3,424) (10,022)
PREOPENING AND OTHER - UNCONSOLIDATED AFFILIATE......... - - (7,868)
----------- ----------- -----------
$ 131,574 $ 190,970 $ 129,294
=========== =========== ===========
Identifiable assets:
HOTEL/CASINO............................................ $ 1,719,436 $ 1,390,215 $ 1,254,602
CORPORATE............................................... 54,358 8,159 33,087
----------- ----------- -----------
$ 1,773,794 $ 1,398,374 $ 1,287,689
=========== =========== ===========
Capital expenditures:
HOTEL/CASINO............................................ $ 349,131 $ 227,658 $ 84,544
CORPORATE............................................... 12,811 98 231
----------- ----------- -----------
$ 361,942 $ 227,756 $ 84,775
=========== =========== ===========
Depreciation and amortization:
HOTEL/CASINO............................................ $ 76,284 $ 64,104 $ 62,196
CORPORATE............................................... 428 140 127
----------- ----------- -----------
$ 76,712 $ 64,244 $ 62,323
=========== =========== ===========
</TABLE>
NOTE 20. SUBSEQUENT EVENTS (UNAUDITED)
--------------------------------------
During December 1998, the Company and Primadonna entered into a definitive
merger agreement whereby MGM Grand, Inc. would acquire Primadonna in an all
stock transaction plus the assumption of debt. The terms of the merger provided
for Primadonna's stockholders to receive 0.33 shares of the Company's common
stock for each share of Primadonna stock held, or a total of approximately 9.5
million shares of MGM Grand, Inc. common stock.
On March 1, 1999, the merger with Primadonna was completed making
Primadonna a wholly-owned subsidiary of the Company. Primadonna owns and
operates three hotel/casino resorts on both sides of Interstate 15 at the
California/Nevada border in Primm, Nevada (Whiskey Pete's, Buffalo Bill's and
the Primm Valley Resort), a 50% interest in NYNY LLC (which now becomes 100%
owned by the Company) and two championship golf courses located four miles south
of Primm in California. The Primm, Nevada hotel/casinos are located on
approximately 143 acres of leased land. Primadonna owns approximately 16 acres
of land in Nevada immediately north of Buffalo Bill's and approximately 573
acres of land in California where the golf courses are located. Approximately
125 of these acres are available for future development.
As of March 1, 1999, the Company assumed approximately $315 million of long
term debt related to the Primadonna acquisition, which includes Primadonna's 50%
share of NYNY LLC's long-term debt.
On February 24, 1999, the Company, along with its Detroit partners,
received commitments from a consortium of banks for a new five-year $230 million
credit facility. Approximately two-thirds of the commitments are from Michigan-
based banks, mostly from the greater metropolitan Detroit area. The facility may
be increased to $250 million at the Company's discretion. Proceeds from the new
facility will be used to finance the development and construction of the
temporary and permanent casino complexes and for general working capital. The
facility will be secured by substantially all of the assets of MGM Grand
Detroit, LLC's temporary facility and will be guaranteed by the Company.
48
<PAGE>
Report of Independent
---------------------
Public Accountants
-------------------
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF MGM GRAND, INC.:
--------------------------------------------------------------
We have audited the accompanying consolidated balance sheets of MGM Grand, Inc.
(a Delaware corporation) and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MGM Grand, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ending
December 31, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 1, 1999
49
<PAGE>
EXHIBIT (g)(2)
MGM GRAND, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 65,769 $ 81,956
Accounts receivable, net 66,158 69,116
Prepaid expenses and other 29,450 11,829
Inventories 11,212 11,081
Deferred tax asset 30,779 34,098
----------------- -----------------
Total current assets 203,368 208,080
----------------- -----------------
PROPERTY AND EQUIPMENT, NET 2,230,791 1,327,722
OTHER ASSETS:
Investments in unconsolidated affiliates, net 10,967 134,025
Excess of purchase price over fair market value
of net assets acquired, net 37,318 37,574
Deposits and other assets, net 56,411 66,393
----------------- -----------------
Total other assets 104,696 237,992
----------------- -----------------
$ 2,538,855 $ 1,773,794
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 31,375 $ 23,931
Construction payable 22,182 17,403
Income taxes payable 14,901 2,457
Current obligation, capital leases 5,174 5,086
Current obligation, long term debt 10,374 10,077
Accrued interest on long term debt 6,270 14,630
Other accrued liabilities 126,539 115,781
----------------- -----------------
Total current liabilities 216,815 189,365
----------------- -----------------
DEFERRED REVENUES 4,874 5,219
DEFERRED INCOME TAXES 98,291 77,165
LONG TERM OBLIGATION, CAPITAL LEASES 13,339 2,867
LONG TERM DEBT 983,230 534,797
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value, 75,000,000 shares
authorized, 67,790,047 and 58,033,094
shares issued and outstanding) 678 580
Capital in excess of par value 1,218,052 968,199
Treasury stock, at cost (6,000,000 shares) (210,589) (210,589)
Retained earnings 202,612 193,187
Other comprehensive income 11,553 13,004
----------------- -----------------
Total stockholders' equity 1,222,306 964,381
----------------- -----------------
$ 2,538,855 $ 1,773,794
================= ================
</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>
Three Months Ended
March 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,425 $ 16,262
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 21,095 16,942
Amortization of debt offering costs 490 377
Provision for doubtful accounts and discounts 11,395 8,187
Loss on early extinguishment of debt 1,382 -
Cumulative change in accounting principle 12,567 -
Earnings in excess of distributions-unconsolidated affiliate (5,026) (8,038)
Deferred income taxes 3,740 2,575
Change in assets and liabilities:
Accounts receivable 16,139 23,043
Inventories 1,279 2,339
Prepaid expenses and other (6,184) (1,193)
Income taxes payable 5,638 -
Accounts payable, accrued liabilities and other (41,139) (36,754)
Currency translation adjustment (127) (71)
------------ ------------
Net cash from operating activities 30,674 23,669
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (117,257) (104,092)
Acquisition of Primadonna Resorts, Inc., net (13,345) -
Disposition of property and equipment, net 4,691 402
Change in construction payable 4,779 (4,590)
Change in deposits and other assets, net 9,880 (10,434)
------------ ------------
Net cash from investing activities (111,252) (118,714)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments to banks and others (2,593) (2,694)
Issuance of long term debt - 500,000
Borrowings under bank line of credit 450,000 31,000
Extinguishment of debt (374,500) -
Repayments of bank line of credit (15,000) (31,000)
Issuance of common stock 6,484 466
------------ ------------
Net cash from financing activities 64,391 497,772
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (16,187) 402,727
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 81,956 34,606
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 65,769 $ 437,333
============ ============
</TABLE>
-3-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Basis of Presentation
MGM Grand, Inc. (the "Company") is a Delaware corporation,
incorporated on January 29, 1986. As of March 31, 1999, approximately
61.5% 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.
On March 1, 1999, the Company completed its Merger (the "Merger") with
Primadonna Resorts, Inc. ("Primadonna") and as part of the Merger acquired
Primadonna's 50% ownership interest in New York-New York Hotel and Casino
LLC ("NYNY LLC") which owns and operates the New York-New York Hotel and
Casino ("NYNY") in Las Vegas, Nevada (see Note 7). Beginning March 1, 1999,
Primadonna and NYNY are wholly-owned subsidiaries of the Company. The
Merger gives the Company ownership of three hotel/casinos located in Primm,
Nevada at the California/Nevada border: Whiskey Pete's, Buffalo Bill's and
the Primm Valley Resort (the "Primm Properties"), as well as two
championship golf courses located 1 mile from the Primm Properties.
Through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., the
Company owns and operates the MGM Grand Hotel/Casino in Darwin, Australia
("MGM Grand Australia").
Through its wholly-owned subsidiary, MGM Grand South Africa, Inc., the
Company manages three casinos throughout various provinces of the Republic
of South Africa. The casino in Nelspruit began operations on October 15,
1997, the casino in Witbank began operations on March 10, 1998 and the
casino in Johannesburg began operations on September 28, 1998. The Company
receives development and management fees from its partner, Tsogo Sun Gaming
& Entertainment, which is responsible for providing all project costs.
Through its wholly-owned subsidiary, MGM Grand Detroit, Inc., the
Company and its local partners in Detroit, Michigan, formed MGM Grand
Detroit, LLC to develop a hotel/casino and entertainment complex at an
approximate cost of $800 million. On November 20, 1997, MGM Grand Detroit
was chosen as a finalist for a development agreement to construct, own and
operate one of Detroit's three new casinos. On April 9, 1998, the Detroit
City Council approved MGM Grand Detroit's development agreement with the
City of Detroit. Construction of the project is subject to the receipt of
various governmental approvals. The plans for the permanent facility call
for an 800-room hotel, a 100,000 square-foot casino, signature restaurants
and retail outlets, a showroom and other entertainment venues. On July 22,
1998, the Michigan Gaming Control Board adopted a resolution which allows
the issuance of casino licenses to conduct gaming operations in temporary
facilities. Pending receipt of a license, MGM Grand Detroit, LLC
anticipates the opening of a temporary gaming facility in the third quarter
of 1999 at an approximate cost of $200 million. Through March 31, 1999,
approximately $77.6 million was expended, with $61.4 million capitalized
and $16.2 million expensed, by the Company for the permanent and temporary
facilities.
Through its wholly-owned subsidiary, MGM Grand Atlantic City, Inc.,
the Company intends to construct, own and operate a destination resort
hotel/casino, entertainment and retail facility in Atlantic City, New
Jersey, at an approximate cost of $700 million, on approximately 35
-4-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 1. Organization and Basis of Presentation (continued)
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. Through March 31, 1999, approximately $54.5 million was
expended, with $53.7 million capitalized and $.8 million expensed by the
Company for the project.
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 1998
Annual Report included on Form 10-K.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
financial position as of March 31, 1999, and the results of operations for
the three month periods ended March 31, 1999 and 1998. 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 1999 presentation, which have no effect on
previously reported net income.
Note 2. Statements of Cash Flows - Supplemental Disclosures
For the three months ended March 31, 1999 and 1998, cash payments made
for interest, net of amounts capitalized were $1.6 million and zero,
respectively.
Cash payments made for state and federal taxes for the three months
ended March 31, 1999 were $2 million. No cash payments were made for state
and federal taxes for the three months ended March 31, 1998.
As a result of the Merger (see Note 7), the Company issued stock to
Primadonna shareholders in the amount of approximately $244.7 million and
assumed long-term debt totaling $389 million.
Note 3. Long Term Debt and Notes Payable
Long term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
Australian Hotel/Casino Loan, due December 1, 2000 (USD) $ 43,604 $ 44,874
Senior Reducing Revolving Credit Facility 450,000 -
6.95% Senior Collateralized Notes, due February 1, 2005 300,000 300,000
6.875% Senior Collateralized Notes, due February 6, 2008 200,000 200,000
-------- --------
993,604 544,874
Less: Current Maturities (10,374) (10,077)
-------- --------
$983,230 $534,797
======== ========
</TABLE>
-5-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 3. Long Term Debt and Notes Payable (continued)
Total interest incurred for the first three months of 1999 and 1998
was $13.1 million and $7.5 million, respectively, of which $4.9 million and
$3.7 million were capitalized in the 1999 and 1998 periods, respectively.
During the first three months of 1999 and 1998, the Company recognized
interest expense from its unconsolidated affiliate of $1.1 million and $2.2
million, respectively.
On July 1, 1996, the Company secured a $500 million 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 million. In July 1997, the Facility was amended, extended and
increased to $1.25 billion (the "New Facility"), with provisions to allow
an increase of the New Facility to $1.5 billion as well as to allow
additional pari passu debt financing up to $500 million. 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. During the three months ended
March 31, 1999, $450 million was drawn down and remained outstanding on the
New Facility. Of the $450 million drawn down, the Company used $216.6
million and $157.9 million to pay off the Primadonna and NYNY bank
facilities, respectively, and terminated these borrowing arrangements.
The Company filed a Shelf Registration Statement with the Securities
and Exchange Commission which became effective on August 4, 1997. The Shelf
Registration Statement allows the Company to issue up to $600 million of
debt and equity securities. On February 2 and February 6, 1998, the Company
completed public offerings totaling $500 million of Senior Collateralized
Notes in tranches of 7 and 10 years. The 7-year tranche of $300 million
carries a coupon of 6.95%, while the 10-year tranche of $200 million
carries a coupon of 6.875%. Both tranches are initially secured equally and
ratably with the New Facility, and the security may be removed equally with
the New Facility at the Company's option upon the occurrence of certain
events, including the maintenance of investment grade ratings. These Senior
Collateralized Notes are pari passu with the New Facility and contain
various restrictive covenants as does the New Facility. The Senior
Collateralized Notes and the New Facility are collateralized by
substantially all of the assets of the Company except for assets of certain
unrestricted subsidiaries.
The Australian bank facility originally provided a total availability
of approximately $66.3 million (AUD $105 million), which has been reduced
by principal payments totaling $24.2 million (AUD $36 million) made in
accordance with the terms of the bank facility, including $2.6 million (AUD
$4.1 million) during the three months ended March 31, 1999. As of March 31,
1999, $43.6 million (AUD $69 million) remained outstanding. The bank
facility includes funding for general corporate purposes. Interest on the
bank facility is based on the Australian Bank Bill rate. The indebtedness,
which matures in December 2002, has been wholly guaranteed by the Company.
MGM Grand Australia has an $12.6 million (AUD $20 million) uncommitted
standby line of credit, with a funding period of 91 days for working
capital purposes. No amount was outstanding during the three months ended
March 31, 1999.
On March 31, 1999, MGM Grand Detroit LLC secured a $230 million credit
facility (the "Detroit Facility") with a consortium of banks, the majority
of which are based in the greater Detroit
-6-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 3. Long Term Debt and Notes Payable (continued)
metropolitan area. The Detroit Facility will be used to finance the
development and construction of the temporary and permanent casino
complexes and for general working capital. The Detroit Facility may be
increased to $250 million at the Company's discretion. The Detroit Facility
is secured by substantially all of the assets of the temporary facility and
is guaranteed by the Company. As of March 31, 1999, the Company was in
compliance with all covenant provisions associated with the aforementioned
obligations.
Note 4. Issuance of Common Stock
On June 23, 1998, the Company announced a $35.00 per share cash tender
offer for up to 6 million shares of the Company's common stock as part of a
12 million share repurchase program. The offer commenced on July 2, 1998
and expired on July 31, 1998. A total of 10.8 million shares of the
Company's common stock were tendered and, accordingly, the shares were
prorated with 6 million shares being purchased. The total acquisition cost
of the tendered shares was approximately $210.6 million. The Company
anticipates that, depending on market conditions, the remaining 6 million
shares in the repurchase program may be acquired in the open market, in
private transactions, through a tender offer or offers or otherwise.
On March 1, 1999, the Company issued 9.5 million shares of the
Company's common stock valued at approximately $244.7 million in connection
with the Merger (see Note 7).
Note 5. Comprehensive Income
Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
Reporting Comprehensive Income, requires that the Company disclose
comprehensive income and its components. The objective of SFAS 130 is to
report a measure of all changes in equity of a company that result from
transactions and other economic events of the period other than
transactions with stockholders. Comprehensive income is the total of net
income and all other non-stockholder changes in equity ("Other
Comprehensive Income").
The Company has recorded currency translation adjustments as Other
Comprehensive Income in the accompanying consolidated financial statements.
Comprehensive income is calculated as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Net income $ 9,425 $16,262
Currency translation adjustment (1,451) (1,102)
------------------------------
Comprehensive income $ 7,974 $15,160
==============================
</TABLE>
Note 6. Earnings per Share
The Company calculates earnings per share ("EPS") in accordance with
the Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
Earnings Per Share. SFAS 128 presents 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
-7-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 6. Earnings per Share (continued)
assumptions that options issued to employees are exercised and repurchased
at the average price for the periods presented (in thousands except per
share amounts):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Net Income $ 9,425 $16,262
======= =======
Weighted Average Basic Shares 55,376 57,990
======= =======
Basic Earnings per Share $ 0.17 $ 0.28
======= =======
Weighted Average Diluted Shares 56,646 58,775
======= =======
Diluted Earnings per Share $ 0.17 $ 0.28
======= =======
</TABLE>
Weighted average diluted shares include the following: options to
purchase 1,270,000 and 785,000 shares issued to employees for the three
month periods ended March 31, 1999 and 1998, respectively.
Note 7. Primadonna Acquisition
On March 1, 1999, the Company completed the Merger with Primadonna
Resorts, Inc. for 9.5 million shares of the Company's common stock valued
at approximately $244.7 million plus the assumption of debt totaling $389
million. Primadonna shareholders received .33 shares of the Company's
common stock for every Primadonna share held. The transaction was accounted
for as a purchase and, accordingly, the purchase price was preliminarily
allocated to the underlying assets acquired and liabilities assumed based
upon their estimated fair values at the date of the Merger. The operating
results for Primadonna are included in the Condensed Consolidated
Statements of Operations from the date of acquisition.
-8-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following unaudited pro forma consolidated financial information for
the Company has been prepared assuming that the Merger had occurred on the
first day of the following respective periods (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Net Revenues $318,465 $280,047
======== ========
Operating Profit before Preopening and Corporate Expense $ 61,702 $ 45,431
======== ========
Operating Income $ 47,799 $ 41,796
======== ========
Net Income before Extaordinary Item and Cumulative Effect of
Accounting Change $ 22,414 $ 21,227
======== ========
Basic Earnings per Share before Extraordinary Item and Cumulative
Effect of Accounting Change $ 0.36 $ 0.31
======== ========
Weighted Average Basic Shares Outstanding (000's) 61,610 67,521
======== ========
Diluted Earnings per Share before Extraordinary Item and Cumulative
Effect of Accounting Change $ 0.36 $ 0.31
======== ========
Weighted Average Diluted Shares Outstanding (000's) 62,973 68,321
======== ========
</TABLE>
These unaudited pro forma results are presented for comparative
purposes only. The pro forma results are not necessarily indicative of what
the Company's actual results would have been had the acquisition been
completed as of the beginning of these periods, or of future results.
Note 8. Start Up Activities
Effective January 1, 1999, the Company adopted Statement of Position
98-5 ("SOP 98-5"), "Reporting on the Costs of Start-up Activities." SOP 98-
5 requires that all companies expense costs of start-up activities as those
costs are incurred. The term "start-up" includes pre-opening, pre-operating
and organization activities. As a result of the adoption of SOP 98-5, the
Company recognized $4.3 million and $.1 million in preopening expense for
the current period related to the Detroit and Atlantic City projects, as
well as $1.1 million related to the Mansion at the MGM Grand Las Vegas.
Additionally, the Company recognized the cumulative effect of the
accounting change of $7.7 million and $.5 million, related to the adoption
of SOP 98-5 for the Detroit and Atlantic City projects.
-9-
<PAGE>
MGM GRAND, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Quarter versus Quarter
Net revenues for the first quarter of 1999 were $251.4 million,
representing an increase of $71.6 million (39.8%) when compared with $179.8
million during the same period last year. The increase in net revenues was
due to growth in every revenue segment at existing properties as well as
the addition of NYNY and the Primm Properties effective with the March 1st
merger with Primadonna Resorts, Inc. (see Note 7).
Consolidated casino revenues for the first quarter of 1999 were $138.1
million, representing an increase of $42.4 million (44.3%) when compared
with $95.7 million during the same period in the prior year. MGM Grand
Las Vegas casino revenues were $107.2 million, representing an increase of
$17.6 million (19.6%) when compared with $89.6 million during the same
period in the prior year. The increase in casino revenues at MGM Grand Las
Vegas was a result of a record table games volume (excluding baccarat) and
a more normalized win percentage in 1999. MGM Grand Australia reported
casino revenues of $6.6 million, representing an increase of $.5 million
(8.2%) when compared with $6.1 million during the same period in the prior
year. The increase in casino revenue was largely due to an increase in
slots volume. In addition, NYNY and the Primm Properties contributed $10.3
million and $13.9 million, respectively, to casino revenues since the
merger on March 1, 1999.
Consolidated room revenues were $54.8 million for the first quarter of
1999 compared with $40.7 million in the prior year's first quarter,
representing an increase of $14.1 million (34.6%). MGM Grand Las Vegas
room revenues were $46.8 million, representing an increase of $6.4 million
(15.8%) when compared with $40.4 million in the same period of the prior
year. The increase was due to a higher average room rate for the 1999 first
quarter of $109 compared with $100, as well as an increase in occupancy to
96.5% in the first quarter of 1999 when compared with 90.5% in the prior
year. MGM Grand Australia room revenues decreased $.1 million (25%) from
$.4 million in 1998 to $.3 million in 1999 due to slightly lower room rates
and occupancy during the first quarter of 1999 compared with 1998. NYNY and
the Primm Properties reported room revenues of $5.9 million and $1.9
million, respectively, since the merger on March 1, 1999.
Consolidated food and beverage revenues were $34.4 million in the
first quarter of 1999, representing an increase of $9.4 million (37.6%)
when compared with $25 million in the first quarter of the prior year. MGM
Grand Las Vegas reported food and beverage revenues of $29.9 million during
the first quarter of 1999, representing an increase of $6.2 million (26.2%)
when compared with $23.7 million in the first quarter of 1998. This
increase resulted from the banquet revenue generated by the Conference
Center, which opened on April 16, 1998, and increased revenue from the
Studio 54 night club. MGM Grand Australia reported food and beverage
revenues of $1 million, representing a decrease of $.3 million (23.1%) when
compared with $1.3 million in the first quarter of 1998, due to fewer food
covers in the current year. NYNY and the Primm Properties reported food
and beverage revenues of $1.2 million and $2.4 million, respectively, since
the merger on March 1, 1999.
Consolidated entertainment, retail and other revenues increased $16.5
million (69%) from $23.9 million in the 1998 period to $40.4 million in the
1999 period. The increase is primarily a result of strengthened MGM Grand
Las Vegas entertainment, retail and other revenue which increased $7.7
million (32.9%) from $23.4 million in the first quarter of 1998 to $31.1
million in 1999. This was the result of increased entertainment revenues
in 1999 which included a heavyweight boxing match. Also, the Company had
increased management and development
-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)
fees from MGM Grand South Africa of $2.6 million in the 1999 period
compared with $.7 million in the prior year. NYNY and the Primm Properties
reported entertainment, retail, and other revenues of $3.4 million and $3.4
million, respectively, since the merger on March 1, 1999.
Income from unconsolidated affiliate was $6.1 million for the first
quarter of 1999, compared with $10.2 million in 1998, representing the
Company's 50% share of NYNY's operating income. The reduction is a result
of the current quarter's two months of activity compared with the prior
year's three months. As a result of the merger with Primadonna Resorts,
Inc. on March 1, 1999, NYNY became a 100% owned subsidiary of the Company
and as such its results of operations have been consolidated with those of
the Company since that time.
Consolidated operating expenses (before Pre-Opening and Corporate
expenses) were $199.5 million in the first quarter of 1999, representing an
increase of $50.3 million (33.7%) when compared with $149.2 million for the
same period last year. The overall increase was attributable to MGM Grand
Las Vegas which included increased casino expenses due to gaming taxes on
the increased revenues, expenses associated with the heavyweight boxing
match held in the quarter and higher food and beverage expenses due to the
increased revenues. MGM Grand Australia operating expenses remained flat
when compared with the prior year period as a result of continuing cost
containment efforts. NYNY and the Primm Properties added operating
expenses of $11.9 million and $16.3 million, respectively, since the merger
on March 1, 1999.
Preopening and other expense for the 1999 first quarter of $8.8
million represents costs principally associated with the Detroit temporary
casino, which is expected to open in the third quarter of 1999.
Corporate expense for 1999 was $5.1 million compared with $2.5 million
in 1998, representing an increase of $2.6 million. The 1999 quarter
included expense of stock options issued to non-employees of the Company.
Interest income of $.3 million for the three months ended March 31,
1999 decreased by $3.5 million from $3.8 million in the first quarter of
1998. The decrease was attributable to lower invested cash balances versus
the prior year.
Interest expense in the first quarter of 1999 was $8.2 million (net of
amounts capitalized) compared with $3.8 million in the first quarter of
1998, reflecting increased outstanding loan balances relating to
construction of the Detroit temporary casino as well as debt assumed in the
Merger with Primadonna on March 1, 1999. Also, the Company recognized
interest expense from unconsolidated affiliate of $1.1 million during the
1999 period compared with $2.2 million in 1998, reflecting a reduced
outstanding balance on the NYNY facility, as well as two months of activity
during 1999 compared with three months in 1998.
The extraordinary loss in the current year's first quarter of $.9
million, net of applicable income tax benefit, reflects the write-off of
unamortized debt costs associated with the extinguishment of the NYNY LLC
credit facility (see Note 3).
-11-
<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)
The cumulative effect of the accounting change in the current year's
first quarter of $8.2 million, net of income tax benefit, reflects the
Company's adoption of the recently issued SOP 98-5. Previously, the Company
had capitalized preopening costs until the development of a property was
substantially completed and ready to open, at which time the cumulative
costs were expensed (see Note 8). SOP 98-5 requires such start costs to be
expensed as incurred.
Liquidity and Capital Resources
As of March 31, 1999 and December 31, 1998, the Company held cash and
cash equivalents of $65.8 million and $82 million, respectively. Cash
provided by operating activities for the first three months of 1999 was
$30.7 million compared with $23.7 million for the same period of 1998.
During the three months ended March 31, 1999, $450 million was drawn
down and remained outstanding on the New Facility. Of the $450 million
drawn down, the Company used $216.6 million and $157.9 million to pay off
the Primadonna and NYNY bank facilities, respectively. Accordingly, both
the Primadonna and NYNY bank facilities have been extinguished.
On May 6, 1996, MGM Grand Las Vegas announced details of a 30-month,
$250 million 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 approximately $570 million, is nearing completion with the
"Mansion at the MGM Grand" offering 29 exclusive suites and villas,
anticipated to open in May 1999; the lion habitat anticipated to open in
June 1999; and expanded parking facilities anticipated to open in July
1999. The Company's 380,000 square foot state-of-the-art conference center
opened in April 1998, and the 50-foot tall polished bronze lion sculpture
along with the "Entertainment Casino" (previously known as the Emerald City
casino) were completed during the first quarter of 1998 which includes a
Studio 54 nightclub and the Rainforest Cafe. Additionally, the new 6.6-
acre pool and spa complex was completed and opened for operations in July
1998 and a new 3,800 space employee parking garage also opened in July
1998. Approximately $81.1 million is anticipated to be expended during 1999
related to the Master Plan, of which $40.7 million had been expended
through March 31, 1999.
Capital expenditures during the first three months of 1999 were $117.3
million, consisting primarily of $22.3 million related to MGM Grand Las
Vegas for general property improvements, $40.7 million for the Master Plan
project, $.8 million at NYNY for general property improvements, $1.3
million at Primm Properties for general property improvements, $.1 million
at MGM Grand Australia for general property improvements, $50.9 million at
MGM Grand Detroit for construction activities and $1.2 million for MGM
Grand Atlantic City land acquisition costs and pre-construction activities.
Anticipated capital expenditures remaining for 1999 are approximately
$421.1 million, consisting of approximately $40.4 million related to the
Master Plan, approximately $121.9 million related to general property
improvements for MGM Grand Las Vegas, approximately $16.3 million related
to general property improvements for NYNY, approximately $4.7 million
related to general property improvements for the Primm Properties,
approximately $234.8 million related to construction activities for MGM
Grand Detroit's temporary and permanent facilities, and approximately $3
million related to land acquisitions and pre-construction activities for
MGM Grand Atlantic City.
-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 June 23, 1998, the Company announced a $35.00 per share cash tender
offer for up to 6 million shares of Company common stock as part of a 12
million share repurchase program. The offer commenced on July 2, 1998 and
expired on July 31, 1998. Based upon the final results, 10.8 million shares
of the Company's common stock were tendered, and accordingly, the shares
were prorated. The total acquisition cost of the tendered shares was
approximately $210.6 million. The Company anticipates that, depending on
market conditions, the remaining 6 million shares in the repurchase program
may be acquired in the open market, in private transactions, through a
tender offer, offers or otherwise.
The Company expects to finance operations, capital expenditures,
existing debt obligations and future share repurchases through cash flow
from operations, cash on hand, and the bank lines of credit.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four digits to define the applicable year,
which may result in system failures and disruptions to operations at
January 1, 2000. The Company is assessing its Year 2000 readiness through
an ongoing Year 2000 Remediation Program that addresses information
technology systems, as well as systems outside of the information
technology area. The Year 2000 Remediation Program takes into
consideration all locations where the Company has operations. The Year
2000 Remediation Program includes continuing assessment of the Company's
Year 2000 issues, contacting suppliers of certain systems to determine the
timing of applicable upgrades, and implementing applicable Year 2000
upgrades, which are currently available.
The Company has initiated formal communications with its significant
suppliers to determine the extent to which the Company is vulnerable to
third party failure to remediate their own Year 2000 issues. In
conjunction with this effort, the Company is assessing the potential impact
of such third party Year 2000 issues. There can be no guarantee that the
systems of third parties on which the Company's systems rely will be timely
converted, or that a failure to convert by another company or a conversion
that is incompatible with the Company's systems, would not have a material
adverse effect on the Company.
The Company's Year 2000 Remediation Program may require enhancements
to ensure there is no disruption to the Company's operations, however, the
financial impact of making such enhancements is not expected to be material
to the Company's financial position or results of operations. During the
current quarter, the Company has not incurred material costs to modify
existing computer systems, however, it is estimated that approximately $2.7
million will be incurred in 1999.
-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
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 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>
ARTHUR ANDERSEN LLP
EXHIBIT (g)(3)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this Schedule 13E-4 of our report dated February 1, 1999 included
in MGM Grand, Inc.'s Annual Report on Form 10-K for the year ended December 31,
1998. It should be noted that we have not audited any financial statements of
the Company subsequent to December 31, 1998 or performed any audit procedures
subsequent to the date of our report.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
June 15, 1999
